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>
Item 5. Other Events
On September 5, 1993, the Registrant filed a voluntary Petition for
Relief under Chapter 11, Title 11 of the United States Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the Eastern
District of North Carolina, Raleigh Division (the "Court"). On August 1,
1994, the Registrant filed with the Court a proposed Joint Plan of
Reorganization with the consent of the official unsecured creditors
committee, the pre-petition secured senior noteholders, and the official
equity committee. On October 5, 1994, the Court approved a First Amended
Disclosure Statement that described the proposed First Amended Joint Plan
of Reorganization (the "Plan") and approving the solicitation of
acceptances and rejections of the Plan from various classes of creditors
and equity holders prior to the Court's holding a confirmation hearing.
On December 14, 1994, the Court confirmed the Plan and entered an order
("Confirmation Order") to that effect.
On April 28, 1995, the Registrant entered into a Warrant Agreement
and Escrow Agreement with First Union National Bank of North Carolina
("First Union") pursuant to which the Registrant issued to First Union
10,000,000 shares of Common Stock as Escrow Agent and 4,285,714 Warrants
as Warrant Agent. The Escrow Agreement and Warrant Agreement specify the
terms, conditions and procedures pursuant to which First Union will hold
and deliver shares of Common Stock and Warrants under the terms of the
Modified and Restated First Amended Joint Plan of Reorganization dated
April 24, 1995 (the "Modified Plan").
On April 28, 1995, the Registrant satisfied the last condition under
the Modified Plan 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. On April 28, 1995,
the Registrant drew down $58,654,000 which was used to satisfy all
outstanding indebtedness to GE Capital Corporation and to the Pre-
Petition Secured Lenders. 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) Revolving Credit Agreement dated as of April 28, 1995, among
the Registrant as Borrower, the lending institutions listed on
Schedule 1 to the Agreement and 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 (the "Credit Agreement").
(2) Security Agreement dated as of April 28, 1995, between the
Registrant and The First National Bank of Boston as Collateral
Agent for the lending institutions who are parties to the
Credit Agreement.
(3) $62,500,000 Revolving Credit Note dated April 28, 1995, issued
to The First National Bank of Boston pursuant to the Credit
Agreement.
(4) $62,500,000 Revolving Credit Note dated April 28, 1995, issued
to The CIT Group/Business Credit, Inc., pursuant to the Credit
Agreement.
(5) Deed of Trust, Assignment of Rents and Security Agreement dated
as of April 27, 1995 by and among Registrant, First National
Bank of Boston, The CIT Group/Business Credit, Inc., pursuant
to the Credit Agreement.
(6) Master Release Agreement dated as of April 28, 1995 by and
between General Electric Capital Corporation and Registrant.
(7) Post-Effective Date GE Assumption Agreement dated as of April
28, 1995 by and between General Electric Capital Corporation
and Registrant.
(8) GE Deferred Obligations Agreement dated as of April 28, 1995
by and between General Electric Capital Corporation and
Registrant.
(9) Warrant Agreement dated as of April 28, 1995, between the
Registrant and First Union National Bank of North Carolina as
Warrant Agent.
(10) Escrow Agreement dated as of April 28, 1995, between the
Registrant and First Union National Bank of North Carolina as
Escrow Agent.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROSE'S STORES, INC.
Date: May 8, 1995 By:/S/Jeanette R. Peters
Jeanette R. Peters
Senior Vice President
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(1) Revolving Credit Agreement dated as of April 28,
1995, among the Registrant as Borrower, the
lending institutions listed on Schedule 1 to the
Agreement and 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 (the "Credit
Agreement").
(2) Security Agreement dated as of April 28, 1995,
between the Registrant and The First National Bank
of Boston as Collateral Agent for the lending
institutions who are parties to the Credit
Agreement.
(3) $62,500,000 Revolving Credit Note dated April 28,
1995, issued to The First National Bank of Boston
pursuant to the Credit Agreement.
(4) $62,500,000 Revolving Credit Note dated April 28,
1995, issued to The CIT Group/Business Credit,
Inc., pursuant to the Credit Agreement.
(5) Deed of Trust, Assignment of Rents and Security
Agreement dated as of April 27, 1995 by and among
Registrant, First National Bank of Boston, The CIT
Group/Business Credit, Inc., pursuant to the
Credit Agreement.
(6) Master Release Agreement dated as of April 28,
1995 by and between General Electric Capital
Corporation and Registrant.
(7) Post-Effective Date GE Assumption Agreement dated
as of April 28, 1995 by and between General
Electric Capital Corporation and Registrant.
(8) GE Deferred Obligations Agreement dated as of
April 28, 1995 by and between General Electric
Capital Corporation and Registrant.
(9) Warrant Agreement dated as of April 28, 1995,
between the Registrant and First Union National
Bank of North Carolina as Warrant Agent.
(10) Escrow Agreement dated as of April 28, 1995,
between the Registrant and First Union National
Bank of North Carolina as Escrow Agent.
REVOLVING CREDIT AGREEMENT
Dated as of April 28, 1995
among
ROSE'S STORES, INC.,
as Borrower,
THE LENDING INSTITUTIONS
listed on SCHEDULE 1 hereto,
as Banks,
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
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION 1
1. Definitions 1
2. Rules of Interpretation 21
2. THE REVOLVING CREDIT FACILITY 22
1. Commitment to Lend 22
2. Commitment Fee 23
3. Reduction of Total Revolving Commitment 23
4. The Revolving Credit Notes 23
5. Interest on Revolving Credit Loans 24
6. Requests for Revolving Credit Loans 24
7. Conversion Options 26
1. Conversion to Different Type of
Revolving Credit Loan 26
2. Continuation of Type of Revolving
Credit Loan 26
8. Settlements; Failure to Make Funds Available 27
9. Change in Borrowing Base 29
3. REPAYMENT OF THE REVOLVING CREDIT LOANS 29
1. Maturity 29
2. Mandatory Repayments of Revolving Credit
Loans 29
3. Optional Repayments of Revolving Credit
Loans 30
4. LETTERS OF CREDIT 31
1. Letter of Credit Commitments . 31
1. Commitment to Issue Letters of
Credit 31
2. Letter of Credit Applications . 32
3. Terms of Letters of Credit . 32
4. Reimbursement Obligations of
Banks . 32
5. Participations of Banks . 33
6. Certain Letters of Credit
Outstanding on the
Closing Date 33
2. Reimbursement Obligation of the Borrower 33
3. Letter of Credit Payments 34
4. Obligations Absolute 36
5. Reliance by Issuer 36
6. Letter of Credit Fees 36
5. CERTAIN GENERAL PROVISIONS 37
1. Agency Fee 37
2. Depository Arrangements 37
3. Funds for Payments 41
1. Payments to Administrative Agent 41
2. No Offset, etc. 41
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4. Computations, etc. 42
5. Inability to Determine LIBOR Rate 43
6. Illegality 43
7. Additional Costs, etc. 44
8. Capital Adequacy 45
9. Certificate 46
10. Indemnity 46
11. Interest After Default 47
1. Overdue Amounts . 47
2. Amounts Not Overdue . 47
12. LIBOR Rate Loans . 47
13. Maximum Interest Rate . 47
6. COLLATERAL SECURITY AND GUARANTY 48
1. Security of Borrower . 48
2. Guaranty and Security of Guarantor . 48
7. REPRESENTATIONS AND WARRANTIES 48
1. Corporate Authority . 48
1. Incorporation; Good Standing . 48
2. Authorization . 49
3. Enforceability . 49
2. Governmental Approvals . 49
3. Title to and Location of Properties; Leases . 50
4. Financial Statements; Projections and
Disclosure Statement 51
1. Financial Statements . 51
2. Projections . 51
3. Disclosure Statement . 51
5. No Material Changes, etc. . 52
6. Franchises, Patents, Copyrights, etc. . 52
7. Litigation . 52
8. No Materially Adverse Contracts, etc. . 52
9. Compliance with Other Instruments, Laws,
etc. . 53
10. Tax Status . 53
11. No Event of Default . 53
12. Holding Company and Investment Company Acts . 53
13. Absence of Financing Statements, etc. . 53
14. Perfection of Security Interest . 54
15. Certain Transactions . 54
16. Employee Benefit Plans . 54
1. In General . 54
2. Terminability of Welfare Plans . 54
3. Guaranteed Pension Plans . 55
4. Multiemployer Plans . 55
17. Regulations U and X . 56
18. Environmental Compliance . 56
19. Subsidiaries, etc. . 58
20. Bank Accounts . 58
21. Undisclosed Claims . 58
<PAGE>
22. Confirmation of Plan . 58
23. Insurance . 59
24. Exit Facility Order . 59
8. AFFIRMATIVE COVENANTS OF THE GUARANTOR AND THE
BORROWER 59
1. Punctual Payment . 59
2. Maintenance of Office . 60
3. Records and Accounts . 60
4. Financial Statements, Certificates and
Information 60
5. Notices . 64
1. Defaults . 64
2. Environmental Events . 64
3. Notification of Claim against
Collateral 65
4. Notice of Litigation and Judg-
ments 65
6. Corporate Existence; Maintenance of
Properties 65
7. Insurance . 66
8. Taxes . 66
9. Inspection of Properties and Books, etc. . 66
1. General; Examinations . 66
2. Environmental Assessments . 67
3. Communications with Accountants . 68
10. Compliance with Laws, Contracts, Licenses, and
Permits 68
11. Employee Benefit Plans . 68
12. Use of Proceeds . 69
13. Additional Mortgaged Property . 69
14. Maintenance of Business . 69
15. Further Assurances . 70
16. Liquidation of Certain Retail Stores . 70
17. Landlord Waivers . 70
18. Appraisal of Henderson Property . 70
19. Certain Legal Opinions . 70
9. CERTAIN NEGATIVE COVENANTS OF THE GUARANTOR AND THE
BORROWER 71
1. Restrictions on Indebtedness . 71
2. Restrictions on Liens . 72
3. Restriction on Investments . 74
4. Distributions . 75
5. Merger, Consolidation and Disposition of
Assets 75
1. Mergers and Acquisitions . 75
2. Disposition of Assets . 75
6. No Subsidiaries, etc. . 76
7. Compliance with Environmental Laws . 76
8. Employee Benefit Plans . 77
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9. Bank Accounts . 77
10. Transactions with Affiliates 77
11. No Amendment of Certain Documents 78
10. FINANCIAL COVENANTS OF THE BORROWER 78
1. Operating Cash Flow to Total Debt Service
Expense . 78
2. Minimum EBITDA . 79
3. Capital Expenditures . 79
4. Minimum Stockholders' Equity . 79
5. Minimum and Maximum Eligible Inventory . 80
11. CLOSING CONDITIONS 81
1. Loan Documents . 81
2. Certified Copies of Charter Documents . 81
3. Corporate Action . 81
4. Incumbency Certificate . 81
5. Validity of Liens . 81
6. Perfection Certificates and UCC Search
Results 82
7. Financial Statements . 82
8. Landlord Consents . 82
9. Certificates of Insurance . 82
10. Cash Management and Agency Account
Agreements . 83
11. Borrowing Base Report . 83
12. Availability at Closing . 83
13. Inventory Reports 83
14. Hazardous Waste Assessments . 83
15. Opinions of Counsel . 83
16. Payment of Fees . 84
17. Termination of Debtor in Possession
Financing . 84
18. Confirmation of Plan; Related Matters . 84
19. Prepetition Claims . 85
20. Capital Structure . 86
21. Minimum EBITDA . 86
22. Actions with Respect to Specified GOB Stores . 86
23. Proceedings and Documents; Due
Diligence Matters . 86
24. Closing Certificate . 87
12. CONDITIONS TO ALL BORROWINGS 87
1. Representations True; No Event of Default . 87
2. No Legal Impediment . 88
3. Governmental Regulation . 88
4. Borrowing Base Report . 88
5. Required Payment . 88
13. EVENTS OF DEFAULT; ACCELERATION; ETC. 88
1. Events of Default and Acceleration . 88
2. Termination of Commitments . 93
3. Remedies . 93
<PAGE>
4. Distribution of Collateral Proceeds . 93
14. SETOFF 94
15. THE ADMINISTRATIVE AGENT 95
1. Authorization . 95
2. Employees and Administrative Agent . 97
3. No Liability . 97
4. No Representations . 97
5. Payments . 98
1. Payments to Administrative Agent . 98
2. Distribution by Administrative
Agent . 98
3. Delinquent Banks . 98
6. Holders of Notes . 99
7. Indemnity . 99
8. Administrative Agent as Bank . 99
9. Resignation .100
10. Notification of Defaults and Events of
Default 100
11. Duties in the Case of Enforcement .100
16. EXPENSES 101
17. INDEMNIFICATION 102
18. SURVIVAL OF COVENANTS, ETC. 103
19. ASSIGNMENT AND PARTICIPATION 104
1. Conditions to Assignment by Banks .104
2. Certain Representations and Warranties;
Limitations; Covenants 104
3. Register .106
4. New Notes .106
5. Participations .107
6. Disclosure .107
7. Assignee or Participant Affiliated with the
Borrower 108
8. Miscellaneous Assignment Provisions .108
9. Assignment by the Borrower .108
20. NOTICES, ETC. 109
21. GOVERNING LAW 110
22. HEADINGS 110
23. COUNTERPARTS 111
24. ENTIRE AGREEMENT, ETC. 111
25. WAIVER OF JURY TRIAL 111
26. CONSENTS, AMENDMENTS, WAIVERS, ETC. 111
27. SEVERABILITY 112
28. DISCLOSURE 113
<PAGE>
SCHEDULES
Schedule 1 Banks, Revolving Commitments, Commitment
Percentages
Schedule 1.1 Specified GOB Stores
Schedule 2 Performance Adjustment Feature; Perfor-
mance Tests
Schedule 5.2 Authorized Withdrawals Relating to
Collection Accounts
Schedule 7.2 Governmental Approvals
Schedule 7.3 Title to and Location of Properties;
Leases
Schedule 7.6 Patents, Copyrights, Trademarks and
Trade Names
Schedule 7.7 Litigation
Schedule 7.9 Compliance with Laws
Schedule 7.10 Taxes; Pension Matters
Schedule 7.16 Employee Benefit Plans
Schedule 7.18 Environmental Compliance
Schedule 7.20 Bank Accounts
Schedule 7.23 Insurance Matters
Schedule 9.1 Existing Indebtedness
Schedule 9.2 Other Existing Liens
Schedule 9.3 Existing Investments
Schedule 9.8 ERISA Matters
EXHIBITS
Exhibit A Form of Borrowing Base Report
Exhibit B Form of Revolving Credit Note
Exhibit C Form of Loan Request
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Landlord Consent
Exhibit G Form of Management Flash Report
Exhibit H Form of Financial Indicator Report
Exhibit I Form of Exit Facility Order
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT (this "Credit Agreement") is
made as of April 28, 1995, by and among ROSE'S STORES, INC. (the
"Borrower"), a Delaware corporation, THE FIRST NATIONAL BANK OF
BOSTON ("FNBB"), a national banking association, and THE CIT
GROUP/BUSINESS CREDIT, INC. ("CIT"), as facility agents (the
"Facility Agents"), FNBB, CIT and the other lending institu-
tions listed on Schedule 1 (the "Banks"), and THE FIRST NA-
TIONAL BANK OF BOSTON, as administrative agent (the "Admin-
istrative Agent") for itself and the other Banks.
INTRODUCTORY STATEMENT
On September 5, 1993, Old Rose's (as hereinafter de-
fined) filed a voluntary petition for protection under Chapter
11 of the Bankruptcy Code (the "Bankruptcy Proceeding"). Pur-
suant to an order entered December 14, 1994 (the "Plan Confir-
mation Order"), the Bankruptcy Court (as hereinafter defined)
confirmed the First Amended Joint Plan of Reorganization of the
Borrower (as so confirmed, and as so modified and restated
pursuant to the Plan Modification Order, the "Plan"). It is a
condition to the effectiveness of the Plan that the Borrower
shall have entered into the Post-Effective Date Financing Fa-
cility (as defined in the Plan). The parties hereto intend that
this Credit Agreement and the other documents and instruments
related hereto (including the Loan Documents (as hereinafter
defined)) shall evidence the terms and conditions of the Post-
Effective Date Financing Facility.
NOW, THEREFORE, in consideration of the premises
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each
of the parties hereto agrees as follows:
1. DEFINITIONS AND RULES OF INTERPRETATION.
1. Definitions. The following terms shall have the
meanings set forth in this Section 1.1 or elsewhere in the
provisions of this Credit Agreement referred to below:
Acceleration. See Section 13.1.
Administrative Agent. The First National Bank of
Boston acting as administrative agent for the Banks.
Administrative Agent's Head Office. The Administra-
tive Agent's head office located at 100 Federal Street, Boston,
<PAGE>
Massachusetts 02110, or such other location as the Adminis-
trative Agent may designate from time to time.
Administrative Agent's Special Counsel. Wachtell,
Lipton, Rosen & Katz or such other counsel as may be approved
by the Administrative Agent.
Affiliate. Any Person which is a director or officer
of any other Person or which, directly or indirectly, controls
or is controlled by or is under common control with such other
Person. For purposes of this definition, a Person shall be
deemed to be "controlled by" any other Person if such other
Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities having
ordinary voting power for the election of directors
of such Person or individuals performing similar
functions for such Person; or
(b) to direct, or cause the direction of, the man-
agement and policies of such Person whether by con-
tract or otherwise.
Agency Account Agreements. See Section 5.2.
Agency Concentration Account. See Section 5.2.
Agency Fee. The Fee designated as such in that cer-
tain letter from the Borrower to the Facility Agents dated March
10, 1995.
Alternate Base Rate. The higher of (i) the annual
rate of interest announced from time to time by FNBB at its head
office in Boston, Massachusetts, as its "alternate base rate"
and (ii) one-half of one percent (.50%) above the Federal Funds
Effective Rate. For the purposes of this definition, "Federal
Funds Effective Rate" shall mean for any day, the rate per annum
equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three
funds brokers of recognized standing selected by the Ad-
ministrative Agent.
<PAGE>
Appraiser. Alco Capital Group, Inc. or another Per-
son selected by the Facility Agents to (i) evaluate the Inven-
tory of the Borrower, including the components of Eligible In-
ventory, (ii) periodically determine the Estimated Net GOB Re-
alization Percentage and (iii) advise the Facility Agents with
respect to other matters including, without limitation, buying
practices, product mix, and markdown policies.
Bankruptcy Code. Title 11, United States Code, 11
U.S.C. Sections 101 et seq. as in effect on the Closing Date,
as the same may be amended.
Bankruptcy Court. The United States Bankruptcy Court
for the Eastern District of North Carolina.
Bankruptcy Proceeding. See Introductory Statement.
Banks. FNBB, CIT and the other lending institutions
listed on Schedule 1 hereto and any other Person who becomes an
assignee of any interests, rights and obligations of a Bank
pursuant to Section 19.1.
Base Rate Loans. Any Revolving Credit Loans bearing
interest calculated by reference to the Alternate Base Rate.
Borrower. Rose's Stores, Inc., as of and after the
Effective Date.
Borrowing Base. At the relevant time of reference
thereto, an amount determined by the Administrative Agent, by
reference to the most recent Borrowing Base Report, that is
equal to the lesser of:
(i) the amount of Eligible Inventory times the Effec-
tive Borrowing Base Percentage; and
(ii) the Eligible Retail Inventory times the Estimated
Net GOB Realization Percentage times (x) ninety three percent
(93%) during the months of July, 1995 and August, 1995 only or
(y) ninety percent (90%) during all months other than July, 1995
and August, 1995.
Borrowing Base Report. A Borrowing Base Report
signed by the chief financial officer of the Borrower and
in substantially the form of Exhibit A hereto.
Business Day. Any day on which banking
institutions in Boston, Massachusetts, are open for the
transaction of banking business and, in the case of LIBOR
Rate Loans, also a day which is a LIBOR Business Day.
<PAGE>
Business Plan. See Section 8.4(k).
Capital Assets. Fixed assets, both tangible
(such as land, buildings, fixtures, machinery and
equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that
Capital Assets shall not include any item customarily
charged directly to expenses or depreciated over a useful
life of twelve (12) months or less in accordance with
generally accepted accounting principles.
Capital Expenditures. Amounts paid or
indebtedness incurred by the Borrower in connection with
the purchase or lease by the Borrower of Capital Assets
that would be required to be capitalized and shown on the
balance sheet of the Borrower in accordance with generally
accepted accounting principles.
Capitalized Leases. Leases under which (a) the
Borrower is the lessee or obligor and (b) the discounted
future rental payment obligations are required to be
capitalized on the balance sheet of the lessee or obligor
in accordance with generally accepted accounting
principles.
Cash Collateralized Letters of Credit. Letters
of Credit for which the Borrower had deposited with the
Administrative Agent in a cash collateral account an amount
in cash equal to one hundred five percent (105%) of the
aggregate Maximum Drawing Amount in respect of such Letter
of Credit.
CERCLA. See Section 7.18(a).
Change of Control. An event or series of events
by which (i) any Person or Persons and any Affiliates of
such Person or Persons shall, whether in a single
transaction or a series of related transaction, acquire,
directly or indirectly, more than 30% of the Voting Stock
of the Borrower or otherwise acquire, directly or
indirectly, the ability to vote for a majority of the
directors of the Borrower or (ii) individuals who, as of
the Closing Date, constitute the board of directors of the
Borrower (the "Incumbent Board") cease for any reason to
constitute more than 50% of the members of the board of
directors of the Borrower; provided, however, that any
individual who becomes a member of the board of directors
of the Borrower subsequent to the Closing Date, whose
election, or nomination for election by the Borrower's
shareholders, was approved by a vote of at least a majority
of directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board for purposes of this definition; but,
provided further, that any such individual whose initial
assumption of office occurs as a result of either an
<PAGE>
actual or threatened election contest (as such term is used
in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other
the board of directors of the Borrowers shall not be so
considered as a member of the Incumbent Board or (iii) R.
Edward Anderson shall cease to be both the chief executive
officer and chairperson of the board of directors of the
Borrower for any reason whatsoever and shall not have been
replaced by a chief executive officer and/or chairperson
(as the case may be) reasonably satisfactory to the Ma-
jority Banks within the two (2) month period following the
date on which he ceases to be both the chief executive of-
ficer and chairperson.
CIT. The CIT Group/Business Credit, Inc.
Class 2B Claims. The claims classified in Class
2B under the Plan, including, without limitation, all
claims of the Pre-Petition Lenders (as defined in the
Plan).
Code. The Internal Revenue Code of 1986.
Collateral. All assets and properties of the
Borrower (whether real or personal, tangible or intangible)
and all property, rights and interests that are subject to
the security interests, liens and mortgages created by the
Security Documents.
Collection Bank. See Section 5.2.
Closing Date. The first date on which the
conditions set forth in Section 11 have been satisfied or
waived and any Revolving Credit Loans are to be made or any
Letter of Credit is to be issued hereunder.
Commitment Percentage. With respect to each
Bank, the percentage set forth on Schedule 1 hereto as such
Bank's percentage of the aggregate Revolving Commitments
of all of the Banks.
Consolidated or consolidated. With reference to
any term defined herein, shall mean that term as applied
to the accounts of the Borrower and any Guarantor,
consolidated in accordance with generally accepted
accounting principles.
Conversion Request. A notice given by the
Borrower to the Administrative Agent of the Borrower's
election to convert or continue a Loan in accordance with
Section 2.7.
<PAGE>
Credit Agreement. This Revolving Credit
Agreement, including the Schedules and Exhibits hereto.
Default. See Section 13.1.
DIP Facility. As defined in the Plan.
Disclosure Statement. The Disclosure Statement
with respect to the First Amended Joint Plan of
Reorganization of Old Rose's, filed in Chapter 11 Case No.
93-01365-5-ATS in the Bankruptcy Court and approved by the
Bankruptcy Court pursuant to Section 1125 of the Bankruptcy
Code on October 5, 1994.
Distribution. With respect to any Person, the
declaration or payment of any dividend on or in respect of
any shares of any class of capital stock of such Person,
other than dividends payable solely in shares of common
stock of such Person; the purchase, redemption, or other
retirement of any shares of any class of capital stock of
such Person, directly or indirectly; the return of capital
by such Person to its shareholders as such; or any other
distribution on or in respect of any shares of any class
of capital stock of such Person.
Dollars or $. Dollars in lawful currency of the
United States of America.
Drawdown Date. The date on which any Revolving
Credit Loan is made or is to be made, and the date on which
any Revolving Credit Loan is converted or continued in
accordance with Section 2.7.
EBITDA. The Net Operating Income (or Deficit)
of the Borrower for any period (which amount shall in
accordance with the definition thereof be determined after
deduction of all expenses and other proper charges payable
for such period) but before payment or provision in respect
of such period for (i) income taxes, (ii) interest ex-
pense, (iii) commitment fees, agency fees, facility fees
and other similar fees, (iv) adjustments relating to Lifo
reserves in accordance with generally accepted accounting
principles, (v) depreciation, amortization and other
similar noncash charges and (vi) noncash reserves taken in
such period for any and all obligations relating to store
closings; provided however that the amount of any cash
payments during such period and any and all subsequent
periods in respect of all such obligations shall be treated
as a reduction of EBITDA in the period of payment.
<PAGE>
Effective Borrowing Base Percentage. For each
fiscal month (or, in the case of November and December
only, each calendar week ending on a Saturday in such
month) the percentage set forth below:
February 53%
March 55%
April 55%
May 60%
June 60%
July 60%
August 64%
September 64%
October 64%
November:
1st clndr wk 64%
2nd clndr wk 64%
3rd clndr wk 62%
4th clndr wk 62%
5th clndr wk 58%
December:
1st clndr wk 56%
2nd clndr wk 52%
3rd clndr wk 48%
4th clndr wk 40%
January 50%
Effective Date. The "Effective Date" under and as
defined in the Plan.
Eligible Assignee. A commercial bank, insurance
company, commercial finance company or other financial insti-
tution having total assets in excess of $500,000,000 or any
other Person approved by the Facility Agents.
Eligible Inventory. At the relevant time of refer-
ence thereto, in accordance with generally accepted accounting
principles and based on the first-in, first-out method of in-
ventory accounting at cost, (i) all Inventory located in the
Borrower's retail stores, as set forth in the Borrower's gen-
eral ledger, (ii) all Inventory located in warehouses, as set
forth in the Borrower's perpetual inventory report and (iii)
Inventory the purchase price of which is supported by either (x)
documentary Letters of Credit issued hereunder or (y) for the
period ending one hundred twenty (120) days after the Closing
Date only, documentary letters of credit issued before the
Closing Date other than under this Credit Agreement that are
supported by Letters of Credit issued under this Credit
Agreement; and as to which, for each item of Inventory set
<PAGE>
forth in clauses (i), (ii) and (iii) above, each of the fol-
lowing requirements have been fulfilled in respect of such In-
ventory to the reasonable satisfaction of the Administrative
Agent and that otherwise continues to be acceptable to the Ad-
ministrative Agent in the exercise of its business judgment:
(a) all of such Inventory is located in the United
States (other than Inventory described in clause (iii) above for
which the Administrative Agent has possession of the documents
related to the documentary letters of credit described in such
clause);
(b) none of such Inventory shall consist of (1) items
in the possession of the Borrower but intended by the Borrower
for return to the suppliers thereof, (2) items belonging to
third parties that have been consigned to the Borrower or are
otherwise in the Borrower's possession or (3) items in the
Borrower's custody on a sale-on-approval basis or sale-or-
return basis or that are subject to any other repurchase or
return agreement (except for Inventory subject to sale-or-
return arrangements for which the vendor is contractually
obligated to provide the Borrower with full credit if re-
turned);
(c) all of such Inventory consists of finished goods
purchased or assembled by Borrower in the ordinary course of its
business and does not consist of raw materials, work in process
or Inventory in transit (other than Inventory described in
clause (iii) above for which the Administrative Agent has
possession of the documents related to the documentary letters
of credit described in such clause);
(d) all of such Inventory is in good condition and
meets all standards imposed by any Person having regulatory
authority over such goods, its use and/or sale, and is cur-
rently saleable in the normal course of the Borrower's busi-
ness;
(e) all of such Inventory is located on the premises
listed on Schedule 7.3 hereto (other than (x) Inventory de-
scribed in clause (iii) above for which the Administrative Agent
has possession of the documents related to the documentary
letters of credit described in such clause and (y) Inventory on
vehicles leased or owned by the Borrower that is in transit
between the Borrower's Henderson Distribution Center and retail
locations listed on Schedule 7.3 hereto);
(f) none of such Inventory shall be unsalable, dam-
aged or otherwise unfit for sale in the normal course of busi-
ness of the Borrower;
<PAGE>
(g) all of such Inventory shall be subject to a
valid, first-priority security interest in favor of the Admin-
istrative Agent; and
(h) all of such Inventory conforms to the other rep-
resentations and warranties contained herein and in the other
Loan Documents.
In addition, a reserve shall be determined from time to time by
the Administrative Agent in its sole discretion, which reserve
shall on the Closing Date be set initially at ten percent (10%),
to account for inventory scheduled for return to vendors, food,
perishables, live plants, freight, excess inventory, slow-
moving inventory, seasonal inventory, clearance inventory,
damaged goods, inventory loads, cash discounts, sample
inventory, packaging or shrinkage. Furthermore, reserves shall
be established for (i) the amount of rent and related charges
past due more than thirty (30) days to landlords in respect of
inventory locations that have not provided waivers of lien
rights to the satisfaction of the Administrative Agent and (ii)
such other matters determined by the Administrative Agent.
Eligible Retail Inventory. The amount of Inventory
at retail (as determined under the first-in, first-out method
of accounting in accordance with generally accepted accounting
principles) in Dollars net of accounting reserves at the time
of determination and after excluding the following items of
Inventory: (i) all items of Inventory that are not being held
for retail sale at the time of determination (including, with-
out limitation, supplies, packaging, restaurant food and food
supplies), (ii) forty percent (40%) of the amount of Inventory
at retail consisting of jewelry, (iii) Inventory consisting of
items on layaway or that consist of items belonging to third
parties that have been consigned to the Borrower or are other-
wise in the Borrower's possession and (iv) thirty percent (30%)
of the first-in, first-out cost of "import inventory" (as set
forth and classified in the general ledger on the date of de-
termination consistent with past practices).
Employee Benefit Plan. Any employee benefit plan
within the meaning of Section 3(3) of ERISA maintained or
contributed to by the Borrower or any ERISA Affiliate, other
than a Multiemployer Plan.
Environmental Laws. See Section 7.18(a).
ERISA. The Employee Retirement Income Security Act
of 1974, as amended.
<PAGE>
ERISA Affiliate. Any Person which is treated as a
single employer with the Borrower under Section 414(b), (c), (m)
or (o) of the Code.
ERISA Reportable Event. A reportable event with re-
spect to a Guaranteed Pension Plan within the meaning of Section
4043 of ERISA and the regulations promulgated thereunder as to
which the requirement of notice has not been waived.
Estimated Inventory Proceeds. The estimated cash
proceeds to be realized from the sale of Inventory pursuant to
going out of business sales minus the estimated costs and ex-
penses (both direct and indirect) of implementing and conduct-
ing such sales (including, without limitation, rent and oc-
cupancy expense, advertising and marketing expenses, payroll
and security costs, and corporate overhead and general admin-
istrative expenses) as such estimated cash proceeds and esti-
mated costs and expenses are determined from time to time by the
Appraiser.
Estimated Net GOB Realization Percentage. The per-
centage determined from time to time by the Appraiser, which
percentage shall be calculated by dividing (i) the Estimated
Inventory Proceeds at such time by (ii) the amount of Eligible
Retail Inventory (adjusted to account for seasonal fluctuations
in the amount of Inventory). Initially, the Estimated Net GOB
Realization Percentage during any fiscal month will be the
amount set forth below in respect of such fiscal month, pro-
vided that such percentages set forth below shall be subject to
change from time to time based solely on the determination by
the Appraiser:
January 38.2%
February 40.2%
March 40.9%
April 42.0%
May 41.6%
June 40.8%
July 40.6%
August 40.4%
September 41.7%
October 43.0%
November 42.6%
December 38.4%
Exchange Act. The Securities Exchange At of 1934, as
amended from time to time, and any successor thereto.
<PAGE>
Exit Facility Order. The "Order Approving Exit Fi-
nancing Facility with the First National Bank of Boston and the
CIT Group/Business Credit, Inc.", entered by the Bankruptcy
Court on April 17, 1995, a copy of which is attached hereto as
Exhibit 1.3
Eurocurrency Reserve Rate. For any day with respect
to a LIBOR Rate Loan, the maximum rate (expressed as a decimal)
at which any Bank subject thereto would be required to maintain
reserves under Regulation D of the Board of Governors of the
Federal Reserve System (or any successor or similar regulations
relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such
liabilities were outstanding. The Eurocurrency Reserve Rate
shall be adjusted automatically on and as of the effective date
of any change in the Eurocurrency Reserve Rate on a non-
discriminatory basis with the Administrative Agent's other
similarly situated customers.
Event of Default. See Section 13.1.
Facility Agents. FNBB and CIT, in their capacities
as facility agents.
Facility Fee. The fee designated as such in that
certain letter from the Borrower to the Facility Agents dated
March 10, 1995.
GOB Order. See Section 11.22.
Final GOB Sales. "Going-out-of-business," "closing
out," "distress," "bankruptcy liquidation" or similar sales
implemented with respect to all Inventory and other assets of
the Borrower located at a retail location of the Borrower.
Final Order. An order or judgment of the Bankruptcy
Court which has not been reversed, stayed, modified or amended
and as to which (i) the time to appeal or seek review, rehear-
ing, reargument, stay or certiorari has expired, and (ii) as to
which no appeal or petition for review, rehearing, reargument,
stay or certiorari proceeding is pending or as to which any
right to appeal or to seek review, rehearing, reargument or
certiorari has been waived.
FNBB. The First National Bank of Boston, a national
banking association, in its individual capacity (unless other-
wise indicated).
Generally Accepted Accounting Principles. (i) When
used in Section 10, whether directly or indirectly through reference
<PAGE>
to a capitalized term used therein, means (A)
principles that are consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its
predecessors, in effect as of the Closing Date, and (B) to the
extent consistent with such principles, the accounting practice
of the Borrower reflected in its financial statements delivered
to the Administrative Agent pursuant to Section 8.4 on the
Closing Date, and (ii) when used in general, other than as
provided above, means principles that are (A) consistent with
the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect
from time to time, and (B) consistently applied with past
financial statements of the Borrower adopting the same
principles, provided that in each case referred to in this
definition of "generally accepted accounting principles" a
certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver
an unqualified opinion (other than a qualification regarding
changes in generally accepted accounting principles) as to fi-
nancial statements in which such principles have been properly
applied.
GE Capital. General Electric Capital Corporation, a
New York Corporation.
GE Obligations. As defined in the Plan.
GOB Order. See Section 11.22.
Guaranteed Pension Plan. Any employee pension ben-
efit plan within the meaning of Section 3(2) of ERISA maintained
or contributed to by the Borrower or any ERISA Affiliate the
benefits of which are guaranteed on termination in full or in
part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
Guarantor. Each Subsidiary of the Borrower.
Guaranty. The guaranty agreement, to be made by any
and each Guarantor in favor of the Banks and the Administrative
Agent pursuant to which each such Guarantor guaranties to the
Banks and the Administrative Agent the payment and performance
in full of the Obligations and in form and substance satisfac-
tory to the Banks and the Administrative Agent.
Hazardous Substances. See Section 7.18(b).
Henderson Distribution Center. The Borrower's ware-
house and distribution center located in Henderson, North
Carolina.
<PAGE>
Henderson Property. The Henderson Distribution Cen-
ter and the Borrower's corporate offices, data processing cen-
ter, and graphics production center located in Henderson, North
Carolina.
Indebtedness. All obligations, contingent and oth-
erwise, that in accordance with generally accepted accounting
principles should be classified on the obligor's balance sheet
as liabilities, or to which reference should be made by foot-
notes thereto (to the extent such footnote quantifies such ob-
ligations), including in any event and whether or not so clas-
sified: (i) all debt and similar monetary obligations, whether
direct or indirect, including, without limitation, Capitalized
Lease obligations; (ii) all liabilities secured by any mort-
gage, pledge, security interest, lien, charge or other encum-
brance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been
assumed; and (iii) all guarantees, endorsements and other con-
tingent obligations whether direct or indirect in respect of
indebtedness of others, including, without limitation, any
obligation to supply funds to or in any manner to invest in or
support, directly or indirectly, the debtor or any other Per-
son, to purchase indebtedness, or to assure the owner or obli-
gee of indebtedness against loss, through an agreement to pur-
chase goods, supplies, or services or provide other support for
the purpose of enabling the debtor or other Person to make
payment in respect of the indebtedness held by such owner or
obligee, and the obligations to reimburse the issuer in respect
of any letters of credit.
Interest Payment Date. (i) As to any Base Rate Loan,
the first Business Day of the calendar month following the last
day of each Interest Period therefor; and (ii) as to any LIBOR
Rate Loan, the last day of each Interest Period therefor.
Interest Period. With respect to each Revolving
Credit Loan (i) initially, the period commencing on the Draw-
down Date of such Loan and ending on the last day of one of the
periods set forth below, as selected by the Borrower in a Loan
Request (A) for any Base Rate Loan, the last day of the calen-
dar month; and (B) for any LIBOR Rate Loan, one (1), two (2),
or three (3) months after such Drawdown Date; and (ii) there-
after, each period commencing on the last day of the next pre-
ceding Interest Period applicable to such Revolving Credit Loan
and ending on the last day of one of the periods set forth
above; provided that all of the foregoing provisions relating
to Interest Periods are subject to the following:
<PAGE>
(a) if any Interest Period with respect to a
LIBOR Rate Loan would otherwise end on a day that is
not a LIBOR Business Day, that Interest Period shall
be extended to the next succeeding LIBOR Business Day
unless the result of such extension would be to carry
such Interest Period into another calendar month, in
which event such Interest Period shall end on the
immediately preceding LIBOR Business Day;
(b) if any Interest Period with respect to a
Base Rate Loan would end on a day that is not a
Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice
as provided in Section 2.7, the Borrower shall be
deemed to have requested a conversion of the affected
LIBOR Rate Loan to a Base Rate Loan and the continu-
ance of all Base Rate Loans as Base Rate Loans on the
last day of the then current Interest Period with
respect thereto;
(d) any Interest Period relating to any LIBOR
Rate Loan that begins on the last LIBOR Business Day
of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the
last LIBOR Business Day of a calendar month; and
(e) any Interest Period relating to any LIBOR
Rate Loan that would otherwise extend beyond the Ma-
turity Date shall end on the Maturity Date.
Inventory. All "inventory" of the Borrower as that
term is defined in Section 9-109 of the U.C.C. to which the
Borrower has title.
Inventory Reporting Package. The Borrower's inven-
tory reporting package consisting of the following items, all
in form satisfactory to the Facility Agents: (i) a "Store In-
ventory Report" detailing the amount and locations of inventory
on a first-in, first-out basis of inventory accounting, (ii) a
"Warehouse Inventory Report" which includes the physical ware-
house count and supporting general ledger detail, (iii) a re-
port setting forth by department inventory on a first-in, first-
out basis of inventory accounting, (iv) a report specifying all
inventory supported by outstanding letters of credit and (v)
all such other inventory reports and supporting schedules which
the Facility Agents shall request from time to time.
<PAGE>
Investments. All expenditures made and all liabili-
ties incurred (contingently or otherwise) for the acquisition
of stock or Indebtedness of, or for loans, advances, capital
contributions or transfers of property to, or in respect of any
guaranties (or other commitments as described under Indebted-
ness) of obligations of, any Person. In determining the ag-
gregate amount of Investments outstanding at any particular
time: (i) the amount of any Investment represented by a guar-
anty shall be taken at not less than the principal amount of the
obligations guaranteed and still outstanding; (ii) there shall
be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, re-
demption, retirement, repayment, liquidating dividend or liq-
uidating distribution); (iii) there shall not be deducted in
respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise;
and (iv) there shall not be deducted from the aggregate amount
of Investments any decrease in the value thereof.
IRS. The United States Internal Revenue Service.
L/C Fee Percentage. One and three quarters percent
(1.75%) as adjusted annually after January 28, 1996 in accor-
dance with the Performance Adjustment Feature.
Lease Assumption Order. That order entered by the
Bankruptcy Court on April 25, 1995 permitting the assumption by
Old Rose's of all nonresidential real property leases to which
Old Rose's is a party other than the leases relating to the
Specified GOB Stores.
Letter of Credit. See Section 4.1.1.
Letter of Credit Application. See Section 4.1.1.
Letter of Credit Limit. Forty million dollars
($40,000,000).
Letter of Credit Participation. See Section 4.1.4.
LIBOR Business Day. Any day on which commercial banks
are open for international business (including dealings in
Dollar deposits) in London, England or such other LIBOR in-
terbank market as may be selected by the Administrative Agent
in its sole discretion acting in good faith.
LIBOR Margin. Three and three-eighths percent
(3.375%) per annum, as adjusted annually after January 28, 1996
pursuant to the Performance Adjustment Feature.
<PAGE>
LIBOR Rate. For any Interest Period with respect to
a LIBOR Rate Loan, the rate of interest equal to (i) the rate
determined by the Administrative Agent at which Dollar deposits
for such Interest Period are offered based on information pre-
sented on Telerate Page 3750 (or any similar service or source
used by the Administrative Agent as a replacement or substitute
for Telerate) as of 11:00 a.m. London time on the second LIBOR
Business Day prior to the first day of such Interest Period,
divided by (ii) a number equal to 1.00 minus the Eurocurrency
Reserve Rate, if applicable.
LIBOR Rate Loans. Any Revolving Credit Loans bearing
interest calculated by reference to the LIBOR Rate.
Loan Documents. This Credit Agreement, the Notes, the
Letter of Credit Applications, the Letters of Credit, the
Security Documents, and all related documents, certificates,
filings, recordings, agreements and instruments.
Loan Request. See Section 2.6.
Loans. The Revolving Credit Loans.
Majority Banks. As of any date, the Banks holding at
least fifty-one percent (51%) of the outstanding principal
amount of the Notes on such date; and if no such principal is
outstanding, the Banks whose aggregate Revolving Commitments
constitute at least fifty-one percent (51%) of the Total Re-
volving Commitment.
Maturity Date. April 30, 1998.
Maximum Drawing Amount. The maximum aggregate amount
that the beneficiaries may at any time draw under all out-
standing Letters of Credit, as such aggregate amount may be
reduced from time to time pursuant to the terms of the Letters
of Credit.
Mortgaged Property. Any Real Estate which is subject
to any Mortgage, including all items of Real Estate constitut-
ing the Henderson Property.
Mortgages. The deed of trust, dated or to be dated
on or prior to the Closing Date, from the Borrower to the Ad-
ministrative Agent with respect to all of the interests of the
Borrower in the Henderson Property, and any other mortgages,
deeds of trust or other security instrument in favor of the
<PAGE>
Administrative Agent with respect to any interests of the Bor-
rower or any Guarantor in Real Estate (including leasehold in-
terests), all in form and substance satisfactory to the Banks
and the Administrative Agent.
Multiemployer Plan. Any multiemployer plan within the
meaning of Section 3(37) of ERISA maintained or contributed to
by the Borrower or any ERISA Affiliate.
Net Operating Income (or Deficit). The net income (or
deficit) of the Borrower after deduction of all expenses, taxes,
and other proper charges, determined in accordance with
generally accepted accounting principles after eliminating
therefrom (i) all extraordinary items of income (but not of
expense or loss) and (ii) for the fiscal year ended January 27,
1996 only, the extraordinary charges incurred through the Ef-
fective Date in connection with the reorganization of the Bor-
rower in connection with the Proceeding.
Notes. The Revolving Credit Notes.
Obligations. All indebtedness, obligations and li-
abilities of the Borrower to any of the Banks, the Administra-
tive Agent, and the Facility Agents, individually or collec-
tively, existing on the date of this Credit Agreement or aris-
ing thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliqui-
dated, secured or unsecured, arising by contract, operation of
law or otherwise, arising or incurred under this Credit Agree-
ment or any of the other Loan Documents or in respect of any of
the Loans made or Reimbursement Obligations incurred or any of
the Notes, Letter of Credit Applications, Letters of Credit or
other instruments at any time evidencing any thereof.
Old Rose's. Rose's Stores, Inc., a debtor and debtor
in possession, prior to the Effective Date.
Operating Cash Flow. For any period, an amount equal
to (i) EBITDA for such period, minus (ii) the sum of (A) all
cash obligations incurred for income taxes during such period,
plus (B) Capital Expenditures made during such period.
OSHA. The Occupational Safety and Health Act of 1970.
Outstanding. With respect to the Loans, the aggre-
gate unpaid principal thereof and accrued but unpaid interest
as of any date of determination.
<PAGE>
PBGC. The Pension Benefit Guaranty Corporation cre-
ated by Section 4002 of ERISA and any successor entity or
entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates
as defined in the Security Agreements.
Performance Adjustment Feature. The Performance Ad-
justment Feature set forth in Schedule 2 hereto.
Permitted Liens. Liens, security interests and other
encumbrances permitted by Section 9.2.
Person. Any individual, corporation, partnership,
trust, unincorporated association, business, or other legal
entity, and any government or any governmental agency or po-
litical subdivision thereof.
Plan. See Introductory Statement.
Plan Confirmation Order. See Introductory Statement.
Plan Modification Order. The order of the Bankruptcy
Court entered on April 24, 1995 confirming the Modified Plan
pursuant to Sections 1127 and 1129 of the Bankruptcy Court and
finding, inter alia, that the modifications to the Plan embod-
ied in the Modified Plan do not materially adversely affect the
treatment of any claims or interests under the Plan, which or-
der shall be in form and substance satisfactory to the Facility
Agents.
Projections. See Section 7.4.2.
Real Estate. All real property interests at any time
owned or leased (as lessee or sublessee) by the Borrower or a
Guarantor.
Reimbursement Obligation. The Borrower's obligation
to reimburse the Administrative Agent and the Banks on account
of any drawing under any Letter of Credit as provided in Section
4.2.
Revolving Commitment. With respect to each Bank,
during any period, the amount set forth on Schedule 1 hereto as
the amount of such Bank's commitment during such period to make
Revolving Credit Loans to, and to participate in the issuance,
extension and renewal of Letters of Credit for the account of,
the Borrower, as the same may be reduced from time to time; or
if such commitment is terminated pursuant to the provisions
hereof, zero.
<PAGE>
Revolving Credit Base Rate Margin. One and one-half
percent (1.5%) per annum, as adjusted annually after January 28,
1996 pursuant to the Performance Adjustment Feature.
Revolving Credit Loans. Revolving credit loans made
or to be made by the Banks to the Borrower pursuant to Section
2.
Revolving Credit Note Record. The grid attached to
a Revolving Credit Note, or the continuation of such grid, or
any other similar record, including computer records, maintained
by any Bank with respect to any Loan referred to in such
Revolving Credit Note.
Revolving Credit Notes. See Section 2.4.
Security Agreements. The Security Agreement dated or
to be dated as of or prior to the Closing Date, between the
Borrower and the Administrative Agent and each in form and sub-
stance satisfactory to the Banks and the Administrative Agent
and any future security or pledge agreement or similar instru-
ment between the Borrower or a Guarantor and the Administrative
Agent entered into from time to time.
Security Documents. The Guaranty (in respect of any
Guarantor), the Security Agreements, the Mortgages, the Agency
Account Agreements and any other security agreements, pledge
agreements and guaranties delivered to and in favor of the Ad-
ministrative Agent from time to time.
Settlement. The making of, or receiving of payments,
in immediately available funds, by the Banks, to the extent
necessary to cause each Bank's actual share of the outstanding
amount of Revolving Credit Loans (after giving effect to any
Loan Request) to be equal to each Bank's Commitment Percentage
of the outstanding amount of such Revolving Credit Loans (after
giving effect to any Loan Request), where, prior to such event
or action, the actual share is not so equal.
Settlement Amount. See Section 2.8(a).
Settlement Date. (a) The Friday of each week, or if
Friday is not a Business Day, the Business Day immediately
following such Friday or (b) any other Business Day selected by
the Administrative Agent.
Settling Bank. See Section 2.8(a).
Specified GOB Stores. The retail locations selected
by the Borrower and listed on Schedule 1.1 for closure and the
<PAGE>
conducting of Final GOB Sales in order to realize to the Bor-
rower no less than $3,000,000 in net proceeds after deductions
for the costs and expenses of implementing and conducting such
sales (including, without limitation, rent and occupancy ex-
pense, advertising and marketing expenses, payroll and security
costs, and corporate overhead and general administrative ex-
penses).
Stockholders' Equity. The excess of Total Assets over
Total Liabilities.
Subsidiary. Any corporation, association, trust,
partnership, joint venture or other business entity of which the
designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by
number of votes) of the outstanding Voting Stock.
Total Assets. All assets of the Borrower determined
in accordance with generally accepted accounting principles.
Total Debt Service Expense. For any period, the sum
of (i) the aggregate amount of interest required to be paid or
accrued by the Borrower during such period on all Indebtedness
of the Borrower outstanding during all or any part of such pe-
riod, whether such interest was or is required to be reflected
as an item of expense or capitalized, including payments con-
sisting of interest in respect of Capitalized Leases and in-
cluding commitment fees, agency fees, cash facility fees, bal-
ance deficiency fees and similar fees or expenses in connection
with the borrowing of money, plus (ii) the aggregate amount of
all scheduled repayments of principal on any Indebtedness (in-
cluding payments under Capitalized Leases) of the Borrower due
and payable during such period.
Total Liabilities. All liabilities of the Borrower
determined in accordance with generally accepted accounting
principles.
Total Revolving Commitment. The sum of the Revolving
Commitments of the Banks, as in effect from time to time, and
as reduced or terminated pursuant to the provisions of this
Credit Agreement, including pursuant to Section 2.3. As of the
Closing Date, the Total Revolving Commitment shall be one
hundred twenty-five million dollars ($125,000,000).
Type. As to any Revolving Credit Loan, its nature as
a Base Rate Loan or a LIBOR Rate Loan.
U.C.C. The Uniform Commercial Code as in effect from
time to time in the State of New York.
<PAGE>
Uniform Customs. With respect to any Letter of
Credit, the Uniform Customs and Practice for Documentary Cred-
its (1993 Revision), International Chamber of Commerce Publi-
cation No. 500 or any successor version thereto adopted by the
Administrative Agent in the ordinary course of its business as
a letter of credit issuer and in effect at the time of issuance
of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement
Obligation for which the Borrower does not reimburse the Ad-
ministrative Agent and the Banks on the date specified in, and
in accordance with, Section 4.2.
Voting Stock. Stock or similar interests, of any
class or classes (however designated), the holders of which are
at the time entitled, as such holders, to vote for the election
of a majority of the directors (or persons performing similar
functions) of the corporation, association, trust, partnership,
joint venture or other business entity involved, whether or not
the right so to vote exists by reason of the happening of a
contingency.
2. Rules of Interpretation.
(a) Unless otherwise indicated, a reference to
any document or agreement shall include such document
or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the
terms of this Credit Agreement, provided that any
reference to the Plan shall mean only the Plan as
amended, modified or supplemented in a manner rea-
sonably acceptable to the Facility Agents.
(b) The singular includes the plural and the
plural includes the singular.
(c) A reference to any law includes any amend-
ment or modification to such law.
(d) A reference to any Person includes its
permitted successors and permitted assigns.
(e) Accounting terms not otherwise defined
herein have the meanings assigned to them by gener-
ally accepted accounting principles applied on a
consistent basis by the accounting entity to which
they refer.
(f) The words "include", "includes" and "in-
cluding" are not limiting.
<PAGE>
(g) All terms not specifically defined herein
or by generally accepted accounting principles, which
terms are defined in the U.C.C., have the meanings
assigned to them therein.
(h) Reference to a particular "Section" refers
to that section of this Credit Agreement unless other-
wise indicated.
(i) The words "herein", "hereof", "hereunder"
and words of like import shall refer to this Credit
Agreement as a whole and not to any particular sec-
tion or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
1. Commitment to Lend. Subject to the terms and
conditions set forth in this Credit Agreement, each of the Banks
severally agrees to lend to the Borrower and the Borrower may
borrow, repay, and reborrow from time to time between the
Closing Date and the Maturity Date upon notice by the Borrower
to the Administrative Agent given in accordance with Section
2.6, such sums as are requested by the Borrower up to a maxi-
mum aggregate amount outstanding (after giving effect to all
amounts requested) at any one time equal to such Bank's Re-
volving Commitment minus such Bank's Commitment Percentage of
the sum of the Maximum Drawing Amount on all Letters of Credit
and all Unpaid Reimbursement Obligations, provided that,
notwithstanding anything in this Credit Agreement to the
contrary, including Section 2.9, (i) the sum of the outstanding
amount of the Revolving Credit Loans (after giving effect to all
amounts requested) plus the Maximum Drawing Amount on all
Letters of Credit and all Unpaid Reimbursement Obligations shall
not at any time exceed the Total Revolving Commitment and (ii)
the sum of the outstanding amount of the Revolving Credit Loans
(after giving effect to all amounts requested) plus the Maximum
Drawing Amount on all Letters of Credit and all Unpaid Re-
imbursement Obligations minus Cash Collateralized Letters of
Credit shall not at any time exceed the Borrowing Base. The
Revolving Credit Loans shall be made pro rata in accordance with
each Bank's Commitment Percentage. Each request for a Revolving
Credit Loan hereunder shall constitute a representation and
warranty by the Borrower that the conditions set forth in
Section 11 and Section 12, in the case of the initial Revolving
Credit Loans to be made on the Closing Date and Section 12, in
the case of all other Revolving Credit Loans, have been
satisfied on the date of such request.
<PAGE>
2. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the accounts of the Banks in ac-
cordance with their respective Commitment Percentages a com-
mitment fee calculated at the rate of one-half of one percent
(0.50%) per annum on the average daily amount during each cal-
endar month or portion thereof from the Closing Date to the
Maturity Date by which (a) the Total Revolving Commitment, mi-
nus the sum of the Maximum Drawing Amount and all Unpaid Re-
imbursement Obligations, exceeds (b) the outstanding amount of
Revolving Credit Loans. The commitment fee shall be payable
monthly in arrears on the first Business Day of each fiscal
month for the immediately preceding fiscal month commencing on
the first such date following the date hereof, with a final
payment on the Maturity Date or any earlier date on which the
Revolving Commitments shall terminate.
3. Reduction of Total Revolving Commitment. The
Borrower shall have the right at any time and from time to time
upon five (5) Business Days' prior written notice to the Admin-
istrative Agent to (i) reduce by $1,000,000 or an integral
multiple thereof or (ii) subject to Section 4.2(c), terminate
entirely the Total Revolving Commitment, whereupon the Revolving
Commitments of the Banks shall be reduced pro rata in accordance
with their respective Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated,
provided that the Total Revolving Commitment shall at no time
be less than the Maximum Drawing Amount. Notwithstanding any-
thing to the contrary in this Credit Agreement, on each an-
niversary of the Closing Date, the Total Revolving Commitment
then in effect shall be permanently reduced in the amount of
five million dollars ($5,000,000). Any reduction of the Total
Revolving Commitment shall reduce the Revolving Commitments of
each Bank pro rata in accordance with their respective Commit-
ment Percentages of such reduction. Upon the effective date of
any reduction or termination of the Total Revolving Commitment,
the Borrower shall pay to the Administrative Agent for the re-
spective accounts of the Banks the full amount of any commit-
ment fee then accrued on the amount of the reduction. No re-
duction or termination of any Bank's Revolving Commitments or
the Total Revolving Commitment may be reinstated.
4. The Revolving Credit Notes. The Revolving Credit
Loans shall be evidenced by separate promissory notes of the
Borrower in substantially the form of Exhibit B hereto (each a
"Revolving Credit Note"), dated as of the Closing Date and
completed with appropriate insertions. One Revolving Credit
Note shall be payable to the order of each Bank in a principal
amount equal to such Bank's Revolving Commitment or, if less,
the outstanding amount of all Revolving Credit Loans made by
such Bank, plus interest accrued thereon, as set forth herein.
<PAGE>
The Borrower irrevocably authorizes each Bank to make or cause
to be made, at or about the time of the Drawdown Date of any
Revolving Credit Loan or at the time of receipt of any payment
of principal on such Bank's Revolving Credit Note, an
appropriate notation on such Bank's Revolving Credit Note Record
reflecting the making of such Revolving Credit Loan or (as the
case may be) the receipt of such payment. The outstanding
amount of the Revolving Credit Loans set forth on such Bank's
Revolving Credit Note Record, absent manifest error, shall be
prima facie evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in
so recording, any such amount on such Bank's Revolving Credit
Note Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under any Revolving Credit Note to
make payments of principal of or interest on any Revolving
Credit Note when due.
5. Interest on Revolving Credit Loans. Except as
otherwise provided in Section 5.11:
(a) Each Base Rate Loan shall bear interest for
the period commencing with the Drawdown Date thereof
and ending on the last day of the Interest Period with
respect thereto at a per annum rate equal to the sum
of the Alternate Base Rate plus the Revolving Credit
Base Rate Margin.
(b) Each LIBOR Rate Loan shall bear interest for
the period commencing with the Drawdown Date thereof
and ending on the last day of the Interest Period with
respect thereto at a per annum rate equal to the sum
of the LIBOR Rate determined for such Interest Period
plus the LIBOR Margin.
(c) The Borrower promises to pay interest on
each Revolving Credit Loan in arrears on each Inter-
est Payment Date with respect thereto.
6. Requests for Revolving Credit Loans.
(a) Subject to the provisions of Section 5.12,
the Borrower shall give to the Administrative Agent
written notice in the form of Exhibit C hereto (or
telephonic notice confirmed in a writing in the form
of Exhibit C hereto) of each Revolving Credit Loan
requested hereunder (a "Loan Request") (i) no later
than 2:00 p.m. (Boston time) on the proposed Drawdown
Date of any Base Rate Loan and (ii) no less than three
(3) LIBOR Business Days prior to the proposed
<PAGE>
Drawdown Date of any LIBOR Rate Loan. Each such no-
tice shall specify (A) the principal amount of the
Revolving Credit Loan requested, (B) the proposed
Drawdown Date of such Revolving Credit Loan, (C) the
Type of such Revolving Credit Loan and (D) with re-
spect to LIBOR Rate Loans, the Interest Period for
such Revolving Credit Loan. Promptly upon receipt of
any such notice in respect of LIBOR Rate Loans, the
Administrative Agent shall notify each of the Banks
thereof. Each Loan Request shall be irrevocable and
binding on the Borrower and shall obligate the Bor-
rower to accept the Revolving Credit Loan requested
from the Banks on the proposed Drawdown Date. Each
Loan Request shall be in a minimum aggregate amount
of $1,000,000 or an integral multiple thereof. The
Administrative Agent shall make each Loan available
to the Borrower by entry of credit to the Borrower's
operating account(s) with the Administrative Agent or
such other account designated by the Borrower and
agreed to by the Administrative Agent.
(b) Notwithstanding the notice and minimum
amount requirements set forth in Section 2.6(a), but
otherwise in accordance with the terms and conditions
of this Credit Agreement, the Administrative Agent
may, in its sole discretion and without conferring
with the Banks, make Revolving Credit Loans to the
Borrower by entry of credits to the Borrower's
operating account(s) with the Administrative Agent or
such other account designated by the Borrower and
agreed to by the Administrative Agent to cover checks
or other charges which the Borrower has drawn or made
against such account. The Borrower hereby requests
and authorizes the Administrative Agent to make from
time to time such Revolving Credit Loans by means of
appropriate entries of such credits sufficient to
cover checks and other charges then presented. The
Borrower acknowledges and agrees that the making of
such Revolving Credit Loans shall, in each case, be
subject in all respects to the provisions of this
Credit Agreement as if they were Revolving Credit
Loans covered by a Loan Request including, without
limitation, the limitations set forth in Section 2.1
and the requirements that the applicable provisions
of Section 11 (in the case of Revolving Credit Loans
made on the Closing Date) and Section 12 be satisfied.
All actions taken by the Administrative Agent pursuant
to the provisions of this Section 2.6(b) shall be
conclusive and binding on the Borrower absent the
Administrative Agent's willful misconduct. Prior to
<PAGE>
a Settlement, interest on Revolving Credit Loans made
pursuant to this Section 2.6(b) shall be for the
account of the Administrative Agent.
7. Conversion Options.
1. Conversion to Different Type of Revolving
Credit Loan. Subject to the provisions of Section
5.12, the Borrower may elect from time to time to
convert any outstanding Revolving Credit Loan to a
Revolving Credit Loan of another Type, provided that
(i) with respect to any such conversion of a Base Rate
Loan to a LIBOR Rate Loan, the Borrower shall give the
Administrative Agent at least three (3) LIBOR Business
Days' prior written notice of such election; and (ii)
with respect to any such conversion of a LIBOR Rate
Loan into a Base Rate Loan, such conversion shall only
be made on the last day of the Interest Period with
respect thereto. All or any part of outstanding
Revolving Credit Loans of any Type may be converted
into a Revolving Credit Loan of another Type as pro-
vided herein, provided that any partial conversion
shall be in an aggregate principal amount of
$1,000,000 or a whole multiple thereof. Each Con-
version Request relating to the conversion of a Re-
volving Credit Loan to a LIBOR Rate Loan shall be
irrevocable by the Borrower. Notwithstanding any-
thing to the contrary in this Credit Agreement, the
Borrower shall not be permitted to have more than five
(5) LIBOR Rate Loans outstanding at any one time.
2. Continuation of Type of Revolving Credit
Loan. Any Revolving Credit Loan of any Type may be
continued as a Revolving Credit Loan of the same Type
upon the expiration of an Interest Period with re-
spect thereto by compliance by the Borrower with the
notice provisions contained in Section 2.7.1; provided
that no LIBOR Rate Loan may be continued as such when
any Default or Event of Default has occurred and is
continuing, and, upon any officer of the Administra-
tive Agent active upon the Borrower's account having
actual knowledge of any such condition, then at the
end of the Interest Period with respect to any LIBOR
Rate Loan then outstanding, each such LIBOR Rate Loan
shall be automatically converted to a Base Rate Loan.
In the event that the Borrower fails to provide any
such notice with respect to the continuation of any
LIBOR Rate Loan as such, then such LIBOR Rate Loan
shall be automatically converted to a Base Rate Loan
<PAGE>
on the last day of the Interest Period relating
thereto. The Administrative Agent shall notify the
Banks promptly when any such automatic conversion
contemplated by this Section 2.7 is scheduled to
occur.
8. Settlements; Failure to Make Funds Available.
(a) On each Settlement Date, the Administrative
Agent shall, not later than 12:00 noon (Boston time),
give telephonic or facsimile notice (i) (A) to the
Banks of the respective outstanding amount of Re-
volving Credit Loans made by the Administrative Agent
on behalf of the Banks from the immediately preceding
Settlement Date through the close of business on the
prior day and (B) to the Banks of the unfunded amount,
if any, of each Revolving Credit Loan requested
pursuant to Section 2.6(a) as of such date and (ii)
to the Banks of the amount (a "Settlement Amount")
that each Bank (the "Settling Bank") shall pay to
effect a Settlement of any Revolving Credit Loan. A
statement of the Administrative Agent submitted to the
Banks with respect to any amounts owing under this
Section 2.8 shall be prima facie evidence of the
amount due and owing. Each Settling Bank shall, not
later than 3:00 p.m. (Boston time) on such Settlement
Date, effect a wire transfer of immediately available
funds to the Administrative Agent in the amount of the
Settlement Amount. All funds advanced by any Bank as
a Settling Bank pursuant to this Section 2.8 shall for
all purposes be treated as a Revolving Credit Loan
made by such Settling Bank to the Borrower and all
funds received by any Bank pursuant to this Section
2.8 shall for all purposes be treated as repayment of
amounts owed with respect to Revolving Credit Loans
made by such Bank. In the event that any bankruptcy,
reorganization, liquidation, receivership or similar
cases or proceedings in which the Borrower is a debtor
prevents a Settling Bank from making any Revolving
Credit Loan to effect a Settlement as contemplated
hereby, or the Administrative Agent otherwise deter-
mines that such procedure should be modified, such
Settling Bank will make such disposition and ar-
rangements with the other Banks and the Administra-
tive Agent with respect to such Revolving Credit
Loans, either by way of purchase of participations,
distribution, pro tanto assignment of claims, subro-
gation or otherwise as shall result in each Bank's
share of the outstanding Revolving Credit Loans being
equal, as nearly as may be, to such Bank's Commitment
<PAGE>
Percentage of the outstanding amount of the Revolving
Credit Loans.
(b) The Administrative Agent may, unless noti-
fied to the contrary by any Bank prior to a Settle-
ment Date, assume that such Bank has made or will make
available to the Administrative Agent on such
Settlement Date the amount of such Bank's Settlement
Amount, and the Administrative Agent may (but it shall
not be required to), in reliance upon such as-
sumption, make available to the Borrower a corres-
ponding amount. If any Bank makes available to the
Administrative Agent such amount on a date after such
Settlement Date, such Bank shall pay to the Adminis-
trative Agent on demand an amount equal to the prod-
uct of (i) the average computed for the period re-
ferred to in clause (iii) below, of the weighted av-
erage interest rate paid by the Administrative Agent
for federal funds acquired by the Administrative Agent
during each day included in such period, times (ii)
the amount of such Settlement Amount, times (iii) a
fraction, the numerator of which is the number of days
that elapse from and including such Settlement Date
to the date on which the amount of such Settlement
Amount shall become immediately available to the
Administrative Agent, and the denominator of which is
360. A statement of the Administrative Agent
submitted to such Bank with respect to any amounts
owing under this paragraph shall be prima facie
evidence of the amount due and owing to the
Administrative Agent by such Bank. If such Bank's
Settlement Amount is not made available to the Ad-
ministrative Agent by such Bank within three (3)
Business Days following such Settlement Date, the
Borrower shall be required to pay such amount to the
Administrative Agent on demand, with interest thereon
at the rate per annum applicable to the Revolving
Credit Loans.
(c) The failure or refusal of any Bank to make
available to the Administrative Agent at the afore-
said time and place on any Settlement Date the amount
of its Settlement Amount (i) shall not relieve any
other Bank from its several obligations hereunder to
make available to the Administrative Agent the amount
of such other Bank's Settlement Amount and (ii) shall
not impose upon such other Bank any liability with
respect to such failure or refusal or otherwise in-
crease the commitment of such other Bank.
<PAGE>
9. Change in Borrowing Base. The Borrowing Base
shall be determined weekly by the Administrative Agent by ref-
erence to the Borrowing Base Report delivered to the Banks and
the Administrative Agent pursuant to Section 8.4(h). The
Administrative Agent shall give to the Borrower written notice
of any change in the Borrowing Base determined by the
Administrative Agent resulting from a change in the Estimated
Net GOB Realization Percentage based upon the results of any
evaluation conducted by the Appraiser, which notice shall be
effective immediately upon its receipt by the Borrower. Prior
to such time as the Borrower receives such notice, the Estimated
Net GOB Realization Percentage shall be the amount in effect
prior to the receipt of such notice. In the event that the
Borrower is required to make an immediate payment to the
Administrative Agent pursuant to Section 3.2(a) because of a
change in the Borrowing Base resulting from a change in the
Estimated Net GOB Realization Percentage (a "Required Borrowing
Base Payment") and the amount of such Required Borrowing Base
Payment is less than five million dollars ($5,000,000), the
Borrower shall not be required to make such payment until the
date that is thirty (30) days after the effective date of the
notice described above. In addition, if immediately after
receiving notice of a change in the Estimated Net GOB
Percentage, the Borrower asserts in good faith that the
Estimated Net GOB Realization Percentage determined by the Ap-
praiser is manifestly incorrect for reasons other than a dis-
agreement with the professional opinion and judgment of the
Appraiser, the Borrower will not be required to make the Re-
quired Borrowing Base Payment related to such disputed change
(but shall be required to make any payment related to the por-
tion of a change that is undisputed) until the earlier of (a)
the date that the Administrative Agent reasserts that the no-
ticed Estimated Net GOB Realization Percentage is correct and
(b) the fifth Business Day following the date of such change if
a payment is still required on such date pursuant to Section
3.2(a).
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
1. Maturity. The Borrower promises to pay on the
Maturity Date, and there shall become absolutely due and pay-
able on the Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and
unpaid interest thereon and all other Obligations under the Loan
Documents.
2. Mandatory Repayments of Revolving Credit Loans.
(a) Pursuant to Section 5.2, good collected
funds deposited in the Agency Concentration Account shall be
applied to the outstanding amount of the Revolving Credit Loans.
<PAGE>
If at any time either (i) the sum of the outstanding amount of
the Revolving Credit Loans, the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations exceeds the Total Revolving
Commitment or (ii) the sum of the outstanding amount of the
Revolving Credit Loans, the Maximum Drawing Amount and all Un-
paid Reimbursement Obligations minus the amount of Cash Col-
lateralized Letters of Credit exceeds the Borrowing Base, then
the Borrower shall immediately (subject to Section 2.9) pay the
amount of the greater of any such excess(es) to the
Administrative Agent for the respective accounts of the Banks
for application: first, to any Unpaid Reimbursement Ob-
ligations; second, to the Revolving Credit Loans; and third, to
provide to the Administrative Agent cash collateral for Re-
imbursement Obligations as contemplated by Section 4.2(b) and
(c). Each payment of any Unpaid Reimbursement Obligations or
prepayment of Revolving Credit Loans shall be allocated among
the Banks, pro rata in proportion to each such Bank's Commitment
Percentage of such Unpaid Reimbursement Obligation or (as the
case may be) the respective unpaid principal amount.
(b) The Borrower agrees to repay the Revolving Credit
Loans such that for a period of thirty consecutive days during
every period from December 1 to the immediately succeeding
February 15, the total aggregate outstanding amount of Revolving
Credit Loans shall be no more than (i) $45,000,000 during such
period ending February 15, 1996, (ii) $27,000,000 during such
period ending February 15, 1997 and (iii) $22,000,000 during
such period ending February 15, 1998.
3. Optional Repayments of Revolving Credit Loans.
The Borrower shall have the right, at its election, to repay the
outstanding amount of the Revolving Credit Loans, as a whole or
in part, at any time without penalty or premium, provided that
any full or partial prepayment of the outstanding amount of any
LIBOR Rate Loans pursuant to this Section 3.3 may be made only
on the last day of the Interest Period relating thereto. In the
case of LIBOR Rate Loans, the Borrower shall give the
Administrative Agent, no later than 10:00 a.m., Boston time, at
least three (3) LIBOR Business Days' notice of any proposed
prepayment pursuant to this Section 3.3, which notice shall
specify the proposed date of prepayment and the principal amount
to be prepaid. Each such partial prepayment of the Revolving
Credit Loans shall be applied, in the absence of instruction by
the Borrower, first to the principal of Base Rate Loans and then
to the principal of LIBOR Rate Loans. Each partial prepayment
shall be allocated among the Banks, in proportion to the re-
spective unpaid principal amount of each Bank's Revolving Credit
Note.
<PAGE>
4. LETTERS OF CREDIT.
1. Letter of Credit Commitments.
1. Commitment to Issue Letters of Credit.
Subject to the terms and conditions hereof and the
execution and delivery by the Borrower of a letter of
credit application on the Administrative Agent's
customary form (a "Letter of Credit Application"), the
Administrative Agent on behalf of the Banks and in
reliance upon the agreement of the Banks set forth in
Section 4.1.4 and upon the representations and
warranties of the Borrower contained herein, agrees,
in its individual capacity, to issue, extend and renew
for the account of the Borrower, for purposes agreed
to by the Borrower and the Facility Agents, one or
more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as
may be requested from time to time by the Borrower and
agreed to by the Administrative Agent; provided,
however, that, after giving effect to such request,
(a) the sum of (i) the aggregate Maximum Drawing
Amount and (ii) all Unpaid Reimbursement Obligations
shall not exceed the Letter of Credit Limit at any one
time, (b) the sum of (i) the aggregate Maximum Drawing
Amount, (ii) all Unpaid Reimbursement Obligations, and
(iii) the amount of all Revolving Credit Loans
outstanding shall not exceed the Total Revolving
Commitment and (c) the sum of (i) the aggregate
Maximum Drawing Amount, (ii) all Unpaid Reimbursement
Obligations minus Cash Collateralized Letters of
Credit, and (iii) the amount of all Revolving Credit
Loans outstanding shall not exceed the Borrowing Base.
A portion of the Letter of Credit Limit in an amount
to be determined may be available for a limited period
of time to provide a Letter of Credit for the benefit
of a representative of certain trade creditors on
terms to be determined that are acceptable to the
Facility Agents (including, without limitation, terms
relating to face amount, conditions to drawing,
expiration date, form of the Letter of Credit and the
terms of related agreements and instruments). Within
three Business Days after the Administrative Agent
issues a Letter of Credit intended to replace an
existing letter of credit issued prior to the Closing
Date (each an "Existing Standby Letter of Credit"),
the Borrower agrees to provide the Administrative
Agent with evidence reasonably satisfactory to the
Administrative Agent that such Existing Standby Letter
of Credit has been cancelled.
<PAGE>
2. Letter of Credit Applications. Each Letter
of Credit Application shall be completed to the
satisfaction of the Administrative Agent. In the
event that any provision of any Letter of Credit Ap-
plication shall be inconsistent with any provision of
this Credit Agreement, then the provisions of this
Credit Agreement shall, to the extent of any such
inconsistency, govern.
3. Terms of Letters of Credit. Each Letter of
Credit issued, extended or renewed hereunder shall,
among other things, (i) provide for the payment of
sight or time drafts for honor thereunder when pre-
sented in accordance with the terms thereof and when
accompanied by the documents described therein, (ii)
if a documentary Letter of Credit, have an expiry date
no later than 150 days from the date of such issuance,
and (iii) if a standby Letter of Credit, have an
expiry date of one (1) year or such shorter period as
may be requested by the Borrower, and if so requested
by the Borrower in the Letter of Credit Application
therefor, an outside expiry date of more than one (1)
year so long as such Letter of Credit will otherwise
expire unless renewed on an annual basis. Each
annually renewable standby Letter of Credit shall
automatically renew if notice of non-renewal is not
given by the Administrative Agent to the beneficiary
of such Letter of Credit at least sixty (60) days
prior to any annual renewal date. The Administrative
Agent agrees to refrain from giving any such notice
of non-renewal so long as (a) the conditions set forth
in Section 12 have been met and (b) the next renewal
date for such Letter of Credit would not be beyond the
Maturity Date. Each Letter of Credit issued, extended
or renewed hereunder shall be subject to the Uniform
Customs. Notwithstanding anything to the contrary
contained herein or otherwise, the Letter of Credit
issued for the benefit of a representative of certain
trade creditors shall permanently expire and be
cancelled no later than one year after the Closing
Date.
4. Reimbursement Obligations of Banks. Each
Bank severally agrees that it shall be absolutely
liable, without regard to the occurrence of any
Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Bank's
Commitment Percentage, to reimburse the Ad-
ministrative Agent on demand for the amount of each
draft paid by the Administrative Agent under each
<PAGE>
Letter of Credit to the extent that such amount is not
reimbursed by the Borrower pursuant to Section 4.2
(such agreement for a Bank being called herein the
"Letter of Credit Participation" of such Bank).
5. Participations of Banks. Each such payment
made by a Bank shall be treated as the purchase by
such Bank of a participating interest in the
Borrower's Reimbursement Obligation under Section 4.2
in an amount equal to such payment. Each Bank shall
share in accordance with its participating interest
in any interest which accrues pursuant to Section 4.2.
6. Certain Letters of Credit Outstanding on the
Closing Date. All provisions of this Credit Agreement
shall apply to letters of credit issued by FNBB prior
to the Closing Date at the request of GE Capital in
connection with the DIP Facility and which remain
outstanding on and after the Closing Date. On and
after the Closing Date, such letters of credit shall
be considered Letters of Credit for all purposes under
this Credit Agreement and such Letters of Credit shall
be deemed to have been issued by the Administrative
Agent on the Closing Date. In addition, and without
limiting the generality of the foregoing, in the event
that any letters of credit issued by FNBB prior to the
Closing Date are drawn either before, on or after the
Closing Date, the Borrower shall reimburse the
Administrative Agent for all such drawings and any and
all associated fees, costs and other charges as if
such letters of credit had been issued by the
Administrative Agent on the Closing Date.
2. Reimbursement Obligation of the Borrower. In
order to induce the Administrative Agent to issue, extend and
renew each Letter of Credit and the Banks to participate
therein, the Borrower hereby agrees to reimburse or pay to the
Administrative Agent, for the account of the Administrative
Agent or (as the case may be) the Banks, with respect to each
Letter of Credit issued (or deemed issued), extended or renewed
by the Administrative Agent hereunder,
(a) on each date that any draft presented under
such Letter of Credit is honored by the Administra-
tive Agent, or the Administrative Agent otherwise
makes a payment with respect thereto, (i) the amount
paid by the Administrative Agent under or with re-
spect to such Letter of Credit, and (ii) the amount
<PAGE>
of any taxes, fees, charges or other costs and ex-
penses whatsoever incurred by the Administrative Agent
or any Bank in connection with any payment made by the
Administrative Agent or any Bank under, or with
respect to, such Letter of Credit, and
(b) on the thirtieth (30th) day prior to the
Maturity Date (and notwithstanding the expiration date
of any outstanding Letter of Credit), an amount equal
to one hundred and five percent (105%) of the ag-
gregate Maximum Drawing Amount under all then out-
standing Letters of Credit, which amount shall be held
by the Administrative Agent for the benefit of the
Banks and the Administrative Agent in an interest
bearing cash collateral account as cash collateral for
all Reimbursement Obligations; provided however that
in lieu of causing such payment to a cash collateral
account, the Borrower may cause to be issued letters
of credit for the benefit of the Administrative Agent
in an amount equal to one hundred and five percent
(105%) of the aggregate Maximum Drawing Amount under
all then outstanding Letters of Credit in form and
substance and from financial institutions satisfactory
to the Administrative Agent in its sole discretion,
and
(c) upon the termination of the Total Revolving
Commitment, or the acceleration of the Reimbursement
Obligations with respect to all Letters of Credit in
accordance with Section 13, an amount equal to one
hundred and five percent (105%) of the aggregate
Maximum Drawing Amount under all then outstanding
Letters of Credit, which amount shall be held by the
Administrative Agent for the benefit of the Banks and
the Administrative Agent in an interest bearing cash
collateral account as cash collateral for all Reim-
bursement Obligations.
Each such payment shall be made to the Administrative Agent at
the Administrative Agent's Head Office in immediately available
funds. Interest on any and all amounts remaining unpaid by the
Borrower under this Section 4.2 at any time from the date such
amounts become due and payable (whether as stated in this
Section 4.2, by acceleration or otherwise) until payment in full
(whether before or after judgment) shall be payable to the
Administrative Agent on demand at the rate specified in Section
5.11 for overdue principal on the Revolving Credit Loans.
3. Letter of Credit Payments. If any draft shall be
presented or other demand for payment shall be made under any
<PAGE>
Letter of Credit, the Administrative Agent shall promptly notify
the Borrower of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to
pay such draft or honor such demand for payment. If the
Borrower fails to reimburse the Administrative Agent as provided
in Section 4.2 on or before the date that such draft is paid or
other payment is made by the Administrative Agent, the Ad-
ministrative Agent may at any time thereafter notify the Banks
of the amount of any such Unpaid Reimbursement Obligation. No
later than 3:00 p.m. (Boston time) on the Business Day next
following the receipt of such notice, each Bank shall make
available to the Administrative Agent, at the Administrative
Agent's Head Office, in immediately available funds, such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation,
together with an amount equal to the product of (i) the average,
computed for the period referred to in clause (iii) below, of
the weighted average interest rate paid by the Administrative
Agent for federal funds acquired by the Administrative Agent
during each day included in such period, times (ii) the amount
equal to such Bank's Commitment Percentage of such Unpaid
Reimbursement Obligation, times (iii) a fraction, the numerator
of which is the number of days that elapse from and including
the date the Administrative Agent paid the draft presented for
honor or otherwise made payment to the date on which such Bank's
Commitment Percentage of such Unpaid Reimbursement obligation
shall become immediately available to the Administrative Agent,
and the denominator of which is 360. The responsibility of the
Administrative Agent to the Borrower and the Banks shall be only
to determine in good faith that the documents (including each
draft) delivered under each Letter of Credit in connection with
such presentment are in conformity in all material respects with
such Letter of Credit. The Borrower and each Bank agrees that
any action taken or failure to act by the Administrative Agent
in connection with this Credit Agreement or a Letter of Credit
shall be binding upon the Borrower, the Banks and all future
holders of the Revolving Credit Notes or of a Letter of Credit
Participation except in cases of gross negligence or willful
misconduct as finally determined by a court of competent
jurisdiction. Without limiting the foregoing sentence, the
Administrative Agent shall be fully justified in failing or
refusing to take any action under this Credit Agreement unless
it shall first have received such advice or concurrence of the
Majority Banks as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction against any
and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. In
addition, the Administrative Agent shall in all cases be fully
protected and not subject to any liability in acting, or in
refraining from acting, under this Agreement in accordance with
a request of the Majority Banks.
<PAGE>
4. Obligations Absolute. The Borrower's obligations
under this Section 4 shall be absolute and unconditional under
any and all circumstances and irrespective of the occurrence of
any Default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Adminis-
trative Agent, any Bank or any beneficiary of a Letter of
Credit. The Borrower further agrees with the Administrative
Agent and the Banks that the Administrative Agent and the Banks
shall not be responsible for, and the Borrower's Reimbursement
Obligations under Section 4.2 shall not be affected by, among
other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, fraudulent or
forged, or any dispute between or among the Borrower, the ben-
eficiary of any Letter of Credit or any financing institution
or other party to which any Letter of Credit may be transferred
or any claims or defenses whatsoever of the Borrower against the
beneficiary of any Letter of Credit or any such transferee. The
Administrative Agent and the Banks shall not be liable for any
error, omission, interruption or delay in transmission, dis-
patch or delivery of any message or advice, however transmit-
ted, in connection with any Letter of Credit. The Borrower
agrees that any action taken or omitted by the Administrative
Agent or any Bank under or in connection with each Letter of
Credit and the related drafts and documents, if done in good
faith, shall be binding upon the Borrower and shall not result
in any liability on the part of the Administrative Agent or any
Bank to the Borrower.
5. Reliance by Issuer. To the extent not incon-
sistent with Section 4.4, the Administrative Agent shall be
entitled to rely, and shall be fully protected in relying upon,
any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other
document or instrument that appears on its face to be in order
and is believed by it in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel,
independent accountants and other experts selected by the
Administrative Agent.
6. Letter of Credit Fees. The Borrower shall pay a
fee (in each case, a "Letter of Credit Fee") to the Adminis-
trative Agent in respect of (A) all standby Letters of Credit,
quarterly in arrears (or at the sole discretion of the
Administrative Agent, monthly in arrears) based on the average
daily outstanding balance of all standby Letters of Credit and
(B) all documentary Letters of Credit, monthly in arrears (based
on the average daily outstanding balance of all documentary
<PAGE>
Letters of Credit), in the case of clauses (A) and (B) equal to
the then applicable L/C Fee Percentage per annum of the face
amount of such standby Letters of Credit or such documentary
Letters of Credit, plus, on the date of issuance and at such
other time or times as such charges are customarily made by the
Administrative Agent, the Administrative Agent's customary
issuance, amendment and processing fees, as the case may be
(including, without limitation, the Administrative Agent's
customary time negotiation fee per document examination as
applicable), such Letter of Credit Fees (but not such issuance,
amendment, or processing fees, which are for the account of the
Administrative Agent only) to be for the accounts of the Banks
in accordance with their respective Commitment Percentages.
5. CERTAIN GENERAL PROVISIONS.
1. Agency Fee. The Borrower shall pay to the Ad-
ministrative Agent annually in advance, for the Administrative
Agent's own account, on the Closing Date and on each anniver-
sary of the Closing Date, the Agency Fee.
2. Depository Arrangements.
(a) The Borrower shall, prior to the Closing
Date, (i) establish a deposit account entitled "Rose's
Stores, Inc." (the "Agency Concentration Account")
maintained with the Administrative Agent at the Ad-
ministrative Agent's Head Office and under the con-
trol of the Administrative Agent. Beginning within
the periods set forth in the next succeeding
sentences, the Borrower shall cause to remain in full
force and effect separate agency account agreements
(the "Agency Account Agreements") in form and sub-
stance satisfactory to the Administrative Agent among
the Borrower, the Administrative Agent and each in-
stitution (each, a "Collection Bank") listed on
Schedule 7.20 hereto with which the Borrower main-
tains a depository account (each, a "Collection Ac-
count"), pursuant to which all collected funds in each
respective Collection Account shall be transferred by
ACH drafts or federal wire transfer to the
Administrative Agent on a daily basis for deposit in
the Agency Concentration Account. Commencing on the
Closing Date, the Borrower shall cause to be main-
tained in effect at all times Agency Account Agree-
ments relating to all Collection Accounts located at
Bankers Trust Company and Centura Bank and Trust
Company. With respect to all Collection Accounts at
other Collection Banks, the Borrower shall have, no
<PAGE>
later than forty-five (45) days after the Closing
Date, used best efforts (including, in all cases, the
Borrower sending a written notice to each Collection
Bank requesting the implementation of an Agency Ac-
count Agreement and notifying such Collection Bank of
the Administrative Agent's lien on all assets of the
Borrower) to cause such Collection Banks to enter into
an Agency Account Agreement. With respect to any and
all Collection Banks that have not entered into an
Agency Account Agreement within forty-five (45) days
after the Closing Date, the Borrower covenants to
implement immediately such arrangements as the
Administrative Agent shall request from time to time
in its sole discretion (including, without limitation,
requiring that the Borrower cease using a particular
bank as a Collection Bank). The Borrower and each
Guarantor shall cause (i) all cash receipts from its
operations and all checks and other items received
from any source to be deposited on a daily basis into
a Collection Account and (ii) all wire transfers of
funds and all transfers of funds pursuant to ACH
drafts for the account of the Borrower to be depos-
ited, to the extent practicable, directly to the
Agency Concentration Account. With respect to each
Collection Account, the Borrower shall have the right
to deposit funds but not to withdraw or to transfer
(other than transfers to the Agency Concentration
Account in accordance with the Agency Account
Agreements); provided, however, that an Agency Account
Agreement may by its terms permit the store manager
or an authorized assistant manager at a retail
location to make a single weekly withdrawal from a
Collection Account for purposes of funding weekend
changing and check cashing requirements at such store;
provided further that such arrangements shall only be
permissible if set forth in the Agency Account
Agreement in the amounts set forth on Schedule 5.2
attached hereto; and provided further that the
Borrower shall cause all such withdrawn amounts to be
redeposited in the appropriate Collection Account on
the second Business Day following the date of with-
drawal. Except as set forth on Schedule 7.20, the
Borrower shall not maintain at any time any deposit
accounts or other bank accounts other than the Col-
lection Accounts, accounts with the Administrative
Agent and such other accounts as may be approved in
writing by the Administrative Agent in writing in its
sole discretion.
<PAGE>
(b) The Administrative Agent shall, on the same
Business Day of receipt of any and all cash proceeds
deposited in the Agency Concentration Account (or such
later date as the Administrative Agent determines that
good collected funds will be received by the
Administrative Agent), and on a provisional basis
until final receipt of good collected funds, apply all
such cash proceeds which were deposited to the Agency
Concentration Account in the form of money, checks or
like items as follows:
(i) first to pay amounts due and
payable under any of the Loan Documents
(other than Revolving Credit Loans);
(ii) second, to reduce Revolving
Credit Loans which are Base Rate Loans;
(iii)
third, to reduce outstanding Revolving
Credit Loans which are LIBOR Rate
Loans, provided that the Borrower shall
(A) pay at the time of such application
of funds any amounts payable under
Section 5.12 associated with the
prepayment of such LIBOR Rate Loans or
(B) if the Borrower requests in writing
and the Administrative Agent consents
in its sole discretion, deposit with
the Administrative Agent in an in-
terest bearing cash collateral account
maintained with the Administrative
Agent cash collateral in amount equal
to the outstanding LIBOR Rate Loans in
lieu of incurring such breakage costs;
(iv) fourth, to provide cash
collateral pursuant to Section 4.2(b);
(v) fifth, from and after the
occurrence and during the continuance
of a Default or Event of Default,
deposit with the Administrative Agent
in an interest bearing cash collateral
account maintained with the
Administrative Agent cash collateral
equal to one hundred and five percent
(105%) of the aggregate Maximum Drawing
Amount under all then outstanding
Letters of Credit issued by the
Administrative Agent and not already
so cash collateralized; and
(vi) sixth, so long as no payment
Default or Event of Default shall have
occurred and be continuing, any
remaining funds in the Agency
<PAGE>
Concentration Account shall be made
available by the Administrative Agent
to the Borrower.
The Borrower shall not have any right to withdraw
amounts in the Agency Concentration Account; provided
however that the Administrative Agent shall make
available funds as provided in clause (vi) above. The
Borrower hereby pledges to the Administrative Agent
all amounts on deposit in the Agency Concentration
Account and all other amounts on deposit with the
Administrative Agent as security for the Obligations.
Subject to satisfaction of the conditions set forth
in Section 12 and the other provisions of this Credit
Agreement, amounts prepaid pursuant to clauses (ii)
and (iii) above may be reborrowed. For purposes of
the foregoing provisions of this Section 5.2(b), the
Administrative Agent shall not be deemed to have
received any such cash proceeds on any day unless
received by the Administrative Agent before 3:00 p.m.
(Boston time) on such day. The Borrower further
acknowledges and agrees that any such provisional
credit by the Administrative Agent shall be subject
to reversal if final collection in good collected
funds of the related item is not received by the
Administrative Agent in accordance with the
Administrative Agent's customary procedures and
practices for collecting provisional items.
(c) The Borrower agrees to pay to the Adminis-
trative Agent any and all normal and customary fees,
costs and expenses which the Administrative Agent
incurs in connection with the opening of and main-
taining the Agency Concentration Account and all other
deposit accounts and depositing for collection by the
Administrative Agent any check or other item of
payment. Absent gross negligence or willful mis-
conduct by the Administrative Agent as finally de-
termined by a court of competent jurisdiction, the
Borrower agrees to indemnify the Administrative Agent
and to hold the Administrative Agent harmless from and
against any loss, cost or expense (including at-
torneys' fees) sustained or incurred by the Adminis-
trative Agent on account of any claims arising in
connection with the Administrative Agent's operation
of the Agency Concentration Account and otherwise in
connection with the Borrower's cash management sys-
tem.
<PAGE>
3. Funds for Payments.
1. Payments to Administrative Agent. All
payments of principal, interest, Reimbursement Obliga-
tions, Letter of Credit Fees, Agency Fees and any other
amounts due hereunder or under any of the other Loan Doc-
uments shall be made to the Administrative Agent, for the
respective accounts of the Banks or (as the case may be)
the account of the Administrative Agent, at the Adminis-
trative Agent's Head Office or at such other location that
the Administrative Agent may from time to time designate,
in each case in immediately available funds.
2. No Offset, etc.
(a) All payments by the Borrower hereunder and
under any of the other Loan Documents shall be made
without setoff or counterclaim and free and clear of
and without deduction for any taxes, levies, imposts,
duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any ju-
risdiction or any political subdivision thereof or
taxing or other authority therein unless the Borrower
is compelled by law to make such deduction or with-
holding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents,
the Borrower will pay to the Administrative Agent, for
the account of the Banks or (as the case may be) the
Administrative Agent, on the date on which such amount
is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Administrative
Agent to receive the same net amount which the Banks
or the Administrative Agent would have received on
such due date had no such obligation been imposed upon
the Borrower. The Borrower will deliver promptly to
the Administrative Agent certificates or other valid
vouchers for all taxes or other charges deducted from
or paid with respect to payments made by the Borrower
hereunder or under such other Loan Document.
(b) Each Bank that is organized under the laws
of a jurisdiction outside the United States hereby
agrees that, if and to the extent it is legally able
to do so, it shall, prior to the date of the first
payment by the Borrower hereunder to be made to such
<PAGE>
Bank or for such Bank's account, deliver to the Bor-
rower and the Administrative Agent, as applicable,
such certificates, documents or other evidence, as and
when required by the Code or Treasury Regulations
issued pursuant thereto, including two (2) duly com-
pleted copies of Internal Revenue Service Form 1001
or Form 4224 and any other certificate or statement
of exemption required by Treasury Regulations, or any
subsequent versions thereof or successors thereto,
properly completed and duly executed by such Bank
establishing that with respect to payments of prin-
cipal, interest or fees hereunder it is (i) not sub-
ject to United States federal withholding tax under
the Code because such payment is effectively con-
nected with the conduct by such Bank of a trade or
business in the United States or (ii) totally exempt
from United States federal withholding taxes under a
provision of an applicable tax treaty. The Borrower
shall not be required to pay any additional amounts
to any Bank pursuant to this Section 5.3.2, if (i) the
obligation to pay such additional amounts would not
have arisen but for a failure by such Bank to comply
with the provisions of this clause (b); or (ii) the
Bank is not eligible for complete exemption from
United States federal withholding tax with respect to
payments of interest, principal or fees under this
Credit Agreement or under any of the other Loan Doc-
uments, other than by reason of any change, after the
Initial Date, of any applicable law, treaty or regu-
lation by any governmental authority or other agency
charged with the interpretation or administration
thereof. For purposes of this clause (b), the term
"Initial Date" shall mean, with respect to any Bank
which is a party hereto on the date hereof, the date
hereof, and with respect to each assignee or trans-
feree of any Bank, the date of the grant of the par-
ticipation in, or transfer or assignment of an in-
terest hereunder to such assignee or transferee.
4. Computations, etc. All computations of interest
on the Loans and of Letter of Credit Fees, Agency Fees or other
fees or amounts due hereunder or under any of the Loan Documents
shall, unless otherwise expressly provided herein, be based on
a 360-day year, and in each case, paid for the actual number of
days elapsed. Except as otherwise expressly provided in the
definition of the term "Interest Period" with respect to LIBOR
Rate Loans, whenever a payment hereunder or under any of the
other Loan Documents becomes due on a day that is not a Busi-
ness Day, the due date for such payment shall be extended to the
next succeeding Business Day, and interest shall accrue during
<PAGE>
such extension. Except as otherwise expressly provided herein,
all fees payable hereunder shall be non-refundable. The
outstanding amount of the Loans and other matters as reflected
on the Administrative Agent's monthly statement delivered to
the Borrower shall be considered correct and binding on the Bor-
rower unless within thirty (30) days after delivery of such
statement to the Borrower the Administrative Agent shall be
notified by the Borrower to the contrary.
5. Inability to Determine LIBOR Rate. In the event,
prior to the commencement of any Interest Period relating to any
LIBOR Rate Loan, the Administrative Agent shall determine or be
notified by the Majority Banks that adequate and reasonable
methods do not exist for ascertaining the LIBOR Rate that would
otherwise determine the rate of interest to be applicable to any
LIBOR Rate Loan during any Interest Period, the Administrative
Agent shall forthwith give notice of such determination (which
shall be conclusive and binding on the Borrower and the Banks)
to the Borrower and the Banks. In such event (i) any Loan
Request or Conversion Request with respect to LIBOR Rate Loans
shall be automatically withdrawn and shall be deemed a request
for Base Rate Loans, (ii) each LIBOR Rate Loan will
automatically, on the last day of the then current Interest
Period relating thereto, become a Base Rate Loan, and (iii) the
obligations of the Banks to make LIBOR Rate Loans shall be
suspended until the Administrative Agent or the Majority Banks
determine that the circumstances giving rise to such suspension
no longer exist, whereupon the Administrative Agent or, as the
case may be, the Administrative Agent upon the instruction of
the Majority Banks, shall so notify the Borrower and the Banks.
6. Illegality. Notwithstanding any other provisions
herein, if any present or future law, regulation, treaty or
directive or the interpretation or application thereof shall
make it unlawful for any Bank to make or maintain LIBOR Rate
Loans, such Bank shall forthwith give notice of such circum-
stances to the Borrower and the other Banks and thereupon (i)
the commitment of such Bank to make LIBOR Rate Loans or convert
Base Rate Loans to LIBOR Rate Loans shall forthwith be sus-
pended and (ii) such Bank's Loans then outstanding as LIBOR Rate
Loans, if any, shall be converted automatically to Base Rate
Loans on the last day of each Interest Period applicable to such
LIBOR Rate Loans or within such earlier period as may be
required by law. The Borrower hereby agrees promptly to pay the
Administrative Agent for the account of such Bank, upon demand
by such Bank, any additional amounts necessary to compensate
such Bank for any costs incurred by such Bank in making any
<PAGE>
conversion in accordance with this Section 5.6, including any
interest or fees payable by such Bank to lenders of funds ob-
tained by it in order to make or maintain its LIBOR Rate Loans
hereunder.
7. Additional Costs, etc. If any present or future
applicable law, which expression, as used herein, includes
statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or
the interpretation thereof and requests, directives, instruc-
tions and notices at any time or from time to time hereafter
made upon or otherwise issued to any Bank or the Administrative
Agent by any central bank or other fiscal, monetary or other
authority (whether or not having the force of law), shall:
(a) subject any Bank or the Administrative Agent
to any tax, levy, impost, duty, charge, fee, deduction
or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any
Letters of Credit, such Bank's Revolving Commitment
or the Loans (other than franchise taxes or taxes
based upon or measured by the income or profits of
such Bank or the Administrative Agent), or
(b) materially change the basis of taxation
(except for changes in franchise taxes or taxes on
income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other
amounts payable to any Bank or the Administrative
Agent under this Credit Agreement or any of the other
Loan Documents, or
(c) impose or increase or render applicable
(other than to the extent specifically provided for
elsewhere in this Credit Agreement) any special de-
posit, reserve, assessment, liquidity, capital ade-
quacy or other similar requirements (whether or not
having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or
letters of credit issued by, or commitments of an
office of any Bank, or
(d) impose on any Bank or the Administrative
Agent any other conditions or requirements with re-
spect to this Credit Agreement, the other Loan Docu-
ments, any Letters of Credit, the Loans, such Bank's
Revolving Commitment, or any class of loans, letters
of credit or commitments of which any of the Loans or
<PAGE>
such Bank's Revolving Commitment forms a part, and
the result of any of the foregoing is
(i) to increase the cost to any Bank of
making, funding, issuing, renewing, extending or maintaining any
of the Loans or such Bank's Revolving Commitment or any Letter
of Credit, or
(ii) to reduce the amount of principal,
interest, Reimbursement Obligation or other amount payable to
such Bank or the Administrative Agent hereunder on account of
such Bank's Revolving Commitment, any Letter of Credit or any
of the Loans, or
(iii) to require such Bank or the Adminis-
trative Agent to make any payment or to forego any interest or
Reimbursement Obligation or other sum payable hereunder, the
amount of which payment or foregone interest or Reimbursement
Obligation or other sum is calculated by reference to the gross
amount of any sum receivable or deemed received by such Bank or
the Administrative Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, within thirty
(30) days of any demand made by such Bank or (as the case may
be) the Administrative Agent at any time and from time to time
and as often as the occasion therefor may arise, pay to such
Bank or the Administrative Agent such additional amounts as will
be sufficient to compensate such Bank or the Administrative
Agent for such additional cost, reduction, payment or foregone
interest or Reimbursement Obligation or other sum. In the event
that any officer of a Bank having administrative responsibility
for the Loans of such Bank obtains actual knowledge of the
occurrence of an event described in this Section 5.7, such Bank
will provide notice to the Borrower as soon as reasonably
practicable.
8. Capital Adequacy. If after the date hereof any
Bank or the Administrative Agent determines that (i) the adop-
tion of or change in any law, governmental rule, regulation,
policy, guideline or directive (whether or not having the force
of law) regarding capital requirements for banks or bank hold-
ing companies or any change in the interpretation or applica-
tion thereof by a court or governmental authority with appro-
priate jurisdiction, or (ii) compliance by such Bank or the
Administrative Agent or any corporation controlling such Bank
or the Administrative Agent with any law, governmental rule,
regulation, policy, guideline or directive (whether or not
<PAGE>
having the force of law) of any such entity regarding capital
adequacy, has the effect of reducing the return on such Bank's
or the Administrative Agent's commitment with respect to any
Loans to a level below that which such Bank or the Administra-
tive Agent could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's or the Ad-
ministrative Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's
capital) by any amount deemed by such Bank or (as the case may
be) the Administrative Agent to be material, then such Bank or
the Administrative Agent may notify the Borrower of such fact.
To the extent that the amount of such reduction in the return
on capital is not reflected in the Alternate Base Rate or LIBOR
Rate, the Borrower agrees to pay such Bank or (as the case may
be) the Administrative Agent for the amount of such reduction
in the return on capital as and when such reduction is deter-
mined within thirty (30) days of the date of presentation by
such Bank or (as the case may be) the Administrative Agent of
a certificate in accordance with Section 5.9 hereof. In the
event that any officer of a Bank having administrative
responsibility for the Loans of such Bank obtains actual
knowledge of the occurrence of an event described in this
Section 5.8, such Bank will provide notice to the Borrower as
soon as reasonably practicable.
9. Certificate. A certificate setting forth any
additional amounts payable pursuant to Section 5.7, Section 5.8
or Section 5.12 and a brief explanation of such amounts which
are due, submitted by any Bank or the Administrative Agent to
the Borrower, shall be conclusive, absent manifest error, that
such amounts are due and owing.
10. Indemnity. The Borrower agrees to indemnify each
Bank and to hold each Bank harmless from and against any loss,
cost or expense that such Bank may sustain or incur as a
consequence of (i) default by the Borrower in payment of the
principal amount of or any interest on any LIBOR Rate Loans as
and when due and payable, including any such loss or expense
arising from interest or fees payable by such Bank to lenders
of funds obtained by it in order to maintain its LIBOR Rate
Loans, (ii) default by the Borrower in making a borrowing or
conversion after the Borrower has given (or is deemed to have
given) a Loan Request or a Conversion Request relating thereto
in accordance with Section 2.6 or Section 2.7 or (iii) the
making of any payment of a LIBOR Rate Loan or the making of any
conversion of any LIBOR Rate Loan to a Base Rate Loan on a day
that is not the last day of the applicable Interest Period with
respect thereto, including interest, fees or other charges
payable by such Bank to lenders of funds obtained by it in or-
der to maintain any such Loans.
<PAGE>
11. Interest After Default.
1. Overdue Amounts. Overdue principal and (to
the extent permitted by applicable law) interest on
the Loans and all other overdue amounts payable
hereunder or under any of the other Loan Documents
shall bear interest compounded monthly and payable on
demand at a rate per annum equal to three and one-
half percent (3.50%) above the Alternate Base Rate
until such amount shall be paid in full (after as well
as before judgment).
2. Amounts Not Overdue. During the continuance
of an Event of Default the principal of the Loans not
overdue shall, until such Event of Default has been
cured or remedied or such Event of Default has been
waived by the Majority Banks pursuant to Section 26,
bear interest compounded monthly and payable on demand
at a rate per annum equal to three and one-half
percent (3.50%) above the Alternate Base Rate until
such amount shall be paid in full (after as well as
before judgment).
12. LIBOR Rate Loans. Until such time as a LIBOR
Rate Loan may be requested, all Loans shall be Base Rate Loans.
Any LIBOR Rate Loans shall be in such amounts and be made pur-
suant to such elections so that, after giving effect thereto,
the principal amount of each contract for a LIBOR Rate Loan
shall not be less than $1,000,000 and no more than five (5)
contracts for LIBOR Rate Loans may be outstanding at any one
time. The remaining Revolving Credit Loans shall bear interest
at the sum of the Alternate Base Rate plus the Revolving Credit
Base Rate Margin. If any payment (or prepayment) of principal
with respect to LIBOR Rate Loans is made or deemed made on any
day other than the last day of an Interest Period applicable
thereto, the Borrower shall reimburse each Bank for any re-
sulting loss, cost or expense incurred by such Bank as a result
of such prepayment (including loss of anticipated profits).
13. Maximum Interest Rate. Notwithstanding any
provision of this Agreement or the Loan Documents to the con-
trary, no Revolving Credit Loans or other amounts payable
hereunder shall under any circumstances bear (or be deemed to
bear) interest at a rate per annum (the rate of interest which
would be applicable absent the provisions of this Section 5.13
being the "Applicable Rate") greater than the maximum rate
permitted by applicable law as the same exists from day to day
(the "Maximum Rate"). If at any time the Applicable Rate
exceeds the Maximum Rate, thereby causing the interest payable
by the Borrower at such time to be limited to the Maximum Rate,
<PAGE>
then any subsequent reduction in the Applicable Rate will not
reduce the rate of interest payable by the Borrower below the
Maximum Rate until the aggregate amount of interest accrued on
the Revolving Credit Loans and other amounts payable hereunder
equals the aggregate amount of interest which would have accrued
if the Applicable Rate had at all times been in effect.
6. COLLATERAL SECURITY AND GUARANTY.
1. Security of Borrower. The Obligations shall be
secured by a perfected first priority lien and security inter-
est (subject only to Permitted Liens entitled to priority under
applicable law) in all of the assets of the Borrower, whether
now owned or hereafter acquired, pursuant to the terms of the
Security Documents to which the Borrower is a party and pursu-
ant to Section 7.2 of the Plan and the Exit Facility Order.
2. Guaranty and Security of Guarantor. The Obli-
gations shall also be guaranteed by any and all Subsidiaries of
the Borrower pursuant to the terms of the Guaranty and shall be
deemed to be guaranteed by any and all Subsidiaries of the
Borrower in accordance with the Exit Facility Order. The obli-
gations of any Guarantor under the Guaranty (or in case there
is more than one Guarantor, under each Guaranty) shall be in
turn secured by a perfected first priority lien and security
interest (subject only to Permitted Liens entitled to priority
under applicable law) in all of the assets of the respective
Guarantor, whether now owned or hereafter acquired, pursuant to
the terms of the Security Documents to which the respective
Guarantor is requested by the Administrative Agent to be a
party. The Borrower agrees to cause each of its Subsidiaries
promptly to enter into the Guaranty and any other Security
Document requested by the Administrative Agent.
7. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Banks and
the Administrative Agent as follows:
1. Corporate Authority.
1. Incorporation; Good Standing. The Borrower
and each Subsidiary of the Borrower (i) is a
corporation duly organized, validly existing and in
good standing under the laws of its state of incor-
poration, (ii) has all requisite corporate power to
own its property and conduct its business as now
conducted and as presently contemplated, and (iii) is
<PAGE>
in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction where
such qualification is necessary except where a fail-
ure to be so qualified would not have a materially
adverse effect on the business, assets or financial
condition of the Borrower.
2. Authorization. The execution, delivery and
performance of this Credit Agreement and the other
Loan Documents to which the Borrower, and, if
applicable, any Guarantor is or is to become a party
and the transactions contemplated hereby and thereby
(i) are within the corporate authority of such Per-
son, (ii) have been duly and validly authorized by all
necessary corporate proceedings, (iii) do not conflict
with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which
such Person is subject or any judgment, order, writ,
injunction, license or permit applicable to such
Person, (iv) do not conflict with any provision of any
agreement or other instrument binding upon such Person
the failure to comply with which would have a
materially adverse effect on the business, assets or
financial condition of such Person and (v) do not
conflict with any provision of the corporate charter
or bylaws of such Person.
3. Enforceability. The execution and delivery
of this Credit Agreement and the other Loan Documents
to which the Borrower, and, if applicable, any
Guarantor is or is to become a party will result in
valid and legally binding obligations of such Person
enforceable against it in accordance with the
respective terms and provisions hereof and thereof,
except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of
creditors' rights and except to the extent that
availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be
brought.
2. Governmental Approvals. Schedule 7.2 lists all
material licenses, permits, consents or approvals from or by,
all material filings with, and all material notices to, all
governmental authorities having jurisdiction, to the extent
required for the ownership, operation and conduct of the prop-
erties and business of the Borrower and each Subsidiary of the
Borrower. Except as set forth in Schedule 7.2, the ownership,
<PAGE>
operation and conduct of the properties and business of the
Borrower and each Subsidiary of the Borrower and the execution,
delivery and performance by the Borrower, and, if applicable,
any Guarantor of this Credit Agreement and the other Loan
Documents to which such Person is or is to become a party and
the transactions contemplated hereby and thereby do not require
the approval or consent of, or filing with, any governmental
agency or authority other than those already obtained.
3. Title to and Location of Properties; Leases.
Except as indicated on Schedule 7.3 hereto, each of the Bor-
rower and any Guarantor owns or has a valid leasehold interest
in all of their respective assets or properties either re-
flected in the pro forma balance sheets of the Borrower as at
the Effective Date (after giving effect to the provisions of the
Plan) or acquired since that date (except property and assets
sold or otherwise disposed of since that date in accordance with
the Loan Documents), subject to no rights of others, including
any mortgages, leases (other than the lessor's rights under any
such lease), conditional sales agreements, title retention
agreements, liens or other encumbrances except Permitted Liens.
All assets of such Person (other than those disposed of in the
ordinary course of business) are located at such places as the
Borrower shall previously have disclosed to the Banks and the
Administrative Agent. All Real Estate presently leased or owned
by the Borrower or any Subsidiary of the Borrower is set forth
in Schedule 7.3, and neither the Borrower nor any Subsidiary of
the Borrower presently leases or owns any Real Estate other than
as set forth therein. All such leases are valid, enforceable
and in full force and effect, and have not been modified or
amended except as set forth in Schedule 7.3. The Borrower and
each Subsidiary of the Borrower, as the case may be, are the
sole holders of the lessees' interests under such leases, and
have the right to pledge and assign the same except as qualified
in Schedule 7.3. Neither the Borrower nor any Subsidiary of
the Borrower has made any pledge or assignment (other than to
the Administrative Agent) of any of their rights under such
leases and, except as set forth in Schedule 7.3, there is no
default or condition which, with the passage of time or the
giving of notice, or both, would constitute a default on the
part of any party under such leases. Neither the Borrower nor
any Subsidiary of the Borrower has made or entered into any
security agreement, pledge, or other agreement with any landlord
under such leases for the purpose of granting or creating a lien
or encumbrance upon any real or personal property owned by the
Borrower or any such Subsidiary. Except with respect to the
leases relating to the Specified GOB Stores, the Bankruptcy
Court has entered an order permitting the assumption of all
leases set forth on Schedule 7.3. All Inventory of the Borrower
and any Guarantor is located on the premises listed on Schedule
<PAGE>
7.3 hereto (other than (x) Inventory in transit to the
continental United States and (y) Inventory on vehicles leased
or owned by the Borrower that is in transit between the
Borrower's Henderson Distribution Center and retail locations
listed on Schedule 7.3).
4. Financial Statements; Projections and Disclosure
Statement.
1. Financial Statements. There has been
furnished to each of the Banks pro forma balance
sheets of the Borrower as at the Effective Date. Such
balance sheets have been prepared based on in-
formation prepared in accordance with generally ac-
cepted accounting principles on a fresh start basis
and fairly present the financial condition of the
Borrower as at the close of business on the Effective
Date. There are no contingent liabilities of the
Borrower as of such date involving material amounts,
known to the officers of the Borrower, which were not
disclosed in such balance sheets or the Schedules
attached hereto.
2. Projections. Copies of the consolidated
monthly forecasts of the Borrower for the fiscal year
ended January 27, 1996, and the quarterly forecasts
for the fiscal years ended January 25, 1997 and
January 31, 1998 (collectively, the "Projections"),
including in each case a balance sheet and statements
of income and cash flow and setting forth all of the
assumptions made with respect to general economic,
financial and market conditions used in formulating
such Projections have been delivered to each Bank.
To the knowledge of the Borrower no facts exist on the
Closing Date that (individually or in the aggregate)
would result in any materially adverse change in any
of such Projections. The Projections are based upon
reasonable estimates and assumptions, have been
prepared on the basis of the assumptions stated
therein and reflect the reasonable estimates of the
Borrower of the results of operations and other in-
formation projected therein.
3. Disclosure Statement. There has been
furnished to each of the Banks a true and complete
copy of the Disclosure Statement, and, all informa-
tion contained in the Disclosure Statement was true
and correct in all material respects as of the date
that the Disclosure Statement was approved by the
Bankruptcy Court.
<PAGE>
5. No Material Changes, etc. Since March 4, 1995,
there has occurred no materially adverse change in the finan-
cial condition, operations, business, properties or assets of
the Borrower. Since the Effective Date, the Borrower has not
made any Distribution, except as otherwise permitted hereunder.
6. Franchises, Patents, Copyrights, etc. The
Borrower and, if applicable, each Guarantor possesses all
franchises, patents, copyrights, trademarks, trade names, li-
censes and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now
conducted without known conflict with any rights of others.
Schedule 7.6 hereto is a listing of all patents, copyrights,
trademarks and trade names owned or used by the Borrower and
each Guarantor.
7. Litigation. Except as set forth on Schedule 7.7
attached hereto, there are no actions, suits, proceedings or
investigations of any kind pending or, to the knowledge of the
Guarantor or the Borrower, threatened against the Borrower, or,
if applicable, any Guarantor before any court, tribunal or
administrative agency or board that, if adversely determined,
might, either in any case or in the aggregate, materially ad-
versely affect the properties, assets, financial condition or
business of such Person, or materially impair the right of such
Person to carry on business substantially as now conducted by
them, or result in any substantial liability not adequately
covered by insurance, or for which adequate reserves in ac-
cordance with generally accepted accounting principles are not
maintained on the consolidated balance sheet of the Borrower and
its Subsidiaries, or which were not finally discharged or
provided for on or prior to the Closing Date in accordance with
the Plan or which question the validity of this Credit Agree-
ment or any of the other Loan Documents, or any action taken or
to be taken pursuant hereto or thereto. For purposes of this
Section 7.7, any action, suit, proceeding or investigation of
any kind that, if adversely determined, might result in a
liability of the Borrower or any Guarantor in the amount of more
than $250,000 shall be considered to materially affect the
properties, assets, financial condition or business of the
Borrower or such Guarantor.
8. No Materially Adverse Contracts, etc. Neither the
Borrower nor, if applicable, any Guarantor, is subject to any
charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation that has had or is expected
in the judgment of the officers of the Borrower to have a
materially adverse effect on its business, assets or financial
condition of the Borrower. The Borrower is not a party to any
contract or agreement that has or is expected, in the judgment
<PAGE>
of the Borrower's officers, to have any materially adverse
effect on its business, assets or financial condition.
9. Compliance with Other Instruments, Laws, etc.
Except as set forth on Schedule 7.9 attached hereto, the Bor-
rower is not in violation of (i) any provision of its charter
documents or bylaws, or (ii) any (a) applicable statute, li-
cense, rule or regulation, including without limitation OSHA,
or any labor or employment laws, (b) agreement or instrument to
which it may be subject or by which it or any of its properties
may be bound or (c) decree, order or judgment, in a manner that
reasonably could be expected to materially and adversely af-
fect, in each case under this clause (ii), the business, assets
or financial condition of the Guarantor or the Borrower.
10. Tax Status. Except as set forth in Schedule 7.10
attached hereto, the Borrower and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction
to which any of them is subject, (ii) has paid all taxes and
other governmental assessments and charges shown or determined
to be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate pro-
ceedings and (iii) has set aside on their books provisions
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. Except as set forth in Schedule 7.10 at-
tached hereto, there are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Borrower know of no basis for any such
claim.
11. No Event of Default. No Default or Event of
Default has occurred and is continuing.
12. Holding Company and Investment Company Acts.
Neither the Borrower nor any of its Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or
an affiliate" of a "holding company", as such terms are defined
in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "princi-
pal underwriter" of an "investment company", as such terms are
defined in the Investment Company Act of 1940.
13. Absence of Financing Statements, etc. Except
with respect to Permitted Liens, there is no valid financing
statement, security agreement, chattel mortgage, real estate
mortgage or other document filed or recorded with any filing
records, registry or other public office, that purports to
cover, affect or give notice of any present or possible future
<PAGE>
lien on, or security interest in, any assets or property of the
Borrower or any Guarantor or any rights relating thereto.
14. Perfection of Security Interest. All filings,
assignments, pledges and deposits of documents or instruments
have been made and all other actions have been taken that are
necessary or advisable, under applicable law, to establish and
perfect the Administrative Agent's security interest in all of
the Collateral, in each case to the extent required by the Se-
curity Documents. The Collateral and the Administrative Agent's
rights with respect to the Collateral are not subject to any
setoff, claims, withholdings or other defenses, except for
Permitted Liens. The Borrower and the Guarantors are the own-
ers of the Collateral free from any lien, security interest,
encumbrance and any other claim or demand, except for Permitted
Liens.
15. Certain Transactions. Except for arm's length
transactions pursuant to which the Borrower makes payments in
the ordinary course of business upon terms no less favorable
than the Borrower could obtain from third parties, no Affiliate
of the Borrower is presently a party to any transaction with the
Borrower, including any contract, agreement or other arrange-
ment providing for the furnishing of services to or by, pro-
viding for rental of real or personal property to or from, or
otherwise requiring payments to or from any Affiliate of the
Borrower or, to the knowledge of the Borrower, any corporation,
partnership, trust or other entity in which any Affiliate of the
Borrower has a substantial interest or is an officer, director,
trustee or partner.
16. Employee Benefit Plans.
1. In General. Except as set forth in Schedule
7.16 attached hereto, each Employee Benefit Plan has
been maintained and operated in compliance in all
material respects with all applicable laws and
regulations, including, without limitation, ERISA and
the Code, including but not limited to the provisions
thereunder respecting prohibited transactions. The
Borrower has heretofore delivered to the Administra-
tive Agent the most recently completed annual report,
Form 5500, with all required attachments, and actu-
arial statement required to be submitted under Section
103(d) of ERISA, with respect to each Guaranteed
Pension Plan.
2. Terminability of Welfare Plans. Except as
set forth in Schedule 7.16 attached hereto, no
<PAGE>
Employee Benefit Plan provides post-retirement wel-
fare benefits (except as required by Title I, Part 6
of ERISA). Except as set forth in Schedule 7.16 at-
tached hereto, the Borrower or an ERISA Affiliate, as
appropriate, has the legal right to amend or termi-
nate each such Plan at any time (or at any time sub-
sequent to the expiration of any applicable bargain-
ing agreement or such later time as provided under the
laws governing collective bargaining) in the discre-
tion of the Borrower or such ERISA Affiliate without
material liability to any Person.
3. Guaranteed Pension Plans. Except as set
forth in Schedule 7.16 attached hereto, (i) each
contribution required to be made to a Guaranteed
Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the
notice or lien provisions of Section 302(f) of ERISA,
or otherwise, has been timely made; (ii) no waiver of
an accumulated funding deficiency or extension of
amortization periods has been received with respect
to any Guaranteed Pension Plan; and (iii) no liability
to the PBGC (other than required insurance premiums,
all of which have been paid) has been incurred by the
Borrower or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not been any
ERISA Reportable Event, or any other event or condi-
tion which presents a material risk of termination of
any Guaranteed Pension Plan by the PBGC. Based on the
latest valuation of each Guaranteed Pension Plan, and
on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of
all such Guaranteed Pension Plans within the meaning
of Section 4001 of ERISA did not exceed the aggregate
value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the benefit
liabilities and assets of any Guaranteed Pension Plan
with assets in excess of benefit liabilities, by more
than $1,000,000.
4. Multiemployer Plans. None of the Borrower
nor any ERISA Affiliate has incurred any material
liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or par-
tial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA. None of
the Guarantor, the Borrower nor any ERISA Affiliate
has been notified that any Multiemployer Plan is in
reorganization or insolvent under and within the
meaning of Section 4241 or Section 4245 of ERISA or
<PAGE>
that any Multiemployer Plan intends to terminate or
has been terminated under Section 4041A of ERISA.
17. Regulations U and X. The proceeds of the Loans
shall be used for funding cash payments to holders of Class 2B
Claims under and as contemplated by the Plan, for
collateralizing letters of credit in existence as of the Clos-
ing Date and for the general working capital needs and general
corporate purposes of the Borrower. The Borrower will obtain
Letters of Credit to replace existing letters of credit issued
for the account of Old Rose's and for such other purposes as may
be agreed upon by the Administrative Agent and the Borrower from
time to time. No portion of any Loan is to be used, and no
portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R.
Parts 221 and 224.
18. Environmental Compliance. Except as set forth
on Schedule 7.18 attached hereto, the Borrower has taken all
necessary steps to investigate the past and present condition
and usage of the Real Estate of the Borrower and each of its
Subsidiaries and the operations conducted thereon and, based
upon such diligent investigation, has determined that to the
best of its knowledge:
(a) none of the Borrower nor any operator of the
Real Estate or any operations thereon is in viola-
tion, or alleged violation, of any applicable judg-
ment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including with-
out limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Compre-
hensive Environmental Response, Compensation and Li-
ability Act of 1980 as amended ("CERCLA"), the Su-
perfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, or
any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which
violation could reasonably be expected to have a ma-
terial adverse effect on the environment or the
business, assets or financial condition of the Bor-
rower;
(b) neither the Borrower nor any Subsidiary of
the Borrower has received notice from any third party
<PAGE>
including, without limitation, any federal, state or
local governmental authority, (i) that any one of them
has been identified by the United States Envi-
ronmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part
300 Appendix B; (ii) that any hazardous waste, as
defined by 42 U.S.C. Section 6903(5), any hazardous
substances as defined by 42 U.S.C. Section 9601(14),
any pollutant or contaminant as defined by 42 U.S.C.
Section 9601(33) and any toxic substances, oil or
hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous
Substances") which any one of them has generated,
transported or disposed of has been found at any site
at which a federal, state or local agency or other
third party has conducted or has ordered that the
Borrower or a Subsidiary of the Borrower conduct a
remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii)
that it is or shall be a named party to any claim,
action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent
or otherwise) arising out of any third party's
incurrence of costs, expenses, losses or damages of
any kind whatsoever in connection with the release of
Hazardous Substances;
(c) (i) no portion of the Real Estate has been
used for the handling, processing, storage or dis-
posal of Hazardous Substances except in accordance
with applicable Environmental Laws; and no under-
ground tank or other underground storage receptacle
for Hazardous Substances is located on any portion of
the Real Estate; (ii) in the course of any activities
conducted by the Borrower or operators of its prop-
erties, no Hazardous Substances have been generated
or are being used on the Real Estate except in ac-
cordance with applicable Environmental Laws; (iii)
there have been no releases (i.e. any past or present
releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Haz-
ardous Substances on, upon, into or from the proper-
ties of the Borrower or any of its Subsidiaries which
releases could reasonably be expected to have a ma-
terial adverse effect on the value of any of the Real
Estate or adjacent properties or the environment; (iv)
there have been no releases on, upon, from or into any
real property in the vicinity of any of the Real
<PAGE>
Estate which, through soil or groundwater con-
tamination, there is reason to believe may have come
to be located on, and which would have a material ad-
verse effect on the value of, the Real Estate; and (v)
in addition, any Hazardous Substances that have been
generated on any of the Real Estate have been trans-
ported offsite only by carriers having an identifi-
cation number issued by the EPA, treated or disposed
of only by treatment or disposal facilities main-
taining valid permits as required under applicable
Environmental Laws, which transporters and facilities
have been and are operating in compliance with such
permits and applicable Environmental Laws; and
(d) no conditions exist at any Real Estate in
respect of which the Borrower or any of its Subsid-
iaries is required (pursuant to Environmental Laws)
to perform Hazardous Substance site assessments, or
the removal or remediation of Hazardous Substances.
19. Subsidiaries, etc. On the Closing Date, the
Borrower has no Subsidiaries and, after the Effective Date, the
Borrower has no Subsidiaries other than as permitted by Section
9.6(b). Except as permitted by Section 9.6(b), the Borrower is
not engaged in any joint venture or partnership with any other
Person.
20. Bank Accounts. Schedule 7.20 sets forth the
account numbers and location of all bank accounts of the Bor-
rower and its Subsidiaries (including, without limitation, the
Collection Accounts) and all such bank accounts are with either
the Administrative Agent or (except to the extent permitted by
Section 5.2 or by the Administrative Agent in writing), with
banks that have entered into an Agency Account Agreement with
the Borrower and the Administrative Agent in respect of all such
bank accounts.
21. Undisclosed Claims. Except as contemplated by
the Plan to survive the Effective Date, there are no prepeti-
tion or administrative claims against Old Rose's which survive
the Effective Date.
22. Confirmation of Plan. The Borrower has de-
livered to the Banks and the Administrative Agent a true, ac-
curate and complete copy of the Plan with any amendments or
modifications thereto (which amendments shall have been ap-
proved by the Banks), as confirmed by the Bankruptcy Court. The
Plan Confirmation Order has been entered by Final Order of the
Bankruptcy Court, and (i) is in full force and effect, (ii)
<PAGE>
has not been revised, modified or amended in any respect and
(iii) is not the subject of any pending appeal in any respect.
The Plan Modification Order (i) has been duly and validly en-
tered by the Bankruptcy Court and is in full force and effect,
(ii) has not been revised, modified or amended in any respect
and (iii) is not the subject of any pending appeal or petition
for review, rehearing, reargument, stay or certiori proceeding.
The Lease Assumption Order (i) has been duly and validly en-
tered by the Bankruptcy Court and is in full force and effect,
(ii) has not been revised, modified or amended in any respect
and (iii) is not the subject of any pending appeal or petition
for review, rehearing, reargument, stay or certiori proceeding.
23. Insurance. The Borrower and each of its Sub-
sidiaries maintains with financially sound and reputable insur-
ers insurance with respect to its respective properties and
business against such casualties and contingencies as in ac-
cordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts,
containing such terms, in such forms and for such periods as is
reasonable and prudent and in accordance with the terms of the
Security Documents. Schedule 7.23 lists all material insurance
policies of any nature maintained by Borrower and each Subsi-
diary of Borrower, as well as a summary of the terms of such
insurance, all of which policies are in full force and effect.
24. Exit Facility Order. The Exit Facility Order has
been entered by Final Order of the Bankruptcy Court, and (i) is
in full force and effect, (ii) has not been revised, modified
or amended in any respect not consented to by the Banks in
writing and (iii) is not the subject of any pending appeal in
any respect.
8. AFFIRMATIVE COVENANTS OF THE GUARANTOR
AND THE BORROWER.
The Borrower covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note
is outstanding or any Bank has any obligation to make any Loans
or the Administrative Agent has any obligation to issue, extend
or renew any Letters of Credit:
1. Punctual Payment. The Borrower will duly and
punctually pay or cause to be paid the principal and interest
on the Loans, all Reimbursement Obligations, the Letter of
Credit Fees, the Facility Fee, the Agency Fee and all other
amounts provided for in this Credit Agreement and the other
<PAGE>
Loan Documents to which the Borrower is a party, all in ac-
cordance with the terms of this Credit Agreement and such other
Loan Documents.
2. Maintenance of Office. The Borrower will maintain
its chief executive office in Henderson, North Carolina, or at
such other place in the United States of America as the Borrower
shall designate upon thirty (30) days' prior written notice to
the Administrative Agent, where notices, presentations and
demands to or upon the Borrower in respect of the Loan Documents
to which the Borrower is a party may be given or made.
3. Records and Accounts. The Borrower will and will
cause each of its Subsidiaries to (i) keep true and accurate
records and books of account in which full, true and correct
entries will be made in accordance with generally accepted
accounting principles and (ii) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation,
depletion, obsolescence and amortization of its properties,
contingencies, and other reserves.
4. Financial Statements, Certificates and Infor-
mation. The Borrower will deliver to the Administrative Agent
(copies of which will be provided by the Administrative Agent
to each of the Banks):
(a) as soon as practicable, but in any event not
later than ninety (90) days after the end of each
fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Subsidiaries and the
consolidating balance sheet of the Borrower and its
Subsidiaries, each as at the end of such year, and the
related consolidated statement of income and
consolidated statement of cash flow and consolidating
statement of income and consolidating statement of
cash flow for such year, each setting forth in com-
parative form the figures for the previous fiscal year
(which for fiscal years ended January 28, 1995 and
January 27, 1996 shall refer to Old Rose's to the
extent applicable) and all such consolidated and
consolidating statements to be in reasonable detail,
prepared in accordance with generally accepted ac-
counting principles, and certified without qualifi-
cation by nationally recognized independent certified
public accountants reasonably acceptable to the Ad-
ministrative Agent, together with a written statement
from such accountants to the effect that they have
read a copy of this Credit Agreement, and that, in
<PAGE>
making the examination necessary to said certifica-
tion, they have obtained no knowledge of any Default
or Event of Default, or, if such accountants shall
have obtained knowledge of any then existing Default
or Event of Default they shall disclose in such
statement any such Default or Event of Default;
(b) as soon as practicable, but in any event not
later than forty-five (45) days after the end of each
of the fiscal quarters of the Borrower (or sixty (60)
days in the case of the last fiscal quarter of each
fiscal year), copies of the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries and
the unaudited consolidating balance sheet of the
Borrower and its Subsidiaries, each as at the end of
such quarter, and the related consolidated statement
of income and consolidated statement of cash flow and
consolidating statement of income and consolidating
statement of cash flow for the portion of the
Borrower's fiscal year then elapsed, each setting
forth in comparative form (x) the figures for the same
portion of the previous fiscal year (which for fiscal
years ended January 28, 1995 and January 27, 1996
shall refer to Old Rose's to the extent applicable)
and (y) the relevant figures in the Business Plan for
such period and all in reasonable detail and prepared
in accordance with generally accepted accounting prin-
ciples (but without footnotes), together with a cer-
tification by the principal financial or accounting
officer of the Borrower that the information con-
tained in such financial statements fairly presents
the financial position of the Borrower and its Sub-
sidiaries on the date thereof (subject to year-end
adjustments) and that such officer has not obtained
knowledge of any Default or Event of Default;
(c) as soon as practicable, but in any event
within (i) sixty (60) days after the end of the fis-
cal month ending in January, (ii) forty-five (45) days
after (x) the end of the fiscal month ending in
February of each fiscal year and (y) the last fiscal
month of each fiscal quarter, and (iii) thirty (30)
days after the end of each other month in each fiscal
year of the Borrower, (1) unaudited monthly consoli-
dated financial statements of the Borrower and its
Subsidiaries for such month and unaudited monthly
consolidating financial statements of the Borrower and
its Subsidiaries for such month, each setting forth
in comparative form (x) the figures for the same
<PAGE>
month of the prior fiscal year (which for fiscal years
ended January 28, 1995 and January 27, 1996 shall
refer to Old Rose's to the extent applicable) and (y)
the relevant figures in the Business Plan for such
period and prepared in accordance with generally ac-
cepted accounting principles (but without footnotes),
together with a certification by the principal fi-
nancial or accounting officer of the Borrower that the
information contained in such financial statements
fairly presents the financial condition of the
Borrower and its Subsidiaries on the date thereof
(subject to year-end adjustments) and that such of-
ficer has not obtained knowledge of any Default or
Event of Default and (2) the monthly management fi-
nancial report for such month (commonly referred to
by the Borrower as the "Highlights Report") substan-
tially similar in format to the form of such report
delivered to the Administrative Agent on April 5,
1995;
(d) simultaneously with the delivery of the
financial statements referred to in subsections (a)
and (b) above, a statement certified by the principal
financial or accounting officer of the Borrower in the
form attached hereto as Exhibit D (i) setting forth
in reasonable detail computations evidencing
compliance with the covenants contained in Section 10
and (if applicable) reconciliations to reflect changes
in generally accepted accounting principles since the
Closing Date and (ii) certifying that, to the
Borrower's knowledge, no change has occurred in any
laws or regulations thereunder or interpretations
thereof, nor has any new law been enacted or regula-
tion passed or other event or condition occurred, that
reasonably could be expected to have a materially
adverse effect on the business or financial condition
of the Borrower or that could impair the validity or
enforceability of any of the Loan Documents;
(e) as soon as practicable, but in any event
within twenty (20) days after the end of each month
in each fiscal year of the Borrower, the Inventory
Reporting Package as of such month end;
(f) simultaneously with the delivery of the
financial statements referred to in subsection (c)
above, a detailed management analysis of the results
of operations including revenues, margins and volume
<PAGE>
by department (commonly referred to as the "Merchan-
dise Stats Report"), in each case as compared to (x)
the same period in the prior fiscal year (which for
fiscal years ended January 28, 1995 and January 27,
1996 shall refer to Old Rose's to the extent ap-
plicable) and (y) the relevant figures in the Busi-
ness Plan for such period, in form and substance ac-
ceptable to the Administrative Agent;
(g) contemporaneously with the filing or mail-
ing thereof, copies of all items filed with the Se-
curities and Exchange Commission or generally made
available to the stockholders of the Borrower;
(h) within three (3) days after the end of each
calendar week or at such other time or times as the
Administrative Agent may reasonably request, a Bor-
rowing Base Report setting forth the Borrowing Base
as at the end of such calendar week or other date so
requested by the Administrative Agent;
(i) within nine (9) days after the end of each
calendar week, the "management flash report" and the
"financial indicator report" as at the end of such
calendar week, each such report in the form of Ex-
hibit G and Exhibit H attached hereto, respectively;
(j) simultaneously with the delivery of the
financial statements referred to in subsection (a)
above, copies of any accountants' management letters;
(k) as soon as practicable and in any event no
less frequently than on an annual basis and on or
before the last date of each fiscal year commencing
with the fiscal year ended January 27, 1996, (i) the
consolidated and consolidating business plans (the
"Business Plan") of the Guarantor and the Borrower for
the immediately following fiscal year (including
written assumptions, monthly balance sheets and
statements of income and cash flow and all material
modifications to such plan), and at the Administra-
tive Agent's request discuss such plan with the Ad-
ministrative Agent and/or the Banks and (ii) updated
Projections; and
(l) from time to time such other financial data,
reports and information (whether financial or
otherwise) as the Administrative Agent or any Bank may
request, including, without limitation, reports and
information requested by the Appraiser or any other
<PAGE>
consultant or advisor retained by the Administrative
Agent or the Facility Agents.
5. Notices.
1. Defaults. The Borrower will immediately
notify the Administrative Agent and each of the Banks
in writing of the occurrence of any Default or Event
of Default or the assertion of any claim or com-
mencement of any litigation that could, if adversely
determined, reasonably be expected to have a material
adverse effect on the business, assets or financial
condition of the Borrower. If any Person (other than
the Banks or the Administrative Agent) shall give any
notice or take any other action in respect of a
claimed default (whether or not constituting an Event
of Default) under this Credit Agreement, any other
Loan Document, or any other material note, evidence
of indebtedness, indenture or other material obliga-
tion to which or with respect to which the Borrower
or any of Subsidiaries is a party or obligor, whether
as principal, guarantor, surety or otherwise, the
Borrower shall forthwith give written notice thereof
to the Administrative Agent and each of the Banks,
describing the notice or action and the nature of the
claimed default.
2. Environmental Events. The Borrower will
promptly, upon being aware thereof, give notice to the
Administrative Agent and each of the Banks (i) of any
violation of any Environmental Law that the Borrower
or a Subsidiary of the Borrower reports in writing or
is reportable by such Person in writing (or for which
any written report supplemental to any oral report is
made) to any federal, state or local environmental
agency, (ii) any inquiry, proceeding, investigation,
or other action, including a notice from any agency
of potential environmental liability, of any federal,
state or local environmental agency or board, that has
the potential to materially adversely affect the
assets, liabilities, financial conditions or
operations of the Borrower or any of its Subsidiaries,
or the Administrative Agent's mortgages, deeds of
trust or security interests pursuant to the Security
Documents and (iii) any release of Hazardous Substance
that is, or is required by applicable law to be,
reported to any governmental authority.
<PAGE>
3. Notification of Claim against Collateral.
The Borrower will, immediately upon becoming aware
thereof, notify the Administrative Agent and each of
the Banks in writing of any challenges, setoff, claims
(including, environmental claims), withholdings or
other defenses to which any of the Collateral, or the
Administrative Agent's rights with respect to the
Collateral, are subject unless any such setoff, claim,
withholding or other defense, singly or in the
aggregate, (i) reasonably could not be expected to
have a material adverse effect on the business, assets
or financial condition of the Borrower or any of its
Subsidiaries, or (ii) does not challenge or call into
question in any way the validity, enforceability,
perfection or priority or otherwise affect the rights
of the Administrative Agent in the Collateral.
4. Notice of Litigation and Judgments. The
Borrower will give notice to the Administrative Agent
and each of the Banks in writing within fifteen (15)
days of becoming aware of any litigation or proceed-
ings threatened in writing or any pending litigation
and proceedings affecting the Borrower or any of its
Subsidiaries or to which the Borrower or any of its
Subsidiaries is or becomes a party involving a claim
against the Borrower or any of its Subsidiaries that
reasonably could be expected to exceed the Borrower's
insurance coverage for such claim by an amount greater
than $250,000 and stating the nature and status of
such litigation or proceedings. The Borrower will
give notice to the Administrative Agent and each of
the Banks, in writing, in form and detail satisfactory
to the Administrative Agent, within ten (10) days of
any judgment not covered by insurance, final or
otherwise, against the Borrower or any of its
Subsidiaries in an amount in excess of $250,000. The
Borrower will promptly give notice to the Admin-
istrative Agent and each of the Banks, in writing, of
any taxes, assessments, charges, levies or claims in
excess of $250,000 which it is contesting pursuant to
Section 8.8.
6. Corporate Existence; Maintenance of Properties.
The Borrower will do or cause to be done all things necessary
to preserve and keep in full force and effect its and its Sub-
sidiaries' corporate existence, rights and franchises. The
Borrower (i) will cause all of its properties and the proper-
ties of its Subsidiaries used or useful in the conduct of its
or their respective business to be maintained and kept in good
<PAGE>
condition, repair and working order and supplied with all nec-
essary equipment, (ii) will cause to be made all necessary re-
pairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Borrower may be nec-
essary so that the business carried on in connection therewith
may be properly conducted at all times, and (iii) will continue
to engage in the businesses now conducted by it.
7. Insurance. The Borrower will maintain or cause
to be maintained with financially sound and reputable insurers
insurance with respect to its properties and business and the
properties and business of its Subsidiaries against such casu-
alties and contingencies as shall be in accordance with the
general practices of businesses engaged in similar activities
in similar geographic areas and in amounts, containing such
terms, in such forms and for such periods as may be reasonable
and prudent (as determined by the Administrative Agent) and in
accordance with the terms of the Security Agreements. The
Borrower will maintain or cause to be maintained insurance on
each Mortgaged Property in accordance with the terms of the
Mortgage with respect thereto. The Administrative Agent shall
be an additional insured and loss payee with respect to each
Mortgaged Property.
8. Taxes. The Borrower will duly pay and discharge,
or cause to be paid and discharged, before the same shall become
overdue, all taxes, assessments and other governmental charges
imposed upon the Borrower and its Subsidiaries or otherwise due
(including, without limitation, all sales and use taxes
collected in connection with the Borrower's business) and upon
such Person's real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies that if unpaid might
by law become a lien or charge upon any of such property;
provided that any such tax, assessment, charge, levy or claim
need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings
and if the Borrower shall have set aside on its books adequate
reserves with respect thereto; and provided further that the
Borrower will pay or cause to be paid all such taxes, assess-
ments, charges, levies or claims forthwith upon the commence-
ment of proceedings to foreclose any lien that may have at-
tached as security therefor.
9. Inspection of Properties and Books, etc.
1. General; Examinations. The Borrower shall
permit the Banks, through the Facility Agents or any
of the Banks' other designated representatives,
including, without limitation, the Appraiser and M.R.
<PAGE>
Weiser & Co., special accounting systems advisor to
the Administrative Agent, to visit, examine and
inspect any of the properties of the Borrower and any
of its Subsidiaries, to examine the books of account
and the records of the Borrower and any of its
Subsidiaries and to make copies thereof and extracts
therefrom, to discuss the affairs, finances and
accounts of the Borrower and any of its Subsidiaries
with, and to be advised as to the same by, its and
their officers, and to conduct examinations, ap-
praisals and verifications of all components included
in the Borrowing Base, the other assets of the Bor-
rower, the business, properties or financial condi-
tion of the Borrower or any of its Subsidiaries, the
appropriateness of the Borrowing Base advance rates,
and all systems and procedures of the Borrower and any
of its Subsidiaries including those relating to cash
management, at such intervals and at such times as the
Administrative Agent or any Bank may request, and in
each case at the expense of the Borrower. Such
examinations may include examinations intended to
determine whether or not the information set forth in
the Borrowing Base Report most recently delivered is
accurate and complete in all material respects based
upon a review and examination of the inventory
(including verification as to the value, location and
respective types). Without limiting the generality
of the foregoing, the Borrowers shall permit the Ap-
praiser to conduct such examinations, including ran-
dom store visits and warehouse inspections as the
Appraiser may determine are necessary to evaluate the
Estimated GOB Realization Percentage.
2. Environmental Assessments. At such times as
may be determined by the Administrative Agent, the
Administrative Agent may, for the purpose of assessing
and ensuring the value of any Mortgaged Property,
obtain environmental assessments or audits of such
Mortgaged Property prepared by a hydrogeologist, an
independent engineer or other qualified consultant or
expert approved by the Administrative Agent to
evaluate or confirm (i) whether any Hazardous
Substances are present in the soil or water at such
Mortgaged Property and (ii) whether the use and
operation of such Mortgaged Property complies with
all Environmental Laws. Environmental assessments may
include, without limitation, detailed visual in-
spections of such Mortgaged Property including any and
all storage areas, storage tanks, drains, dry wells
and leaching areas, the taking of soil samples,
<PAGE>
surface water samples and ground water samples, as
well as such other investigations or analyses as the
Administrative Agent deems appropriate. All such
environmental assessments shall be conducted and made
at the expense of the Borrower.
3. Communications with Accountants. The
Borrower authorizes the Administrative Agent and, if
accompanied by the Administrative Agent, the Banks to
communicate directly with the Borrower's independent
certified public accountants and authorizes such ac-
countants to disclose to the Administrative Agent and
the Banks any and all financial statements and other
supporting financial documents and schedules includ-
ing copies of any management letter and other reports
with respect to the business, financial condition and
other affairs of the Borrower. At the request of the
Administrative Agent, the Borrower shall deliver a
letter addressed to such accountants authorizing and
instructing them to comply with the provisions of this
Section 8.9.3.
10. Compliance with Laws, Contracts, Licenses, and
Permits. Except as set forth on Schedule 7.9 attached hereto,
the Borrower and each of its Subsidiaries will comply with (i)
the provisions of its charter documents and by-laws and (ii)(a)
all applicable laws and regulations wherever its business is
conducted, including all Environmental Laws, ERISA and OSHA, (b)
all agreements and instruments by which it or any of its prop-
erties may be bound and (c) all applicable decrees, orders, and
judgments, except, in each case under this clause (ii), for non-
compliance which reasonably could not be expected to have a
materially adverse effect on the business, assets or financial
condition of the Borrower or any of its Subsidiaries. If any
authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall be-
come necessary or required in order that the Borrower or a
Subsidiary may fulfill any of its obligations hereunder or any
of the other Loan Documents to which the Borrower or such Sub-
sidiary is a party, the Borrower will immediately take or cause
to be taken all reasonable steps within the power of the Bor-
rower to obtain, or cause to be obtained, such authorization,
consent, approval, permit or license and furnish the Adminis-
trative Agent and the Banks with evidence thereof.
11. Employee Benefit Plans. The Borrower will (i)
promptly upon filing the same with the Department of Labor or
the IRS furnish to the Administrative Agent a copy of the most
recent actuarial statement required to be submitted under
<PAGE>
Section 103(d) of ERISA and Annual Report, Form 5500, with all
required attachments, in respect of each Guaranteed Pension Plan
and (ii) promptly upon receipt or dispatch, furnish to the Ad-
ministrative Agent any notice, report or demand sent to or re-
ceived from the Department of Labor, the IRS or the PBGC in
respect of a Guaranteed Pension Plan under Sections 302, 4041,
4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect
of a Multiemployer Plan, under Sections4041A, 4202, 4219, 4242,
or 4245 of ERISA.
12. Use of Proceeds. The Borrower will use the
proceeds of the Loans solely to fund cash payments to holders
of Class 2B Claims, administrative and priority claims and GE
Obligations as contemplated by the Plan, for collateralizing
letters of credit in existence as of the Closing Date, and for
the general working capital needs and general corporate pur-
poses of the Borrower. The Borrower may obtain Letters of
Credit to replace existing letters of credit issued for the
account of Old Rose's and for such other purposes as the Bor-
rower and the Administrative Agent may from time to time agree.
13. Additional Mortgaged Property. If after the
Closing Date, the Administrative Agent so requests, the Bor-
rower shall forthwith deliver or cause to be delivered to the
Administrative Agent a fully executed mortgage, deed of trust
or other instrument constituting a lien and security interest
encumbering any real estate interest of the Borrower or a
Guarantor (including, without limitation, leasehold interests
and additional items of Real Estate acquired by the Borrower or
a Guarantor after the Closing Date), in form and substance
satisfactory to the Administrative Agent (including, in the case
of leasehold interests, having landlord consents requested by
the Administrative Agent), together with title insurance poli-
cies, environmental reports, surveys, evidences of insurances
with the Administrative Agent named as loss payee and additional
insured, legal opinions and other documents and certificates
with respect to such real estate as the Administrative Agent may
request. The Borrower further agrees that, following the tak-
ing of such actions with respect to such real estate, the
Administrative Agent shall have for the benefit of the Banks and
the Administrative Agent a valid and enforceable first priority
lien and security interest encumbering such real estate, free
and clear of all defects and encumbrances except for Permitted
Liens. The Borrower shall pay any and all costs and expenses
incurred in connection with such additional liens and security
interests, including, without limitation, attorneys' fees and
recording and similar taxes.
14. Maintenance of Business. The Borrower shall
continue to engage in the business conducted by Old Rose's as
<PAGE>
of and prior to the Closing Date, including, without limita-
tion, the discount retail department store concept (including
no material change in the product mix) in effect on the Closing
Date.
15. Further Assurances. The Borrower will cooperate
and will cause each of its Subsidiaries to cooperate with the
Banks and the Administrative Agent and execute, deliver and
cause to be executed and delivered such further instruments and
documents, and cause to be performed such acts, as the Banks or
the Administrative Agent shall reasonably request to carry out
to their satisfaction the transactions contemplated by this
Credit Agreement and the other Loan Documents, including,
without limitation, acts relating to the Borrower's cash man-
agement system and practices and the delivery of uniform com-
mercial code filings, continuation statements and other in-
struments, additional security agreements and pledge agreements
and legal opinions in form and substance and from counsel ac-
ceptable to the Administrative Agent and the Banks as may be
requested by the Administrative Agent in connection with the
grant and perfection of its liens and security interests in all
of the assets and properties of the Borrower and each of its
Subsidiaries.
16. Liquidation of Certain Retail Stores. Within
thirty days of the Closing Date, the Borrower shall commence the
Final GOB Sales at the Specified GOB Stores.
17. Landlord Waivers. The Borrower shall use best
efforts to cause to be delivered to the Administrative Agent a
waiver of lien rights in form and substance satisfactory to the
Administrative Agent from each landlord in respect of each lo-
cation in which inventory is located.
18. Appraisal of Henderson Property. Within thirty
days of the Closing Date, the Borrower shall deliver to the
Administrative Agent a written third-party appraisal of the
Henderson Property.
19. Certain Legal Opinions. Within thirty days of
the Closing Date, the Borrower shall cause the delivery of a
favorable legal opinion addressed to the Banks and the Admin-
istrative Agent, in form and substance and from counsel satis-
factory to the Banks and the Administrative Agent, with respect
to the enforceability, perfection and priority of the security
interests of the Banks and the Administrative Agent with re-
spect to Collateral located in Georgia and South Carolina and
such other matters requested by the Banks and the Administra-
tive Agent.
<PAGE>
9. CERTAIN NEGATIVE COVENANTS OF THE GUARANTOR
AND THE BORROWER.
The Borrower covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note
is outstanding or any Bank has any obligation to make any Loans
or the Administrative Agent has any obligations to issue, extend
or renew any Letters of Credit:
1. Restrictions on Indebtedness. The Borrower will
not, and will not permit any of its Subsidiaries to, create,
incur, assume, guarantee or be or remain liable, contingently
or otherwise, with respect to any Indebtedness other than:
(a) Indebtedness to the Banks and the Adminis-
trative Agent arising under any of the Loan Docu-
ments;
(b) accounts payable and other current liabil-
ities of the Borrower incurred in the ordinary course
of business not incurred through (i) the borrowing of
money, or (ii) the obtaining of credit except for
credit on an open account basis customarily extended
and in fact extended in connection with normal pur-
chases of goods and services;
(c) Indebtedness in respect of taxes, assess-
ments, governmental charges or levies and claims for
labor, materials and supplies to the extent that
payment therefor shall not at the time be required to
be made in accordance with the provisions of Section
8.8;
(d) Indebtedness in respect of judgments or
awards that have been in force for less than the ap-
plicable period for taking an appeal so long as ex-
ecution is not levied thereunder or in respect of
which the Borrower shall at the time in good faith be
prosecuting an appeal or proceedings for review and
in respect of which a stay of execution shall have
been obtained pending such appeal or review;
(e) endorsements for collection, deposit or
negotiation and warranties of products or services,
in each case incurred in the ordinary course of bus-
iness;
(f) obligations under Capitalized Leases and
purchase money Indebtedness incurred in connection
with the acquisition after the date hereof of any
<PAGE>
real or personal property by the Borrower, provided
that the aggregate principal amount of such obliga-
tions under Capitalized Leases and purchase money
Indebtedness of the Guarantor and the Borrower shall
not exceed the aggregate amount of $12,000,000 at any
one time;
(g) Indebtedness of the Borrower to any of its
Subsidiaries so long as such Indebtedness is subor-
dinated to the prior payment and satisfaction in full
of the Obligations pursuant to documentation in form
and substance satisfactory to the Administrative Agent
and Indebtedness of Subsidiaries of the Borrower to
the Borrower so long as such Indebtedness is evidenced
by promissory notes which are pledged to the
Administrative Agent as security for the Obligations;
(h) Indebtedness existing on the Closing Date
and set forth on Schedule 9.1 that shall not exceed
the amount set forth on Schedule 9.1;
(i) Indebtedness representing guarantees or
similar assurances by the Borrower with respect to
rental obligations under leases relating to closed
stores; provided that the form and amount of such
guarantees and assurances are acceptable to the Ma-
jority Banks.
2. Restrictions on Liens. Except as otherwise
permitted under this Credit Agreement, the Borrower will not and
will not permit any of its Subsidiaries to (i) create or incur
or suffer to be created or incurred or to exist any lien,
encumbrance, mortgage, pledge, charge, restriction or other
security interest of any kind upon any of its respective prop-
erty or assets of any character whether now owned or hereafter
acquired, or upon the income or profits therefrom; (ii) trans-
fer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment
of Indebtedness or performance of any other obligation in pri-
ority to payment of its general creditors; (iii) acquire, or
agree or have an option to acquire, any property or assets upon
conditional sale or other title retention or purchase money
security agreement, device or arrangement; (iv) suffer to exist
for a period of more than thirty (30) days after the same shall
have been incurred any Indebtedness or claim or demand against
it that if unpaid might by law or upon bankruptcy or insol-
vency, or otherwise, be given any priority whatsoever over its
general creditors; or (v) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles,
<PAGE>
chattel paper or instruments, with or without recourse; pro-
vided that the Borrower and its Subsidiaries may create or in-
cur or suffer to be created or incurred or to exist:
(a) liens to secure taxes, assessments and other
government charges in respect of obligations not
overdue or liens on properties other than Mortgaged
Properties to secure claims for labor, material or
supplies in respect of obligations not overdue;
(b) deposits or pledges made in connection with,
or to secure payment of, workmen's compensation,
unemployment insurance, old age pensions or other
social security obligations;
(c) liens on properties other than Mortgaged
Properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by
Section 9.1(d);
(d) liens of carriers, warehousemen, mechanics
and materialmen, and other like liens on properties
other than Mortgaged Properties, in existence less
than 120 days from the date of creation thereof in
respect of obligations not overdue;
(e) encumbrances on Real Estate other than the
Mortgaged Properties consisting of easements, rights
of way, zoning restrictions, restrictions on the use
of real property and defects and irregularities in the
title thereto, landlord's or lessor's liens under
leases to which the Borrower is a party, and other
minor liens or encumbrances none of which either in-
dividually or in the aggregate (of all items in this
clause (e)) could reasonably be expected to have a
materially adverse effect on the business, opera-
tions, assets or financial condition of the Borrower;
(f) purchase money security interests in or
purchase money mortgages on real or personal property
other than inventory or any Mortgaged Properties ac-
quired after the date hereof to secure purchase money
Indebtedness of the type and amount permitted by
Section 9.1(f), incurred in connection with the
acquisition of such property, which security interests
or mortgages cover only the real or personal property
so acquired;
<PAGE>
(g) liens and encumbrances on each Mortgaged
Property as and to the extent specifically stated to
be permitted by the Mortgage applicable thereto;
(h) liens in favor of the Administrative Agent
for the benefit of the Banks and the Administrative
Agent under the Loan Documents;
(i) liens on amounts deposited to secure the
performance of tenders, bids and other contracts,
other than for the payment of borrowed money, arising
in the ordinary course of the business of the Bor-
rower;
(j) for a period ending no later than one year
after the Closing Date only, a second priority lien
in the Henderson Property in favor of a representa-
tive of certain trade creditors provided that the
terms and conditions of such lien (including, without
limitation, the rights arising from such lien and
remedies in respect thereto) and all documents and
other matters relating to such lien shall be in form
and substance acceptable to the Facility Agents; and
(k) any other liens existing on the date hereof
and listed in Schedule 9.2 hereto.
3. Restriction on Investments. The Borrower will
not, and will not permit any of its Subsidiaries to, make or
permit to exist or to remain outstanding any Investment except
Investments in:
(a) so long as there exist at the time no out-
standing Revolving Credit Loans, marketable direct or
guaranteed obligations of the United States of America
that mature within three (3) months from the date of
purchase by the Borrower;
(b) so long as there exist at the time no out-
standing Revolving Credit Loans, certificates of de-
posit and time deposits of United States banks having
total assets in excess of $1,000,000,000;
(c) so long as there exist at the time no out-
standing Revolving Credit Loans, securities commonly
known as "commercial paper" issued by a corporation
organized and existing under the laws of the United
States of America or any state thereof that at the
time of purchase have been rated and the ratings for
which are not less than "P 1" if rated by Moody's
<PAGE>
Investors Services, Inc., and not less than "A 1" if
rated by Standard and Poor's Corporation;
(d) so long as no Event of Default has occurred
and is continuing or would result after giving effect
thereto, Investments by the Borrower in any Subsid-
iary of the Borrower created or acquired, or in any
joint venture or partnership an interest in which the
Borrower acquired, in accordance with Section 9.6(b)
not to exceed $250,000 in value in the aggregate in
any twelve (12) month period;
(e) Investments existing on the date hereof and
listed on Schedule 9.3 hereto; and
(f) Investments consisting of loans and ad-
vances to employees for moving, entertainment, travel
and other similar expenses in the ordinary course of
business not to exceed $250,000 in the aggregate at
any time outstanding;
provided, however, that such Investments will be considered
Investments permitted by this Section 9.3 only if all actions
have been taken to the reasonable satisfaction of the
Administrative Agent to provide to the Administrative Agent, for
the benefit of the Banks and the Administrative Agent, a first
priority perfected security interest in all of such Investments
free of all encumbrances other than Permitted Liens.
4. Distributions. The Borrower will not make any
Distributions.
5. Merger, Consolidation and Disposition of Assets.
1. Mergers and Acquisitions. The Borrower will
not become a party to any merger or consolidation, or
agree to or effect any asset acquisition, except for
the acquisition of inventory in the ordinary course
of business and Capital Expenditures permitted by
Section 10.3.
2. Disposition of Assets. The Borrower will not
become a party to or agree to or effect any sale,
transfer or other disposition of assets (including the
sale and leaseback of assets), other than (i) the sale
of inventory to retail customers in the ordinary
course of business and (ii) so long as no Event of
Default has occurred or is continuing or would occur
<PAGE>
after giving effect to such sale or disposition, (A)
sales of obsolete fixtures and equipment no longer
used or useful in the Borrower's business, (B) other
sales of Capital Assets up to an aggregate amount sold
in any twelve (12) month period of $250,000 in gross
cash proceeds, (C) for the fiscal years ending January
25, 1997 and January 31, 1998 only, the disposal of
Capital Assets and Inventory relating to the closure
of no more than three retail locations in any fiscal
year, (D) the disposal of Capital Assets and inven-
tory in connection with the Final GOB Sales at the
Specified GOB Stores.
6. No Subsidiaries, etc. The Borrower will not
create, acquire or suffer to exist any Subsidiaries nor create,
acquire or suffer to exist any interest in any joint venture or
partnership except as permitted by Section 9.3(e) and provided
that (i) such Subsidiary or joint venture becomes a party to a
Guaranty and grants to the Administrative Agent a first prior-
ity perfected lien in all of its assets pursuant to a Security
Agreement and (ii) all the capital stock or other equity in-
terests of the Borrower in such Subsidiary or joint venture are
pledged to the Administrative Agent pursuant to a pledge
agreement in form and substance acceptable to the Administra-
tive Agent.
7. Compliance with Environmental Laws. Except as set
forth on Schedule 7.18 attached hereto, the Borrower will not
and will not permit any of its Subsidiaries to, (i) other than
in compliance with clause (ii) below, (a) use any of the Real
Estate or any portion thereof for the handling, processing,
storage or disposal of Hazardous Substances, (b) cause or permit
to be located on any of the Real Estate any underground tank or
other underground storage receptacle for Hazardous Substances,
(c) generate any Hazardous Substances on any of the Real Estate,
(d) conduct any activity at any Real Estate or use any Real
Estate in any manner so as to cause a release (i.e. releasing,
spilling, leaking, pumping, pouring, emitting, emptying, dis-
charging, injecting, escaping, leaching, disposing or dumping)
or threatened release of Hazardous Substances on, upon or into
the Real Estate, or (ii) otherwise conduct any activity at any
Real Estate or use any Real Estate in any manner that would
violate any Environmental Law or bring such Real Estate in
violation of any Environmental Law, which reasonably could be
expected to have a material adverse effect on the environment
or the business, assets or financial condition of the Borrower
and its Subsidiaries.
<PAGE>
8. Employee Benefit Plans. Except as disclosed on
Schedule 9.8, neither the Borrower nor any ERISA Affiliate will
(a) engage in any "prohibited transaction"
within the meaning of Section 406 of ERISA or Section
4975 of the Code which reasonably could be expected
to result in a material liability for the Borrower;
or
(b) permit any Guaranteed Pension Plan to incur
an "accumulated funding deficiency", as such term is
defined in Section 302 of ERISA and Section 412 of the
Code, whether or not such deficiency is or may be
waived; or
(c) fail to contribute to any Guaranteed Pen-
sion Plan to an extent which, or terminate any Guar-
anteed Pension Plan in a manner which, reasonably
could be expected to result in the imposition of a
lien or encumbrance on the assets of the Guarantor or
the Borrower pursuant to Section 302(f) or Section
4068 of ERISA; or
(d) permit or take any action which reasonably
could be expected to result in the aggregate benefit
liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the
value of the aggregate assets of such Plans,
disregarding for this purpose the benefit liabilities
and assets of any such Plan with assets in excess of
benefit liabilities, by more than $1,000,000, based
on the latest valuation of each Guaranteed Pension
Plan, and on the actuarial methods and assumptions
employed for that valuation.
9. Bank Accounts. The Borrower will not, and will
not permit any Subsidiary to, (i) establish any bank accounts
other than those listed on Schedule 7.20 without the Adminis-
trative Agent's prior written consent, (ii) violate directly or
indirectly any bank agency, lock box or similar agreement in
favor of the Administrative Agent for the benefit of the Banks
and the Administrative Agent with respect to any such account,
or (iii) deposit into any of the payroll accounts identified as
such on Schedule 7.20 any amounts in excess of amounts neces-
sary to pay current payroll obligations from such accounts.
10. Transactions with Affiliates. The Borrower will
conduct and will cause each of its Subsidiaries to conduct
transactions with any of their respective Affiliates on any-
thing other than an arm's length basis and in the ordinary
<PAGE>
course of the business of the Borrower consistent with past
practices.
11. No Amendment of Certain Documents. The Borrower
will not amend, supplement or modify the terms of its
certificate of incorporation or corporate by-laws, the Plan or
any document or instrument delivered in connection therewith to
which it is a party, in each case without the prior written
consent of the Administrative Agent.
10. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note
is outstanding or any Bank has any obligation to make any Loans
or the Administrative Agent has any obligation to issue, extend
or renew any Letters of Credit:
1. Operating Cash Flow to Total Debt Service Ex-
pense. As of July 29, 1995, the Borrower will not permit both
(i) the ratio of Operating Cash Flow to Total Debt Service Ex-
pense for the single fiscal quarter ended on such date to be
less than -0.60:1 and (ii) the ratio of Operating Cash Flow to
Total Debt Service Expense for the two fiscal quarters ended on
such date to be less than 0.10:1. As of October 28, 1995, the
Borrower will not permit both (i) the ratio of Operating Cash
Flow to Total Debt Service Expense for the single fiscal quar-
ter ended on such date to be less than 0.95:1 and (ii) the ra-
tio of Operating Cash Flow to Total Debt Service Expense for the
two fiscal quarters ended on such date to be less than
0.20:1. As of each date set forth below, the Borrower will not
permit the ratio of Operating Cash Flow to Total Debt Service
Expense for the four fiscal quarters ended on such date to be
less than the ratio set forth opposite such date in the table
below:
Four Quarters Ended Ratio
January 27, 1996 1.05:1
April 27, 1996 1.05:1
July 27, 1996 1.05:1
October 26, 1996 1.10:1
January 25, 1997 1.10:1
April 26, 1997 1.15:1
July 26, 1997 1.20:1
October 25, 1997 1.25:1
January 31, 1998 1.30:1
<PAGE>
2. Minimum EBITDA. As of each date set forth below,
the Borrower will not permit EBITDA for both (i) the single
fiscal quarter ended on such date and (ii) the period of two
consecutive fiscal quarters ended on such date (treated as a
single accounting period) to be less than the amounts set forth
in the applicable column opposite such period in such table:
Minimum EBITDA
Quarter(s) Ended One Quarter Two Quarters
July 29, 1995 $ 700,000$ 3,500,000
October 28, 1995 $ 3,300,000$ 4,000,000
January 27, 1996 $ 5,100,000$ 8,400,000
April 27, 1996
$ 2,500,000 $ 7,700,000
July 27, 1996 $ 1,200,000$ 3,800,000
October 26, 1996 $ 3,400,000$ 4,600,000
January 25, 1997 $ 5,100,000$ 8,500,000
April 26, 1997 $ 2,500,000
$ 7,800,000
July 26, 1997 $ 1,400,000$ 4,100,000
October 25, 1997 $ 3,600,000$ 5,100,000
January 31, 1998 $ 5,300,000$ 9,000,000
In addition, the Borrower shall not permit EBITDA (i) for the
fiscal year ending January 27, 1996 to be less than $13,900,000,
(ii) for the fiscal year ending January 25, 1997 to be less than
$14,600,000 and (iii) for the fiscal year ending January 31,
1998 to be less than $15,800,000.
3. Capital Expenditures. The Borrower will not make
Capital Expenditures in an aggregate amount that exceeds (i) in
any fiscal quarter, $3,000,000 or (ii) in any fiscal year,
$8,000,000. The Borrower shall not make Capital Expenditures
with respect to the opening of new retail locations in an
aggregate amount that exceeds $3,000,000 in any fiscal year.
4. Minimum Stockholders' Equity. The Borrower will
not permit Stockholders' Equity for any fiscal quarter ending
during any period described in the table set forth below to be
less than the amount opposite such period in such table:
Quarter Ended Amount
July 29, 1995 $ 27,000,000
October 28, 1995 $ 29,000,000
<PAGE>
January 27, 1996 $ 36,000,000
April 27, 1996 $ 36,000,000
July 27, 1996 $ 36,000,000
October 26, 1996 $ 37,000,000
January 25, 1997 $ 42,000,000
April 26, 1997 $ 42,000,000
July 26, 1997 $ 42,000,000
October 25, 1997 $ 44,000,000
January 31, 1998 $ 49,000,000
5. Minimum and Maximum Eligible Inventory. The
Borrower shall not permit Eligible Inventory (excluding for this
purpose only, Eligible Inventory described in clause (iii) of
the definition thereof) on any date set forth below to be either
(i) more than the amount set forth below in column A opposite
such date or (ii) less than the amount set forth below in col-
umn B opposite such date:
Column A Column B
Maximum Minimum
Eligible Eligible
Date Inventory Inventory
July 29, 1995 $188,000,000 $147,000,000
October 28,1995 $214,000,000 $167,000,000
January 27, 1996 $162,000,000 $127,000,000
April 27, 1996 $196,000,000 $154,000,000
July 27, 1996 $192,000,000 $150,000,000
October 26, 1996 $221,000,000 $173,000,000
January 25, 1997 $168,000,000 $131,000,000
April 26, 1997 $204,000,000 $159,000,000
July 26, 1997 $199,000,000 $156,000,000
October 25, 1997 $229,000,000 $180,000,000
January 31, 1998 $174,000,000 $136,000,000
For any date set forth above, if the Borrower has a level of
Eligible Inventory which either (i) exceeds the maximum inven-
tory set forth in Column A above by an amount less than
$5,000,000 or (ii) is less than the minimum inventory set forth
in Column B above by an amount less than $5,000,000, such
failure to comply with this Section 10.5 in respect of such date
shall not constitute an Event of Default unless the Borrower
fails to comply with this Section 10.5 (by any amount, without
giving effect to this sentence) on the next immediately
succeeding date set forth above; provided that if the Borrower
fails to comply with this Section 10.5 on such succeeding date
by any amount, such prior failure to comply and such subsequent
failure to comply shall immediately constitute Events of
Default.
<PAGE>
11. CLOSING CONDITIONS.
The obligations of the Banks to make the initial Re-
volving Credit Loans and of the Administrative Agent to issue
any initial Letters of Credit shall be subject to the satis-
faction of the following conditions precedent:
1. Loan Documents. Each of the Loan Documents shall
have been duly executed and delivered by the respective parties
thereto, shall be in full force and effect and shall be in form
and substance (including with respect to exhibits and the
information included on the schedules to the Loan Documents)
satisfactory to each of the Banks. Each Bank shall have
received a fully executed copy of each such document.
2. Certified Copies of Charter Documents. Each of
the Banks shall have received from the Borrower a copy,
certified by a duly authorized officer of such Person to be true
and complete on the Closing Date, of each of (i) its charter or
other incorporation documents as in effect on such date of
certification, and (ii) its by-laws as in effect on such date.
3. Corporate Action. All corporate action necessary
for the valid execution, delivery and performance by the
Borrower of this Credit Agreement and the other Loan Documents
to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the
Banks shall have been provided to each of the Banks.
4. Incumbency Certificate. Each of the Banks shall
have received from the Borrower an incumbency certificate, dated
as of the Closing Date, signed by a duly authorized officer of
the Borrower, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (i) to
sign, in the name and on behalf of the Borrower, each of the
Loan Documents to which the Borrower is or is to become a party;
(ii) to make Loan Requests and Conversion Requests and to apply
for Letters of Credit; and (iii) to give notices and to take
other action on its behalf under the Loan Documents.
5. Validity of Liens. The Security Documents shall
be effective to create in favor of the Administrative Agent a
legal, valid and enforceable first (except for Permitted Liens
entitled to priority under applicable law) security interest in
and lien upon the Collateral. All filings, recordings, deliv-
eries of instruments and other actions necessary or desirable
in the opinion of the Administrative Agent to protect and
<PAGE>
preserve such security interests (including, without limitation,
the receipt of a lender's policy of title insurance in form and
substance satisfactory to the Administrative Agent) shall have
been duly effected. The Administrative Agent shall have
received evidence thereof in form and substance satisfactory to
the Administrative Agent.
6. Perfection Certificates and UCC Search Results.
The Administrative Agent shall have received from each of the
Guarantor and the Borrower a completed and fully executed
Perfection Certificate and the results of UCC searches with
respect to the Collateral, indicating no liens other than
Permitted Liens and otherwise in form and substance satisfac-
tory to the Administrative Agent.
7. Financial Statements. At least five (5) Business
Days prior to the Closing Date, the Facility Agents shall have
received, all in form and substance satisfactory to the Facility
Agents, (i) the unaudited consolidated and consolidating fi-
nancial statements of Old Rose's for the fiscal year ending
January 28, 1995, prepared in accordance with generally ac-
cepted accounting principles, together with certification by
the principal financial or accounting officer of Old Rose's that
the information contained in such financial statements fairly
presents the financial condition of Old Rose's on the date
thereof (subject to year end audit adjustments), (ii) an update
of the Borrower's projections for the fiscal years ending
January 25, 1997 and January 31, 1998 which projections shall
included a balance sheet, income statement, statement of cash
flow, all presented on a basis consistent with past practice but
after taking into account the effect of the Final GOB Sales at
the Specified GOB Stores, (iii) an update of the Business Plan
for the year ended January 27, 1996, (iv) certain management
financial reports for the year ended January 28, 1995
substantially similar in format to the report delivered to the
Administrative Agent on April 5, 1995, (v) a pro forma balance
sheet for the Borrower as of the Closing Date, and (vi) a report
setting forth sources and uses of funds in connection with the
Closing Date and the effectiveness of the Plan.
8. Landlord Consents. The Borrower shall have
requested of, and shall have made best efforts to obtain from,
each landlord of each location at which inventory is located a
waiver of lien rights substantially in the form of Exhibit F.
9. Certificates of Insurance. The Administrative
Agent shall have received (i) a certificate of insurance from
an independent insurance broker dated as of the Closing Date,
identifying insurers, types of insurance, insurance limits, and
policy terms, noting the Administrative Agent's interest as
<PAGE>
loss payee and additional insured with respect thereto and
otherwise describing the insurance obtained in accordance with
the provisions of the Security Agreements and to the satisfac-
tion of the Administrative Agent and (ii) certified copies of
all policies evidencing such insurance (or certificates there-
fore signed by the insurer or an agent authorized to bind the
insurer).
10. Cash Management and Agency Account Agreements.
The Administrative Agent and the Borrower shall have entered
into Agency Account Agreements with Bankers Trust Company and
with Centura Bank and Trust Company. The Administrative Agent
shall be completely satisfied with the status of all other as-
pects of the Borrower's cash management system.
11. Borrowing Base Report. The Administrative Agent
shall have received from the Borrower at least two (2) Business
Days prior to the Closing Date, the initial Borrowing Base
Report dated as of the Saturday immediately preceding such date
which is two (2) Business Days prior to the Closing Date.
12. Availability at Closing. The Banks shall be
satisfied that, after giving effect to all payments to be made
under the Plan in settlement of Administrative Claims, Non-Tax
Priority Claims, Allowed Tax Claims, Non-Priority Tax Claims,
and to satisfy in full the GE Obligations and the Class 2B
Claims and after the issuance of all Letters of Credit required
to replace outstanding letters of credit of Old Rose's or sup-
port such letters of credit, the Borrower will have the ability
under Section 2.1 herein to borrow, on the Closing Date, Re-
volving Credit Loans in an aggregate amount of at least
$12,000,000.
13. Inventory Reports. The Administrative Agent
shall have received from the Borrower at least five (5) days
prior to the Closing Date the most recent Inventory Report
Package, which shall be dated no later than April 1, 1995.
14. Hazardous Waste Assessments. The Administrative
Agent shall have received hazardous waste site assessments from
environmental engineers and in form and substance satisfactory
to the Administrative Agent, covering the Mortgaged Property and
all other real property in respect of which the Borrower may
have material liability, whether contingent or otherwise, for
dumping or disposal of Hazardous Substances.
15. Opinions of Counsel. Each of the Banks and the
Administrative Agent shall have received a favorable legal
opinion addressed to the Banks and the Administrative Agent,
<PAGE>
dated as of the Closing Date, in form and substance satisfac-
tory to the Banks and the Administrative Agent (including with
respect to enforceability, perfection and priority), from:
(a) Proskauer Rose Goetz & Mendelson LLP, spe-
cial counsel to the Borrower; and
(b) Smith, Debnam, Hibbert & Pahl, counsel to
the Borrower;
(c) Perry, Kittrell, Blackburn & Blackburn,
special real estate counsel to the Borrower; and
(d) opinions of such other counsel as the Ad-
ministrative Agent may reasonably request.
16. Payment of Fees. The Borrower shall have paid
to the Facility Agents or the Administrative Agent, as
appropriate, the Facility Fee and the first year's Agency Fee.
The Borrower shall have paid all fees and expenses of profes-
sionals retained by the Administrative Agent in connection with
the Loan Documents, including the fees and expenses of the Ad-
ministrative Agent's Special Counsel, the Appraiser and M.R.
Weiser & Co., special accounting systems advisor to the Admin-
istrative Agent.
17. Termination of Debtor in Possession Financing.
The Administrative Agent shall have received a payoff letter
from GE Capital, acknowledging that all GE Obligations have been
paid in full or otherwise provided for in a manner acceptable
to the Banks and all liens in favor of GE Capital under the DIP
Facility have been released. In addition, on the Closing Date,
GE Capital shall have executed and delivered to the Administra-
tive Agent for filing all termination statements and taken such
other actions and provided such further assurances as may be
requested by the Administrative Agent to discharge or evidence
the discharge of all mortgages, deeds of trust and security
interests granted by Old Rose's in favor of GE Capital.
18. Confirmation of Plan; Related Matters. Subject
only to the initial extension of credit hereunder, all
conditions to the Effective Date in Section 8.1 of the Plan
shall have occurred and all actions contemplated to occur on the
Effective Date shall have taken place, including without
limitation, the actions contemplated by Sections 7.5 and 7.11
of the Plan. The Administrative Agent shall have received a
true, accurate and complete copy of the Plan, with any amend-
ments thereto reasonably required and acceptable to the Banks,
<PAGE>
as confirmed by the Plan Confirmation Order and the Plan Modi-
fication Order. The Plan Confirmation Order shall have been
entered by Final Order of the Bankruptcy Court, shall be in full
force and effect and not be the subject of any stay or pending
appeal in any respect. The Plan Modification Order (i) shall
have been duly and validly entered by the Bankruptcy Court and
be in full force and effect, (ii) shall not have been revised,
modified or amended in any respect and (iii) shall be either (a)
a Final Order or (b) not a Final Order; provided however, that
notwithstanding the foregoing conditions in clause (iii) of this
sentence, if the Plan Modification Order is not a Final Order,
the Administrative Agent shall examine the circumstances that
existed with respect to such order at the time of entry by the
Bankruptcy Court and thereafter, including, without limitation,
whether there were any objections to such order or indications
that a party-in-interest may appeal such order, and the nature
of any pending appeals or petitions for review, rehearing,
reargument, stay or certiorari proceeding, and may determine in
its reasonable discretion after taking into account such
circumstances not to make any initial Revolving Credit Loans or
issue any initial Letters of Credit until such time as the Plan
Modification Order is a Final Order. The Lease Assumption Order
(i) shall have been duly and validly entered by the Bankruptcy
Court and be in full force and effect, (ii) shall not have been
revised, modified or amended in any respect, and (iii) shall be
either (a) a Final Order or (b) not a Final Order; provided
however, that notwithstanding the foregoing conditions in clause
(iii) of this sentence, if the Lease Assumption Order is not a
Final Order, the Administrative Agent shall examine the
circumstances that existed with respect to such order at the
time of entry by the Bankruptcy Court and thereafter, including,
without limitation, whether there were any objections to such
order or indications that a party-in-interest may appeal such
order, and the nature of any pending appeals or petitions for
review, rehearing, reargument, stay or certiorari proceeding,
and may determine in its reasonable discretion after taking into
account such circumstances not to make any initial Revolving
Credit Loans or issue any initial Letters of Credit until such
time as the Lease Assumption Order is a Final Order. The Exit
Facility Order shall have been entered by Final Order of the
Bankruptcy Court, shall be in full force and effect, shall not
have been reversed, modified or amended in any respect not
consented to by the Banks in writing and shall not be the
subject of any stay or pending appeal in any respect. The
Administrative Agent shall have received a certified copy of the
Exit Facility Order.
19. Prepetition Claims. All prepetition claims shall
have been settled, discharged, extinguished or provided for as
<PAGE>
contemplated by the Plan, and the Banks shall be satisfied that
all claims against, and contingent liabilities of, Old Rose's
that survive the Closing Date shall not exceed the amounts set
forth on Schedule 9.1 attached hereto, and appropriate ac-
counting reserves shall have been taken with respect to such
liabilities so that in the Banks' reasonable opinion the Pro-
jections will remain reasonable in all material respects and the
Borrower will be capable of complying with its financial and
other covenants herein contained. The Administrative Agent
shall have received a payoff letter from all the holders of
Class 2B Claims (or the agent for the holders of Class 2B
Claims), acknowledging that all Class 2B Claims have been sat-
isfied in full (other than fees of professionals retained by the
holders of Class 2B Claims) and that all liens in favor of the
Pre-Petition Lenders (as defined in the Plan) have been
released. In addition, on the Closing Date, the Pre-Petition
Lenders or their collateral agent(s) (including predecessors of
the current collateral agent) as appropriate shall have exe-
cuted and delivered to the Administrative Agent for filing all
termination statements and taken such other actions and pro-
vided such further assurances as may be requested by the Ad-
ministrative Agent to discharge or evidence the discharge of all
mortgages, deeds of trust and security interests granted by Old
Rose's in favor of the Pre-Petition Lenders or such agent(s).
20. Capital Structure. The capital structure of the
Borrower shall be satisfactory to the Administrative Agent; it
being understood that the capital structure of the Borrower
contemplated under the Plan to be effective on the Effective
Date shall be considered satisfactory to the Administrative
Agent on the Closing Date.
21. Minimum EBITDA. The Administrative Agent shall
be satisfied that for the fiscal year ended January 28, 1995,
EBITDA shall have exceeded $16,000,000.
22. Actions with Respect to Specified GOB Stores.
The Bankruptcy Court shall have entered an order (the "GOB Or-
der") in form and substance satisfactory to the Administrative
Agent approving Final GOB Sales in respect of the Specified GOB
Stores. There shall be pending an order with respect to all
leases relating to the Specified GOB Stores seeking the as-
sumption and assignment or the rejection of all such leases.
23. Proceedings and Documents; Due Diligence Matters.
All proceedings in connection with the transactions contemplated
by this Agreement, the other Loan Documents and all other
documents incident thereto shall be satisfactory in substance
<PAGE>
and in form to the Facility Agents, the Administrative Agent's
Special Counsel, and local North Carolina counsel to the
Facility Agents and the Banks, the Facility Agents and such
counsel shall have received all information and such counterpart
originals or certified or other copies of such documents as the
Administrative Agent may reasonably request. The Facility
Agents shall be satisfied with all aspects of its due diligence
with respect to the Borrower, including the final review of the
Borrower's accounting systems.
24. Closing Certificate. The Facility Agents shall
have received a certificate of the Borrower duly executed by an
authorized officer of the Borrower certifying that (i) the
representations and warranties contained in Section 7 are true
and correct on and as of such date, (ii) no Default or Event of
Default exists or would result from the making of the initial
Loans or issuance of the initial Letter of Credit and (iii)
since March 4, 1995, no material adverse change has occurred in
the business, operations, assets or financial condition of Old
Rose's or reasonably could be expected to occur with respect to
the Borrower.
12. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Revolving
Credit Loan and of the Administrative Agent to issue, extend or
renew any Letter of Credit, in each case whether on or after the
Closing Date, shall also be subject to the satisfaction of the
following conditions precedent:
1. Representations True; No Event of Default. Each
of the representations and warranties of the Borrower contained
in this Credit Agreement, the other Loan Documents or in any
document or instrument delivered pursuant to or in connection
with this Credit Agreement shall be true as of the date as of
which they were made and shall also be true at and as of the
time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if
made at and as of that time (except to the extent of changes
resulting directly from transactions contemplated or permitted
by this Credit Agreement and the other Loan Documents and
changes occurring in the ordinary course of business that sin-
gly or in the aggregate are not materially adverse to the Banks
or the business or financial affairs of the Borrower, and to the
extent that such representations and warranties relate ex-
pressly to an earlier date) and no Default or Event of Default
shall have occurred and be continuing or would occur after
giving effect to the request for a Revolving Credit Loan or the
<PAGE>
issuance, extension or renewal of a Letter of Credit, as ap-
plicable.
2. No Legal Impediment. No change shall have
occurred in any law or regulations thereunder or interpreta-
tions thereof that in the reasonable opinion of any Bank would
make it illegal for such Bank to make such Loan or to partici-
pate in the issuance, extension or renewal of such Letter of
Credit or in the reasonable opinion of the Administrative Agent
would make it illegal for the Administrative Agent to issue,
extend or renew such Letter of Credit.
3. Governmental Regulation. Each Bank shall have
received such statements in substance and form reasonably sat-
isfactory to such Bank as such Bank shall require for the pur-
pose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
4. Borrowing Base Report. The Administrative Agent
shall have received the most recent Borrowing Base Report
required to be delivered to the Administrative Agent in ac-
cordance with Section 8.4(h) and all supporting information re-
quested by the Administrative Agent.
5. Required Payment. The Borrower shall have paid
all fees and other amounts due under any of the Loan Documents.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
1. Events of Default and Acceleration. If any of the
following events ("Events of Default" or, if the giving of
notice or the lapse of time or both is required, then, prior to
such notice or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any princi-
pal of the Loans or any Reimbursement Obligation when
the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;
(b) the Borrower or a Guarantor shall fail to
pay any interest on the Loans, any Letter of Credit
Fee, Facility Fee, Agency Fee, or other sums due
hereunder or under any of the other Loan Documents,
when the same shall become due and payable, whether
at the stated date of maturity or any accelerated
<PAGE>
date of maturity or at any other date fixed for pay-
ment;
(c) the Borrower shall fail to comply with any
of its covenants contained in Sections 5.2, 8.1, 8.2,
8.5, 8.6, 8.7, 8.9, 8.12, 8.14, 8.16, 8.18 and 8.19,
any covenant in Section 9, any covenant in Section 10
or any of the covenants contained in any of the Mort-
gages; provided that any default in performance of the
covenant set forth in Section 10.5 will be subject to
the last sentence of such section;
(d) the Borrower or a Guarantor shall fail to
perform any term, covenant or agreement contained
herein or in any of the other Loan Documents (other
than those specified elsewhere in this Section 13.1)
for ten (10) days after written notice of such failure
has been given to the Borrower by the Administrative
Agent;
(e) any representation or warranty of the Bor-
rower in this Credit Agreement or any of the other
Loan Documents or in any other document or instrument
delivered pursuant to or in connection with this
Credit Agreement shall prove to have been false in any
respect upon the date when made or deemed to have been
made or repeated;
(f) the Borrower or a Guarantor shall fail to
pay when due, or within any applicable period of
grace, any obligation (other than obligations under
the Loan Documents) in excess of $300,000 in aggre-
gate principal amount in respect of borrowed money
(including letters of credit issued for the account
of the Borrower) or any Capitalized Leases, or fail
to observe or perform any term, covenant or agreement
contained in any agreement by which it is bound,
evidencing, securing or guaranteeing borrowed money
or in respect of any Capitalized Leases in excess of
$300,000 in aggregate principal amount, if such
failure would permit the holder or holders thereof or
of any obligations issued thereunder or the obligee
thereunder to accelerate the maturity thereof after
the giving of any required notice or lapse of any
applicable grace period;
(g) the Borrower or a Guarantor shall make an
assignment for the benefit of creditors, or admit in
writing its inability to pay or generally fail to pay
<PAGE>
its debts as they mature or become due, or shall pe-
tition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of the Bor-
rower or a Guarantor or of any substantial part of the
assets of the Borrower or a Guarantor or shall
commence any case or other proceeding relating to the
Borrower or any of its Subsidiaries under any bank-
ruptcy, reorganization, arrangement, insolvency, re-
adjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such
case or other proceeding shall be commenced against
the Borrower or a Guarantor or the Borrower shall
indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application
shall not have been dismissed within forty five (45)
days following the filing thereof (provided that
during such forty-five (45) day period, no other Event
of Default (including an Event of Default described
in clause (j) below) occurs and all other requirements
and terms of the Loan Documents are satisfied);
(h) a decree or order is entered appointing any
such trustee, custodian, liquidator or receiver or
adjudicating the Borrower or any of its Subsidiaries
bankrupt or insolvent, or approving a petition in any
such case or other proceeding, or a decree or order
for relief is entered in respect of the Borrower or
any of its Subsidiaries in an involuntary case under
federal bankruptcy laws as now or hereafter consti-
tuted;
(i) there shall remain in force, undischarged,
unsatisfied and unstayed, for more than thirty (30)
days, whether or not consecutive, any final judgment
or arbitration award against the Borrower or a Guar-
antor that, either individually or together with other
outstanding final judgments and awards, undischarged,
against the Borrower and the Guarantors exceeds in the
aggregate $500,000 and the Borrower shall have failed
to provide evidence satisfactory to the Administrative
Agent that such judgment or award is fully covered by
independent third-party insurance;
<PAGE>
(j) if any of the Loan Documents shall be can-
celled, terminated, revoked or rescinded or the Ad-
ministrative Agent's security interests, mortgages or
liens in any part of the Collateral (including prop-
erty acquired after the filing of an involuntary case
or proceeding against the Borrower) shall cease to be
perfected, or shall cease to have the priority con-
templated by the Loan Documents, in each case other-
wise than in accordance with the terms thereof, or any
action at law, suit in equity or other legal
proceeding to cancel, revoke or rescind (either di-
rectly or indirectly) any of the Loan Documents or
challenge the validity, enforceability, or priority
of the liens in favor of the Administrative Agent
under the Loan Documents shall be commenced by or on
behalf of the Borrower or a Guarantor, or any court
or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a deter-
mination that, or issue a judgment, order, decree or
ruling to the effect that, any one or more of the Loan
Documents or the liens granted thereunder is illegal,
invalid or unenforceable in accordance with the terms
thereof;
(k) with respect to any Guaranteed Pension Plan,
(i) an ERISA Reportable Event other than one disclosed
on Schedule 7.16 attached hereto shall have occurred
and such event reasonably could be expected to result
in liability of the Borrower to the PBGC or such
Guaranteed Pension Plan in an aggregate amount
exceeding $2,000,000 and such event in the circum-
stances occurring reasonably could be expected to
constitute grounds for the termination of such Guar-
anteed Pension Plan by the PBGC or for the appoint-
ment by the appropriate United States District Court
of a trustee to administer such Guaranteed Pension
Plan; or (ii) a trustee shall have been appointed by
the United States District Court to administer such
Plan; or (iii) the PBGC shall have instituted pro-
ceedings to terminate such Guaranteed Pension Plan;
(l) the Borrower shall be enjoined, restrained
or in any way prevented by the order of any court or
any administrative or regulatory agency or any law or
regulation thereunder from conducting any material
part of its business for more than ten (10) days;
(m) there shall occur any material damage to,
or loss, or destruction in respect of, the Henderson
Property (including the Inventory located at the
<PAGE>
Henderson Property), or there shall occur any strike,
lockout, labor dispute, embargo, condemnation, act of
God or public enemy, or other casualty, which causes,
for more than ten (10) consecutive days, the cessa-
tion or substantial curtailment of the Borrower's
business and would have a material adverse effect on
the business, assets or financial condition of the
Borrower;
(n) there shall occur the loss, suspension,
termination or revocation of, or failure to renew, any
license, permit or agreement in favor of the Borrower
or to which the Borrower is a party if such loss,
suspension, termination, revocation or failure to
renew would have a material adverse effect on the
business, assets or financial condition of the Bor-
rower;
(o) there shall occur a Change of Control;
(p) notwithstanding the occurrence of the Ef-
fective Date, any of the Plan Confirmation Order, the
Plan Modification Order, the Lease Assumption Order,
the GOB Order or the Exit Facility Order shall be (i)
revoked, vacated or reversed or (ii) amended,
supplemented or otherwise modified in a manner which
conflicts with the Loan Documents or which, in the
judgment of the Administrative Agent, is adverse to
the rights and interests of the Banks under this
Agreement and the other Loan Documents or there shall
occur a material default under the Plan which de-
fault, in the reasonable opinion of the Administra-
tive Agent, would enable the conversion of the Bank-
ruptcy Proceeding to a case under Chapter 7 of the
Bankruptcy Code or is otherwise adverse to the rights
and interests of the Banks under this Agreement or the
other Loan Documents;
then, and in any such event, so long as the same may be con-
tinuing, the Administrative Agent may, and upon the request of
the Majority Banks shall, by notice in writing (an "Accelera-
tion") to the Borrower declare all amounts owing with respect
to this Credit Agreement, the Notes and the other Loan Docu-
ments and all Reimbursement Obligations to be, and they shall
thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Borrower; provided
that in the event of any Event of Default specified in Sections
13.1(g) or 13.1(h) with respect to the Borrower or a Guarantor,
all such amounts shall become immediately due and payable
<PAGE>
automatically and without any requirement of notice or other act
from the Administrative Agent or any Bank.
2. Termination of Commitments. If any one or more
of the Events of Default specified in Section 13.1(g) or Section
13.1(h) shall occur with respect to the Borrower, any unused
portion of the credit hereunder shall forthwith terminate and
each of the Banks shall be relieved of all further obligations
to make Loans to the Borrower and the Administrative Agent shall
be relieved of all further obligations to issue, extend or renew
Letters of Credit. If any other Event of Default shall have
occurred and be continuing the Administrative Agent may and,
upon the request of the Majority Banks, shall, by notice to the
Borrower, terminate the unused portion of the credit hereunder,
and upon such notice being given such unused portion of the
credit hereunder shall terminate immediately and each of the
Banks shall be relieved of all further obligations to make Loans
and the Administrative Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No
termination of the credit hereunder shall relieve the Borrower
of any of the Obligations.
3. Remedies. In case any one or more of the Events
of Default shall have occurred and be continuing, and whether
or not the Banks shall have accelerated the maturity of the
Loans pursuant to Section 13.1, each Bank, if owed any amount
with respect to the Loans or the Reimbursement Obligations, may,
with the consent of the Majority Banks but not otherwise, pro-
ceed to protect and enforce its rights by suit in equity, ac-
tion at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in
this Credit Agreement and the other Loan Documents or any in-
strument pursuant to which the Obligations to such Bank are
evidenced, including as permitted by applicable law the ob-
taining of the ex parte appointment of a receiver, and, if such
amount shall have become due, by declaration or otherwise,
proceed to enforce the payment thereof or any other legal or
equitable right of such Bank. No remedy herein conferred upon
any Bank or the Administrative Agent or the holder of any Note
or purchaser of any Letter of Credit Participation is intended
to be exclusive of any other remedy and each and every remedy
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 or any other provision of law.
4. Distribution of Collateral Proceeds. In the event
that, following the occurrence or during the continuance of any
Event of Default and after an Acceleration, the Administrative
Agent or any Bank, as the case may be, receives any monies in
connection with the enforcement of any the Security Documents,
<PAGE>
or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as
follows:
(a) First, to the payment of, or (as the case
may be) the reimbursement of the Administrative Agent
for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been in-
curred or sustained by the Administrative Agent in
connection with the collection of such monies by the
Administrative Agent (including fees and expenses of
counsel), for the exercise, protection or enforcement
by the Administrative Agent of all or any of the
rights, remedies, powers and privileges of the Ad-
ministrative Agent under this Credit Agreement or any
of the other Loan Documents or in respect of the Col-
lateral or in support of any provision of adequate
indemnity to the Administrative Agent against any
taxes or liens which by law shall have, or may have,
priority over the rights of the Administrative Agent
to such monies;
(b) Second, to all other Obligations in ac-
cordance with clauses (i) through (v) of Section
5.2(b) or in such other order or preference as the
Majority Banks may determine; provided, however, that
distributions in respect of such Obligations shall be
made pro rata among the Banks; and provided, further,
that the Administrative Agent may in its discretion
make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full
or other provisions for payment in full satisfactory
to the Banks and the Administrative Agent of all of
the Obligations, to the payment of any obligations
required to be paid pursuant to Section 9-504(1)(c)
of the U.C.C.; and
(d) Fourth, the excess, if any, shall be re-
turned to the Borrower or to such other Persons as are
entitled thereto.
14. SETOFF.
Regardless of the adequacy of any collateral, and in
addition to and not in limitation of any rights under appli-
cable law, during the continuance of any Event of Default, any
deposits with or other sums credited by or due from any of the
<PAGE>
Banks (including the Administrative Agent) to the Borrower or
any Guarantor and any securities or other property of the Bor-
rower or any Guarantor in the possession of such Bank may be
applied to or set off by such Bank against the payment of Ob-
ligations and any and all other liabilities, direct, or indi-
rect, absolute or contingent, due or to become due, now exist-
ing or hereafter arising, of the Borrower to such Bank and such
Bank shall give the Borrower and the Administrative Agent prompt
notice following such set off. The Borrower hereby grants to
each Bank and the Administrative Agent, as security for the
Obligations, a continuing security interest in any and all
balances, credits, deposits, accounts and moneys of the Borrower
then or thereafter maintained with such Bank or the
Administrative Agent. Each of the Banks agrees with each other
Bank that if such Bank shall receive (either directly or
indirectly) from the Borrower or any Guarantor (whether by
voluntary payment, exercise of the right of setoff, counter-
claim, cross action, enforcement of the claim evidenced by the
Notes held by, or constituting Reimbursement Obligations owed
to, such Bank by proceedings against the Borrower at law or in
equity or by proof thereof in bankruptcy, reorganization, liq-
uidation, receivership or similar proceedings, or otherwise) any
amount in excess of its ratable portion of the payments received
by all of the Banks with respect to the Notes held by, and
Reimbursement Obligations owed to, all of the Banks, such Bank
will make such disposition and arrangements with the other Banks
with respect to such excess, either by way of distribution, pro
tanto assignment of claims, subrogation or otherwise as shall
result in each Bank receiving in respect of the Notes held by
it or Reimbursement Obligations owed it, its proportionate
payment as contemplated by this Credit Agreement; provided that
if all or any part of such excess payment is thereafter
recovered from such Bank, such disposition and arrangements
shall be rescinded and the amount restored to the extent of such
recovery, but without interest. If under any applicable
bankruptcy, insolvency or other similar insolvency law, any Bank
receives a secured claim in lieu of a setoff to which this
Section applies, such Bank shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Bank entitled under this
Section to share in the benefits of any recovery on such secured
claim.
15. THE ADMINISTRATIVE AGENT.
1. Authorization.
(a) The Administrative Agent is authorized to
take such action on behalf of each of the Banks and
<PAGE>
to exercise all such powers as are hereunder and un-
der any of the other Loan Documents and any related
documents delegated to the Administrative Agent, to-
gether with such powers as are reasonably incident
thereto, provided that no duties or responsibilities
not expressly assumed herein or therein shall be im-
plied to have been assumed by the Administrative
Agent.
(b) The relationship between the Administrative
Agent and each of the Banks is that of an independent
contractor. The use of the term "Administrative
Agent" is for convenience only and is used to de-
scribe, as a form of convention, the independent
contractual relationship between the Administrative
Agent and each of the Banks. Nothing contained in
this Credit Agreement nor the other Loan Documents
shall be construed to create an agency, trust or other
fiduciary relationship between the Administrative
Agent and any of the Banks.
(c) As an independent contractor empowered by
the Banks to exercise certain rights and perform
certain duties and responsibilities hereunder and
under the other Loan Documents, the Administrative
Agent is nevertheless a "representative" of the Banks,
as that term is defined in Article 1 of the Uniform
Commercial Code, for purposes of actions for the
benefit of the Banks and the Administrative Agent with
respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions
include the designation of the Administrative Agent
as "secured party", "mortgagee", "collateral agent"
or the like on all financing statements and other
documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection,
priority or enforcement of any security interests,
mortgages or deeds of trust in collateral security
intended to secure the payment or performance of any
of the Obligations. The Borrower acknowledges and
agrees that all liens and security interests granted
in favor of the Administrative Agent, whatever its
designation, are for the benefit of the Administra-
tive Agent, the Facility Agents and the Banks and that
the Administrative Agent whatever its designation is
a "representative" of the Banks, as that term is
defined in Article 1 of the Uniform Commercial Code.
<PAGE>
2. Employees and Administrative Agent. The Ad-
ministrative Agent may exercise its powers and execute its du-
ties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Credit Agreement
and the other Loan Documents. The Administrative Agent may
utilize the services of such Persons as the Administrative Agent
in its sole discretion may reasonably determine, and all fees
and expenses of any such Persons shall be paid by the Borrower.
3. No Liability. Neither the Administrative Agent
nor any of its shareholders, directors, officers or employees
nor any other Person assisting them in their duties nor any
agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be
taken, in good faith by it or them hereunder or under any of
the other Loan Documents, or in connection herewith or there-
with, or be responsible for the consequences of any oversight
or error of judgment whatsoever, except that the Administrative
Agent or such other Person, as the case may be, may be liable
for losses due to its willful misconduct or gross negligence as
finally determined by a court of competent jurisdiction.
4. No Representations. The Administrative Agent
shall not be responsible for the execution or validity or en-
forceability of this Credit Agreement, the Notes, the Letters
of Credit, any of the other Loan Documents or any instrument at
any time constituting, or intended to constitute, collateral
security for the Notes, or for the value of any such collateral
security or for the validity, enforceability or collectability
of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any cer-
tificate or instrument hereafter furnished to it by or on be-
half of the Borrower, or be bound to ascertain or inquire as to
the performance or observance of any of the terms, conditions,
covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for
the Notes or to inspect any of the properties, books or records
of the Borrower. The Administrative Agent shall not be bound
to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrower or any holder of any of the
Notes shall have been duly authorized or is true, accurate and
complete. The Administrative Agent has not made nor does it now
make any representations or warranties, express or implied, nor
does it assume any liability to the Banks, with respect to the
credit worthiness or financial conditions of the Borrower. Each
Bank acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Bank, and
<PAGE>
based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter
into this Credit Agreement.
5. Payments.
1. Payments to Administrative Agent. A payment
by the Borrower to the Administrative Agent hereunder
or any of the other Loan Documents for the account of
any Bank shall constitute a payment to such Bank. The
Administrative Agent agrees promptly to distribute to
each Bank such Bank's pro rata share of payments
received by the Administrative Agent for the account
of the Banks except as otherwise expressly provided
herein or in any of the other Loan Documents.
2. Distribution by Administrative Agent. If in
the opinion of the Administrative Agent the
distribution of any amount received by it in such
capacity hereunder, under the Notes or under any of
the other Loan Documents might involve it in liabil-
ity, it may refrain from making such distribution
until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If
a court of competent jurisdiction shall adjudge that
any amount received and distributed by the Adminis-
trative Agent is to be repaid, each Person to whom any
such distribution shall have been made shall either
repay to the Administrative Agent its proportionate
share of the amount so adjudged to be repaid or shall
pay over the same in such manner and to such Persons
as shall be determined by such court.
3. Delinquent Banks. Notwithstanding anything
to the contrary contained in this Credit Agreement or
any of the other Loan Documents, any Bank that fails
(i) to make available to the Administrative Agent its
pro rata share of any Loan or to purchase any Letter
of Credit Participation or (ii) to comply with the
provisions of Section 14 with respect to making dispo-
sitions and arrangements with the other Banks, where
such Bank's share of any payment received, whether by
setoff or otherwise, is in excess of its pro rata
share of such payments due and payable to all of the
Banks, in each case as, when and to the full extent
required by the provisions of this Credit Agreement,
shall be deemed delinquent (a "Delinquent Bank") and
shall be deemed a Delinquent Bank until such time as
such delinquency is satisfied. A Delinquent Bank
<PAGE>
shall be deemed to have assigned any and all payments
due to it from the Borrower, whether on account of
outstanding Loans, Unpaid Reimbursement Obligations,
interest, fees or otherwise, to the remaining nonde-
linquent Banks for application to, and reduction of,
their respective pro rata shares of all outstanding
Loans and Unpaid Reimbursement Obligations. The De-
linquent Bank hereby authorizes the Administrative
Agent to distribute such payments to the nondelinquent
Banks in proportion to their respective pro rata
shares of all outstanding Loans and Unpaid
Reimbursement Obligations. A Delinquent Bank shall
be deemed to have satisfied in full a delinquency when
and if, as a result of application of the assigned
payments to all outstanding Loans and Unpaid
Reimbursement Obligations of the nondelinquent Banks,
the Banks' respective pro rata shares of all out-
standing Loans and Unpaid Reimbursement Obligations
have returned to those in effect immediately prior to
such delinquency and without giving effect to the
nonpayment or other event causing such delinquency.
6. Holders of Notes. The Administrative Agent may
deem and treat the payee of any Note or the purchaser of any
Letter of Credit Participation as the absolute owner or
purchaser thereof for all purposes hereof until it shall have
been furnished in writing with a different name by such payee
or by a subsequent holder, assignee or transferee.
7. Indemnity. The Banks ratably agree hereby to
indemnify and hold harmless the Administrative Agent from and
against any and all claims, actions and suits (whether ground-
less or otherwise), losses, damages, costs, expenses (including
attorneys' fees and any expenses for which the Administrative
Agent has not been reimbursed by the Borrower as required under
the Loan Documents), and liabilities of every nature and char-
acter arising out of or related to this Credit Agreement, the
Notes, or any of the other Loan Documents or the transactions
contemplated or evidenced hereby or thereby, or the Adminis-
trative Agent's actions taken hereunder or thereunder, except
to the extent that any of the same shall be directly caused by
the Administrative Agent's willful misconduct or gross negli-
gence as finally determined by a court of competent jurisdic-
tion.
8. Administrative Agent as Bank. In its individual
capacity, FNBB shall have the same obligations and the same
rights, powers and privileges in respect to its Revolving
Commitment and the Loans made by it, and as the holder of any
<PAGE>
of the Notes and as the purchaser of any Letter of Credit Par-
ticipations, as it would have were it not also the Administra-
tive Agent.
9. Resignation. The Administrative Agent may resign
at any time by giving sixty (60) days' prior written notice
thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint
a successor Administrative Agent. Unless a Default or Event of
Default shall have occurred and be continuing, such successor
Administrative Agent shall be reasonably acceptable to the
Borrower. If no successor Administrative Agent shall have been
so appointed by the Majority Banks and shall have accepted such
appointment within thirty (30) days after the retiring Admin-
istrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Banks, ap-
point a successor Administrative Agent, which shall be a fi-
nancial institution having a rating of not less than A or its
equivalent by Standard & Poor's Corporation. Upon the accep-
tance of any appointment as Administrative Agent hereunder by
a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Adminis-
trative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation, the provisions of
this Credit Agreement and the other Loan Documents shall
continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Ad-
ministrative Agent.
10. Notification of Defaults and Events of Default.
Each Bank hereby agrees that, upon learning of the existence of
a Default or an Event of Default, it shall promptly notify the
Administrative Agent thereof. The Administrative Agent hereby
agrees that upon receipt of any notice under this Section 15.10
it shall promptly notify the other Banks of the existence of
such Default or Event of Default.
11. Duties in the Case of Enforcement. In case one
or more Events of Default have occurred and shall be con-
tinuing, and whether or not acceleration of the Obligations
shall have occurred, the Administrative Agent shall, if (i) so
requested by the Majority Banks and (ii) the Banks have pro-
vided to the Administrative Agent such additional indemnities
and assurances against expenses and liabilities as the Admin-
istrative Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or
other disposition of all or any part of the Collateral and ex-
ercise all or any such other legal and equitable and other
<PAGE>
rights or remedies as it may have in respect of such Collat-
eral. The Majority Banks may direct the Administrative Agent
in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnity and
hold the Administrative Agent, harmless from all liabilities
incurred in respect of all actions taken or omitted in accor-
dance with such directions, provided that the Administrative
Agent need not comply with any such direction to the extent that
the Administrative Agent reasonably believes the Administrative
Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
16. EXPENSES.
The Borrower agrees to pay (i) the costs of producing
and reproducing this Credit Agreement, the other Loan Documents
and the other agreements and instruments mentioned herein, (ii)
any taxes (including any interest and penalties in respect
thereto) payable by the Administrative Agent or any of the Banks
(other than taxes based upon the Administrative Agent's or any
Bank's net income and franchise taxes) on or with respect to the
transactions contemplated by this Credit Agreement (the Bor-
rower hereby agreeing to indemnify the Administrative Agent and
each Bank with respect thereto), (iii) the fees, expenses and
disbursements of the Administrative Agent's Special Counsel or
any other counsel (including local counsel) to the Facility
Agents incurred in connection with the preparation, administra-
tion, interpretation and implementation of the Loan Documents
and other instruments mentioned herein or the transactions
contemplated hereunder (including the letter of credit and other
support that may be provided for the benefit of a representative
of certain trade creditors of the Borrower and related matters),
each closing hereunder, and amendments, modifications,
approvals, consents or waivers hereto or hereunder, (iv) the
fees, expenses and disbursements of the Appraiser, and any other
consultant or professional retained by the Administrative Agents
or the Facility Agents in connection with the administration,
implementation and preparation of the Loan Documents and the
transactions contemplated hereby, (v) the fees, expenses and
disbursements of the Facility Agents incurred in connection with
the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, including all
title insurance premiums and surveyor, engineering and appraisal
charges and environmental assessment and inspection charges and
any expenses incurred in connection with periodic commercial
finance examinations conducted by any of the Facility Agents or
a representative thereof, (vi) any reasonable fees, and costs,
expenses and bank charges, including bank charges for returned
<PAGE>
checks, incurred by the Administrative Agent in establishing,
maintaining or handling the Agency Concentration Account, any
agency accounts and other deposit or other accounts; (vii) all
out-of-pocket expenses (including, without limitation, reason-
able attorneys' fees and costs, which attorneys may be employ-
ees of the Facility Agents, and consulting, accounting, ap-
praisal, investment banking and similar professional fees and
charges of professionals retained by the Facility Agents with
the consent of the Majority Banks) incurred by the Facility
Agents in connection with (A) the enforcement of or preser-
vation of rights under any of the Loan Documents against the
Borrower or the administration thereof after the occurrence of
a Default or Event of Default and (B) any litigation, proceed-
ing or dispute whether arising hereunder or otherwise, in any
way related to any Bank's or the Administrative Agent's rela-
tionship with the Borrower and (viii) all fees, expenses and
disbursements of the Facility Agents or the Administrative Agent
incurred in connection with UCC searches, UCC filings or
mortgage recordings. The covenants of this Section 16 shall
survive payment or satisfaction of all other Obligations.
17. INDEMNIFICATION.
In addition to the provisions of Section 16, the
Borrower agrees to indemnity and hold harmless the
Administrative Agent and each Bank (and each of their re-
spective officers, directors, employees, affiliates, agents,
attorneys, consultants and controlling persons) from and against
any and all claims, actions and suits whether groundless or
otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out
of this Credit Agreement or any of the other Loan Documents or
the transactions contemplated hereby including, without
limitation, (i) any actual or proposed use by the Borrower of
the proceeds of any of the Loans or Letters of Credit, (ii) the
reversal or withdrawal of any provisional credits granted by the
Administrative Agent upon the transfer of funds to or from the
Agency Concentration Account or other bank agency or accounts
or in connection with the provisional honoring of checks or
other items, (iii) any actual or alleged infringement of any
patent, copyright, trademark, service mark or similar right of
the Guarantor or the Borrower comprised in the Collateral, (iv)
the Guarantor or the Borrower entering into or performing this
Credit Agreement or any of the other Loan Documents to which it
is a party, (v) with respect to the Guarantor or the Borrower
and their respective properties and assets, the violation of any
Environmental Law, the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release or threatened
<PAGE>
release of any Hazardous Substances or any action, suit, pro-
ceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims
with respect to wrongful death, personal injury or damage to
property) and (vi) all matters related to the letter of credit
and other support that may be provided for the benefit of a
representative of certain trade creditors of the Borrower, in
each case including, without limitation, the fees and dis-
bursements of counsel and allocated costs of internal counsel
incurred in connection with any such investigation, litigation
or other proceeding absent the gross negligence or willful
misconduct of the Administrative Agent or, as the case may be,
such Bank, as finally determined by a court of competent ju-
risdiction. In litigation, or the preparation therefor, the
Banks and the Administrative Agent shall be entitled to select
their own counsel and, in addition to the foregoing indemnity,
the Borrower agrees to pay promptly the fees and expenses of
such counsel. If, and to the extent that the obligations of the
Borrower under this Section 17 are unenforceable for any reason,
the Borrower hereby agrees to make the maximum contribution to
the payment in satisfaction of such obligations which is per-
missible under applicable law. The covenants contained in this
Section 17 shall survive payment or satisfaction in full of all
other Obligations.
18. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and war-
ranties made herein, in the Notes, in any of the other Loan
Documents or in any documents or other papers delivered by or
on behalf of the Borrower pursuant hereto shall be deemed to
have been relied upon by the Banks and the Administrative Agent,
notwithstanding any investigation heretofore or hereafter made
by any of them, and shall survive the making by the Banks of any
of the Loans and the issuance, extension or renewal of any
Letters of Credit, as herein contemplated, and shall continue
in full force and effect so long as any Letter of Credit or any
amount due under this Credit Agreement or the Notes or any of
the other Loan Documents remains outstanding or any Bank has any
obligation to make any Loans or the Administrative Agent has any
obligation to issue, extend or renew any Letter of Credit, and
for such further time as may be otherwise expressly specified
in this Credit Agreement. All statements contained in any
certificate or other paper delivered to any Bank or the
Administrative Agent at any time by or on behalf of the Borrower
pursuant hereto or in connection with the transactions contem-
plated hereby shall constitute representations and warranties
by the Borrower for all purposes of this Credit Agreement.
<PAGE>
19. ASSIGNMENT AND PARTICIPATION.
1. Conditions to Assignment by Banks. Except as
provided herein, each Bank may assign to one or more Eligible
Assignees all or a portion of its interests, rights and obli-
gations under this Credit Agreement (including all or a portion
of its Commitment Percentage and Revolving Commitment and the
same portion of the Loans at the time owing to it, the Notes
held by it and its assigned interest in the risk relating to any
Letters of Credit); provided that (i) the Administrative Agent
shall have given its prior written consent to such assignment,
which consent will not be unreasonably withheld or delayed, (ii)
each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Bank's interests, rights and
obligations under this Credit Agreement, (iii) each assignment
shall be in a minimum amount of $10,000,000, (iv) each Bank
shall retain Loans of at least a $10,000,000 in the aggregate,
(v) the parties to such assignment shall execute and deliver to
the Administrative Agent, for recording in the Register (as
hereinafter defined), an Assignment and Acceptance,
substantially in the form of Exhibit E hereto (an "Assignment
and Acceptance"), together with any Notes subject to such as-
signment and (vi) no Bank (except for each of the Facility
Agents) may assign any of its Loans unless the Revolving Com-
mitment of each Facility Agent in its capacity as a Bank is less
than or equal to twenty-five million dollars ($25,000,000) at
such time. Upon such execution, delivery, acceptance and re-
cording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i)
the assignee thereunder shall be a party hereto (and Schedule
1 shall be deemed amended to reflect such assignment) and, to
the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Bank hereunder, and (ii) the as-
signing Bank shall, to the extent provided in such assignment
and upon payment to the Administrative Agent of the registra-
tion fee referred to in Section 19.3, be released from its
obligations under this Credit Agreement.
2. Certain Representations and Warranties; Limi-
tations; Covenants. By executing and delivering an Assignment
and Acceptance, the parties thereunder shall be deemed to con-
firm to and agree with each other and the other parties hereto
as follows:
(a) other than the representation and warranty
that it is the legal and beneficial owner of the in-
terest being assigned thereby free and clear of any
adverse claim, the assigning Bank makes no represen-
tation or warranty, express or implied, and assumes
<PAGE>
no responsibility with respect to any statements,
warranties or representations made in or in connec-
tion with this Credit Agreement or the execution,
legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the
other Loan Documents or any other instrument or doc-
ument furnished pursuant hereto or the attachment,
perfection or priority of any security interest or
mortgage;
(b) the assigning Bank makes no representation
or warranty and assumes no responsibility with re-
spect to the financial condition of the Guarantor or
the Borrower or any other Person primarily or sec-
ondarily liable in respect of any of the Obligations,
or the performance or observance by the Guarantor or
the Borrower or any other Person primarily or sec-
ondarily liable in respect of any of the Obligations
or any of their obligations under this Credit Agree-
ment or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto or
thereto;
(c) such assignee confirms that it has received
a copy of this Credit Agreement, and such other doc-
uments and information as it has deemed appropriate
to make its own credit analysis and decision to enter
into such Assignment and Acceptance;
(d) such assignee will, independently and
without reliance upon the assigning Bank, the Admin-
istrative Agent or any other Bank and based on such
documents and information as it shall deem appropri-
ate at the time, continue to make its own credit de-
cisions in taking or not taking action under this
Credit Agreement;
(e) such assignee represents and warrants that
it is an Eligible Assignee;
(f) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this
Credit Agreement and the other Loan Documents as are
delegated to the Administrative Agent by the terms
hereof or thereof, together with such powers as are
reasonably incidental thereto;
(g) such assignee agrees that it will perform
in accordance with their terms all of the obligations
<PAGE>
that by the terms of this Credit Agreement are re-
quired to be performed by it as a Bank;
(h) such assignee represents and warrants that
it is legally authorized to enter into such Assign-
ment and Acceptance; and
(i) such assignee acknowledges that it has made
arrangements with the assigning Bank satisfactory to
such assignee with respect to its pro rata share of
Letter of Credit Fees in respect of outstanding Let-
ters of Credit.
3. Register. The Administrative Agent shall maintain
a copy of each Assignment and Acceptance delivered to it and a
register or similar list (the "Register") for the recordation
of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit
Loans owing to and Letter of Credit Participations purchased by,
the Banks from time to time. The entries in the Register shall
be conclusive in the absence of manifest error, and the Bor-
rower, the Administrative Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Credit Agreement. The
Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the as-
signing Bank agrees to pay to the Administrative Agent a pro-
cessing and registration fee in the sum of $3,000.
4. New Notes. Upon its receipt of an Assignment and
Acceptance executed by the parties to such assignment, together
with each Note subject to such assignment, the Administrative
Agent shall (i) record the information contained therein in the
Register, and (ii) give prompt notice thereof to the Borrower
and the Banks (other than the assigning Bank). Within five (5)
Business Days after receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Administrative
Agent, in exchange for each surrendered Note, a new Note to the
order of such Eligible Assignee in an amount equal to the amount
assumed by such Eligible Assignee pursuant to such Assignment
and Acceptance and, if the assigning Bank has retained some
portion of its obligations or Loans, a new Note to the order of
the assigning Bank in an amount equal to the amount retained by
it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate
principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be substantially
<PAGE>
the form of the assigned Notes. The surrendered Notes shall
be cancelled and returned to the Borrower.
5. Participations. Each Bank may sell partici-
pations to one or more banks or other entities in all or a
portion of such Bank's rights and obligations under this Credit
Agreement and the other Loan Documents; provided that (i) each
such participation shall be in an amount of not less than
$10,000,000, (ii) any such sale or participation shall not af-
fect the rights and duties of the selling Bank hereunder to the
Borrower, (iii) the selling Bank shall notify the Administra-
tive Agent of such participation and the participant on or prior
to the effective date thereof and (iv) the only rights granted
to the participant pursuant to such participation arrangements
with respect to waivers, amendments or modifications of the Loan
Documents shall be the rights under such participation
arrangements to approve waivers, amendments or modifications
that would reduce the principal of or the interest rate on any
Loans, extend the term or increase the amount of the Revolving
Commitment of such Bank as it relates to such participant,
reduce the amount of any commitment fees, or Letter of Credit
Fees to which such participant is entitled or extend any fixed
payment date for principal or interest; provided, however, that
notwithstanding anything in this Credit Agreement to the
contrary, a participant shall not have any voting rights as a
Bank with respect to any of the Loan Documents and the sole
rights and remedies of any participant in connection with the
Loan Documents shall be its rights and remedies against the
selling Bank.
6. Disclosure. The Borrower agrees that in addition
to disclosures made in accordance with standard and customary
banking practices any Bank may disclose information obtained by
such Bank pursuant to this Credit Agreement to assignees or
participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential
assignees or participants shall agree (i) to treat in confidence
such information unless such information otherwise becomes
public knowledge, (ii) not to disclose such information to a
third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of
transactions unrelated to such contemplated assignment or par-
ticipation. The Borrower shall provide such information as is
reasonably necessary to enable the Facility Agents to complete
any syndication of the Total Revolving Commitment and shall
otherwise cooperate in any reasonable manner requested by the
Facility Agents in any such syndication.
<PAGE>
7. Assignee or Participant Affiliated with the
Borrower. If any assignee Bank is an Affiliate of the Bor-
rower, then any such assignee Bank shall have no right to vote
as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Ad-
ministrative Agent pursuant to Section 13.1 or Section 13.2, and
the determination of the Majority Banks shall for all purposes
of this Agreement and the other Loan Documents be made without
regard to such assignee Bank's interest in any of the Loans.
If any Bank sells a participating interest in any of the Loans
or Reimbursement Obligations to a participant, and such
participant is the Borrower or an Affiliate of the Borrower,
then such transferor Bank shall promptly notify the
Administrative Agent of the sale of such participation. A
transferor Bank shall have no right to vote as a Bank hereunder
or under any of the other Loan Documents for purposes of
granting consents or waivers or for purposes of agreeing to
amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Administrative Agent pursuant
to Section 13.1 or Section 13.2 to the extent that such
participation is beneficially owned by the Borrower or any
Affiliate of the Borrower, and the determination of the Majority
Banks shall for all purposes of this Agreement and the other
Loan Documents be made without regard to the interest of such
transferor Bank in the Loans to the extent of such
participation.
8. Miscellaneous Assignment Provisions. Any as-
signing Bank shall retain its rights to be indemnified pursuant
to Section 17 with respect to any claims or actions arising
prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America
or any state thereof, it shall, prior to the date on which any
interest or fees are payable hereunder or under any of the other
Loan Documents for its account, deliver to the Borrower and the
Administrative Agent certification as to its exemption from
deduction or withholding of any United States federal income
taxes. Anything contained in this Section 19 to the contrary
notwithstanding, any Bank may at any time pledge all or any
portion of its interest and rights under this Credit Agreement
(including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or the
enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
9. Assignment by the Borrower. The Borrower shall
not assign or transfer any of its rights or obligations under
<PAGE>
any of the Loan Documents without the prior written consent of
each of the Banks.
20. NOTICES, ETC.
Except as otherwise expressly provided in this Credit
Agreement, all notices and other communications made or re-
quired to be given pursuant to this Credit Agreement or the
Notes or any Letter of Credit Applications shall be in writing
and shall be delivered in hand, mailed by United States regis-
tered or certified first class mail, postage prepaid, sent by
reputable overnight courier, or sent by telegraph, telecopy or
facsimile and confirmed by delivery via courier or postal ser-
vice, addressed as follows:
(a) if to the Borrower:
Rose's Stores, Inc.
218 South Garnett Street
Henderson, North Carolina 27536
Attention: Chief Executive Office
Facsimile: (919) 430-2902
or at such other address and/or facsimile number for
notice as the Borrower shall last have furnished in
writing to the Person giving the notice;
(b) if to the Administrative Agent,
The First National Bank of Boston, 01-09-06
100 Federal Street
Boston, Massachusetts 02110
Attention: Elizabeth A. Ratto, Vice President
Facsimile: (617) 434-2309
or such other address and/or facsimile number for
notice as the Administrative Agent shall last have
furnished in writing to the Person giving the notice;
and
(c) if to any Bank, at such Bank's address set
forth on Schedule 1, hereto, or such other address for
notice as such Bank shall have last furnished in
writing to the Person giving the notice.
<PAGE>
Any such notice or demand shall be deemed to have been
duly given or made and to have become effective (i) if delivered
by hand or overnight courier to a responsible officer of the
party to which it is directed, at the time of the receipt
thereof by such officer, (ii) if delivered by facsimile to the
Person to whom it is directed, at the time of verbal
confirmation of the receipt by such Person or the time that the
transmitting facsimile device produces a report confirming
transmission, and (iii) if sent by registered or certified
first-class mail, postage prepaid, on the third Business Day
following the mailing thereof.
21. GOVERNING LAW; SUBMISSION TO JURISDICTION.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPE-
CIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE
CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR
ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF SAID STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS
OR CHOICE OF LAW, OTHER THAN NEW YORK STATE GENERAL OBLIGATIONS
LAW SECTION 5-1401). THE BORROWER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS
IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE
ADDRESS SPECIFIED IN SECTION 20. THE BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
Except as expressly consented in writing by the Banks,
the Bankruptcy Court's retention of jurisdiction under the Plan,
the Plan Confirmation Order, the Plan Modification Order or
otherwise shall not govern the enforcement of the Loan Documents
or any Obligations or any rights or remedies relating thereto.
22. HEADINGS.
The captions in this Credit Agreement are for conve-
nience of reference only and shall not define or limit the
provisions hereof.
<PAGE>
23. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be
executed in several counterparts and by each party on a sepa-
rate counterpart, each of which when executed and delivered
shall be an original, and all of which together shall consti-
tute one instrument. In proving this Credit Agreement it shall
not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is
sought.
24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed
in connection herewith or therewith express the entire under-
standing of the parties with respect to the transactions con-
templated hereby. Neither this Credit Agreement nor any term
of any of the Loan Documents may be changed, waived, discharged
or terminated, except as provided in Section 26.
25. WAIVER OF JURY TRIAL.
EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE
BANKS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO
ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS
PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE
PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSE-
QUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER (I) CERTIFIES THAT NO REPRESEN-
TATIVE, ADMINISTRATIVE AGENT OR ATTORNEY OF ANY BANK OR THE
ADMINISTRATIVE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH BANK OR THE ADMINISTRATIVE AGENT WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(II) ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT AND THE BANKS
HAVE BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER
THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Unless otherwise provided in this Credit Agreement or
the other Loan Documents, any consent or approval required or
permitted by this Credit Agreement to be given by all of the
<PAGE>
Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or
mentioned herein may be amended, and the performance or obser-
vance by the Borrower of any terms of this Credit Agreement, the
other Loan Documents or such other instrument or the con-
tinuance of any Default or Event of Default may be waived (ei-
ther generally or in a particular instance and either retroac-
tively or prospectively), with, but only with, the written
consent of the Borrower and the written consent of the Majority
Banks. The Administrative Agent shall not act to release its
lien on any Collateral without the written consent of the Ma-
jority Banks. Notwithstanding the foregoing, the rate of in-
terest on the Notes (other than interest accruing pursuant to
Section 5.11 following the effective date of any waiver by the
Majority Banks of the Default or Event of Default relating
thereto), the fixed maturity date of the Notes, the amount of
the Revolving Commitments of the Banks, the amount of the
commitment fee in Section 2.2 or Letter of Credit Fees hereunder
may not be changed without the written consent of each Bank
affected thereby; the definitions of Majority Banks, Borrowing
Base, Eligible Inventory, Eligible Retail Inventory, Estimated
Inventory Proceeds, Effective Borrowing Base Percentage and
Estimated Net GOB Realization Percentage may not be amended
without the written consent of all of the Banks; and the amount
of the Agency Fee or any Letter of Credit Fees payable for the
Administrative Agent's account and Section 15 may not be amended
without the written consent of the Administrative Agent. Ex-
cept for the consent to the use of cash collateral in a bank-
ruptcy proceeding, the Administrative Agent shall not release
its lien on Eligible Inventory in an amount greater than
$10,000,000 without the consent of each Bank. No waiver shall
extend to or affect any obligation not expressly waived or im-
pair any right consequent thereon. No course of dealing or
delay or omission on the part of the Administrative Agent or any
Bank in exercising any right shall operate as a waiver thereof
or otherwise be prejudicial thereto. No notice to or demand
upon the Borrower shall entitle the Borrower to other or further
notice or demand in similar or other circumstances.
27. SEVERABILITY.
The provisions of this Credit Agreement are severable
and if any one clause or provision hereof shall be held invalid
or unenforceable in whole or in part in any jurisdiction, then
such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and
shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this
Credit Agreement in any jurisdiction.
<PAGE>
28. DISCLOSURE.
Neither the Administrative Agent nor any Bank shall
disclose information obtained by the Administrative Agent or
such Bank pursuant to this Credit Agreement (unless such in-
formation otherwise is or becomes public knowledge) other than
disclosures (i) made in accordance with standard and customary
banking practices, (ii) to officers and directors, attorneys or
other agents, (iii) as required by law or legal practice or (iv)
agreed to by the Borrower or the Guarantor or otherwise
permitted under this Credit Agreement or otherwise.
[Remainder of Page Intentionally Omitted]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Credit Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
ROSE'S STORES, INC.
ATTEST:
By:/s/ R. Edward Anderson
Name:R. Edward Anderson
/s/G. Templeton Blackburn, II Title: Chairman, President and CEO
Secretary
[CORPORATE SEAL]
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ Elizabeth A. Ratto
Name: Elizabeth A. Ratto
Title: Vice President
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: /s/ Christopher MacDonald
Name:Christopher MacDonald
Title: Vice President
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as
of April 28, 1995, made by Rose's Stores, Inc., a Delaware cor-
poration, having its chief executive offices at 218 South Gar-
nett Street, Henderson, North Carolina ("Rose's" or the "Bor-
rower"), in favor of The First National Bank of Boston ("FNBB"),
a national banking association, as administrative agent
(hereafter, the "Collateral Agent") for the banks (the "Banks")
party to the Credit Agreement referred to below;
W I T N E S S E T H :
WHEREAS, on December 14, 1994, the United States
Bankruptcy Court for the Eastern District of North Carolina (the
"Bankruptcy Court") confirmed the First Amended Joint Plan of
Reorganization of Rose's Stores, Inc. (as modified and restated
as the "Modified and Restated First Amended Joint Plan of
Reorganization" approved by the Bankruptcy Court on April 24,
1995,the "Plan");
WHEREAS, in connection with the effectiveness of the
Plan, the Borrower, the Banks, the Collateral Agent and FNBB and
The CIT Group/Business Credit, Inc. as facility agents have
entered into a Revolving Credit Agreement dated as of April 28,
1995 (as amended, restated or otherwise modified from time to
time, the "Credit Agreement") pursuant to which the Banks have
extended commitments to provide to Borrower a senior secured
revolving credit and letter of credit facility, as more spe-
cifically set forth in the Credit Agreement;
WHEREAS, it is a condition to the obligations of the
Banks to extend credit under the Credit Agreement and to the
effectiveness of the Plan that the Borrower execute this Secu-
rity Agreement;
WHEREAS, the Borrower has duly authorized the execu-
tion, delivery and performance of this Agreement and the Credit
Agreement and such execution, delivery and performance has been
authorized and confirmed pursuant to the Exit Facility Order;
WHEREAS, the liens granted hereunder are in addition
to and not in derogation of the first priority perfected liens
in favor of the Collateral Agent in all Collateral and all other
assets and property of the Borrower (whether now existing or
hereafter acquired) as provided in Section 7.2 of the Plan and
in the Exit Facility Order;
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants herein contained, and in order to in-
duce the Banks to make Revolving Credit Loans to, and to induce
the Collateral Agent to issue Letters of Credit on behalf of,
and to otherwise extend credit to, the Borrower pursuant to the
Credit Agreement and the other Loan Documents and for other good
and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
<PAGE>
1. Defined Terms. Unless otherwise defined herein,
(i) terms defined in the Credit Agreement are used herein as
therein defined and (ii) the following terms shall have the fol-
lowing meanings (such meanings being equally applicable to both
the singular and plural forms of the terms defined):
"Account" shall mean any and all "accounts," as such
term is defined in the UCC, including, whether or not included
in such definition, all accounts, accounts receivable, other
receivables (including receivables from credit card companies,
clearing houses or otherwise relating to credit cards), con-
tract rights, chattel paper, instruments, documents and notes,
whether now owned or hereafter acquired by Borrower and whether
or not earned by performance.
"Account Collateral" means all of the following prop-
erty, whether presently existing or hereafter arising or ac-
quired:
(i) all checks, drafts, promissory notes, certifi-
cates and other instruments payable to the Borrower or in
which the Borrower has any interest;
(ii) the Agency Concentration Account, all funds and
amounts on deposit therein, all obligations of the Col-
lateral Agent to the Borrower in respect thereof and all
documents, certificates and instruments, if any, from time
to time representing or evidencing the Agency Concentra-
tion Account, such funds and amounts or such obligations;
(iii) the Letter of Credit Cash Collateral Account,
all funds and amounts on deposit therein, all obligations
of the Collateral Agent to the Borrower in respect thereof
and all documents, certificates and instruments, if any,
from time to time representing or evidencing the Letter of
Credit Cash Collateral Account, such funds and amounts or
such obligations;
(iv) all investments of any Borrower in existence from
time to time (including without limitation cash equivalent
investments) and all certificates and instruments, if any,
from time to time representing or evidencing investments;
(v) all other accounts in any financial institution
(other than the Agency Concentration Account and the let-
ter of Credit Cash Collateral Account), all funds and
amounts on deposit therein and all certificates and in-
struments, if any, from time to time representing or evi-
dencing such accounts;
(vi) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
or all of the then existing Account Collateral; and
(vii) to the extent not covered by clauses (i) through
(vi) above, all proceeds of any or all of the foregoing
Account Collateral.
"Account Debtor" means any Person who is or who may
become obligated to Borrower under, with respect to, or on ac-
<PAGE>
count of an Account.
"Agreement" means this Security Agreement, as the same
may from time to time be amended, modified or supplemented.
"Chattel Paper" means any "chattel paper," as such
term is defined in the UCC, now owned or hereafter acquired by
Borrower, wherever located.
"Collateral" shall have the meaning assigned to such
term in Section 2 of this Agreement.
"Contract" means any contract, undertaking or agree-
ment (other than rights evidenced by Chattel Paper, Documents
or Instruments), as the same may from time to time be amended
or modified, in or under which Borrower may now or hereafter
have any right, title or interest, including any agreement se-
curing or relating to the terms of payment or the terms of
performance of any Account.
"Copyrights" means all of the following now owned or
hereafter acquired by Borrower or used by Borrower under any
License: all copyrights and all semi-conductor chip product mask
works, whether registered or unregistered, now or hereafter in
force throughout the world, including all of Borrower's right,
title and interest in and to all copyrights and mask works
registered in the United States Copyright Office or anywhere
else in the world, and all applications for registration
thereof, whether pending or in preparation, all rights cor-
responding thereto throughout the world and all extensions and
renewals of any thereof.
"Default" means any event that with the passage of
time, the giving of notice or both would become an Event of
Default unless cured or waived as specifically provided in the
Credit Agreement.
"Document" means any "document," as such term is de-
fined in the UCC, now owned or hereafter acquired by Borrower,
wherever located.
"Equipment" means any "equipment," as such term is
defined in the UCC, now or hereafter owned or acquired by Bor-
rower, wherever located, and, in any event, including all ma-
chinery, equipment, furnishings, display racks and cases, ve-
hicles (including, without limitation, all trucks, trailers, and
other motor vehicles), cash registers, computers and other
electronic data processing and office equipment, any and all
additions, substitutions and replacements of any of the fore-
going, together with all attachments, components, parts,
equipment and accessories installed thereon and affixed thereto.
"Fixtures" means any "fixtures," as such term is de-
fined in the UCC, now owned or hereafter acquired by Borrower,
wherever located.
"General Intangibles" means any "general intan-
gibles," as such term is defined in the UCC, now owned or
<PAGE>
hereafter acquired by Borrower, and, in any event, including all
right, title and interest which Borrower may now or hereafter
have in or under any Contract, franchise agreement, development
agreement, all customer lists, interests in partnerships, joint
ventures and other business associations, licenses, permits,
trade secrets, proprietary or confidential information,
operating and training manuals, store layouts and designs,
software, data bases, data, skill, expertise, experience,
processes, models, drawings, materials and records, goodwill,
all rights and claims in or under insurance policies (including
insurance for fire, damage, loss, and casualty, whether covering
personal property, real property, tangible rights or intangible
rights, all liability, life, key man, and business interruption
insurance, and all unearned premiums), uncertificated
securities, deposit accounts, rights to receive tax refunds and
other refunds, rebates, payments and rights of indemnification.
"Goods" means all "goods," as such term is defined in
the UCC, now owned or hereafter acquired by Borrower wherever
located.
The words "hereby," "herein," "hereof," "hereunder,"
and words of similar import refer to this Agreement as a whole
(including any amendments, attachments and schedules hereto) and
not merely to the specific section, paragraph or clause in which
the respective word appears.
"Instrument" means any "instrument," as such term is
defined in the UCC, now owned or hereafter acquired by Bor-
rower, wherever located, including all certificated securities
and all notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writ-
ings that constitute, Chattel Paper.
"Inventory Collateral" means all Inventory and,
whether or not included in the definition of Inventory in the
Credit Agreement, all inventory in all of its forms wherever
located, now or hereafter existing, including, without limita-
tion, all inventory and any raw materials and work in process
therefor, finished goods thereof and materials used or consumed
in the manufacture or production thereof, inventory in which the
Borrower has an interest in mass or a joint or other interest
or right of any kind (including, without limitation, goods in
which the borrower has an interest or right as consignee and all
inventory which is returned to or repossessed by or on behalf
of the Borrower) and all documents related to inventory.
"Letter of Credit Cash Collateral Account" that cer-
tain cash collateral account maintained at the office of the
Collateral Agent, subject to the sole dominion and control of
the Administrative Agent, in which the Borrower shall deposit
amounts required to be deposited in order to secure Letters of
Credit in accordance with the terms of the Credit Agreement.
"License" means any license of rights or interests now
held or hereafter acquired by Borrower.
"Lien" means any lien, encumbrance, mortgage, pledge,
charge, restriction, filing or other security interest of any
kind.
"Patents" means all of the following now owned or
<PAGE>
hereafter acquired by Borrower or used by Borrower under any
License: (i) all letters patent of the United States or any
other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any
other country, including registrations, recordings and ap-
plications in the United States Patent and Trademark Office or
in any similar office or agency of any other country, and (ii)
all reissues, continuations, continuations-in-part or exten-
sions thereof.
"Pledged Instruments" means all promissory notes and
other instruments identified in Schedule I hereto and all other
promissory notes and instruments which are delivered by Bor-
rower to the Collateral Agent as Pledged Property hereunder.
"Pledged Property" means all Pledged Instruments and
all pledged shares of capital stock, all other securities and
equity interests in another Person, and all other instruments
which are now being delivered by Borrower to the Collateral
Agent or may from time to time hereafter be delivered by Bor-
rower to the Collateral Agent for the purpose of pledge under
this Agreement or any other Loan Document, and all proceeds
(including dividends and other distributions) in respect of any
of the foregoing.
"Proceeds" means "proceeds," as such term is defined
in the UCC and, in any event, shall include (i) any and all
proceeds of any insurance, indemnity, warranty or guaranty
payable to Borrower from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to Borrower from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by
any governmental body, authority, bureau or agency (or any
person acting under color of governmental authority), and (iii)
any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon dispo-
sition or otherwise.
"Trademark Assignment" shall mean the Trademark and
License Assignment Agreement(s) made by the Borrower in favor
of the Collateral Agent in connection with Trademark Collateral
or other intellectual property collateral.
"Trademark Collateral" means all of the following
property of the Borrower, whether presently existing or here-
after arising or acquired:
(a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names,
trade styles, service marks, logos, other source of busi-
ness identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general
intangibles of a like nature, all registrations and re-
cordings thereof and all applications in connection
therewith, including registrations, recordings and ap-
plications in the United States Patent and Trademark Of-
fice or in any similar office or agency of the United
<PAGE>
States, any State thereof, or any other country or any
political subdivision thereof;
(b) all trademark licenses, including each trademark
license;
(c) all reissues, extensions or renewals of any of
the items described in the foregoing clauses (a) and (b);
(d) all of the goodwill of the business connected
with the use of, and symbolized by the items described in,
the foregoing clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including each claim by the Borrower against
third parties for past, present or future infringement or
dilution of any trademark, trademark registration or
trademark license, or for any injury to the goodwill as-
sociated with any such trademark, trademark registration,
trademark license or trade name.
"UCC" means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York;
provided, however, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or
priority of the Collateral Agent's security interest in any
Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the
term "UCC" shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for pur-
poses of definitions related to such provisions.
2. Grant of Security Interest.
(a) To secure the prompt and complete payment
and performance when due (whether at stated maturity, by ac-
celeration or otherwise) of all the Obligations and all other
obligations under the Loan Documents, and to induce the Banks
to enter into the Credit Agreement and to extend credit to
Borrower in accordance with the terms thereof (including the
issuance of Letters of Credit by the Collateral Agent), Bor-
rower hereby pledges and assigns to the Collateral Agent (for
its benefit in its capacity as Collateral Agent) and for the
ratable benefit of the Banks, and hereby grants to the Col-
lateral Agent (for its benefit in its capacity as Collateral
Agent) and for the ratable benefit of the Banks, a first pri-
ority lien and security interest in all of the Borrower's right,
title and interest in and to any and all property, assets and
things of value of every kind or type, tangible, intangible,
real personal and fixed, whether now owned by or owing to, or
hereafter acquired by or arising in favor of Borrower (including
under any trade names, styles or divisions thereof), and whether
owned or consigned by, or leased to Borrower, and regardless of
where located (all of which being hereinafter collectively
referred to as the "Collateral"), including, without limitation:
(i) all cash of Borrower;
(ii) all Account Collateral of Borrower;
(iii) all Accounts of Borrower;
<PAGE>
(iv) all Inventory Collateral of Borrower;
(v) all Equipment of Borrower;
(vi) all General Intangibles of Borrower;
(vii) all Fixtures of Borrower;
(viii) all Chattel Paper of Borrower;
(ix) all Contracts of Borrower;
(x) all Documents of Borrower;
(xi) all Instruments of Borrower;
(xii) all other Pledged Property of Bor-
rower, whether now or hereafter delivered to Borrower in con-
nection with this Agreement or the Credit Agreement;
(xiii) all dividends, distributions, interest
and other payments and rights with respect to any Pledged
Property of the Borrower or any other Collateral;
(xiv) all other Goods and personal property
of Borrower, whether tangible or intangible;
(xv) all software and databases of Bor-
rower, and all Copyrights and Patents;
(xvi) all Trademark Collateral of the
Borrower;
(xvii) all aircraft owned by Borrower and all
ground equipment and other equipment related thereto;
(xviii) all other property and rights of every
kind and description and interest therein, now held or hereaf-
ter acquired by the Borrower; and
(xix) to the extent not otherwise included,
all Proceeds of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and
products of each of the foregoing;
provided, however, that, notwithstanding any provision to the
contrary contained in this Agreement, Borrower does not grant,
and the Collateral Agent has not taken, a security interest in
any Hazardous Substances of Borrower or with respect to which
such Borrower may be responsible or liable.
(b) In addition, to secure the prompt and com-
plete payment when due of the Obligations and in order to in-
duce the Banks as aforesaid, Borrower hereby grants to the
Collateral Agent a security interest in all monies and other
property of Borrower held by the Collateral Agent or any Bank
in whatever capacity, including all property of every descrip-
<PAGE>
tion now or hereafter in the possession or custody of, or in
transit to, the Collateral Agent, for any purpose, including
safekeeping, collection or pledge, for the account of Borrower,
or as to which Borrower may have any right or power.
3. Security for Obligations. The pledge, assignment,
lien and security interest granted under this Agreement by the
Borrower secures the payment of all Obligations and all other
obligations of the Borrower under the Loan Documents, whether
for principal, interest, premium, fees, expenses or otherwise.
The pledge, assignment, lien and security interest granted
hereunder is granted as security only and shall not subject the
Collateral Agent to, or in any way alter or modify, any obli-
gation or liability of the Borrower with respect to or arising
out of any of the Collateral.
4. Collateral Agent's Rights; Limitations on Col-
lateral Agent's Obligations.
(a) It is expressly agreed by Borrower that,
anything herein to the contrary notwithstanding, Borrower shall
remain liable under each of its Contracts and each of its Li-
censes to observe and perform all the conditions and obliga-
tions to be observed and performed by it thereunder and Bor-
rower shall be responsible to perform all of its duties and
obligations thereunder, all in accordance with and pursuant to
the terms and provisions of each such Contract or License. The
Collateral Agent shall have no obligation or liability under any
Contract or License by reason of or arising out of this
Agreement or the granting to the Collateral Agent of a security
interest therein or the receipt by the Collateral Agent of any
payment relating to any Contract or License pursuant hereto, nor
shall the Collateral Agent be required or obligated in any
manner to perform or fulfill any of the obligations of Borrower
under or pursuant to any Contract or License, or to make any
payment, or to make any inquiry as to the nature or the suf-
ficiency of any payment received by it or the sufficiency of any
performance by any party under any Contract or License, or to
present or file any claim, or to take any action to collect or
enforce any performance or the payment of any amounts which may
have been assigned to it or to which it may be entitled at any
time or times.
(b) Subject to the requirements of the Credit
Agreement, the Collateral Agent authorizes Borrower to collect
its Accounts and to receive and hold all receipts in respect of
Accounts, and the Collateral Agent may, upon the occurrence and
during the continuance of any Default or Event of Default, upon
notice to Borrower, limit or terminate said authority at any
time. If a Default or an Event of Default has occurred and is
continuing, at the request of the Collateral Agent, Borrower
shall deliver to the Collateral Agent all original and other
documents evidencing, and relating to, the sale and delivery of
the Inventory or the performance of labor or service which
created any Accounts, including all original orders, invoices
and shipping receipts; and, prior to the occurrence of a De-
fault or an Event of Default, Borrower shall deliver photo-
copies thereof to the Collateral Agent at its request.
(c) the Collateral Agent may at any time notify
Account Debtors of Borrower, parties to the Contracts of Bor-
rower, obligors in respect of Instruments of Borrower, and ob-
<PAGE>
ligors in respect of Chattel Paper of the Borrower, that the
Accounts and the right, title and interest of Borrower in and
under such Contracts, Instruments, and Chattel Paper have been
assigned to the Collateral Agent and that payments shall be made
directly to the Collateral Agent. Upon the request of the
Collateral Agent, Borrower shall so notify such Account Debt-
ors, parties and obligors. Upon the occurrence and during the
continuance of a Default or an Event of Default, the Collateral
Agent may, in its own name or in the name of Borrower, com-
municate with such Account Debtors, parties and obligors to
verify with such Persons, to the Collateral Agent's satisfac-
tion, the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper.
(d) The Collateral Agent shall have the right
at reasonable times to make test verifications of the Accounts
and physical verifications and appraisals of the Inventory
Collateral and other Collateral in any manner and through any
medium that it considers advisable, and Borrower agrees to
furnish all such assistance and information as the Collateral
Agent or its agents (including the Appraiser) may require, and
to pay all expenses incurred by the Collateral Agent, in con-
nection therewith. Borrower, at its own expense, shall cause
certified independent public accountants satisfactory to the
Collateral Agent to prepare and deliver to the Collateral Agent
the results of any physical verification of all or any portion
of the Inventory Collateral made or observed by such ac-
countants.
5. Representations and Warranties. Borrower repre-
sents and warrants that:
(a) Except for the security interest and Lien
granted under this Agreement and for Permitted Liens, Borrower
is the sole owner of each item of the Collateral, with good and
marketable title thereto free and clear of any and all Liens.
No amounts payable under or in connection with any of its Ac-
counts or Contracts are evidenced by Instruments which have not
been delivered to the Collateral Agent.
(b) No effective security agreement, financing
statement, equivalent security or lien instrument or continua-
tion statement covering all or any part of the Collateral is on
file or of record in any public office, except such as may have
been filed by Borrower in favor of the Collateral Agent pursu-
ant to the Loan Documents or this Agreement or evidencing Per-
mitted Liens.
(c) The security interest granted to the Col-
lateral Agent in the Collateral is a duly perfected, valid and
enforceable, non-voidable security interest in favor of the
Collateral Agent, for the ratable benefit of the Banks, which
Lien and security interest is prior to all other Liens. The
Borrower acknowledges and agrees that the Collateral Agent is
the representative of the Banks and the other holders of Obli-
gations (within the meaning of Sections 1-201(35) and 9-105(m)
of the UCC as in effect on the date hereof) and that the grant
<PAGE>
of a lien and security interest to the Collateral Agent here-
under is effective to create a valid and enforceable security
agreement in favor of the Collateral Agent in whatever capacity
and in favor of all of the Banks as security for all of the
Obligations. All of the filing offices in which a financing
statement should be filed in order to perfect a security in-
terest or Lien in the Collateral are listed on Schedule II
hereto. Assuming that form UCC-1 financing statements have been
filed in all of the filing offices listed on Schedule II hereto,
all action necessary or desirable to protect and perfect such
Lien upon and security interest in each item of the Collateral
has been duly taken.
(d) Schedule I hereto lists all Instruments
(other than checks received in the ordinary course of business
and employee receivables in amounts less than $6,000 individu-
ally and $25,000 in the aggregate). All action necessary or
desirable to protect and perfect the Collateral Agent's Lien
upon and security interest in each item set forth on Schedule
I and all further actions from time to time deemed reasonably
necessary by the Collateral Agent to protect and perfect such
security interest will be duly taken upon request of the Col-
lateral Agent. The security interest of the Collateral Agent
in the Collateral listed on Schedule I hereto is prior to all
other Liens.
(e) Borrower's chief executive office, princi-
pal place of business, corporate offices, all stores and ware-
houses and the locations of all of its records concerning the
Collateral are set forth in Schedule III hereto, and Borrower
shall not change the location of such chief executive office,
principal place of business, corporate offices, stores or
warehouses or remove such records unless it has taken such ac-
tion as is necessary to cause the Lien of the Collateral Agent
in the Collateral to continue to be perfected to the Collateral
Agent's sole satisfaction.
(f) The amount represented by Borrower to the
Collateral Agent from time to time as owing by each Account
Debtor or by all Account Debtors in respect of the Accounts of
the Borrower will at such time be the correct amount actually
and unconditionally owing by such Account Debtors thereunder and
are not known by the Borrower to be disputed in whole or in part
by such Account Debtor.
(g) Schedule IV hereto correctly describes all
Patents, all items of Trademark Collateral and all Copyrights
owned by Borrower or any Subsidiary of Borrower, and all Patent
licenses, licenses relating to Trademark Collateral and Copy-
right licenses to which Borrower is a party (whether as licen-
sor or licensee).
6. Covenants. Borrower agrees that from and after
the date of this Agreement and until the Obligations are fully
satisfied:
(a) Further Assurances; Pledge of Instruments
Constituting Collateral. At any time and from time to time,
upon the request of the Collateral Agent, and at the sole ex-
pense of Borrower, Borrower shall promptly and duly execute and
deliver any and all such further instruments and documents
(including but not limited to Trademark Assignments) and take
<PAGE>
such further action as the Collateral Agent may deem desirable
to obtain the full benefits of this Agreement and of the rights
and powers herein granted, including, but not limited to (i)
using its best efforts to secure all consents and approvals
necessary or appropriate for the assignment to the Collateral
Agent of any License or Contract held by Borrower constituting
Collateral, (ii) properly executing and delivering and/or fil-
ing any financing or continuation statements under the UCC with
respect to the Liens and security interests granted hereunder,
under the Plan or under any other Loan Document, (iii) trans-
ferring Collateral to the Collateral Agent's possession (if such
Collateral consists of Chattel Paper or Instruments, or if a
security interest in such Collateral can be perfected only by
possession), (iv) placing the interest of the Collateral Agent
as lienholder on the certificate of title of any vehicle or
aircraft owned by Borrower, and (v) obtaining landlord's
agreements acceptable to the Collateral Agent in form and sub-
stance. If any amount payable under or in connection with any
of the Collateral shall be or become evidenced by any Instru-
ment (other than checks collected in the ordinary course of
business), such Instrument shall be immediately pledged to the
Collateral Agent hereunder, and shall be duly endorsed in a
manner satisfactory to the Collateral Agent and delivered to the
Collateral Agent.
(b) Maintenance of Records. Borrower shall keep
and maintain, at its own cost and expense, satisfactory and
complete records of the Collateral, including a record of any
and all payments received and any and all credits granted with
respect to the Collateral and all other dealings with the
Collateral. Borrower shall evidence this Agreement in its books
and records pertaining to the Collateral to evidence the
security interests hereunder. All Chattel Paper constituting
Collateral shall be marked with the following legend or such
other legend as may be requested by the Collateral Agent: "This
writing and the obligations evidenced or secured hereby are
subject to the security interest of The First National Bank of
Boston, as Collateral Agent." For Collateral Agent's further
security, Borrower agrees that the Collateral Agent shall have
a special property interest in Borrower's books and records
pertaining to the Collateral and, after the occurrence and
during the continuance of any Default or Event of Default,
Borrower shall deliver and turn over any such books and records
to the Collateral Agent or to its representatives at any time
on demand of the Collateral Agent. Prior to the occurrence of
a Default or an Event of Default, Borrower shall permit any rep-
resentative of the Collateral Agent to inspect such books and
records and shall provide photocopies thereof to the Collateral
Agent upon request.
(c) Indemnification. In any suit, proceeding
or action brought by or against the Collateral Agent relating
to any Account, Chattel Paper, Contract, General Intangible,
Instrument or Document for any sum owing thereunder, or to en-
force any provision of any Account, Chattel Paper, Contract,
General Intangible, Instrument, or Document, Borrower shall
save, indemnify and keep the Collateral Agent (and all of its
officers, directors, affiliates, employees, attorneys and other
<PAGE>
agents) harmless from and against all expense, loss or damage
suffered by reason of any defense, setoff, counterclaim, re-
coupment or reduction of liability whatsoever of the obligor
thereunder arising out of a breach by Borrower of any obliga-
tion thereunder or arising out of any other agreement, indebt-
edness or liability at any time owing to, or in favor of, such
obligor or its successors from Borrower and all such obliga-
tions of Borrower shall be and remain enforceable against, and
only against, Borrower and shall not be enforceable against the
Collateral Agent or any of the Banks.
(d) Limitation on Liens on Collateral. Bor-
rower shall not create, permit or suffer to exist, and shall
defend the Collateral against and take such other action as is
necessary to remove, any Lien on the Collateral except Permit-
ted Liens. Borrower shall further defend the right, title and
interest of the Collateral Agent in and to any of Borrower's
rights under the Accounts, Chattel Paper, Contracts, Documents,
General Intangibles, Instruments and Pledged Property consti-
tuting Collateral, and to the Equipment and Inventory consti-
tuting Collateral, and in and to the Proceeds thereof, against
the claims and demands of all Persons whomsoever.
(e) Limitations on Modifications of Accounts.
After the occurrence and during the continuance of any Default
or Event of Default and upon notice to Borrower from the Col-
lateral Agent, Borrower shall not (i) grant any extension of
the time of payment of any of the Accounts, Chattel Paper, In-
struments or amounts due under any Contract or General Intan-
gibles constituting Collateral; (ii) compromise or settle the
same for less than the full amount thereof; (iii) release, in
whole or in part, any Person liable for the payment thereof; or
(iv) allow any credit or discount whatsoever thereon other than
trade discounts granted in the ordinary course of business of
Borrower.
(f) Limitations on Disposition. Borrower shall
not sell, lease, transfer or otherwise dispose of any of the
Collateral, or attempt or contract to do so except as permitted
by Section 9.5.2 of the Credit Agreement.
(g) Further Identification of Collateral.
Borrower shall, if so requested by the Collateral Agent, fur-
nish to the Collateral Agent, as often as the Collateral Agent
reasonably requests, statements and schedules further identi-
fying and describing the Collateral and such other reports in
connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
(h) Notices. Borrower shall advise the Col-
lateral Agent promptly, in reasonable detail, of any Lien, other
than Permitted Liens, attaching to or asserted against any of
the Collateral.
(i) Right of Inspection. The Collateral Agent
shall at all times have full and free access during normal
business hours to all the books and records and correspondence
of Borrower, and the Collateral Agent or its representatives
(including the Appraiser) may examine the same, take extracts
therefrom and make photocopies thereof, and Borrower agrees to
render to the Collateral Agent, at Borrower's cost and expense,
such clerical and other assistance as may be reasonably re-
<PAGE>
quested with regard thereto. The Collateral Agent and its
representatives (including the Appraiser) shall have the right
to enter into and upon any premises where any of the Inventory
or Equipment constituting Collateral is located for the purpose
of inspecting the same, observing its use or otherwise pro-
tecting the Collateral Agent's interests therein.
(j) Maintenance of Equipment. Borrower shall
keep and maintain the Equipment in good operating condition
sufficient for the continuation of the business conducted by
Borrower on a basis consistent with current practices, and
Borrower shall provide or arrange for all maintenance and ser-
vice and all repairs necessary for such purpose.
(k) Continuous Perfection. Borrower shall not
change its name, identity or corporate structure in any manner
which might make any financing or continuation statement filed
in connection herewith seriously misleading within the meaning
of section 9-402(7) of the UCC or any other then applicable
provision of the UCC, unless Borrower shall have given the
Collateral Agent at least thirty (30) days prior written notice
thereof and shall have taken all action (or made arrangements
to take such action substantially simultaneously with such
change if it is impossible to take such action in advance)
necessary or reasonably requested by the Collateral Agent to
amend such financing statement or continuation statement so that
it is not seriously misleading. Borrower shall not change the
location of its chief executive office, principal place of
business, corporate offices, stores or warehouses or the loca-
tion of its records concerning the Collateral without giving
thirty (30) days' prior written notice thereof to the Col-
lateral Agent and unless all filings have been made under the
UCC and other actions taken in order to maintain in favor of the
Collateral Agent a valid, legal, enforceable and perfected first
priority security interest in all of the Collateral. Without
limiting the generality of the foregoing, Borrower shall not
permit the movement of any Collateral out of the jurisdictions
of the filing offices listed on Schedule II hereof or permit any
other movement of Collateral which would have the effect of
impairing in any manner (either immediately or with the lapse
of any time period) the Collateral Agent's lien and security
interest in such Collateral without providing 30 days' prior
written notice thereof to the Collateral Agent and unless all
filings have been made under the UCC and other actions taken in
order to maintain in favor of the Collateral Agent a valid,
legal, enforceable and perfected first priority security
interest in such Collateral.
(l) Trademark Collateral and Copyrights.
(i) Borrower shall notify the Collateral
Agent immediately if it knows or has reason to know that any
application or registration relating to any item of Trademark
Collateral or any Copyright that is material to the conduct of
Borrower's business may become abandoned or dedicated, or of any
adverse determination or development (including the institution
of, or determination or development in, any proceeding in the
United States Patent and Trademark Office, the United States
<PAGE>
Copyright Office or any court) regarding Borrower's ownership
of any item of Trademark Collateral or any Copyright that is
material to the conduct of Borrower's business, its right to
register the same, or to keep and maintain the same.
(ii) In no event shall Borrower, either
itself or through any agent, employee, licensee or designee,
file an application for the registration of any item of Trade-
mark Collateral with the United States Patent and Trademark
office, or of any Copyright with the United States Copyright
Office, or any similar office or agency in any other country or
any political subdivision thereof, without giving the Col-
lateral Agent prior written notice thereof, and, upon request
of the Collateral Agent, Borrower shall execute and deliver any
and all agreements, instruments, documents, and papers as the
Collateral Agent may request to evidence the Collateral Agent's
security interest in such item of Trademark Collateral or such
Copyright and the General Intangibles, including, with respect
to Trademarks owned by Borrower, all goodwill of Borrower, re-
lating to the foregoing or represented thereby.
(iii) Borrower shall take all reasonable
and necessary action to maintain and pursue each application,
to obtain the relevant registration, and to maintain the reg-
istration, of each item of Trademark Collateral and each Copy-
right which is owned by Borrower and which is material to the
conduct of Borrower's business, including the filing of ap-
plications for renewal, affidavits of use, affidavits of non-
contestability and opposition and interference and cancellation
proceedings.
(iv) In the event that any item of the
Trademark Collateral or any Copyright owned by Borrower that is
material to the conduct of Borrower's business is infringed, or
misappropriated or diluted by a third party, Borrower shall
notify the Collateral Agent promptly after Borrower learns
thereof and shall, upon reasonable request by the Collateral
Agent, promptly sue for infringement, misappropriation or di-
lution and to recover any and all damages for such infringe-
ment, misappropriation or dilution, and shall take such other
actions as the Collateral Agent shall reasonably deem ap-
propriate under the circumstances to protect such Trademark or
Copyright.
7. Collateral Agent's Appointment as Attorney-in-
Fact.
(a) The Borrower hereby irrevocably constitutes
and appoints the Collateral Agent and any officer or agent
thereof, with full power of substitution, as its true and law-
ful attorney-in-fact with full irrevocable power and authority
in the place and stead of Borrower and in the name of Borrower
or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to ex-
ecute and deliver any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing,
hereby grants to the Collateral Agent the power and right, on
behalf of Borrower, without notice to or assent by Borrower to
do the following:
<PAGE>
(i) in the name of Borrower, in its own
name or otherwise, take possession of, endorse and receive
payment of any checks, drafts, notes, acceptances, or other
Instruments for the payment of monies due under any Collateral;
(ii) continue or obtain any insurance re-
quired pursuant to the terms of the Credit Agreement or this
Agreement, and pay all or any part of the premiums therefor and
the costs thereof;
(iii) receive payment of any and all monies,
claims, and other amounts due or to become due at any time
arising out of or in respect of any Collateral;
(iv) after and during the continuance of a
Default or Event of Default, ask, demand, collect, receive and
give acquittances and receipts for any and all money due or to
become due under any Collateral, and take ownership and control
of any and all lock boxes and other depository accounts by
written notice to any bank or other institution maintaining such
lock boxes or other depository accounts;
(v) pay or discharge taxes, liens, secu-
rity interests, or other encumbrances levied or placed on or
threatened against the Collateral;
(vi) direct any party liable for any pay-
ment under or in respect of any of the Collateral to make pay-
ment of any and all monies due or to become due thereunder,
directly to the Collateral Agent or as the Collateral Agent
shall direct;
(vii) sign and endorse any invoices, freight
or express bills, bills of lading, storage or warehouse re-
ceipts, drafts against debtors, assignments, verifications,
letter of credit documents and notices in connection with ac-
counts and other Documents constituting or related to the Col-
lateral;
(viii) after and during the continuance of a
Default or Event of Default, settle, compromise or adjust any
suit, action, or proceeding with respect to the Collateral and,
in connection therewith, give such discharges or releases as the
Collateral Agent may deem appropriate;
(ix) after and during the continuance of a
Default or Event of Default, file and vote any claim or take or
commence any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Collateral Agent
for the purpose of collecting any and all such monies due under
any Collateral whenever payable;
(x) commence and prosecute any suits, ac-
tions or proceedings at law or in equity in any court of com-
petent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any Col-
lateral;
<PAGE>
(xi) defend any suit, action or proceeding
brought against Borrower with respect to any Collateral if
Borrower does not defend such suit, action or proceeding or if
the Collateral Agent believes that Borrower is not pursuing such
defense in a manner that will maximize the recovery with respect
to such Collateral;
(xii) after and during the continuance of a
Default or Event of Default, license or, to the extent per-
mitted by an applicable License, sublicense, whether general,
specific or otherwise, and whether on an exclusive or non-
exclusive basis, any Patent, trademark or Copyright throughout
the world for such term or terms, on such conditions and in such
manner as the Collateral Agent shall, in its sole discretion,
determine; and
(xiii) sell, transfer, pledge, repair, make
any agreement with respect to, or otherwise deal with any of the
Collateral as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to
do, at the Collateral Agent's option and Borrower's expense, at
any time, or from time to time, all acts and things which the
Collateral Agent reasonably deems necessary or advisable to
perfect, preserve, or realize upon the Collateral and the Col-
lateral Agent's Lien therein in order to effect the intent of
this Agreement, all as fully and effectively as Borrower might
do.
(b) Borrower hereby ratifies, to the extent
permitted by law, all that said attorneys shall lawfully do or
cause to be done by virtue hereof. The power of attorney
granted herein is a power coupled with an interest and shall be
irrevocable until the Obligations are paid in full in cash.
(c) The powers conferred on the Collateral Agent
hereunder are solely to protect the interests of the Collateral
Agent and the Banks in the Collateral and shall not impose any
duty upon the Collateral Agent or the Banks to exercise any such
powers. The Collateral Agent and the Banks shall be accountable
only for amounts that it actually receives in cash as a result
of the exercise of such powers and neither they nor any of their
officers, directors, employees, agents or representatives shall
be responsible to Borrower for any act or failure to act, except
for its own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(d) Borrower also authorizes the Collateral
Agent, at any time and from time to time upon the occurrence and
during the continuance of any Default or Event of Default, (i)
to communicate in its own name with any party to any Contract
constituting Collateral with regard to the assignment of the
right, title and interest of Borrower in and under the Con-
tracts and other matters relating thereto and (ii) to execute,
in connection with the sale or disposition of any Collateral any
endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
Section 8. Collateral Agent May Perform. If the
Borrower fails to perform any agreement contained herein, the
Collateral Agent may itself perform, or cause to be performed,
the matters covered by such agreement or covenant, and the ex-
penses of the Collateral Agent in connection therewith (in-
<PAGE>
cluding, without limitation, attorneys' fees and disbursements)
shall be payable by the Borrower.
Section 9. Agency Concentration Account; Letter of
Credit Cash Collateral Account. (a) The Collateral Agent shall
establish at its office at 100 Federal Street, Boston,
Massachusetts O2110, under its exclusive dominion and control
and in its name, a special account as the Agency Concentration
Account and a special account as the Letter of Credit Cash
Collateral Account. All amounts on deposit in the Agency Con-
centration Account and the Letter of Credit Cash Collateral
Account shall be for the exclusive benefit and under the ex-
clusive control of the Collateral Agent. The Collateral Agent
shall have the exclusive right of withdrawal over the Agency
Concentration Account and the Letter of Credit Cash Collateral
Account.
(b) Upon the termination of each Letter of Credit
which is cash collateralized in the Letter of Credit Cash Col-
lateral Account on its expiry date or upon the return or can-
cellation of such Letter of Credit along with instruments ter-
minating the Letter of Credit in a form acceptable to the Col-
lateral Agent, the Collateral Agent shall forthwith release from
the Letter of Credit Cash Collateral Account an amount equal to
the undrawn amount of such Letter of Credit plus any income
earned thereon less all letter of credit fees and other amounts
due and payable to the Collateral Agent or the Banks under the
Loan Documents.
(c) Funds held in the Agency Concentration Account
or the Letter of Credit Cash Collateral Account shall not be
commingled with other funds of the Borrower or any other per-
son.
10. Performance by the Collateral Agent of Borrower's
Obligation. If Borrower fails to perform or comply with any of
its agreements contained herein or in any other Loan Document,
and the Collateral Agent, as provided for by the terms of this
Agreement, or in any other Loan Document, shall itself perform
or comply, or otherwise cause performance of or compliance with
such agreement, the expenses, including attorneys' fees, of the
Collateral Agent incurred in connection with such performance
or compliance, together with interest thereon at the rate then
in effect in respect under the Credit Agreement, shall be pay-
able by Borrower to the Collateral Agent on demand or as a Re-
volving Credit Loan (at the Collateral Agent's option) and shall
constitute Obligations.
11. Execution of Financing Statements. Pursuant to
Section 9-402 of the UCC, the Borrower authorizes the Col-
lateral Agent to file financing statements with respect to the
Collateral without the signature of the Borrower in such form
and in such filing offices as the Collateral Agent determines
appropriate to perfect or protect the security interests of the
Collateral Agent and the Banks. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
<PAGE>
12. Remedies, Rights Upon Default.
(a) If any Event of Default shall occur, the
Collateral Agent may exercise in addition to all other rights
and remedies granted to it under this Agreement, the Credit
Agreement, the other Loan Documents and under any other in-
strument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under
the UCC or that may otherwise be available at law or in equity,
all of which rights and remedies shall be cumulative and non-
exclusive to the fullest extent permitted by applicable law.
Without limiting the generality of the foregoing, Borrower ex-
pressly agrees that in any such event the Collateral Agent,
without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Borrower or any
other Person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent per-
mitted by the UCC and other applicable law), may forthwith en-
ter upon the premises of Borrower where any Collateral is lo-
cated through self-help, without judicial process, without first
obtaining a final judgment or giving Borrower notice and
opportunity for a hearing on the Collateral Agent's claim or the
Collateral Agent's action, and without paying rent to Borrower,
and collect, receive, assemble, process, appropriate and realize
upon the Collateral, or any part thereof, and may forthwith
sell, lease, assign, give an option or options to purchase, or
sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales (including pursuant to Final
GOB Sales), at any exchange or broker's board or at any of the
Collateral Agent's offices or elsewhere at such prices as it may
deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Collateral Agent shall have
the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to credit
bid all or any amount of the Obligations and to purchase the
whole or any part of said Collateral so sold, free of any right
or equity of redemption, which equity of redemption Borrower
hereby releases. Such sales may be adjourned and continued from
time to time with or without notice. Borrower agrees that, as
between Borrower and the Collateral Agent, the Collateral Agent
shall have the right to conduct such sales on Borrower's
premises or elsewhere (including pursuant to Final GOB Sales)
and shall have the right to use Borrower's premises without
charge for such sales for such time or times as the Collateral
Agent deems necessary or advisable.
Borrower agrees that it shall not interfere with or
hinder in any way the Collateral Agent's right and ability un-
der the terms of this Agreement, any other Loan Document, and
applicable law to perfect its liens and security interests in
any item of Collateral, to enforce its liens and security in-
terests in any part of the Collateral, and to realize upon the
Collateral.
Borrower further agrees, at the Collateral Agent's
request, to assemble the Collateral and make it available to
the Collateral Agent at places which the Collateral Agent shall
reasonably select, whether at the Borrower's premises or else-
where. Until the Collateral Agent is able to effect a sale,
lease, or other disposition of Collateral, the Collateral Agent
<PAGE>
shall have the right to use or operate Collateral, or any part
thereof, to the extent that it deems appropriate for the pur-
pose of preserving Collateral or its value or for any other
purpose deemed appropriate by the Collateral Agent. The Col-
lateral Agent may, if it so elects, seek the appointment of a
receiver or keeper to take possession of Collateral and to en-
force any of the Collateral Agent's remedies with respect to
such appointment. The Collateral Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropria-
tion, realization or sale, as provided in the Credit Agreement
and hereof, Borrower remaining liable for any deficiency re-
maining unpaid after such application, and only after so paying
over such net proceeds and after the payment by the Collateral
Agent of any other amount required by any provision of law,
including Section 9-504(l)(c) of the UCC, need the Collateral
Agent account for the surplus, if any, to Borrower. Borrower
agrees that five (5) days' prior notice by the Collateral Agent
of the time and place of any public sale or of the time after
which a private sale may take place is reasonable notification
of such matters. Borrower shall remain liable for any defi-
ciency if the proceeds of any sale or disposition of the Col-
lateral are insufficient to pay all amounts to which the Col-
lateral Agent is entitled, Borrower also being liable for any
attorneys' fees, brokers' fees, fees of an inventory disposi-
tion specialist and other fees and expenses incurred by the
Collateral Agent to collect such deficiency.
(b) In view of the fact that federal and state
securities laws may impose certain restrictions on the method
by which a sale of Collateral consisting of securities (as de-
fined by federal or state law) may be effected, Borrower agrees
that upon the occurrence and during the continuation of an Event
of Default, the Collateral Agent may, from time to time, attempt
to sell all or any part of such Collateral by means of a private
placement restricting the bidders and prospective purchasers to
those who will represent and agree that they are purchasing for
investment only and not for distribution and otherwise ensure
that a sale to such prospective purchasers will not violate
applicable federal or state securities laws. In so doing, the
Collateral Agent may solicit offers to buy such Collateral, or
any part of it, for cash, from a limited number of investors
deemed by the Collateral Agent to be responsible parties who
might be interested in purchasing such Collateral.
(c) Borrower agrees to pay any and all costs of
the Collateral Agent, including attorneys' fees, incurred in
connection with the enforcement of any of its rights and rem-
edies hereunder.
(d) Except as otherwise specifically provided
herein, Borrower hereby waives presentment, demand, protest or
any notice (to the maximum extent permitted by applicable law)
of any kind in connection with this Agreement or any Col-
lateral.
(e) All cash Proceeds received by the Col-
lateral Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral, may
<PAGE>
in the discretion of the Collateral Agent, be held by the Col-
lateral Agent as Collateral for, and/or then or at any time
thereafter applied (after payment to the Collateral Agent of an
amount sufficient to pay in full the expenses of the Collateral
Agent in connection with such sale, collection or other real-
ization, including all expenses, liabilities and advances in-
curred or made by the Collateral Agent in connection therewith,
including attorneys' fees) in whole or in part by the Col-
lateral Agent against all or any part of the Obligations in such
order, not inconsistent with the terms of the Credit Agreement,
as the Collateral Agent, shall elect. Any surplus of such cash
or cash Proceeds held by the Collateral Agent and remaining
after payment in full of all the Obligations shall be paid over
to Borrower or to whomsoever may be lawfully entitled to receive
such surplus.
(f) For the purpose of enabling the Collateral
Agent to exercise rights and remedies under this Section 12 at
such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, Borrower hereby irrevocably
grants to the Collateral Agent the right (exercisable without
payment of royalty or other compensation to Borrower) to use,
license or sublicense any Patent, item of Trademark Collateral,
Copyright or trade secret, now owned or hereafter acquired by
Borrower, and wherever the same may be located, and including
in such right reasonable access to all media in which any of the
foregoing items may be recorded or stored and to all computer
and automatic machinery software and programs used for the
compilation or printout thereof, provided that, with respect to
any item of Trademark Collateral, such item shall be used by the
Collateral Agent only in conjunction with the types of goods and
services then being or theretofore having been offered by Bor-
rower in respect of such item of Trademark Collateral.
(g) With respect to Collateral located in North
Carolina, the Collateral Agent may elect to proceed as provided
in North Carolina General Statute Section 25-9-601, et seq.
13. Limitation on Collateral Agent's Duty in Respect
of Collateral. The Collateral Agent shall use reasonable care
with respect to the Collateral in its possession or under its
control. The Collateral Agent shall be deemed to have exer-
cised reasonable care in the custody and preservation of the
Collateral in its possession or under its control if the Col-
lateral is accorded treatment substantially equal to that which
the Collateral Agent accords its own property, it being under-
stood that the Agent shall not have any responsibility or li-
ability for (i) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Col-
lateral Agent has or is deemed to have knowledge of such mat-
ters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Collateral, or (iii)
the collection of any proceeds or by reason of any invalidity,
lack of value or uncollectability of any of the payments re-
ceived by it from obligors or otherwise. The Collateral Agent
shall not have any other duty as to any Collateral in its pos-
session or control or in the possession or control of any agent
or nominee of the Collateral Agent or any income thereon or as
to the preservation of rights against prior parties or any other
rights pertaining thereto.
<PAGE>
14. Notices. Except as otherwise provided herein,
whenever it is provided that any notice, demand, request, con-
sent, approval declaration or other communication shall or may
be given to or served upon any of the parties by any other
party, or whenever any of the parties desires to give or serve
upon any other communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declara-
tion or other communication shall be in writing and shall be
delivered in the manner provided in the Credit Agreement.
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication
shall in no way adversely affect the effectiveness of such no-
tice, demand, request, consent, approval, declaration or other
communication.
15. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the re-
maining provisions hereof, and any such prohibition or unen-
forceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. No Waiver; Cumulative Remedies. The parties
shall not by any act, delay, omission or otherwise be deemed to
have waived any of their respective rights or remedies hereun-
der, and no waiver by any party shall be valid unless in writ-
ing, signed by such party, and then only to the extent therein
set forth. A waiver by any party of any right or remedy here-
under on any one occasion shall not be construed as a bar to
any right or remedy which such party would otherwise have had
on any future occasion. No failure to exercise nor any delay
in exercising on the part of the Collateral Agent, any right,
power or privilege hereunder, shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege.
The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive
of any rights and remedies provided by law. None of the terms
or provisions of this Agreement may be waived, altered, modi-
fied or amended except by an instrument in writing, duly ex-
ecuted by the Collateral Agent and Borrower.
17. Limitation by Law. All rights, remedies and
powers provided in this Agreement may be exercised only to the
extent that the exercise thereof does not violate any ap-
plicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable manda-
tory provisions of law that may be controlling and to be lim-
ited to the extent necessary so that they shall not render this
Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered, or filed under the provi-
sions of any applicable law.
18. Successor and Assigns. This Agreement and all
obligations of Borrower hereunder shall be binding upon the
successors and assigns of Borrower (which successors and as-
<PAGE>
signs shall include a trustee in bankruptcy for Borrower), and
shall, together with the rights and remedies of the Collateral
Agent hereunder, inure to the benefit of the Collateral Agent
and its successors and assigns. No sales of participations,
other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Obligations or
any portion thereof or interest therein shall in any manner
affect the security interest granted to the Collateral Agent
hereunder. Without limiting the foregoing, any Bank may assign
or otherwise transfer any Note, Loan, participation in a Letter
of Credit or other Obligation held by it to any other Person,
in accordance with the terms of the Credit Agreement as
applicable, and such other Person, to the extent that it is a
Bank, shall thereupon become vested with all the benefits in
respect thereof granted herein or otherwise. Borrower may not
assign, sell or otherwise transfer an interest in this Agree-
ment.
19. Mortgages. In the event that any of the Col-
lateral hereunder is also subject to a valid and enforceable
Lien under the terms of any Mortgage and the terms of such
Mortgage are inconsistent with the terms of this Agreement, then
with respect to such Collateral, the terms of such Mortgage
shall be controlling in the case of fixtures and leases, letting
and licenses of, and contracts and agreements relating to the
lease of real property, and the terms of this Agreement shall
be controlling in the case of all other Collateral.
20. Acknowledgment of Liens. The Borrower acknowl-
edges and agrees that the liens and security interests granted
to the Collateral Agent hereunder for the benefit of the Banks
are in addition to and not in any way in derogation of the liens
and security interests granted to the Collateral Agent and the
Banks (as "Post-Effective Date Financing Lenders") pursuant to
Section 7.2 of the Plan and in the Exit Facility Order and that
the liens and security interests granted pursuant to Section
7.2 of the Plan and the Exit Facility Order are valid and
perfected first priority security interests.
21. Security Interest Absolute. All rights and se-
curity interests of the Collateral Agent hereunder, and all
obligations of each Borrower hereunder, shall be absolute and
unconditional, irrespective of:
(i) any lack of validity or enforceability of the
Credit Agreement or any other Loan Document, any agreement
with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations or any other amendment or waiver of, or any
consent to any departure from, the Credit Agreement or any
other Loan Document;
(iii) any exchange or release of, or any non-
perfection of any security interest in, any of the Col-
lateral or any other collateral for the Obligations, or any
release, amendment or waiver of, or consent to any
departure from, any provision of the Credit Agreement or
any guaranty or security for all or any of the Obliga-
tions; or
<PAGE>
(iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Borrower or any security interest granted hereunder or
under any other Loan Document other than payment in full
in cash of the Obligations to the extent any such payment
has not been returned to the Borrowers, their successors,
transferees or assigns.
22. Further Indemnification. Borrower agrees to pay,
and to hold the Collateral Agent harmless from, any and all
liabilities with respect to, or resulting from any delay in
paying, any and all excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any
of the Collateral or in connection with any of the transactions
contemplated by this Agreement
23. GOVERNING LAW; CONSENT TO JURISDICTION. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS,
IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALID-
ITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS (OTHER THAN
NEW YORK STATE GENERAL OBLIGATIONS LAW SECTION 5-1401), AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER
CONSENTS TO PERSONAL JURISDICTION, WAIVES ANY OBJECTION AS TO
JURISDICTION OR VENUE, OR FORUM NON CONVENIENS, AND AGREES NOT
TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE,
IN THE COUNTY OF NEW YORK, STATE OF NEW YORK. SERVICE OF PRO-
CESS ON BORROWER OR THE COLLATERAL AGENT IN ANY ACTION ARISING
OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS SHALL BE EF-
FECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS LISTED IN THE
CREDIT AGREEMENT. NOTHING HEREIN SHALL PRECLUDE THE COLLATERAL
AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION.
24. Section Titles. The Section titles contained in
this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the
agreement between the parties hereto.
25. Agreement as Mortgage of Personal Property. This
Security Agreement may be registered with the appropriate of-
fice of the Register of Deeds in North Carolina as provided for
in N.C.G.S. Section 47-20.2 and shall constitute a "mortgage of
personal property" as described in N.C.G.S. Section 47-20 et
seq.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
caused this Security Agreement to be executed and delivered by
its duly authorized officer on the date first set forth above.
Attest: ROSE'S STORES, INC.
__________________ By:
Secretary Name:
Title:
[seal]
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
as Collateral Agent
By:
Name:
Title:
<PAGE>
STATE OF )
) ss.
COUNTY OF )
On this ____ day of April, 1995, before me personally
came ______________________________ to me known, who being by
me duly sworn, did depose and say that he resides at
_________________________________, that he is a _____________
_____________________ of ________________________________, one
of the corporations described in and which executed the within
instrument, and that he signed his name thereto by authority of
the Board of Directors of said corporations.
_________________________________
Notary Public
<PAGE>
STATE OF )
) ss.
COUNTY OF )
On this ____ day of April, 1995, before me personally
came ______________________________ to me known, who being by
me duly sworn, did depose and say that he resides at
_________________________________, that he is a _____________
_____________________ of ________________________________, one
of the corporations described in and which executed the within
instrument, and that he signed his name thereto by authority of
the Board of Directors of said corporations.
_________________________________
Notary Public
<PAGE>
REVOLVING CREDIT NOTE
$62,500,000 April 28, 1995
FOR VALUE RECEIVED, the undersigned ROSE'S STORES,
INC., a Delaware corporation (the "Borrower"), hereby promises
to pay to the order of THE FIRST NATIONAL BANK OF BOSTON, a
national banking association (the "Bank") at the head office of
The First National Bank of Boston, as administrative agent for
the Banks under the Credit Agreement referred to below (in such
capacity, and including any successors to The First National
Bank of Boston, as administrative agent, the "Administrative
Agent") at 100 Federal Street, Boston, Massachusetts:
(a) on April 30, 1998, and from time to time at the
times provided in the Credit Agreement defined below, the
principal amount of SIXTY TWO MILLION, FIVE HUNDRED
THOUSAND DOLLARS ($62,500,000) or, if less, the aggregate
outstanding unpaid principal amount of Revolving Credit
Loans advanced by the Bank to the Borrower pursuant to the
Revolving Credit Agreement dated as of April 28, 1995 (as
the same may be amended, modified, supplemented and in
effect from time to time, the "Credit Agreement"), among
the Borrower, the Bank, the other Banks party thereto, the
Administrative Agent and the Facility Agents; and
(b) interest on the principal balance hereof from time
to time outstanding from the Closing Date under the Credit
Agreement through and including the maturity date hereof,
and, if unpaid on the maturity date hereof, interest on the
principal balance hereof after the maturity date hereof,
all at the times and at the rate provided in the Credit
Agreement.
This Note evidences borrowings under and has been
issued by the Borrower in accordance with the terms of the
Credit Agreement. The Bank and any holder hereof is entitled
to the benefits of the Credit Agreement, the Security Documents
and the other Loan Documents, including the benefits of the
collateral security provided thereunder, and may enforce the
agreements of the Borrower contained therein, and any holder
hereof may exercise the respective remedies provided for thereby
or otherwise available in respect thereof, all in accordance
with the respective terms thereof. All capitalized terms used
in this Note and not otherwise defined herein shall have the
same meanings herein as in the Credit Agreement.
All payments of principal of and interest on this Note
shall be payable in lawful currency of the United States of
America in immediately available funds.
The Borrower irrevocably authorizes the Bank to make
or cause to be made, at or about the time of the Drawdown Date
of any Revolving Credit Loan or at the time of receipt of any
payment of principal of this Note, an appropriate notation on
<PAGE>
the grid attached to this Note, or the continuation of such
grid, or any other similar record, including computer records,
reflecting the making of such Revolving Credit Loan or (as the
case may be) the receipt of such payment. The outstanding
amount of the Revolving Credit Loans set forth on the grid at-
tached to this Note, or the continuation of such grid, or any
other similar record, including computer records, maintained by
the Bank with respect to any Revolving Credit Loans shall be,
absent manifest error, prima facie evidence of the principal
amount thereof owing and unpaid to the Bank, but the failure to
record, or any error in so recording, any such amount on any
such grid, continuation or other record shall not limit or
otherwise affect the obligation of the Borrower hereunder or
under the Credit Agreement to make payments of principal of and
interest on this Note when due.
The Borrower has the right in certain circumstances
and the obligation under certain other circumstances to prepay
the whole or part of the principal of this Note on the terms and
conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall
occur, the entire unpaid principal amount of this Note and all
of the unpaid interest accrued thereon may become or be de-
clared due and payable in the manner and with the effect pro-
vided in the Credit Agreement.
No delay or omission on the part of the Bank or any
holder hereof in exercising any right hereunder shall operate
as a waiver of such right or of any other rights of the Bank or
such holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar or waiver of the same or any other
right on any further occasion.
The Borrower and every endorser of this Note or the
obligation represented hereby waives presentment, demand, no-
tice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or en-
forcement of this Note, and assents to any extension or post-
ponement of the time of payment or any other indulgence to any
substitution, exchange or release of collateral and to the ad-
dition or release of any other party or person primarily or
secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HERE-
UNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT RE-
GARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER (OTHER
THAN NEW YORK STATE GENERAL OBLIGATIONS LAW Section 5-1401).
THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE
UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section
20 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OB-
JECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
IN WITNESS WHEREOF, the undersigned has caused this
Revolving Credit Note to be signed in its corporate name and its
<PAGE>
corporate seal to be impressed thereon by its duly authorized
officer as of the day and year first above written.
Attest: ROSE'S STORES, INC.
__________________ By:
Secretary Name:
Title:
[Corporate Seal]
<PAGE>
_
_ Amount of Balance of _
_ Amount Type Interest Principal Principal Notation _
_ Date of Loan of Loan Period Paid or Unpaid Made By: _
_ Prepaid _
_ _ _ _ _ _ _ _
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_ _ _ _ _ _ _ _
<PAGE>
REVOLVING CREDIT NOTE
$62,500,000 April 28, 1995
FOR VALUE RECEIVED, the undersigned ROSE'S STORES,
INC., a Delaware corporation (the "Borrower"), hereby promises
to pay to the order of THE CIT GROUP/BUSINESS CREDIT, INC. (the
"Bank") at the head office of The First National Bank of Boston,
as administrative agent for the Banks under the Credit Agreement
referred to below (in such capacity, and including any successors
to The First National Bank of Boston, as administrative agent, the
"Administrative Agent") at 100 Federal Street, Boston, Massachusetts:
(a) on April 30, 1998, and from time to time at the
times provided in the Credit Agreement defined below, the
principal amount of SIXTY TWO MILLION, FIVE HUNDRED
THOUSAND DOLLARS ($62,500,000) or, if less, the aggregate
outstanding unpaid principal amount of Revolving Credit
Loans advanced by the Bank to the Borrower pursuant to the
Revolving Credit Agreement dated as of April 28, 1995 (as
the same may be amended, modified, supplemented and in
effect from time to time, the "Credit Agreement"), among
the Borrower, the Bank, the other Banks party thereto, the
Administrative Agent and the Facility Agents; and
(b) interest on the principal balance hereof from time
to time outstanding from the Closing Date under the Credit
Agreement through and including the maturity date hereof,
and, if unpaid on the maturity date hereof, interest on the
principal balance hereof after the maturity date hereof,
all at the times and at the rate provided in the Credit
Agreement.
This Note evidences borrowings under and has been
issued by the Borrower in accordance with the terms of the
Credit Agreement. The Bank and any holder hereof is entitled
to the benefits of the Credit Agreement, the Security Documents
and the other Loan Documents, including the benefits of the
collateral security provided thereunder, and may enforce the
agreements of the Borrower contained therein, and any holder
hereof may exercise the respective remedies provided for thereby
or otherwise available in respect thereof, all in accordance
with the respective terms thereof. All capitalized terms used
in this Note and not otherwise defined herein shall have the
same meanings herein as in the Credit Agreement.
All payments of principal of and interest on this Note
shall be payable in lawful currency of the United States of
America in immediately available funds.
The Borrower irrevocably authorizes the Bank to make
or cause to be made, at or about the time of the Drawdown Date
of any Revolving Credit Loan or at the time of receipt of any
payment of principal of this Note, an appropriate notation on
<PAGE>
the grid attached to this Note, or the continuation of such
grid, or any other similar record, including computer records,
reflecting the making of such Revolving Credit Loan or (as the
case may be) the receipt of such payment. The outstanding
amount of the Revolving Credit Loans set forth on the grid at-
tached to this Note, or the continuation of such grid, or any
other similar record, including computer records, maintained by
the Bank with respect to any Revolving Credit Loans shall be,
absent manifest error, prima facie evidence of the principal
amount thereof owing and unpaid to the Bank, but the failure to
record, or any error in so recording, any such amount on any
such grid, continuation or other record shall not limit or
otherwise affect the obligation of the Borrower hereunder or
under the Credit Agreement to make payments of principal of and
interest on this Note when due.
The Borrower has the right in certain circumstances
and the obligation under certain other circumstances to prepay
the whole or part of the principal of this Note on the terms and
conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall
occur, the entire unpaid principal amount of this Note and all
of the unpaid interest accrued thereon may become or be de-
clared due and payable in the manner and with the effect pro-
vided in the Credit Agreement.
No delay or omission on the part of the Bank or any
holder hereof in exercising any right hereunder shall operate
as a waiver of such right or of any other rights of the Bank or
such holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar or waiver of the same or any other
right on any further occasion.
The Borrower and every endorser of this Note or the
obligation represented hereby waives presentment, demand, no-
tice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or en-
forcement of this Note, and assents to any extension or post-
ponement of the time of payment or any other indulgence to any
substitution, exchange or release of collateral and to the ad-
dition or release of any other party or person primarily or
secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HERE-
UNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT RE-
GARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER (OTHER
THAN NEW YORK STATE GENERAL OBLIGATIONS LAW Section 5-1401).
THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND THE CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE
UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section
20 OF THE CREDIT AGREEMENT. THE BORROWER HEREBY WAIVES ANY OB-
JECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
IN WITNESS WHEREOF, the undersigned has caused this
Revolving Credit Note to be signed in its corporate name and its
<PAGE>
corporate seal to be impressed thereon by its duly authorized
officer as of the day and year first above written.
Attest: ROSE'S STORES, INC.
__________________ By:
Secretary Name:
Title:
[Corporate Seal]
<PAGE>
_ Amount of Balance of _
_ Amount Type Interest Principal Principal Notation _
_ Date of Loan of Loan Period Paid or Unpaid Made By: _
_ Prepaid _
_ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _
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<PAGE>
NORTH CAROLINA DEED OF TRUST,
ASSIGNMENT OF RENTS
VANCE COUNTY AND SECURITY AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT (the "Mortgage" or "Deed of Trust"), is made as of the
day of April, 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"); THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), as
Administrative Agent and as a "Bank" under the Revolving Credit
Agreement dated the date hereof among Mortgagor, FNBB and The
CIT Group/Business Credit, Inc. (as from time to time amended,
modified, supplemented, restated or assigned the "Loan Agree-
ment"), whose address is 100 Federal Street, Boston, Massachu-
setts 02110; and THE CIT GROUP/BUSINESS CREDIT, INC., as a
"Bank" under the Loan Agreement, whose address is 1211 Avenue
of the Americas, New York, New York 10036 ("CIT; FNBB and CIT
are hereinafter referred to collectively as the "Banks", and
are also referred to herein collectively as "Mortgagee" or
"Beneficiary").
W I T N E S S E T H:
WHEREAS, the Banks have agreed to make loans to, and
issue letters of credit on behalf of, Mortgagor in the ag-
gregate principal sum of up to $125,000,000.00 (the "Loan")
pursuant to the Loan Agreement, the provisions of which are
incorporated herein by reference as if fully set forth herein
(capitalized terms employed herein without definition have the
meaning specified in the Loan Agreement); and
WHEREAS, Mortgagor has executed and delivered to each
Bank a Revolving Credit Note in the amount of the Revolving
Credit Commitment of such Bank and in the aggregate principal
amount of $125,000,000 for all of the Banks to evidence the Loan
(as from time to time amended, modified, supplemented, extended
or replaced, individually, a "Note" and collectively, the
"Notes"); and
WHEREAS, Mortgagor is the owner of the land situated
in Vance County, North Carolina, and more particularly de-
scribed 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, and
Mortgagor desires to grant to Beneficiary, in its capacity as
Administrative Agent for itself and the other Banks under the
Loan Agreement, a security interest in the same.
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 suc-
<PAGE>
cessors and assigns, in trust, with power of sale, the follow-
ing 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 limita-
tion, all shades, wall-to-wall carpeting, screens and screen-
ing, 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 here-
after acquired) as well as the proceeds thereof (including in-
surance 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 substitution thereof, or accessions thereto, whether or not
the same are or shall be attached to the Premises in any man-
ner, whether now owned or hereafter acquired by Mortgagor, to-
gether with all proceeds of the foregoing.
The items of personal property described in para-
<PAGE>
graphs 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 col-
lectively referred to as the "Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property, with the
appurtenances thereof, unto Trustee, its successors and as-
signs, 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
1 The Obligations. This Deed of Trust is executed
to secure the following: (i) the repayment of all sums due
under the Notes, (ii) the payment of the Mortgagor's reim-
bursement obligations, whether contingent or matured, to the
Banks under the Loan Agreement in connection with Letters of
Credit issued under the Loan Agreement for the account of
Mortgagor, (iii) the payment and performance of the covenants
and agreements contained in the Loan Agreement, the Notes, this
Deed of Trust and all other agreements executed in connection
with the Loan (collectively the "Loan Documents"), and (iv) the
payment of all additional sums as herein provided and agreed to
be made by or on behalf of Mortgagor, plus any sums advanced or
expended by Mortgagee to protect the security for the Loan.
2 Future Advances Secured. This Deed of Trust
secures all present and future indebtedness owing by Mortgagor
under the Loan Documents. The amount of present obligations
secured by this Deed of Trust is $000,000,000.00 and the maxi-
mum 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 $125,000,000.00. All such future
obligations shall be incurred on or before April 30, 1998,
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. All principal sums to
be advanced under the Loan (including reimbursement obligations
under Letters of Credit) shall be evidenced by the Notes, and
the final payment date, which if not sooner paid and if payment
thereof is not extended, shall be April 30, 1998.
ARTICLE II
COVENANTS AND AGREEMENTS OF MORTGAGOR
1.
1 Payment of Secured Obligations. Mortgagor shall
pay when due the principal of, and the interest on, the in-
<PAGE>
debtedness evidenced by the Notes, all charges and fees secured
by this Mortgage and shall otherwise comply with all terms of
the Loan Documents.
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 Mortgagee in connection with the Loan, 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.
3 Leases. Mortgagor shall keep, observe and perform
all of the covenants, agreements, terms, conditions and
provisions on its part to be kept, observed and performed under
each lease of any portion of the Premises (collectively the
"Leases"), shall require its tenants to keep, observe and per-
form all of the covenants, agreements, terms, conditions and
provisions on their part to be kept, observed or performed un-
der any and all Leases and shall not suffer or permit any breach
or default to occur with respect to the foregoing. In the event
of a default by Mortgagor under the Leases, Mortgagee shall have
the right, but not the obligation, to perform or to require
performance of any such covenants, agreements, terms, conditions
or provisions of the Leases, and to add any expense incurred in
connection therewith to the debt secured hereby, which expense
shall bear interest from the date of payment to the date of
recovery by Mortgagee at the interest rate then applicable under
the Notes. Any such expense incurred by Mortgagee, with
interest thereon, shall be immediately due and payable.
No release or forbearance of any of Mortgagor's ob-
ligations under the Leases shall release Mortgagor from any of
its obligations under this Mortgage.
4 Required Insurance; Delivery of Polices; 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)
business interruption insurance; (iii) comprehensive general
liability insurance on an "occurrence basis"; and (iv) boiler
and machinery insurance. All such policies of insurance re-
quired by the terms of this Deed of Trust shall contain an en-
dorsement 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 hold-
ing 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.
<PAGE>
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 in-
sured. At Beneficiary's option, Mortgagor shall furnish Ben-
eficiary with an original of all policies of insurance required
under this Section 2.4 or a certificate of insurance for each
required policy setting forth the coverage, the limits of li-
ability, the name of the carrier, the policy number and the
period of coverage. 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 con-
tinuing insurance in the form required by this Deed of Trust.
All such policies shall contain a provision that, notwith-
standing any contrary agreement between Mortgagor and the in-
surance 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, without at least thirty (30) days' prior written
notice to Beneficiary.
5 Application of Insurance Proceeds.
(a) Unless otherwise provided herein or in the
Loan Agreement, the proceeds of the insurance carried
pursuant to this Mortgage or the Loan Agreement 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 pro-
ceeds 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 2.5(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 2.5(d)
below, if the amount of the proceeds exceeds $10,000.00, unless
specifically waived in writing by Mortgagee, the proceeds shall
be paid to and held by Mortgagee to be used by Mortgagor for the
repair or replacement of the Improvements, such funds to remain
with Mortgagee and to be disbursed substantially in accordance
with standard construction loan disbursement procedures as
repair or restoration progresses.
(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. Prior to any disbursement of such
proceeds, Mortgagor shall present evidence satisfactory to
<PAGE>
Mortgagee that sufficient funds (whether through insurance
proceeds or additional funds supplied by Mortgagor) exists
so that the Improvements can be restored. To the extent
that the insurance proceeds are not sufficient to restore
or to replace the Improvements, Mortgagor shall use its own
funds to restore or to replace the Improvements. Any
balance remaining after such application of such insurance
proceeds shall be paid to Mortgagor.
(d) Notwithstanding the provisions contained in
Section 2.5(b) above, at the option of Mortgagee, all in-
surance proceeds shall be paid to Mortgagee to be applied
against the balance due under the Notes if an Event of
Default shall have occurred and be continuing.
6 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. Mortgagor hereby irrevocably
appoints Mortgagee its attorney-in-fact, coupled with an
interest, to endorse any checks, drafts or other instruments
representing any proceeds of such insurance, whether payable by
reason of loss thereunder or otherwise.
7 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
thereof by Mortgagor, then Mortgagor shall indemnify, de-
fend and hold Mortgagee, its officers, employees, agents
or representatives, and Trustee, harmless from all li-
ability by reason of said litigation, including the at-
torneys' fees and expenses incurred by Mortgagee, its of-
ficers, employees, agents, or representatives, or Trustee,
in any such litigation, whether or not any such litigation
is prosecuted to judgment. If Mortgagee commences an ac-
tion 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 ex-
penses 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 vio-
lates 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 Notes 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-
<PAGE>
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, set-
off, deduction or defense and without abatement, suspen-
sion, deferment, diminution or reduction, and the obliga-
tions 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 dam-
age 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 Mort-
gagor 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 rights now or hereafter conferred by statute or
otherwise to any abatement, suspension, deferment, dimi-
nution or reduction of any sum secured hereby and payable
by Mortgagor.
8 Taxes, Utilities and Impositions. Mortgagor shall
pay, or cause to be paid and discharged, on or before the last
day on which they may be paid without penalty or interest, all
such duties, taxes, sewer rents, charges for water, or for
setting or repairing meters, and all other utilities in the
Improvements or on the Premises or any part thereof, and any
assessments and payments, usual or unusual, extraordinary or
ordinary, which shall be imposed upon or become due and payable
or become a lien upon the Premises or any part thereof and the
sidewalks or streets in front thereof by virtue of any present
or future law of the United States or of the State, County, City
or Town wherein the Premises are located (all of the foregoing
being herein collectively called "Impositions"), and upon
request by Mortgagee, Mortgagor shall immediately submit
receipts evidencing payment of the same. In the event of de-
fault of any such payment of any Impositions, Mortgagee may pay
the same and the amount so paid by Mortgagee shall, at the
Mortgagee's option, become immediately due and payable with
<PAGE>
interest thereon at the applicable rate under the Notes and
shall be deemed part of the indebtedness secured by this Mort-
gage.
9 Monthly Deposits. Mortgagor shall deposit with
Mortgagee, or its designee, on the due date of each monthly
installment under the Notes, a sum which, in the estimation of
Mortgagee, shall be equal to the estimated Impositions next due,
as estimated by Beneficiary, less all installments already paid
therefor, divided by the number of months that are to elapse
before one (1) month prior to the date when the Impositions may
be paid without penalty or interest. Upon the execution and
delivery hereof, Mortgagor shall deposit with Mortgagee, or its
designee, such sum which, when supplemented by the aforesaid
monthly installments, will permit payment of the Impositions not
later than thirty (30) days prior to the date upon which the
same may be paid without penalty or interest; said deposits to
be held by Mortgagee, or its designee, free of interest to
Mortgagor, and free of any liens or claims on the part of
creditors of Mortgagor and as a part of the security of
Mortgagee, and to be used by Mortgagee, or its designee, to pay
Impositions in full as the same become due and payable. If
said monthly deposits are insufficient to pay Impositions as the
same become due and payable, Mortgagor will deposit with
Mortgagee, or its designee, within ten (10) days after demand
therefor, such additional sum or sums as may be required in
order for Mortgagee, or its designee, to pay Impositions in
full. It shall be the responsibility of Mortgagor to furnish
Mortgagee with bills in sufficient time to pay the Impositions
before any penalty attaches. Upon any default in the provisions
of the Loan Documents, Mortgagee may, at its option, apply any
money in the fund resulting from said deposits to the payment
of the indebtedness secured hereby in such manner as it may
elect. Notwithstanding the foregoing, Mortgagor shall have no
obligation to make the deposits and payments provided for in
this Section 2.9 until an Event of Default shall have occurred
and be continuing and the Mortgagee has requested that the
Mortgagor make such deposits and payments.
10 Maintenance, Repairs, Alterations. Mortgagor
shall keep the Mortgaged Property or cause the same to be kept
in a good condition and repair and fully protected from the
elements to the satisfaction of Mortgagee; Mortgagor shall not
commit or permit any waste thereon and shall not do or permit
any act by which the physical condition of the Mortgaged Prop-
erty shall become less valuable; Mortgagor shall not remove,
demolish or substantially or structurally alter any building,
structure or other Improvement (except such alterations as may
be required by laws, ordinances or regulations) without the
prior written permission of Mortgagee; Mortgagor shall complete
promptly and in good and workmanlike manner any building or
other Improvement which may be constructed on the Premises and
promptly restore in like manner any Improvement which may be
damaged or destroyed thereon and shall pay when due all claims
for labor performed and materials furnished therefor; and
Mortgagor shall use and operate, and shall require any lessees,
sub-lessees or licensees of Mortgagor to use or operate, the
Mortgaged Property in compliance with all applicable laws, or-
dinances, regulations, covenants, conditions, and restrictions,
and with all applicable requirements of any ground lease, lease
or sublease, if any, now or hereafter affecting the Premises or
any part thereof. Mortgagee and its representatives shall have
<PAGE>
access to the Premises and Mortgaged Property at all reasonable
times to determine whether Mortgagor is complying with its ob-
ligations under this Mortgage, including, but not limited to,
those set out in this Section.
11 Eminent Domain. Mortgagor assigns to Mortgagee
the amount, to the fullest extent permitted by law, up to the
then outstanding balance on the Loan, 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 Loan or release the same to Mortgagor
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.
12 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 pow-
ers of Mortgagee or Trustee. If any action or proceeding af-
fecting 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 con-
nection therewith, including its attorneys' fees, shall be paid
by Mortgagor, together with interest thereon at the applicable
rate under the Notes, and any such sum and the interest thereon
shall be deemed to be part of the indebtedness secured by this
Mortgage.
13 Actions by Mortgagee to Preserve Security, etc.
If Mortgagor fails to make any payment, satisfy any Imposition,
pay any insurance premium or do any act as and in the manner
provided for in the Loan Documents, Mortgagee, in its sole
discretion, without obligation so to do and without notice to
or demand upon Mortgagor (except as may be expressly provided
herein) and without releasing Mortgagor from any obligation, may
make or do the same in such manner and to such extent as
Mortgagee may deem necessary to protect the security hereof.
Mortgagor shall pay upon demand all expenses incurred or paid
by Mortgagee (including counsel fees and court costs) on ac-
count of the exercise of any of the aforesaid rights or privi-
leges or on account of any litigation which may arise in con-
nection with the Loan Documents or on account of any attempt,
without litigation, to enforce the terms of this Mortgage or
the Notes. Such sums shall include, but not be limited to all
costs and expenses of any kind incurred by Mortgagee in con-
nection with the exercise by the Mortgagee of any of Mortgagee's
remedies set forth in this Mortgage due to an Event of Default
or otherwise. In case the Mortgaged Property or any part
thereof shall be advertised for foreclosure sale and not sold,
Mortgagor shall pay all costs in connection therewith.
In the event that Mortgagee is called upon to pay any
<PAGE>
sum of money to protect or sustain the lien of the Mortgage and
the Notes as aforesaid, all monies advanced or due hereunder
shall become immediately due and payable, together with inter-
est thereon at the applicable rate under the Notes 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.
14 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
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.
15 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.
16 Liens. Mortgagor shall pay and promptly dis-
charge, at Mortgagor's cost and expense, all liens, encum-
brances and charges (other than this Mortgage and encumbrances
approved by Mortgagee) upon the Mortgaged Property or any part
thereof or interest therein.
17 Use of Mortgaged Property. The Mortgaged Property
shall be constantly utilized and occupied by Mortgagor for the
uses to which they are devoted on the date hereof and not
otherwise, without the prior written consent of Mortgagee, which
may be withheld for any reason or no reason.
18 Waivers; Surveys. Mortgagor shall furnish all
such waivers of liens or claims on the Mortgaged Property and
such surveys as Mortgagee may reasonably request and copies of
all certificates of occupancy concerning the Mortgaged Property
promptly upon receipt by Mortgagor.
19 Further Assurance. Whenever requested by
Mortgagee, 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 Mort-
gagee 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
<PAGE>
and record supplementary mortgages, financing statements or
other chattel instruments as required herein within ten (10)
days after written request by Mortgagee, Mortgagor hereby ir-
revocably appoints Mortgagee its attorney-in-fact, coupled with
an interest, to execute and deliver such supplementary mort-
gages, financing statements or other chattel instruments in the
name of, and on behalf of, Mortgagor.
20 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 Loan, no subordination
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 obli-
gations to Mortgagee or have the effect of releasing Mortgagor,
from full responsibility to Mortgagee for the complete dis-
charge of each of Mortgagor's obligations hereunder or under the
Loan Documents.
21 Transfer of Property. Except to the extent
permitted by and in accordance with the provisions of the Loan
Agreement, Mortgagor will not sell, contract to sell, or
transfer, alienate, convey, swap, mortgage, pledge, encumber or
otherwise dispose of the Mortgaged Property, or any part thereof
or any interest therein without the prior written consent of
Mortgagee. Any such unauthorized conveyance of the Mortgaged
Property, or any part thereof or interest therein, without said
consent, shall, at the option of Mortgagee, constitute an Event
of Default (as defined herein). Notwithstanding the foregoing,
Mortgagor shall have the right to lease space in the Mortgaged
Property in the ordinary course of business in accordance with
the terms of the Loan Agreement.
2.
ARTICLE III
ASSIGNMENT OF REVENUES
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
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.
<PAGE>
2 Restrictions on Further Assignments, etc.
Mortgagor shall not, without the prior written consent of
Mortgagee, assign the Revenues, or any part thereof.
3 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
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".
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) Except as expressly permitted in the Loan
Agreement, Mortgagor shall not lease, sell, convey or in
any manner transfer the Personal Property without the prior
written consent of Mortgagee.
(c) The Personal Property is not used or bought
for personal, family or household purposes.
(d) The Personal Property shall be kept on or
at the Premises and Mortgagor shall not remove the Per-
sonal Property from the Premises without the prior written
consent of Mortgagee, except such portions or items of
Personal Property as are promptly replaced by Mortgagor
with comparable items of equal or greater value.
(e) 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
<PAGE>
expressly referred to herein.
(f) 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.
4.
ARTICLE V
EVENTS OF DEFAULT
Any one or more of the following shall constitute an
Event of Default under this Mortgage, the Loan Agreement and
the Notes after the expiration of any applicable cure or grace
period:
1 Monetary Default.
(a) Failure of Mortgagor to make any payment
required by the Notes 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 Imposition on or prior
to the last day on which payment may be made without in-
terest or penalty, or insurance premium required 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 Imposition or insurance premium
required hereunder.
2 Unauthorized Alteration. Except as hereinbefore
permitted, major renovations, structural changes, demolition or
removal of any of the Improvements which materially diminishes
the value of the Improvements without the prior consent of
Mortgagee.
3 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 Waste. Failure to maintain the Improvements and
Personal Property in good repair; provided, however, Mortgagor
<PAGE>
shall have thirty (30) days after being notified by Mortgagee
of such failure in which to cure such failure, which thirty (30)
day period shall be extended for a reasonable period not in
excess of a total of sixty (60) days if the necessary repairs
to bring the Improvements or Personal Property in compliance by
their nature cannot be accomplished within said thirty (30) day
period and Mortgagor diligently and continuously pursues such
a cure during said period.
5 Noncompliance with Laws. Failure to comply with
any requirements or order or notice of violation or ordinance
issued by any governmental authority claiming jurisdiction over
the Mortgaged Property within the time specified in such order,
notice, law ordinance, or regulation, or, if not so specified,
within thirty (30) days from the issuance thereof.
6 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 prepay-
ment premium.
7 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 un-
true in any material respect at the time when made.
8 Sale of Mortgaged Property. Any sale, assignment,
transfer, conveyance or other change in the legal or equitable
title to the Mortgaged Property, or any part thereof or interest
therein, whether voluntarily or involuntarily by operation of
law or otherwise and whether or not of record or for
consideration unless permitted herein or agreed to in advance,
in writing, by Mortgagee.
9 Insurance. Failure of Mortgagor to maintain or
cause to be maintained any of the insurance required under this
Mortgage.
10 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.
11 Other Default. The occurrence of an Event of
Default under any of the other Loan Documents.
5.
ARTICLE VI
REMEDIES
In the event that one or more of the Events of De-
fault 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:
1 Acceleration. Mortgagee may declare the entire
unpaid balance of the Notes, together with all accrued interest
thereon, immediately due and payable without notice.
<PAGE>
2 Receiver. Mortgagee shall have the absolute and
unconditional right to apply for and to obtain the appointment
of a receiver or similar official for all or a portion of the
Mortgaged Property, to, among other things, manage and operate
the Mortgaged Property, or any part thereof, and to apply the
Revenues to the payment of interest and principal of the Notes
and any other obligations of Mortgagor to Mortgagee hereunder.
In the event of such application, Mortgagor consents to the
appointment of such receiver or similar official and agrees that
such receiver or similar official may be appointed without
notice to Mortgagor, without regard to the adequacy of any se-
curity for the debt and without regard to the solvency of
Mortgagor or any other person, firm or corporation who or which
may be liable for the payment of the Notes or any other obli-
gation of Mortgagor hereunder. All expenses related to the
appointment of a receiver hereunder shall be the responsibility
of Mortgagor, and shall bear interest at the applicable rate
under the Notes and shall be deemed part of the indebtedness
secured by this Mortgage.
3 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) Either personally, through its authorized
agent, or by means of a court appointed receiver, to take
possession of all or any of the Personal Property and ex-
clude 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 improvements to and exercise all
rights and powers of Mortgagor 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 under any of the
instruments which secure the Notes, 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 fore-
going 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.
<PAGE>
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.
Mortgagee may be a purchaser at any such sale, and unless
the Personal Property is perishable or threatens to de-
cline 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 date, time
and place of any public sale of the Personal Property or
other intended disposition thereof. Such notice shall be
mailed to Mortgagor by registered or certified mail at the
address set forth for notices in the Loan Agreement. Such
notice shall also be posted in the courthouse, in the
county in which the sale is to be held, for at least five
(5) days immediately preceding the date of such public
sale.
4 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 relat-
ing 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 nec-
essary, 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 ap-
ply 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 the deposit
is not immediately made. 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 purchaser 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
<PAGE>
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 Notes 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 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 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 Ar-
ticle 9, Part 5 of Chapter 25 of the North Carolina Statutes as
then in effect, or its election, may proceed as to the Pre-
mises, 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.
6 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
Notes, 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 represented by
said judgment or decree shall be secured hereby to the same
extent as the Notes is 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.
7 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, the Loan Agreement
<PAGE>
or the Notes or under any other agreement of Mortgagor,
including the Loan Documents, or any laws now or hereafter in
force, notwithstanding 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 other remedy
herein or by law provided or permitted, but each shall be cu-
mulative 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, concur-
rently 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
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 per-
son, firm or corporation designated by Mortgagee, a duly ac-
knowledged written statement setting forth the amount of the
debt secured by this Mortgage, and stating either that no off-
sets 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.
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.
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 successors 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 Mortgagor hereunder or
under the Notes or the lien or priority of this Mortgage with
respect to any part of the Mortgaged Property; provided,
however, that the foregoing shall not constitute, or be deemed
to constitute, a consent to any transfer by Mortgagor or any
other vesting of title to the Mortgaged Property in any person
or entity other than Mortgagor. All provisions of this Mortgage
shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators,
<PAGE>
successors and assigns, except as otherwise herein expressly
provided.
4 Notices. All notices required to be given
hereunder shall be given and deemed received as provided in
Section 8.5 of the Loan Agreement.
5 Modification in Writing. This Mortgage may not 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 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.
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 unenforce-
able 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.
8 Governing Law. This Mortgage shall be governed by
and construed in accordance with the laws of the State of North
Carolina.
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.
As employed herein, the terms "Banks," "Mortgagee" and
"Beneficiary" each means collectively as of the date hereof FNBB
and CIT. Mortgagor acknowledges that additional lending
institutions may from time to time become "Banks" under the
Loan Agreement and that from time to time one or more lending
institutions that are "Banks" under the Loan Agreement may cease
to be a "Bank" under the Loan Agreement. Mortgagor accordingly
agrees that as employed herein the terms "Bank," Mortgagee" and
"Beneficiary" mean each lending institution that as of any date
of determination is a "Bank" under the Loan Agreement.
<PAGE>
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 obliga-
tions herein conferred upon Trustee.
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.
12 Additional Obligations Secured. Mortgagor agrees
that any amounts advanced or expended by Mortgagee on behalf of
Mortgagor as provided in the Loan Documents, or otherwise
advanced by Mortgagee to protect its security interest in and
lien on the Mortgaged Property, shall accrue interest at the
applicable rate under the Notes and shall be deemed a part of
the indebtedness secured by this Mortgage.
<PAGE>
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 Notes, this Mortgage and the other 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
ATTEST:
By:
Secretary President
(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 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 acknowledged the said writing to be the act
and deed of the corporation.
Witness my hand and official stamp or seal, this the
day of April, 1995.
Notary Public
My Commission Expires:
(SEAL)
MASTER RELEASE AGREEMENT
MASTER RELEASE AGREEMENT, dated as of April 28, 1995 by and between GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE Capital"), and ROSE'S
STORES, INC., debtor and debtor-in-possession in that certain bankruptcy Case
No. 93-01365-5-ATS (the "Chapter 11 Case") pending in the United States
Bankruptcy Court Eastern District of North Carolina Raleigh Division (the
"Bankruptcy Court") in such capacity and on behalf of Reorganized Rose's (as
defined below) and as successor by merger to RSI Trading, Inc., a Delaware
corporation (the "Company").
WHEREAS, GE Capital and the Company are party to that certain Debtor-In-
Possession Loan Agreement, dated as of September 20, 1993, as amended by each
of the:
First Amendment to Debtor-in-Possession Loan Agreement (10/10/93),
Second Amendment to Debtor-in-Possession Loan Agreement (10/12/93),
Third Amendment to Debtor-in-Possession Loan Agreement (10/13/93),
Fourth Amendment to Debtor-in-Possession Loan Agreement (11/15/93),
Fifth Amendment to Debtor-in-Possession Loan Agreement (12/15/93),
Sixth Amendment to Debtor-in-Possession Loan Agreement (12/17/93),
that certain "Supplemental Consensual Adequate Protection Order in
Connection with Debtor's Motion for Order Authorizing Debtor to Con-
duct Additional Going Out of Business Sales and Other Relief," entered
by the Bankruptcy Court in the Chapter 11 Case on May 17, 1994,
Eighth Amendment to Debtor-in-Possession Loan Agreement (6/14/94),
Ninth Amendment to Debtor-in-Possession Loan Agreement (6/22/94),
Tenth Amendment to Debtor-in-Possession Loan Agreement (7/1/94),
Eleventh Amendment to Debtor-in-Possession Loan Agreement (7/12/94),
Twelfth Amendment to Debtor-in-Possession Loan Agreement (8/31/94),
Thirteenth Amendment to Debtor-in-Possession Loan Agreement (11/30/94)
and
Fourteenth Amendment to Debtor-in-Possession Loan Agreement and Waiver
Agreement (3/31/95)
(as so amended, the "Loan Agreement") and that certain Revolving Credit Note in
the principal amount of $125,000,000 made by the Company in favor of GE Capital
(the "Note");
WHEREAS, in connection with the Loan Agreement, GE Capital has incurred
at the request of and on behalf of the Company certain Letter of Credit
Obligations (as defined in the Loan Agreement) with respect to those certain
outstanding documentary letters of credit (each a "Documentary LC" and
collectively, the "Documentary LCs") and outstanding standby letters of credit
(each a "Standby LC" and collectively, the "Standby LCs") as set forth on Annex
A to this Agreement;
<PAGE>
WHEREAS, in connection with the Loan Agreement, GE Capital and the Company
are party to that certain Pledge and Security Agreement, dated as of September
20, 1993 (the "Pledge and Security Agreement"), whereby the Company granted to
GE Capital valid, perfected, non-voidable security interests and Liens (as
therein defined) on all of the Company's right, title and interest in, to and
under certain Collateral (as therein defined);
WHEREAS, in connection with the Pledge and Security Agreement, GE Capital,
the Company and certain financial institutions are party to those certain
blocked account letters described on Annex B to this Agreement (the "Blocked
Account Letters");
WHEREAS, in connection with the Pledge and Security Agreement, GE Capital
and certain landlords are party to those certain landlord waiver agreements
described on Annex C to this Agreement (the "Landlord Waiver Agreements");
WHEREAS, in connection with the Pledge and Security Agreement, GE Capital
and the Company are party to that certain Trademark and License Agreement, dated
as of September 28, 1993 (the "Trademark and License Agreement"), whereby the
Company sold, assigned, transferred and set over to GE Capital for purposes of
security all of the Company's right, title and interest in and to all Trademarks
(as therein defined) and the goodwill associated therewith;
WHEREAS, in connection with the Pledge and Security Agreement, GE Capital
and the Company are party to that certain Master Assignment of Leases, dated as
of September 28, 1993 (the "Master Lease Assignment"), whereby the Company,
pledged, granted, transferred and assigned to GE Capital all of the Company's
right, title and interest in, to and under the Leases (as therein defined),
including all extensions, renewals and modifications thereof;
WHEREAS, in connection with the Loan Agreement, GE Capital and RSI Trading
Inc., a Delaware corporation ("RSI") are party to that certain Unconditional
Guaranty of Payment and Performance, dated as of September 28, 1993 (the "RSI
Guaranty"), whereby RSI unconditionally guaranteed to GE Capital the full and
prompt payment of the Note;
WHEREAS, in connection with the RSI Guaranty, GE Capital and RSI are party
to that certain Guarantor Security Agreement, dated as of September 28, 1993
(the "RSI Security Agreement"), whereby RSI granted to GE Capital valid, per-
fected, non-voidable security interests in and Liens (as therein defined) on
all of RSI's right, title and interest in, to and under certain Collateral
(as therein defined); and
WHEREAS, as of the date hereof, pursuant to that certain Modified and
Restated First Amended Joint Plan of Reorganization of Rose's Stores, Inc. as
confirmed by order of the Bankruptcy Court dated April 24, 1995 (the "Plan"),
Reorganized Rose's (as therein defined) is consummating a financing transaction
(the "Post-Effective Date Financing Facility") the proceeds of which will be
used in part to satisfy and discharge all ascertainable, liquidated, noncon-
<PAGE>
tingent and matured obligations of the Company to GE Capital under the Basic
Documents (as hereinafter defined) and Reorganized Rose's will otherwise make
provisionfor the outstanding Letter of Credit Obligations and certain other
deferred obligations to be paid following the closing of the Post-Effective
Date Financing Facility (the "Transaction");
WHEREAS, this agreement is that certain Master Release Agreement referred
to in the Plan.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by GE Capital and the Company (on
behalf of itself, as successor by merger to RSI, and Reorganized Rose's), the
parties hereby agree as follows:
1. Satisfaction and Discharge of Certain Monetary Obligations under the
Loan Agreement; Provision for Letter of Credit Obligations; Continuing
Obligations of the Company. (a) GE Capital on the date hereof shall receive
from, or at the direction of, the Company via wire transfer those amounts set
forth on Annex D to this Agreement.
(b) With respect to each outstanding Documentary LC described on
Annex B to this Agreement, GE Capital, as a condition to the effectiveness of
this Agreement, and the Company and The First National Bank of Boston, a na-
tional banking association and issuer of each of the Documentary LCs, shall
have entered into that certain Release Agreement with Respect to Documentary
LCs (the "Documentary LC Agreement"), whereby immediately upon the execution
and delivery of such agreement GE Capital shall be released and held harmless
from any and all reimbursement or other obligations with respect to the Docu-
mentary LCs.
(c) With respect to each outstanding Standby LC described on
Annex B to this Agreement, GE Capital, as a condition to the effectiveness of
this Agreement, the Company on behalf of itself and Reorganized Rose's, shall
have entered into that certain Deferred GE Obligations Agreement (the "Defer-
red GE Obligations Agreement") pursuant to which Reorganized Rose's shall
have delivered to GE Capital as security with respect to the Standby LCs an
acceptable back-to-back irrevocable standby letter of credit in favor of GE
Capital.
(d) As a condition to the effectiveness of this Agreement, the
Company (on behalf of itself and Reorganized Rose's) and GE Capital shall have
entered into that certain Post-Effective Date GE Assumption Agreement (the
"Post-Effective Date GE Assumption Agreement"), whereby Reorganized Rose's
shall (A) assume each and every continuing obligation of the Company to GE
Capital, GE Capital Commercial Finance, Inc., GE Capital Corporate Finance,
Inc. and their respective affiliates, and any of their respective officers,
directors, employees, attorneys, and agents, under (i) the Loan Agreement,
(ii) that certain Amended and Restated Commitment Letter of GE Capital to
Rose's Stores, Inc. dated as of July 19, 1994 and the related Fee Letter
<PAGE>
dated as of July 19, 1994 (the "GE Commitment") and (iii) that certain Agree-
ment Terminating Amended and Restated Letter to Provide Confirmation Financ-
ing dated as of March 31, 1995 (the "GE Commitment Termination Agreement"),
which remain outstanding and unsatisfied after (x) the closing of the Post-
Effective Date Financing Facility, (y) the payment described in subparagraph
(a) of this Section 1 and (z) giving effect to the releases of GE Capital to
be accomplished as provided in subparagraphs (b) and (c) of this Section 1,
including, without limitation, any indemnification obligations of the Company
under or pursuant to the Loan Agreement, the GE Commitment and the GE Commit-
ment Termination Agreement; (B) agree to pay within ten (10) days following
the presentation of invoices by GE Capital certain GE Obligations which at
the time of the closing of the Post-Effective Date Financing
Facility are capable of being satisfied in full, in Cash, except that the amount
of such obligations is not then finally determined, including, without
limitation, certain fees, costs and expenses incurred by or on behalf of GE
Capital with respect to the DIP Facility; and (C) agree to the provision by
Reorganized Rose's as of the closing of the Post-Effective Date Financing
Facility for the payment of those obligations described in clause (B) above on
its books and records.
2. Termination of Security Interest and Guarantees; Release of
Collateral, Etc. GE Capital agrees that any and all liens, security interests,
mortgage liens and other encumbrances in its favor securing Obligations of the
Company arising from or related to the Basic Documents (as defined below) or the
DIP Facility (as defined in the Plan), including, without limitation, those
created pursuant to any of the following agreements, instruments, documents and
understandings (collectively, the Basic Documents"), and the obligations of the
Company or RSI thereunder shall be terminated and released (other than any
obligations which are the subject of the Deferred GE Obligations Agreement or
Post-Effective Date Assumption Agreement), effective immediately upon the
occurrence of the last of the following: (a) the transmittal on behalf of the
Company via wire transfer to an account to be identified by GE Capital of the
amount set forth in Annex D and provision of a federal reserve wire transfer
number with respect thereto and (b) receipt by GE Capital of fully executed
originals of each of this Agreement, the Documentary LC Agreement, the GE
Deferred Obligations Agreement and the Post-Effective Date GE Assumption
Agreement and (c) in the case of each of the agreements described in clause (b),
the performance of all obligations of the Company or Reorganized Rose's
thereunder which are required to be performed prior to or upon the execution and
delivery of such agreements, including, without limitation, the receipt of the
back-to-back standby letter of credit required to be delivered pursuant to the
GE Deferred Obligations Agreement (such time being, the "Effective Time"):
(a) the Loan Agreement (other than with respect to matters which
are the subject of the Deferred GE Obligations Agreement or
the Post-Effective Date GE Assumption Agreement);
(b) the Pledge and Security Agreement;
(c) the Trademark and License Agreement;
(d) the Master Lease Assignment Agreement;
(e) the RSI Guaranty Agreement;
<PAGE>
(f) each of the Landlord Waiver Agreements;
(g) each of the Blocked Account letters;
(h) any and all other agreements, instruments, documents or
understandings relating to or arising out of the Loan
Agreement (other than with respect to matters which are
the subject of the Deferred GE Obligations Agreement or
the Post-Effective Date GE Assumption Agreement).
Thereupon, GE Capital agrees, for the benefit of Reorganized Rose's and the
Lenders under the Post-Effective Date Financing Agreement, to execute and de-
liver all termination statements and other agreements, certificates or other
documents and perform such other acts reasonably requested by Reorganized
Rose's or the Lenders under the Post-Effective Date Financing Facility,
evidencing the release of such liens, security interests, mortgage liens or
other encumbrances. Notwithstanding the foregoing, GE Capital shall have no
responsibility, and it shall be the sole responsibility and obligation of
the Company or Reorganized Rose's, as the case may be, to record, at its sole
cost and expense, and at its discretion, any and all instruments to confirm
of public record the satisfaction of all such liens, security interests, mort-
gage liens and other encumbrances. From and after the Effective Time, if GE
Capital shall receive the proceeds of any Collateral (other than any payments
to which GE Capital is entitled pursuant to this Agreement, the Deferred GE
Obligations Agreement or the Post-Effective Date GE Assumption Agreement), GE
Capital shall turn over such proceeds to the Administrative Agent on behalf
of the Lenders under the Post-Effective Date Financing Facility as promptly
as possible.
3. Release of GE Capital. The Company (on behalf of itself, Reorganized
Rose's and RSI), hereby unconditionally releases, remises, relinquishes, acquits
and forever discharges GE Capital, GE Capital Commercial Finance, Inc., GE
Capital Corporate Finance, Inc. and their respective affiliates, and any of
their respective officers, directors, employees, attorneys, and agents (each a
"Released Party") of and from any and all claims, demands, debts, actions,
causes of action, suits, covenants, contracts, agreements, obligations, pro-
mises, accounts, damages, costs, expenses, defenses, offsets and liabilities
of any kind and character whatsoever, known or unknown, suspected or unsus-
pected, in contract or in tort, at law or in equity, which any of the Company,
RSI or Reorganized Rose's ever had, now have, claim to have had, now claim to
have, or hereafter can, shall or may claim to have against any Released Party
from the beginning of the world to the date of the execution of this Agreement,
for or by reason of, in whole or in part, directly or indirectly, the Basic
Documents, the GE Commitment or the Commitment Termination or any actions,
inactions or omissions by any Released Party with respect to, in connection
with or arising from any of the foregoing, but excluding any such claim aris-
ing from or relating to the performance by any Released Party of any of its
obligations under this Agreement.
4. Miscellaneous. (a) From and after the date hereof, GE Capital shall
take such further actions and shall execute and deliver such further agreements,
certificates and other documents (all such agreements, certificates and docu-
ments to be without any representations or warranties whatsoever) as Reorgan-
ized Rose's
<PAGE>
or the Lenders under the Post-Effective Date Financing Agreement request and
prepare and which are reasonably required to carry out the purposes, intent and
effect of the releases and terminations set forth herein. Reorganized Rose's
shall pay all out-of-pocket expenses of GE Capital, including reasonable fees
and disbursements of the law firm acting as special counsel for GE Capital and
such local counsel as may be retained by GE Capital, in connection with such
further actions, additional agreements, certificates and other documents.
(b) Each party hereto acknowledges that it has participated in the
negotiation of this Agreement, the Deferred GE Obligations Agreements, and the
Post-Effective Date GE Assumption Agreement (collectively the "Operative
Agreements") and no provision, condition, term or covenant of any of the
Operative Agreements shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured,
dictated or drafted such provisions. The Company (on behalf of itself,
Reorganized Rose's and RSI) acknowledges and agrees that (i) it has at all times
had access to an attorney and the negotiations of the terms of and in the
preparation and execution of the Operative Agreements, (ii) it has had the
opportunity to review and analyze the Operative Agreements for a sufficient
period of time prior to the execution and delivery thereof, (iii) no
representations or warranties have been made by or on behalf of GE Capital, or
relied upon the Company pertaining to the subject matter of any of the Operative
Agreements other than those that are set forth in the Operative Agreements, and
(iv) all of the terms of the Operative Agreements were negotiated at arms-length
and were prepared and executed without fraud, duress, undue influence or coer-
cion of any kind exerted by any of the parties upon the others, and that the
execution and delivery of the Operative Agreements are the free and voluntary
acts of the parties.
(c) This Agreement shall be binding upon the Company, Reorganized Rose's
and GE Capital, and shall inure to the benefit of their respective successors
and assigns.
In addition, the Administrative Agents, the Facility Agents and the Lenders
under the Post-Effective Date Financing Facility shall be entitled to rely on
and enforce the provisions of Sections 2 and 4(a) of this Agreement as is
they were parties hereto.
(d) Whenever any of this Agreement, the GE Deferred Obligations Agree=
ment or the Post-Effective Date GE Assumption Agreement provides that any
notice, demand, request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by another, or when-
ever any of the parties desires to give or serve upon another any communication
with respect to any of such agreements, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
shall be delivered (i) in person with receipt acknowledged, or (ii) by facsimile
with receipt confirmed, or (iii) by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
<PAGE>
(1) If to Lender at:
GENERAL ELECTRIC CAPITAL CORPORATION
3379 Peachtree Road, N.E.
Suite 600
Atlanta, Georgia 30326
Attn: Vice President -
Portfolio/Rose's Stores, Inc.
Facsimile: (404) 262-9034
With copies to:
GENERAL ELECTRIC CAPITAL CORPORATION
292 Long Ridge Road
Stamford, Connecticut 06927
Attn: Corporate Finance Group
Legal Counsel
Facsimile: (203) 357-3047
and
SMITH, GAMBRELL & RUSSELL
Promenade Two
Suite 3100
1230 Peachtree Street
Atlanta, Georgia 30309
Attn: Bruce W. Moorhead, Jr., Esq.
John R. Schneider, Esq.
Facsimile: (404) 815-3509
(2) If to Borrower at:
ROSE'S STORES, INC.
P.O. Drawer 947
Henderson, North Carolina 27536
Attn: Mr. R. Edward Anderson
President and Chief Executive
Officer
Facsimile: (919) 430-2536
<PAGE>
With copies to:
SMITH DEBNAM HIBBERT & PAHL
4700 New Bern Avenue
P. O. Box 26268
Raleigh, North Carolina 27611-6268
Attn: J. Larkin Pahl, Esq.
Facsimile: (919) 250-2100
and
PROSKAUER ROSE GOETZ & MENDELSOHN
1585 Broadway
New York, New York 10036
Attn: Alan B. Hyman, Esq.
Michael E. Foreman, Esq.
Facsimile: (212) 969-2900
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered or
sent by facsimile, with receipt acknowledged or confirmed,or three (3) Business
Days after the same shall have been deposited in the United States mail. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
(e) This Agreement shall be governed by and construed and interpreted
in accordance with the laws of the State of New York without reference to
principles of conflict of laws.
(f) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION
(WITHOUT SUBMITTING TO ARBITRATION), THE PARTIES WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS
OR REMEDIES UNDER THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
by its officer thereunto duly authorized on the date first above written.
ROSE'S STORES, INC., on behalf of itself,
as successor by merger to RSI, and
Reorganized Rose's
By:/s/ George T. Blackburn, II
Name:George T. Blackburn, II
Title:Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By:/s/ Timothy C. Huban
Name:Timothy C. Huban
Title:Vice President - Commercial Finance
<PAGE>
Annex A
ROSE'S STORES, INC. S = ABN/AMRO
STANDBY LETTERS OF CREDIT LASB = B of A (L/C02)
04/26/95
ISSUE EXPIRY ORIGINAL DRAW/
L/C # DATE DATE AMOUNT AMEND END BAL.
S930261 10/01/93 01/31/94 7,194,000.00 (7,194,000.00) 0.00
S930291 10/20/93 10/19/95 290,686.00 (91,862.00) 198,824.00
S930292 10/20/93 10/19/95 209,378.00 (103,861.00) 105,517.00
S930293 10/20/93 10/19/95 63,886.00 (9,376.00) 54,510.00
S930294 10/20/93 10/19/95 38,362.50 (9,532.50) 28,830.00
S930295 10/20/93 10/19/95 149,037.50 (85,910.00) 63,127.50
S930296 10/20/93 10/19/95 40,117.00 (26,795.00) 13,322.00
S930313 12/28/93 11/01/95 950,000.00 (70,000.00) 880,000.00
S930328 11/05/93 11/04/95 10,480.00 0.00 10,480.00
S950022 02/01/95 EVERGREEN 250,000.00 0.00 250,000.00
LASB-218674 10/27/93 EVERGREEN 450,000.00 0.00 450,000.00
LASB-219063 01/31/94 01/31/96 2,800,000.00 (57,478.00) 2,742,522.00
-----------------
4,797,132.50
<PAGE>
ROSE'S STORES, INC.
LETTER OF CREDIT SUMMARY BY LC #
Bank of Boston L/C03
04/26/95
GECC O/S
7001... Issue Expiry Original Draw/
L/C # Date Date Amount Ammend Notes End Bal.
8418 05/06/95 35,203.20 (21,307.20) Drw 4/10/95 13,896.00
8429 04/06/95 05/01/95 8,310.00 (4,122.00) Drw 4/11/95 4,188.00
8445 02/14/95 05/21/95 88,776.00 0.00 88,776.00
8447 02/14/95 05/21/95 38,400.00 0.00 38,400.00
8453 02/14/95 05/01/95 5,825.40 5,825.40 Drw 4/19/95 0.00
8460 03/01/95 05/21/95 7,344.00 0.00 7,344.00
8461 03/01/95 06/05/95 39,571.20 0.00 39,571.20
8462 03/01/95 06/29/95 53,904.96 21.54 Amd 3/30/95 53,926.50
8463 03/01/95 05/21/95 31,200.00 0.00 31,200.00
8466 03/13/95 05/01/95 88,052.40 0.00 88,052.40
8467 03/15/95 06/20/95 14,932.80 0.00 14,932.80
8468 03/15/95 06/20/95 71,160.00 0.00 71,160.00
8469 03/15/95 06/20/95 38,400.00 0.00 38,400.00
8470 03/15/95 06/29/95 28,111.20 0.00 28,111.20
8471 03/21/95 06/20/95 69,240.00 0.00 69,240.00
8472 03/15/95 06/20/95 31,860.00 0.00 31,860.00
8473 03/15/95 05/19/95 36,288.00 0.00 36,288.00
8474 03/15/95 05/21/95 248,912.00 0.00 248,912.00
8475 03/24/95 06/05/95 13,644.00 0.00 13,644.00
8476 03/24/95 06/05/95 25,344.00 0.00 25,344.00
8477 03/24/95 06/22/95 46,137.60 0.00 46,137.60
8478 03/24/95 06/05/95 51,856.08 0.00 51,856.08
8479 03/24/95 06/29/95 97,563.84 0.00 97,563.84
<PAGE>
8480 03/24/95 05/21/95 90,842.40 0.00 90,842.40
8481 03/24/95 05/21/95 24,000.00 0.00 24,000.00
8482 03/24/95 06/09/95 34,375.00 0.00 34,375.00
8483 03/24/95 06/05/95 29,568.00 0.00 29,568.00
8484 03/24/95 06/05/95 16,884.00 0.00 16,884.00
8485 03/24/95 05/16/95 1,576.80 0.00 1,576.80
8486 03/24/95 04/29/95 12,604.80 0.00 12,604.80
8487 03/24/95 05/31/95 2,460.00 0.00 2,460.00
8488 03/24/95 05/01/95 1,968.00 0.00 1,968.00
8489 03/24/95 05/06/95 5,538.00 0.00 5,538.00
8490 03/24/95 05/16/95 14,198.40 0.00 14,198.40
8491 03/29/95 06/20/95 62,352.00 0.00 62,352.00
8492 03/29/95 06/20/95 24,000.00 0.00 24,000.00
8493 04/05/95 07/06/95 30,528.00 0.00 30,528.00
8494 04/05/95 07/15/95 53,049.12 0.00 53,049.12
8495 04/05/95 08/05/95 124,911.84 0.00 124,911.84
8496 03/29/95 06/20/95 91,512.00 0.00 91,512.00
8497 04/05/95 06/05/95 62,088.24 0.00 62,088.24
8498 04/05/95 05/21/95 102,636.30 0.00 102,636.30
8499 04/06/95 07/06/95 147,000.00 0.00 147,000.00
8500 04/06/95 06/20/95 47,427.84 0.00 47,427.84
8501 04/06/95 05/21/95 195,617.50 0.00 195,617.50
8502 04/06/95 05/19/95 48,836.00 0.00 48,836.00
<PAGE>
8503 04/11/95 07/21/95 57,624.00 0.00 57,624.00
8504 04/11/95 07/21/95 34,620.00 0.00 34,620.00
8505 04/18/95 07/21/95 53,914.20 0.00 53,914.20
8506 04/18/95 07/21/95 47,916.00 0.00 47,916.00
8507 04/11/95 05/31/95 6,441.00 0.00 6,441.00
8508 04/11/95 06/15/95 28,800.00 0.00 28,800.00
8509 04/18/95 07/06/95 64,741.68 0.00 64,741.68
8510 04/18/95 07/30/95 49,608.00 0.00 49,608.00
8511 04/18/95 07/16/95 64,741.68 0.00 64,741.68
8512 04/18/95 07/30/95 170,100.00 0.00 170,100.00
8513 04/18/95 07/22/95 32,072.40 0.00 32,072.40
8514 04/18/95 07/21/95 19,602.00 0.00 19,602.00
8515 04/18/95 07/30/95 46,440.00 0.00 46,440.00
8516 04/18/95 07/30/95 111,006.12 0.00 111,006.12
8517 04/18/95 07/21/95 34,272.00 0.00 34,272.00
8518 04/18/95 06/20/95 338,858.00 0.00 338,858.00
8519 04/18/95 06/20/95 69,460.00 0.00 69,460.00
8520 04/18/95 06/20/95 6,516.00 0.00 6,516.00
8521 04/18/95 05/31/95 3,600.00 0.00 3,600.00
<PAGE>
8522 04/18/95 06/20/95 35,295.00 0.00 35,295.00
8523 04/18/95 06/20/95 85,526.70 0.00 85,526.70
8524 04/18/95 06/20/95 137,582.20 0.00 137,582.20
3,892,747.90 (31,233.06) Total O/S:3,861,514.84
<PAGE>
ANNEX B
The following blocked accounts letters exist between General Electric
Capital Corporation, Rose's and each of the respective parties named below:
Financial Institution Account Number
American Fidelity 66036
The Bank - First Citizens Bank 5505-356-5
The Bank of Franklin 232515506
Bank of Speedwell 123-180-4
Bowling Green Bank and Trust Company 023-826-0
Branch Banking & Trust Company 195-1000139
Calvin B. Taylor Banking Co. 901066101
Carolina Bank 0600170230
Cenit Bank 0110025006702
Cenit Bank 007025016462
Central Carolina Bank 122-354-5
Central Fidelity Bank 79-11-265-693
Centura Bank 000-101-818-3
Centura Bank 007-201-711-9
The Citizens Bank 016-77-9
Community Bank 0037000019
Crestar 000136-8877
Deposit Guaranty National Bank 750-523-222-8
Deposit Guaranty National Bank 500-2183216
Deposit Guaranty National Bank 500-2182484
Dominion National Bank 73-55228646
Farmers & Merchants National Bank 402-875-9
Farmers Bank & Trust Company 094-799-7
Fidelity Bank 00000141000774
First Bulloch Bank & Trust 65905
First Citizens Bank 0861209543
First Community Bank 00-5031-5
First Community Bank of Tifton 007231
First & Farmers 02-4815-0
First Farmers & Merchants 088-546-0
National Bank
First National Bank 0312371
First National Bank 001055-3
First National Bank of Alta Vista 00-002-001-993
First National Bank of Griffin 3005774
First National Bank of Reidsville 15-016-9
First National Bank & Trust 0305537
First Union National Bank of Georgia 5530140704
First National Bank of North Carolina 2070580280022
First Virginia Bank 5082-6980
First Virginia Bank 22183272
First Virginia Bank 0159-0111
First Virginia Bank 9057-9550
<PAGE>
First Virginia Bank 051403203
First Virginia Bank 01593099
First Virginia Bank 300932345
First Virginia Bank 0327-0416
First Virginia Bank 3013-4838
First Virginia Bank-Clinch Valley 6505
First Virginia Bank-Commonwealth 54615976
First Virginia Bank of Maryland 002811-01
First Virginia Bank of Tidewater 5035-6100
First Virginia Bank of Tidewater 2825-5100
First Virginia Bank of Tidewater 50435760
Home Banc 500684801
Lexington State Bank 001030477
National Bank of Fredericksburg 1056565
NationsBank of Georgia 000-51-813
NationsBank of Maryland 36-0178-4
NationsBank of Tennessee 240-219-985-8
NationsBank of Virginia 202-9416
One Valley Bank 0000-8621
Orangeburg National Bank 0113007752
Peoples Bank of Fannin County 01-02-722
Peoples Bank of Kent County 3-391174-00
Peoples Bank & Trust 24605801
Planters Bank & Trust 1277969212
Planters Bank & Trust Company 1247019512
Raleigh Federal Savings Bank 471097
Security Bank & Trust Company 020117149601
Southern Bank 4901-8183-22
Southern National Bank 431-507996
United Southern Bank of Morristown 71026934
Wachovia Bank of North 300048980
Carolina, N.A.
Wachovia Bank of North 6264109296
Carolina, N.A.
Wachovia Bank of North 6265-109-385
Carolina, N.A.
The Yadkin Valley Bank 0041000269
<PAGE>
ANNEX C
SCHEDULE OF LANDLORD WAIVERS AND CONSENTS
STORE NO. LOCATION LANDLORD
I. Operating Stores
Store 18 Reidsville, North Carolina Pennrose Mall Associates,L.P.
Store 26 Dunn, North Carolina Dunn Plaza Limited Partnership
Store 42 Hartsville, South Carolina Hartsville Mall Company
Store 95 Forest City, North Carolina Tri-City Associates
Store 99 Moultrie, Georgia Moultrie Plaza, Ltd.
Store 116 Harrisonburg, Virginia Steroben Associates
Store 119 Clinton, North Carolina Sampson Associates,
Store 127 Jackson, Mississippi S.G. Investors, Ltd.
Store 135 Somerset, Kentucky Tradewinds Shopping Center, Inc.
Store 168 Hopewell, Virginia Cavalier Square, Ltd. Partnership
Store 180 Fayetteville, North Carolina Bordeaux Center, Inc.
Store 183 Henderson, North Carolina Henderson Mall Limited
Store 205 Laurel, Mississippi HASCO Properties
Store 215 Macon, Georgia Goshen Realty Corp.
Store 224 Bowling Green, Kentucky Western Gateway Shopping
Center, Inc.
Store 228 Winston-Salem, North Carolina Columbine Associates
Store 231 Macon, Georgia E.G. McKenzie, Jr.,
Thad E. Murphey & H. P. Persons
Store 235 Albany, Georgia Oglethorpe-Albany Associates
Store 237 Florence, South Carolina Mr. Charles S. Schofield
South Park Shopping Center
Store 246 Newburn, North Carolina Barnett Real Properties, Inc.
Store 256 Onley, Virginia Mr.and Mrs. Richard F. Hall,Jr.
<PAGE>
Store 284 Sylva, North Carolina F.F.P. Associates & C.A.-
Silva, Limited
Store 285 Abingdon, Virginia Mr.and Mrs.Ben M. Frizzell, Jr.
Store 294 Richlands, Virginia Richlands Mall Association, Ltd.
Store 314 Lumberton, North Carolina North Elm Shopping Center, Inc.
Store 319 Henderson, North Carolina Marion Eisenbaum Self Trust
Store 321 Ocean City, Maryland Ocean Plaza Limited Partnership
Store 334 Asheboro, North Carolina Randolph Development Company
(a joint venture)
Store 338 Wilmington, North Carolina Eli Schneidman & Goli, Inc.
Store 365 Hickory, North Carolina Hickory Associates, Inc.
Store 375 Jefferson, North Carolina Ashe County Limited Partnership
Store 378 Zebulon, North Carolina Bailey & Associates, Inc.
Store 380 Franklin, Virginia Bailey & Associates, Inc.
Store 384 Wilmington, North Carolina Ogden Associates
Store 408 Boone, North Carolina Grandfather Mountain L.P.
Store 426 Clemmons, North Carolina New Towne Center, L.P.
Store 436 Morristown, Tennessee Morristown Plaza Associates, Ltd.
Store 438 Mount Airy, North Carolina Mount Airy Associates
Store 450 Burnesville, North Carolina M & M Investments
<PAGE>
II. Closed Stores
Store 101 Spartanburg, South Carolina Baker & Baker Real Estate
Developers
Store 170 Hendersonville, North Carolina American Development Company,
Inc.
Store 173 Tifton, Georgia Tifton Mall, Inc.
Store 179 Monroe, North Carolina Salem Real Estate Limited
Partnership
Store 187 Lanett, Alabama Fletcher Bright Company
Store 195 Cookeville, Tennessee Brantley Square, Ltd.
Store 219 Eden, North Carolina Peach Tree Investments Corp.
Store 226 Lancaster, South Carolina Development Associates
Store 232 Asheville, North Carolina Thomas A. Langston
Store 236 Athens, Georgia Willowood Partners, Ltd.
Store 248 Aberdeen, North Carolina SWF Associates
Store 271 Ahoskie, North Carolina UTICA Realty Corp.
Store 278 Morehead, Kentucky Diversified Quantities, Inc.
Store 280 Mooresville, North Carolina Stellar Enterprises, a Florida
general partnership
Store 293 Lincolnton, North Carolina Linco Associates
Store 295 Beaufort, North Carolina Mr. Calvin G. Wellons and
Mrs. Jean R. Wellons
Store 300 Beaufort, South Carolina Beaufort Plaza, Inc.
Store 306 Winchester, Kentucky David Hocker & Associates,
Successor to the Winchester
Land Development Corporation
Store 312 Oxford, North Carolina Hilltop Associates
Store 320 Wise, Virginia Southmark Realty Partnership
Limited
Store 327 Blackburg, Virginia Blacksburg Associates, L.P.
Store 337 Durham, North Carolina United Dominion Realty Trust,
Inc.
Store 342 Jacksonville, North Carolina Mr. Allen Eisenbaum &
Mr. Eugene Kagan
Store 363 Front Royal, Virginia Aston-Royal (a North Carolina
limited partnership)
Store 366 Burlington, North Carolina New Market Square Limtied
Partnership c/o B.T. Proper-
ties Corp.
Store 367 Culpepper, Virginia Aston-Culpepper (a North Caro-
lina limited partnership)
Store 371 Salisbury, North Carolina Salisbury Mall, Ltd.
Store 388 Selma, North Carolina Bailey & Associates, Inc.
Store 389 Kernersville, North Carolina Claes Honig
c/o Gleiberman Spears & Shepe
Store 443 Kill Devil Hill, North Carolina Bailey & Associates
Store 446 Waldorf, Maryland C.W. Waldorf Retail Limited
Partnership
Store 449 Hampton, Virginia United Dominion Realty Trust,
a Virginia corporation
<PAGE>
ANNEX D
All calculations set forth herein assume (i) no borrowings or repayments
under the Loan Agreement occurring on or after 5:00 p.m. (Atlanta Time) on April
27, 1995 and (ii) receipt by GE Capital of the amounts set forth herein not
later than 2:00 p.m. (Atlanta Time) on April 28, 1995.
Principal (excluding face amount of Letter
of Credit Obligations) $32,673,722.92
Interest through April 28, 1995 $159,257.58
Uncharged Expenses through close of business
on April 27, 1995 $47,538.04
TOTAL $32,880,518.54
Additional uncharged expenses to be paid by
direct wire transfer to Smith, Gambrell & Russell
on April 28, 1995 $118,735.27
POST-EFFECTIVE DATE GE ASSUMPTION AGREEMENT
POST-EFFECTIVE DATE GE ASSUMPTION AGREEMENT, dated as of April 28, 1995
by and between GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
Capital"), and ROSE'S STORES, INC., debtor and debtor-in-possession in that
certain bankruptcy Case No. 93-01365-5-ATS (the "Chapter 11 Case") pending in
the United States Bankruptcy Court Eastern District of North Carolina Raleigh
Division (the "Bankruptcy Court") in such capacity and on behalf of Reorganized
Rose's (as defined below) (the "Company").
WHEREAS, GE Capital and the Company are party to that certain Debtor-In-
Possession Loan Agreement, dated as of September 20, 1993, as amended by each
of the:
First Amendment to Debtor-in-Possession Loan Agreement (10/10/93),
Second Amendment to Debtor-in-Possession Loan Agreement (10/12/93),
Third Amendment to Debtor-in-Possession Loan Agreement (10/13/93),
Fourth Amendment to Debtor-in-Possession Loan Agreement (11/15/93),
Fifth Amendment to Debtor-in-Possession Loan Agreement (12/15/93),
Sixth Amendment to Debtor-in-Possession Loan Agreement (12/17/93),
that certain "Supplemental Consensual Adequate Protection Order in
Connection with Debtor's Motion for Order Authorizing Debtor to Conduct
Additional Going Out of Business Sales and Other Relief," entered by the
Bankruptcy Court in the Chapter 11 Case on May 17, 1994,
Eighth Amendment to Debtor-in-Possession Loan Agreement (6/14/94),
Ninth Amendment to Debtor-in-Possession Loan Agreement (6/22/94),
Tenth Amendment to Debtor-in-Possession Loan Agreement (7/1/94),
Eleventh Amendment to Debtor-in-Possession Loan Agreement (7/12/94),
Twelfth Amendment to Debtor-in-Possession Loan Agreement (8/31/94),
Thirteenth Amendment to Debtor-in-Possession Loan Agreement (11/30/94),
and
Fourteenth Amendment to Debtor-in-Possession Loan Agreement and Waiver
Agreement (3/31/95)
(as so amended, the "Loan Agreement"), which agreement contains certain
obligations and agreements by the Company which the parties intend to survive
the termination of the Loan Agreement and the occurrence of the Effective Date
(as defined in the Plan) of the Plan (as hereinafter defined) in the Chapter 11
Case;
WHEREAS, GE Capital and the Company were previously party to those certain
Amended and Restated Commitment Letter of GE Capital to Rose's Stores, Inc.
dated as of July 19, 1994 and the related Fee Letter dated as of July 19, 1994
(the "GE Commitment") and Agreement Terminating Amended and Restated Letter
to Provide Confirmation Financing dated as of March 31, 1995 (the "GE Commit-
ment Termination Agreement" and together with the Loan Agreement and GE Com-
mitment the "Agreements"), which agreements contain certain obligations and
<PAGE>
agreements by the Company which the parties intend to survive the termination
of the GE Commitment and the occurrence of the Effective Date of the Plan in
the Chapter 11 Case;
WHEREAS, as of the date hereof, pursuant to that certain Modified and
Restated First Amended Joint Plan of Reorganization of Rose's Stores, Inc. as
confirmed by order of the Bankruptcy Court dated April 24, 1995 (the "Plan"),
Reorganized Rose's (as therein defined) is consummating a financing transaction
(the "Post-Effective Date Financing Facility") which closing is a condition to
the occurrence of the Effective Date of the Plan and whereupon the Debtor will
cease to exist and Reorganized Rose's shall become vested with all the property
and assets of the Debtor;
WHEREAS, this agreement is that certain Post-Effective Date GE Assumption
Agreement referred to in the Plan.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by GE Capital and the Company (on
behalf of itself, and Reorganized Rose's), the parties hereby agree as follows:
1. Assumption of Obligations. In accordance with the Plan, immediately
upon the execution and delivery of this Agreement by the Company, (i) except
with respect to the Standby LCs strictly in accordance with the provisions of
the Deferred GE Obligations Agreement, GE Capital shall not have any obligations
whatsoever to the Company, Reorganized Rose's or any other person pursuant to
or arising from the Loan Agreement, including, without limitation, any obliga-
tion to make any Advances thereunder, and (ii) Reorganized Rose's shall be
deemed to (a) have assumed the due and punctual performance of, and (b) other-
wise be bound by, the following: all unperformed or unsatisfied Obligations
under the Loan Agreement and Sections 1, 2.2 (b) and (g), 2.10, 7.22, 8.2,
10.2, 10.4, 10.10, 10.13, 10.14 and 10.15 of the Loan Agreement; Sections 7,
8, 11.4 and 11.5 of the GE Commitment, the Commitment Termination in toto,
and, in each case any and all definitional provisions, cross-referenced sec-
tions or other sections of such Agreements necessary to interpret or enforce
any of such sections; provided, however, that except as hereinafter provided,
any monetary obligations of the Company with respect to Advances and the pay-
ment of interest, fees and expenses related to Advances shall be deemed satis-
fied in full upon (x) the payment in full in cash of any invoices presented
therefor by GE Capital for amount due under the Loan Agreement but not pre-
viously paid within sixty (60) days following the date hereof or (y) in the
event that no such invoices are presented within such period, the passage of
sixty (60) days following the date hereof; and provided, further, that it is
expressly understood that all liens, security interests, mortgage liens and
other encumbrances in favor of GE Capital securing Obligations under the Loan
Agreement have been terminated pursuant to that certain Master Release Agree-
ment dated as of the date hereof by and between the Company and GE Capital,
the Plan and/or that certain "Order Approving Exit Financing Facility with
<PAGE>
The First National Bank of Boston and The CIT Group/Business Credit, Inc."
entered by the Bankruptcy Court on April 17, 1995.
Notwithstanding the foregoing, it is understood and agreed that so long as any
Standby LCs (as defined in the GE Deferred Obligations Agreement) remain
outstanding, certain fees and expenses with respect thereto, including, without
limitation, LC fees (as defined in the Loan Agreement) shall continue to accrue
and will be invoiced to Reorganized Rose's monthly in arrears.
2. Miscellaneous. (a) Any rights or obligations granted in or
assumed by this agreement shall be in addition to any rights or obligations
contained in or granted by the Plan or applicable law.
(b) This agreement shall be binding upon the Company, Reorganized Rose's,
GE Capital and their respective successors and assigns, provided, however, that
no obligations of any party hereunder may be assigned without the prior written
consent of the other party to this agreement.
(c) Each Indemnified Person (as such term is defined in each of the Loan
Agreement and GE Commitment) shall be entitled to rely on the provisions of this
agreement as if they were a party hereto.
(d) This agreement shall be governed by and construed and interpreted
in accordance with the laws of the State of New York without reference to
principles of conflict of laws.
(e) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION
(WITHOUT SUBMITTING TO ARBITRATION), THE PARTIES WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
[Remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
by its officer thereunto duly authorized on the date first above written.
ROSE'S STORES, INC., on behalf of itself,
as successor by merger to RSI, and
Reorganized Rose's
By:/s/ George T. Blackburn, II
Name: George T. Blackburn, II
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Timothy C. Huban
Name: Timothy C. Huban
Title: Vice President - Commercial Finance
<PAGE>
GE DEFERRED OBLIGATIONS AGREEMENT
GE DEFERRED OBLIGATIONS AGREEMENT, dated as of April 28, 1995 by and
between GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
Capital"), and ROSE'S STORES, INC., debtor and debtor-in-possession in that
certain bankruptcy Case No. 93-01365-5-ATS (the "Chapter 11 Case") pending in
the United States Bankruptcy Court Eastern District of North Carolina Raleigh
Division (the "Bankruptcy Court") in such capacity and on behalf of Reorganized
Rose's (the "Company").
WHEREAS, GE Capital and the Company are party to that certain Debtor-In-
Possession Loan Agreement, dated as of September 20, 1993, as amended by each
of the:
First Amendment to Debtor-in-Possession Loan Agreement (10/10/93),
Second Amendment to Debtor-in-Possession Loan Agreement (10/12/93),
Third Amendment to Debtor-in-Possession Loan Agreement (10/13/93),
Fourth Amendment to Debtor-in-Possession Loan Agreement (11/15/93),
Fifth Amendment to Debtor-in-Possession Loan Agreement (12/15/93),
Sixth Amendment to Debtor-in-Possession Loan Agreement (12/17/93),
that certain "Supplemental Consensual Adequate Protection Order in
Connection with Debtor's Motion for Order Authorizing Debtor to Conduct
Additional Going Out of Business Sales and Other Relief," entered by the
Bankruptcy Court in the Chapter 11 Case on May 17, 1994,
Eighth Amendment to Debtor-in-Possession Loan Agreement (6/14/94),
Ninth Amendment to Debtor-in-Possession Loan Agreement (6/22/94),
Tenth Amendment to Debtor-in-Possession Loan Agreement (7/1/94),
Eleventh Amendment to Debtor-in-Possession Loan Agreement (7/12/94),
Twelfth Amendment to Debtor-in-Possession Loan Agreement (8/31/94),
Thirteenth Amendment to Debtor-in-Possession Loan Agreement (11/30/94),
and
Fourteenth Amendment to Debtor-in-Possession Loan Agreement and Waiver
Agreement (3/31/95)
(as so amended, the "Loan Agreement"; notwithstanding the termination of the
Loan Agreement, capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to such terms in the Loan Agreement) and that certain
Revolving Credit Note in the principal amount of $125,000,000 made by the Com-
pany in favor of GE Capital (the "Note");
WHEREAS, as of the date hereof, pursuant to that certain Modified and
Restated First Amended Joint Plan of Reorganization of Rose's Stores, Inc. as
confirmed by order of the Bankruptcy Court dated April 24, 1995 (the "Plan"),
Reorganized Rose's (as therein defined) is consummating a financing transaction
(the "Post-Effective Date Financing Facility") the proceeds of which will be
used in part to satisfy and discharge certain monetary obligations of the Com-
pany under the Loan Agreement and Reorganized Rose's will otherwise make pro-
<PAGE>
vision for the outstanding Letter of Credit Obligations and certain other de-
ferred obligations to be paid following the closing of the Post-Effective
Date Financing Facility (the "Transaction");
WHEREAS, pursuant to Section 10.2 of the Loan Agreement, the Company has
agreed to reimburse GE Capital for all reasonable out-of-pocket expenses of GE
Capital in connection with the Loan Agreement, the termination of the Loan
Agreement, consummation of the Plan and matters related thereto, including,
without limitation, legal fees and expenses, photocopying and duplicating
expenses, long distance telephone charges, air express charges, and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal or other professional services (collectively, the "Reimbursable
Expenses");
WHEREAS, in light of the timing of the closing of the Transaction, the
parties agree that it is unlikely that all Reimbursable Expenses incurred up to
the time of closing of the Transaction can be processed in a manner permitting
such expenses to be paid in connection with the closing of the Transaction; and,
therefore, the parties desire to make provision for the payment of such
Reimbursable Expenses by Reorganized Rose's following the closing of the
Transaction and the Effective Date of the Plan;
WHEREAS, pursuant to the Loan Agreement and at the request of the Company,
GE Capital has incurred certain Letter of Credit Obligations, including certain
of such obligations with respect to the standby letters of credit described on
Annex A hereto (the "Standby LCs");
WHEREAS, the expiry dates of the Standby LCs occur following the time at
which GE Capital's obligation to incur or maintain Letter of Credit Obligations
terminates under the Loan Agreement and the Company and Reorganized Rose's have
requested that GE Capital permit the Standby LCs to remain outstanding following
the closing of the Transaction which GE Capital is willing to do upon the terms
and conditions set forth herein;
WHEREAS, this Agreement together with that certain Release Agreement with
Respect to Documentary LCs dated of even date herewith by and between GE Capital
and The First National Bank of Boston ("FNBB") are collectively those GE De-
ferred Obligations Agreements referred to in the Plan.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by GE Capital and the Company (on
behalf of itself and Reorganized Rose's), the parties hereby agree as follows:
1. Payment of Reimbursable Expenses. Reorganized Rose's hereby agrees
to reimburse GE Capital for all Reimbursable Expenses not otherwise reimbursed
in connection with the closing of the Transaction within ten (10) days following
the delivery of appropriate invoices therefore by GE Capital. Upon the request
of Reorganized Rose's, GE Capital shall provide to Reorganized Rose's reasonable
back-up documentation with respect to such Reimbursable Expenses. GE Capital
will present all such invoices not later than sixty (60) days following the
<PAGE>
closing of the Transaction pursuant to GE Capital's normal business practice.
In order to provide for the timely reimbursement of the Reimbursable Expenses,
Reorganized Rose's hereby agrees to make adequate provision on its books and
records for the payment of such expenses.
2. Treatment of Standby LCs. (a) Simultaneous with the execution and
delivery of this agreement, Reorganized Rose's shall deliver to GE Capital an
irrevocable standby letter of credit for the benefit of GE Capital, from FNBB
and in form and substance satisfactory to GE Capital in its sole discretion,
which (i) are in an amount equal to one hundred percent (100%) of the aggregate
maximum amount which may be drawn under the Standby LCs, (ii) have an expiry
date on or after April 28, 1996, and (iii) are drawable by GE Capital on terms
acceptable to GE Capital and FNBB (the "Back-to-Back LC").
(b) Upon the delivery to GE Capital of documents, in form and substance
satisfactory to GE Capital in its sole discretion, evidencing the termination
and release of GE Capital from any and all obligations under the reimbursement
agreements by and between GE Capital and the issuing banks with respect to any
of (x) the Standby LC issued by Bank of America (No. 219063) and the Standby LC
issued by ABN/Amro (No. 930313), (y) the Standby LC issued by Bank of America
(No. 218674) and the Standby LC issued by ABN/Amro (No. 950022) or (z) all of
the other Standby LCs issued by ABN/Amro (Nos. 930291, 930292, 930293, 930294,
930295, 930296 and 930328) (the "Subject LC's), GE Capital shall, within three
(3) days following the receipt of acceptable documents evidencing such
termination and release, perform such acts as reasonably necessary to allow the
face amount of the Back-to-Back LC to be reduced by an amount equal to the face
amount of the Subject LCs which were the subject of such event.
(c) Reorganized Rose's acknowledges and agrees that (i) all obligations
of GE Capital under this agreement with respect to the Standby LCs constitute
Letter of Credit Obligations under the Loan Agreement and remain subject to all
provisions of the Loan Agreement assumed by Reorganized Rose's pursuant to the
Post-Effective Date GE Assumption Agreement, (ii) it shall pay all LC Fees and
any other fees, costs or expenses payable by GE Capital in respect of, or
arising from, the Standby LCs upon invoice therefore by GE Capital monthly in
arrears, and (iii) except as expressly set forth herein GE Capital shall have no
obligation to, nor shall it have any obligation to consent to, amend, modify,
extend or otherwise renew any Standby LC or any Letter of Credit Obligation
respecting any such Standby LC.
3. Miscellaneous. (a) This Agreement shall be binding upon the Com-
pany, Reorganized Rose's and GE Capital, and shall inure to the benefit of their
respective successors and assigns. In addition, the Administrative Agents, the
Facility Agents and the Lenders under the Post-Effective Date Financing Facility
shall be entitled to rely on and enforce the provisions of Section 2(b) of this
Agreement as if they were parties hereto.
(b) This Agreement shall be governed by and construed and interpreted
in accordance with the laws of the State of New York without reference to
principles of conflict of laws.
<PAGE>
(c) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION
(WITHOUT SUBMITTING TO ARBITRATION), THE PARTIES WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
[The remainder of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
by its officer thereunto duly authorized on the date first above written.
ROSE'S STORES, INC., on behalf of itself and
Reorganized Rose's
By: /s/ George T. Blackburn, II
Name:George T. Blackburn, II
Title:Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Timothy C. Huban
Name:Timothy C. Huban
Title:Vice President - Commercial Finance
<PAGE>
Annex A
ROSE'S STORES, INC. S = ABN/AMRO
STANDBY LETTERS OF CREDIT LASB = B of A (L/C02)
04/26/95
ISSUE EXPIRY ORIGINAL DRAW/
L/C # DATE DATE AMOUNT AMEND END BAL.
S930261 10/01/93 01/31/94 7,194,000.00 (7,194,000.00) 0.00
S930291 10/20/93 10/19/95 290,686.00 (91,862.00) 198,824.00
S930292 10/20/93 10/19/95 209,378.00 (103,861.00) 105,517.00
S930293 10/20/93 10/19/95 63,886.00 (9,376.00) 54,510.00
S930294 10/20/93 10/19/95 38,362.50 (9,532.50) 28,830.00
S930295 10/20/93 10/19/95 149,037.50 (85,910.00) 63,127.50
S930296 10/20/93 10/19/95 40,117.00 (26,795.00) 13,322.00
S930313 12/28/93 11/01/95 950,000.00 (70,000.00) 880,000.00
S930328 11/05/93 11/04/95 10,480.00 0.00 10,480.00
S950022 02/01/95 EVERGREEN 250,000.00 0.00 250,000.00
LASB-218674 10/27/93 EVERGREEN 450,000.00 0.00 450,000.00
LASB-219063 01/31/94 01/31/96 2,800,000.00 (57,478.00) 2,742,522.00
-----------
4,797,132.50
Warrant Agreement
between
Rose's Stores, Inc.
and
First Union National Bank of North Carolina,
as Warrant Agent
______________
Dated as of April 28, 1995
______________
<PAGE>
TABLE OF CONTENTS
PAGE
1. Appointment of Warrant Agent; Issuance of Warrants;
Form of Warrants; Undeliverable Distributions . . . . . . . . . 2
1.1 Appointment of Warrant Agent; Issuance of Warrants;
Form of Warrants . . . . . . . . . . . . . . . . . . . . . 2
1.2 Undeliverable Distributions. . . . . . . . . . . . . . . . 3
2. Registration. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Exchange or Transfer of Warrant Certificates;
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Exchange or Transfer of Warrant Certificates . . . . . . . 4
3.2 Fractional Certificates or Shares. . . . . . . . . . . . . 5
4. Term of Warrants; Exercise of Warrants; Compliance
with Government Regulations . . . . . . . . . . . . . . . . . . 5
4.1 Term of Warrants; Exercise of Warrants . . . . . . . . . . 5
4.2 Compliance with Government Regulations . . . . . . . . . . 7
5. Cancellation and Destruction of Warrant Certificates. . . . . . 7
6. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . 8
7. Mutilated or Missing Warrants . . . . . . . . . . . . . . . . . 8
8. Reservation and Availability of Shares; Purchase
of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 Reservation and Availability of Shares . . . . . . . . . . 8
8.2 Purchase of Warrants by the Company. . . . . . . . . . . . 8
9. Common Stock Record Date . . . . . . . . . . . . . . . . . . . . 8
10. Adjustment of Exercise Price and Number of Shares . . . . . . . 9
10.1 Mechanical Adjustments . . . . . . . . . . . . . . . . . . 9
10.2 Voluntary Adjustment by the Company. . . . . . . . . . . . 11
10.3 Notice of Exercise Price and Adjustment. . . . . . . . . . 11
10.4 No Other Adjustment for Dividends. . . . . . . . . . . . . 11
10.5 Preservation of Purchase Rights Upon Merger,
Consolidation, etc.. . . . . . . . . . . . . . . . . . . . 11
10.6 Statement on Warrant Certificates. . . . . . . . . . . . . 11
11. Fractional Interests. . . . . . . . . . . . . . . . . . . . . . 12
12. Agreements of Holders . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PAGE
13. Concerning the Warrant Agent. . . . . . . . . . . . . . . . . . 12
14. Merger or Consolidation or Change of Name of Warrant Agent. . . 12
15. Duties of Warrant Agent . . . . . . . . . . . . . . . . . . . . 13
16. Change of Warrant Agent . . . . . . . . . . . . . . . . . . . . 16
17. Issuance of New Warrant Certificates. . . . . . . . . . . . . . 17
18. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . 17
19. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
20. Supplements and Amendments . . . . . . . . . . . . . . . . . . 19
21. Determination and Actions by the Board of Directors, etc . . . 20
22. No Rights as Stockholders. . . . . . . . . . . . . . . . . . . 20
23. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 20
24. Benefits of this Agreement . . . . . . . . . . . . . . . . . . 20
25. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 20
26. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 21
27. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 21
28. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . 21
29. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 21
30. Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
THIS WARRANT AGREEMENT (the "Agreement"), dated as of April 28, 1995, is
by and between Rose's Stores, Inc., a Delaware corporation (the "Company"), and
First Union National Bank of North Carolina, a national banking association, as
Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, the Company filed, on September 5, 1993, a voluntary Petition for
Relief under Chapter 11, Title 11 of the United States Code (the "Bankruptcy
Code") with the United States Bankruptcy Court for the Eastern District of North
Carolina, Raleigh Division (the "Bankruptcy Court"); and
WHEREAS, the Company's First Amended Joint Plan of Reorganization, filed
with the Bankruptcy Court on October 4, 1994, accepted by the Company's credi-
tors and equity holders entitled to vote thereon, confirmed by the Bankruptcy
Court on December 14, 1994 and as subsequently amended (the "Plan"), provides
for the issuance and distribution of warrants (the "Warrants") to purchase
the new common stock ("Common Stock") of the Company, to be issued as of the
date of the Plan's effectiveness and the Company's emergence from Chapter 11
(the "Effective Date"); and
WHEREAS, a Modified and Restated First Amended Joint Plan of Reorganization
(the "Modified Plan") was filed on April 19, 1995, and approved by the Bank-
ruptcy Court by order dated April 24, 1995, which Modified Plan retains the
provisions of the Plan relating to the issuance of the Warrants; and
WHEREAS, the Modified Plan provides that the Company shall issue 4,285,714
Warrants to purchase up to an aggregate of 4,285,714 shares (the "Shares"),
subject to adjustment as hereinafter provided, of the Company's Common Stock to
the record holders (the "Record Equity Holders"), as of the Effective Date, of
shares of the existing Voting Common Stock or Non-Voting Class B Stock of the
Company to be cancelled as of the Effective Date (the "Old Stock"), and provides
that provision be made for the handling of Undeliverable Distributions (as
defined below); and
WHEREAS, each Warrant entitles the holder thereof to purchase one Share
of Common Stock, subject to adjustment as hereinafter provided, and as used
herein, "Shares" shall include any asset, property or other security of the
Company or any successor to which each Holder (as hereinafter defined) shall be
entitled upon exercise of the Warrants; and
WHEREAS, the Company wishes the Warrant Agent to act as Warrant Agent on
behalf of the Company in connection with the issuance, division, transfer,
exchange and exercise of the Warrants, and the Warrant Agent is willing to so
act.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein and for good and valuable consideration, the parties hereto
agree as follows:
1. Appointment of Warrant Agent; Issuance of Warrants; Form of Warrants;
Undeliverable Distributions.
<PAGE>
1.1 Appointment of Warrant Agent; Issuance of Warrants; Form of Warrants.
(a) The Company hereby appoints the Warrant Agent to act as agent for
the Company in accordance with the instructions set forth in this Agreement, and
the Warrant Agent hereby accepts such appointment. The Warrant Agent shall
maintain the Warrant Register described in Section 2 and shall countersign,
issue and deliver the Warrants under the terms of this Agreement and any written
instructions of the Chairman of the Board, the President, the Chief Executive
Officer, the Chief Financial Officer, the Treasurer or the Secretary of the
Company which are not inconsistent with the terms of this Agreement.
(b) The Warrants shall be issued to the Holders within thirty (30) days
of the Effective Date, subject to the conditions set forth in this Agreement.
The Company shall notify the Warrant Agent as of the date of the occurrence of
the Effective Date. Upon execution of this Agreement and prior to the issuance
of any Warrants or distribution by the Warrant Agent of any Warrant Certifi-
cates, the Company shall deliver, or cause to be delivered, to the Warrant Agent
detailed and sufficient records identifying the Record Equity Holders, the
number of Warrants to be issued to each Record Equity Holder, the record ad0
dress for each Record Equity Holder, and records pertaining to the Old Stock
Certificates held by such Record Equity Holders sufficient to allow the War-
rant Agent to make determinations under Section 1.1(c).
(c) Upon written direction of the Company and prior to the issuance or
distribution by the Warrant Agent of any Warrant, the Warrant Agent shall send,
by first class mail, postage prepaid, to each Record Equity Holder a letter of
transmittal form ("Transmittal Form") and a request for surrender (each in form
provided by the Company and reasonably acceptable to the Warrant Agent) by such
Record Equity Holder of the certificate(s) ("Old Stock Certificate") repre-
senting such Record Equity Holder's Old Stock. No Warrant Certificate shall
be issued or distributed by the Warrant Agent unless the Warrant Agent shall
have first received from the Record Equity Holder a completed Transmittal
Form and the surrendered Old Stock Certificate; provided, however, that if
any such Old Stock Certificate shall have been lost, stolen or mutilated,
such Record Equity Holder shall be required to provide evidence, reasonably
satisfactory to the Company and the Warrant Agent, of such loss, theft or
destruction and an indemnity orbond, if requested, also reasonably satisfac-
tory to the Company and the Warrant Agent, as a condition to the issuance and
distribution to such Record Equity Holder of Warrants Certificates pursuant
to this Agreement. Upon receipt of surrendered Old Stock Certificates, the
Warrant Agent shall compare the stock ownership information contained in such
certificates with the records provided to the Warrant Agent pursuant to Sec-
tion 1.1(b) and shall submit to the Company any questions regarding any incon-
sistencies therein. The Company shall instruct the Warrant Agent to take or
omit such actions in response to any such inconsistency and the Warrant Agent
shall be entitled to rely on such instructions without further liability.
The Warrant Agent shall deliver all Old Stock Certificates and other docu-
ments related thereto (including indemnities or bonds) to the transfer agent
for such stock.
(d) The Warrants shall be evidenced by certificates ("Warrant
Certificates" or "Certificates") substantially in the form attached hereto as
Exhibit A. The Warrant Certificates shall be executed on behalf of the Company
<PAGE>
by the manual or facsimile signature of the Chairman of the Board, the Presi-
dent,the Chief Executive Officer, the Chief Financial Officer or the Treasur-
er of the Company, under its corporate seal, affixed or in facsimile and
attested by the manual or facsimile signature of the Secretary or an Assist-
ant Secretary of the Company.
(e) Each Warrant Certificate shall be countersigned by the manual
signature of the Warrant Agent (or any successor to the Warrant Agent then
acting as warrant agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrant Certificates shall be dated as of
the date of countersignature thereof by the Warrant Agent upon initial issu-
ance and upon transfer, split-up, combination or exchange.
(f) In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer of the Company before
countersignature by the Warrant Agent, such Warrant Certificates may,
nevertheless, be issued and delivered with the same force and effect as though
the person who signed such Warrant Certificates had not ceased to be such of-
ficer of the Company. Any Warrant Certificates may be signed on behalf of
the Company by any person who, at the actual date of execution of such War-
rant Certificates, shall be a proper officer of the Company to sign such War-
rant Certificates, even if such person did not hold such office on the date
of this Agreement.
(g) Upon written order of the Company, signed by any person reasonably
believed by the Warrant Agent to be the Chairman of the Board, the President,
the Chief Executive Officer, the Chief Financial Officer, the Treasurer or the
Secretary of the Company (each such person being referred to hereinafter as an
"Authorized Person"), and upon satisfaction of conditions set forth in
subparagraph (c) hereof, the Warrant Agent shall deliver the Warrant Certifi-
cates to the Holders by first class mail, postage prepaid. All Authorized
Persons as of the date of this Agreement are identified on Schedule 1 attach-
ed hereto. Such Schedule may be modified from time to time to delete or add
names by delivery to the Warrant Agent of a revised and dated Schedule signed
by a person who, prior to and after such modification, is an Authorized Person.
1.2 Undeliverable Distributions.
(a) For purposes of this Agreement, "Undeliverable Distributions" shall
mean (i) Transmittal Forms sent by the Warrant Agent to Record Equity Holders
which are returned to the Warrant Agent as undeliverable, or (ii) Warrant
Certificates, distributed by the Warrant Agent in accordance with the terms of
this Agreement, which are returned to the Warrant Agent as undeliverable.
(b) The Warrant Agent shall hold all Undeliverable Distributions for
possible future distribution to the potential claimants of such Undeliverable
Distributions until the Expiration Date (as defined herein) of the Warrants.
(c) If, at any time prior to the Expiration Date of the Warrants, the
Warrant Agent receives notification in writing from the person or entity in
whose name the Undeliverable Distribution was delivered as to the proper current
address of such person, the Warrant Agent may deliver, without further
authorization from the Company, the Undeliverable Distribution to such person
<PAGE>
at such new address; provided, however, that such person has satisfied the
conditions to issuance and distribution of Warrants and Warrant Certificates set
forth in Section 1.1(c) hereof.
(d) Each time an Undeliverable Distribution is returned to the Warrant
Agent, the Warrant Agent shall note such return in its records and, upon request
of the Company and in no event more frequently than monthly, shall notify the
Company in writing of such return and of the date of the attempted distribution
of such Undeliverable Distributions.
2. Registration. The Warrant Agent shall number the Warrant
Certificates sequentially and shall maintain a warrant register (the "Warrant
Register") as they are issued, which register shall be kept at one of the War-
rant Agent's offices in Charlotte, North Carolina. The Warrant Register
shall show the names and addresses of the respective Holders of the Warrants,
the number of Shares purchasable on the face of each Warrant so held and the
date of such Warrant. The Company and the Warrant Agent may deem and treat
the registered holder of any Warrant on the Warrant Register (the "Holder,"
which term shall also refer to the registered holder of any shares) as the
absolute owner thereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for the purpose of any exercise of such War-
rants and for all other purposes. Neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary or be bound to recognize, or
make any inquiries with respect to, any equitable or other claim to or inter-
est in such Warrant on the part of any other person and shall not be liable
for any registration or transfer of Warrants which are registered or are to
be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with knowl-
edge of such facts such that its participation therein amounts to bad faith.
3. Exchange or Transfer of Warrant Certificates; Fractional Shares.
3.1 Exchange or Transfer of Warrant Certificates. Subject to the prior
payment of any tax or governmental charge pursuant to Section 6 of this Agree-
ment and any other reasonable charges as the Company may prescribe in writing
to the Warrant Agent, Warrant Certificates may be transferred, split up, com-
bined with or exchanged for another Warrant Certificate or Warrant Certifi-
cates entitling the Holder or Holders collectively to purchase a like aggre-
gate number of Warrants as the Warrant Certificate or Warrant Certificates
surrendered entitled such Holder to purchase. Any Holder desiring to trans-
fer, split up, combine or exchange any Warrant Certificate shall deliver such
request in writing to the Warrant Agent at its office designated for such pur-
pose, shall surrender to the Warrant Agent the Warrant Certificate or Warrant
Certificates to be transferred, split up, combined or exchanged, accompanied
by a duly executed written instrument or instruments of transfer satisfactory
to the Warrant Agent and the Company, and shall pay any applicable tax, gov-
ernmental charge or other charge. Thereupon, the Warrant Agent shall counter-
sign, date, number and deliver to the person so designated a Warrant Certifi-
cate or Warrant Certificates, shall cancel the surrendered Warrant Certifi-
cate or Warrant Certificates and shall properly note such transfer, split up,
combination or exchange in the Warrant Register.
<PAGE>
In all cases of written requests pursuant to this Section by an attorney,
the original power of attorney, duly approved, or copy thereof, duly certified,
shall be deposited and remain with the Warrant Agent. In the case of written
requests by executors, administrators, guardians or other legal representatives,
duly authenticated evidence of their authority shall be produced and deposited
with the Warrant Agent.
3.2 Fractional Certificates or Shares. The Company shall not be required
to issue fractional Warrant Certificates or fractions of Warrants or Shares, or
to distribute certificates which evidence fractional shares. Only whole War-
rants may be transferred, split up, combined or exchanged hereunder, and War-
rant Certificates for fractions of a Warrant will not be issued upon any such
transfer, split-up, combination or exchange. Fractional interests upon exercise
of Warrants shall be distributed as provided in Section 11 hereof.
4. Term of Warrants; Exercise of Warrants; Compliance with Government
Regulations.
4.1 Term of Warrants; Exercise of Warrants.
(a) Each Warrant entitles the Holder thereof to purchase one Share at
any time during hours of regular business operations from the date the Warrants
are issued to Holders under the Modified Plan until 5:00 P.M., New York City
time, on the seventh anniversary of the Effective Date (the "Expiration Date")
at the exercise price per Warrant determined as set forth below, subject to
adjustment as set forth herein (the "Exercise Price"). Each Warrant not
exercised prior to the Expiration Date shall expire without recourse, and shall
no longer be of any force or effect.
(b) The initial Exercise Price, pursuant to the terms of the Modified
Plan, shall equal, on the Effective Date, the Full Recovery Target Amount (as
defined below) divided by 10,000,000. This initial Exercise Price per share
shall be adjusted on each of the first three (3) anniversaries of the Effective
Date to equal the Full Recovery Target Amount (as defined below) on each such
anniversary divided by 10,000,000, and shall be adjusted on the fourth, fifth
and sixth anniversaries of the Effective Date to equal 105%, 110% and 115%,
respectively, of the Full Recovery Target Amount (as defined below) on each such
anniversary divided by 10,000,000.
(c) The Full Recovery Target Amount, as defined in the Modified Plan,
shall mean, on any applicable date, the amount of Allowed Claims in Class 3
(except for those to be satisfied by Cash payment pursuant to the Modified Plan
or order of the Bankruptcy Court) plus the total Reserve Amount as of such date,
if any, determined pursuant to section 7.12 of the Modified Plan for all Dis-
puted Claims in Class 3. Capitalized terms not defined in this Section
4.1(c) shall have the meanings given them in the Modified Plan.
(d) The Exercise Price and the number and kind of Shares purchasable upon
the exercise of each Warrant are subject to further adjustment upon the
occurrence of certain events, pursuant to the provisions of Section 10 of this
Agreement. Subject to the provisions of this Agreement, each Holder of a War-
rant Certificate shall have the right to exercise the Warrants evidenced
thereby in
<PAGE>
whole or in part at any time and from time to time prior to 5:00 p.m., New York
City time, on the Expiration Date upon surrender of the Warrant Certificate,
with the form of election to exercise on the reverse side thereof duly execut-
ed, to the Warrant Agent at the office of the Warrant Agent designated for
such purpose, together with payment of the Exercise Price, as adjusted in ac-
cordance with the provisions of this Agreement, for the number of Shares in
respect of which such Warrants are then exercised. Payment of such Exercise
Price may be made by money order or by certified or official bank check in
lawful money of the United States of America in accordance with paragraph (c)
below. The date and time of exercise of any Warrant shall be deemed to be the
date and time of receipt by the Warrant Agent of the applicable Warrant Certi-
ficate, with the form of election to exercise on the reverse side thereof
duly filled in and signed and accompanied by proper payment as herein provided.
The method of delivery of any Warrant Certificates to the Warrant Agent is at
the option and risk of the Holder thereof.
(c) Upon receipt of a Warrant Certificate representing an exercisable
Warrant, with the appropriate form of election to exercise duly executed,
accompanied by payment of the Exercise Price for the Shares to be purchased and
an amount equal to any applicable transfer tax (as determined by the Warrant
Agent) in cash, or by certified or official bank check or money order payable
to the order of the Company, the Warrant Agent shall thereupon promptly (i)
requisition from any transfer agent of the Shares (or make available, if the
Warrant Agent is the transfer agent) certificates for the number of Shares to
be purchased, and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, (ii) after receipt of such Exercise Price,
deliver such amount paid upon exercise to the Company and (iii) after receipt
of such certificates, cause the same to be delivered to or upon the order of the
Holder of such Warrant Certificate, registered in such name or names as may be
designated by such Holder. In the event that the Company is obligated to issue
other securities of the Company upon the exercise of a Warrant, the Company
shall make all arrangements necessary so that such other securities are avail-
able for distribution by the Warrant Agent, if and when appropriate.
<PAGE>
(d) In case the Holder of any Warrant Certificate shall exercise fewer
than all the Warrants evidenced thereby, a new Warrant Certificate evidencing
Warrants equivalent to the Warrants remaining unexercised shall be issued by the
Warrant Agent and delivered to the Holder of such Warrant Certificate or to his
duly authorized assigns.
(e) In case any Holder desiring to exercise a Warrant Certificate or
Certificates makes such request to exercise within any period during which the
transfer books for the Company's Common Stock or other class of stock purchas-
able upon the exercise of the Warrants evidenced by such Warrant Certificate or
Certificates are closed for any purpose, the Warrant Agent and the Company shall
not be required to make delivery of certificates for Shares purchasable upon
such exercise, and the person entitled to receive delivery of such certifi-
cates shall not be deemed to have become a holder of record of such Shares,
until the next succeeding business day on which the transfer books of the
Company are open.
4.2 Compliance with Government Regulations. The Company covenants that
if any Shares require, under any United States federal or state law or applic-
able governing rule or regulation of any national securities exchange, reg-
istration with or approval of any United States federal or state governmental
authority, or listing on any such national securities exchange before such
Shares may be issued to a Holder upon exercise, the Company shall in good
faith and as promptly as practicable endeavor to cause such stock to be duly
registered, approved or listed on the relevant national securities exchange,
as the case may be; provided, however, that, in no event shall any Shares be
issued, and the Company is hereby authorized to suspend the exercise of all
Warrants, for the period during which such registration, approval or listing
is required but not in effect, in which event the Expiration Date shall be
extended for any such period of suspension.
The Company shall have the sole and exclusive responsibility and liability
to make any and all determinations regarding the applicability of, compliance
with and effect of federal or state laws, rules or regulations and shall in-
struct the Warrant Agent and the Transfer Agent from time to time in writing
if and in the event the Company determines that any certificates representing
Shares or Warrants should not be signed and delivered to any person in light
of any such federal or state laws, rules or regulations.
5. Cancellation and Destruction of Warrant Certificates. All Warrant
Certificates surrendered for the purpose of exercise, transfer split-up,
combination or exchange shall be surrendered and delivered to the Warrant Agent
for cancellation and shall be canceled by it, or delivered to the Warrant Agent
in canceled form, and no Warrant Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Agreement. The
Company shall deliver to the Warrant Agent for cancellation and retirement, and
the Warrant Agent shall so cancel and retire, any other Warrant Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
With respect to canceled Warrant Certificates, the Warrant Agent shall retain,
destroy or deliver them to the Company, as the Company directs in writing.
<PAGE>
6. Payment of Taxes. The Company shall pay all federal and state
transfer taxes, documentary stamp taxes, and charges, if any, attributable to
the initial issuance of Warrants and of Shares initially issued upon the exer-
cise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer in-
volved in the issue or delivery of any Warrant Certificates or any certifi-
cates for Shares in a name other than that of the Holder of such Warrants or
to issue or deliver any certificates for Shares in a name other than that of
the Holder upon the exercise of any Warrants until such tax shall have been
paid (any such tax being payable by the Holder of such Warrant Certificate at
the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
7. Mutilated or Missing Warrants. Upon receipt by the Company and the
Warrant Agent of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Warrant Certificate and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to the Company
and the Warrant Agent, and reimbursement to the Company and the Warrant Agent
of all reasonable expenses incidental thereto, and upon surrender to the Warrant
Agent and cancellation of the Warrant Certificate if mutilated, the Company
shall execute and deliver a new Warrant Certificate of like tenor to the
Warrant Agent for countersignature and delivery to the Holder in lieu of the
Warrant Certificate so lost, stolen, destroyed or mutilated.
8. Reservation and Availability of Shares; Purchase of Warrants.
8.1 Reservation and Availability of Shares. The Company covenants and
agrees that it shall at all times cause to be reserved and kept available, free
from preemptive rights, out of the authorized and unissued Shares, a number of
Shares that shall be sufficient to permit the exercise in full of the rights of
purchase represented by the Warrants.
The Company covenants and agrees that it shall take all such action as may
be necessary to ensure that all Shares that may be issued upon exercise of
Warrants shall, at the time of delivery of the certificates for such Shares
(subject to the payment of the Exercise Price and any applicable transfer
taxes), be duly and validly authorized and issued, fully paid and nonassessable
outstanding Shares of the Company.
8.2 Purchase of Warrants by the Company. The Company shall have the
right, except as limited by law, other agreements, or herein, to purchase, or
otherwise acquire, Warrants at such times, in such manner and for such
consideration as it may deem appropriate.
9. Common Stock Record Date. Each person in whose name any certificate
for Shares is issued upon the exercise of Warrants shall for all purposes be
deemed to have become the holder of the Shares represented thereby on, and such
certificate shall be dated, the date upon which the Warrant Certificate
evidencing such Warrants was duly presented and payment of the Exercise Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such presentation and payment is a date upon which the transfer books
of the Company are closed, such person shall be deemed to have become the re-
cord holder of such Shares on, and such certificate shall be dated, the next
succeeding
<PAGE>
business day on which the transfer books of the Company are open; provided
further, that unless otherwise provided by law or as contemplated by Section
4.2, such transfer books shall not be closed at any one time for a period of
longer than five calendar days. Except as provided elsewhere herein, prior to
the date a Holder of Warrants becomes a Holder of Shares pursuant to the exer-
cise of such Warrants, the Holder of a Warrant Certificate, as such, shall
not be entitled to any rights of a stockholder of the Company with respect to
Shares for which the Warrants shall be exercisable, including, without limita-
tion, the right to vote upon any matter submitted to the stockholders of the
Company, to receive dividends or other distributions or to exercise any pre-
emptive rights, and shall not be entitled to receive any notice of any pro-
ceedings of the Company.
10. Adjustment of Exercise Price and Number of Shares. The number and
kind of securities or other property purchasable upon the exercise of each
Warrant and the Exercise Price shall be subject to adjustment by the Company
from time to time as set forth in this Section 10.
10.1 Mechanical Adjustments. The number of Shares purchasable upon the
exercise of each Warrant and the Exercise Price shall be subject to adjustment
as follows:
(a) In case the Company shall at any time after the date of this
Agreement and prior to the Expiration Date (i) declare or pay a dividend, or
make a distribution, in shares of Common Stock to holders of Common Stock, (ii)
subdivide the outstanding Common Stock into a greater number of shares, (iii)
combine the outstanding Common Stock into a smaller number of shares, (iv) issue
any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing entity) or (v) make a distribu-
tion on its Common Stock in shares of its capital stock other than Common
Stock, then the kind and number of Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder of
each Warrant shall be entitled to receive the kind and number of Shares or
other securities of the Company which he would have owned or have been entitl-
ed to receive after the happening of any of the events described above, had
such Warrants been exercised immediately prior to the happening of such event
or any record date with respect thereto and at a time when the transfer books
of the Company were open. An adjustment made pursuant to this paragraph (a)
shall become effective immediately after the effective date of such event.
Notwithstanding the foregoing, no distribution of Common Stock required to be
made pursuant to the Plan will require an adjustment pursuant to this Section
10.1(a).
(b) In case the Company at any time after the date of this Agreement and
prior to the Expiration Date shall issue other than as required pursuant to the
Plan (without payment of consideration) rights, options or warrants to holders
of its outstanding Common Stock entitling them to subscribe for or purchase
shares of Common Stock or securities convertible into or exchangeable for Common
Stock, then the Company shall reserve for distribution, and shall distribute
upon payment of the Exercise Price, such rights, options, warrants or securi-
ties to the Holders of the Warrants as if the Warrants had been exercised
immediately prior to the record date for such distribution; provided, that
no such rights,
<PAGE>
options, warrants or securities shall be reserved after the expiration date, if
any, of any such rights, options, warrants or securities.
(c) In case the Company at any time after the date of this Agreement and
prior to the Expiration Date shall make a distribution other than as required
pursuant to the Plan to all holders of Common Stock or any other capital stock
issued with respect to the Common Stock of any asset, property or security
(other than (i) cash dividends payable out of current earnings and (ii) those
distributions referred to in subsection (a) or (b) above), then, and in each
such case, the Holders, upon the exercise of the Warrants, shall be entitled to
receive in addition to the Shares, the amount of assets, property or securities
to which such Holder would have been entitled as a Holder of Common Stock if
such Holder had exercised his Warrant immediately prior to the record date
for such distribution. At the time of any such distribution, the Company
shall, at its election, either (x) deposit the assets, property or securities
payable to Holders pursuant hereto in trust for the Holders with the Warrant
Agent or an institution eligible to act as trustee under an indenture qualif-
ied under the Trust Indenture Act of 1939, as amended, with instructions as
to the investment of such property and any proceeds therefrom so as to pro-
tect the value of such property for the Holders or (y) distribute to the Hold-
ers the assets, property or securities to which they would be entitled upon
exercise. Such election by the Company shall be made by the Company by giv-
ing written notice thereof to the Holders. In the event that the Company
elects to deposit the assets, property or securities payable to Holders pur-
suant hereto in trust for the Holders, the trust indenture shall provide that
any assets, property or securities deposited in such trust shall revert to
the Company upon the expiration of the term of the Warrants.
(d) No adjustment in the number of Shares purchasable hereunder shall
be required unless such adjustments would require an increase or decrease of at
least one percent (1%) in the number of Shares purchasable upon the exercise of
each Warrant; provided, however, that any adjustments which by reason of this
paragraph (d) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations shall be made
to the nearest one thousandth (.001) of a share.
(e) Whenever the number of Shares purchasable upon the exercise of each
Warrant is adjusted, as herein provided, the Exercise Price payable upon exer-
cise of each Warrant shall be adjusted by multiplying such Exercise Price im-
mediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be
the number of Shares so purchasable immediately thereafter.
10.2 Voluntary Adjustment by the Company. The Company may at its option,
at any time during the term of the Warrants, reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the Board
of Directors of the Company or extend the Expiration Date of the Warrants.
10.3 Notice of Exercise Price and Adjustment. Whenever the initial
Exercise Price is set or the number of Shares purchasable upon the exercise of
each Warrant or the Exercise Price is adjusted, as herein provided, the Company
<PAGE>
shall (a) promptly prepare a certificate setting forth such initial Exercise
Price or adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Warrant Agent and with each transfer
agent for the Common Stock a copy of such certificate and (c) mail or, at its
option, cause the Warrant Agent to mail, a brief summary thereof to each Hold-
er of a Warrant Certificate in accordance with Section 19 hereof. The War-
rant Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge
of any such adjustment unless and until it shall have received such certificate.
10.4 No Other Adjustment for Dividends. Except as provided in subsection
10.1, no adjustment or payment in respect of any dividends shall be made during
the term of a Warrant or upon the exercise or conversion of a Warrant.
10.5 Preservation of Purchase Rights Upon Merger, Consolidation, etc.
In case of any consolidation of the Company with, or merger of the Company into,
any other person (including, without limitation, any corporation, partnership,
joint venture or association) or merger of any other person with or into the
Company or in case of any sale, transfer or lease to any other person of all or
substantially all the property of the Company, the Company or such successor or
purchasing person, as the case may be, shall assume, by written agreement, the
obligation to grant to each Holder the right, and each Holder shall have the
right, thereafter upon payment of the Exercise Price in effect immediately prior
to such action to purchase upon exercise of each Warrant solely the kind and
amount of shares or other securities and property and any proceeds therefrom
which the Holder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, transfer or lease had such War-
rant been exercised immediately prior to such action. Such agreement (a copy
of which shall be delivered to the Warrant Agent) shall provide for adjust-
ments, which shall be as nearly equivalent as may be practicable to the ad-
justments provided for in this Section 10. The provisions of this subsection
10.5 shall similarly apply to successive consolidations, mergers, sales,
transfers or leases.
10.6 Statement on Warrant Certificates. Irrespective of any adjustments
in the Exercise Price or the number or kind of securities purchasable upon the
exercise of the Warrants, Warrant Certificates theretofore or thereafter issued
may continue to express the same price and number and kind of Shares as are
stated in the Warrant Certificates initially issuable pursuant to this Agree-
ment.
11. Fractional Interests. The Company shall not be required to issue
fractional Shares on the exercise or other transfer of Warrants or as a result
of any adjustment pursuant to the provisions of Section 10 hereof. If more than
one Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Share would, except for the provisions of this Section 11, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company shall
round such fraction to the nearest whole Share (up or down), with half Shares
being rounded down, and will deliver the additional Share if rounded up.
<PAGE>
12. Agreements of Holders. Every Holder of a Warrant by accepting the
same consents and agrees with the Company and the Warrant Agent and with every
other holder of a Warrant that:
(a) the Warrant Certificates are transferable only on the Warrant
Register if surrendered at the office of the Warrant Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer, and
(b) the Company and the Warrant Agent may deem and treat the person in
whose name a Warrant Certificate is registered as the absolute owner thereof and
of the Warrants evidenced thereby (notwithstanding any notations of ownership
or writing on the Warrant Certificates made by anyone other than the Company or
the Warrant Agent) for all purposes whatsoever, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
13. Concerning the Warrant Agent. The Company agrees to pay to the
Warrant Agent reasonable compensation as set forth in Schedule 2 attached hereto
for all services rendered by it hereunder and, from time to time, on demand of
the Warrant Agent, its reasonable expenses and counsel fees and disbursements
and other reasonable disbursements incurred in the negotiation, administration
and execution of this Agreement and the exercise and performance of its duties
hereunder.
14. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent or any successor Warrant Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent or any successor Warrant
Agent shall be a party, or any corporation succeeding to the corporate trust or
stock transfer business of the Warrant Agent or any successor Warrant Agent,
shall be the successor to the Warrant Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Warrant Agent under the provisions of Section 16 hereof. In case
at the time such successor Warrant Agent shall succeed to the agency created by
this Agreement any of the Warrant Certificates shall have been countersigned but
not delivered, any such successor Warrant Agent may adopt the countersignature
of the predecessor Warrant Agent and deliver such Warrant Certificates so
countersigned; and, in case at that time any of the Warrant Certificates shall
not have been countersigned, any successor Warrant Agent may countersign such
Warrant Certificate either in the name of the predecessor or in the name of the
successor Warrant Agent; and in all such cases such Warrant Certificates shall
have the full force provided in the Warrant Certificates in this Agreement.
In case at any time the name of the Warrant Agent shall be changed, and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrant Certificates so countersigned; and, in case at that
time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior
name or in its changed name; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Agreement.
<PAGE>
15. Duties of Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, all of which the Company, by its acceptance hereof, and the Holders
of Warrant Certificates, by their acceptance thereof, shall be bound:
(a) The Warrant Agent shall have no implied duties or obligations and
shall not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein or given pursuant hereto.
(b) The Warrant Agent may rely upon any instrument, not only as to its
due execution, validity and effectiveness, but also as to the truth and accuracy
of any information contained therein, which the Warrant Agent shall in good
faith believe to be genuine, to have been signed or presented by the person
or parties purporting to sign the same and to conform to the provisions of
this Agreement.
(c) The Warrant Agent shall have no liability or obligation with respect
to its duties hereunder except for the Warrant Agent's willful misconduct or
gross negligence. In no event shall the Warrant Agent be liable for incidental,
indirect, special, consequential or punitive damages. The Warrant Agent shall
not be obligated to take any legal action or commence any proceeding in
connection with this Agreement or the Modified Plan, or to appear in, prosecute
or defend any such legal action or proceeding.
(d) The Warrant Agent may consult legal counsel selected by it (which
may be counsel for the Company) in the event of any dispute or question as to
the construction of any of the provisions hereof or of any other agreement or
of its duties hereunder, and shall incur no liability and shall be fully
indemnified from any liability whatsoever in acting in accordance with the
opinion or instruction of such counsel. The Company shall promptly pay, upon
demand, the reasonable fees and expenses of any such counsel.
(e) From and at all times after the date of the Agreement, the Company
shall, to the fullest extent permitted by law and to the extent provided herein,
indemnify and hold harmless the Warrant Agent and each director, officer,
employee, attorney, agent and affiliate of the Warrant Agent (collectively, the
"Indemnified Parties") against any and all actions, claims (whether or not
valid), losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including without limitation reasonable attorneys' fees, costs and
expenses) incurred by or asserted against any of the Indemnified Parties from
and after the date hereof, whether direct, indirect or consequential, as a re-
sult of or arising from or in any way relating to any claim, demand, suit,
action or proceeding (including any inquiry or investigation) by any person,
including without limitation the Company, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any person under
any statute or regulation, including, but not limited to, any federal or
state securities laws, or under any common law or equitable cause or other-
wise, arising from or in connection with the negotiation, preparation, execu-
tion, performance or failure of performance of this Escrow Agreement or any
transactions contemplated herein, whether or not any such Indemnified Party
is a party to any such action, proceeding, suit or the target of any such
inquiry or investigation; provided, however, that no Indemnified Party shall
have the right to be indemnified hereunder for any liability finally deter-
mined by a court of competent
<PAGE>
jurisdiction, subject to no further appeal, to have resulted solely from the
gross negligence or willful misconduct of such Indemnified Party. If any such
action or claim shall be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel and the
payment of all expenses. Such Indemnified Party shall, in its sole discretion,
have the right to employ separate counsel (who may be selected by such
Indemnified Party in its sole discretion) in any such action and to participate
in the defense thereof, and the fees and expenses of such counsel shall be paid
by such Indemnified Party, except that the Company shall be required to pay such
fee and expenses if (a) the Company agrees to pay such fees and expenses, or (b)
the Company shall fail to assume the defense of such action or proceeding or
shall fail, in the reasonable discretion of such Indemnified Party, to employ
counsel satisfactory to the Indemnified Party in any such action or proceeding,
(c) the Company is the plaintiff in any such action or proceeding or (d) the
named parties to any such action or proceeding (including any impleaded parties)
include both Indemnified Party and the Company, and Indemnified Party shall have
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Company.
The Company shall be liable to pay fees and expenses of counsel pursuant to the
preceding sentence. All such fees and expenses payable by the Company pursuant
to the foregoing sentence shall be paid from time to time as incurred, both in
advance of and after the final disposition of such action or claim. All of the
foregoing losses, damages, costs and expenses of the Indemnified Parties shall
be payable by the Company, upon demand by such Indemnified Party. The
obligations of the Company under this Section shall survive any termination of
this Warrant Agreement and the resignation or removal of the Warrant Agent.
(f) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed on behalf of the Company by an Authorized
Person and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(g) The Warrant Agent shall not be liable for, or by reason of, any of
the statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except as to the fact that it has countersigned the Warrant
Certificates) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(h) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement, the Modified Plan or in any Warrant
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 10 hereof or responsible for the manner, method or amount
<PAGE>
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Warrants
evidenced by Warrant Certificates after receipt of the certificate described in
Section 10. 3 hereof); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or other securities to be issued under this Agreement or any
Warrant Certificate or as to whether any shares of Common Stock or other
securities shall, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(i) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any Authorized
Person, and is authorized to apply to such Authorized Persons for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such Authorized Person. Any application by the Warrant
Agent for written instructions from the Company may, at the option of the War-
rant Agent, set forth in writing any action proposed to be taken or omitted
by the Warrant Agent under this Agreement and the date on and/or after which
such action shall be taken or such omission shall be effective. The Warrant
Agent shall not be liable for any action taken by, or omission of, the War-
rant Agent in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less
than five (5) business days after the date any Authorized Person actually
receives such application, unless any such officer shall have consented in
writing to any earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Warrant Agent shall have re-
ceived written instructions in response to such application specifying the
action to be taken or omitted.
(j) The Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement to the extent lawfully permitted to so act. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
(k) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents (which shall not include its employees), and the
Warrant Agent shall not be answerable or accountable for any act, omission,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company or to the holders of the Warrants resulting from any such act,
omission, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.
(l) No provision of this Agreement shall require the Warrant Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
<PAGE>
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(m) If, with respect to any Warrant Certificate surrendered to the
Warrant Agent for exercise or transfer, the form of election to purchase or
transfer, as the case may be, has not been completed, the Warrant Agent shall
not take any further action with respect to such requested exercise or transfer
without first consulting with the Company.
(n) The Warrant Agent shall not be required to take notice of, or be
deemed to have notice of, any fact, event or determination under this Agreement
unless and until the Warrant Agent shall be specifically notified in writing by
the Company of such fact, event or determination.
16. Change of Warrant Agent. The Warrant Agent or any successor Warrant
Agent may resign and be discharged from its duties under this Agreement upon
sixty (60) days' notice in writing mailed to the Company and to each transfer
agent of the Common Stock by registered or certified mail. The Company may
remove the Warrant Agent or any successor Warrant Agent upon sixty (60) days'
notice in writing mailed to the Warrant Agent or successor Warrant Agent, as the
case may be, and to each transfer agent of the Common Stock by registered or
certified mail. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within
a period of sixty (60) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, then the Holder of any Warrant Certificate may
apply to any court of competent jurisdiction for the appointment of a new War-
rant Agent. Notwithstanding any provision to the contrary contained herein, the
removal or resignation of the Warrant Agent will be effective upon the expira-
tion of the applicable notice period, and in the event a successor has not
then been appointed, the Company shall assume the role of Warrant Agent until
such time as a successor Warrant Agent has been appointed in accordance with
the terms of this Agreement. Any successor Warrant Agent, whether appointed
by the Company or by such a court, shall be (a) a corporation organized and
doing business under the laws of the United States or of any state thereof,
in good standing, which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Warrant Agent a combined capital and surplus of at least fifty million dol-
lars ($50,000,000) or (b) an affiliate of a corporation described in clause
(a) of this sentence. After appointment, the successor Warrant Agent shall
be vested with the same powers, rights, duties and responsibilities as if it
had been originally named as Warrant Agent without further act or deed, and
the predecessor Warrant Agent shall deliver and transfer to the successor War-
rant Agent any property at the time held by it hereunder and execute and de-
liver any further assurance, conveyance, act or deed necessary for the pur-
pose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Warrant Agent
and each transfer agent of the Common Stock and mail a notice thereof in writing
to the Holders of the Warrant Certificates. Failure to give any notice provided
for in this Section 16, or any defect therein, shall not affect the legality or
<PAGE>
validity of the resignation or removal of the Warrant Agent or the appointment
of the successor Warrant Agent, as the case may be.
17. Issuance of New Warrant Certificates. Notwithstanding any of the
provisions of this Agreement or of the Warrants to the contrary, the Company
may, at its option, cause the Warrant agent to issue new Warrant Certificates
evidencing Warrants in such form as may be approved by its Board of Directors
to reflect any adjustment or change in the Exercise Price per Share and the
number or kind or class of shares or other securities or property purchasable
under the Warrant Certificates made in accordance with the provisions of this
Agreement.
18. Notice of Certain Events. In case the Company shall propose, except
as contemplated by the Plan, (a) to declare or pay a dividend, or make a
distribution, to Holders of Common Stock in shares of Common Stock, to subdivide
the outstanding Common Stock, to combine the outstanding Common Stock into a
smaller number of shares, to issue any shares of its capital stock in a
reclassification of the Common Stock or to make a distribution on its Common
Stock in shares of its capital stock other than Common Stock or (b) to issue
(without payment of consideration), or sell, rights, options or warrants to all
holders of Common Stock entitling them to subscribe for or to purchase shares
of Common Stock or securities convertible into or exchangeable for Common Stock,
or (c) to make a distribution to all holders of Common Stock of any asset,
property or security (other than (1) cash dividends payable out of current
earnings, (2) distributions referred to in (a) or (b) above and (3) in connec-
tion with the total liquidation, dissolution or winding up of the Company),
or (d) to effect any consolidation or merger into or with, or to effect any
sale or other transfer, in one or more transactions, of all or substantially
all of the assets of the Company and its subsidiaries taken as a whole to any
other person, or (e) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each Holder
of a Warrant Certificate, in accordance with Section 19 hereof, a notice of
such proposed action, which shall specify the record date for the purposes of
such stock dividend, subdivision, reclassification, distribution of rights,
options, warrants, assets, property or security, or the date on which such
consolidation, merger, sale, transfer, liquidation, dissolution, or winding
up is to take place and the date of participation therein by the Holders of
the Shares, if any such date is to be fixed, and such notice shall be so given
in the case of any action covered by clause (a) or (b) above at least ten
(10) days prior to the record date for determining Holders of the Shares for
purposes of such action, and in the case of any such other action, at least
ten (10) days prior to the date of the taking of such proposed action or the
date of participation therein by the Holders of the Shares, whichever shall
be the earlier. Failure to publish, mail or receive such notice or any de-
fect therein or in the publication or mailing thereof shall not affect the
validity of any action taken in connection with such stock dividend, subdivi-
sion, reclassification, distribution, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up. Except as specifically required
herein, the Company shall not be required to provide notice to Holders of War-
rant Certificates of any events of which it is not required to provide notice
to Holders of New Roses Common Stock. Where the Company is required to give
notice of an event to its stockholders, it shall not be required to give
greater notice of such event to Warrant Holders.
<PAGE>
19. Notices. Notices or demands authorized by this Agreement to be given
or made by the Warrant Agent or by the Holder of any Warrant Certificate to or
on the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Warrant Agent) as follows:
Rose's Stores, Inc.
218 S. Garnett Street
Henderson, North Carolina 27536
Attn: Chief Financial Officer
with a copy to:
Rose's Stores, Inc.
218 S. Garnett Street
Henderson, North Carolina 27536
Attn: George T. Blackburn, II
Subject to the provisions of Section 14, any notice or demand authorized
by this Agreement to be given or made by the Company or by the Holder of any
Warrant Certificate to or on the Warrant Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
First Union Nation Bank of North Carolina
Shareholder Services Administration Group
230 South Tryon Street, 11th Floor
Charlotte, North Carolina 28288-1153
Notices or demands authorized by this Agreement to be given or made by the
Company or the Warrant Agent to the Holder of any Warrant Certificate shall be
sufficiently given or made if sent by mail, postage prepaid, addressed to such
Holder at the address of such Holder as shown on the registry books of the
Company or the Warrant Register maintained by the Warrant Agent.
20. Supplements and Amendments.
(a) The Company may, and the Warrant Agent shall, if the Company so
directs, from time to time supplement or amend this Agreement without approval
of any Holders of Warrant Certificates in order (i) to cure any ambiguity, (ii)
to correct or supplement any provision contained herein which may be defective
or inconsistent with any provisions of the Plan or any other provisions herein,
or (iii) to change or supplement the provisions hereunder in any manner which
the Company may deem necessary or desirable; provided, however, in each case
described in clauses (i) through (iii), the addition or amendment does not
adversely affect the interests of the Holders of Warrant Certificates.
(b) In addition, this Warrant Agreement may be supplemented or amended to
the extent provided in paragraph (a) of this Section 20 by the written consent
of the Company and the Holders of Warrant Certificates representing more than
<PAGE>
50% of the Shares obtainable upon the exercise of the Warrants outstanding at
the time of such consent.
(c) Upon the delivery of a certificate from an appropriate officer of
the Company and an opinion of counsel reasonably acceptable to the Warrant Agent
which states that the proposed supplement or amendment is in compliance with the
terms of this Section 20, the Warrant Agent shall execute such supplement or
amendment.
(d) Notwithstanding anything to the contrary herein, no supplement or
amendment which changes the rights or duties of the Warrant Agent shall be
effective without the consent of the Warrant Agent.
21. Determination and Actions by the Board of Directors, etc. The Board
of Directors of the Company shall have the exclusive power and authority (which
may be delegated to any committee of such Board or to the appropriate officers
of the Company) to administer this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors, or the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to amend this
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board of Directors (or its delegates)
in good faith, shall (x) be final, conclusive and binding on the Company, the
Warrant Agent, the Holders of the Warrant Certificates and all other parties,
and (y) not subject the Board of Directors (or its delegates) to any liability
to the Holders of the Warrant Certificates. In exercising its power and
authority to administer this Agreement, in connection with any amendment to this
Agreement or through reorganization, consolidation, merger, dissolution,
reclassification, issue or sale of securities, sale of assets or any other
voluntary action, the Board of Directors shall at all times act in good faith
in performance of its fiduciary duties to Holders of Warrants.
22. No Rights as Stockholders. Nothing contained in this Agreement or
in any of the Warrants shall be construed as conferring upon the Holders or
their transferees any rights whatsoever as stockholders of the Company, in-
cluding, without limitation, the right to vote or to receive dividends (ex-
cept as specifically provided herein) or to consent to or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or on any other matter.
23. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company, the Warrant Agent or the Holders shall bind
and inure to the benefit of their respective successors and assigns hereunder,
whether by transfer, merger or otherwise. Upon becoming a successor to the
Company, such successor shall be deemed to be the Company for purposes of this
Agreement.
<PAGE>
24. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the Holders of the Warrants any legal or equitable right,
remedy or claim under this Agreement, and this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and such Holders.
25. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses and any other
available remedy.
26. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
27. Governing Law. This Agreement, each Warrant and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
to be made and to be performed entirely within such State, except that the
rights and duties of the Warrant Agent shall be governed by the laws of the
State of North Carolina.
28. Descriptive Headings. Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
29. Counterparts. This Agreement may be executed in any number of
counterparts each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
30. Conflict. In the event of any conflict between the provisions of
the Modified Plan and the Warrant Agreement, the provisions of the Modified Plan
shall control.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
ROSE'S STORES, INC.
By:
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Warrant Agent
By:
Name:
Title:
<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND WERE ISSUED PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY 11 U.S.C. Section 1145, UNDER AN ORDER DATED DECEMBER
14, 1994 CONFIRMING THE FIRST AMENDED JOINT PLAN OF REORGANIZATION OF ROSE'S
STORES, INC. DATED OCTOBER 4, 1994 (THE "PLAN"), AND AN ORDER DATED APRIL 24,
1995 CONFIRMING THE MODIFIED AND RESTATED FIRST AMENDED JOINT PLAN OF
REORGANIZATION DATED APRIL 19, 1995 (THE "MODIFIED PLAN"). THE HOLDER OF THIS
CERTIFICATE IS REFERRED TO 11 U.S.C. Section 1145 FOR GUIDANCE AS TO THE SALE
OF THESE SECURITIES OR THE COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE
WARRANTS REPRESENTED BY THIS CERTIFICATE.
VOID AFTER 5:00 P.M.
NEW YORK CITY TIME, ON
APRIL 28, 2002
No. A- Warrants
WARRANT CERTIFICATE FOR PURCHASE OF
COMMON STOCK OF
ROSE'S STORES, INC.
This certifies that, for value received, _________________, or registered
assigns, is the owner of the number of Warrants set forth above, each of which
entities the owner to purchase, subject to the terms and conditions hereof and
of the Warrant Agreement mentioned below, at any time after the date hereof and
prior to the Expiration Date (as herein defined), one share of the common stock,
no par value per share (the "Common Stock"), of Rose's Stores, Inc., a Delaware
corporation (the "Company"), at the exercise price determined pursuant to 6.2.4
of the Modified Plan (the "Exercise Price") payable in lawful money of the
United States of America by money order or certified or official bank check
payable to the Company, upon surrender of this Warrant Certificate with the
form of Election to Exercise on the reverse hereof duly completed and execut-
ed together with payment of the Exercise Price at the office or agency of the
Warrant Agent (as defined in the Warrant Agreement referred to below) in the
City of Charlotte, State of North Carolina.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to, and are subject to all of the terms, provisions and conditions of,
that certain Warrant Agreement dated as of April 28, 1995 (hereinafter called
the "Warrant Agreement"), between the Company and the Warrant Agent, to all of
which terms, provisions and conditions the registered holder of this Warrant
Certificate consents to by acceptance hereof. The Warrant Agreement and the
summary of its terms set forth on the reverse side of this Warrant Certificate
are hereby incorporated into this Warrant Certificate by reference and made a
part of this Warrant Certificate. The Warrant Agreement sets forth the terms
and conditions under which the exercise price of a Warrant, the type of shares
or other consideration to be received upon exercise of the Warrant, and/or the
number of shares to be received upon exercise of a Warrant are or may be
adjusted. Reference is hereby made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Warrant Agent, the Company and the holders of the
Warrant Certificates or Warrants. In the event of any conflict between the
<PAGE>
provisions of this Warrant Certificate and the Warrant Agreement, the provisions
of the Warrant Agreement shall control. In the event of any conflict between
the provisions of the Modified Plan and the Warrant Agreement, the provisions
of the Modified Plan shall control.
Copies of the Modified Plan and the Warrant Agreement are available for
inspection at the Charlotte, North Carolina office of the Warrant Agent, First
Union National Bank of North Carolina, or may be obtained upon written request
addressed to the Secretary, Rose's Stores, Inc., 218 S. Garnett Street,
Henderson, North Carolina 27536. The Company shall not be required upon the
exercise of the Warrants evidenced by this Warrant Certificate to issue frac-
tions of Warrants or shares, but shall round such fractional share to the
nearest whole share (up or down), with half shares being rounded down, and
will deliver the additional share if rounded up.
The Warrants evidenced by this Warrant Certificate shall expire at 5:00
p.m., New York City time, on April 28, 2002. The day and time of expiration
are referred to herein as the "Expiration Date".
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
Witness the facsimile seal of the Company and the facsimile signatures of
its duly authorized officers.
DATED:
ROSE'S STORES, INC.
By:
President
Attest:
Secretary
COUNTERSIGNED:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA (Charlotte, NC),
as Warrant Agent
By:
Authorized Signature
Attest:
Secretary
Summary of Terms of Warrant Agreement
The Warrant Agreement provides that if the purchase price as determined
pursuant to Section 6.2.4 of the Modified Plan is adjusted from time to time for
reasons enumerated in the Warrant Agreement, the number of shares purchasable
upon the exercise of each Warrant represented by this Warrant Certificate are
subject to modification or adjustment.
The Warrants evidenced by this Warrant Certificate shall be exercisable
until 5:00 p.m., New York City time, on April 28, 2002.
In the event that upon any exercise the number of Warrants exercised shall
be fewer than the total number of Warrants represented hereby, there shall be
issued to the holder hereof or his assignee a new Warrant Certificate evidencing
the Warrants not so exercised.
No payment or adjustment shall be made for any cash dividends, whether paid
or declared, on any shares issuable upon exercise of a Warrant. The Company
shall not be required to issue fractions of shares or any certificates which
evidence fractional shares. In lieu of a fractional share the Company shall
round such fractional share to the nearest whole share (up or down), with half
shares being rounded down, and will deliver the additional share if rounded up.
The Company and the Warrant Agent may deem and treat the registered holder
of this Warrant Certificate as the absolute owner hereof and of the Warrants
represented by this Warrant Certificate (notwithstanding any notation of
<PAGE>
ownership or other writing hereon made by anyone) for the purpose of any exer-
cise of such Warrants and for all other purposes. Neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary or be bound
to recognize, or make any inquiries with respect to, any equitable or other
claim to or interest in this Warrant Certificate on the part of any other
person and shall not be liable for any registration or transfer of a Warrant
Certificate which is registered or to be registered in the name of a fiduci-
ary or the nominee of a fiduciary unless made with the actual knowledge that
a fiduciary or nominee is committing a breach of trust in requesting such re-
gistration or transfer, or with knowledge of such facts such that its partici-
pation therein amounts to bad faith.
Prior to the exercise of the Warrants represented hereby, the registered
holder of this Warrant Certificate, as such, shall not be entitled to vote on
or be deemed the holder of Common Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof for any purpose, and
nothing contained in the Warrant Agreement or herein shall be construed to
confer upon the holder of this Warrant Certificate, as such, any of the
rights of a stockholder of the Company, including, without limitation, the
right to vote, or to receive dividends or to consent to or receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or in any other matter or to receive notice of any
proceedings of the Company (except as provided in the Warrant Agreement).
Each Warrant entitles the holder thereof to purchase one share at any time
during hours of regular business operations from the date the Warrants are is-
sued until 5:00 P.M., New York City time, on the seventh anniversary of the
Effective Date (the "Expiration Date") at the exercise price per Warrant
determined pursuant to Section 6.2.4 of the Modified Plan, subject to adjust-
ment as set forth herein (the "Exercise Price"). Each Warrant not exercised
prior to the Expiration Date shall expire. The Exercise Price and the number
and kind of shares purchasable upon the exercise of each Warrant are subject
to adjustment upon the occurrence of certain events pursuant to the provi-
sions of Section 10 of the Warrant Agreement. Each holder of a Warrant Certi-
ficate shall have the right to exercise the Warrants evidenced thereby in
whole or in part at any time prior to the Expiration Date upon surrender of
the Warrant Certificate, with the form of Election to Exercise below duly
completed, to the Warrant Agent at the office of the Warrant Agent designated
for such purpose, together with payment of the Exercise Price, as adjusted in
accordance with the provisions of this Agreement, for the number of shares
in respect of which such Warrants are then exercised. Payment of such Exercise
Price may be made by money order or by certified or official bank check in
lawful money of the United States of America. In case the holder of any War-
rant Certificate shall exercise fewer than all the Warrants evidenced there-
by, a new Warrant Certificate evidencing Warrants equivalent to the Warrants
remaining unexercised shall be issued by the Warrant Agent and delivered to
the holder of such Warrant Certificate.
Upon surrender of this Warrant Certificate with the form of Assignment
below duly completed, accompanied by payment of an amount equal to any applic-
able transfer tax, at the office or agency of the Warrant Agent indicated on
the face of this Warrant Certificate, a new Warrant Certificate or Certificates
representing the Warrants represented by this Warrant Certificate shall be is-
sued to the transferee; provided, however, that if the registered holder of this
Warrant Certificate elects to transfer fewer than all of the Warrants repre-
sented
<PAGE>
by this Warrant Certificate, a new Warrant Certificate for the Warrants not
so transferred shall be issued to such registered holder. This Warrant Certi-
ficate, together with other Warrant Certificates, may be exchanged by the
registered holder for another Warrant Certificate or Certificates of differ-
ent denominations, of like tenor and representing in the aggregate Warrants
equal in number to the same full number of Warrants represented by this
Warrant Certificate and any other Warrant Certificate so exchanged with the
form of Assignment duly completed and executed. Only whole Warrants may be so
transferred or exchanged. Certificates for fractions of a Warrant will not be
issued upon any exchange or transfer.
If the day of receipt of this Warrant Certificate with the form of Election
to Exercise duly filled in and executed, accompanied by payment of the Exercise
Price for the shares specified in the form of Election to Exercise (and of an
amount equal to any applicable taxes or governmental charges), shall occur
within any period during,which the transfer books for the Company's Common
Stock or other class of stock purchasable upon the exercise of the Warrants
evidenced by this Warrant Certificate are closed for any purpose, the Warrant
Agent and the Company shall not be required to make delivery of certificates
for shares purchasable upon such exercise, and the person entitled to receive
delivery of such certificates shall not be deemed to have become a holder
of record of such shares, until the next succeeding business day on which the
transfer books of the Company are open.
<PAGE>
To be printed on reverse side of Warrant Certificate
FORM OF ELECTION TO EXERCISE
The undersigned hereby irrevocably elects to exercise _________ Warrants
evidenced by this Warrant Certificate, and to purchase an equal number of full
shares (the "Shares") of the common stock, no par value per share (the "Common
Stock"), of Rose's Stores, Inc., a Delaware corporation (the "Company"), issu-
able upon exercise of such Warrants, and herewith tenders payment for such
Shares in the amount of $_____________ in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of _________________ whose address is _________________________ and whose
social security number or other identifying number is __________, and that such
certificate be delivered to _________________ whose address is
________________________. If said number of Shares is less than all of the
Shares purchasable hereunder, the undersigned requests that a new Warrant
Certificate evidencing the right to purchase the remaining balance of the Shares
of Common Stock for which this Warrant Certificate is exercisable be registered
in the name of _________________________ whose address is ______________________
and whose social security number or other identifying number is
___________________, and that such certificate be delivered to
___________________ out-of-pocket expenses, including counsel fees.
