FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 26, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-631
ROSE'S HOLDINGS, INC.
Incorporated Under the Laws of Delaware
I.R.S. Employer Identification No. 56-2043000
P. H. Rose Building
218 South Garnett Street
Henderson, North Carolina 27536
Telephone No. 919/430-2600
ROSE'S STORES, INC.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
As of July 11, 1997, of the 10,000,000 shares of Rose's Stores, Inc.
common stock delivered to First Union National Bank of North Carolina
("FUNB"), as Escrow Agent, pursuant to the Modified and Restated First Amended
Joint Plan of Reorganization, 8,612,661 of such shares of common stock are
outstanding. The remaining 54,680 shares held in escrow will be distributed
by FUNB in satisfaction of disputed Class 3 claims as and when such claims are
resolved. If all pending claims are resolved adversely to the registrant,
approximately 8,667,341 shares of common stock will be outstanding. If all
pending claims are resolved in accordance with the registrant's records,
approximately 8,632,341 shares of common stock will be outstanding. To the
extent that escrowed shares of common stock are not used to satisfy claims,
they will revert to the registrant and will be retired or held in the treasury
of the registrant. On August 7, 1997, Rose's Holdings, Inc. was created as
the parent company of Rose's Stores, Inc.
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ROSE'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
(Amounts in thousands except per share amounts)
On August 7, 1997, pursuant to an agreement and plan of merger among
Rose's Stores, Inc. ("Stores") and two newly created, wholly-owned subsidiaries
of Stores, Stores became a wholly-owned subsidiary of Rose's Holdings, Inc.
("Company"). As a result of such merger, each share of common stock, no par
value ("Stores Common Stock"), of Stores was converted into common stock, no par
value ("Common Stock"), of Rose's Holdings, Inc. and each warrant, option or
other right entitling the holder thereof to purchase or receive shares of Stores
Common Stock was converted into a warrant, option or other right (as the case
may be) entitling the holder thereof to purchase or receive shares of Common
Stock on identical terms. The powers, rights and other provisions of the Common
Stock are identical to the powers, rights and other provisions of the Stores
Common Stock. Rose's Holdings, Inc. had no transactions during the second
quarter.
The following summary of financial information of Rose's Stores, Inc.,
("Stores"), which is unaudited, reflects all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
to reflect a fair statement of the information presented.
ROSE'S STORES, INC.
STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
July 26, 1997 July 27, 1996
<S> <C> <C>
Revenue:
Gross sales $ 153,722 165,844
Leased department sales 5,091 5,679
Net sales 148,631 160,165
Leased department income 1,324 1,160
Total revenue 149,955 161,325
Costs and Expenses:
Cost of sales 114,780 123,089
Selling, general and administrative 37,907 38,665
Depreciation and amortization (483) (616)
Interest 1,737 1,979
Total costs and expenses 153,941 163,117
Loss Before Extraordinary Item (3,986) (1,792)
Extraordinary Item - Loss on Early
Extinguishment of Debt - (914)(a)
Net Loss $ (3,986) (2,706)
Loss Per Share Before Extraordinary Item $ (.46) (.21)
Net Loss Per Share $ (.46) (.31)
Weighted Average Shares 8,667 8,667
</TABLE>
(a) The extraordinary item - loss on early extinguishment of debt
represents the deferred costs of a financing facility which were
written off as a result of the Stores obtaining a new facility in the
second quarter of 1996.
See notes to financial statements
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ROSE'S STORES, INC.
STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Twenty-Six Weeks Ended
July 26, 1997 July 27, 1996
<S> <C> <C>
Revenue:
Gross sales $ 294,003 320,270
Leased department sales 9,070 9,960
Net sales 284,933 310,310
Leased department income 2,358 2,240
Total revenue 287,291 312,550
Costs and Expenses:
Cost of sales 217,664 236,129
Selling, general and administrative 72,660(a) 75,484
Depreciation and amortization (1,012) (1,288)
Interest 3,273 3,365
Total costs and expenses 292,585 313,690
Loss Before Extraordinary Item (5,294) (1,140)
Extraordinary Item - Loss on Early
Extinguishment of Debt - (914)(b)
Net Loss $ (5,294) (2,054)
Loss Per Share Before Extraordinary Item $ (.61) (.13)
Net Loss Per Share $ (.61) (.24)
Weighted average shares 8,667 8,667
</TABLE>
(a) Included in 1997 selling, general and administrative costs is income of
$754 from the settlement of pre-petition insurance liabilities and a
loss of $189 from the closing of a store during the first quarter.
(b) The extraordinary item - loss on early extinguishment of debt
represents the deferred costs of a financing facility which were
written off as a result of the Stores obtaining a new facility in 1996.
See notes to financial statements
PAGE
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ROSE'S STORES, INC.
BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
July 26, January 25, July 27,
1997 1997 1996
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 595 1,241 232
Accounts receivable 11,320 5,101 10,681
Inventories 156,442 141,287 179,848
Other current assets 3,041 4,503 4,174
Total current assets 171,398 152,132 194,935
Property and Equipment, at cost,
less accumulated depreciation and amortization 8,692 7,710 7,066
Other Assets 644 480 565
$ 180,734 160,322 202,566
Liabilities and Stockholders' Equity
Current Liabilities
Short-term debt $ 59,408 44,138 66,546
Bank drafts outstanding 2,729 - -
Accounts payable 29,644 19,230 36,761
Accrued salaries and wages 6,124 6,422 6,610
Pre-petition liabilities 1,079 2,737 4,554
Other current liabilities 11,533 10,908 11,701
Total current liabilities 110,517 83,435 126,172
Excess of Net Assets Over Reorganization Value,
Net of Amortization 20,122 21,872 23,621
Reserve for Income Taxes 13,033 12,996 12,673
Deferred Income 34 339 727
Other Liabilities 1,382 740 867
Stockholders' Equity
Preferred stock, authorized 10,000 shares;
none issued - - -
Common stock, authorized 50,000 shares;
issued 8,667 at 7/26/97, 1/25/97 and 7/27/96
(Note 1) 35,000 35,000 35,000
Paid-in capital 1,159 1,159 1,159
Retained earnings (accumulated deficit) (513) 4,781 2,347
Total stockholders' equity 35,646 40,940 38,506
$ 180,734 160,322 202,566
</TABLE>
See notes to financial statements
PAGE
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ROSE'S STORES, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Twenty-Six Weeks Ended
July 26, 1997 July 27, 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (5,294) (2,054)
Expenses not requiring the outlay of cash:
Depreciation and amortization (1,012) (1,288)
Amortization of deferred financing costs 362 247
(Gain) loss on disposal of property and equipment - (2)
Settlement of pre-petition liabilities (754) -
Provision for closed store 189 -
Extraordinary loss on early extinguishment of debt - 914
Cash provided by (used in) assets and liabilities:
(Increase) decrease in accounts receivable (6,219) (3,472)
(Increase) decrease in inventories (15,155) (26,658)
(Increase) decrease in other assets 1,466 536
Increase (decrease) in accounts payable 10,414 12,916
Increase (decrease) in other liabilities (168) (487)
Increase (decrease) in income tax reserves 37 -
Increase (decrease) in reserve for store closings (530) (21)
Increase (decrease) in deferred income (305) (247)
Increase (decrease) in accumulated PBO - (200)
Net cash provided by (used in) operating activities (16,969) (19,816)
Cash flows from investing activities:
Purchases of property and equipment (847) (2,339)
Proceeds from disposal of property and equipment - 2
Net cash provided by (used in) investing activities (847) (2,337)
Cash flows from financing activities:
Net activity on line of credit 15,270 32,873
Payments of unsecured priority and administrative claims (151) (78)
Principal payments on capital leases (148) (167)
Increase (decrease) in bank drafts outstanding 2,729 (9,530)
Payments of deferred financing costs (530) (1,306)
Net cash provided by (used in) financing activities 17,170 21,792
Net decrease in cash (646) (361)
Cash and cash equivalents at beginning of period 1,241 593
Cash and cash equivalents at end of period $ 595 232
Supplemental disclosure of additional non-cash
investing and financing activities:
Retirement of net book value of assets in reserve
for store closings $ 14 -
</TABLE>
See notes to financial statements
PAGE
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Notes to Financial Statements:
(1) On August 7, 1997, pursuant to an agreement and plan of merger among
Rose's Stores, Inc. ("Stores") and two newly created, wholly-owned
subsidiaries of Stores, Stores became a wholly-owned subsidiary of
Rose's Holdings, Inc. ("Company"). As a result of such merger, each
share of common stock, no par value (the "Stores Common Stock") was
converted into common stock, no par value ("Common Stock"), of Rose's
Holdings, Inc. and each warrant, option or other right entitling the
holder thereof to purchase or receive shares of Stores Common Stock was
converted into a warrant, option or other right (as the case may be)
entitling the holder thereof to purchase or receive shares of Common
Stock on identical terms. The powers, rights and other provisions of
the Common Stock are identical to the powers, rights and other
provisions of the Stores Common Stock. Rose's Holdings, Inc. had no
transactions during the second quarter. Intercompany accounts and
transactions will be eliminated in the future. Incident to the merger,
the Company entered into a guaranty of the obligations (the "Guaranty")
of Stores under the three year revolving credit agreement (the "Credit
Agreement") between Stores and the participating lenders in favor of
such lenders. The Guaranty is secured by a stock pledge and security
agreement (the "Security Agreement") covering all the assets of the
Company. In addition, Stores entered into a second amendment to the
Credit Agreement (the "Second Amendment") effecting certain changes
incident to the merger. The Guaranty, Security Agreement, and Second
Amendment are filed as exhibits to this report.
(2) On September 5, 1993, Stores 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 (the "Bankruptcy Court"). Stores' Modified
and Restated First Amended Joint Plan of Reorganization (the "Plan")
was approved by order of the Bankruptcy Court on April 24, 1995. On
April 28, 1995 (the "Effective Date"), the Plan became effective.
Since emergence, distributions of the Stores Common Stock have been
made to holders of Allowed Class 3 Unsecured Claims (as defined in the
Plan) in accordance with the provisions of the Plan. As a result of
distributions of the Stores Common Stock pursuant to the Plan, as of
July 11, 1997, Stores had 8,613 shares of Stores Common Stock
outstanding of the 10,000 shares of Stores Common Stock which were
delivered pursuant to the Plan on the Effective Date to First Union
National Bank of North Carolina ("FUNB") as escrow agent. In addition,
as of July 11, 1997, and pursuant to the provisions of the Plan, 1,333
shares had reverted to Stores from escrow to be retired.
The remaining 54 shares held in escrow will be distributed by FUNB in
satisfaction of disputed Class 3 claims as and when such claims are
resolved.
The disputed Class 3 claims which remained unresolved at July 11, 1997
were primarily claims of landlords with respect to leases which were
rejected during the course of the Chapter 11 proceeding and general
liability claims being resolved under an alternative dispute resolution
program established by the Bankruptcy Court. If all pending claims are
resolved adversely to the Company, approximately 54 additional shares
<PAGE>
Notes to Financial Statements (Continued):
of Common Stock will be issued and there will be a total of approxi-
mately 8,667 shares of Common Stock issued and outstanding. If all
pending claims are resolved in accordance with the Company's records
and/or position as to such claims, approximately 19 additional shares
of Common Stock will be issued, and there will be a total of approxi-
mately 8,632 shares of Common Stock issued and outstanding. To the
extent that escrowed shares of Common Stock are not used to satisfy
claims, they will revert to the Company and will be retired or held in
the treasury of the Company.
On the Effective Date, all shares of Stores pre-emergence Voting Common
Stock and Non-Voting Class B Stock were cancelled and the record owners
of such stock as of such date received warrants to purchase the new
Stores Common Stock. One warrant was issued for every 4.377 shares of
pre-emergence Voting Common Stock or Non-Voting Class B Stock and
allows the holder to purchase one share of the new Stores Common Stock.
The warrants may be exercised at any time until they expire on April
28, 2002. The initial warrant exercise price of $14.45 was calculated
pursuant to a formula set forth in the Plan. The exercise price was
adjusted to $12.01 on April 28, 1996, the first anniversary of the
Effective Date, and was adjusted to $11.87 on April 28, 1997, the
second anniversary of the Effective Date. The exercise price will be
adjusted on the third anniversary of the Effective Date to reflect
adjustments to the total of allowed and disputed claims of the
Company's unsecured creditors. The exercise price will be further
adjusted on the fourth, fifth and sixth anniversaries of the Effective
Date to reflect 105%, 110% and 115%, respectively, of the total of the
allowed and disputed claims of the unsecured creditors.
Under the New Equity Compensation Plan, nonqualified stock options to
purchase 268 shares of Stores Common Stock were outstanding on July 26,
1997. The weighted average option price per share is $3.81. The
options vest over a three year period (unless earlier vested by reason
of certain acceleration events, including a change of control of the
Company). One half of the options expire five years from the date of
issuance and the remainder expire seven years from the date of
issuance.
The exercise of outstanding stock options and warrants would not result
in a dilution of earnings per share and are excluded from the
calculation of earnings per share.
(3) Accounts receivable is net of an allowance for doubtful accounts of
$464 as of July 26, 1997; $420 as of January 25, 1997 and $289 as of
July 27, 1996.
(4) The operating results presented herein are not necessarily indicative
of the operating results for a full year due to seasonal factors, among
other reasons.
(5) Stores paid interest (including deferred financing costs) of $2,033 in
the second quarter of 1997 and $1,371 in the comparable quarter of last
year. Year-to-date, Stores paid interest of $3,311 in 1997 and $3,040
in 1996.
<PAGE>
Notes to Financial Statements (Continued):
(6) Certain reclassifications have been made to the 1996 financial
statements to conform with the 1997 presentation.
PAGE
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Amounts in thousands)
Revenue
Sales for the second quarter of 1997 were $153,722, a decrease of $12,122, or
7.3%, from the second quarter of 1996, and year-to-date sales were $294,003, a
decrease of $26,267, or 8.2% from the comparable period of the prior year.
The decline in sales was primarily attributable to a decline in sales on a
comparable store basis of 7.0% for the quarter and 7.7% year-to-date. The On
June 26, 1997, two small stores, operating under the name Rose's Express, were
opened.
Costs and Expenses
Cost of sales as a percent of net sales was 77.2% for the second quarter of
1997 and 76.9% for the comparable period of the prior year. Year-to-date cost
of sales as a percent of net sales was 76.4% for 1997 and 76.1% for the
comparable period of the prior year. The increase in the cost of sales as a
percent of net sales for the quarter was .3%. This increase resulted from
higher promotional markdowns (.7%), an increase in freight costs (.1%), and a
decrease in advertising co-op income (.1%). These increases were partially
offset by a decrease in shrinkage (.4%) and in increase in mark-on percent
(.2%). The increase in the year-to-date cost of sales as a percent to net
sales was also .3%. The increase in promotional markdowns (.5%), higher
freight costs (.1%), and less advertising co-op income (.1%) were also
partially offset by a decrease in shrinkage (.4%).
Selling, general and administrative expenses (SG&A) as a percent of net sales
were 25.5 % for the second quarter of 1997 and 24.1% for the comparable
quarter of the prior year. Year-to-date SG&A expenses as a percentage of
sales were 25.5% in 1997 and 24.3% in 1996. The higher percentage to sales
for the quarter and year-to-date resulted from the decrease in sales. SG&A
expenses decreased by $758 for the quarter and by $2,824 year-to-date.
Included in 1997 year-to-date selling, general and administrative expense was
income of $754 resulting from the settlement of pre-petition insurance
liabilities and a loss of $189 from the closing of a store during the first
quarter.
Liquidity and Capital Resources
As of August 9, 1997, under the Company's three year revolving credit facility
(the "Credit Facility"), the Company had $66,044 outstanding in short-term
borrowings, $6,090 in outstanding letters of credit and unused availability of
$23,129. The Company's management believes that the Company's current
financing arrangement and cash flows are adequate to meet its liquidity needs.
Under the Credit Facility, trade suppliers which extend credit to the Company
are supported by a subordinated lien on all of the assets of the Company
including a subordinated lien of $15,000 in the real estate properties of the
Company (the "Trade Lien"). The Trade Lien expires April 29, 1998, was put
into place on April 30, 1997, and replaces the prior trade security package
(consisting of a $5,000 letter of credit and a subordinated lien in the real
estate properties of the Stores), which expired on April 29, 1997.
PAGE
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In the second quarter of 1997, $643 in cash was invested in property and
equipment, as compared to $1,479 in the second quarter of 1996. Year-to-date
cash investment in property and equipment was $847 in 1997 compared to $2,339
in 1996. The 1997 expenditures were for store improvements and computer
software. The 1996 expenditures were primarily for store remodelings and new
computer software. Cash used in operating activities, primarily to fund
inventory levels, was $14,519 in the second quarter of 1997, and $16,969 year-
to-date. Cash used in operating activities during 1996 was $7,493 in the
second quarter and $19,816 year-to-date.
PAGE
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PART II. OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K
(a) 10.1 Continuing Guaranty dated as of August 6, 1997,
between the Lendor Group and the Company.
10.2 Security Agreement dated as of August 6, 1997,
between Foothill Capital Corporation and the Company.
10.3 Amendment Number Two to Loan and Security Agreement
between Rose's Stores, Inc., as Borrower, Financial
Institutions as listed on the signature pages, as the
Lenders, PPM Finance, Inc., as Co-Agent, and Foothill
Capital Corporation, as Agent, dated as of August 6,
1997.
(b) The Registrant filed the following reports on Form 8-K
during the quarter covered by this report:
(i) Report on Form 8-K dated June 26, 1997, reporting
under Item 5 the results of the annual meeting of
stockholders held on June 26, 1997.
(ii) Report on Form 8-K dated August 7, 1997, reporting
under Item 5 the merger pursuant to which Rose's
Stores, Inc. became a wholly-owned subsidiary of
Rose's Holdings, Inc.
PAGE
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSE'S HOLDINGS, INC.
Date: September 9, 1997 By /s/ R. Edward Anderson
R. Edward Anderson
President,
Chief Executive Officer
Date: September 9, 1997 By /s/ Jeanette R. Peters
Jeanette R. Peters
Senior Vice President,
Chief Financial Officer
CONTINUING GUARANTY
This Continuing Guaranty ("Guaranty"), dated as of
August 6, 1997, is executed and delivered by ROSE'S HOLDINGS,
INC., a Delaware corporation ("Guarantor") in favor of the LENDER
GROUP, in light of the following:
Recitals
A. ROSE'S STORES, INC., a Delaware corporation
("Borrower"), has previously entered into the Loan Documents with
the Lender Group;
B. Concurrently herewith, Borrower is becoming a
wholly-owned subsidiary of Guarantor; and
C. In order to induce Agents and the Lenders
(collectively, and together with any successors or assigns of any
of the foregoing, the "Lender Group) to continue to extend
financial accommodations to Borrower pursuant to the Loan
Agreement, and in consideration thereof, and in consideration of
any loans or other financial accommodations heretofore or
hereafter extended by Lender Group to Borrower, whether pursuant
to the Loan Agreement or otherwise, Guarantor has agreed to
guarantee the Guaranteed Obligations.
NOW, THEREFORE, in consideration of the foregoing,
Guarantor hereby agrees, in favor of the Lender Group, as
follows:
1. Definitions and Construction.
A. Definitions. Capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement. The following terms, as used in
this Guaranty, shall have the following meanings:
"Guaranteed Obligations" means any and all
obligations, indebtedness, or liabilities of any kind or
character owed by Borrower to any member of the Lender Group
including all such obligations, indebtedness, or liabilities,
whether for principal, interest (including any interest which,
but for the application of the provisions of the Bankruptcy Code,
would have accrued on such amounts), premium, reimbursement
obligations, fees, costs, expenses (including, attorneys' fees),
or indemnity obligations, whether heretofore, now, or hereafter
made, incurred, or created, whether voluntarily or involuntarily
made, incurred, or created, whether secured or unsecured (and if
secured, regardless of the nature or extent of the security),
whether absolute or contingent, liquidated or unliquidated,
determined or indeterminate, whether Borrower is liable
individually or jointly with others, and
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whether recovery is or hereafter becomes barred by any statute of limitations
or otherwise becomes unenforceable for any reason whatsoever,
including any act or failure to act by the Lender Group
"Guaranty Security Agreement" means that
certain Security Agreement, of even date herewith, between
Collateral Agent and Guarantor.
"Loan Agreement" means that certain Loan and
Security Agreement, dated as of May 21, 1996, among the Lender
Group and Borrower.
B. Construction. Unless the context of this
Guaranty clearly requires otherwise, references to the plural
include the singular, references to the singular include the
plural, and the term "including" is not limiting. The words
"hereof," "herein," "hereby," "hereunder," and other similar
terms refer to this Guaranty as a whole and not to any particular
provision of this Guaranty. Any reference herein to any of the
Loan Documents includes any and all alterations, amendments,
extensions, modifications, renewals, or supplements thereto or
thereof, as applicable. Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved
against the Lender Group or Guarantor, whether under any rule of
construction or otherwise. On the contrary, this Guaranty has
been reviewed by Guarantor, the Lender Group, and their
respective counsel, and shall be construed and interpreted
according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of the Lender Group
and Guarantor.
2. Guaranteed Obligations. Guarantor hereby
irrevocably and unconditionally guarantees to Lender Group, as
and for its own debt, until final and indefeasible payment
thereof has been made, (a) payment of the Guaranteed Obligations,
in each case when and as the same shall become due and payable,
whether at maturity, pursuant to a mandatory prepayment
requirement, by acceleration, or otherwise; it being the intent
of Guarantor that the guaranty set forth herein shall be a
guaranty of payment and not a guaranty of collection; and (b) the
punctual and faithful performance, keeping, observance, and
fulfillment by Borrower of all of the agreements, conditions,
covenants, and obligations of Borrower contained in the Loan
Agreement and in each of the other Loan Documents.
3. Continuing Guaranty. This Guaranty includes
Guaranteed Obligations arising under successive transactions
continuing, compromising, extending, increasing, modifying,
releasing, or renewing the Guaranteed Obligations, changing the
interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Guaranteed Obligations
after prior Guaranteed Obligations have been satisfied in whole
or in part. Guarantor hereby absolutely, knowingly,
unconditionally, and expressly waives and agrees not to assert
any right it has under Section 2815 of the California Civil Code,
or otherwise, to revoke this Guaranty as to future indebtedness.
If such a revocation is effective notwithstanding the foregoing
waiver, Guarantor acknowledges and agrees that (a) no such
revocation shall be effective until written notice thereof has
been received by the Agent (b) no such revocation shall apply to
any Guaranteed Obligations in existence on such date (including,
any subsequent continuation, extension, or renewal thereof, or
change in the interest rate,
<PAGE>
payment terms, or other terms and conditions thereof), (c) no such revocation
shall apply to any Guaranteed Obligations made or created after such date to the
extent made or created pursuant to a legally binding commitment
of Lender Group in existence on the date of such revocation, (d)
no payment by Guarantor, Borrower, or from any other source,
prior to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by
Borrower or from any source other than Guarantor, subsequent to
the date of such revocation, shall first be applied to that
portion of the Guaranteed Obligations as to which the revocation
is effective and which are not, therefore, guaranteed hereunder,
and to the extent so applied shall not reduce the maximum
obligation of Guarantor hereunder.
4. Performance Under This Guaranty. In the event
that Borrower fails to make any payment of any Guaranteed
Obligations on or before the due date thereof, or if Borrower
shall fail to perform, keep, observe, or fulfill any other
obligation referred to in clause (b) of Section 2 hereof in the
manner provided in the Loan Agreement or the other Loan
Documents, as applicable, Guarantor immediately shall cause such
payment to be made or each of such obligations to be performed,
kept, observed, or fulfilled.
5. Primary Obligations. This Guaranty is a primary
and original obligation of Guarantor and is an absolute,
unconditional, and continuing guaranty of payment and performance
which shall remain in full force and effect without respect to
future changes in conditions, including any change of law.
Guarantor agrees that it is directly, and jointly and severally
with any other guarantor of the Guaranteed Obligations, liable to
Lender Group, that the obligations of Guarantor hereunder are
independent of the obligations of Borrower or any other
guarantor, and that a separate action may be brought against
Guarantor whether such action is brought against Borrower or any
other guarantor or whether Borrower or any such other guarantor
is joined in such action. Guarantor agrees that its liability
hereunder shall be immediate and shall not be contingent upon the
exercise or enforcement by Lender Group of whatever remedies it
may have against Borrower or any other guarantor, or the
enforcement of any lien or realization upon any security Lender
Group may at any time possess. Guarantor agrees that any release
which may be given by Lender Group to Borrower or any other
guarantor shall not release Guarantor. Guarantor consents and
agrees that Lender Group shall be under no obligation (under
Sections 2899 or 3433 of the California Civil Code or otherwise)
to marshal any assets of Borrower or any other guarantor in favor
of Guarantor, or against or in payment of any or all of the
Guaranteed Obligations.
6. Waivers.
A. Guarantor absolutely, unconditionally,
knowingly, and expressly waives:
1. (1) notice of acceptance hereof; (2)
notice of any loans or other financial accommodations
made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations;
(3) notice of the amount of the Guaranteed Obligations,
subject, however, to Guarantor's right to make inquiry
of Lender Group
<page.
to ascertain the amount of the Guaranteed Obligations at
any reasonable time; (4) notice of any adverse change in
the financial condition of Borrower or of any other fact
that might increase Guarantor's risk hereunder;
(5) notice of presentment for payment, demand, protest,
and notice thereof as to
any instruments among the Loan Documents; (6) notice of
any unmatured event of default or event of default
under the Loan Agreement; and (7) all other notices
(except if such notice is specifically required to be
given to Guarantor hereunder or under any Loan Document
to which Guarantor is a party) and demands to which
Guarantor might otherwise be entitled.
2. its right, under Sections 2845 or 2850
of the California Civil Code, or otherwise, to require
Lender Group to institute suit against, or to exhaust
any rights and remedies which Lender Group has or may
have against, Borrower or any third party, or against
any collateral for the Guaranteed Obligations provided
by Borrower, Guarantor, or any third party. In this
regard, Guarantor agrees that it is bound to the
payment of all Guaranteed Obligations, whether now
existing or hereafter accruing, as fully as if such
Guaranteed Obligations were directly owing to Lender
Group by Guarantor. Guarantor further waives any
defense arising by reason of any disability or other
defense (other than the defense that the Guaranteed
Obligations shall have been fully and finally performed
and indefeasibly paid) of Borrower or by reason of the
cessation from any cause whatsoever of the liability of
Borrower in respect thereof.
3. (1) any rights to assert against Lender
Group any defense (legal or equitable), set-off,
counterclaim, or claim which Guarantor may now or at
any time hereafter have against Borrower or any other
party liable to Lender Group; (2) any defense, set-
off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or
future lack of perfection, sufficiency, validity, or
enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense Guarantor has to
performance hereunder, and any right Guarantor has to
be exonerated, provided by Sections 2819, 2822, or 2825
of the California Civil Code, or otherwise, arising by
reason of: the impairment or suspension of Lender
Group's rights or remedies against Borrower; the
alteration by Lender Group of the Guaranteed
Obligations; any discharge of Borrower's obligations to
Lender Group by operation of law as a result of Lender
Group's intervention or omission; or the acceptance by
Lender Group of anything in partial satisfaction of the
Guaranteed Obligations; (4) the benefit of any statute
of limitations affecting Guarantor's liability
hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of
limitations applicable to the Guaranteed Obligations
shall similarly operate to defer or delay the operation
of such statute of limitations applicable to
Guarantor's liability hereunder.
<PAGE>
B. Guarantor absolutely, unconditionally,
knowingly, and expressly waives any defense arising by reason of
or deriving from (i) any claim or defense based upon an election
of remedies by Lender Group including any defense based upon an
election of remedies by Lender Group under the provisions of
Sections 580a, 580b, 580d, and 726 of the California Code of
Civil Procedure or any similar law of California or any other
jurisdiction; or (ii) any election by Lender Group under
Bankruptcy Code Section 1111(b) to limit the amount of, or any
collateral securing, its claim against the Borrower. Pursuant to
California Civil Code Section 2856:
"Guarantor waives all rights and
defenses arising out of an election of
remedies by the creditor, even though that
election of remedies, such as a nonjudicial
foreclosure with respect to security for a
guaranteed obligation, has destroyed the
guarantor's rights of subrogation and
reimbursement against the principal by the
operation of Section 580(d) of the California
Code of Civil Procedure or otherwise.
"Guarantor waives all rights and
defenses arising out of an election of
remedies by the creditor, even though that
election of remedies, such as a nonjudicial
foreclosure with respect to security for a
guaranteed obligation, has destroyed
Guarantor's rights of subrogation and
reimbursement against Borrower by the
operation of Section 580(d) of the California
Code of Civil Procedure or otherwise."
"Guarantor waives all rights and
defenses that Guarantor may have because
Borrower's Obligations are secured by real
property. This means, among other things:
"(1) Bank may collect from Guarantor
without first foreclosing on any real or
personal property collateral pledged by
Borrower.
"(2) If Bank forecloses on any real
property collateral pledged by Borrower:
(A) The amount of the Guaranteed
Obligations may be reduced only by the price
for which that collateral is sold at the
foreclosure sale, even if the collateral is
worth more than the sale price.
(B) Bank may collect from
Guarantor even if Bank, by foreclosing on the
real property collateral, has destroyed any
right Guarantor may have to collect from
Borrower.
<PAGE>
"This is an unconditional and
irrevocable waiver of any rights and defenses
Guarantor may have because Borrower's
Obligations are secured by real property.
These rights and defenses include, but are
not limited to, any rights or defenses based
upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure."
If any of the Guaranteed Obligations at any time are secured by a
mortgage or deed of trust upon real property, Lender Group may
elect, in its sole discretion, upon a default with respect to the
Guaranteed Obligations, to foreclose such mortgage or deed of
trust judicially or nonjudicially in any manner permitted by law,
before or after enforcing this Guaranty, without diminishing or
affecting the liability of Guarantor hereunder except to the
extent the Guaranteed Obligations are repaid with the proceeds of
such foreclosure. Guarantor understands that (a) by virtue of
the operation of California's antideficiency law applicable to
nonjudicial foreclosures, an election by Lender Group
nonjudicially to foreclose such a mortgage or deed of trust
probably would have the effect of impairing or destroying rights
of subrogation, reimbursement, contribution, or indemnity of
Guarantor against Borrower or other guarantors or sureties, and
(b) absent the waiver given by Guarantor herein, such an election
would prevent Lender Group from enforcing this Guaranty against
Guarantor. Understanding the foregoing, and understanding that
Guarantor is hereby relinquishing a defense to the enforceability
of this Guaranty, Guarantor hereby waives any right to assert
against Lender Group any defense to the enforcement of this
Guaranty, whether denominated "estoppel" or otherwise, based on
or arising from an election by Lender Group nonjudicially to
foreclose any such mortgage or deed of trust. Guarantor
understands that the effect of the foregoing waiver may be that
Guarantor may have liability hereunder for amounts with respect
to which Guarantor may be left without rights of subrogation,
reimbursement, contribution, or indemnity against Debtor or other
guarantors or sureties. Guarantor also agrees that the "fair
market value" provisions of Section 580a of the California Code
of Civil Procedure shall have no applicability with respect to
the determination of Guarantor's liability under this Guaranty.
C. Until such time as all of the Guaranteed
Obligations have been fully, finally, and indefeasibly paid in
full in cash: (i) Guarantor hereby postpones any right of
subrogation Guarantor has or may have as against Borrower with
respect to the Guaranteed Obligations; (ii) Guarantor hereby
postpones any right to proceed against Borrower or any other
Person, now or hereafter, for contribution, indemnity,
reimbursement, or any other suretyship 0rights and claims,
whether direct or indirect, liquidated or contingent, whether
arising under express or implied contract or by operation of law,
which Guarantor may now have or hereafter have as against
Borrower with respect to the Guaranteed Obligations; and (iii)
Guarantor also hereby postpones any right to proceed or seek
recourse against or with respect to any property or asset of
Borrower.
D. WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR
HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY
WAIVES AND AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES
<PAGE>
ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815,
2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850,
CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c,
580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL
CODE.
7. Releases. Guarantor consents and agrees that,
without notice to or by Guarantor and without affecting or
impairing the obligations of Guarantor hereunder, Lender Group
may, by action or inaction:
A. compromise, settle, extend the duration or the
time for the payment of, or discharge the
performance of, or may refuse to or otherwise not
enforce the Loan Documents;
B. release all or any one or more parties to any one
or more of the Loan Documents or grant other
indulgences to Borrower in respect thereof;
C. amend or modify in any manner and at any time (or
from time to time) any of the Loan Documents; or
D. release or substitute any other guarantor, if any,
of the Guaranteed Obligations, or enforce,
exchange, release (by action or inaction), or
waive any security for the Guaranteed Obligations
(including, the collateral referred to in
Section 18 hereof) or any other guaranty of the
Guaranteed Obligations, or any portion thereof.
8. No Election. Lender Group shall have the right to
seek recourse against Guarantor to the fullest extent provided
for herein, and no election by Lender Group to proceed in one
form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Lender Group's right to
proceed in any other form of action or proceeding or against
other parties unless Lender Group has expressly waived such right
in writing. Specifically, but without limiting the generality of
the foregoing, no action or proceeding by Lender Group under any
document or instrument evidencing the Guaranteed Obligations
shall serve to diminish the liability of Guarantor under this
Guaranty except to the extent that Lender Group finally and
unconditionally shall have realized indefeasible payment by such
action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations
shall not be considered indefeasibly paid for purposes of this
Guaranty unless and until all payments to Lender Group are no
longer subject to any right on the part of any person, including
Borrower, Borrower as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of
Borrower's assets to invalidate or set aside such payments or to
seek to recoup the amount of such payments or any portion
thereof, or to declare same to be fraudulent or preferential.
Upon such full and final performance and indefeasible payment of
the Guaranteed Obligations whether by Guarantor or Borrower,
Lender Group shall have no obligation whatsoever to transfer or
assign its interest in the Loan Documents to Guarantor. In the
<PAGE>
event that, for any reason, any portion of such payments to
Lender Group is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation
intended to be satisfied thereby shall be revived and continued
in full force and effect as if said payment or payments had not
been made, and Guarantor shall be liable for the full amount
Lender Group is required to repay plus any and all costs and
expenses (including attorneys' fees) paid by Lender Group in
connection therewith.
10. Financial Condition of Borrower. Guarantor
represents and warrants to Lender Group that Guarantor is
currently informed of the financial condition of Borrower and of
all other circumstances which a diligent inquiry would reveal and
which bear upon the risk of nonpayment of the Guaranteed
Obligations. Guarantor further represents and warrants to Lender
Group that Guarantor has read and understands the terms and
conditions of the Loan Agreement and the other Loan Documents.
Guarantor hereby covenants that Guarantor will continue to keep
informed of Borrower's financial condition, the financial
condition of other guarantors, if any, and of all other
circumstances which bear upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations.
11. Guarantor's Representations, Warranties and
Covenants. Guarantor represents and warrants to Lender Group
that it is a holding company and does not conduct any business
operations. Presently, Borrower is the only subsidiary of
Guarantor. In addition, Guarantor agrees that it will not take
any of the following actions without the prior written consent of
75% of the members, in dollar amount, of the Lender Group: (a)
organize any additional subsidiaries; (b) purchase the assets or
stock of any other Person; or (c) incur any Indebtedness or Liens
upon any of its assets.
12. Payments; Application. All payments to be made
hereunder by Guarantor shall be made in lawful money of the
United States of America at the time of payment, shall be made in
immediately available funds, and shall be made without deduction
(whether for taxes or otherwise) or offset. All payments made by
Guarantor hereunder shall be applied as follows: first, to all
costs and expenses (including attorneys' fees) incurred by Lender
Group in enforcing this Guaranty or in collecting the Guaranteed
Obligations; second, to all accrued and unpaid interest, premium,
if any, and fees owing to Lender Group constituting Guaranteed
Obligations; and third, to the balance of the Guaranteed
Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to
pay, on demand, all reasonable attorneys' fees and all other
costs and expenses which may be incurred by Lender Group in the
enforcement of this Guaranty (including those brought relating to
proceedings pursuant to 11 U.S.C.) or in any way arising out of,
or consequential to the protection, assertion, or enforcement of
the Guaranteed Obligations (or any security therefor), whether or
not suit is brought.
14. Indemnification. Guarantor agrees to indemnify
Lender Group and hold Lender Group harmless against all
obligations, demands, or liabilities asserted by any party and
against all losses in any way suffered, incurred, or paid by
<PAGE>
Lender Group as a result of or in any way arising out of,
following, or consequential to Lender Group's transactions with
Borrower.
15. Notices. All notices or demands by Guarantor or
Lender Group to the other relating to this Guaranty shall be in
writing and either personally served or sent by registered or
certified mail, postage prepaid, return receipt requested,
overnight delivery service, or by telefacsimile, and shall be
deemed to be given for purposes of this Guaranty on the earlier
of the date of actual receipt or three days after the deposit
thereof in the mail. Unless otherwise specified in a notice sent
or delivered in accordance with the provisions of this section,
such writing shall be sent, if to Guarantor, at Guarantor's
address set forth on the signature page hereof, and if to Lender
Group, then to Agent as follows:
Foothill Capital Corporation
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, CA 90025-3333
Telefacsimile number: (310) 575-3435
Phone number: (310) 996-7000
16. Cumulative Remedies. No remedy under this
Guaranty or under any Loan Document is intended to be exclusive
of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given
hereunder or under any Loan Document, and those provided by law
or in equity. No delay or omission by Lender Group to exercise
any right under this Guaranty shall impair any such right nor be
construed to be a waiver thereof. No failure on the part of
Lender Group to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
17. Books and Records. Guarantor agrees that Lender
Group's books and records showing the account between Lender
Group and Borrower shall be admissible in any action or
proceeding and shall be binding upon Guarantor for the purpose of
establishing the items therein set forth and shall constitute
prima facie proof thereof.
18. Collateral. The obligations of Guarantor
hereunder are secured, as provided in the Guaranty Security
Agreement.
19. Severability of Provisions. Any provision of this
Guaranty which is prohibited or unenforceable under applicable
law, shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof.
20. Entire Agreement; Amendments. This Guaranty
constitutes the entire agreement between Guarantor and Lender
Group pertaining to the subject matter contained herein. This
Guaranty may not be altered, amended, or modified, nor may any
provision hereof be waived or noncompliance therewith consented
<PAGE>
to, except by means of a writing executed by both Guarantor and
Lender Group. Any such alteration, amendment, modification,
waiver, or consent shall be effective only to the extent
specified therein and for the specific purpose for which given.
No course of dealing and no delay or waiver of any right or
default under this Guaranty shall be deemed a waiver of any
other, similar or dissimilar right or default or otherwise
prejudice the rights and remedies hereunder.
21. Successors and Assigns. The death of Guarantor
shall not terminate this Guaranty. This Guaranty shall be
binding upon Guarantor's heirs, executors, administrators,
representatives, successors and assigns and shall inure to the
benefit of the successors and assigns of Lender Group; provided,
however, Guarantor shall not assign this Guaranty or delegate any
of its duties hereunder without Lender Group's prior written
consent. Any assignment without the consent of Lender Group
shall be absolutely void. In the event of any assignment or
other transfer of rights by Lender Group, the rights and benefits
herein conferred upon Lender Group shall automatically extend to
and be vested in such assignee or other transferee.
22. Intentionally Omitted.
23. Choice of Law and Venue. THE VALIDITY OF THIS
GUARANTY, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND
THE RIGHTS OF GUARANTOR AND LENDER GROUP, SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA. GUARANTOR HEREBY AGREES THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
GUARANTY SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, OR, AT THE SOLE OPTION OF LENDER GROUP, IN ANY OTHER
COURT IN WHICH LENDER GROUP SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. GUARANTOR HEREBY EXPRESSLY WAIVES ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION.
24. Waiver of Jury Trial. GUARANTOR HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION, CAUSE OF ACTION,
CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE DEALINGS OF GUARANTOR AND LENDER GROUP WITH
RESPECT TO THIS GUARANTY, OR THE TRANSACTIONS RELATED HERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE. GUARANTOR HEREBY
AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND
THAT LENDER GROUP MAY FILE AN ORIGINAL COUNTERPART OF THIS
SECTION WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF
<PAGE>
THE CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
25. Waivers, Consents. Guarantor warrants and agrees
that each of the waivers and consents set forth herein is made
after consultation with legal counsel and with full knowledge of
its significance and consequence, with the understanding that
events giving rise to any defense or right waived may diminish,
destroy, or otherwise adversely affect rights which Guarantor
otherwise may have against Borrower, Lender Group, or others, or
against any collateral, and that, under the circumstances, the
waivers and consents herein given are reasonable and not contrary
to public policy or law. If any of the waivers or consents
herein are determined to be unenforceable under applicable law,
such waivers and consents shall be effective to the maximum
extent permitted by law.
IN WITNESS WHEREOF, Guarantor has executed and
delivered this Guaranty as of the date set forth in the first
paragraph hereof.
ROSE'S HOLDINGS, INC.,
a Delaware corporation
By:/s/Jeanette Peters
Title: Senior VP and CFO
Guarantor's Address:218 South Garnett Street
Henderson, North Carolina 27536
Telephone: (919) 430-2100
Telefacsimile: (919) 430-2930
SECURITY AGREEMENT
This SECURITY AGREEMENT (as may hereafter be
amended, supplemented or restated from time-to-time in
accordance with the terms hereof, this "Agreement"), dated as
of August 6, 1997 is entered into by and between ROSE'S
HOLDINGS, INC., a Delaware corporation ("Debtor"), and
FOOTHILL CAPITAL CORPORATION, a California corporation, as
collateral agent for the Lenders ("Agent"), in light of the
following facts:
R E C I T A L S
A. Concurrently herewith Borrower is becoming a
wholly owed subsidiary of Debtor;
B. Debtor has executed and delivered the Guaranty
to Agent on behalf of the Lender Group; and
C. Debtor is executing and delivering to Agent
this Agreement to secure the Secured Obligations.
A G R E E M E N T
NOW THEREFORE, in consideration of the mutual
promises, covenants, conditions, representations, and
warranties hereinafter set forth and for other good and
valuable consideration, the parties hereto mutually agree as
follows:
1. Definitions and Construction.
1 Definitions. All initially capitalized
terms used but not defined in this Agreement shall have the
meanings assigned to such terms in the Loan Agreement. In
addition, the following terms, as used in this Agreement, have
the following meanings:
"Bankruptcy Code" means Bankruptcy Reform
Act of 1978 (11 U.S.C. Sections 101-1330), as amended or
supplemented from time to time, and any successor statute, and
any and all rules issued or promulgated in connection
therewith.
"Borrower" means Rose's Stores, Inc., a
Delaware corporation.
"Code" means the California Uniform
Commercial Code, as amended and supplemented from time to
time, and any successor statute.
<PAGE>
"Collateral" means all of the following:
(i) All of Debtor's presently owned or
hereafter acquired Accounts, Equipment, General Intangibles,
Inventory, Negotiable Collateral, any money or other assets of
Debtor that now or hereafter come into the possession, custody
or control of Agent;
(ii) 100 shares of the outstanding Common
Stock of the Borrower which share constitutes 100% of the
capital stock of the Borrower and all of the hereafter-
acquired shares of Common Stock of the Borrower in which
Debtor has an interest at any time while this Agreement is in
effect (the "Shares");
(iii) All of Debtor's presently
existing and hereafter arising stock subscription warrants,
stock options, or other rights to the Borrower's capital stock
and all rights represented thereby (the "Options"); and
(iv) The proceeds of each of the
foregoing, including any and all dividends, cash, stock,
instruments, and other property from time to time received,
receivable, or otherwise distributed in respect of or in
exchange for the Shares or Options (the "Proceeds").
"Event of Default" has the meaning given
to such term in Section 10.
"Guaranty" means Debtor's Continuing
Guaranty, of even date herewith, of the obligations of
Borrower to the Lender Group.
"Secured Obligations" means all of the
present and future obligations of Debtor to the Lender Group
pursuant to the Guaranty.
"'33 Act" means the Securities Act of
1933, as amended and supplemented from time to time, and any
successor statute, and any and all rules promulgated in
connection therewith.
2 Construction. Unless the context of this
Agreement clearly requires otherwise, references to the plural
include the singular, references to the singular include the
plural, and the term "including" is not limiting. The words
"hereof," "herein," "hereby," "hereunder," and other similar
terms refer to this Agreement as a whole and not to any
particular provision of this Agreement. Any reference herein
to any document includes any and all alterations, amendments,
extensions, modifications, renewals, or supplements thereto or
thereof, as applicable. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved
against Agent or Debtor, whether under any rule of construc-
tion or otherwise. On the contrary, this Agreement has been
reviewed by Debtor, Agent, and their respective counsel, and
shall be construed and interpreted according to the ordinary
<PAGE>
meaning of the words used so as to fairly accomplish the
purposes and intentions of Agent and Debtor.
2. Pledge. As security for the prompt and
complete payment and performance of the Secured Obligations,
Debtor hereby delivers, pledges, and grants to Agent a
continuing security interest in all of Debtor's now-owned or
hereafter-acquired right, title, and interest in and to the
Collateral. All certificates or instruments representing or
evidencing the Collateral shall be delivered promptly to and
held by Agent pursuant hereto and shall be in suitable form
for transfer or assignment in blank, all in form and substance
satisfactory to Agent.
3. Further Assurances. Debtor agrees that it
shall cooperate with Agent and shall execute and deliver, or
cause to be executed and delivered, to Agent all stock powers,
proxies, assignments, financing statements, instruments, and
other documents, and shall take all further action, at the
expense of Debtor, from time to time requested by Agent, in
order to maintain a continuing, first-priority, perfected
security interest in the Collateral in favor of Agent, and to
enable Agent to exercise and enforce its rights and remedies
hereunder with respect to the Collateral, and Debtor agrees
that it shall execute and deliver to Agent at Agent's request
any further applications, agreements, documents and instru-
ments, and shall perform any and all acts deemed necessary by
Agent to carry into effect the terms, conditions, and
provisions of this Agreement and the transactions connected
herewith. Should Debtor fail to execute or deliver any such
applications, agreements, documents, financing statements and
instruments, or to perform any such acts, Debtor acknowledges
that Agent may execute and deliver the same and perform such
acts in the name of Debtor and on its behalf as its attorney-
in-fact in accordance with Section 13.
4. Agent's Duties. Agent shall not have any
duties with respect to the Collateral other than the duty to
use reasonable care if the Collateral is in its possession.
In accordance with Section 9207 of the Code, Agent shall be
deemed to have used reasonable care if it observes
substantially the same standard of care with respect to the
custody or preservation of the Collateral as it observes with
respect to similar assets owned by Agent. Without limiting
the generality of the foregoing, Agent shall not be under any
obligation to take any steps to preserve rights in the
Collateral against any other parties, to sell the same if it
threatens to decline in value, or to exercise any rights
represented thereby (including rights with respect to calls,
conversions, exchanges, maturities, or tenders); provided,
however, that Agent may, at its option, do so, and any and all
expenses incurred in connection therewith shall be for the
account of Debtor.
5. Voting Rights; Dividends; Etc. During the term
of this Agreement, and as long as no Event of Default has
occurred and is continuing:
1 Debtor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the
Shares or any part thereof; provided, however, no vote shall
<PAGE>
be cast or any consent, waiver or ratification given or any
action taken which would violate or be inconsistent with the
terms of this Agreement, the Loan Agreement or any other
instrument or agreement referred to therein or herein, or
which could have the effect of impairing the value of the
Collateral or any part thereof or the position or interest of
Agent therein.
2 Debtor shall be entitled to receive and
retain any and all dividends and distributions paid in respect
of the Shares; provided, however, that any and all:
(a) dividends and distributions paid or
payable other than in cash in respect of, and any and all
additional shares or instruments or other property received,
receivable, or otherwise distributed in respect of, or in
exchange for the Shares;
(b) dividends and distributions paid or
payable in cash in respect of any of the Shares in connection
with a partial or total liquidation or dissolution, merger,
consolidation of the Borrower, or any exchange of stock,
conveyance of assets, or similar corporate reorganization; and
(c) cash paid with respect to, payable,
or otherwise distributed on redemption of, or in exchange for,
any of the Shares,
shall be forthwith delivered to Agent to hold as Collateral
and shall, if received by Debtor, be received in trust for the
benefit of Agent, be segregated from the other property or
funds of Debtor, and be forthwith delivered to Agent as
Collateral in the same form as so received (with any necessary
endorsement), and, if deemed appropriate by Agent, Debtor
shall take such actions, including the actions described in
Section 2, as Agent may require.
6. Representations, Warranties, and Covenants.
Debtor warrants, represents, and covenants that:
1 Debtor is a corporation duly organized,
validly existing and in good standing under the laws of
Delaware.
2 The execution, delivery and performance of
this Agreement are within Debtor's powers, are not in conflict
with the terms of the Certificate of Incorporation or By-Laws
or other organizational agreement or instrument of Debtor, and
will not result in a breach of or constitute a default under
any material contract, obligation, indenture or other
instrument to which Debtor is a party or by which Debtor is
bound; and there is no material law, rule or regulation, nor
is there any judgment, decree or order of any court or
governmental authority binding on Debtor which would be
contravened by the execution, delivery, performance or
enforcement of this Agreement.
<PAGE>
3 Debtor has taken all corporate action
necessary to authorize the execution and delivery of this
Agreement, and the consummation of the transactions
contemplated hereby and thereby. Upon its execution and
delivery in accordance with the terms hereof, this Agreement
will constitute legal, valid and binding agreements and
obligations of Debtor, enforceable against Debtor in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, and similar laws and
equitable principles affecting the enforcement of creditors'
rights generally.
4 Other than United States federal laws and
state securities laws and rules, there are no restrictions
upon the transfer of any of the Collateral to or by Agent;
Debtor is the sole beneficial owner of the Collateral, and
Debtor has the right to pledge and grant a security interest
in or otherwise transfer such Collateral free of any
encumbrances or rights of third parties.
5 All of the Collateral shall remain free
from all liens, claims, encumbrances, and purchase-money or
other security interests except as created hereby. Debtor
shall not, without Agent's prior written consent, sell or
otherwise dispose of any of the Collateral.
6 The execution and delivery of this
Agreement, and the delivery to Agent of the certificate
evidencing the Shares creates a valid, perfected, and first-
priority security interest in the Collateral in favor of
Agent, and all actions necessary or desirable to such
perfection have been duly taken.
7 No authorization or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required either: (a) for the grant by
Debtor of the security interest granted hereby or for the
execution, delivery, or performance of this Agreement by
Debtor; (b) for the perfection of or exercise by Agent of its
rights and remedies hereunder (except as may have been taken
by or at the direction of Debtor or as may be required in
connection with a disposition of the Collateral by laws
affecting the offering and sale of securities generally); or
(c) for the exercise by Agent of the voting or other rights
provided for in this Agreement or the remedies in respect of
the Collateral pursuant to this Agreement (except as may be
required in connection with a disposition of the Collateral by
laws affecting the offering and sale of securities generally)
and any applicable antitrust laws.
8 The Borrower presently has issued and
outstanding 100 shares of Common Stock, which shares are owned
by Debtor.
9 There are no presently existing Options.
10 The Shares have been duly and validly
issued by the Borrower, and they are fully-paid and
nonassessable.
<PAGE>
11 Debtor has made its own arrangements for
keeping informed of changes or potential changes affecting the
Collateral (including, but not limited to, rights to convert,
rights to subscribe, payment of dividends, reorganization or
other exchanges, tender offers, and voting rights), and Debtor
agrees that Agent shall not have any responsibility or
liability for informing Debtor of any such changes or
potential changes or for taking any action or omitting to take
any action with respect thereto.
7. Share Adjustments. In the event that during
the term of this Agreement, any reclassification,
readjustment, or other change is declared or made in the
capital structure of Borrower, or any Option is exercised, all
new substituted and additional shares, options, or other
securities, issued or issuable to Debtor by reason of any such
change or exercise shall be delivered to and held by Agent
under the terms of this Agreement in the same manner as the
Collateral originally pledged hereunder.
8. Options. In the event that during the term of
this Agreement Options shall be issued or exercised in connec-
tion with the Collateral, such Options acquired by Debtor
shall be immediately assigned by Debtor to Agent and all new
shares or other securities so acquired by Debtor shall also be
immediately assigned to Agent to be held under the terms of
this Agreement in the same manner as the Collateral originally
pledged hereunder.
9. Consent. Debtor hereby consents that, from
time to time, before or after the occurrence or existence of
any Event of Default, with or without notice to or assent from
Debtor, any other security at any time held by or available to
Agent for any of the Secured Obligations or any other security
at any time held by or available to Agent of any other person,
firm, or corporation secondarily or otherwise liable for any
of the Secured Obligations, may be exchanged, surrendered, or
released and any of the Secured Obligations may be changed,
altered, renewed, extended, continued, surrendered,
compromised, waived, or released, in whole or in part, as
Agent may see fit. Debtor shall remain bound under this
Agreement notwithstanding any such exchange, surrender,
release, alteration, renewal, extension, continuance,
compromise, waiver, or inaction, or extension of further
credit.
10. Event of Default. The occurrence of an Event
of Default under, and as defined in, the Loan Agreement shall
constitute an event of default ("Event of Default") under this
Agreement.
11. Remedies Upon Default. Upon the occurrence and
continuance of an Event of Default, Agent shall have, in
addition to any other rights given by law or in this
Agreement, in the Loan Agreement, or in any other agreement
between Agent and Debtor, all of the rights and remedies with
respect to the Collateral of a secured party under the Code,
and also shall have, without limitation, the following rights,
<PAGE>
which Debtor hereby agrees to be commercially reasonable:
1 to transfer all or any part of the Shares
into the Agent's name or the name of its nominee or nominees;
2 all rights of Debtor to exercise the
voting and other consensual rights that it would otherwise be
entitled to exercise pursuant to Section 5.1 and to receive
the dividends and distributions that it would otherwise be
authorized to receive and retain pursuant to Section 5.2
shall, at Agent's option, cease, and all such rights shall, at
Agent's option, thereupon become vested in Agent, and Agent
shall, at its option, thereupon have the sole right to
exercise such voting and other consensual rights and to
receive and hold as Collateral such dividends and interest
payments. Any payments received by Debtor contrary to the
provisions of this Section shall be held in trust by Debtor
for the benefit of Agent, shall be segregated from other funds
of Debtor, and shall be promptly paid over to Agent, with any
necessary endorsement;
3 to vote the Shares (whether or not
transferred into the name of the Agent), and give all
consents, waivers and ratifications in respect of the
Collateral and otherwise act with respect thereto as though it
were the outright owner thereof; DEBTOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS AGENT THE PROXY AND ATTORNEY-IN-FACT
OF DEBTOR, COUPLED WITH AN INTEREST, WITH FULL POWER OF
SUBSTITUTION TO DO SO; SUCH PROXY SHALL CONTINUE IN FULL FORCE
AND EFFECT AND TERMINATE UPON THE SOONER TO OCCUR OF: (a) THE
INDEFEASIBLE PAYMENT IN FULL OF THE SECURED OBLIGATIONS; AND
(b) JULY 31, 2007.
4 at any time or from time to time, to sell,
assign and deliver, or grant options to purchase, all or any
part of the Collateral, or any interest therein, at any public
or private sale, without demand of performance, advertisement
or notice of intention to sell or of the time or place of sale
or adjournment thereof or to redeem or otherwise (all of which
are hereby waived by Debtor), for cash, on credit or for other
property, for immediate or future delivery without any assump-
tion of credit risk, and for such price or prices and on such
terms as the Agent in its absolute discretion may determine;
provided, that at least five days notice of the time and place
of any such sale shall be given to Debtor. Agent shall not be
obligated to make any such sale of Collateral regardless of
whether any such notice of sale has therefore been given.
Debtor hereby waives any other requirement of notice, demand,
or advertisement for sale, to the extent permitted by law.
Debtor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with
respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling the
Collateral and any other security for the Secured Obligations
or otherwise. At any such sale, unless prohibited by
applicable law, Agent may bid for and purchase all or any part
of the Collateral so sold free from any such right or equity
<PAGE>
of redemption. Agent shall not be liable for failure to
collect or realize upon any or all of the Collateral or for
any delay in so doing nor shall Agent be under any obligation
to take any action whatsoever with regard thereto;
5 to buy the Collateral, in its own name, or
in the name of a designee or nominee. Agent shall have the
right to execute any document or form, in its name or in the
name of the Debtor, that may be necessary or desirable in
connection with such sale of the Collateral.
6 to sell the Shares or Options by a private
placement, restricting bidders and prospective purchasers to
those who will represent and agree that they are purchasing
for investment only and not for distribution. In so doing,
Agent may solicit offers to buy the Shares or Options, or any
part of it for cash, from a limited number of investors deemed
by Agent, in its reasonable credit judgment, to be responsible
parties who might be interested in purchasing the Shares or
Options. If Agent shall solicit such offers from not less
than four such investors, then the acceptance by Agent of the
highest offer obtained therefor shall be deemed to be a
commercial reasonable method of disposition of such Shares or
Options, even though the sales price established and/or
obtained may be substantially less than the price that would
be obtained pursuant to a public offering. Notwithstanding
the foregoing, should Agent determine that, prior to any
public offering of any securities contained in the Collateral,
such securities should be registered under the '33 Act and/or
registered or qualified state law, and that such registration
and/or qualification is not practical, Debtor agrees that it
will be commercially reasonable if a private sale is arranged
so as to avoid a public offering even if offers are solicited
from fewer than four investors, and even though the sales
price established and/or obtained may be substantially less
than the price that would be obtained pursuant to a public
offering.
12. Indefeasible Payment. The Secured Obligations
shall not be considered indefeasibly paid for purposes of this
Agreement unless and until all payments to Agent and Lenders
are no longer subject to any right on the part of any Person,
including Debtor, Debtor as a debtor in possession, or any
trustee (whether appointed under the Bankruptcy Code or
otherwise) of Debtor or any of Debtor's Assets, to invalidate
or set aside such payments or to seek to recoup the amount of
such payments or any portion thereof, or to declare same to be
fraudulent or preferential. In the event that, for any
reason, any portion of such payments to Agent is set aside or
restored, whether voluntarily or involuntarily, after the
making thereof, then the obligation intended to be satisfied
thereby shall be revived and continued in full force and
effect as if said payment or payments had not been made.
<PAGE>
13. Agent as Debtor's Attorney-in Fact. Debtor
hereby irrevocably appoints Agent as its attorney-in-fact to
arrange for the transfer, at any time after the occurrence and
during the continuance of an Event of Default, of the
Collateral on the books of the Borrower to the name of Agent
or to the name of Agent's nominee. Debtor further authorizes
Agent to perform any and all acts which Agent deems necessary
for the protection and preservation of the Collateral or of
the value of Agent's security interest therein, including but
not limited to receiving income thereon as additional security
hereunder, all at Debtor's expense, and Debtor agrees to repay
Agent promptly upon demand any amounts expended hereunder by
Agent, together with interest thereon. Debtor further grants
to Agent a power of attorney coupled with an interest to
execute all agreements, forms, applications, documents and
instruments and to take all actions and do all things as could
be executed, taken, or done by Debtor in connection with the
protection and preservation of the Collateral or this
Agreement if Debtor does not timely do so. This power of
attorney is irrevocable and coupled with an interest, and
authorizes Agent to act for Debtor in connection with the
matters described herein without notice to or demand upon
Debtor.
14. General Provisions.
1 Cumulative Remedies; No Prior Recourse to
Collateral. The enumeration herein of Agent's rights and
remedies is not intended to be exclusive, and such rights and
remedies are in addition to and not by way of limitation of
any other rights or remedies that the Agent may have under the
Loan Agreement, the Loan Documents, the Code, or other
applicable law. Agent shall have the right, in its sole
discretion, to determine which rights and remedies are to be
exercised and in which order. The exercise of one right or
remedy shall not preclude the exercise of any others, all of
which shall be cumulative.
2 No Implied Waivers. No act, failure, or
delay by Agent shall constitute a waiver of any of its rights
and remedies. No single or partial waiver by Agent of any
provision of this Agreement or any other Loan Document, or of
a breach or default hereunder or thereunder, or of any right
or remedy which Agent may have, shall operate as a waiver of
any other provision, breach, default, right, or remedy or of
the same provision, breach, default, right, or remedy on a
future occasion. No waiver by Agent shall affect its rights
to require strict performance of this Agreement.
3 Notices. All notices or demands by any
party hereto to the other party and relating to this Agreement
shall be sent in accordance with the terms of Section 15 of
the Guaranty.
4 Successors and Assigns. This Agreement
shall bind the successors and assigns of Debtor, and shall
inure to the benefit of the successors and assigns of Agent;
provided, however, that Debtor may not assign this Agreement
nor delegate any of its duties hereunder without Agent's prior
written consent and any prohibited assignment shall be
<PAGE>
absolutely void. Agent may assign this Agreement and its
rights and duties hereunder and no consent or approval by
Debtor is required in connection with any such assignment.
Agent reserves the right to sell, assign, transfer, negotiate,
or grant participations in all or any part of, or any interest
in Agent's rights and benefits hereunder.
5 Section Headings. Headings and numbers
have been set forth herein for convenience only. Unless the
contrary is compelled by the context, everything contained in
each section applies equally to this entire Agreement.
6 Amendments in Writing. This Agreement
cannot be changed or terminated orally, but only by a writing
signed by each party hereto. All prior agreements,
understandings, representations, warranties, and negotiations,
if any, are merged into this Agreement.
7 Counterparts; Telefacsimile Execution.
This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall
be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also
shall deliver a manually executed counterpart of this
Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
8 Termination By Agent. After termination
of the Loan Agreement and when Agent and Lenders have received
payment and performance, in full, of the Secured Obligations,
Agent shall execute and deliver to Debtor a termination of all
of the security interests granted by Debtor hereunder and, to
the extent they have been delivered to Agent and not disposed
of in accordance with this Agreement, certificates evidencing
the Share.
9 Governing Law; Severability of Provisions.
This Agreement shall be deemed to have been made in the State
of California and the validity, enforceability, construction,
interpretation and enforcement of this Agreement and the
rights of the parties hereto shall be determined under,
governed by and construed in accordance with the laws of the
State of California without regard to the principles of
conflicts of law; provided, however, the respective rights of
the parties hereto in the Collateral, including voting the
Shares, transfer of the Shares and proxy rights, shall be
governed by the corporate laws of the Commonwealth of
Delaware, as applicable, to the extent either such law is
applicable to such rights. If any provision of this Agreement
or its exhibits shall be determined to be invalid, void or
illegal, such provision shall be construed and amended in a
manner which would permit its enforcement, but in no event
shall such provision affect, impair or invalidate any other
provision hereof.
<PAGE>
10 JURISDICTION AND VENUE; WAIVER OF JURY
TRIAL. THE PARTIES HERETO AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE OR FEDERAL COURT LOCATED
IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. THE
PARTIES HERETO HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT TO OR IN ANY WAY
RELATED TO THIS AGREEMENT. THE PARTIES HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION OF THE
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE OTHER PARTY HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first written above.
ROSE'S HOLDINGS, INC.,
a Delaware corporation
By:/s/ Jeanette Peters
Name: Jeanette Peters
Title: Senior VP and CFO
FOOTHILL CAPITAL CORPORATION,
a California corporation, as collateral
agent for the Lenders
By: Signature not shown
Title:
AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT
This Amendment Number Two to Loan and Security Agreement
("Amendment") is entered into as of August 6, 1997 by and among
ROSE'S STORES, INC., a Delaware corporation ("Borrower"), on the
one hand, and the financial institutions listed on the signature
pages hereof (such financial institutions are referred to
collectively as the "Lenders"), PPM FINANCE, INC., a Delaware
corporation, as Co-Agent for the Lenders ("Co-Agent"), and
FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent
and Collateral Agent for the Lenders ("Agent"), on the other
hand, in light of the following:
A. Borrower, Lenders, Agent and Co-Agent have previously
entered into that certain Loan and Security Agreement, dated as
of May 21, 1996, as amended by Amendment Number One to Loan and
Security Agreement as of June 26, 1996 (the "Agreement").
B. Borrower, Lenders, Agent and Co-Agent desire to further
amend the Agreement as provided for and on the conditions herein.
NOW, THEREFORE, Borrower, Lenders, Agent and Co-Agent hereby
amend and supplement the Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used in this
Amendment shall have the meanings given to them in the Agreement
unless specifically defined herein.
2. AMENDMENTS.
(a) The definition of "Change of Control" in Section 1.1
of the Agreement is hereby amended to read as follows:
" Change of Control shall be deemed to have occurred
at such time as: a "person" or "group" (within the meaning
of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly of more than 30% of the total
voting power of all classes of stock then outstanding of
Holdings normally entitled to vote in the election of
directors or if Borrower ceases to be a wholly-owned
subsidiary of Holdings."
(b) Section 1.1 of the Agreement is hereby amended to add
the following definition:
" Holdings means Rose's Holdings, Inc., a Delaware
corporation."
<PAGE>
(c) Section 7.12 of the Agreement is hereby amended to
read as follows:
"7.12 Distributions and Advances to
Holdings. Except for payments to Holdings, in an
amount not to exceed $1,000,000 in any 12 month
period, for purposes of paying: (a) directors' and
officers' liability insurance, (b) professional fees
to Holdings' accountants and attorneys, (c) payment
of directors' fees for outside directors, and payment
of travel expenses relating to board of directors'
meetings for both officers and directors of Holdings,
make any advances to Holdings or any distributions,
or declare or pay any dividends (in cash or other
property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrowers' capital
stock, of any class, whether now or hereafter
outstanding."
(d) Section 8 of the Agreement is hereby amended by
adding the following subsection:
"8.14 If the obligations of Holdings under its
guaranty are limited or terminated by operation of law or
by Holdings, or if Holdings is in default under its
guaranty or any security documents securing such guaranty,
or if Holdings becomes the subject of an Insolvency
Proceeding."
3. CONDITIONS PRECEDENT. The effectiveness of this Amendment
is expressly conditioned upon: (a) receipt by Agent of this
Amendment, duly executed by Borrower; and (b) the execution and
delivery by Rose's Holdings, Inc. of a Continuing Guaranty of
Borrower's Obligations to the Lending Group together with a
Security Agreement and related UCC financing statements securing
Rose's Holdings, Inc.'s obligations under the Continuing
Guaranty.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms
to Agent, Co-Agent and Lenders that all of Borrower's
representations and warranties set forth in the Agreement are
true, complete and accurate in all respects as of the date
hereof.
5. NO DEFAULTS. Borrower hereby affirms to Agent, Co-Agent
and Lenders that no Event of Default has occurred and is
continuing as of the date hereof.
6. LIMITED EFFECT. In the event of a conflict between the
terms and provisions of this Amendment and the terms and
provisions of the Agreement, the terms and provisions of this
Amendment shall govern. In all other respects, the Agreement, as
amended and supplemented hereby, shall remain in full force and
effect.
7. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties
on separate counterparts, each of which when so executed and
delivered shall be deemed to be an original. All such
<PAGE>
counterparts, taken together, shall constitute but one and the
same Amendment. This Amendment shall become effective upon the
execution of a counterpart of this Amendment by each of the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first set forth above.
ROSE'S STORES, INC.,
a Delaware corporation
By:/s/ Jeanette Peters
Title: Senior VP and CFO
PPM FINANCE, INC.,
a Delaware corporation, a Co-Agent
By: Signature not shown
Title:
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent and a
Lender
By: Signature not shown
Title
JACKSON NATIONAL LIFE INSURANCE COMPANY, a
Michigan life insurance company, in its
capacity as a Lender
By PPM AMERICA, INC.,
its attorney-in-fact
By: Signature not shown
Title:
WELLS FARGO BANK, N.A.
By: Signature not shown
Title:
<PAGE>
CONGRESS FINANCIAL CORPORATION
(NEW ENGLAND)
By: Signature not shown
Title:
FREMONT FINANCIAL CORPORATION
By: Signature not shown
Title:
FINOVA CAPITAL CORPORATION
By: Signature not shown
Title:
SANWA BUSINESS CREDIT CORPORATION
By: Signature not shown
Title:
COAST BUSINESS CREDIT, A DIVISION OF
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By: Signature not shown
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Rose's
Holdings, Inc., Form 10-Q for the quarter ended July 26, 1997, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000085149
<NAME> ROSE'S HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-26-1997
<CASH> 595
<SECURITIES> 0
<RECEIVABLES> 11,784
<ALLOWANCES> 464
<INVENTORY> 156,442
<CURRENT-ASSETS> 171,398
<PP&E> 10,706
<DEPRECIATION> 2,014
<TOTAL-ASSETS> 180,734
<CURRENT-LIABILITIES> 110,517
<BONDS> 0
0
0
<COMMON> 35,000
<OTHER-SE> 646
<TOTAL-LIABILITY-AND-EQUITY> 180,734
<SALES> 284,933
<TOTAL-REVENUES> 287,291
<CGS> 217,664
<TOTAL-COSTS> 217,664
<OTHER-EXPENSES> (1,012)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,273
<INCOME-PRETAX> (5,294)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,294)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,294)
<EPS-PRIMARY> (.61)
<EPS-DILUTED> (.61)
</TABLE>
