GENERAL SECURITY AGREEMENT
dated as of April 29, 1997
by
ROSE'S STORES, INC.,
to
X.X. XXXXXXX & ASSOCIATES, INC.,
as Trustee
PAGE
TABLE OF CONTENTS
Page No.
SECTION 1. Definitions . . . . . . . . . . . . . . . . .- 1 -
SECTION 2. Grant of Security Interest. . . . . . . . . .- 2 -
SECTION 3. Security for Obligations. . . . . . . . . . .- 3 -
SECTION 4. Representations and Warranties. . . . . . . .- 3 -
SECTION 5. Covenants as to the Collateral. . . . . . . .- 5 -
SECTION 5A. Acts Permitted Under the Foothill Loan
Agreement . . . . . . . . . . . . . . . . . .- 9 -
SECTION 6. Additional Provisions Concerning the
Collateral. . . . . . . . . . . . . . . . . .- 9 -
SECTION 7. Events of Default . . . . . . . . . . . . . - 11 -
SECTION 8. Remedies Upon Default . . . . . . . . . . . - 12 -
SECTION 9. Indemnity and Expenses. . . . . . . . . . . - 13 -
SECTION 10. Notices . . . . . . . . . . . . . . . . . . - 13 -
SECTION 11. Security Interest Absolute. . . . . . . . . - 14 -
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . - 14 -
PAGE
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT (this "Agreement"), dated as of
April 29, 1997, made by ROSE'S STORES, INC., a Delaware corporation
(the "Debtor") to X.X. XXXXXXX & ASSOCIATES, INC., Trustee (as
defined in the Collateral Trust Agreement described below) for the
benefit of the Trade Vendors (as defined in the Collateral Trust
Agreement).
W I T N E S E T H:
WHEREAS, the Debtor is now and may hereafter become indebted
to its Trade Vendors for goods which have been and may hereafter
be sold by them to the Debtor to operate its business;
WHEREAS, the Trade Vendors require, as a condition for their
extension of credit to the Debtor, that the Debtor execute and
deliver to the Trustee, for the benefit of the Trade Vendors, this
Agreement, pursuant to which the Debtor, as security for such
indebtedness and the other Obligations (as defined herein), is
granting to the Trustee, for the benefit of the Trade Vendors, a
security interest in the Collateral (as defined herein);
WHEREAS, the Debtor and the Trustee have entered into a
Collateral Trust Agreement, dated as of the date hereof, (as the
same may be amended, amended and restated, supplemented or
otherwise modified from time to time, the "Collateral Trust
Agreement"), pursuant to which the Trustee will administer the
Collateral for the benefit of the Trade Vendors; and
WHEREAS, pursuant to the Loan and Security Agreement, dated
as of May 31, 1996, by and among Foothill Capital Corporation
("Foothill"), as Agent and Lender, the other Lenders, and Rose's
Stores, Inc., as Borrower, as amended, amended and restated,
supplemented, extended, renewed, or replaced from time to time (the
"Foothill Loan Agreement") the Debtor, as security for the
Obligations (as defined in the Foothill Loan Agreement), has
granted to the Agent, for the benefit of the Lenders, a first
priority security interest in the Collateral;
NOW THEREFORE, in consideration of the premises, and for other
good and valuable consideration, the receipt of which is hereby
acknowledged, the Debtor hereby agrees with the Trustee, for the
benefit of the Trade Vendors, as follows:
SECTION 1. Definitions. All initially capitalized terms
used in this Agreement which are defined in the Collateral Trust
Agreement or in Article 9 of the Uniform Commercial Code as
currently in effect in the State of New York (the "Code") and which
are not otherwise defined herein shall have the same meanings
herein as set forth therein. In the event of any inconsistencies
in such definitions, the provisions of this Agreement shall
control.
SECTION 2. Grant of Security Interest. As security for
the payment in full of all of the Obligations, the Debtor hereby
pledges and assigns to the Trustee and grants to the Trustee, for
the benefit of the Trade Vendors, a continuing general lien upon
and second priority, perfected security interest in, subject only
to the security interest of the Agent therein, all of the
following, which is owned by the Debtor or in which the Debtor has
any interest, wherever held by the Debtor or others for its account
(collectively, the "Collateral"):
(a) Accounts,
(b) Debtor's Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Negotiable Collateral,
(g) any money, or other assets of Debtor that now
or hereafter come into the possession, custody,
or control of the Trustee, and
(h) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including
proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Debtor's
Books, Equipment, General Intangibles, Inventory,
Negotiable Collateral, real property, money,
deposit accounts, or other tangible or intangible
property resulting from the sale, exchange,
collection, or other disposition of any of the
foregoing, or any portion thereof or interest
therein, and the proceeds thereof.
As used in this Agreement:
(a) "Accounts" means all currently existing and
hereafter arising accounts, contract rights, and all other forms
of obligations owing to the Debtor arising out of the sale or
lease of goods or the rendition of services by the Debtor,
irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
(b) "Debtor's Books" means all of the Debtor's books
and records including: ledgers; records indicating, summarizing,
or evidencing the Debtor's properties or assets (including the
Collateral) or liabilities; all information relating to the
Debtor's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other
computer prepared information.
(c) "Equipment" means all of the Debtor's present and
hereafter acquired machinery, machine tools, motors, equipment,
furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, goods (other than consumer
goods, farm products, or Inventory), wherever located, including,
(a) any interest of the Debtor in any of the foregoing, and (b)
all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the
foregoing.
(d) "General Intangibles" means all of the Debtor's
present and future general intangibles and other personal property
(including contract rights, rights arising under common law,
statutes, or regulations, choses or things in action, goodwill,
patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment
and other rights under any royalty, franchise, or licensing
agreements, infringement claims, computer programs, information
contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
(e) "Inventory" means all present and future inventory
in which the Debtor has any interest, including goods held for
sale or lease or to be furnished under a contract of service and
all of the Debtor's present and future raw materials, work in
process, finished goods, and packing and shipping materials,
wherever located, and any documents of title representing any of
the above.
(f) "Negotiable Collateral" means all of the Debtor's
present and future letters of credit, notes, drafts, instruments,
certificated securities (including the shares of stock of
subsidiaries of the Debtor), documents, personal property leases
(wherein the Debtor is the lessor), chattel paper, and the
Debtor's Books relating to any of the foregoing.
SECTION 3. Security for Obligations. The security
interest hereby created in the Collateral constitutes continuing
collateral security for payment and performance of all of the
Obligations. As used in this Agreement, "Obligations" means, all
obligations, liabilities and indebtedness, whether matured or
unmatured, of the Debtor arising out of or evidenced by the Note,
any Security Document or the Collateral Trust Agreement, whether
as principal, interest, fees or expenses, including, without
limitation, the Trade Obligations, the fees and expenses of the
Trustee and the Mortgage Trustee and the of the Trade Committee,
and the reasonable fees and disbursements of the respective
counsel to the Trustee, the Mortgage Trustee and the Trade
Committee payable pursuant to the Collateral Agreement or this
Agreement.
SECTION 4. Representations and Warranties. The Debtor
represents and warrants as follows:
(a) The Debtor (i) is a corporation duly organized,
validly existing and in good standing under the laws of the state
of its incorporation as set forth on the first page hereof, and
(ii) has all requisite power and authority to execute, deliver and
perform this Agreement.
(b) The execution, delivery and performance by the
Debtor of this Agreement (i) have been duly authorized by all
necessary corporate action, (ii) do not and will not contravene
its charter or by-laws, any other applicable law or any
contractual restriction binding on or affecting the Debtor or any
of its properties, and (iii) do not and will not result in or
require the creation of any lien, security interest or other
charge or encumbrance upon or with respect to any of its
properties other than as set forth in this Agreement.
(c) This Agreement is a legal, valid and binding
obligation of the Debtor enforceable against the Debtor in
accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the rights of
creditors generally and limitations imposed by federal or state
law or equitable principles upon the specific enforceability of
any of the remedies, covenants or other provisions hereof and
thereof.
(d) All Equipment and Inventory now existing is, and
all Equipment and Inventory hereafter existing will be, unless
consented to in writing by the Trustee, located at the address(es)
specified therefor in Schedule I hereto. The Debtor's chief place
of business and chief executive office, the place where the Debtor
keeps its records concerning Accounts and General Intangibles and
all originals of all chattel paper which constitutes Accounts are
located at the address(es) specified therefor in such Schedule I.
None of the Accounts or General Intangibles is evidenced by a
promissory note or other instrument. Set forth as Schedule II
hereto is a complete and correct list of each trade name used by
the Debtor.
(e) The Debtor is and will be at all times the owner of
the Collateral free and clear of any lien, security interest or
other charge or encumbrance, except for (i) the security interest
created by this Agreement, (ii) the security interest in favor of
the Agent and (iii) the security interests and other encumbrances
described in Schedule III hereto. No effective financing
statement or other instrument similar in effect covering all or
any part of the Collateral is on file in any recording or filing
office, except (i) such as may have been filed in favor of the
Agent in connection with the Foothill Loan Agreement, (ii) such as
may have been filed in favor of the Trustee and (iii) such as may
have been filed to perfect or protect any security interest or
encumbrance described in Schedule III hereto.
(f) The exercise by the Trustee of any of its rights
and remedies hereunder will not contravene any law or any
contractual restrictions binding on or affecting the Debtor or any
of its properties and will not result in or require the creation
of any lien, security interest or other charge or encumbrance upon
or with respect to any of the Debtor's properties other than as
set forth in this Agreement.
(g) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or
regulatory body is required for (i) the due execution, delivery
and performance by the Debtor of this Agreement, (ii) the grant by
the Debtor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or (iii) the exercise by
the Trustee of any of its rights and remedies hereunder, except
for the filing of the financing statements required to be filed to
perfect the security interest created by this Agreement.
(h) There is no pending or, to the best of Debtor's
knowledge, threatened action, suit, proceeding or claim before any
court or other governmental authority or any arbitrator, or any
order, judgment or award by any court or other governmental
authority or arbitrator, that may adversely affect the grant by
the Debtor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or the exercise by the
Trustee of any of its rights and remedies hereunder.
(i) This Agreement creates a valid second priority
security interest in the Collateral in favor of the Trustee, for
the benefit of the Trade Vendors, as security for the Obligations.
The filing of the financing statements required to perfect the
security interest created by this Agreement has been made and
results in the perfection of such security interest in that
portion of the Collateral in which a security interest may be
perfected by filing financing statements. Such security interest
is, or in the case of Collateral in which the Debtor obtains
rights after the date hereof and in which a security interest may
be perfected by filing financing statements, will be, a perfected,
second priority security interest, subject only to the security
interest of the Agent and the other encumbrances described in
Schedule III hereto.
SECTION 5. Covenants as to the Collateral. So long as
any of the Obligations shall remain outstanding, unless the
Trustee shall otherwise consent in writing:
(a) Further Assurances. The Debtor will at its
expense, at any time and from time to time, promptly execute and
deliver all further instruments and documents and take all further
action that may be necessary or desirable or that the Trustee may
reasonably request in order (i) to perfect and protect the
security interest created hereby; (ii) after the occurrence and
during the continuance of an Event of Default (as hereinafter
defined), to enable the Trustee to exercise and enforce it rights
and remedies hereunder in respect of the Collateral, or (iii) to
otherwise effect the purpose of this Agreement, including, without
limitation, (A) marking conspicuously each item of chattel paper
included in the Accounts and General Intangibles and, at the
request of the Trustee, each of its records pertaining to the
Collateral with a legend, in form and substance reasonably
satisfactory to the Trustee, indicating that such chattel paper or
Collateral is subject to the security interest created hereby,
(B) if any Account or General Intangible shall be evidenced by a
promissory note or other instrument or chattel paper, delivering
and pledging to the Trustee hereunder such note, instrument or
chattel paper duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance
satisfactory to the Trustee, (C) executing and filing such
financing or continuation statements, or amendments thereto, as
may be necessary or desirable or that the Trustee may reasonably
request in order to perfect and preserve the security interest
purported to be created hereby, and (D) furnishing to the Trustee
from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection
with the Collateral as the Trustee may reasonably request, all in
reasonable detail.
(b) Location of Equipment and Inventory. The Debtor
will keep the Equipment and Inventory at the location(s) specified
therefor in Schedule I hereto, or, upon not less than 30 Business
Days' prior written notice to the Trustee accompanied by a new
Schedule I hereto indicating each new location of the Equipment
and Inventory, at such other location as the Debtor may elect,
provided that the Trustee's rights in such Equipment and
Inventory, including, without limitation, the existence,
perfection and priority of the security interest created hereby in
such Equipment and Inventory, are not materially adversely
affected thereby.
(c) Condition of Equipment. The Debtor will cause
Equipment necessary for the operation of its business to be
maintained and preserved in good repair and working order,
ordinary wear and tear excepted, and will forthwith, or in the
case of any loss or damage to any Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made
all necessary repairs, replacement, and other improvements in
connection therewith so that the value and operating efficiency
thereof shall at all times be maintained and preserved. The
Debtor will promptly furnish to the Trustee a statement regarding
any loss or damage in excess of $100,000 to any Equipment.
(d) Taxes. The Debtor will pay timely (before
delinquency or the expiration of any extension period) when due
all property and other taxes, assessments and governmental charges
or levies imposed upon, and all claims (including claims for
labor, materials and supplies) against any Collateral, except to
the extent the validity thereof is being contested in good faith
by proper proceedings and with respect to which adequate reserves
have been set aside for the payment thereof.
(e) Insurance.
(i) The Debtor will, at it own expense, maintain
insurance (including, without limitation, comprehensive
general liability insurance and all risk insurance
insuring against loss by fire, explosion, theft and such
other casualties as may be satisfactory to the Trustee)
with respect to the Equipment and Inventory in such
amounts, against such risks, in such form and with such
insurers, as is currently in effect. Each policy for
liability insurance shall provide for all losses to be
paid on behalf of the Trustee and the Debtor as their
respective interests may appear, and each policy for
property damage shall provide for all losses to be paid
directly to the Trustee upon the occurrence and during
the continuance of an Event of Default. In addition,
each such policy or property damage insurance shall
provide for all losses to be paid directly to the
Trustee and shall (A) include the Trustee as an insured
party thereunder (without any representation or warranty
by or obligation upon the Trustee) as its interest may
appear, (B) contain the agreement by the insurer that
any loss pursuant to clause (iii) of this Section 5(e)
shall be payable to the Trustee notwithstanding any
action, inaction or breach of representation or warranty
by the Debtor, (C) provide that there shall be no
recourse against the Trustee for payment of premiums or
other amounts with respect thereto, and (D) provide that
at least 10 days' prior written notice of cancellation
or of lapse shall be given to the Trustee by the
insurer. The Debtor will, if so requested by the
Trustee, deliver to the Trustee duplicate policies of
all liability and property damage insurance and, as
often as the Trustee may reasonably request, a report of
a reputable insurance broker with respect to such
insurance. The Debtor will also, after the occurrence
and during the continuance of an Event of Default, at
the request of the Trustee, duly execute and deliver
instruments of assignment of such insurance policies and
cause the respective insurer to acknowledge notice of
such assignment.
(ii) Reimbursement under any liability insurance
maintained by the Debtor pursuant to this Section 5(e)
may be paid directly to the party who shall have
incurred liability covered by such insurance. In the
case of any loss involving damage to Equipment or
Inventory as to which clause (iii) of this Section 5(e)
is not applicable, the Debtor will make or cause to be
made the necessary repairs to or replacements to such
Equipment and Inventory, and any proceeds of insurance
maintained by the Debtor pursuant to this Section 5(e)
shall be paid to the Debtor as reimbursement for the
costs of such repair or replacements.
(iii) Upon the occurrence and during the
continuance of an Event of Default, or the actual or
constructive total loss (in excess of $100,000 per
occurrence) of any Equipment or Inventory, all insurance
payments in respect of such Equipment and Inventory and
all other Collateral shall be paid to the Trustee and
applied as specified in Section 8(b) hereof.
(f) Provisions Concerning the Accounts and General
Intangibles.
(i) The Debtor will (A) give the Trustee at least
30 days' prior written notice of any change in the
Debtor's name, identity or corporate structure, (B) keep
its chief place of business and chief executive office
and all originals of all chattel paper which constitutes
Accounts or General Intangibles at the locations
specified therefor in Schedule I hereof, and (C) keep
adequate records concerning the Accounts and General
Intangible and such chattel paper and, after reasonable
notice, permit representatives of the Trustee to inspect
and make abstracts from such records and chattel paper
at any time during normal business hours.
(ii) The Debtor will, except as otherwise provided
in this subsection (f) continue to collect at its own
expense, all amounts due or to become due under the
Accounts and General Intangibles. In connection with
such collections, the Debtor may (and, at the Trustee's
direction, will) take such action as the Debtor or the
Trustee may deem necessary or advisable to enforce
collection or performance of the Accounts and General
Intangibles; provided, however, the Trustee shall have
the right at any time, upon the occurrence and during
the continuance of an Event of Default, to notify the
account debtors or obligors under any Account or General
Intangible of the assignment of such Account or General
Intangible to the Trustee and to direct such account
debtors or obligors to make payment of all amounts due
or to become due to the Debtor hereunder directly to the
Trustee and, upon such notification and at the expense
of the Debtor and to the extent permitted by law, to
enforce collection of any such Account or General
Intangible and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the
same extent as the Debtor might have done. In addition,
upon the occurrence and during the continuance of an
Event of Default, the Trustee shall have the right to
notify the United States Postal Service authorities to
change the address for delivery of mail addressed to the
Debtor at such address as the Trustee may designate and
to do all other acts and things necessary to carry out
this Agreement. Upon the occurrence and during the
continuance of an Event of Default, (A) all amounts and
proceeds (including instruments) received by the Debtor
in respect of the Accounts and General Intangibles shall
be received in trust for the benefit of the Trustee
hereunder, shall be segregated from other funds of the
Debtor and shall be forthwith paid over to the Trustee
in the same form as so received (with any necessary
indorsement) to be held as cash collateral and either
(1) released to the Debtor so long as no Event of
Default, or an event which, with the giving of notice or
lapse of time or both, would constitute an Event of
Default shall have occurred and be continuing or (2) if
any Event of Default shall be continuing, applied as
specified in Section 8(b) hereof, and (B) the Debtor
will not adjust, settle or compromise the amount or
payment of any Account or General Intangible or release
wholly or partly any account debtor or obligor thereof
or allow any credit or discount thereon without the
express written consent of the Trustee.
(g) Transfers and Other Liens. The Debtor will not
(i) sell, transfer or assign (by operation of law or otherwise),
lease, exchange or otherwise dispose of any of the Collateral
except for (A) sales or disposal of Inventory in the ordinary
course of business and (B) sale and disposition of obsolete
equipment in the ordinary course of business so long as the amount
thereof sold in any fiscal year by the Debtor shall not have a
fair market value in excess of $100,000, or (ii) create or suffer
to exist any lien, security interest or other charge or
encumbrance upon or with resect to any of the Collateral, except
for (A) the security interest created hereby, (B) the security
interest in favor of the Agent and (C) the security interests and
other encumbrances described in or permitted under Schedule III
hereto.
SECTION 5A. Acts Permitted Under the Foothill Loan
Agreement. Notwithstanding anything to the contrary contained in
this Agreement, including, without limitation, the covenants set
forth in Section 5 hereof and the additional provisions concerning
the Collateral set forth in Section 6 hereof, the Debtor shall
have the right at any time, except (i) upon the occurrence and
during the continuance of an Event of Default or (ii) to the
extent not permitted under the Foothill Loan Agreement, to take
such acts permitted under, and exercise such rights as may be
provided for in, Section 6.6, 6.8, 7.1, 7.2, 7.4, 7.10 and 7.14 of
the Foothill Loan Agreement.
SECTION 6. Additional Provisions Concerning the
Collateral.
(a) So long as any of the Obligations remain
outstanding the Debtor hereby authorizes the Trustee to file,
without the signature of the Debtor where permitted by law, one or
more financing or continuation statements, and amendments thereto,
relating to the Collateral.
(b) The Debtor hereby irrevocably appoints the Trustee,
the Debtor's attorney-in-act and proxy, with full authority in the
place and stead of the Debtor and in the name of the Debtor or
otherwise, from time to time in the Trustee's discretion, to take
any action and to execute any instrument which the Trustee may
reasonably deem necessary or advisable to accomplish the purpose
of this Agreement (subject to the rights of the Debtor under
Section 5(f) hereof), including, without limitation: (A) to
receive, take, endorse, sign, assign and deliver, all in the name
of the Trustee or the Debtor, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral (but
in all instances before an Event of Default in the name of the
Debtor and not the Trustee); (B) to obtain and adjust insurance
required to be paid to the Trustee pursuant to Section 5(e)
hereof, and to receive, indorse and collect any drafts or other
instruments, document and chattel paper in connection therewith;
and (C) in addition to the foregoing and without limitation, upon
the occurrence and during the continuation of an Event of Default,
(1) to receive, indorse and collect any notes, drafts or other
instruments, documents and chattel paper relating to the
Collateral; (ii) to ask, demand, collect, xxx for, recover,
compound, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any Collateral; (iii) to
receive, indorse, and collect any drafts or other instruments,
documents and chattel paper in connection with clause (B),
(C)(i) or (C)(ii) of this Subsection (b); and (iv) to file any
claim or take any action or institute any proceedings which the
Trustee may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Trustee with
respect to any Collateral, including, without limitation, the
right, in the name of the Trustee, for the benefit of the Trade
Vendors, or the Debtor, to file claims under any insurance policy,
to receive, receipt and give acquittance for any payments that may
be payable thereunder, and to execute any and all endorsements,
receipts, release, assignment, reassignment or other documents
that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(c) If the Debtor fails to perform any agreement
contained herein, the Trustee may itself perform, or cause
performance of, such agreement or obligation, and the reasonable
expenses of the Trustee incurred in connection therewith shall be
payable by the Debtor pursuant to Section 9 hereof.
(d) The powers conferred on the Trustee hereunder are
solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the
Trustee shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
(e) Upon the termination of the Collateral Trust
Agreement and this Agreement and payment and satisfaction in full
by Debtor of all Obligations, the Trustee shall deliver to Debtor,
at Debtor's sole cost and expense, all UCC-3 termination
statements and any other documents necessary to terminate the
Collateral Trust Agreement and this Agreement and to release the
liens and security interests granted under this Agreement with
respect to the Collateral. Upon the Debtor's written request and
certification to the Trustee that a sale, disposition or
transaction is permitted under this Agreement (upon which
certification the Trustee may rely conclusively, without further
inquiry), the Trustee shall release any lien or security interest
granted under this Agreement on any Collateral (i) constituting
property being sold or disposed of if a release is required or
desirable in connection therewith, (ii) constituting property in
which Debtor owned no interest at the time the security interest
was granted or at any time thereafter, or (iii) constituting
property leased to Debtor under a lease that has expired or been
terminated in a transaction permitted under this Agreement;
provided, however, that (x) the Trustee shall not be required to
execute any document necessary to evidence such release on terms
that, in the Trustee's opinion, would expose the Trustee to
liability or create any obligation or entail any consequence other
than the release of such lien or security interest without
recourse, representation or warranty, and (y) such release shall
not in any manner discharge, affect or impair the Obligations or
any liens or security interests granted under this Agreement
(other than those expressly being released) upon (or obligations
of the Debtor in respect of) all interests retained by Debtor,
including the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.
SECTION 7. Events of Default. Any one or more of the
following events shall constitute an event of default (each, an
"Event of Default") under this Agreement:
(a) The failure of the Debtor to pay when due and
payable any of the Obligations;
(b) If any material misstatement or material
misrepresentation now or hereafter exists in any warranty,
representation, statement or report made to the Trustee by the
Debtor or any officer, employee, agent, or director thereof;
(c) The failure or neglect by the Debtor to
perform, keep or observe any term, provision, condition, covenant,
or agreement contained in this Agreement or any other Vendor
Document, which failure or neglect continues for ten (10) or more
days;
(d) The occurrence of an "Event of Default" under
and as defined in the Mortgage; or
(e) The occurrence of an "Event of Default" under
and as defined in Section 8.1, 8.5, 8.6 or 8.7 of the Foothill
Loan Agreement or Agent declares all "Obligations" under and as
defined in the Foothill Loan Agreement immediately due and
payable.
SECTION 8. Remedies Upon Default. If any Event of
Default shall have occurred and be continuing:
(a) The Trustee may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all of the rights and
remedies of a secured party on default under the Code (whether or
not the Code applies to the affected Collateral), and may also (i)
require the Debtor to, and the Debtor hereby agrees that it will
at its expense and upon request of the Trustee forthwith, assemble
all or part of the Collateral as directed by the Trustee and make
it available to the Trustee at a place to be designated by the
Trustee which is reasonably convenient to both parties, and
(ii) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at a public or private
sale, at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and
upon such other terms as the Trustee may reasonably deem
commercially reasonable. The Debtor agrees that, to the extent
notice of sale shall be required by law, at least five (5) days'
notice to the Debtor of the time and place of any public sale or
the time after which any private sale is to be made shall
constitute reasonable notification. The Trustee shall not be
obligated to make any sale of regardless of notice of sale having
been given. The Trustee may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. The Debtor
hereby waives any claims against the Trustee arising by reason of
the fact that the price at which the Collateral may have been sold
at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of
the Obligations, even if the Trustee accepts the first offer
received and does not offer the Collateral to more than one
offeree, provided that such sale has been conducted in a
commercially reasonable manner.
(b) Any cash held by the Trustee as Collateral and all
cash proceeds received by the Trustee in respect of any sale of,
collection from, or other realization upon, all or any part of the
Collateral may, in the discretion of the Trustee, be held by the
Trustee as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Trustee
pursuant to Section 9 hereof) in whole or in part by the Trustee
against, all or any part of the Obligations in the order provided
for in Article 9 of the Collateral Trust Agreement.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to
which the Trustee is legally entitled, the Debtor shall be liable
for the deficiency, together with interest thereon at the rate
specified in the Collateral Trust Agreement or such other rate as
shall be fixed by applicable law, together with the costs of
collection and the reasonable fees and expenses of any attorneys
employed by the Trustee to collect such deficiency.
SECTION 9. Indemnity and Expenses.
(a) The Debtor agrees to indemnify the Trustee from and
against any and all claims, losses and liabilities growing out of
or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or
liabilities resulting solely and directly from the Trustee's gross
negligence or willful misconduct.
(b) The Debtor will, upon demand, pay to the Trustee
the amount of any and all reasonable costs and expenses, including
the reasonable fees and disbursements of the Trustee's counsel and
of any experts and agents, which the Trustee may reasonably incur
in connection with (i) as applicable, the preparation,
administration, amendment, waiver or other modification this
Agreement, the other Security Documents, or the Collateral Trust
Agreement; (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any
Collateral; (iii) the exercise or enforcement of any of the rights
of the Trustee hereunder; or (iv) the failure by the Debtor to
perform or observe any of the provisions hereof.
SECTION 10. Notices. All notices, requests, demands and
other communications provided for or permitted hereunder shall,
unless otherwise stated herein, be in writing (including telex and
telecopy communications) and shall be sent by registered or
certified mail, return receipt requested, telex, telecopier or
hand delivery;
(a) If to the Debtor, to X.X. Xxx Xxxxxx 000,
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Chief Financial
Officer, or at such other address as shall be designated by it in
a written notice to the Trustee with a copy to Proskauer, Rose,
Xxxxx & Xxxxxxxxxx, LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-
8299 Attention: Xxxxxxx X. Xxxxxxx, Esq., counsel to the Debtor,
or at such other address as shall be designated by such firm in a
written notice to the Trustee; and
(b) If to the Trustee, to its address at 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxxxx,
or at such other address as shall designated by it in a written
notice to the Debtor, with a copy to Otterbourg, Steindler,
Houston & Xxxxx, PC., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxx X. Xxxx, Esq., counsel the Trade Committee, or at
such other address as shall be designated by such firm in a
written notice to the Debtor.
All such notices, requests, demands and communications shall be
deemed to have been duly given or made, (i) when delivered by
hand, (ii) five Business Days after being deposited in the United
States mail, postage prepared, (iii) when telexed with answer back
received or (iv) when telecopied with receipt acknowledged.
SECTION 11. Security Interest Absolute. All rights and
the security interest of the Trustee hereunder and all obligations
of the Debtor hereunder shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of this
Agreement or any other Vendor Document; (ii) any change in the
time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations, or any other amendment
or waiver of or consent to any departure from this Agreement or
any other Vendor Document; (iii) any increase in, addition to,
exchange or release of, or non-perfection of any lien on or
security interest in, any other collateral, or any release or
amendment or waiver of or consent to departure from any guaranty,
for all or any of the Obligations; or (iv) the absence of any
action on the part of the Trustee to obtain payment or performance
of the Obligations from the Debtor or any other party.
SECTION 12. Miscellaneous.
(a) Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by
the Debtor and the Trustee, and no waiver of any provision of this
Agreement shall be effective unless it is in writing and signed by
the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given.
(b) Waivers; Cumulative Rights; Etc. No failure on the
part of the Trustee to exercise, and no delay in exercising, any
right hereunder or under any other Vendor Document shall operate
as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or
the exercise of any other right. The rights and remedies of the
Trustee provided herein are cumulative and are in addition to, and
not exclusive of, any rights or remedies provided by law. The
rights of the Trustee under this Agreement are not conditional or
contingent on any attempt by the Trustee to exercise any of its
rights against any other Person.
(c) Captions; Separability. The captions of the
various Sections, Subsections and paragraphs of this Agreement
have been inserted only for the purposes of convenience; such
captions are not a part of this Agreement and shall not be deemed
in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement. 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 remaining
portions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(d) Continuing Security Interest; Assignments. This
Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the
payment in full of the Obligations in accordance with the terms of
the Collateral Trust Agreement and (ii) be binding on the Debtor
and its successors and assigns and shall inure, together with all
rights and remedies of the Trustee hereunder, to the benefit of
the Trustee and its successors, transferees and assigns.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
(f) CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT MAY BE TRIED AND LITIGATED IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR, AT
THE SOLE OPTION OF TRUSTEE, IN ANY OTHER COURT IN WHICH TRUSTEE
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH
OF DEBTOR AND TRUSTEE WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH 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 12(b).
DEBTOR AND TRUSTEE HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
ANY OF THE VENDOR DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. DEBTOR AND TRUSTEE REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
(g) Admissibility of Security Agreement. The Debtor
agrees that any copy of this Agreement signed by the Debtor and
transmitted by telecopier for delivery to the Trustee shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in
existence.
(h) Binding Nature. This Agreement shall be binding
upon and inure to the benefit of the successors, assigns or other
legal representatives of the Debtor, and shall, together with the
rights and remedies of the Trustee hereunder, be binding upon and
inure to the benefit of the Trustee and the Trade Vendors and each
of their respective successors, assigns or other legal
representatives.
(i) Counterparts. This Agreement may be executed by
the parties hereto individually or in any combination, in one or
more counterparts, each of which shall be an original and all of
which shall together constitute one and the same agreement.
(j) Schedules. The Trustee is authorized to annex
hereto any schedules referred to herein.
(k) Acknowledgment of Receipt. The Debtor acknowledges
receipt of a copy of this Agreement.
(l) This Agreement is subject to the terms and
conditions of the Intercreditor Agreement, dated on or about the
date hereof, between the Agent and the Trustee relating to the
priorities of their respective security interests in, and
respective rights and remedies in and to, the Collateral.
PAGE
IN WITNESS WHEREOF, the Debtor has caused this Agreement to
be executed and delivered by its officer thereunto duly
authorized, as of the date first above written.
ROSE'S STORES, INC.
By:/s/ Xxxxxxxx Peters____
Name: Xxxxxxxx Peters_____
Title: Chief Financial Officer
PAGE
SCHEDULE I
TO
GENERAL SECURITY AGREEMENT
1. Location(s) of Equipment and Inventory:
2. The Debtor's (a) chief executive office, (b) chief place of
business, and (c) place where the Debtor keeps its records
concerning Accounts and General Intangibles.
PAGE
SCHEDULE II
TO
GENERAL SECURITY AGREEMENT
Trade Names
SCHEDULE III
TO
GENERAL SECURITY AGREEMENT
Permitted Encumbrances
