-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, e7vann1osVrol/j19/1ezyd8Dw9fkco/atXg9/3YCkxAMIC1991PQ92i5wxurRZw fZLPMeCsOUG/bpJVWgKsiA== 0000950168-95-000330.txt : 19950426 0000950168-95-000330.hdr.sgml : 19950426 ACCESSION NUMBER: 0000950168-95-000330 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19950425 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950425 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROSES STORES INC CENTRAL INDEX KEY: 0000085149 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 560382475 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-00631 FILM NUMBER: 95531071 BUSINESS ADDRESS: STREET 1: PO DRAWER 947 STREET 2: 218 S GARNETT ST CITY: HENDERSON STATE: NC ZIP: 27536 BUSINESS PHONE: 9194302600 8-K 1 ROSES 8-K 04/25/95 80822 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 24, 1995 ROSE'S STORES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 0-631 56-0382475 (Commission File Number) (IRS Employer Identification No.) 218 S. Garnett Street Henderson, North Carolina 27536 (Address of principal executive offices) (Zip Code) (919) 430-2600 (Registrant's telephone number, including area code) 1 Item 5. Other Events On September 5, 1993, the Registrant filed a voluntary Petition for Relief under Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the Eastern District of North Carolina, Raleigh Division (the "Court"). On August 1, 1994, the Registrant filed with the Court a proposed Joint Plan of Reorganization with the consent of the official unsecured creditors committee, the pre-petition secured senior noteholders, and the official equity committee. On October 5, 1994, the Court approved a First Amended Disclosure Statement that described the proposed First Amended Joint Plan of Reorganization (the "Plan") and approving the solicitation of acceptances and rejections of the Plan from various classes of creditors and equity holders prior to the Court's holding a confirmation hearing. On December 14, 1994, the Court confirmed the Plan and entered an order ("Confirmation Order") to that effect. On February 3, 1995, the Court approved an amendment to the Plan to set a fixed price for certain subscription rights to be offered to the Company's equity holders. On February 13, 1995, the Court approved an amendment to the Plan to change the record date, for determining the equity holders entitled to receive warrants to purchase the new common stock (the "Common Stock") to be issued by the Company upon emergence from Chapter 11 and a possible distribution of Common Stock, to the date that the Plan becomes effective (the "Effective Date"). On April 24, 1995, the Court approved a Modified and Restated First Amended Joint Plan of Reorganization (the "Modified Plan"), which is being filed as an exhibit hereto together with other exhibits related to the the Bankruptcy proceeding. Item 7. Financial Statements and Exhibits (c) The following exhibits are part of this report: (1) Modified and Restated First Amended Joint Plan of Reorganization dated April 19, 1995. (2) Order dated April 24, 1995 approving Modified and Restated First Amended Joint Plan of Reorganization dated April 19, 1995. (3) Short Term Incentive Compensation Plan. (4) New Equity Compensation Plan (5) The Registrant's obligations with respect to the compensation of its officers and directors as specified in the following orders of the Court: 2 (a) Order Approving Short-Term Incentive Plan (August 4, 1994) (b) Order Authorizing Increased Compensation of R. Edward Anderson, President and Chief Executive Officer and Chairman of the Board (dated October 12, 1994) (c) Order Authorizing Increased Compensation of (i) Kathy M. Hurley, Senior Vice President, Merchandising; (ii) Jeanette R. Peters, Senior Vice President, Chief Financial Officer; and (iii) George T. Blackburn, II, Vice President, Real Estate, General Counsel, and Secretary (dated December 15, 1994) (d) Order Authorizing Entry into Employment Agreement with R. Edward Anderson, President and Chief Executive Officer (dated December 15, 1994) (e) Order Approving Consummation Bonus and Stock Option Awards (February 14, 1995) (f) Amended Order Approving Rejection of Termination Agreements and Implementation of Severance Program (dated April 1, 1994) 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ROSE'S STORES, INC. Date: _______________, 1995 By: Jeanette R. Peters Senior Vice President Chief Financial Officer 4 EXHIBIT INDEX Exhibit No. Description Page No. (1) Modified and Restated First Amended Joint Plan of Reorganization dated April 19, 1995. (2) Order dated April 24, 1995 approving Modified and Restated First Amended Joint Plan of Reorganization dated April 19, 1995. (3) Short Term Incentive Compensation Plan. (4) New Equity Compensation Plan (5) The Registrant's obligations with respect to the compensation of its officers and directors as specified in the following orders of the Court: (a) Order Approving Short-Term Incentive Plan (August 4, 1994) (b) Order Authorizing Increased Compensation of R. Edward Anderson, President and Chief Executive Officer and Chairman of the Board (dated October 12, 1994) (c) Order Authorizing Increased Compensation of (i) Kathy M. Hurley, Senior Vice President, Merchandising; (ii) Jeanette R. Peters, Senior Vice President, Chief Financial Officer; and (iii) George T. Blackburn, II, Vice President, Real Estate, General Counsel, and Secretary (dated December 15, 1994) (d) Order Authorizing Entry into Employment Agreement with R. Edward Anderson, President and Chief Executive Officer (dated December 15, 1994) (e) Order Approving Consummation Bonus and Stock Option Awards (February 14, 1995) (f) Amended Order Approving Rejection of Termination Agreements and Implementation of Severance Program (dated April 1, 1994) 5 EX-1 2 EXHIBIT (1) UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO. 93-01365-5-ATS ROSE'S STORES, INC., (TAX ID #56-0382475), CHAPTER 11 Debtor. MODIFIED AND RESTATED FIRST AMENDED JOINT PLAN OF REORGANIZATION OF ROSE'S STORES, INC. April 19, 1995 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 "Administrative Agent" . . . . . . . . . . . . . . . . . . . 1 1.2 "Administrative Claim" . . . . . . . . . . . . . . . . . . . 1 1.3 "ADR Procedure" . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 "Allowed Claim" . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 "Allowed Non-Tax Priority Claim" . . . . . . . . . . . . . . 2 1.6 "Allowed Secured Claim" . . . . . . . . . . . . . . . . . . . 2 1.7 "Allowed Tax Claim" . . . . . . . . . . . . . . . . . . . . . 3 1.8 "Allowed Unsecured Claim" . . . . . . . . . . . . . . . . . . 3 1.9 "Assumed Contracts and Leases" . . . . . . . . . . . . . . . 3 1.10 "Available Cash" . . . . . . . . . . . . . . . . . . . . . . 3 1.11 "Avoiding Power Actions" . . . . . . . . . . . . . . . . . . 3 1.12 "Bankruptcy Code" . . . . . . . . . . . . . . . . . . . . . 3 1.13 "Bankruptcy Court" . . . . . . . . . . . . . . . . . . . . . 3 1.14 "Bankruptcy Rules" . . . . . . . . . . . . . . . . . . . . . 3 1.15 "Bank Group" . . . . . . . . . . . . . . . . . . . . . . . . 3 1.16 "Bank of Tokyo" . . . . . . . . . . . . . . . . . . . . . . 3 1.17 "Bar Date" . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.18 "Board of Directors" . . . . . . . . . . . . . . . . . . . . 4 1.19 "Business Day" . . . . . . . . . . . . . . . . . . . . . . . 4 1.20 "Cash" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.21 "Chapter 11 Case" . . . . . . . . . . . . . . . . . . . . . 4 1.22 "Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.23 "Class" . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.24 "Class 3 Common Stock Designation" . . . . . . . . . . . . . 4 1.25 "Class 5 Rights Notice" . . . . . . . . . . . . . . . . . . 4 1.26 "Class 5 Subscription Stock Designation" . . . . . . . . . . 4 1.27 "Class 5 Subscriber" . . . . . . . . . . . . . . . . . . . . 4 1.28 "Class 5 Subscription" . . . . . . . . . . . . . . . . . . . 4 1.29 "Class 5 Subscription Price" . . . . . . . . . . . . . . . . 5 1.30 "Collateral Agent" . . . . . . . . . . . . . . . . . . . . . 5 1.31 "Committees" . . . . . . . . . . . . . . . . . . . . . . . . 5 1.32 "Common Stock Interest" . . . . . . . . . . . . . . . . . . 5 1.33 "Confirmation" . . . . . . . . . . . . . . . . . . . . . . . 5 1.34 "Confirmation Date" . . . . . . . . . . . . . . . . . . . . 5 1.35 "Confirmation Orders" . . . . . . . . . . . . . . . . . . . 5 1.36 "Consummation Certificate" . . . . . . . . . . . . . . . . . 5 1.37 "Consummation Date" . . . . . . . . . . . . . . . . . . . . 5 1.38 "Contingent Claim" . . . . . . . . . . . . . . . . . . . . . 5 1.39 "Core Stores" . . . . . . . . . . . . . . . . . . . . . . . 5 1.40 "Damages Claims" . . . . . . . . . . . . . . . . . . . . . . 6 1.41 "Debtor" . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.42 "Deferred GE Obligations" . . . . . . . . . . . . . . . . . 6 1.43 "Deferred GE Obligations Agreements" . . . . . . . . . . . . 6 1.44 "Determination Date" . . . . . . . . . . . . . . . . . . . . 6 1.45 "DIP Facility" . . . . . . . . . . . . . . . . . . . . . . . 6 1.46 "DIP Financing Documents" . . . . . . . . . . . . . . . . . 6 1.47 "DIP Financing Orders" . . . . . . . . . . . . . . . . . . . 7 i Page 1.48 "Disclosure Statement" . . . . . . . . . . . . . . . . . . . 7 1.49 "Disputed Claim" . . . . . . . . . . . . . . . . . . . . . . 7 1.50 "Distribution Agent" . . . . . . . . . . . . . . . . . . . . 7 1.51 "Distribution Date" . . . . . . . . . . . . . . . . . . . . 7 1.52 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . 7 1.53 "Effective Date Shares" . . . . . . . . . . . . . . . . . . 7 1.54 "Employee Stock Options" . . . . . . . . . . . . . . . . . . 7 1.55 "Equity Committee" . . . . . . . . . . . . . . . . . . . . . 7 1.56 "Equity Record Date" . . . . . . . . . . . . . . . . . . . . 8 1.57 "Estate" . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.58 "Facility Agents" . . . . . . . . . . . . . . . . . . . . . 8 1.59 "Filing Date" . . . . . . . . . . . . . . . . . . . . . . . 8 1.60 "Final Decree" . . . . . . . . . . . . . . . . . . . . . . . 8 1.61 "Final Order" . . . . . . . . . . . . . . . . . . . . . . . 8 1.62 "Full Recovery Target Amount" . . . . . . . . . . . . . . . 8 1.63 "GE Capital" . . . . . . . . . . . . . . . . . . . . . . . . 8 1.64 "GE Obligations" . . . . . . . . . . . . . . . . . . . . . . 8 1.65 "GE Master Release Agreement" . . . . . . . . . . . . . . . 8 1.66 "Intercreditor Agreements" . . . . . . . . . . . . . . . . . 9 1.67 "Interests" . . . . . . . . . . . . . . . . . . . . . . . . 9 1.68 "Management Incentive and Retention Program" . . . . . . . . 9 1.69 "Modified Plan" . . . . . . . . . . . . . . . . . . . . . . 9 1.70 "Modified Plan Confirmation Order" . . . . . . . . . . . . . 10 1.71 "New Rose's Charter" . . . . . . . . . . . . . . . . . . . . 10 1.72 "New Rose's Common Stock" . . . . . . . . . . . . . . . . . 10 1.73 "New Rose's Common Stock Secondary Distribution" . . . . . . 10 1.75 "New Rose's Common Stock Escrow Agreement" . . . . . . . . . 10 1.76 "New Rose's Warrant Agreement" . . . . . . . . . . . . . . . 10 1.77 "New Rose's Warrants" . . . . . . . . . . . . . . . . . . . 11 1.78 "Non-Voting Class B Stock" . . . . . . . . . . . . . . . . . 11 1.79 "Permitted Encumbrance Collateral" . . . . . . . . . . . . . 11 1.80 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.81 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.82 "Plan Confirmation Date" . . . . . . . . . . . . . . . . . . 11 1.83 "Plan Confirmation Order" . . . . . . . . . . . . . . . . . 11 1.84 "Plan Proponents" . . . . . . . . . . . . . . . . . . . . . 11 1.85 "Post-Effective Date Collateral" . . . . . . . . . . . . . . 11 1.86 "Post-Effective Date Financing Facility" . . . . . . . . . . 11 1.87 "Post-Effective Date GE Assumption Agreement" . . . . . . . 12 1.88 "Post-Effective Date GE Obligations" . . . . . . . . . . . . 12 1.89 "Post-Effective Date Lenders" . . . . . . . . . . . . . . . 12 1.90 "Pre-Petition Lenders" . . . . . . . . . . . . . . . . . . . 12 1.91 "Pre-Petition Lenders' Allowed Secured Claims" . . . . . . . 12 1.92 "Pre-Petition Secured Noteholders" . . . . . . . . . . . . . 13 1.93 "Pre-Petition Secured Noteholder Warrant Agreement" . . . . 13 1.94 "Pre-Petition Secured Noteholder Warrants" . . . . . . . . . 13 1.95 "Pre-Petition Secured Notes" . . . . . . . . . . . . . . . . 13 1.96 "Pre-Petition Stock Option" . . . . . . . . . . . . . . . . 13 1.97 "Pre-Petition Warrant" . . . . . . . . . . . . . . . . . . . 14 1.98 "Professional" . . . . . . . . . . . . . . . . . . . . . . . 14 ii Page 1.99 "Professional Fees" . . . . . . . . . . . . . . . . . . . . 14 1.100 "Pro-Rata" . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.101 "Reconstituted Board of Directors" . . . . . . . . . . . . . 14 1.102 "Record Date" . . . . . . . . . . . . . . . . . . . . . . . 14 1.103 "Released Parties" . . . . . . . . . . . . . . . . . . . . . 15 1.104 "Reorganized Rose's" . . . . . . . . . . . . . . . . . . . . 15 1.105 "Reserve" . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.106 "Reserve Amount" . . . . . . . . . . . . . . . . . . . . . . 15 1.107 "Retiree Claim" . . . . . . . . . . . . . . . . . . . . . . 15 1.108 "RSI" . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.109 "Second Supplemental Adequate Protection Consent Order" . . 15 1.110 "Subscription Proceeds Escrow" . . . . . . . . . . . . . . . 15 1.111 "Subscription Proceeds" . . . . . . . . . . . . . . . . . . 16 1.112 "Subordinated Claims" . . . . . . . . . . . . . . . . . . . 16 1.113 "Supplemental Adequate Protection Orders" . . . . . . . . . 16 1.114 "Unsecured Committee" . . . . . . . . . . . . . . . . . . . 16 1.115 "Voting Common Stock" . . . . . . . . . . . . . . . . . . . 16 ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS . . . . . . . . . . . 16 2.1 Criterion of Class . . . . . . . . . . . . . . . . . . . . . 16 2.2 Claims and Interests . . . . . . . . . . . . . . . . . . . . 17 ARTICLE III PAYMENT OF ADMINISTRATIVE CLAIMS ALLOWED TAX CLAIMS, PROFESSIONAL FEES, AND RETIREE CLAIMS, AND TREATMENT OF GE CAPITAL . . . . . . 17 3.1 Administrative Claims . . . . . . . . . . . . . . . . . . . . 18 3.2 Allowed Tax Claims . . . . . . . . . . . . . . . . . . . . . 18 3.3 Professional Fees . . . . . . . . . . . . . . . . . . . . . . 18 3.4 Retiree Claims and Benefits Under Section 1114 of the Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . 19 3.5 Treatment of GE Capital . . . . . . . . . . . . . . . . . . . 19 ARTICLE IV CLAIMS NOT IMPAIRED UNDER THE PLAN . . . . . . . . . . . . . 20 4.1 Non-Impairment . . . . . . . . . . . . . . . . . . . . . . . 20 4.2 Class 1 (Non-Tax Priority Claims) . . . . . . . . . . . . . . 20 4.3 Class 2A (General Secured Claims) . . . . . . . . . . . . . . 20 4.4 Class 2B (Pre-Petition Lenders' Allowed Secured Claims) . . . 21 ARTICLE V CLAIMS AND INTERESTS IMPAIRED UNDER THE PLAN . . . . . . . . 22 5.1 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . 22 5.2 Class 3 (Unsecured Claims) . . . . . . . . . . . . . . . . . 22 5.3 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . 22 5.4 Class 5 (Common Stock Interests) . . . . . . . . . . . . . . 22 5.5 Class 6 (Pre-Petition Warrants) . . . . . . . . . . . . . . . 22 5.6 Class 7 (Pre-Petition Stock Options) . . . . . . . . . . . . 23 5.7 Class 8 (Subordinated Claims) . . . . . . . . . . . . . . . . 23 5.8 Effect of Bar Dates . . . . . . . . . . . . . . . . . . . . . 23 5.9 Non-consensual Confirmation . . . . . . . . . . . . . . . . . 24 iii Page ARTICLE VI PROVISIONS GOVERNING DISTRIBUTIONS . . . . . . . . . . . . . 24 6.1 Distributions by Reorganized Rose's or Other Distribution Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 6.2 Distributions to Impaired Classes . . . . . . . . . . . . . . 24 6.2.1 Distributions of New Rose's Common Stock . . . . . . 24 6.2.2 Distribution of Subscription Proceeds . . . . . . . 26 6.2.3 Distribution of New Rose's Common Stock Secondary Distribution . . . . . . . . . . . . . . . . . . . 26 6.2.4 Distribution of New Rose's Warrants . . . . . . . . 26 6.2.5 Listing of Common Stock and Warrants . . . . . . . . 27 6.3 Timing of Distributions . . . . . . . . . . . . . . . . . . . 27 6.4 Disputed Payments . . . . . . . . . . . . . . . . . . . . . . 27 6.5 Delivery of Distributions and Undeliverable or Unclaimed Distributions . . . . . . . . . . . . . . . . . . . . . . . 27 6.5.1 Delivery of Distributions in General . . . . . . . . 27 6.5.2 Distributions Held by Distribution Agent . . . . . . 27 6.5.3 Failure to Claim Undeliverable Distributions . . . . 28 6.6 Fractional Distributions and Fractional Cents; Round Lots . . 29 6.7 Full and Final Satisfaction . . . . . . . . . . . . . . . . . 29 6.8 Allocation of Distributions to Holders of Allowed Secured Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE VII MEANS OF EXECUTION . . . . . . . . . . . . . . . . . . . . 30 7.1 Funds for Distribution . . . . . . . . . . . . . . . . . . . 30 7.2 Post-Effective Date Financing Facility . . . . . . . . . . . 30 7.3 Corporate Action . . . . . . . . . . . . . . . . . . . . . . 32 7.4 Cancellation of Common Stock, Pre-Petition Warrants, Pre- Petition Stock Options and Pre-Petition Secured Notes and Surrender of Common Stock, Pre-Petition Warrants and Pre- Petition Secured Notes . . . . . . . . . . . . . . . . . . 32 7.5 New Rose's Charter . . . . . . . . . . . . . . . . . . . . . 33 7.6 Voting Powers . . . . . . . . . . . . . . . . . . . . . . . . 33 7.7 Authorization and Issuance of Equity Instruments of Reorganized Rose's . . . . . . . . . . . . . . . . . . . . 33 7.7.1 New Rose's Common Stock . . . . . . . . . . . . . . 33 7.7.2 New Rose's Warrants . . . . . . . . . . . . . . . . 34 7.8 New Rose's Common Stock Allocable to Management of Reorganized Rose's . . . . . . . . . . . . . . . . . . . . 34 7.9 Applicability of Sections 1125 and 1145 of the Bankruptcy Code to the New Rose's Common Stock Issued under the Modified Plan . . . . . . . . . . . . . . . . . . . . . . . 34 7.10 Class 5 Subscription. . . . . . . . . . . . . . . . . . . . 35 7.11 Merger of RSI and Cancellation of RSI Common Stock . . . . . 36 7.12 Reserve Provisions for Disputed Claims . . . . . . . . . . . 36 7.13 Voting of Undistributed New Rose's Common Stock . . . . . . 38 7.14 Preservation or Waiver of Rights of Action of the Estate . . 38 iv Page 7.15 Use of ADR Procedure Regarding Determination and Allowance of Damage Claims . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE VIII CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE PLAN . . . . . . . . . . . . . . . . 39 8.1 Conditions to the Effective Date . . . . . . . . . . . . . . 39 8.2 Waiver of Conditions to the Effective Date . . . . . . . . . 40 ARTICLE IX DISCHARGE, RELEASES, INJUNCTIONS AND RELATED PROVISIONS . . 40 9.1 Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . 40 9.2 Releases of Released Parties . . . . . . . . . . . . . . . . 41 9.3 Releases by the Debtor and Reorganized Rose's . . . . . . . . 41 9.4 Releases by Recipients of New Rose's Common Stock, New Rose's Warrants and Cash, or Available Cash (as applicable), and by All Other Persons . . . . . . . . . . . 42 9.5 Limitations on Amounts to be Distributed to Holders of Allowed Claims Which Are Insured . . . . . . . . . . . . . 43 9.6 General Release of Liens . . . . . . . . . . . . . . . . . . 43 9.7 Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . 44 9.7.1 Injunction Related to Claims Released by the Debtor and Reorganized Rose's Recipients of Cash, New Rose's Common Stock and New Rose's Warrants, or Available Cash (if applicable), and All Other Persons . . . . . . . . . . . . . . . . . . . . . . 44 9.7.2 Injunction Relating to the Modified Plan . . . . . . 44 9.7.3 Consent By Holders of Claims and Interests to Entry of Injunctive Relief . . . . . . . . . . . . . . . 44 9.8 Rights of Fireman's Fund Insurance Company . . . . . . . . . 44 ARTICLE X EXECUTORY CONTRACTS, INDEMNIFICATION OBLIGATIONS, POST-PLAN CONFIRMATION DATE TRADE CLAIMS, CONTINUED APPLICABILITY OF BANKRUPTCY CODE . . . . . . 45 10.1 Executory Contracts and Unexpired Leases . . . . . . . . . . 45 10.2 Indemnification and Contribution Obligations . . . . . . . . 46 10.3 Post-Plan Confirmation Date Claims . . . . . . . . . . . . . 46 10.4 Continued Applicability of the Bankruptcy Code . . . . . . . 47 ARTICLE XI RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . 47 11.1 Jurisdiction From Confirmation Through the Effective Date . 47 11.2 Jurisdiction From and After the Effective Date . . . . . . . 47 ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 48 12.1 The Committees and the Post-Effective Date Trade Committee . 48 12.1.1 Dissolution of Committees . . . . . . . . . . . . . 49 12.1.2 Creation of Post-Effective Date Trade Committee . . 49 v Page 12.1.3 Post-Effective Date Trade Committee Procedures . . 49 12.1.4 Post-Effective Date Trade Committee Compensation . 49 12.1.5 Retention of Professionals . . . . . . . . . . . . 50 12.1.6 Liability . . . . . . . . . . . . . . . . . . . . . 50 12.2 Means of Cash Payments . . . . . . . . . . . . . . . . . . . 50 12.3 Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . 50 12.4 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . 51 12.5 Revesting . . . . . . . . . . . . . . . . . . . . . . . . . 51 12.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 51 12.7 Defects, Omissions and Amendments . . . . . . . . . . . . . 51 12.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 52 12.9 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 52 12.10 Agreement Among the Plan Proponents . . . . . . . . . . . . 52 12.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 53 12.12 Severability . . . . . . . . . . . . . . . . . . . . . . . 54 12.13 Revocation and Withdrawal of Modified Plan . . . . . . . . 54 12.14 Effect of Withdrawal or Revocation . . . . . . . . . . . . 54 12.15 Ratification in Confirmation Orders . . . . . . . . . . . . 54 12.16 Post-Effective Date Effectuation of the Modified Plan's Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 12.17 Execution . . . . . . . . . . . . . . . . . . . . . . . . . 55 vi UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO. 93-01365-5-ATS ROSE'S STORES, INC., (TAX ID #56-0382475), CHAPTER 11 Debtor. MODIFIED AND RESTATED FIRST AMENDED JOINT PLAN OF REORGANIZATION Rose's Stores, Inc., debtor and debtor-in-possession, Nationwide Life Insurance Company, Wausau Preferred Health Insurance Company, Equitable Variable Life Insurance Company, The Equitable Life Assurance Society of the United States, Jefferson-Pilot Life Insurance Company, The Franklin Life Insurance Company, The Franklin United Life Insurance Company, Great- West Life & Annuity Insurance Company, American Family Life Insurance Company, State Mutual Life Assurance Company of America, SMA Life Assurance Company, Merrill Lynch Life Insurance Company, ML Life Insurance Company of New York, Woodmen of the World Life Insurance Society, Knights of Columbus, Washington National Insurance Company, The Stonehill Investment Corp., Central Life Assurance Company, Lazard Freres & Co., or their successors and assigns as the case may be, the Bank of Tokyo, Ltd., the Official Committee of Unsecured Creditors and the Official Committee of Equity Security Holders jointly propose the following Modified and Restated First Amended Joint Plan of Reorganization pursuant to Section 1121(a) of the Bankruptcy Code: ARTICLE I DEFINITIONS For purposes of this Modified and Restated First Amended Joint Plan of Reorganization, the following terms shall have the meanings herein set forth. Unless otherwise indicated, the singular shall include the plural and the plural shall include the singular. Capitalized terms shall at all times refer to the terms as defined in this Article. To the extent that terms are used and not otherwise defined in this Modified Plan, they shall have the meanings ascribed to them in the Bankruptcy Code. 1.1 "Administrative Agent" shall mean The First National Bank of Boston, as administrative agent under the Post-Effective Date Financing Facility. 1.2 "Administrative Claim" shall mean a Claim that is allowed under Section 503(b) of the Bankruptcy Code and entitled to priority under Section 507(a)(1) of the Bankruptcy Code or is otherwise determined to be entitled to such priority by Final Order, including, without limitation, fees and expenses of Professionals retained or to be compensated pursuant to the Bankruptcy Code, and all fees and charges assessed against the Debtor's Estate pursuant to 28 U.S.C. (section mark) 1930. 1.3 "ADR Procedure" shall mean the three-step alternative dispute resolution procedure pursuant to which the Debtor and a holder of a Damages Claims may seek to reach a determination of the amount of a Damages Claim for purposes of allowance, and Cash payment only where a Damages Claim is determined to be an Allowed Claim in an amount equal to or less than $500, pursuant to and as instituted by that certain order of the Bankruptcy Court dated April 26, 1994 entitled, "Order Approving Alternative Dispute Resolution Procedure," and such other orders of the Bankruptcy Court entered in connection therewith. 1.4 "Allowed Claim" shall mean a Claim that: (a) has been scheduled by the Debtor pursuant to Section 521(1) of the Bankruptcy Code and Bankruptcy Rule 1007, is not scheduled as disputed, contingent or unliquidated, and is not a Claim as to which a proof of Claim has been filed; (b) is a Claim as to which a proof of Claim has been timely-filed as of the applicable Bar Date and no objection thereto, or application to equitably subordinate or otherwise limit recovery, has been made as of a given date, and on or before any applicable deadline; (c) has been allowed by a Final Order of the Bankruptcy Court, or (d) in the case of the claims of the Pre-Petition Lenders, the Pre-Petition Lenders' Allowed Secured Claims. Allowed Claim shall include any portion of a Claim that is not disputed, contingent or unliquidated. "Allowed Claim" shall not include interest on the amount of any Claim except with respect to an Allowed Secured Claim as permitted by Section 506(b) of the Bankruptcy Code or as otherwise allowed by the Bankruptcy Court. Under no circumstances shall "Allowed Claim" include Claims arising from the rejection of any agreement pursuant to which Pre-Petition Warrants or Pre-Petition Stock Options may be, or have been, issued or exercised. 1.5 "Allowed Non-Tax Priority Claim" shall mean that portion of an Allowed Claim entitled to priority treatment under Section 507(a) of the Bankruptcy Code, exclusive of Allowed Tax Claims and Administrative Claims. 1.6 "Allowed Secured Claim" shall mean that portion of an Allowed Claim equal to the value, as determined by Final Order of the Bankruptcy Court pursuant to Section 506(a) of the Bankruptcy Code and Bankruptcy Rule 3012, of the interest of the holder of the Allowed Secured Claim in the property of the Estate which secures such Allowed Secured Claim by a valid and enforceable lien, security interest and/or pledge. In the case of the claims of the Pre-Petition Lenders, Allowed Secured Claim shall mean the Pre-Petition Lenders' Allowed Secured Claims. 1.7 "Allowed Tax Claim" shall mean that portion of an Allowed Claim entitled to priority under Section 507(a)(7) of the Bankruptcy Code. 2 1.8 "Allowed Unsecured Claim" shall mean any Allowed Claim that is not an Administrative Claim, an Allowed Non-Tax Priority Claim, an Allowed Secured Claim, an Allowed Tax Claim, a Subordinated Claim, or a Claim classified as an Interest in Classes 5, 6, and 7. 1.9 "Assumed Contracts and Leases" shall mean those executory contracts and unexpired, non-residential real or personal property leases which the Debtor has assumed, will assume, as of the Effective Date, or is the subject of a motion to assume as of the Effective Date, pursuant to Section 365 of the Bankruptcy Code by Final Order(s) of the Bankruptcy Court. 1.10 "Available Cash" shall mean all Cash of the Debtor as of the Effective Date. 1.11 "Avoiding Power Actions" shall mean all claims, rights and causes of action of the Estate against any Person under Sections 544 to 550, inclusive, of the Bankruptcy Code. 1.12 "Bankruptcy Code" shall mean Title 11, United States Code, 11 U.S.C. (double section mark) 101 et seq. as in effect on the Filing Date, as the same thereafter has been, and may be, amended. 1.13 "Bankruptcy Court" shall mean the United States Bankruptcy Court for the Eastern District of North Carolina, Raleigh Division, or such other court as may hereafter be granted primary jurisdiction over the Chapter 11 Case. 1.14 "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure, effective August 1, 1991 in accordance with the provisions of 28 U.S.C. (section mark) 2075 as the same thereafter has been, and may be, amended. 1.15 "Bank Group" shall mean, collectively, NationsBank of North Carolina, N.A., Branch Banking & Trust Company, Crestar Bank, The Bank of New York, Credit Lyonnais New York Branch, Credit Lyonnais Cayman Island Branch, Central Carolina Bank and Wachovia Bank of North Carolina, N.A., and their successors, assigns and participants. 1.16 "Bank of Tokyo" shall mean Bank of Tokyo, Ltd. 1.17 "Bar Date" shall mean any date fixed by order of the Bankruptcy Court as the last date on which a particular Claim against the Debtor must be filed. 1.18 "Board of Directors" shall mean the board of directors of Rose's as of the date immediately preceding the Effective Date. 1.19 "Business Day" shall mean any day other than a Saturday, Sunday or legal holiday as such term is defined in Bankruptcy Rule 9006(a). 3 1.20 "Cash" shall mean cash, cash equivalents (including personal checks drawn on a bank insured by the Federal Deposit Insurance Corporation, certified checks and money orders) and other readily marketable direct obligations of the United States of America and certificates of deposit issued by banks. 1.21 "Chapter 11 Case" shall mean the Debtor's case pursuant to Chapter 11 of the Bankruptcy Code administered in the Bankruptcy Court under case number 93-01365-5-ATS. 1.22 "Claim" shall mean a Claim against the Debtor as defined in Sections 101(5) and 102(2) of the Bankruptcy Code. 1.23 "Class" shall mean a category of holders of Claims or Interests which are substantially similar in nature to the Claims or Interests of the other holders in such Class respectively, as classified pursuant to this Plan. 1.24 "Class 3 Common Stock Designation" shall mean all of the Effective Date Shares which are not included in the Class 5 Subscription Stock Designation, if any, or the New Rose's Common Stock Secondary Distribution, if any. 1.25 "Class 5 Rights Notice" shall mean the notice sent to all holders of Common Stock Interests in Class 5 within 5 days of the Equity Record Date advising them of their rights under the Class 5 Subscription, including a return notification form which a Class 5 Subscriber must use to indicate participation in the Class 5 Subscription. The Class 5 Rights Notice effectuated the Class 5 Subscription pursuant to Section 7.10 of this Plan, and was distributed to the holders of Common Stock Interests in the form negotiated among the Debtor and the Committees. 1.26 "Class 5 Subscription Stock Designation" shall mean shares of New Rose's Common Stock, if any, purchased by and issued to Class 5 Subscribers pursuant to Section 7.10 of this Plan and the Class 5 Rights Notice. 1.27 "Class 5 Subscriber" shall mean a holder of Common Stock Interests in Class 5 who, if any, has irrevocably elected to acquire shares of New Rose's Common Stock pursuant to Section 7.10 of this Plan and the Class 5 Rights Notice. 1.28 "Class 5 Subscription" shall mean the procedure by which a holder of Common Stock Interests in Class 5 may elect to pay Cash to acquire shares of New Rose's Common Stock, pursuant to Section 7.10 of this Plan and the Class 5 Rights Notice. 1.29 "Class 5 Subscription Price" shall mean $6.50 per share of New Rose's Common Stock payable by a Class 5 Subscriber pursuant to the Plan pursuant to the order of the Bankruptcy Court dated February 3, 1995. 4 1.30 "Collateral Agent" shall mean Shawmut Bank Connecticut National Association (successor-in-interest to NationsBank of North Carolina, N.A., the successor-in-interest to NCNB National Bank of North Carolina) in its capacity as the successor collateral agent for the Pre-Petition Lenders, or any successor thereto, pursuant to the Intercreditor Agreements. 1.31 "Committees" shall mean, collectively, the Unsecured Committee and the Equity Committee. 1.32 "Common Stock Interest" shall mean any equity interest in the Voting Common Stock and Non-Voting Class B Stock registered on the applicable Record Date in such stock register as may be maintained by or on behalf of the Debtor. "Common Stock Interest" excludes any Pre-Petition Warrants or Pre-Petition Stock Options. 1.33 "Confirmation" shall mean entry of an order of the Bankruptcy Court confirming the Modified Plan pursuant to Sections 1127(b) and 1129 of the Bankruptcy Code. 1.34 "Confirmation Date" shall mean the date upon which both Confirmation Orders are entered by the Bankruptcy Court. 1.35 "Confirmation Orders" shall mean, collectively, the Plan Confirmation Order and the Modified Plan Confirmation Order. 1.36 "Consummation Certificate" shall mean a certification of the chief financial officer of Reorganized Rose's stating that the Effective Date has occurred as of the calendar date thereof. 1.37 "Consummation Date" shall mean the date on which the Bankruptcy Court enters the Final Decree. 1.38 "Contingent Claim" shall mean any Claim for which a proof of claim has been timely filed with the Bankruptcy Court as of the applicable Bar Date but was not filed in a sum certain and which Claim has not been disallowed or fixed by the Bankruptcy Court at a sum certain. 1.39 "Core Stores" shall mean, collectively, the 106 discount retail stores operated by the Debtor in the ordinary course of business and not identified by order of the Bankruptcy Court as being the subject of any going-out-of-business sales scheduled, as of the Effective Date, to be commenced no later than thirty days after the Effective Date. 1.40 "Damages Claims" shall have the meaning of such term set forth in the order of the Bankruptcy Court dated April 26, 1994 entitled, "Order Approving Alternative Dispute Resolution Procedure." 5 1.41 "Debtor" shall mean Rose's Stores, Inc., a Delaware corporation, as debtor and debtor-in-possession during the pendency of the Chapter 11 Case through the Effective Date. 1.42 "Deferred GE Obligations" shall mean (i) the Letter of Credit Obligations outstanding at the time of closing of the Post-Effective Date Financing Facility and (ii) those GE Obligations which at the time of the closing of the Post-Effective Date Financing Facility would be capable of being satisfied in full, in Cash, except that the amount of such obligations is not then finally determined, including, without limitation, certain fees, costs and expenses incurred by or on behalf of GE Capital with respect to the DIP Facility, to the extent set forth in the Deferred GE Obligations Agreements. 1.43 "Deferred GE Obligations Agreements" shall mean those certain agreements to be entered into by and among GE Capital, the Debtor, Reorganized Rose's and certain other parties, each in form and substance mutually acceptable to GE Capital, the Facility Agents and Reorganized Rose's, the forms of which agreements shall have been filed with the Bankruptcy Court prior to the entry of the Modified Plan Confirmation Order and approved therein by the Bankruptcy Court subject to changes as may be agreed to by GE Capital, the Facility Agents and Reorganized Rose's (without any party thereto having an obligation to make any changes), providing for (i) with respect to Letter of Credit Obligations outstanding at the time of the closing of the Post-Effective Date Financing Facility, either (A) the full and final release of GE Capital from any and all reimbursement or other obligations with respect to each outstanding letter of credit or (B) the provision of cash or other collateral by Reorganized Rose's as described therein. 1.44 "Determination Date" shall mean that date which is the later of (i) 105 days following the Effective Date or the first Business Day thereafter or (ii) 20 days after the first date on which at least 2,000,000 shares of New Rose's Common Stock shall have been distributed to holders of Allowed Claims in Class 3 and/or holders of Common Stock Interests in Class 5, unless the Post-Effective Date Committee, in its sole discretion, waives the requirement that at least 2,000,000 shares of New Rose's Common Stock be distributed prior to the Determination Date. 1.45 "DIP Facility" shall mean, collectively, the DIP Financing Documents and the DIP Financing Orders, as amended. 1.46 "DIP Financing Documents" shall mean that certain "Debtor-in- Possession Loan Agreement" dated as of September 20, 1993, together with all agreements, documents and amendments entered into by the Debtor and GE Capital in connection therewith. 1.47 "DIP Financing Orders" shall mean the "Final Order Authorizing Debtor-In-Possession to Borrow Funds With Priority Over Administrative Expenses and Secured by Liens on Property of the 6 Estate" dated October 14, 1993 (the "Final DIP Order"), as such order has been, and may be, amended and modified from time to time during the Chapter 11 Case by further orders of the Bankruptcy Court. 1.48 "Disclosure Statement" shall mean the disclosure statement filed by the Debtor and approved by order of the Bankruptcy Court dated October 5, 1994 as containing adequate information in accordance with Section 1125 of the Bankruptcy Code. 1.49 "Disputed Claim" shall mean (i) that portion of any Claim as to which an objection to the allowance thereof has been interposed, or an application to equitably subordinate or otherwise limit recovery has been made, within thirty days after the Effective Date or any other date fixed by order of the Bankruptcy Court and which objection or application has not been determined by a Final Order, or (ii) a Contingent Claim. Under no circumstances may any of the Pre-Petition Lenders' Allowed Secured Claims constitute a Disputed Claim. 1.50 "Distribution Agent" shall mean an entity which is authorized to make distributions required to be made under this Plan in accordance with Section 6.1 of this Modified Plan. 1.51 "Distribution Date" shall mean any date on which a distribution is required to be made under this Modified Plan. 1.52 "Effective Date" shall mean the first Business Day, or as soon as practicable thereafter, upon which all the conditions set forth in Section 8.1 of this Modified Plan have been satisfied or waived. 1.53 "Effective Date Shares" shall mean the 10,000,000 shares of New Rose's Common Stock to be issued by Reorganized Rose's on the Effective Date for the benefit of and on account of the holders of Claims in Class 3 and/or holders of Common Stock Interests in Class 5, and officers of Reorganized Rose's pursuant to the Management Incentive and Retention Program. 1.54 "Employee Stock Options" shall mean those certain Pre-Petition Stock Options granted prior to the Filing Date to employees of the Debtor. 1.55 "Equity Committee" shall mean the Official Committee of Equity Security Holders appointed by the Office of the Bankruptcy Administrator for the Eastern District of North Carolina to serve in the Chapter 11 Case, as the same may be constituted from time to time. 1.56 "Equity Record Date" shall mean February 7, 1995, the Record Date for purposes of distributing the rights to participate in the Class 5 Subscription to holders of Common Stock Interests 7 pursuant to the order of the Bankruptcy Court dated February 13, 1995. 1.57 "Estate" shall mean the estate created in the Chapter 11 Case by operation of Section 541 of the Bankruptcy Code. 1.58 "Facility Agents" shall mean The First National Bank of Boston or The CIT Group/Business Credit, Inc., collectively, in their capacities as facility agents under the Post-Effective Date Financing Facility. 1.59 "Filing Date" shall mean September 5, 1993. 1.60 "Final Decree" shall mean the final decree entered by the Bankruptcy Court on the Consummation Date pursuant to Bankruptcy Rule 3022. 1.61 "Final Order" shall mean an order or judgment of the Bankruptcy Court which has not been reversed, stayed, modified or amended and as to which (i) the time to appeal or seek review, rehearing, reargument or certiorari has expired, and (ii) as to which no appeal or petition for review, rehearing, reargument, stay or certiorari proceeding is pending or as to which any right to appeal or to seek review, rehearing, reargument or certiorari has been waived. 1.62 "Full Recovery Target Amount" shall mean, on any applicable date, the amount of Allowed Claims in Class 3 (except for those to be satisfied by Cash payment pursuant to this Modified Plan or order of the Bankruptcy Court) plus the total Reserve Amount as of such date, if any, determined pursuant to Section 7.12 of this Modified Plan for all Disputed Claims in Class 3. 1.63 "GE Capital" shall mean General Electric Capital Corporation, a New York corporation. 1.64 "GE Obligations" shall mean all obligations of the Debtor to GE Capital and certain individual and corporate affiliates under and pursuant to the DIP Facility. 1.65 "GE Master Release Agreement" shall mean that certain agreement to be entered into by and between GE Capital and Debtor, in form and substance acceptable to GE Capital, the Debtor and the Facility Agents, the form of which agreement shall have been filed with the Bankruptcy Court prior to the entry of the Modified Plan Confirmation Order and approved therein by the Bankruptcy Court subject to changes as may be agreed to by GE Capital, the Facility Agents and Reorganized Rose's (without any party thereto having an obligation to make any changes), (i) acknowledging the payoff amount at the "Closing Event" (as defined in the order dated April 17, 1995 of the Bankruptcy Court approving the Post-Effective Date Financing Facility) with respect to the GE Obligations (other than (a) the Deferred GE Obligations and (b) the Post-Effective Date GE 8 Obligations) and (ii) providing for, among other things, that simultaneously upon the payment of such payoff amount to GE Capital, in Cash, and the execution and delivery of the Deferred GE Obligations Agreements and the Post-Effective Date GE Assumption Agreement and, in each case, such performance as may be required thereunder prior to or upon the execution and delivery thereof, all liens in favor of GE Capital under the DIP Facility shall be terminated and released and GE Capital shall execute and deliver to the Administrative Agent for filing (at the sole cost and expense of Debtor or Reorganized Rose's) all termination statements and take such other actions and provide such further assurances as may be reasonably requested and prepared by the Administrative Agent (all such actions and assurances to be taken at the sole cost and expense of Reorganized Rose's) to discharge or evidence the discharge of all mortgages, deeds of trust and security interests granted by the Debtor in favor of GE Capital. 1.66 "Intercreditor Agreements" shall mean, collectively, those agreements by and among the Pre-Petition Lenders, to the extent applicable, and the Collateral Agent, providing, as among themselves, the terms and conditions by which, among other things, the Pre-Petition Lenders, in conjunction with the Collateral Agent, maintain and may enforce their respective security interests and liens in or on certain property of the Estate, including, without limitation, that certain substitution of collateral agent agreement dated as of September 30, 1994 by and among the Collateral Agent, the Pre-Petition Lenders and NationsBank of North Carolina, N.A. as predecessor collateral agent. 1.67 "Interests" shall mean collectively, all Common Stock Interests, all Pre-Petition Warrants and all Pre-Petition Stock Options. 1.68 "Management Incentive and Retention Program" shall mean that certain incentive and retention program covering periods both prior and subsequent to the Effective Date, authorized by the Final Order of the Bankruptcy Court dated February 14, 1995. 1.69 "Modified Plan" shall mean this Chapter 11 modified and restated first amended joint plan of reorganization, reflecting such non-material modifications to the Plan as may be required to effectuate the Post- Effective Date Financing Facility and otherwise facilitate the tasks required to be taken in conjunction with the Effective Date under the Plan, inclusive of any exhibits hereto and any documents incorporated herein by reference, as it may from time to time be amended, as and to the extent permitted herein or by the Bankruptcy Code. 1.70 "Modified Plan Confirmation Order" shall mean the order of the Bankruptcy Court confirming the Modified Plan pursuant to Sections 1127 and 1129 of the Bankruptcy Code and finding, inter alia, that the modifications to the Plan embodied in the Modified Plan do not materially adversely affect the treatment of any Claims 9 or Interests under the Plan, which order shall be in a form acceptable to all Plan Proponents, the Facility Agents and GE Capital. 1.71 "New Rose's Charter" shall mean the restated certificate of incorporation of Reorganized Rose's, in substantially the form to be filed with the Bankruptcy Court on or before the Effective Date, as modified or amended to the extent necessary and consistent with the Modified Plan, and effective as of the Effective Date. 1.72 "New Rose's Common Stock" shall mean the no par value shares of common stock of Reorganized Rose's authorized to be issued pursuant to the New Rose's Charter. 1.73 "New Rose's Common Stock Secondary Distribution" shall mean any and all Effective Date Shares remaining in the New Rose's Common Stock Escrow as of the Determination Date for distribution to holders of Common Stock Interests in Class 5, after distribution of shares of New Rose's Common Stock pursuant to Section 6.2.1(b). 1.74 "New Rose's Common Stock Escrow" shall mean the escrow established pursuant to the New Rose's Common Stock Escrow Agreement, into which such number of the Effective Date Shares shall be deposited as provided in Section 6.2.1(a) of this Modified Plan. 1.75 "New Rose's Common Stock Escrow Agreement" shall mean the escrow agreement between Reorganized Rose's and the escrow agent named therein which sets forth the terms and conditions establishing the New Rose's Common Stock Escrow, and an escrow for undeliverable distributions under Section 6.5 of this Modified Plan, which agreement shall be substantially in the form as negotiated among the Debtor and the Committees to their satisfaction and filed with the Bankruptcy Court prior to or on the Effective Date as such document is effective as of the Effective Date. 1.76 "New Rose's Warrant Agreement" shall mean the warrant agreement between Reorganized Rose's and the warrant agent named therein which sets forth the terms and conditions respecting exercise and issuance of the New Rose's Warrants, and an escrow for undeliverable New Rose's Warrants, which agreement shall be substantially in a form as negotiated among the Debtor and the Committees to their satisfaction and filed with the Bankruptcy Court on or before the Effective Date, as such document may be modified or amended and effective as of the Effective Date. 1.77 "New Rose's Warrants" shall mean the 4,285,714 warrants to purchase New Rose's Common Stock issued to holders of Common Stock Interests in Class 5 in accordance with Section 6.2.4 of this Modified Plan and the New Rose's Warrant Agreement. 10 1.78 "Non-Voting Class B Stock" shall mean the Non-Voting Class B Stock of the Debtor, no par value, exclusive of any shares of Non-Voting Class B Stock held in treasury. 1.79 "Permitted Encumbrance Collateral" shall mean any asset of Reorganized Rose's with respect to which the Post-Effective Date Lenders have agreed in writing by the terms of the Post-Effective Date Financing Facility may be encumbered by a security interest, lien or other encumbrance which is not junior and subordinate to the liens and security interests granted to the Post-Effective Date Lenders pursuant to the Post- Effective Date Financing Facility. 1.80 "Person" shall mean any individual, corporation, partnership, joint venture, trust, estate, unincorporated association, committee, or organization, governmental entity or political subdivision thereof, or any other entity. 1.81 "Plan" shall mean the First Amended Joint Plan of Reorganization of Rose's Stores, Inc., dated October 4, 1994, as confirmed by the Plan Confirmation Order. 1.82 "Plan Confirmation Date" shall mean December 14, 1994, the date on which the Bankruptcy Court entered the Plan Confirmation Order. 1.83 "Plan Confirmation Order" shall mean the Final Order of the Bankruptcy Court entered on December 14, 1994 confirming the Plan pursuant to Section 1129 of the Bankruptcy Code. 1.84 "Plan Proponents" shall mean, collectively, the Debtor, each of the Pre-Petition Secured Noteholders, the Bank of Tokyo, and each of the Committees, as proponents of the Plan and the Modified Plan. 1.85 "Post-Effective Date Collateral" shall mean, as of the Effective Date, all presently owned or thereafter acquired assets and property of every type of Reorganized Rose's, whether or not such assets and properties are identified as collateral in the documents and agreements memorializing the terms and provisions of the Post-Effective Date Financing Facility. 1.86 "Post-Effective Date Financing Facility" shall mean that financing facility, effective as of the Effective Date, that shall be provided pursuant to agreements and documents memorializing that certain revolving credit facility in an aggregate principal amount of up to $125,000,000 described in the commitment letter dated March 10, 1995 of The First National Bank of Boston and The CIT Group/Business Credit, Inc. authorized and approved by order of the Bankruptcy Court dated March 22, 1995, as such financing facility is approved prior to the Effective Date by order of the Bankruptcy Court, on appropriate notice and hearing, on terms not materially inconsistent with the terms of the aforesaid financing commitment. 11 1.87 "Post-Effective Date GE Assumption Agreement" shall mean that certain agreement to be entered into by and among GE Capital, the Debtor, and Reorganized Rose's, in form and substance mutually acceptable to GE Capital, the Facility Agents, and Reorganized Rose's, the form of which agreement shall have been filed with the Bankruptcy Court prior to the entry of the Modified Plan Confirmation Order and approved therein by the Bankruptcy Court subject to changes as may be agreed to by GE Capital, the Facility Agents and Reorganized Rose's (without any party thereto having an obligation to make any changes), whereby Reorganized Rose's shall assume each and every of the Post-Effective Date GE Obligations. 1.88 "Post-Effective Date GE Obligations" shall mean all obligations of the Debtor to GE Capital, GE Capital Commercial Finance, Inc., GE Capital Corporate Finance, Inc. and their respective affiliates, and each of their respective officers, directors, employees, attorneys and agents if any, under (i) the DIP Facility (other than the Deferred GE Obligations), (ii) that certain Amended and Restated Commitment Letter of GE Capital to Rose's Stores, Inc., dated as of July 19, 1994 and the related Fee Letter dated as of July 19, 1994 (the "GE Commitment") and (iii) that certain Agreement Terminating Amended and Restated Letter to Provided Confirmation Financing dated as of March 31, 1995 (the "GE Commitment Termination Agreement"), which in light of their contingent, unmatured or unliquidated nature are not at the time of the closing of the Post-Effective Date Financing Facility quantifiable or otherwise capable of being satisfied in full by the payment of Cash, including, without limitation, all indemnification obligations of the Debtor under or pursuant to the DIP Facility, the GE Commitment and the GE Commitment Termination Agreement. 1.89 "Post-Effective Date Lenders" shall mean, collectively, The First National Bank of Boston, The CIT Group/Business Credit, Inc. (in all capacities) and the other lending institutions who are, as of the Effective Date, parties to (in whatever capacity) or who may provide financing to Reorganized Rose's pursuant to, the Post-Effective Date Financing Facility. 1.90 "Pre-Petition Lenders" shall mean collectively, the Bank Group, the Pre-Petition Secured Noteholders and the Bank of Tokyo. 1.91 "Pre-Petition Lenders' Allowed Secured Claims" shall have the meaning set forth in the Second Supplemental Adequate Protection Consent Order, and the Pre-Petition Lenders' Allowed Secured Claims as of the date on which such Claims shall be satisfied in full pursuant to this Modified Plan shall equal the amounts that are set forth in Exhibit C annexed to the Second Supplemental Adequate Protection Consent Order (as of the date the Second Supplemental Adequate Protection Consent Order was filed), plus any and all accrued and unpaid interest, fees, expenses and charges due to the Pre-Petition Lenders as of the date on which such Claims shall be satisfied in full pursuant to this Modified Plan, less all amounts received with respect thereto by the Pre- 12 Petition Lenders toward satisfaction of such claims through the date on which such Claims shall be satisfied in full pursuant to this Modified Plan. 1.92 "Pre-Petition Secured Noteholders" shall mean the holders of the Pre-Petition Secured Notes, to wit: Nationwide Life Insurance Company, Wausau Preferred Health Insurance Company, Equitable Variable Life Insurance Company, The Equitable Life Assurance Society of the United States, Jefferson-Pilot Life Insurance Company, The Franklin Life Insurance Company, The Franklin United Life Insurance Company, Great-West Life & Annuity Insurance Company, American Family Life Insurance Company, State Mutual Life Assurance Company of America, SMA Life Assurance Company, Merrill Lynch Life Insurance Company, ML Life Insurance Company of New York, Woodmen of the World Life Insurance Society, Knights of Columbus, Washington National Insurance Company, The Stonehill Investment Corp., Central Life Assurance Company, and Lazard Freres & Co., or their predecessors-in-interest, or successors and assigns as of the Record Date. 1.93 "Pre-Petition Secured Noteholder Warrant Agreement" shall mean that certain agreement executed in connection with the pre-petition refinancing of the Debtor pursuant to which Pre-Petition Secured Noteholder Warrants were issued and which agreement further provided for the future issuance of additional such warrants. 1.94 "Pre-Petition Secured Noteholder Warrants" shall mean those certain Pre-Petition Warrants held by Pre-Petition Secured Noteholders and any rights to receive future warrants pursuant to the Pre-Petition Secured Noteholder Warrant Agreement which were not exercised prior to the Filing Date. 1.95 "Pre-Petition Secured Notes" shall mean the 11% Senior Secured Notes due December 31, 1998, issued by the Debtor pursuant to the terms of that certain "Combined, Amended and Restated Note Agreement" dated May 29, 1992. 1.96 "Pre-Petition Stock Option" shall mean any option to purchase an equity interest in the Debtor's Common Stock, including, without limitation, Employee Stock Options, and any Claims arising thereunder, subject to subordination pursuant to Section 510(b) of the Bankruptcy Code, arising from rescission of a purchase or sale of a Pre-Petition Stock Option or for damages arising from such purchase and sale or for reimbursement of contribution or occurrence of such Claim. 1.97 "Pre-Petition Warrant" shall mean any warrant issued pre- petition to purchase an equity interest in the Debtor, including, without limitation, Pre-Petition Secured Noteholder Warrants, and any Claims subject to subordination pursuant to Section 510(b) of the Bankruptcy Code, arising from rescission of the purchase or sale of a Pre-Petition Warrant or for damages 13 arising from such purchase or sale or reimbursement of contribution or occurrence of such Claim. 1.98 "Professional" shall mean any Person (i) retained pursuant to an order of the Bankruptcy Court in accordance with Sections 327 and 1103 of the Bankruptcy Code and to be compensated for services pursuant to Sections 327, 328, 329, 330 and 331 of the Bankruptcy Code, or (ii) for which compensation and reimbursement has been allowed by the Bankruptcy Court pursuant to Section 503(b)(4) of the Bankruptcy Code. 1.99 "Professional Fees" shall mean compensation for services rendered and reimbursement of expenses in connection with the Chapter 11 Case allowed to Professionals by order of the Bankruptcy Court pursuant to Sections 330, 331, 1103 or 503(b) of the Bankruptcy Code. Professional Fees as defined herein shall not include the fees of the professionals of the Pre-Petition Lenders, which shall be paid in accordance with the provisions of the Second Supplemental Adequate Protection Consent Order. 1.100 "Pro-Rata" shall mean the ratio of an Allowed Claim, Reserve Amount or Interest in or respecting a particular Class to the aggregate amount of all Allowed Claims plus Reserve Amounts or Interests in or respecting that Class. 1.101 "Reconstituted Board of Directors" shall mean the board of directors of Reorganized Rose's as of and after the Effective Date, appointed pursuant to Sections 7.5 and 7.6 of this Modified Plan and as set forth in the schedule filed with the Bankruptcy Court prior to the Effective Date. 1.102 "Record Date" shall mean (a) for the purpose of voting on the Plan, the date of entry of the order approving the Disclosure Statement, (b) for the purposes of any distribution and payments under and pursuant to this Modified Plan other than the rights to participate in the Class 5 Subscription to holders of Common Stock Interests, the Effective Date, (c) for the purpose of distributing the rights to participate in the Class 5 Subscription to the holders of Common Stock Interests, the Equity Record Date, and (d) for the purpose of making payments to or for the benefit of the Pre-Petition Lenders pursuant to Section 4.4 of this Modified Plan, the Business Day prior to the scheduled date of the closing of the Post- Effective Date Financing Facility. 1.103 "Released Parties" shall mean, collectively, (i) all past and present officers, directors, agents, employees, and Professionals of the Debtor, (ii) all members, agents and Professionals of the Committees, (iii) each of the Pre-Petition Lenders and their past and present officers, directors, agents, employees and professionals and (iv) GE Capital, GE Capital Corporate Finance Group, Inc. and GE Capital Commercial Finance, Inc., and all of their respective past and present officers, directors, agents, employees and professionals. 14 1.104 "Reorganized Rose's" shall mean Rose's Stores, Inc., a Delaware corporation, operating and conducting business pursuant to the New Rose's Charter, as of and after the Effective Date. 1.105 "Reserve" shall mean any escrow or interest-bearing account established to hold distributions on account of Disputed Claims, pursuant to Section 7.12 of this Modified Plan. The amount of the Reserve shall include interest and dividends accrued thereon. 1.106 "Reserve Amount" shall mean the dollar value of a Disputed Claim for purposes of determining the aggregate distribution to be reserved for a Disputed Claim pursuant to Section 7.12 of this Plan. 1.107 "Retiree Claim" shall mean a Claim arising from or relating to retiree benefits, if any, as defined in Section 1114(a) of the Bankruptcy Code, which is allowed under Section 1114(e)(2) of the Bankruptcy Code. 1.108 "RSI" shall mean RSI Trading, Inc., a Delaware corporation that was a wholly owned subsidiary of the Debtor prior to its merger with the Debtor prior to the Effective Date. 1.109 "Second Supplemental Adequate Protection Consent Order" shall mean the "Second Supplemental Consensual Adequate Protection Order In Connection with Payment Of Net Proceeds From "GOB2" Sales And The Filing Of The Joint Plan Of Reorganization Of Rose's Stores, Inc." signed by the Plan Proponents and GE Capital and entered by the Bankruptcy Court, as modified by orders of the Bankruptcy Court dated August 30, 1994 and November 30, 1994. 1.110 "Subscription Proceeds Escrow" shall mean the escrow account established pursuant to Section 7.10 of this Modified Plan and the Class 5 Rights Notice in connection with the Class 5 Subscription into which Subscription Proceeds, if any, shall be deposited and from which the Subscription Proceeds shall be distributed to holders of Allowed Unsecured Claims in Class 3 or otherwise in accordance with Section 6.2.2 of this Modified Plan. 1.111 "Subscription Proceeds" shall mean the aggregate amount of Cash, if any, tendered by the Class 5 Subscribers to acquire shares constituting the Class 5 Subscription Stock Designation pursuant to Section 7.10 of this Modified Plan and the Class 5 Rights Notice, and maintained in the Subscription Proceeds Escrow in accordance with the Class 5 Rights Notice pending distribution pursuant to Section 6.2.2 of this Modified Plan. The Subscription Proceeds shall not be property of the Estate or of Reorganized Rose's. 1.112 "Subordinated Claims" shall mean all Claims subject to subordination pursuant to Section 510(b) of the Bankruptcy Code arising from rescission of a purchase or sale of Voting Common 15 Stock and Non-Voting Class B Stock, or for damages arising from such purchase or sale, or for reimbursement, contribution or indemnification on occurrence of such Claim. 1.113 "Supplemental Adequate Protection Orders" shall mean, collectively, the "Supplemental Consensual Adequate Protection Order In Connection with Debtor's Motion For Order Authorizing Debtor To Conduct Additional Going Out Of Business Sales And Other Relief" signed by the Bankruptcy Court on May 17, 1994, and the Second Supplemental Adequate Protection Consent Order. 1.114 "Unsecured Committee" shall mean the Official Committee of Unsecured Creditors appointed by the Office of the Bankruptcy Administrator for the Eastern District of North Carolina to serve in the Chapter 11 Case, as the same may be constituted from time to time. 1.115 "Voting Common Stock" shall mean the Voting Common Stock of the Debtor, no par value, exclusive of any shares of Voting Common Stock held in treasury, registered as of the Record Date in such stock register as may be maintained by or on behalf of the Debtor. ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS 2.1 Criterion of Class. A Claim or Interest is in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is in a different Class to the extent that the remainder of the Claim or Interest qualifies within the description of the different Class. The Debtor reserves the right to have any Claim or Interest reclassified as appropriate and to the extent permitted by the Bankruptcy Court. In particular, a Claim filed as a Non-Tax Priority Claim but which does not comport with provisions of Section 507(a) of the Bankruptcy Code shall be treated by the Debtor pursuant to Bankruptcy Court Order as a Claim not entitled to priority, or as an Interest (as appropriate), and the Debtor will ascribe a vote cast in connection with this Modified Plan by a holder of such Claim to the proper Class, to the extent permitted by the Bankruptcy Court. 2.2 Claims and Interests. All Allowed Claims and Interests are divided into the following Classes pursuant to Sections 1122 and 1123(a)(1) of the Bankruptcy Code, which Classes shall be mutually exclusive: (a) Class 1 (Non-Tax Priority Claims). Class 1 consists of all Allowed Non-Tax Priority Claims. 16 (b) Class 2 (Secured Claims). Class 2 consists of all Allowed Secured Claims. Class 2 Claims are classified further into two subclasses: (i) Class 2A (General Secured Claims). Class 2A consists of all Allowed Secured Claims, other than those asserted by the Pre-Petition Lenders, the collateral for which constitutes an asset which is property of the Estate, and which property secures such Allowed Secured Claims by a valid and enforceable lien, security interest and/or pledge; and (ii) Class 2B (Pre-Petition Lenders Secured Claims). Class 2B consists of the Pre-Petition Lenders' Allowed Secured Claims. (c) Class 3 (Unsecured Claims). Class 3 consists of all Allowed Unsecured Claims. (d) Class 4. Intentionally omitted. (e) Class 5 (Common Stock Interests). Class 5 consists of all Common Stock Interests. (f) Class 6 (Pre-Petition Warrants). Class 6 consists of all Interests arising from Pre-Petition Warrants. (g) Class 7 (Pre-Petition Stock Options). Class 7 consists of all Interests arising from Pre-Petition Stock Options. (h) Class 8 (Subordinated Claims). Class 8 consists of all Subordinated Claims. ARTICLE III PAYMENT OF ADMINISTRATIVE CLAIMS ALLOWED TAX CLAIMS, PROFESSIONAL FEES, AND RETIREE CLAIMS, AND TREATMENT OF GE CAPITAL 3.1 Administrative Claims. All Administrative Claims, other than Professional Fees, shall be paid by the Debtor in full, in Cash, (a) in such amounts as are incurred by the Debtor in the ordinary course of its business, or (b) in such amounts as such Administrative Claims are allowed by Final Order of the Bankruptcy Court (i) upon the later of the Effective Date or the date upon which the Bankruptcy Court enters a Final Order allowing such Administrative Claim, or (ii) upon such other terms as may exist in the ordinary course of the Debtor's business, or (iii) as may be agreed upon between the holders of such Administrative Claims and the Debtor. Those liabilities of the Debtor due and payable in the ordinary course of business after the Effective Date shall be 17 treated as ordinary course of business obligations of Reorganized Rose's. 3.2 Allowed Tax Claims. Allowed Tax Claims shall be paid by the Debtor in full, in Cash, on the later of the Effective Date or the date upon which the Bankruptcy Court enters a Final Order allowing such Allowed Tax Claim, or upon such other terms as may be agreed to between the Debtor and any holder of an Allowed Tax Claim; provided, however, that (i) the Debtor may make, at its option, in lieu of payment in full of the Allowed Tax Claims on the Effective Date, deferred Cash payments respecting Allowed Tax Claims to the extent permitted by Section 1129(a)(9) of the Bankruptcy Code and, in such event, interest shall be paid on the unpaid portion of such Allowed Tax Claim at a rate to be agreed to by the Debtor and the appropriate governmental unit or, if they are unable to agree, to be determined by the Bankruptcy Court, and (ii) if such Allowed Tax Claim is for a tax assessed against property of the Estate, the amount of such Allowed Tax Claim does not exceed the value of the Estate's interest in such property, and (iii) in the event an Allowed Tax Claim may also be classified as a Secured Claim, the Debtor may, at its option, elect to treat such Allowed Tax Claim as an Allowed Secured Claim. Payments to the Internal Revenue Service with respect to any Allowed Tax Claims shall be made in equal quarterly payments with interest at 8% per annum, accruing from the Plan Confirmation Date until full payment is made, with the first such quarterly payment being made within fifteen days after the Effective Date. All Allowed Tax Claims that by their terms become due and payable after the Confirmation Date shall be paid when due. 3.3 Professional Fees. Awards of Professional Fees for all periods up to and including the Plan Confirmation Date shall be paid (i) first, from those trusts or escrows established by prior order of the Bankruptcy Court, on account of Professional Fees for which payment was requested but not authorized by the Bankruptcy Court prior to the Plan Confirmation Date, and, (ii) thereafter, by the Debtor in Cash, pursuant to order of the Bankruptcy Court. During the period from the Plan Confirmation Date through and including the Effective Date, Professionals employed by the Debtor or the Committees may be paid compensation and reimbursement of expenses monthly in arrears in full in Cash upon the submission of invoices to the Debtor and the Committees. Ten (10) days after receipt by the Debtor and the Committees of any such invoice, the Debtor shall be authorized to pay such invoice without further order of the Bankruptcy Court unless the Debtor and/or the Person seeking payment has received a written objection to the payment thereof from any of the Debtor or the Committees within such period. In the event fees and expenses of any professional retained by the Debtor are objected to by either the Debtor or the Committees, such fees and expenses shall be subject to and payable only upon Bankruptcy Court approval or prior agreement of the parties. All Professional Fees for services rendered after the Effective Date in connection with the Debtor or Reorganized Rose's, 18 as the case may be, the Chapter 11 Case and/or this Modified Plan shall be paid by the Debtor or Reorganized Rose's, as the case may be, pursuant to the provisions of this Plan or upon such terms as agreed to by the Debtor or Reorganized Rose's, as the case may be, and the particular Professional without further Bankruptcy Court review or authorization. In all circumstances, the fees of the professionals of the Pre-Petition Lenders shall be paid in accordance with the Second Supplemental Adequate Protection Consent Order, and shall be paid in full, in Cash, in connection with the closing of the Post-Effective Date Financing Facility. 3.4 Retiree Claims and Benefits Under Section 1114 of the Bankruptcy Code. On and after the Effective Date, all Allowed Retiree Claims arising prior to the Effective Date shall be treated as Administrative Claims, paid in full, and all retiree benefits, as such term is defined in Section 1114(a) of the Bankruptcy Code, shall continue, at the level established or modified pursuant to Section 1114 of the Bankruptcy Code, solely to the extent, and for the period, that the Debtor and Reorganized Rose's is, or may be, contractually or legally obligated to provide such benefits. 3.5 Treatment of GE Capital. Simultaneous with the closing of the Post-Effective Date Financing Facility, (i) all of the GE Obligations (other than (a) the Deferred GE Obligations and (b) the Post-Effective Date GE Obligations) shall be fully and finally satisfied, in Cash, in accordance with this Section 3.5, (ii) Reorganized Rose's shall have made adequate provision with respect to the Deferred GE Obligations by the execution and delivery of the Deferred GE Obligations Agreements and such performance as may be required thereunder prior to or upon the execution and delivery thereof, (iii) Reorganized Rose's shall have assumed each and every of the Post-Effective Date GE Obligations by the execution and delivery of the Post-Effective Date GE Assumption Agreement and in each case, such performance as may be required thereunder prior to or upon the execution and delivery thereof, and (iv) GE Capital shall enter into and deliver the GE Master Release Agreement. Simultaneously upon such time as (i) all GE Obligations (other than (a) the Deferred GE Obligations and (b) the Post-Effective Date GE Obligations) are fully satisfied, in Cash (the amount of which shall be fixed and provided to Reorganized Rose's and the Facility Agents prior to the initial funding under the Post-Effective Date Financing Facility), (ii) all Deferred GE Obligations are provided for by Reorganized Rose's by the execution and delivery of the Deferred GE Obligations Agreements and such performance as may be required thereunder prior to or upon the execution and delivery thereof, and (iii) all Post- Effective Date GE Obligations are assumed by Reorganized Rose's by the execution and delivery of the Post-Effective Date GE Assumption Agreement and such performance as may be required thereunder prior to or upon the execution and delivery thereof, all liens, claims, interests, rights, remedies and protections granted to GE Capital pursuant to the DIP Facility shall be released and terminated. Notwithstanding anything to the contrary set forth in or implied by any provisions of this Modified 19 Plan, on and after the Effective Date Reorganized Rose's shall be deemed to have assumed, without any action or the execution of any document, any and all Post-Effective Date GE Obligations. ARTICLE IV CLAIMS NOT IMPAIRED UNDER THE PLAN 4.1 Non-Impairment. Claims in Class 1, Class 2A and Class 2B are not impaired under this Modified Plan. In the event of a controversy as to whether any holders of Claims or Interests are impaired, the Bankruptcy Court shall, after appropriate notice and hearing, determine such controversy. The Debtor reserves the right to re-classify Claims or Interests as appropriate and to the extent permitted by the Bankruptcy Court. In particular, a Claim filed as a Non-Tax Priority Claim but which does not comport with provisions of Section 507(a) of the Bankruptcy Code shall be treated by the Debtor as a Claim not entitled to priority or an Interest, as appropriate, and the Debtor will ascribe a vote cast in connection with this Modified Plan by a holder of such Claim to the proper Class, to the extent permitted by the Bankruptcy Court. 4.2 Class 1 (Non-Tax Priority Claims). The Allowed Non-Tax Priority Claims shall be paid in full, in Cash, on the later of the Effective Date or the date of a Final Order allowing any such Claim in this Class 1, or upon such other terms as may be agreed to between the Debtor and any holder of an Allowed Claim in this Class 1. 4.3 Class 2A (General Secured Claims). The Allowed Secured Claims in Class 2A shall be treated as follows at the Debtor's option: (a) (i) any default, other than of the kind specified in Section 365(b)(2) of the Bankruptcy Code, shall be cured, provided that accrued and unpaid interest, if any, which the Debtor may be obligated to pay with respect to such default shall be simple interest at the contract rate and not at any default rate of interest; (ii) the maturity of the Allowed Secured Claim shall be reinstated as the maturity existed before any default; (iii) the holder of the Allowed Secured Claim shall be compensated for any damage incurred as a result of any reasonable reliance by the holder on any provision that entitled the holder to accelerate maturity of the Allowed Secured Claim; and (iv) the other legal, equitable, or contractual rights to which the Allowed Secured Claim entitles the holder shall not otherwise be altered; provided, however, 20 that as to any Allowed Secured Claim which is a nonrecourse claim and exceeds the value of the collateral securing such Allowed Secured Claim, the collateral may be sold at a sale at which the holder of such Allowed Secured Claim has an opportunity to bid; or (b) on the Effective Date, or on such other date thereafter as may be agreed to by the Debtor and the holder of such Allowed Secured Claim, the Debtor shall abandon the collateral securing such Allowed Secured Claim to the holder thereof in full satisfaction and release of such Allowed Secured Claim; or (c) on the Effective Date or as soon as practicable thereafter, the holder of such Allowed Secured Claim shall receive, on account of such Allowed Secured Claim, Cash equal to its Allowed Secured Claim, or such lesser amount to which the holder of such Allowed Secured Claim shall agree, in full satisfaction and release of such Allowed Secured Claim. 4.4 Class 2B (Pre-Petition Lenders' Allowed Secured Claims). The Pre-Petition Lenders' Allowed Secured Claims shall be paid in full, in Cash, contemporaneous with the closing of the Post-Effective Date Financing Facility from a portion of the funds provided thereunder, such that all liens in favor of the Pre-Petition Lenders shall have been thereby released and discharged. Furthermore, contemporaneous with the closing of the Post- Effective Date Financing Facility, the Pre-Petition Lenders, or the Collateral Agent on their behalf, shall provide to the Administrative Agent a payoff letter acknowledging that all Class 2B Pre-Petition Lenders' Allowed Secured Claims have been satisfied in full (except as the Debtor and the Pre-Petition Lenders agree that Reorganized Rose's shall later satisfy certain Claims for fees and expenses once such amounts are determined) and that all liens in favor of the Pre-Petition Lenders have been released, and shall have executed and delivered to the Administrative Agent for filing all termination statements and taken such other actions and provided such further assurances as may be requested by the Administrative Agent to discharge or evidence the discharge of all mortgages, deeds of trust and security interests granted by the Debtor in favor of the Pre-Petition Lenders or their agents. All promissory notes under all agreements with the Pre-Petition Lenders, including, without limitation, the Pre-Petition Secured Notes and the Pre-Petition Secured Noteholder Warrants, shall be deemed to be cancelled, annulled and extinguished upon the payment in full of the Pre-Petition Lenders' Allowed Secured Claims applicable thereto. 21 ARTICLE V CLAIMS AND INTERESTS IMPAIRED UNDER THE PLAN 5.1 Intentionally Omitted 5.2 Class 3 (Unsecured Claims). Except with respect to those holders of Class 3 Allowed Unsecured Claims which are Damage Claims entitled to receive a Cash payment in accordance with the ADR Procedure as ratified and incorporated into this Modified Plan pursuant to Section 7.15 of this Modified Plan, each holder of an Allowed Unsecured Claim in Class 3 shall receive in exchange for such claim its Pro-Rata share of (i) the Class 3 Common Stock Designation, on such Distribution Dates specified by, and otherwise in accordance with, Section 6.2.1 of this Modified Plan, and (ii) the Subscription Proceeds, if any, not returnable to the Class 5 Subscribers pursuant to the Class 5 Rights Notice, on such Distribution Dates specified by, and otherwise in accordance with, Section 6.2.2 of this Modified Plan. 5.3 Intentionally Omitted. 5.4 Class 5 (Common Stock Interests). Each holder of a Common Stock Interest in Class 5 shall receive in exchange for such interest (i) its Pro-Rata share of the New Rose's Warrants, on such Distribution Dates as set forth in Section 6.2.4 of this Modified Plan, (ii) its Pro-Rata share of the New Rose's Common Stock Secondary Distribution, if any, on such Distribution Dates as set forth in Section 6.2.3 of this Modified Plan, and (iii) the non-transferrable right to pay Cash to acquire shares of New Rose's Common Stock in accordance with the Class 5 Subscription pursuant to Section 7.10 of this Modified Plan and the Class 5 Rights Notice. 5.5 Class 6 (Pre-Petition Warrants). Holders of Interests in Class 6 shall not receive any distribution whatsoever on account of such Interests, and as of the Effective Date, all Interests in any Pre-Petition Warrants, including, without limitation, Pre-Petition Secured Noteholder Warrants, shall be deemed canceled, annulled and extinguished. In addition, all agreements, including, without limitation, the Pre-Petition Secured Noteholder Warrant Agreement, providing for the issuance of Pre-Petition Warrants to any Persons shall be deemed rejected, provided that any and all Allowed Claims arising therefrom shall be deemed subject to the subordination provisions of Section 510(b) of the Bankruptcy Code, and such holders shall receive no distribution on account of any such Allowed Claims. 5.6 Class 7 (Pre-Petition Stock Options). Holders of Interests in Class 7 shall not receive any distribution whatsoever on account of such Interests, and as of the Effective Date, all Interests in any Pre-Petition Stock Options, including, without limitation, Employee Stock Options, shall be deemed canceled, 22 annulled and extinguished. In addition, all agreements providing for the issuance of Pre-Petition Stock Options, including, without limitation, the Employee Stock Option Plans, to any Persons shall be deemed rejected and/or terminated, provided that any and all Allowed Claims arising therefrom shall be deemed subject to the subordination provisions of Section 510(b) of the Bankruptcy Code, and such holders shall receive no distribution on account of any such Allowed Claims. 5.7 Class 8 (Subordinated Claims). Holders of Subordinated Claims in Class 8 shall not receive any distribution whatsoever on account of such Claims, and as of the Effective Date, all Subordinated Claims shall be deemed canceled, annulled and extinguished. 5.8 Effect of Bar Dates. As of the Effective Date, any Claim arising solely on account of a proof of claim filed after an applicable Bar Date shall be deemed disallowed and expunged, and the holder of such Claim shall be forever barred from asserting such Claim against the Debtor or its property, and from voting on this Modified Plan and/or sharing in any distribution hereunder in respect of such Claim unless otherwise provided pursuant to further order of the Bankruptcy Court. All Claims scheduled by the Debtor as contingent, unliquidated or disputed on its voluntary petition under Chapter 11, or on its Lists, Schedules and Statements filed pursuant to Section 521(1) of the Bankruptcy Code and Bankruptcy Rule 1007, shall be deemed extinguished if the respective proofs of claim in connection with such Claims were not filed by the applicable Bar Dates, unless otherwise provided pursuant to further order of the Bankruptcy Court. Any Damages Claim which is asserted after the Effective Date by a claimant who received no notice of the Chapter 11 Case ("Post-Effective Date Damages Claim") (i) shall be liquidated pursuant to the ADR Procedure, and (ii) once liquidated, shall be treated as an Allowed Unsecured Claim in Class 3 and satisfied from the shares of New Rose's Common Stock maintained in the Collective Reserve established pursuant to the Bankruptcy Court order dated January 24, 1995 entitled "Order (i) Fixing Collective Reserve Amount for Certain Disputed, Contingent and Unliquidated Damages Claims; and (ii) Deeming Such Claims to be 'Disputed Claims' and Not 'Allowed Claims' Pending Resolution of Such Claims Pursuant to the ADR Procedure" ("Collective Reserve Order") and any future orders which may be entered by the Bankruptcy Court, provided that such shares of New Rose's Common Stock will first be distributed to holders of Damages Claims who have filed a proof of claim on or before the applicable Bar Date or such other date as set by the Bankruptcy Court. 5.9 Non-consensual Confirmation. In the event that any impaired Class of Claims or Interests shall not accept this Modified Plan in accordance with Section 1129(a) of the Bankruptcy Code, the Plan Proponents, with the exception of (a) the Unsecured Committee if Class 3 does not accept this Modified Plan, or (b) the Equity Committee if Class 5 does not accept this Modified Plan, 23 reserve the right to (i) request that the Bankruptcy Court confirm this Modified Plan in accordance with Section 1129(b) of the Bankruptcy Code, or (ii) with the approval of the Plan Proponents, the Facility Agents and GE Capital, amend this Modified Plan in accordance with Section 12.7 of this Modified Plan. ARTICLE VI PROVISIONS GOVERNING DISTRIBUTIONS 6.1 Distributions by Reorganized Rose's or Other Distribution Agent. With the approval of the Board of Directors and the Bankruptcy Court, and subject to the terms and provisions of the Class 5 Rights Notice and the New Rose's Warrant Agreement to the extent applicable, either Reorganized Rose's or its designee, as Distribution Agent, shall make all distributions required to be made under this Modified Plan on the Effective Date or such other Distribution Date as is specified in this Modified Plan. Any entity designated by either Reorganized Rose's or authorized by other agreement to be a Distribution Agent and to make such distributions may employ or contract with other entities to assist in or make the distributions required by this Plan to the extent agreed by Reorganized Rose's. The Distribution Agent shall serve without bond, and to the extent that the Distribution Agent is not Reorganized Rose's, the Distribution Agent shall receive from Reorganized Rose's reasonable compensation and reimbursement of reasonable out-of-pocket expenses on terms acceptable to Reorganized Rose's. 6.2 Distributions to Impaired Classes. The following shall constitute the means of distributions to the holders of Allowed Claims and Interests in their respective Classes: 6.2.1 Distributions of New Rose's Common Stock. (a) Within forty-five days after the Effective Date, (i) an amount of shares, if any, equal to 70% of the Effective Date Shares which are not included in the Class 5 Subscription Stock Designation or the shares to be distributed in accordance with the Management Incentive and Retention Program pursuant to subparagraph (iii) below shall be distributed on a Pro- Rata basis among all holders of Allowed Claims in Class 3 and the Reserves established on account of Disputed Claims in Class 3 in accordance with Section 7.12 of this Modified Plan, (ii) an amount of shares equal to 100% of the Class 5 Subscription Stock Designation shall be distributed among all Class 5 Subscribers in the manner specified in Section 7.10 of this Modified Plan and the Class 5 Rights Notice, (iii) 150,000 of the Effective Date Shares will be distributed in accordance with the Management Incentive and Retention Program, and (iv) the remaining Effective Date Shares, if any, which are not distributed pursuant to subparagraphs (i), (ii) and (iii) above shall be deposited into the New Rose's Common Stock Escrow. 24 (b) Within thirty days after the Determination Date, the Distribution Agent which is the escrow agent of the New Rose's Common Stock Escrow shall distribute on a Pro-Rata basis among all holders of Allowed Claims in Class 3 and the Reserves established on account of Disputed Claims in Class 3 in accordance with Section 7.12 of this Plan, the lesser of (i) all of the shares of New Rose's Common Stock maintained in the New Rose's Common Stock Escrow, or (ii) such number of shares of New Rose's Common Stock having an aggregate value, as determined in accordance with subparagraph (c) below, when added to (x) the aggregate value, also as determined in accordance with subparagraph (c) below, of that portion of Class 3 Common Stock Designation distributed or deposited in accordance with subparagraph (a)(i) above and (y) two (2) times the Subscription Proceeds payable to all holders of Allowed Claims in Class 3 and the Reserves established on account of Disputed Claims in Class 3 as specified in Section 6.2.2 of this Modified Plan, equal to the Full Recovery Target Amount. (c) The determination of value for purposes of distributions of shares of New Rose's Common Stock maintained in the New Rose's Common Stock Escrow pursuant to subparagraph (b) above shall be the average of the intra day high and low average price of the New Rose's Common Stock for the fifteen trading days prior to the Determination Date, so long as not less than 2,000,000 shares of New Rose's Common Stock shall have been distributed at least 20 days prior to the Determination Date unless the Post-Effective Date Committee, in its sole discretion, waives the requirement that at least 2,000,000 shares shall have been distributed. (d) The shares of New Rose's Common Stock issued pursuant to this Modified Plan shall be subject to dilution arising from the issuance of shares by Reorganized Rose's of New Rose's Common Stock as may be authorized or required, from time to time, (i) pursuant to the Management Incentive and Retention Program, and (ii) by operation or exercise of the New Rose's Warrants. 6.2.2 Distribution of Subscription Proceeds. (a) In the event that the Subscription Proceeds total $25 million or greater, the Subscription Proceeds in the Subscription Proceeds Escrow, after the return of any Subscription Proceeds, including interest thereon, to the Class 5 Subscribers if required by the Class 5 Rights Notice, shall be distributed together with interest thereon Pro-Rata among all holders of Allowed Claims in Class 3 and the Reserves established on account of Disputed Claims in Class 3 pursuant to Section 7.12 of this Modified Plan. Upon the resolution of all Disputed Claims in Class 3 in accordance with Section 7.12 of this Modified Plan, any Cash remaining in the Subscription Proceeds Escrow, including interest thereon, shall be distributed Pro-Rata to holders of Allowed Claims in Class 3. Prior to the resolution of all Disputed Claims in Class 3, if at any time or times the Subscription Proceeds Escrow contains more than enough Subscription Proceeds to satisfy all of the remaining 25 Disputed Claims in Class 3 by payment of 50% of the Reserve Amounts established therefor, such excess Subscription Proceeds may be distributed from time to time among the holders of Allowed Claims in Class 3 as provided in the preceding sentence. (b) In the event that the Subscription Proceeds total less than $25 million, the Subscription Proceeds, together with accrued interest thereon, shall be returned to the Class 5 Subscribers pursuant to the Class 5 Rights Notice. 6.2.3 Distribution of New Rose's Common Stock Secondary Distribution. Within thirty days of the Determination Date, shares of New Rose's Common Stock constituting the New Rose's Common Stock Secondary Distribution, if any, shall be distributed Pro-Rata to all holders of Common Stock Interests in Class 5 in accordance with the New Rose's Common Stock Escrow Agreement. 6.2.4 Distribution of New Rose's Warrants. Within thirty days of the Effective Date, the 4,285,714 New Rose's Warrants shall be distributed by Reorganized Rose's to the warrant agent under the New Rose's Warrant Agreement, who, as a Distribution Agent, shall distribute the New Rose's Warrants on a Pro-Rata basis to all holders of Common Stock Interests in Class 5 pursuant to the Modified Plan and the New Rose's Warrant Agreement. Each New Rose's Warrant shall entitle the holder thereof to purchase one share of New Rose's Common Stock from the date the New Rose's Warrants are issued until the seventh anniversary of the Effective Date at the per share price equal, subject to adjustment as provided in the New Rose's Warrant Agreement, to (i) on the Effective Date, and as adjusted on each of the first three anniversaries of the Effective Date, the Full Recovery Target Amount divided by 10,000,000, the number of Effective Date Shares and (ii) as adjusted on the fourth, fifth, and sixth anniversaries of the Effective Date, 105%, 110% and 115%, respectively, of the Full Recovery Target Amount divided by 10,000,000, the number of Effective Date Shares. 6.2.5 Listing of Common Stock and Warrants. The Debtor intends to apply for listing of the New Rose's Common Stock and the Warrants on a national securities exchange or quotation on the National Association of Securities Dealers Automated Quotation National Market System. 6.3 Timing of Distributions. Except as otherwise provided in this Article 6, or as may be ordered by the Bankruptcy Court, all distributions shall be made on the respective Distribution Dates as specified in this Modified Plan, or as soon as practicable thereafter, and all distributions shall be deemed timely made if made on such respective Distribution Dates or as soon as practicable thereafter. 6.4 Disputed Payments. In the event of any dispute between and among the holders of Claims or Interests as to the right of any 26 Person to receive or retain any payment or distribution to be made to such Person under this Modified Plan, the Distribution Agent may, in lieu of making such payment or distribution to such Person, instead hold such payment or distribution until the disposition thereof shall be determined by the Bankruptcy Court. 6.5 Delivery of Distributions and Undeliverable or Unclaimed Distributions. 6.5.1 Delivery of Distributions in General. Except as provided in the Class 5 Rights Notice, the New Rose's Warrant Agreement or New Rose's Common Stock Escrow Agreement, distributions to holders of Allowed Claims or Common Stock Interests shall be made: (a) at the addresses set forth in the proofs of Claim filed by such holders; (b) at the addresses set forth in any written notices of address change delivered to the Debtor and transmitted to the Distribution Agent after the date on which any related proof of Claim was filed; or if the information described in clauses (a) or (b) is not available, (c) at the addresses reflected in the Debtor's schedules of liabilities or the applicable stock register as maintained by or on behalf of the Debtor on the applicable Record Date. 6.5.2 Distributions Held by Distribution Agent. If the distribution to any holder of an Allowed Claim or Common Stock Interest is returned to a Distribution Agent as undeliverable, no further distributions shall be made to such holder, but shall be held by the Distribution Agent, unless and until the applicable Distribution Agent is notified in writing of such holder's then current address, at which time all previously missed distributions shall be mailed to such holder. Undeliverable distributions shall remain in the possession of the applicable Distribution Agent until such time as a distribution becomes deliverable. Undeliverable Cash shall be held in trust in segregated bank accounts in the name of the applicable Distribution Agent for the benefit of the potential claimants of such funds, and shall be accounted for separately. Any Distribution Agent holding undeliverable Cash shall invest such Cash in a manner consistent with the investment and deposit guidelines of Reorganized Rose's as permitted consistent with the Post-Effective Date Financing Facility. Undeliverable shares of New Rose's Common Stock or New Rose's Warrants shall be held in trust for the benefit of the potential claimants of such shares by the applicable Distribution Agent in numbers of shares sufficient to fund the unclaimed amounts of such New Rose's Common Stock and shall be accounted for separately. 6.5.3 Failure to Claim Undeliverable Distributions. Except upon a showing of (i) excusable neglect and (ii) no prejudice to any Persons who have received a distribution under the Plan (as determined by the Bankruptcy Court), any holder of an Allowed Claim or Common Stock Interest that does not assert a right to receive a distribution of Cash or shares of New Rose's Common Stock pursuant to this Modified Plan with respect to an undeliverable distribution 27 within one year after the first distribution shall have its right to receive such undeliverable distribution discharged and shall be forever barred from asserting any such right for an undeliverable distribution against the applicable Distribution Agent and Reorganized Rose's or its property. In such cases: (i) any Cash held for distribution on account of such Allowed Claims for undeliverable distributions (including Cash interest and maturities on undeliverable dividends and other distributions on undeliverable shares of New Rose's Common Stock) shall be property of Reorganized Rose's, free of any restrictions thereon, and (ii) any shares of New Rose's Common Stock held for issuance on account of such Claims or Common Stock Interest for undeliverable distributions shall either be canceled or held as treasury shares as Reorganized Rose's may determine is appropriate. To the extent that such undeliverable Cash or shares of New Rose's Common Stock is held by a Distribution Agent, such Distribution Agent shall return such Cash or shares or other instruments evidencing such New Rose's Common Stock to Reorganized Rose's. Checks issued by a Distribution Agent in respect of distributions to the holders of Allowed Claims or Common Stock Interest shall be null and void if not cashed within 120 days of the date of issuance thereof. Any amount paid by Reorganized Rose's, to a Distribution Agent in respect of such a check shall be promptly returned to Reorganized Rose's, by such Distribution Agent. Requests for the reissuance of any check shall be made directly to the applicable Distribution Agent by the holder of the Allowed Claim or Common Stock Interest with respect to which such check was originally issued. Any Claim in respect of such a check voided pursuant to this Section shall be made on or before the later of the first anniversary of the first distribution or 90 days after the issuance of such check. After such date, except upon a showing of (i) excusable neglect and (ii) no prejudice to any Persons who have received a distribution under this Modified Plan (as determined by the Bankruptcy Court), all claims in respect of a check voided pursuant to this Section shall be discharged and forever barred. Nothing contained in this Modified Plan shall require Reorganized Rose's or any Distribution Agent to attempt to locate any holder of an Allowed Claim or Common Stock Interest. 6.6 Fractional Distributions and Fractional Cents; Round Lots. Any other provision of this Modified Plan notwithstanding, no fractional shares of New Rose's Common Stock or New Rose's Warrants shall be issued or distributed in connection with this Modified Plan. Each holder entitled under this Modified Plan to receive New Rose's Common Stock or New Rose's Warrants shall receive the total number of whole New Rose's Common Stock certificates or New Rose's Warrant certificates to which such holder is entitled. Whenever any distribution to a particular holder would otherwise call for a distribution under this Modified Plan of a fraction of a share of New Rose's Common Stock or of a New Rose's Warrant, the Distribution Agent will allocate separately to each such holder one whole share or warrant, as the case may be, to such holders in order of the fractional portion of their 28 entitlements, starting with the largest such fractional portion, until all remaining whole shares or warrants, as the case may be, have been allocated. Upon the allocation of a whole share or warrant, as the case may be, to a holder in respect of the fractional portion of its entitlement, such fractional portion shall be canceled. If two or more holders are entitled to equal fractional entitlements and the number of holders so entitled exceeds the number of whole shares or warrants, as the case may be, which remain to be allocated, Reorganized Rose's shall allocate the remaining whole shares or warrants to such holders by random lot or such other impartial method that Reorganized Rose's deems fair. Upon the allocation of all the whole shares or warrants, as the case may be, all remaining fractional portions of the entitlements shall be canceled and shall be of no further force and effect. Whenever any payment of a fraction of a cent would otherwise be called for, the actual payment shall reflect a rounding down of such fraction to the nearest, lowest whole cent. 6.7 Full and Final Satisfaction. Except as otherwise expressly provided herein, full and complete performance by the Debtor and Reorganized Rose's hereunder shall be in full and final satisfaction, settlement, release and discharge of all Claims and Interests. 6.8 Allocation of Distributions to Holders of Allowed Secured Claims. All payments made hereunder to a holder of an Allowed Secured Claim with respect to which there is accrued but unpaid interest as of the Effective Date shall be allocated first to the principal amount of the Allowed Secured Claim and then to such accrued but unpaid interest to the extent that the amount of the payments made under this Plan to such a holder exceeds the principal amount of such claim. ARTICLE VII MEANS OF EXECUTION In addition to the provisions set forth elsewhere in this Modified Plan regarding the means of execution, the following shall constitute the means of execution of this Modified Plan. 7.1 Funds for Distribution. The funds utilized to make the Cash payments hereunder have been and will continue to be generated by, among other things, the operation of the Debtor's businesses, asset dispositions and any Post-Effective Date Financing Facility. On any Distribution Date, Reorganized Rose's shall cause to be available for distribution shares of New Rose's Common Stock and the New Rose's Warrants. 7.2 Post-Effective Date Financing Facility. All loans, advances, debts, guarantees, liabilities and obligations for monetary amounts (whether or not such amounts are liquidated or 29 determinable) owing by Reorganized Rose's to the Post-Effective Date Lenders, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the Post-Effective Date Financing Facility, including, without limitation, all interest, fees, charges, expenses, attorneys' fees and any other sum chargeable to Reorganized Rose's under any of the documents and agreements memorializing the Post-Effective Date Financing Facility, shall be secured by valid and enforceable liens on, and security interests in, the Post-Effective Date Collateral. In connection with the closing of the Post-Effective Date Financing Facility, Reorganized Rose's shall grant, and shall be hereby deemed to grant, to the Post- Effective Date Lenders liens and security interests in all of the Post- Effective Date Collateral for the purpose of securing all obligations and liabilities of Reorganized Rose's under the Post-Effective Date Financing Facility, which security interests and liens shall constitute valid and perfected first-priority security interests in and liens upon all Post- Effective Date Collateral, superior to and with priority over all other security interests and liens whether consensual or non-consensual, statutory or otherwise, and whether existing now or in the future, except as to that portion of the Post-Effective Date Collateral which is Permitted Encumbrance Collateral, as to which Permitted Encumbrance Collateral the Post-Effective Date Lenders shall have valid and perfected security interests and liens subordinate only to, or pari passu with, as the case may be, all valid, perfected and unavoidable liens and security interests existing thereon as of the Effective Date and described in the Post- Effective Date Financing Facility. The terms of the Post-Effective Date Financing Facility shall be subject to the approval of the Bankruptcy Court by entry of its order prior to the Effective Date, which order shall be in form and substance reasonably satisfactory to the Plan Proponents, GE Capital, and the Facility Agents. Simultaneously upon the satisfaction in full, in Cash, of the GE Obligations (other than (a) the Deferred GE Obligations and (b) the Post-Effective Date GE Obligations) and the execution and delivery of (i) the Deferred GE Obligations Agreements and (ii) the Post-Effective Date GE Assumption Agreement, and in each case, such performance as may be required thereunder prior to or upon the execution and delivery thereof, the liens and security interests granted in favor of the Post-Effective Date Lenders shall be effective and shall be deemed created and fully perfected immediately upon the Effective Date and without the necessity of the execution by the Debtor or Reorganized Rose's or filing by the Post-Effective Date Lenders of financing statements, mortgages, security agreements or any other documents. Neither the Post- Effective Date Lenders (nor the Facility Agents or the Administrative Agent on their behalf) shall be required to file financing statements, mortgages, deeds of trust, notices of lien, certificates of title or any other instruments (collectively, "Instruments") in any jurisdiction or take any other action in order to validate or perfect the liens and security interests granted to the Post-Effective Date Lenders. The entry of the 30 Confirmation Orders and the occurrence of the Effective Date shall constitute immediate and full perfection of the liens and security interests granted to the Post-Effective Date Lenders, notwithstanding any failure of the Post-Effective Date Lenders (or the Facility Agents or the Administrative Agent on their behalf) to file or otherwise perfect said security interests through such Instruments or otherwise in accordance with any state or other applicable law. Notwithstanding the foregoing, the Post-Effective Date Lenders or any of their agents may, at their sole discretion, choose to have the Facility Agents and/or the Administrative Agent, file any or all of such Instruments or otherwise confirm perfection of such liens and security interests and all such Instruments shall be deemed to have been filed or recorded at the time and on the date of the Effective Date. In lieu of filing some or all of such Instruments, the Post-Effective Date Lenders or any of their agents may, at their sole discretion, choose to have the Facility Agents and/or the Administrative Agent, file certified copies of the Confirmation Orders or the Order approving the Post-Effective Date Financing Facility in any place at which any of such Instruments would or could otherwise be filed, together with such description of collateral located within the geographic area covered by such place of filing as the Post-Effective Date Lenders or their agents may determine, and such filing shall have the same effect as if all such Instruments had been filed or recorded at the time and on the date the Effective Date. Should the Post-Effective Date Lenders so choose to have the Facility Agents and/or the Administrative Agent, as permitted under the Post-Effective Date Financing Facility, attempt to file such Instruments or certified copies of the Confirmation Orders, or otherwise attempt to confirm perfection of any or all such liens and security interests, no defect or failure in connection with such attempt shall in any way limit, waive or alter the fact that such liens and security interests are effective and fully perfected immediately upon and forever after the Effective Date. In the event that any party elects to file Instruments or otherwise confirm perfection of the security interests granted as permitted under the Post-Effective Date Financing Facility, said filing or other confirmation of the security interests granted as permitted under the Post- Effective Date Financing Facility shall in no manner whatsoever vitiate, reduce or abrogate in any manner the first priority security interests in respect of the collateral granted to the Post-Effective Date Lenders in accordance with the provisions of this Modified Plan and the Post-Effective Date Financing Facility, whether or not the Post-Effective Date Lenders or their agents ever choose to file Instruments or otherwise confirm the respective liens and security interests in the collateral granted to the Post-Effective Date Lenders or their agents as authorized (but not required) by this paragraph and irrespective of the sequence of any such filings as between the Post-Effective Date Lenders (or their agents and representatives) and such other party. None of the provisions set forth in or implied by this Modified Plan, including, without limitation, Sections 3.5, 4.4 and 8.1 of this Modified Plan, shall be deemed to modify any of the provisions of 31 the Post-Effective Date Financing Facility, including, without limitation, any closing conditions. 7.3 Corporate Action. Pursuant to this Modified Plan and Section 303 of the Delaware General Corporation Law, the following shall be deemed to have occurred and be effective, if applicable, as provided herein, and shall be authorized and approved in all respects, without any requirement of further action by the stockholders or directors of the Debtor or Reorganized Rose's, and with like effect as if such actions had been taken by unanimous action of the stockholders and directors of the Debtor or Reorganized Rose's, as applicable: the adoption of the New Rose's Charter and the by-laws of Reorganized Rose's and the initial selection of directors serving on the Reconstituted Board of Directors and officers of Reorganized Rose's; the distribution of Cash and the issuance and distribution of the New Rose's Common Stock, New Rose's Warrants and implementation of the terms and provisions of the Class 5 Subscription, and all agreements thereunder; and the implementation of the other matters provided for under this Modified Plan involving the corporate structure of Reorganized Rose's, or any other corporate action to be taken by or required of Reorganized Rose's or the Debtor, as applicable, and all agreements and transactions provided for, or contemplated in this Modified Plan. 7.4 Cancellation of Common Stock, Pre-Petition Warrants, Pre-Petition Stock Options and Pre-Petition Secured Notes and Surrender of Common Stock, Pre-Petition Warrants and Pre-Petition Secured Notes. All Common Stock Interests, Pre-Petition Warrants, and Pre-Petition Stock Options shall be canceled, annulled and extinguished as of the Effective Date; provided, however, that the right to receive distributions pursuant to Section 6.2 of this Modified Plan shall survive such cancellation, annulment and extinguishment. As of the close of business on the Effective Date, the transfer ledgers or registers and any other records determining record ownership of the Debtor's equity and debt instruments maintained in the ordinary course shall be closed and there shall be no further changes in the record holders of Claims and Interests on the books of the Debtor. Neither the Debtor nor Reorganized Rose's shall have any obligation to recognize any thereafter occurring transfers of Claims or Interests, but shall be entitled instead to recognize only those Persons who were or holders of such Claims or Interests as of the close of business on the Effective Date, as reflected on the transfer ledgers or registers and any other records maintained in the ordinary course. Each such holder shall surrender or cause to be surrendered the relevant instrument, if any, to Reorganized Rose's for cancellation (or if such instrument has been stolen, lost, or destroyed, in lieu thereof (x) a lost security affidavit and (y) a bond the terms of which are reasonably required by Reorganized Rose's). Until a holder of record on the Effective Date surrenders or causes to be surrendered the relevant instrument, such holder shall have no rights with respect to any distribution under this Modified Plan. 32 7.5 New Rose's Charter. On the Effective Date, the New Rose's Charter will become effective. The New Rose's Charter shall, together with the provisions of this Modified Plan, provide for, among other things, the authorization and issuance of New Rose's Common Stock, New Rose's Warrants, the constitution of the Reconstituted Board of Directors, and such other provisions that are necessary to facilitate consummation of this Modified Plan and the requirements of the Bankruptcy Code, including a prohibition against the issuance of nonvoting equity securities in accordance with Section 1123(a)(6) of the Bankruptcy Code. The Reconstituted Board of Directors shall have no less than seven and no more than thirteen directors. The Unsecured Committee in its sole discretion shall have the right to select all but one director to serve on the Reconstituted Board of Directors, and the Equity Committee in its sole discretion shall have the right to select one director to serve on the Reconstituted Board of Directors. 7.6 Voting Powers. The certificate of incorporation of Reorganized Rose's will provide that the holders of such of the New Rose's Common Stock as may, from time to time, be issued and outstanding, may elect, using non- cumulative voting, all directors of Reorganized Rose's subsequent to the initial installation of the Reconstituted Board of Directors pursuant to Section 7.5 of this Modified Plan. 7.7 Authorization and Issuance of Equity Instruments of Reorganized Rose's. 7.7.1 New Rose's Common Stock. Pursuant to the New Rose's Charter, among other things, Reorganized Rose's will be authorized to issue up to 50,000,000 shares of New Rose's Common Stock. On the Effective Date, Reorganized Rose's will issue the Effective Date Shares pursuant to this Modified Plan and shall reserve for issuance 4,285,714 shares of New Rose's Common Stock to effectuate the New Rose's Warrant Agreement, and shall reserve for issuance 550,000 shares of New Rose's Common Stock to effectuate the stock options to be granted pursuant to the Management Incentive and Retention Program. All shares of the New Rose's Common Stock to be issued pursuant to this Modified Plan will be, upon issuance, fully paid and non-assessable and shall be subject to dilution as set forth in Section 6.2.1 (d) of this Modified Plan, and the holders thereof will have no preemptive or other rights to subscribe for additional shares. 7.7.2 New Rose's Warrants. Reorganized Rose's shall be authorized to issue New Rose's Warrants, as provided in Sections 5.4 and 6.2.4 of this Modified Plan and in the New Rose's Warrant Agreement, for the purchase of New Rose's Common Stock reserved for issuance pursuant to this Modified Plan. 7.8 New Rose's Common Stock Allocable to Management of Reorganized Rose's. Pursuant to the Management Incentive and Retention Program, and similar corporate policies that may be 33 implemented and administered by Reorganized Rose's, on and after the Effective Date, and on the Determination Date (if applicable), the employees identified in accordance therewith shall receive such shares, if any, of New Rose's Common Stock, as may be approved. Any shares of New Rose's Common Stock distributed pursuant to the Management Incentive and Retention Program will cause dilution with respect to the interests provided to holders of Allowed Claims and Common Stock Interests receiving distributions of New Rose's Common Stock pursuant to the terms of this Modified Plan. 7.9 Applicability of Sections 1125 and 1145 of the Bankruptcy Code to the New Rose's Common Stock Issued under the Modified Plan. The protection afforded by Section 1125 of the Bankruptcy Code with regard to the solicitation of acceptances or rejections of the Modified Plan, and with regard to the offer, issuance, sale or purchase of New Rose's Common Stock, the New Rose's Warrants and the rights to participate in the Class 5 Subscription issued to and distributed pursuant to this Modified Plan, shall apply to the full extent provided by law, and the entry of the Confirmation Orders shall constitute the determination by the Bankruptcy Court that the Plan Proponents and Reorganized Rose's (and if applicable, GE Capital, GE Capital Corporate Finance Group, Inc. and GE Capital Commercial Finance, Inc.) and each of their respective officers, directors, partners, employees, members or agents, and each Professional, attorney, accountant, or other professional employed by any of them, shall have acted in good faith and in compliance with the applicable provisions of the Bankruptcy Code pursuant to Section 1125 of the Bankruptcy Code. In addition, the Confirmation Orders shall provide that the exemption from the requirements of Section 5 of the Securities Act of 1933, 15 U.S.C. (section mark) 77e, and any state or local law requiring registration for the offer or sale of a security provided for in Section 1145 of the Bankruptcy Code shall apply to the New Rose's Common Stock, the New Rose's Warrants and the rights to participate in the Class 5 Subscription issued under this Modified Plan. 7.10 Class 5 Subscription. (a) As a Class, the holders of Common Stock Interests in Class 5 shall collectively have rights to subscribe for and purchase up to 100% of the Effective Date Shares at the Class 5 Subscription Price, provided that the aggregate amount of Subscription Proceeds equals at least $25 million, all in accordance with the terms and provisions of the Class 5 Rights Notice. To effectuate the Class 5 Subscription and elections thereunder, within 5 days of the Equity Record Date, the Debtor sent the Class 5 Rights Notice to each holder of a Common Stock Interest in Class 5 as of the Equity Record Date. The Class 5 Rights Notice notified such holders of their respective rights to acquire New Rose's Common Stock by tender and payment of Cash, in an amount equal to the number of shares of New Rose's Common Stock sought to be acquired multiplied by the Class 5 Subscription Price. Such Cash was to be payable to the Distribution Agent for deposit 34 into the Subscription Proceeds Escrow, which shall be held and maintained by the Distribution Agent designated therein. Since the Subscription Proceeds in the Subscription Proceeds Escrow as of March 31, 1995 did not equal or exceed $25 million, the Distribution Agent shall return to each Class 5 Subscriber the subscription payment made by such Class 5 Subscriber, together with accrued interest thereon. The Plan provided that upon tender of the fully executed Class 5 Rights Notice and payment of the Subscription Price, and, upon the aggregate deposit of at least $25 million of Subscription Proceeds into the Subscription Proceeds Escrow, each Class 5 Subscriber would have the irrevocable right to receive distributions of shares of New Rose's Common Stock constituting the Class 5 Subscription Stock Designation pursuant to the following allocations: each Class 5 Subscriber would be allocated initially the lesser of (i) the number of shares for which it had subscribed and tendered payment pursuant to the Class 5 Rights Notice, or (ii) its Pro-Rata share of 100% of the Effective Date Shares issued and outstanding on the Effective Date. Any shares of the New Rose's Common Stock remaining unallocated after the immediately foregoing allocation would be allocated to each Class 5 Subscriber who subscribed for more than its Pro-Rata share of New Rose's Common Stock in the amount of such over-subscription. If a sufficient number of shares of New Rose's Common Stock was not available to satisfy all such over- subscriptions, the available shares would be allocated among the Class 5 Subscribers who over-subscribed based on each such Class 5 Subscriber's Pro-Rata share of Common Stock Interests as of the Equity Record Date for the Class 5 Subscription. The allocation process could have involved a series of allocations to ensure that the total number of shares available for over-subscription was distributed on the pro-rata basis described immediately above. (b) The Class 5 Subscription shall and did terminate on March 31, 1995. 7.11 Merger of RSI and Cancellation of RSI Common Stock. Prior to the Effective Date, RSI was merged into Reorganized Rose's, in accordance with Delaware General Corporation Law and applicable orders of the Bankruptcy Court, with the written consent of the Unsecured Committee. All common stock of RSI shall be deemed cancelled, annulled and extinguished as of the Effective Date if not actually cancelled, annulled and extinguished earlier. Reorganized Rose's shall assume, to the fullest extent permitted by law and only if such obligations have not been previously rescinded, canceled, terminated, or rejected, or barred by order of the Bankruptcy Court, prior to the Effective Date, all obligations relating to indemnification and exculpation of RSI's directors, officers, employees, fiduciaries, agents or controlling persons as of the Effective Date as arise under applicable laws or as provided in any of (i) RSI's certificate of incorporation in effect prior to or as of the date hereof, (ii) RSI's by-laws in effect prior to or as of the date hereof, or (iii) any agreement with the RSI, in each 35 of these cases (i) -- (iii) with respect to matters occurring on or prior to the Effective Date. 7.12 Reserve Provisions for Disputed Claims. (a) All Cash, New Rose's Common Stock, or Available Cash, (as applicable), to which a Disputed Claim otherwise would be entitled as an Allowed Claim in a particular class as of a Distribution Date, shall not be distributed, but, if necessary, shall be held in Reserve on the applicable Distribution Date by the Debtor, in such amount as would have been distributed if the holder thereof had an Allowed Claim in the full amount of its Disputed Claim; provided, however, that if a holder of a Contingent Claim is not receiving a distribution under this Modified Plan and such Contingent Claim is not being discharged by this Modified Plan, or is assumed by Reorganized Rose's, the Debtor shall not be required to reserve any Cash, New Rose's Common Stock or Available Cash (as applicable), with respect thereto. (b) For the purposes of effectuating the provisions of this Section 7.12 and the distributions to holders of Allowed Claims and Common Stock Interests, the Bankruptcy Court may fix or liquidate the Reserve Amount on account of a particular Disputed Claim pursuant to Section 502(c) of the Bankruptcy Code, in which event the amount so fixed or liquidated shall be deemed the amount of the Disputed Claim pursuant to Section 502(c) of the Bankruptcy Code for purposes of distribution under this Modified Plan. In lieu of fixing or liquidating the amount of any Disputed Claim, the Bankruptcy Court may determine the Reserve Amount for such Disputed Claim, or such Reserve Amount may be fixed by agreement in writing by and between the Debtor and the holder thereof. Each of the Debtor, the Unsecured Committee and the Equity Committee shall have standing to (i) move for an order of the Bankruptcy Court, pursuant to Section 502(c) of the Bankruptcy Court, fixing or liquidating the Reserve Amount for any and all Disputed Claims in Class 3 to be deposited into a Reserve, and (ii) object to any Disputed Claim or any Reserve Amount fixed on account of any Disputed Claim. In the event that any Disputed Claim has not been fixed or liquidated pursuant to this Section 7.12(b), the Reserve Amount with respect to such Disputed Claim shall be equal to the face amount of the Disputed Claim. (c) No holder of a Disputed Claim shall have any Claim against the Cash and/or New Rose's Common Stock, reserved with respect to such Claim until such Disputed Claim shall become an Allowed Claim. In no event shall any holder of any Disputed Claim or unliquidated Claim be entitled to receive (under this Modified Plan or otherwise) from the Debtor, Reorganized Rose's or the Reserve, any payment, in Cash and New Rose's Common Stock or other property, which is greater than the Reserve Amount deposited into a Reserve for such Claim pursuant to this Section 7.12 plus any interest, if applicable, earned thereon. In no event shall the 36 Debtor or Reorganized Rose's have any responsibility or liability for any loss to or of any amount reserved under this Modified Plan. (d) When a Disputed Claim becomes an Allowed Claim, distribution on account thereof shall be made as soon as practicable after the date of subsequent allowance of such Disputed Claim as provided in Article 6 of this Modified Plan, by means determined by Reorganized Rose's; provided, further, to the extent that any such distributions include Cash, then such distributions shall also include interest accrued from the Effective Date (net of Pro-Rata assessment for reasonable fees and expenses incurred in administering the Reserve). (e) To the extent a Disputed Claim ultimately becomes an Allowed Claim in an amount less than the amount reserved for such Disputed Claim, then the resulting surplus of Cash, and New Rose's Common Stock, or Available Cash (as applicable) (together with any interest, if applicable, thereon), shall be retained by Reorganized Rose's or held in the treasury of Reorganized Rose's, as applicable; provided, however, that any cash remaining in the Subscription Proceeds Escrow including accrued interest thereon, after distributions to Disputed Claims in Class 3 that become Allowed Claims in Class 3, shall be distributed as set forth in Section 6.2.2 of this Modified Plan. (f) Within 30 days after the Effective Date, Reserve Amounts shall have been fixed pursuant to Section 7.12(b) of this Modified Plan for all Disputed Claims in Class 3. Upon resolution of a Disputed Claim in Class 3, any Reserve Amount which was previously fixed for such Disputed Claim shall be set to zero, the total Reserve Amount for Disputed Claims in Class 3 shall be reduced accordingly, and any Cash deposited in a Reserve on account of such Disputed Claim together with accrued interest thereon shall be distributed to the holder of such Disputed Claim to the extent that such Disputed Claim has become an Allowed Claim, and shall otherwise be deposited into the Subscription Proceeds Escrow. 7.13 Voting of Undistributed New Rose's Common Stock. Shares of New Rose's Common Stock issued or reserved for issuance under this Modified Plan shall not be voted in any election of directors of Reorganized Rose's, or any other matter requiring the vote of shareholders, until such time as the New Rose's Common Stock has actually been distributed to a holder of an Allowed Claim or Common Stock Interest, or to an employee of Reorganized Rose's entitled to receive shares of New Rose's Common Stock pursuant to the Management Incentive and Retention Program. In addition, a holder of a Disputed Claim shall not be entitled to vote in any election of directors of Reorganized Rose's, or any other matter requiring the vote of shareholders until such time as the Disputed Claim has become an Allowed Claim, and the holder of such Allowed Claim has received its distribution and become a shareholder of record of Reorganized Rose's. 37 7.14 Preservation or Waiver of Rights of Action of the Estate. Except as expressly provided to the contrary in this Modified Plan, such as provided in, without limitation, Sections 9.2, 9.3 and 9.4, the Supplemental Adequate Protection Consent Orders, the DIP Facility, or any other contract, instrument, release, indenture or other agreement entered into in connection with this Modified Plan, in accordance with Section 1123(b) of the Bankruptcy Code, Reorganized Rose's shall retain and may enforce any claims, rights and causes of action that the Estate may hold against any Person, including, without limitation, any rights of setoff or recoupment. Reorganized Rose's or its successors may pursue any such retained claims, rights or causes of action, as appropriate, in accordance with the best interests of Reorganized Rose's. Notwithstanding the foregoing, on the Effective Date, all preference and other avoidance power actions not commenced prior to the Effective Date that the Debtor, the Estate or Reorganized Rose's could have commenced pursuant to Sections 544, 545, 547, 548, 550 and 553 of the Bankruptcy Code, and all rights to withhold any distribution on account of the receipt of any payment that is recoverable under such Bankruptcy Code sections shall be deemed waived irrevocably. 7.15 Use of ADR Procedure Regarding Determination and Allowance of Damage Claims. Notwithstanding anything contained in this Modified Plan to the contrary, the ADR Procedure shall govern all matters relating to the determination and allowance of Damage Claims, and the payment of Cash only to Damage Claims which become Allowed Claims in an amount less than $500 in lieu of the treatment set forth in this Modified Plan for Claims in Class 3. Reorganized Rose's shall be authorized and empowered to take all action reasonably necessary and appropriate to effectuate the ADR Procedure. ARTICLE VIII CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE PLAN 8.1 Conditions to the Effective Date. The following conditions must occur and be satisfied for this Modified Plan to be effective and for the Effective Date to occur: (a) Confirmation must have occurred pursuant to the Confirmation Orders. (b) The Debtor shall have entered into a Post-Effective Date Financing Facility sufficient for the operations of Reorganized Rose's, and all conditions to the closing date and the initial credit extension thereunder, other than the occurrence of the Effective Date, shall have occurred or been waived. 38 (c) The closing of the Post-Effective Date Financing Facility and the Effective Date shall each occur by April 30, 1995, respectively, or such later date or dates as the Plan Proponents, GE Capital and the Facility Agents shall have agreed upon in writing. (d) All documents and agreements contemplated to be executed or implemented in connection with this Modified Plan including, without limitation, those documents and agreements which are expressly identified in this Modified Plan shall be filed with the Bankruptcy Court in a substantially final form. (e) The Debtor shall be able to effectuate all Cash distributions required to be made on the Effective Date under this Modified Plan. (f) After giving effect to all payments to be made under the Plan in satisfaction of Administrative Claims, Non-Tax Priority Claims, Allowed Tax Claims, Non-Priority Tax Claims, and to satisfy in full the GE Obligations (other than the Post-Effective Date GE Obligations and the Deferred GE Obligations) and the Pre-Petition Lenders' Allowed Secured Claims (including after the issuance of all Letters of Credit required to replace outstanding letters of credit issued under the DIP Facility or support such letters of credit), Reorganized Rose's will have the ability to borrow at least $12 million in the aggregate under the Post-Effective Date Financing Facility. (g) Simultaneous with the closing of the Post-Effective Date Financing Facility, the Pre-Petition Lenders' Allowed Secured Claims shall be satisfied in full pursuant to Section 4.4 of this Modified Plan, the GE Obligations shall be satisfied in full pursuant to Section 3.5 of this Modified Plan, provided that the Deferred GE Obligations and the Post-Effective Date GE Obligations shall be satisfied by the execution and delivery of the agreements and documents contemplated by Section 3.5 of this Modified Plan, and in each case, such performance as may be required thereunder prior to or upon the execution and delivery thereof. 8.2 Waiver of Conditions to the Effective Date. The condition precedent set forth in Section 8.1(d) of this Modified Plan with respect to those documents requiring negotiations between or among any of the Debtor, the Equity Committee, the Unsecured Committee and GE Capital, may be waived with the consent of the respective applicable parties. Otherwise, none of the conditions precedent set forth in Sections 8.1 of this Modified Plan may be waived except upon the express written agreement of all Plan Proponents, the Facility Agents and GE Capital. 39 ARTICLE IX DISCHARGE, RELEASES, INJUNCTIONS AND RELATED PROVISIONS 9.1 Discharge. Except as otherwise expressly provided in Section 1141 of the Bankruptcy Code or this Modified Plan, the distributions made pursuant to and in accordance with the applicable terms and conditions of this Modified Plan will be in full and final satisfaction, settlement, release and discharge as against the Debtor, of any debt that arose before the Effective Date and any debt of a kind specified in Section 502(g), 502(h) or 502(i) of the Bankruptcy Code and all Claims and Interests of any nature, including without limitation any interest accrued thereon from and after the Filing Date whether or not (i) a proof of Claim or Interest based on such debt, obligation or interest is filed or deemed filed under Section 501 of the Bankruptcy Code, (ii) such Claim or Interest is allowed under Section 502 of the Bankruptcy Code or (iii) the holder of such Allowed Claim or Interest has accepted this Modified Plan. Therefore, upon the Effective Date, except as otherwise provided in this Modified Plan, all Persons which are or could have been holders of Claims against, or Interests in, the Debtor shall be precluded from asserting against the Debtor or Reorganized Rose's, or any of their assets or properties, any other or further Claims or Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, and the Confirmation Order shall permanently enjoin said holders of Claims or Interests, their successors and assigns, from enforcing or seeking to enforce any such Claims or Interests, subject to the occurrence of the Effective Date. 9.2 Releases of Released Parties. As of the Effective Date, each of the Released Parties are hereby released from any and all claims asserted or that can be asserted against such Released Party that arise out of such Released Party's relationship with or work performed for the Debtor on or prior to the Effective Date, other than claims which constitute (i) claims preserved against such Released Party pursuant to the Modified Plan, (ii) claims that arise from obligations created under or in connection with the Modified Plan, (iii) rights pursuant to this Modified Plan or any agreement provided for or contemplated in this Modified Plan, or (iv) claims which may be asserted against such Released Party by an insurance carrier or the issuer of a bond in connection with any insurance contract, reinsurance contract, surety bond, fidelity bond, or other type of insured or bonded obligation; provided, however, that the foregoing release provisions (i) shall not apply to such Released Party's gross negligence or willful misconduct, and (ii) shall not apply to (a) any Released Party who is the subject of any action or proceeding pending as of the Effective Date to recover property or money for the benefit of the Estate, or (b) any claims asserted by or against any of the Debtor's present or former officers or directors in any action or proceeding pending as of the Effective Date; and provided, however, that (i) in the 40 case of the Pre-Petition Lenders, the scope of the foregoing release as and to the extent given by the Pre-Petition Lenders shall extend only to claims of the Pre-Petition Lenders arising on or prior to the Effective Date against any of the Released Parties solely in the Pre-Petition Lenders' capacity as the holders of the Pre-Petition Secured Notes and not to the extent of any other claims arising out of any other relationship which any of the Pre- Petition Lenders may have with the Debtor or any of the Released Parties, including, without limitation, any insurance, fidelity bond or suretyship relationship; and (ii) in the case of GE Capital, the scope of the foregoing release as and to the extent given by GE Capital shall extend only to the claims of GE Capital arising on or prior to the Effective Date against any of the Released Parties solely in GE Capital's capacity as the lender under the DIP Facility and shall not extend to any other claims of GE Capital arising out of any other relationship which GE Capital may have with the Debtor or any of the Released Parties. 9.3 Releases by the Debtor and Reorganized Rose's. Except as, and only to the extent, provided otherwise in this Modified Plan, as of the Effective Date, the Debtor, the Estate and Reorganized Rose's shall be deemed to forever release, waive and discharge all known and unknown claims of any nature that the Debtor, its Estate, or Reorganized Rose's has, had or may have against any Released Party for all acts and omissions through the Effective Date other than (i) claims preserved against such Released Party pursuant to the Modified Plan, (ii) claims that arise from obligations created under or in connection with the Modified Plan, (iii) any claims asserted against any of the Debtor's present or former officers or directors in any action or proceeding pending as of the Effective Date or (iv) claims which may be asserted against such Released Party through subrogation or otherwise by an insurance carrier or the issuer of a bond in connection with any insurance contract, reinsurance contract, surety bond, fidelity bond, or other type of bonded obligation. As of the Effective Date, the Debtor and Reorganized Rose's shall also be deemed to forever release, waive and discharge all Avoiding Power Actions. 9.4 Releases by Recipients of New Rose's Common Stock, New Rose's Warrants and Cash, or Available Cash (as applicable), and by All Other Persons. Except as, and only to the extent, otherwise provided in this Modified Plan, each Person receiving Cash, New Rose's Warrants, the right to participate in the Class 5 Subscription and/or New Rose's Common Stock, Available Cash (as applicable), or other distribution or payment pursuant to this Modified Plan on account of its Allowed Claim, Administrative Claim or Common Stock Interest, as the case may be, shall be deemed, as of the Effective Date, to forever release, waive and discharge all known and unknown claims of any nature arising on or prior to the Effective Date against each of the Released Parties to the extent that such claims arise out of such Released Party's actions or failure to act in connection with the Debtor, the Committees, the 41 Chapter 11 Case, or claims otherwise treated and discharged under this Modified Plan, other than claims which constitute (i) claims preserved against such Released Party pursuant to the Modified Plan, (ii) claims that arise from obligations created under or in connection with the Modified Plan, (iii) such Person's rights pursuant to this Modified Plan or any agreement provided for or contemplated in this Modified Plan or (iv) claims which may be asserted against such Released Party by an insurance carrier or the issuer of a bond in connection with any insurance contract, reinsurance contract, surety bond, fidelity bond, or other type of insured or bonded obligation; provided, however, that the foregoing release provisions (i) shall not apply to such Released Party's gross negligence or willful misconduct, and (ii) shall not apply to (a) any Released Party who is the subject of any action or proceeding pending as of the Effective Date to recover property or money for the benefit of the Estate, or (b) any claims asserted by or against any of the Debtor's present or former officers of directors in any action or proceeding pending as of the Effective Date; and provided, however, that (i) in the case of the Pre-Petition Lenders, the scope of the foregoing release as and to the extent given by the Pre-Petition Lenders shall extend only to claims of the Pre-Petition Lenders arising on or prior to the Effective Date against any of the Released Parties solely in the Pre-Petition Lenders' capacity as the holders of the Pre-Petition Secured Notes and not to the extent of any other claims arising out of any other relationship which any of the Pre-Petition Lenders may have with the Debtor or any of the Released Parties, including, without limitation, any insurance, fidelity bond or suretyship relationship; and (ii) in the case of GE Capital, the scope of the foregoing release as and to the extent given by GE Capital shall extend only to the claims of GE Capital arising on or prior to the Effective Date against any of the Released Parties solely in GE Capital's capacity as the lender under the DIP Facility and shall not extend to any other claims of GE Capital arising out of any other relationship which GE Capital may have with the Debtor or any of the Released Parties. Nothing in this Modified Plan shall be construed as a release by GE Capital of any of the (i) GE Obligations except by operation of Section 3.5 of this Modified Plan and actions taken by GE Capital in connection therewith, (ii) any Post- Effective Date GE Obligations, or (iii) any Deferred GE Obligations. 9.5 Limitations on Amounts to be Distributed to Holders of Allowed Claims Which Are Insured. Notwithstanding any provision in this Modified Plan to the contrary, no property shall be distributed to or retained by the holders of Allowed Claims whose Claims may be satisfied solely pursuant to the terms of the Debtor's applicable insurance policies. Except as otherwise provided for in this Modified Plan, nothing in this Section 9.5 shall constitute a waiver of any claim, debt, right, cause of action or liability that any Person may hold against any other entity, including any of the Debtor's insurance carriers. 42 9.6 General Release of Liens. Except as otherwise provided in this Modified Plan or the Post-Effective Date Financing Facility, or in any contract, instrument, indenture or other agreement or document created in connection with this Modified Plan or the implementation hereof, on the Effective Date, all mortgages, deeds of trust, liens or other security interest against property of the Estate will be released, and all the right, title and interest of any holder of such mortgages, deeds of trust, liens or other security interests shall revert to Reorganized Rose's or the Debtor, as applicable, and the successors and assigns thereof, it being understood that simultaneous upon satisfaction of (i) the GE Obligations in accordance with Section 3.5 of this Modified Plan and by the execution and delivery of the agreements contemplated thereby and in each case, such performance as may be required thereunder prior to or upon the execution and delivery thereof, and (ii) the Pre-Petition Lenders' Allowed Secured Claims, all liens in favor of GE Capital and the Pre-Petition Lenders shall be deemed released without any further act on the Effective Date. Without in any way limiting the effect of the immediately preceding sentence, all Persons holding any mortgages, deeds of trust, liens or other security interests released in accordance with the prior sentence, shall deliver and/or execute from time to time, at the sole cost and expense of the Debtor or Reorganized Rose's, any instrument or document reasonably requested by Reorganized Rose's or the Administrative Agent to evidence or effectuate such release. 9.7 Injunctions. 9.7.1 Injunction Related to Claims Released by the Debtor and Reorganized Rose's Recipients of Cash, New Rose's Common Stock and New Rose's Warrants, or Available Cash (if applicable), and All Other Persons. As of the Effective Date and subject to its occurrence, all Persons that have held, currently hold or may have asserted a Claim or other debt, or liability or an interest or other right of a holder of an Interest, that is released or terminated pursuant to Sections 9.1 (if applicable), 9.2, 9.3, 9.4 or 9.6 above are, except as provided with respect to the New Rose's Common Stock and the New Rose's Warrants, permanently enjoined from taking any of the following actions on account of such released Claims, debts or liabilities or Interests: (i) commencing or continuing, in any manner or in any place, any action or other proceeding, (ii) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order, (iii) creating, perfecting or enforcing any lien or encumbrance, (iv) asserting a set-off, right or subrogation or recoupment of any kind against any debt, liability or obligation due to any such releasing Person, and (v) commencing or continuing any action, in any manner or in any place, that does not comply with or is inconsistent with the provisions of this Modified Plan. 43 9.7.2 Injunction Relating to the Modified Plan. As of the Effective Date, except as otherwise provided herein, all Persons are permanently enjoined from commencing or continuing, in any manner or in any place, any action or other proceeding, whether directly, derivatively or otherwise against any or all of the Released Parties, on account of or respecting any claims, debts, rights, causes of action or liabilities released or discharged pursuant to this Modified Plan, except to the extent permitted under the Modified Plan. 9.7.3 Consent By Holders of Claims and Interests to Entry of Injunctive Relief. Without limitation to the scope, extent, validity or enforceability of the injunctive relief set forth in this Section 9.7 and in the Confirmation Orders, by accepting distributions pursuant to this Modified Plan, each holder of an Allowed Claim or Interest receiving distributions pursuant to this Modified Plan shall be deemed to have specifically consented to the releases and injunctions set forth in this Article IX. 9.8 Rights of Fireman's Fund Insurance Company. Notwithstanding any other provision in this Modified Plan, including, without limitation, those provisions set forth in this Article IX, unless otherwise agreed, the Modified Plan shall not impair or prejudice in any manner the right of Fireman's Fund Insurance Company or any of its subsidiaries (collectively, "FFIC"), (i) to make draws or otherwise enforce their rights regarding any letter of credit issued to FFIC, (ii) to seek to compel payment of any administrative claim held by FFIC, (iii) to assert or enforce any rights of setoff, subrogation or recoupment; (iv) to retain or enforce any liens held by FFIC on funds held by FFIC, or (v) to assert claims, including without limitation contribution or indemnification claims, and obtain recovery thereon against any Person other than a Released Party, (vi) to obtain repayment or recovery for payments made to or for the benefit of a Released Party on account of a claim made by such Released Party under an insurance policy issued by FFIC, or (vii) to exercise any and all rights or remedies arising out of or in connection with insurance services or coverage provided by FFIC after the Effective Date. Notwithstanding the foregoing, nothing herein shall be deemed to constitute an admission by the Debtor as to the validity, priority or nature of any claim filed by FFIC against the Debtor. In addition, the foregoing shall not constitute an assumption by the Debtor of any agreement between the Debtor and FFIC, and the Debtor expressly reserves its right to reject any such agreement. Nothing herein shall be construed to limit or reduce any rights, remedies, liens, priorities or protections granted to GE Capital pursuant to the DIP Facility. 44 ARTICLE X EXECUTORY CONTRACTS, INDEMNIFICATION OBLIGATIONS, POST-PLAN CONFIRMATION DATE TRADE CLAIMS, CONTINUED APPLICABILITY OF BANKRUPTCY CODE 10.1 Executory Contracts and Unexpired Leases. Unless specifically assumed by order of the Bankruptcy Court, the subject of a motion to assume, or the subject of a motion or an order seeking additional time to assume or reject, on the Effective Date (i) all executory contracts and unexpired leases except for Assumed Contracts and Leases shall be deemed rejected by the Debtor or Reorganized Rose's as of the Effective Date or as otherwise provided for by order of the Bankruptcy Court, and (ii) the Debtor expressly rejects and terminates the Employee Stock Option Plan and the Pre-Petition Secured Noteholder Warrant Agreement, and Claims arising from the rejection and termination of these and other executory contracts or unexpired leases shall be treated in accordance with the terms of this Modified Plan. With respect to the Assumed Contracts and Leases, in accordance with Section 1123(a)(5)(G) of the Bankruptcy Code, upon the later of the Effective Date or assumption, the Debtor or Reorganized Rose's shall cure all defaults thereunder by (i) making a Cash payment of only those amounts which are allowed, as determined by the Debtor or Reorganized Rose's or (ii) on such terms as agreed to in writing between such claimants and the Debtor or Reorganized Rose's. Any disputes regarding the amount which will be paid to cure the Assumed Contracts and Leases will be resolved by the Bankruptcy Court after notice and hearing. All non-Debtor parties to executory contracts or unexpired leases rejected by order of the Bankruptcy Court or, by operation of this Section 10.1 shall be required to file a proof of claim with respect to any and all Claims arising from or relating to such rejection no later than 30 days following the Effective Date. Failure to so file timely such a proof of claim shall be a waiver of such Claim, and shall have such effect and consequences as provided for in Section 5.8 of this Modified Plan regarding the failure to file as proof of claim by an applicable Bar Date. 10.2 Indemnification and Contribution Obligations. Reorganized Rose's shall assume, to the fullest extent permitted by law and only if such obligations have not been rejected or terminated prior to the Effective Date, all obligations relating to indemnification and exculpation of the Debtor and of all Persons who as of the Effective Date were the Debtor's directors, officers, employees, fiduciaries, agents or controlling persons as arise under applicable laws or as provided in any of (i) the Debtor's certificate of incorporation in effect prior to or as of the date hereof, (ii) the Debtor's by-laws in effect prior to or as of the date hereof, or (iii) any agreement with, or any corporate policy relating to indemnification in effect prior to the Effective Date of, the Debtor, in each of these cases (i)-(iii) with respect to matters occurring on or prior to the Effective Date. Except as 45 otherwise provided in this Modified Plan, all Claims based upon contractual, statutory or common law indemnification obligations other than those described in this paragraph shall not survive Confirmation of this Modified Plan and shall be discharged pursuant to Section 1141 of the Bankruptcy Code. 10.3 Post-Plan Confirmation Date Claims. Claims assertable against the Debtor or Reorganized Rose's arising from goods, inventory and services provided, or credit extended with respect to goods, inventory and services provided, to the Debtor or Reorganized Rose's during the period after the Plan Confirmation Date and prior to the Effective Date, shall be deemed Administrative Claims and be entitled to treatment pursuant to Section 3.1 of this Modified Plan without the need for notice and hearing pursuant to Section 503(b) of the Bankruptcy Code or further order of the Bankruptcy Court. Moreover, in accordance with Section 365(d)(3) of the Bankruptcy Code, the Debtor shall perform all its obligations arising from and after the Filing Date under any unexpired lease of nonresidential real property until such lease is assumed or rejected. In addition, the Debtor will continue to comply with Section 365(d)(3) of the Bankruptcy Code, and the Debtor shall perform all its obligations, in full and on time, to the extent not inconsistent with Section 365(d)(3) of the Bankruptcy Code, arising from and after the Filing Date under any unexpired lease of nonresidential real property until such lease is assumed or rejected. Such obligations shall be deemed Administrative Claims and be entitled to treatment pursuant to Section 3.1 of this Modified Plan without the need for notice and hearing pursuant to Section 503(b) of the Bankruptcy Code or further order of the Bankruptcy Court. The Debtor's obligations under the leases subject to this section only include those specified in the lease, if any, including but not limited to rent, real estate taxes, percentage rent, and common area maintenance charges; such charges will be pro-rated per diem if the lease is rejected or terminated during a payment period. 10.4 Continued Applicability of the Bankruptcy Code. From the Plan Confirmation Date through the Effective Date, the operations of the Debtor shall be subject to the terms and provisions of the Bankruptcy Code notwithstanding that confirmation of the Plan occurred by entry of the Plan Confirmation Order, unless otherwise expressly provided for in the Plan and this Modified Plan. ARTICLE XI RETENTION OF JURISDICTION 11.1 Jurisdiction From Confirmation Through the Effective Date. From the Plan Confirmation Date through the Effective Date, the Bankruptcy Court shall retain full jurisdiction over the 46 Chapter 11 Case notwithstanding that confirmation of the Plan has occurred by entry of the Plan Confirmation Order. 11.2 Jurisdiction From and After the Effective Date. From and after the Effective Date and until such time as all payments and distributions required to be made, all events required to have occurred under this Modified Plan have occurred, and all other obligations required to be performed under this Modified Plan have been made and performed by the Debtor or Reorganized Rose's, the Bankruptcy Court shall retain such jurisdiction as is legally permissible, including, but not limited to, the following: (a) To hear and determine any and all objections to the allowance of a Claim or Interest or any controversy as to the classification of Claims or Interests or Reserves; (b) To hear and determine any and all applications by Professionals for compensation and reimbursement of expenses; (c) To hear and determine any and all pending applications for the rejection and disaffirmance of executory contracts and unexpired leases and fix and allow any Claims resulting therefrom; (d) To enable the Debtor, or Reorganized Rose's to prosecute any and all proceedings which have been or may be brought prior to the Effective Date, to set aside liens or encumbrances and to recover any transfers, assets, properties or damages to which the Debtor or Reorganized Rose's may be entitled under applicable provisions of the Bankruptcy Code or any other federal, state or local laws except as may be waived pursuant to this Modified Plan; (e) To liquidate any disputed, contingent or unliquidated Claims or Interests; (f) To enforce the provisions of this Modified Plan and the injunction and releases provided for in Article IX of this Modified Plan; (g) To correct any defect, cure any omission, or reconcile any inconsistency in this Modified Plan or in the Confirmation Order as may be necessary to carry out its purpose and the intent of this Modified Plan; (h) To hear and determine any and all Avoiding Power Actions; (i) To determine any Tax Claim which the Debtor or Reorganized Rose's, as applicable, may incur as a result of the transactions contemplated herein; 47 (j) To determine such other matters as may be provided for in the Confirmation Orders confirming this Modified Plan or as may be authorized under the provisions of the Bankruptcy Code; (k) To resolve any and all disputes that may arise under this Modified Plan; (l) To hear and determine any and all administrative matters that may arise in closing the Chapter 11 Case, including the entry of the Final Decree; and (m) all other matters with respect to which the Bankruptcy Court's retention of jurisdiction over the Chapter 11 Case as is legally permissible, including without limitation, jurisdiction as is necessary to ensure that the purpose and intent of this Modified Plan are implemented. ARTICLE XII MISCELLANEOUS 12.1 The Committees and the Post-Effective Date Trade Committee. 12.1.1 Dissolution of Committees. On the Effective Date, the Unsecured Committee shall be deemed disbanded and the duties of the Unsecured Committee, and the retention of its counsel and other retained Professionals, shall automatically terminate. The Equity Committee shall be deemed disbanded and the duties of the Equity Committee, and the retention of its counsel and other retained Professionals, shall automatically terminate except with respect to any pending appeal to which the Equity Committee is a party, on the sixtieth day after the Determination Date or the first Business Day thereafter, unless such period is extended by order of the Bankruptcy Court on appropriate notice and hearing. Until the duties of the Equity Committee terminate pursuant to this Section 12.1.1, the Equity Committee shall have the right to continue to retain its counsel and other retained Professionals, and the reasonable fees and expenses of such Professionals shall to be treated as set forth in Section 3.3 of this Modified Plan. 12.1.2 Creation of Post-Effective Date Trade Committee. From and after the Effective Date, a committee shall be formed and constituted and shall consist of five (5) members who have previously served on the Unsecured Committee (the "Post-Effective Date Trade Committee") in an official or ex officio capacity. The Post-Effective Date Trade Committee shall continue in existence solely with respect to (i) any appeal of the Confirmation Order, (ii) applications for Professional Fees, (iii) resolution of Claims, distributions and Reserves (other than with respect to Damage Claims), until the aggregate amount of Disputed Claims in 48 Class 3 is less than $6,500,000, and (iv) such other matters as may be proposed by the Post-Effective Date Trade Committee and approved by the Debtor or the Reconstituted Board of Directors, as applicable, or as otherwise provided by a Final Order of the Bankruptcy Court. 12.1.3 Post-Effective Date Trade Committee Procedures. A majority of the Post-Effective Date Trade Committee shall constitute a quorum. One member of the Post-Effective Date Trade Committee shall be designated by the majority of its members as its chairperson ("Chairperson"). Meetings of the Post-Effective Date Trade Committee shall be called by the Chairperson upon such notice and in such manner as its Chairperson may deem advisable. The Post-Effective Date Trade Committee shall function by decisions made by a majority of its members in attendance at any meeting. The Post-Effective Date Trade Committee shall adopt by-laws which shall otherwise control its functions. 12.1.4 Post-Effective Date Trade Committee Compensation. The members of the Post-Effective Date Trade Committee shall serve without compensation. Reasonable expenses of the members of the Post-Effective Trade Committee shall be reimbursed and paid by Reorganized Rose's upon submission of bills to Reorganized Rose's or upon Final Order of the Bankruptcy Court. 12.1.5 Retention of Professionals. The Post-Effective Date Trade Committee shall have the right to retain the services of attorneys and accountants which are necessary to assist the Post-Effective Date Trade Committee in the performance of its duties. The reasonable fees and expenses of such professionals shall be paid in accordance with Section 3.3 of this Modified Plan, upon the submission of invoices to Reorganized Rose's and the Post-Effective Date Trade Committee. Ten (10) days after receipt by Reorganized Rose's and the Post-Effective Date Committee of any such invoice, Reorganized Roses's shall be authorized to pay such invoice unless it and/or the Person seeking payment has received a written objection to the payment thereof from any of Reorganized Rose's or the Post-Effective Date Committee within such period. In the event fees and expenses of any such professional are objected to, such fees and expenses shall be payable only upon prior agreement of the parties or by order of the Bankruptcy Court, or other court of competent jurisdiction. 12.1.6 Liability. Neither the Post-Effective Date Trade Committee nor any of its members, designees, counsel or accountants or any duly designated agent or representative of the Post-Effective Date Trade Committee shall be liable for the act, default or misconduct of any other member of the Post-Effective Date Trade Committee, nor shall any member be liable for anything other than such member's gross negligence, willful misconduct or fraud. None of the Post-Effective Date Trade Committee's members, designees, agents or representatives or their respective employees, shall incur or be under any liability or obligation by reason of any act 49 done or omitted to be done, by any member of the Post-Effective Date Trade Committee, designee, agent or representative. The Post- Effective Date Trade Committee may, in connection with the performance of its functions, and in its sole and absolute discretion, consult with counsel, accountants and its agents, and shall not be liable for anything done or omitted or suffered to be done in accordance with such advice or opinions. If the Post-Effective Date Trade Committee determines not to consult with counsel, accountants or its agents, such determination shall not be deemed to impose any liability on the Post-Effective Date Trade Committee, or its members and/or its designees. 12.2 Means of Cash Payments. Cash payments made pursuant to this Modified Plan shall be in United States dollars by checks drawn on a domestic bank selected by the Debtor or Reorganized Rose's, as applicable, or by wire transfer from a domestic bank. 12.3 Set-Offs. Except as expressly provided herein, nothing contained in this Modified Plan shall constitute a waiver or release by the Debtor of any right of set-off the Debtor may have, or which may be assertable by Reorganized Rose's or the Debtor, as applicable, against any holder of a Claim or an Interest. 12.4 Withholding Taxes. The Debtor, Reorganized Rose's, (if applicable), or any agent making distributions under this Modified Plan shall be entitled to deduct any federal, state or local withholding taxes from any Cash payments made with respect to Allowed Claims or interest thereon and Interests. If distributions of New Rose's Common Stock are subject to any tax withholding, the Debtor, Reorganized Rose's or the agent shall be permitted, but not required, to withhold from any Cash otherwise to be distributed to the holder or to sell the appropriate amount of New Rose's Common Stock otherwise to be issued to the holder and to apply the proceeds of such sale to satisfy all or a portion of the tax withholding obligation. 12.5 Revesting. Except as otherwise provided by this Modified Plan, upon the Effective Date, title to all properties and assets provided for in this Plan shall pass to Reorganized Rose's, free and clear of all Claims and Interests, including liens or other encumbrances, of creditors and of equity security holders, and the Confirmation Orders shall be a judicial determination of discharge of all of the Debtor's liabilities except as provided in this Modified Plan; provided, however, that liens and encumbrances granted pursuant to the Modified Plan that are granted in satisfaction, exchange, release and discharge of existing liens, shall be deemed to have attached and to have become perfected at the time of the attachment and perfection of those existing liens so that attachment and perfection shall be deemed to have been continuous notwithstanding this paragraph, the revesting of property in the Debtor and the granting of new liens and encumbrances. 50 12.6 Headings. Headings are utilized in this Modified Plan for the convenience of reference only, and shall not constitute a part of this Modified Plan for any other purpose. 12.7 Defects, Omissions and Amendments. The Plan Proponents may, with the approval of the Bankruptcy Court and without notice to and consent of all holders of Claims and Interests, but after notice to the Facility Agents, GE Capital and the Plan Proponents, and consent by the Facility Agents, GE Capital and the Plan Proponents, which consent shall not be unreasonably withheld, insofar as they do not materially and adversely affect the interests of holders of Claims and Interests, correct any defect, omission or inconsistency in this Modified Plan in such manner and to such extent as may be necessary to expedite the execution of this Modified Plan. This Modified Plan may be altered or amended before or after Confirmation as provided in Section 1127 of the Bankruptcy Code if, in the opinion of the Bankruptcy Court, the modification does not materially and adversely affect the interests of holders of Claims and Interests; provided, however, that any such altered or amended plan shall not be binding on the Facility Agents or GE Capital without their respective consents. This Modified Plan may be altered or amended before or after entry of the Modified Plan Confirmation Order in a manner which, in the opinion of the Bankruptcy Court, materially and adversely affects holders of Claims and Interests, only on consent of all Plan Proponents, the Facility Agents, and GE Capital after a further hearing and acceptance of this Modified Plan as so altered or modified as provided in Section 1126 of the Bankruptcy Code. 12.8 Governing Law. Except to the extent that the Bankruptcy Code is applicable, and unless otherwise specified in an agreement entered into to effectuate this Modified Plan, the rights and obligations arising under this Modified Plan shall be governed by and construed and enforced in accordance with the internal laws of the State of North Carolina. 12.9 Conflicts. Unless otherwise agreed in writing by each of the Plan Proponents, the Facility Agents and GE Capital, in the event of any conflict between the provisions of any of the Second Supplemental Adequate Protection Consent Order and this Modified Plan, the Confirmation Orders, or any other order which may be entered in the Chapter 11 Case after entry of the Second Supplemental Adequate Protection Consent Order or any succeeding case or proceeding, the provisions of the Second Supplemental Adequate Protection Consent Order shall govern with regard to the matters addressed therein, provided, however, that upon full satisfaction of the Pre-Petition Lenders' Allowed Secured Claims pursuant to Section 4.4 of this Modified Plan and the GE Obligations pursuant to Section 3.5 of this Modified Plan, the Modified Plan shall govern for all purposes. 12.10 Agreement Among the Plan Proponents. The terms, provisions and conditions of this Modified Plan constitute a mutual 51 agreement reached among each of the Plan Proponents in conjunction with their agreement regarding the terms, provisions and conditions of the Supplemental Adequate Protection Orders, the Plan Support Consent Order, the Plan and the Plan Confirmation Order. In the event that this Modified Plan is either (x) abandoned or (y) fails to become effective in accordance with Section 8.1 of this Modified Plan, the Plan Proponents agree as follows: (a) The Plan Proponents will endeavor to preserve for the benefit of GE Capital and the Pre-Petition Lenders their respective rights and remedies afforded them in the Supplemental Adequate Protection Orders. (b) Under no circumstances, other than circumstances arising as a result of the Balloting Pre-Petition Lenders' breach of their agreement in paragraph 7 of the Plan Support Consent Order as determined by Bankruptcy Court Order, shall any of the Plan Proponents support any plan of reorganization which treats the claims of the Pre- Petition Lenders in a manner materially worse than the treatment afforded such claims pursuant to Exhibit 5.1 to the Plan. The foregoing agreement shall survive notwithstanding the abandonment of this Modified Plan or the failure of the Modified Plan to become effective, but shall be null and void, and of no force and effect, in the event that the Effective Date of this Modified Plan occurs. 12.11 Notices. All notices, requests or demands for payments provided for in this Plan shall be in writing and shall be deemed to have been given when personally delivered by hand, delivered by courier or deposited in any general or branch post office of the United States Postal Service or received by telex or telecopier. Notices, requests and demands for payments shall be addressed and sent, postage prepaid, or delivered, to: (a) Rose's Stores, Inc.: P.O. Box Drawer 947, Henderson, North Carolina 27536, Attn: Chief Financial Officer, with a copy to Proskauer Rose Goetz & Mendelsohn, 1585 Broadway, New York, New York 10036, Attn: Alan B. Hyman, Esq., and Smith Debnam Hibbert & Pahl, P.O. Box 26268, Raleigh, North Carolina 27611, Attn: J. Larkin Pahl, Esq.; (b) the Post-Effective Date Trade Committee: Mattel Toys, Attn: Ms. Dorothy Fee, Director Customer Relations, 333 Continental Boulevard, El Seguendo, California 90245; with a copy to Otterbourg, Steindler, Houston & Rosen, P.C., 230 Park Avenue, New York, New York 10956, Attn: Scott L. Hazan, Esq and Glenn B. Rice, Esq. (c) the Equity Committee: J. David Rosenberg, Esq., c/o Keating, Muething & Klekamp, 1800 Provident Tower, One East Fourth Street, P.O. Box 1800, Cincinnati, Ohio 45202 with a 52 copy to Lord Bissell & Brook, 115 South LaSalle, Chicago, Illinois 60603, Attn: Benjamin Waisbren, Esq. and Burns, Day & Presnell, P.A., 2626 Glenwood Avenue, Suite 560, P.O. Box 10867, Raleigh, North Carolina 27608, Attn: Lacy M. Presnell, III; (d) General Electric Capital Corporation: 3379 Peachtree Road, N.E., Suite 600, Atlanta, GA, Attn: Region Operations Manager, with a copy to Smith, Gambrell & Russell, 1230 Peachtree Street, N.E., Promenade II, Suite 3100, Atlanta, GA, 30309, Attn: Bruce W. Moorhead, Esq.: and/or (e) at any other address designated by a Plan Proponent by notice to each holder of an Allowed Claim or Interest, and, in the case of notices to holders of Allowed Claims and Interests, at the last known address according to the Debtor's books and records or at any other address designated by a holder of an Allowed Claim on its proof of claim (or by a holder of an Interest on its proof of interest, if any) or filed with the Bankruptcy Court, provided that any notice of change of address shall be effective only upon receipt. 12.12 Severability. Should any provision in this Modified Plan be determined to be unenforceable, such determination shall in no way limit or affect the enforceability and operative effect of any or all other provisions of this Modified Plan. 12.13 Revocation and Withdrawal of Modified Plan. This Modified Plan shall be deemed revoked and withdrawn in the event that the Effective Date does not occur by April 30, 1995, or such later date as established pursuant to Section 8.1(c) of this Modified Plan; provided, however, that nothing in this Section 12.13 shall prejudice or affect the rights of any Person under the Second Supplemental Adequate Protection Consent Order or the Plan Support Consent Order, except as expressly provided for in this Modified Plan, unless and until the Effective Date of this Modified Plan occurs. 12.14 Effect of Withdrawal or Revocation. If the Modified Plan is revoked or withdrawn pursuant to Section 12.13 above, or if the Effective Date does not occur by April 30, 1995 or such later date as established pursuant to Section 8.1(c) of this Modified Plan, then this Modified Plan shall be deemed null and void and the Plan as operative in accordance with the "Alternative Treatment Provisions" thereof shall be reinstated and in full force and effect, and in such event nothing contained in this Modified Plan shall be deemed to constitute a waiver or release of any Claims or Interests by or against any Plan Proponent or any other Person or to prejudice in any manner the rights of any Plan Proponent or any Person in any further proceedings involving the Debtor; provided, however, that nothing in this Section 12.14 shall prejudice or affect the rights of any Person under the Second Supplemental Adequate Protection Consent Order or the Plan Support Consent 53 Order, except as expressly provided for in this Modified Plan, unless and until the Effective Date of this Modified Plan occurs. 12.15 Ratification in Confirmation Orders. The Confirmation Orders shall ratify all transactions effected by the Debtor and/or any successors to, or designees of, the Debtor, including Reorganized Rose's (if applicable), by operation of an order of the Bankruptcy Court, during the period commencing on the Filing Date and ending on the date of the Modified Plan Confirmation Order. 12.16 Post-Effective Date Effectuation of the Modified Plan's Terms. From and after the Effective Date, the Chairman of the Board, President, any Executive Vice President, Senior Vice President or Vice President of Reorganized Rose's or the Debtor, as applicable, shall be authorized to execute, deliver, file or record such contracts, instruments, releases, indentures and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of this Modified Plan. The Secretary or any Assistant Secretary of the Debtor or Reorganized Rose's, as applicable, shall be authorized to certify or attest to any of the foregoing actions. Pursuant to Section 1146(c) of the Bankruptcy Code, none of the following executed in connection with any transactions consummated pursuant to this Modified Plan shall be subject to any stamp tax, real estate transfer tax or similar tax: (i) the issuance, transfer or exchange of New Rose's Common Stock or New Rose's Warrants or obligations under the Post-Effective Date Financing Facility, (ii) the creation of any mortgage, deed of trust or other security interest or instrument necessary to perfect the same, (iii) the making or assignment of any lease or sublease, or (iv) the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, this Modified Plan, including any merger agreements or agreements of consolidation, deeds, bills of sale or assignments. 12.17 Execution. Each of the parties receiving distributions under this Modified Plan shall take all steps, and execute all documents, including appropriate releases, necessary to effectuate the foregoing. 54 This Modified and Restated First Amended Joint Plan of Reorganization is respectfully submitted to the United States Bankruptcy Court for the Eastern District of North Carolina, Raleigh Division, on the 19th day of April, 1995. Respectfully Submitted, ROSE'S STORES, INC. Debtor and Debtor-in-Possession By: (signature of R. Edward Anderson appears here by TLG) ______________________________ R. Edward Anderson Chairman, President and Chief Executive Officer 55 SMITH DEBNAM HIBBERT & PAHL Counsel to the Debtor and Debtor-in-Possession By: (signature of Terri L. Gardner appears here) ______________________________ J. Larkin Pahl N.C. State Bar No. 3311 Terri L. Gardner N.C. State Bar No. 9809 4700 New Bern Avenue P.O. Box 26268 Raleigh, NC 27611 (919) 250-2000 PROSKAUER ROSE GOETZ & MENDELSOHN Special Bankruptcy Counsel to the Debtor and Debtor-in-Possession By: (signature of Michael E. Foreman appears here by TLG) ______________________________ Alan B. Hyman Michael E. Foreman Members of the Firm 1585 Broadway New York, New York 10036 (212) 969-3000 HEBB & GITLIN A Professional Corporation Counsel to the Pre-Petition Secured Noteholders By: (signature of Michael J. Reilly appears here by Stephani W. Humrickhouse) ______________________________ Michael J. Reilly Thomas H. Day One State Street Hartford, CT 06103-3178 (203) 240-2700 56 NICHOLLS & CRAMPTON, P.A. Counsel to the Pre-Petition Secured Noteholders By: (signature of Stephani W. Humrickhouse appears here) ______________________________ Gregory B. Crampton N.C. State Bar No. 991 Stephani W. Humrickhouse N.C. State Bar No. 9528 100 St. Albans Dr. P.O. Box 18237 Raleigh, NC 27619 (919) 781-1311 ANDERSON KILL OLICK & OSHINKSY, P.C. Counsel to Bank of Tokyo, Ltd. By: (signature of Jeffrey L. Glatzer appears here with permission William A. Mann) ______________________________ Jeffrey L. Glatzer Linda Gerstel 1251 Avenue of the Americas New York, New York 10020 (212) 278-1000 RAGSDALE, LIGGETT & FOLEY Counsel to Bank of Tokyo, Ltd. By: (signature of William A. Mann appears here) ______________________________ William A. Mann N.C. State Bar No. 2854 CrossPointe Plaza 2840 Plaza Place Raleigh, NC 27612 (919) 787-5200 57 OTTERBOURG, STEINDLER, HOUSTON & ROSEN, P.C. Counsel to the Official Committee of Unsecured Creditors By: (signature of Glen B Rice appears here by N. Hunter Wyche, Jr. ______________________________ Scott L. Hazan Glenn B. Rice 230 Park Avenue New York, New York 10169 (212) 661-9100 WYCHE & STORY Counsel to the Official Committee of Unsecured Creditors By: (signature of N. Hunter Wyche, Jr. appears here) ______________________________ N. Hunter Wyche, Jr. N.C. State Bar No. 9533 Post Office Drawer 1389 Raleigh, NC 27602-1389 (919) 821-7700 58 LORD BISSELL & BROOK Counsel to the Official Committee of Equity Security Holders By: (signature of Michael Yetnikoff appears here by LP) ______________________________ Benjamin Waisbren Michael Yetnikoff 115 South LaSalle Street Chicago, Illinois 60603 (312) 443-0700 BURNS, DAY & PRESNELL, P.A. Counsel to the Official Committee of Equity Security Holders By: (signature of Lacy M. Presnell, III appears here) ______________________________ Lacy M. Presnell, III N.C. State Bar No. 2626 Glenwood Avenue Suite 560 P.O. Box 10867 Raleigh, NC 27608 (919) 782-1441 59 EX-2 3 EXHIBIT (2) UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION - -----------------------------------X : In re: : : Case No. 93-01365-5-ATS ROSE'S STORES, INC., : : Chapter 11 Debtor. : : - -----------------------------------X ORDER APPROVING NONMATERIAL MODIFICATIONS TO DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION AND CONFIRMING DEBTOR'S MODIFIED AND RESTATED FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE UPON the motion, dated April 19, 1995 (the "Motion"), of Rose's Stores, Inc., debtor and debtor-in-possession (the "Debtor"), seeking entry of this Order approving nonmaterial modifications to the Debtor's First Amended Joint Plan of Reorganization (the "Plan") and confirming the Debtor's Modified and Restated First Amended Joint Plan of Reorganization; and the First Amended Disclosure Statement relating to the Plan (the "Disclosure Statement") having been approved, by order of the Court dated October 5, 1994, as containing "adequate information", as such term is defined in Section 1125 of the Bankruptcy Code; and the Plan having been confirmed by order of the Court dated December 14, 1994 (the "Plan Confirmation Order"); and the Debtor having filed its Modified and Restated First Amended Joint Plan of Reorganization on April 19, 1995 (the "Modified Plan"); and it appearing that good and sufficient notice of the Motion has been provided; and this Court having examined the Motion and upon the completion of a hearing on the Motion (the "Hearing"), with respect to which Hearing no party appeared in objection to the Motion; and having heard evidence presented by the parties and the representations of counsel; THIS COURT FINDS THAT: A. The proposed modifications to the Plan as described in the Motion and set forth in the Modified Plan (and as authorized and approved by this Order) have been proposed jointly by the Plan Proponents(1), consented to by GE Capital and the Facility Agents and do not materially adversely affect the treatment of any party receiving distributions under the Plan and the Modified Plan. Each such modification shall be and hereby is deemed to be accepted by all parties-in-interest who previously accepted the Plan. B. Substantial consummation of the Plan has not occurred, and the Modified Plan meets the requirements of Sections 1122, 1123 and 1129 of the Bankruptcy Code. Section 12.7 of the Plan provides the means for amending the Plan after Confirmation and the Plan Proponents have complied with Section 12.7 of the Plan in submitting the Modified Plan. The circumstances of this Chapter 11 case warrant modification of the Plan, in that the modifications set (1) Capitalized terms not otherwise defined in this Order shall have the same meaning ascribed to them in the Modified Plan, first, or the Disclosure Statement, second. 2 forth in the Modified Plan are necessary to effectuate the Post-Effective Date Financing Facility and otherwise consummate the Modified Plan. C. On or about April 5, 1995, the Debtor mailed to all parties on the official service list a notice advising them of the proposed modifications to the Plan and of the time and place of the Hearing. D. Any party-in-interest required to receive notice of the Motion and the Hearing has received due, proper and adequate notice thereof. All parties-in-interest had the opportunity to appear and be heard at the Hearing. E. The following constitute all documents, agreements and exhibits necessary for the Effective Date of the Modified Plan to occur, in compliance with Section 8.1(d) of the Modified Plan: the New Rose's Common Stock Escrow Agreement, the New Rose's Warrant Agreement, the Deferred GE Obligations Agreements, the GE Master Release Agreement, the Post-Effective Date GE Assumption Agreement, the New Rose's Charter and By-Laws, and all agreements and documents relating to the Post-Effective Date Financing Facility. F. The Disclosure Statement identified Mr. R. Edward Anderson, the Debtor's President and Chief Executive Officer to serve as a director of Reorganized Rose's. In accordance with Section 7.5 of the Modified Plan, the Unsecured Committee has 3 advised the Debtor that the following seven (7) individuals will also serve as directors of Reorganized Rose's: Mr. Elliot J. Stone, Mr. Joseph L. Mullen, Mr. Joseph Nusim, Mr. Harold Smith, Mr. Denis J. Taura, Mr. Walter F. Loeb and N. Hunter Wyche, Jr., Esq. The Equity Committee has advised the Debtor that it has selected J. David Rosenberg, Esq. to serve as a director of Reorganized Rose's. G. As a result of the offer made to the holders of Common Stock Interests in Class 5 to subscribe for and purchase up to 100% of the Effective Date Shares at the Class 5 Subscription Price, Subscription Proceeds in the approximate amount of $180,000 were contributed by the Class 5 Subscribers, which Subscription Proceeds shall be returned to the Class 5 Subscribers pursuant to Section 6.2.2 of the Modified Plan. H. The Plan Proponents have complied with Section 1125 of the Bankruptcy Code with respect to the Modified Plan. I. The Court finds that each and every act and omission to act by GE Capital, GE Capital Corporate Finance Group, Inc. and GE Capital Commercial Finance, Inc., and all of their respective past and present officers, directors, agents, employees and professionals, taken with respect to each of the DIP Facility and any and all other agreements, instruments, documents or understandings relating to or arising out of the DIP Facility, the GE Master Release Agreement, the Deferred GE Obligations Agreements, 4 the Post-Effective Date GE Assumption Agreement, that certain Amended and Restated Commitment Letter of GE Capital to Rose's Stores, Inc., dated as of July 19, 1994 and the related Fee Letter dated as of July 19, 1994 and that certain Agreement Terminating Amended and Restated Letter to Provide Confirmation Financing dated as of March 31, 1995, including, without limitation, all calculations of principal and interest, and all fees, expenses, costs and charges paid by the Debtor have been, were and are (a) made or taken in good faith, (b) reasonable, (c) in compliance with the terms of any and all applicable agreements, instruments and other documents and (d) in compliance with, and not in contravention or violation of, any order of this Court or applicable law. THEREFORE, NOW, upon the Motion of the Debtor and after due deliberation, the Court hereby ORDERS, ADJUDGES AND DECREES THAT: 1. The Motion and the relief requested therein is hereby approved and authorized in its entirety. 2. The Plan is hereby deemed to be modified in all respects, as and to the extent set forth in the Modified Plan. The Modified Plan shall supersede the Plan for purposes of Section 1127(b) of the Bankruptcy Code. 5 3. All holders of Claims or Interests that accepted or rejected the Plan are deemed to have accepted or rejected, as the case may be, the Modified Plan. 4. All references to the Plan in the Plan Confirmation Order shall be references to the Modified Plan. 5. All references to the Post-Effective Date Lender in the Plan shall be references to the Post-Effective Date Lenders for purposes of this Order. 6. All findings of fact set forth in the Plan Confirmation Order are incorporated herein by reference, and made applicable to the Modified Plan, except that (i) the first sentence of the finding set forth in Paragraph U entitled Feasibility (Section 1129(a)(11)) relating to the Alternative Treatment Provisions of the Plan, shall be deleted in its entirety for purposes of Confirmation of the Modified Plan and (ii) the finding set forth in Paragraph Y entitled No Other Plan (Section 1129(c)) shall be modified for purposes of Confirmation of the Modified Plan to state as follows "No other plan, except the Plan, which by this Order is superseded by the Modified Plan, has been filed with respect to the Debtor's Chapter 11 Case." 7. Paragraph 1 of the Plan Confirmation Order, entitled Confirmation, shall be superseded with respect to the Modified Plan and replaced as follows: 6 "The Modified Plan shall be, and hereby is confirmed, having met the requirements of Section 1127(b) and 1129 of the Bankruptcy Code." 8. Paragraph 2 of the Plan Confirmation Order, entitled Record Date, shall be superseded with respect to the Modified Plan and replaced as follows: "Pursuant to Rule 3021 of the Federal Rules of Bankruptcy Procedure, the record date for the purpose of determining (i) those holders of Common Stock Interests entitled to distributions under the Modified Plan and (ii) those holders of Claims in Classes 1, 2A and 3 entitled to distributions under the Modified Plan shall be the Effective Date. The record date for the purpose of determining holders of Claims in Class 2B entitled to distributions under the Modified Plan shall be the first Business Day prior to the closing of the Post-Effective Date Financing Facility." 9. Paragraph 3 of the Plan Confirmation Order, entitled New Agreements, is incorporated herein by reference, and made applicable to the Modified Plan (including the Post-Effective Date Financing Facility contemplated by and in connection with the Modified Plan), except that, for purposes of Confirmation of the Modified Plan (i) references to the New Rose's Common Stock Trust Agreement shall be deleted for purposes of Confirmation of the Modified Plan and replaced with references to the New Rose's Common Stock Escrow Agreement, (ii) references to the New Rose's Secured Notes Documents shall be deleted, and (iii) the following phrase 7 shall be inserted after the phrase "the New Rose's Warrant Agreement": "the Deferred GE Obligations Agreements, the GE Master Release Agreement, the Post-Effective Date GE Assumption Agreement". 10. Paragraph 4 of the Plan Confirmation Order, entitled Approval of Agreements, shall be deleted in its entirety for purposes of Confirmation of the Modified Plan and replaced as follows: "The New Rose's Common Stock Escrow Agreement, the New Rose's Warrant Agreement, the Deferred GE Obligations Agreements, the GE Master Release Agreement, the Post-Effective Date GE Assumption Agreement, the New Rose's Charter and By-Laws, and all agreements and documents relating to the Post-Effective Date Financing Facility are each hereby approved substantially in their respective forms as filed or to be filed with this Court, and with such changes as may be agreed to by the parties thereto after the date of filing. The Debtor shall perform, and is hereby authorized, empowered and directed to perform its obligations pursuant to all such agreements as part of the Modified Plan." 11. Paragraph 5 of the Plan Confirmation Order, entitled Effective Date, is incorporated herein by reference, and made applicable to the Modified Plan, except that the reference to Section 8.2 should be modified for purposes of Confirmation of the Modified Plan to reference Section 8.1 of the Modified Plan, and the second sentence (including footnote 2) of such ordered provision shall be deleted in its entirety for purposes of the Modified Plan. 8 12. Paragraph 6 of the Plan Confirmation Order, entitled Effect of Withdrawal or Revocation, shall be superseded with respect to the Modified Plan and replaced as follows: "In the event that the Effective Date does not occur by April 30, 1995 or such later date as established pursuant to Section 8.1(c) of the Modified Plan, then the Modified Plan shall be deemed null and void, and the Plan as operative in accordance with the "Alternative Treatment Provisions" thereof shall be reinstated and in full force and effect, and in such event, nothing contained in the Modified Plan shall be deemed to constitute a waiver or release of any Claims or Interests by or against any Plan Proponent or any other Person or to prejudice in any manner the rights of any Plan Proponent or any Person in any further proceedings involving the Debtor; provided, however, that nothing in the Modified Plan shall prejudice or affect the rights of any Person under the Second Supplemental Adequate Protection Consent Order or the Plan Support Consent Order, except as expressly provided for in the Modified Plan, unless and until the Effective Date of the Modified Plan occurs." 13. Paragraph 7 of the Plan Confirmation Order, entitled Treatment of GE Capital, shall be superseded with respect to the Modified Plan and replaced as follows: "Simultaneous with the closing of the Post-Effective Date Financing Facility, (i) all of the GE Obligations (other than (a) the Deferred GE Obligations and (b) the Post-Effective Date GE Obligations) shall be fully and finally satisfied, in Cash, in accordance with Section 3.5 of the Modified Plan, (ii) Reorganized Rose's shall have made adequate provision with respect to the Deferred GE Obligations by the execution and delivery of the Deferred GE Obligations Agreements and such performance as may be required thereunder prior to or upon 9 the execution and delivery thereof, (iii) Reorganized Rose's shall have assumed each and every of the Post-Effective Date GE Obligations by the execution and delivery of the Post-Effective Date GE Assumption Agreement and such performance as may be required thereunder prior to or upon the execution and delivery thereof, and (iv) GE Capital shall enter into and deliver the GE Master Release Agreement. Simultaneously upon such time as (i) all GE Obligations (other than (a) the Deferred GE Obligations and (b) the Post-Effective Date GE Obligations) are fully satisfied, in Cash (the amount of which shall be fixed and provided to Reorganized Rose's and the Facility Agents prior to the initial funding under the Post-Effective Date Financing Facility), (ii) all Deferred GE Obligations are provided for by Reorganized Rose's by the execution and delivery of the Deferred GE Obligations Agreements and such performance as may be required thereunder prior to or upon the execution and delivery thereof, and (iii) all Post-Effective Date GE Obligations are assumed by Reorganized Rose's by the execution and delivery of the Post- Effective Date GE Assumption Agreement and such performance as may be required thereunder prior to or upon the execution and delivery thereof, all liens, claims, interests, rights, remedies and protections granted to GE Capital pursuant to the DIP Facility shall be released and terminated. Notwithstanding anything to the contrary set forth in or implied by any provisions of the Modified Plan, on and after the Effective Date Reorganized Rose's shall be deemed to have assumed, without any action or the execution of any document, any and all Post- Effective Date GE Obligations." 14. Paragraph 8 of the Plan Confirmation Order, entitled Post- Effective Date Financing Facility, is incorporated herein fully by reference, and made applicable to the Modified Plan. 15. Paragraph 9 of the Plan Confirmation Order, entitled Cancellation of Common Stock, Pre-Petition Warrants and Stock Options and Pre-Petition Secured Notes, is incorporated herein fully by reference, and made applicable to the Modified Plan. 16. Paragraph 10 of the Plan Confirmation Order, entitled Distributions, shall be superseded with respect to the Modified Plan and replaced as follows: 10 "The Cash payments and other distributions required under the Modified Plan shall be made in accordance with Article VI of the Modified Plan." 17. Paragraph 11 of the Plan Confirmation Order, entitled Exemption from Securities Laws, is incorporated herein by reference, and made applicable to the Modified Plan, except that the reference to the New Rose's Secured Notes shall be deleted for purposes of Confirmation of the Modified Plan. 18. Paragraph 13 of the Plan Confirmation Order, entitled Perfection of Post-Effective Date Collateral, shall be of no further force and effect with respect to the Modified Plan. 19. Paragraph 14 of the Plan Confirmation Order, entitled Executory Contracts and Unexpired Leases, is incorporated herein fully by reference, and made applicable to the Modified Plan. 20. Paragraph 15 of the Plan Confirmation Order, entitled Consummation of the Amended Plan, is incorporated herein fully by reference, and made applicable to the Modified Plan. 21. Paragraph 16 of the Plan Confirmation Order, entitled Post- Effective Date Effectuation of the Plan's Terms, is incorporated herein fully by reference, and made applicable to the Modified Plan. 22. Paragraph 17(a) of the Plan Confirmation Order, entitled NEXTRECORD scharge, is incorporatedHARein by reference, and made 11 applicable to the Modified Plan, except that the following phrase shall be deleted for purposes of Confirmation of the Modified Plan: "and except in the event the Alternative Treatment Provisions are effective pursuant to Section 8.1 of the Plan,". 23. Paragraph 17(b) of the Plan Confirmation Order, entitled Discharge, is incorporated herein fully by reference, and made applicable to the Modified Plan. 24. Paragraph 18(a) of the Plan Confirmation Order, entitled Releases of Released Parties, is incorporated herein fully by reference, and made applicable to the Modified Plan. 25. Paragraph 18(b) of the Plan Confirmation Order, entitled Releases by the Debtor and Reorganized Rose's, is incorporated herein by reference, and made applicable to the Modified Plan, except that the following phrase shall be deleted for purposes of Confirmation of the Modified Plan: "Except in the event that the Alternative Treatment Provisions are effective pursuant to Section 8.1 of the Plan, as of the Effective Date, and". 26. Paragraph 18(c) of the Plan Confirmation Order, entitled Releases by Recipients of New Rose's Common Stock, New Rose's Secured Notes, New Rose's Warrants and Cash, or Available Cash (as applicable), and by All Other Persons, is incorporated herein by reference, and made applicable to the Modified Plan, except that references to the New Rose's Secured Notes shall be deleted for 12 purposes of Confirmation of the Modified Plan and the last sentence of the provision shall be superseded with respect to the Modified Plan and replaced as follows: "Nothing in the Modified Plan or this Order shall be construed as a release by GE Capital or otherwise of any of the GE Obligations, except by operation of Section 3.5 of the Modified Plan and actions taken by GE Capital in connection therewith." 27. Paragraph 19(a) of the Plan Confirmation Order, entitled Injunction Related to Claims Released by the Debtor and Reorganized Rose's (if applicable), Recipients of Cash, New Rose's Common Stock, New Rose's Secured Notes and New Rose's Warrants, or Available Cash (if applicable) and All Other Persons, is incorporated herein by reference, and made applicable to the Modified Plan, except that references to the New Rose's Secured Notes, New Rose's Secured Notes Documents and the Supplemental Adequate Protection Orders shall be deleted for purposes of Confirmation of the Modified Plan. 28. Paragraph 19(b) of the Plan Confirmation Order, entitled Injunction Relating to the Plan, is incorporated herein fully by reference, and made applicable to the Modified Plan. 29. Paragraph 19(c) of the Plan Confirmation Order, entitled Consent by Holders of Claims and Interests to Entry of Injunctive Relief, is incorporated herein fully by reference, and made applicable to the Modified Plan. 30. Paragraph 19(d) of the Plan Confirmation Order, entitled Injunction Against Subsequent Bankruptcy Proceedings, shall be of no further force and effect with respect to the Modified Plan. 13 31. Paragraph 20 of the Plan Confirmation Order, entitled Jurisdiction from Confirmation through the Effective Date, shall be deleted in its entirety and replaced as follows: "From the Plan Confirmation Date through the Effective Date, the Bankruptcy Court shall retain full jurisdiction over the Chapter 11 Case notwithstanding that Confirmation of the Plan has occurred by entry of the Plan Confirmation Order." 32. Paragraph 21 of the Plan Confirmation Order, entitled Jurisdiction from and after the Effective Date, is incorporated herein by reference, and made applicable to the Modified Plan, except that Provision (m) shall be of no further force and effect with respect to the Modified Plan. 33. Paragraph 22 of the Plan Confirmation Order, entitled Claims Involving Debtor and GOB2 Landlords, is incorporated herein fully by reference, and made applicable to the Modified Plan. 34. Paragraph 23 of the Plan Confirmation Order, entitled Modification or Amendment, shall be superseded with respect to the Modified Plan and replaced as follows: "The Modified Plan may be modified or amended before or after entry of this Order as provided in Section 1127 of the Bankruptcy Code and in Section 12.7 of the Modified Plan if, in the opinion of the Bankruptcy Court, the modification does not materially and adversely affect the interests of holders of Claims and Interests; provided, however, that any such altered or amended plan shall not be binding on the Facility Agents or, prior to the Effective Date, on GE Capital 14 (and after the Effective Date, unless it affects GE Capital) without their respective consents. The Modified Plan may be altered or amended before or after the entry of this Order in a manner which, in the opinion of the Bankruptcy Court, materially and adversely affects holders of Claims and Interests only on consent of all Plan Proponents, the Facility Agents and GE Capital and after a further hearing and acceptance of the Modified Plan as so altered or modified as provided in Section 1126 of the Bankruptcy Code."(2) 35. Paragraph 24 of the Plan Confirmation Order, entitled Payment of Professional Fees and Expenses, is incorporated herein by reference, and made applicable to the Modified Plan, except that the phrase "Plan Confirmation Date" shall be substituted for the phrase "Confirmation Date". 36. Paragraph 26 of the Plan Confirmation Order, entitled Failure to Claim Undeliverable Distributions, is incorporated herein by reference, and made applicable to the Modified Plan, except that the phrase "the Debtor, as applicable, or" shall be deleted for purposes of Confirmation of the Modified Plan. 37. Paragraph 27 of the Plan Confirmation Order, entitled Taxes, is incorporated herein fully by reference, and made applicable to the Modified Plan. 38. Paragraph 28 of the Plan Confirmation Order, entitled Treatment of Taxes, is incorporated herein by reference, and made applicable to the Modified Plan, except that the phrase "Confirmation Date" shall be substituted with the phrase "Plan Confirmation Date" throughout the Paragraph. (2) To the extent that this ordered provision conflicts with the Modified Plan, this provision shall govern. 15 39. Paragraph 29 of the Plan Confirmation Order, entitled Full and Final Satisfaction, is incorporated herein fully by reference, and made applicable to the Modified Plan. 40. Paragraph 30 of the Plan Confirmation Order, entitled Conflicts, shall be superseded with respect to the Modified Plan and replaced as follows: "Unless otherwise agreed in writing by each of the Plan Proponents, the Facility Agents and GE Capital, in the event of any conflict between the provisions of any of the Second Supplemental Adequate Protection Consent Order, the Modified Plan, this Order, the Plan Confirmation Order or any other order which may be entered in the Chapter 11 Case after entry of the Second Supplemental Adequate Protection Consent Order or any succeeding case or proceeding, the provisions of the Second Supplemental Adequate Protection Consent Order shall govern with regard to the matters addressed therein, provided, however, that upon full satisfaction of the Pre-Petition Lenders' Allowed Secured Claims pursuant to Section 4.4 of the Modified Plan and the GE Obligations pursuant to Section 3.5 of the Modified Plan, the Modified Plan shall govern for all purposes." 41. Paragraph 31 of the Plan Confirmation Order, entitled Ratification of Actions, is incorporated herein by reference, and made applicable to the Modified Plan, except that the phrase "Confirmation Date" shall be substituted with the phrase "Date of this Order". 42. Paragraph 32 of the Plan Confirmation Order, entitled Notice, is incorporated herein fully by reference, and made applicable to the Modified Plan. 43. All loans, advances, debts, guarantees, liabilities and obligations for monetary amounts (whether or not such amounts are liquidated or determinable) owing by Reorganized Rose's to the Post-Effective Date Lenders, and all covenants and duties regarding such amounts, of any kind or nature, present or 16 future, whether or not evidenced by any note, agreement or other instrument, arising under the Post-Effective Date Financing Facility, including, without limitation, all interest, fees, charges, expenses, attorneys' fees and any other sum chargeable to Reorganized Rose's under any of the documents and agreements memorializing the Post-Effective Date Financing Facility, shall be secured by valid and enforceable liens on, and security interests in, the Post-Effective Date Collateral. In connection with the closing of the Post-Effective Date Financing Facility, Reorganized Rose's shall grant, and shall be hereby deemed to grant, to the Post-Effective Date Lenders liens and security interests in all of the Post-Effective Date Collateral for the purpose of securing all obligations and liabilities of Reorganized Rose's under the Post-Effective Date Financing Facility, which security interests and liens shall constitute valid and perfected first-priority security interests in and liens upon all Post-Effective Date Collateral, superior to and with priority over all other security interests and liens whether consensual or non-consensual, statutory or otherwise, and whether existing now or in the future.(3) 44. The terms of the Post-Effective Date Financing Facility have been approved by order of the Bankruptcy Court entered on April 17, 1995 (the "Exit Financing Order"). Simultaneously upon the satisfaction in full, in Cash, of the GE Obligations (other than (a) the Deferred GE Obligations and (b) the Post-Effective Date GE Obligations) and the execution and delivery of (i) the Deferred GE Obligations Agreements and (ii) the Post-Effective Date GE Assumption Agreement, and in each case, such performance as may be required thereunder prior to or upon the execution and delivery thereof, the liens and security interests granted (3) To the extent that this ordered provision conflicts with the Modified Plan, this provision shall govern. 17 in favor of the Post-Effective Date Lenders shall be effective and shall be deemed created and fully perfected immediately upon the Effective Date and without the necessity of the execution by the Debtor or Reorganized Rose's or filing by the Post-Effective Date Lenders of financing statements, mortgages, security agreements or any other documents. Neither the Post-Effective Date Lenders (nor the Facility Agents or the Administrative Agent on their behalf) shall be required to file financing statements, mortgages, deeds of trust, notices of lien, certificates of title or any other instruments (collectively, "Instruments") in any jurisdiction or take any other action in order to validate or perfect the liens and security interests granted to the Post-Effective Date Lenders. The entry of this Order and the Plan Confirmation Order and the occurrence of the Effective Date shall constitute immediate and full perfection of the liens and security interests granted to the Post-Effective Date Lenders, notwithstanding any failure of the Post-Effective Date Lenders (or the Facility Agents or the Administrative Agent on their behalf) to file or otherwise perfect said security interests through such Instruments or otherwise in accordance with any state or other applicable law. Notwithstanding the foregoing, the Post-Effective Date Lenders or any of their agents may, at their sole discretion, choose to have the Facility Agents and/or the Administrative Agent, file any or all of such Instruments or otherwise confirm perfection of such liens and security interests and all such Instruments shall be deemed to have been filed or recorded at the time and on the date of the Effective Date. In lieu of filing some or all of such Instruments, the Post-Effective Date Lenders or any of their agents may, at their sole discretion, choose to have the Facility Agents and/or the Administrative Agent, file certified copies of this Order and the Plan Confirmation Order or the Exit Financing Order in any place at which any of such Instruments 18 would or could otherwise be filed, together with such description of collateral located within the geographic area covered by such place of filing as the Post-Effective Date Lenders or their agents may determine, and such filing shall have the same effect as if all such Instruments had been filed or recorded at the time and on the date the Effective Date. Should the Post-Effective Date Lenders so choose to have the Facility Agents and/or the Administrative Agent, as permitted under the Post-Effective Date Financing Facility, attempt to file such Instruments or certified copies of this Order and the Plan Confirmation Order or the Exit Financing Order, or otherwise attempt to confirm perfection of any or all such liens and security interests, no defect or failure in connection with such attempt shall in any way limit, waive or alter the fact that such liens and security interests are effective and fully perfected immediately upon and forever after the Effective Date. In the event that any party elects to file Instruments or otherwise confirm perfection of the security interests granted as permitted under the Post-Effective Date Financing Facility, said filing or other confirmation of the security interests granted as permitted under the Post-Effective Date Financing Facility shall in no manner whatsoever vitiate, reduce or abrogate in any manner the first priority security interests in respect of the collateral granted to the Post-Effective Date Lenders in accordance with the provisions of the Modified Plan and the Post-Effective Date Financing Facility, whether or not the Post-Effective Date Lenders or their agents ever choose to file Instruments or otherwise confirm the respective liens and security interests in the collateral granted to the Post-Effective Date Lenders or their agents as authorized (but not required) by this paragraph and irrespective of the sequence of any such filings as between the Post-Effective Date Lenders (or their agents and representatives) and such other party. None of the 19 provisions set forth in or implied by the Modified Plan, including, without limitation, Sections 3.5, 4.4 and 8.1 of the Modified Plan, shall be deemed to modify any of the provisions of the Post-Effective Date Financing Facility, including, without limitation, any closing conditions. 45. Reorganized Rose's, by its authorized officer, shall file with this Court a certification stating that (i) the Closing Event (as defined in the Exit Financing Order) and (ii) the Effective Date has occurred, and a notice regarding the occurrence of the Effective Date shall be served on the official service list within ten (10) days after entry of this Order. 46. Reorganized Rose's shall file postconfirmation reports with the Court pursuant to 11 U.S.C. section 1106(a)(7) as that provision applies to debtors in possession by 11 U.S.C. section 1107(a). An initial postconfirmation report reflecting the action taken by Reorganized Rose's to consummate the Modified Plan and Reorganized Rose's estimated date of substantial consummation shall be filed within sixty (60) days of this Order. Until the Modified Plan has been substantially consummated, Reorganized Rose's shall file quarterly reports beginning ninety (90) days after the filing of the initial report. Quarterly reports shall reflect any progress made in consummating the Modified Plan during the period covered by the report. The postconfirmation reports shall be filed in the format prescribed by the Bankruptcy Administrator. 47. Within thirty (30) days of substantial consummation of the Modified Plan, as defined by 11 U.S.C. Section 1101(2), Reorganized Rose's shall file a final report, in the format prescribed by the Bankruptcy Administrator, 20 reflecting the payments for all costs of administration and each class of creditors, and a motion for the entry of a Final Decree pursuant to Rule 3022 of the Federal Rules of Bankruptcy Procedure. 48. Reorganized Rose's shall pay to the Clerk, United States Bankruptcy Court, any Court costs currently due from Reorganized Rose's. 49. Reorganized Rose's shall serve a copy of this Order on the official service list within ten (10) days of the entry of this Order and promptly file a Certificate of Service with the Clerk. Dated: Raleigh, North Carolina April 24, 1995 UNITED STATES BANKRUPTCY JUDGE 21 EX-3 4 EXHIBIT (3) 08/04/94 ROSE'S STORES, INC. SHORT-TERM INCENTIVE COMPENSATION PLAN THIS SHORT-TERM INCENTIVE COMPENSATION PLAN (the "Plan) is hereby established by Rose's Stores, Inc. (the "Company") as authorized by the Compensation Committee of the Board of Directors of the Company (the "Committee") to maximize the performance and commitment of certain officers of the Company who are essential for the future success of the Company by providing such officers with incentives to achieve certain financial goals for the Company. 1. EFFECTIVE DATE This Plan shall be effective as of January 30, 1994, subject to the approval by the court with jurisdiction over the Company's proceeding under chapter 11 (the "Proceeding") of Title 11 of the United States Code. 2. ELIGIBLE ASSOCIATES The following officers of the Company shall be eligible to receive bonuses under the terms of this Plan: executive vice presidents, senior vice presidents, vice presidents and the treasurer (the "Participants"). 3. BONUS Each Participant shall be entitled to the payment of bonuses under this Plan in accordance with section 5 herein based on the Company's cumulative Consolidated EBITDA (as defined in the Debtor-in-Possession Loan Agreement entered into between the Company and RSI Trading Co., as borrowers, and General Electric Capital Corporation, as lender (the "DIP Financing Agreement")) for the period beginning January 30, 1994 and ending July 31, 1994, and for the period beginning August 1, 1994 and ending January 29, 1995 (each a "Period"), and each six month period thereafter as shall be determined by the Committee. 4. MAXIMUM INCENTIVE AWARD The maximum bonus that may become payable to a Participant under this Plan for a Period (the "Maximum Incentive Award") shall the following: (i) for a Participant who is an executive vice president or a senior vice president of the Company, seventeen and one-half percent (17-1/2%) of the Participant's annual base salary for the Company's fiscal year commencing January 30, 1994, as determined by the Company in its discretion; and (ii) for a Participant who is a vice president or the treasurer of the Company, fifteen percent (15%) of the Participant's annual base salary for the Company's fiscal year commencing January 30, 1994, as determined by the Company in its discretion. 5. ENTITLEMENT TO BONUS a. Achievement of Target Consolidated EBITDA. If the Company's cumulative Consolidated EBITDA for a Period equals the target cumulative Consolidated EBITDA set out in Section 7.19(b) of the DIP Financing Agreement ("Target Consolidated EBITDA") for such Period, as shall be confirmed by the Committee, each Participant shall be entitled to a bonus equal to fifty percent (50%) of the Participant's Maximum Incentive Award. b. Achievement of Cumulative Consolidated EBITDA Equal to 120% of Target Consolidated EBITDA. If the Company's cumulative Consolidated EBITDA for a Period equals one hundred and twenty percent (120%) of Target Consolidated EBITDA for such Period, as shall be confirmed by the Committee, each Participant shall be entitled to a bonus in an amount equal to one hundred percent (100%) of the Participant's Maximum Incentive Award. c. Achievement of Cumulative Consolidated EBITDA of more than Target Consolidated EBITDA but less than 120% of Target Consolidated EBITDA. If (i) cumulative Consolidated EBITDA for a Period is more than Target Consolidated EBITDA for such Period but less than one hundred and twenty percent (120%) of Target Consolidated EBITDA for such Period, as shall be confirmed by the Committee, each Participant shall be entitled to a bonus in an amount between fifty percent (50%) and one hundred percent (100%) of the Participant's Maximum Incentive Award as determined by linear interpolation. 6. PAYMENT OF BONUSES a. Entitlement to Payment. Notwithstanding any other provision of this Plan: (i) a Participant shall be entitled to payment of a bonus under this Plan for a Period only if such Participant is employed by the Company on the date on which payment of bonuses for such Period are made by the Company hereunder and such Participant has performed at or above the expectations of the Company (as determined by the Company in its discretion on the basis of the Participant's performance evaluations for the relevant Period); and (ii) the amount of any bonus payable under this Plan for a Period to any Participant who becomes a Participant after the beginning of the Period shall be a pro-rata portion of the bonus to which such Participant shall otherwise be entitled hereunder, determined by the Company in its sole discretion on the basis of the portion of the Period during which such individual was a Participant. b. Time and Form of Payment. Payment to a Participant of all bonuses to which the Participant is entitled hereunder shall be made in a lump sum, in cash, within 30 days following the Effective Date (as defined in the Company's draft plan of reorganization dated July 15, 1994) and simultaneously with the distribution to the Company's general unsecured creditors. If the Company does not reach the Effective Date, no bonuses shall be payable under the Plan and no Participant shall have a claim against the Company arising under the Plan. 7. ADMINISTRATION OF PLAN The Company shall be entitled to determine an individual's entitlement to a bonus under the Plan and the amount of any such bonus and shall otherwise administer the Plan in its sole discretion, provided that no payment shall be made other than as specifically provided by the terms hereof other than pursuant to the approval of the Committee. All decisions of the Company regarding the Plan shall be final and binding on all parties. 8. SUCCESSOR TO THE COMPANY This Plan shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company shall require any such successor to expressly assume this Plan. As used in this Plan, "Company" shall mean the Company as defined above and any successor to its business and/or assets as set forth above. 9. NO RIGHTS TO CONTINUED EMPLOYMENT This Plan shall not be construed to give any Participant a right to continued employment with, or the right to be retained in the employ of, the Company. 10. TAXES To the extent required by law, the Company shall withhold any federal, state or local taxes from payments made under this Plan, including social security taxes. 11. AMENDMENT AND TERMINATION Subject to the authorization of the Committee, the Company shall be entitled to amend or terminate this Plan at any time except to the extent a benefit has already accrued hereunder. 12. MISCELLANEOUS If any provision of this Plan shall be determined to be void by any court of competent jurisdiction, then such determination shall not affect any other provision of this Plan, all of which shall remain in full force and effect. This Plan shall be construed and enforced in accordance with the laws of the State of North Carolina. IN WITNESS WHEREOF, the Company hereby adopts this Plan under seal through its duly authorized officers on this ___ day of ________________, 1994. ROSE'S STORES, INC. ATTEST: (Corporate Seal) ______________________ By:___________________________ Authorized Officer EX-4 5 EXHIBIT (4) ROSE'S STORES, INC. NEW EQUITY COMPENSATION PLAN ROSE'S STORES, INC. NEW EQUITY COMPENSATION PLAN TABLE OF CONTENTS ARTICLE I GENERAL PROVISIONS 1 ARTICLE II DEFINITIONS 2 ARTICLE III ADMINISTRATION 6 ARTICLE IV INCENTIVE STOCK OPTIONS 12 ARTICLE V NONQUALIFIED STOCK OPTIONS 14 ARTICLE VI STOCK APPRECIATION RIGHTS 15 ARTICLE VII INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS 17 ARTICLE VIII RESTRICTED STOCK 20 ARTICLE IX DEFERRED STOCK 23 ARTICLE X STOCK AWARDS 26 ARTICLE XI PERFORMANCE SHARES 28 ARTICLE XII OTHER STOCK-BASED AWARDS 30 ARTICLE XIII ACCELERATION EVENTS 32 ARTICLE XIV AMENDMENT AND TERMINATION 36 ARTICLE XV MISCELLANEOUS PROVISIONS 38 i ROSE'S STORES, INC. NEW EQUITY COMPENSATION PLAN ARTICLE I - GENERAL PROVISIONS 1.1 The Plan is designed for the benefit of the executives and key employees of the Corporation; to attract and retain for the Corporation personnel of exceptional ability; to motivate such personnel through added incentives to make a maximum contribution to greater profitability; to develop and maintain a highly competent management team; and to be competitive with other companies with respect to executive compensation. 1.2 Awards under the Plan may be made to Participants in the form of (i) Incentive Stock Options; (ii) Nonqualified Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted Stock; (v) Deferred Stock; (vi) Stock Awards; (vii) Performance Shares; and (viii) Other Stock-Based Awards and other forms of equity-based compensation as may be provided and are permissible under this Plan and the law. 1.3 The Plan shall be effective as of the Effective Date of the First Amended Joint Plan of Reorganization of Rose's Stores, Inc. dated October 4, 1994, as may be amended or replaced (the "Effective Date"). The Effective Date shall constitute the date on which the Plan was adopted for purposes of the Code. 1.4 Any Awards granted in the form of Incentive Stock Options shall be conditioned on, and subject to, approval of the Plan by the shareholders of the Corporation within twelve (12) months following the date on which the Plan was adopted by the Corporation. If shareholder approval shall not be obtained within such twelve (12) month period, any Awards granted in the form of Incentive Stock Options shall be deemed to constitute Nonqualified Stock Options. 1 ARTICLE II - DEFINITIONS Except where the context otherwise indicates, the following definitions shall apply: 2.1 "Acceleration Event" means the occurrence of an event defined in Article XIII of the Plan. 2.2 "Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter amended. All citations to sections of the Act or rules thereunder are to such sections or rules as they may from time to time be amended or renumbered. 2.3 "Agreement" means the written agreement evidencing each Award granted to a Participant under the Plan. 2.4 "Award" means an award granted to a Participant in accordance with the provisions of the Plan, including, but not limited to, a Stock Option, Stock Right, Restricted or Deferred Stock, Stock Awards, Performance Shares, Other Stock-Based Award, or any combination of the foregoing. 2.5 "Board" means the Board of Directors of the Corporation. 2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered. 2.7 "Committee" means the Compensation Committee or such other committee consisting of three (3) or more members as may be appointed by the Board to administer this Plan pursuant to Article III. To the extent required by Rule 16b-3 under the Act, the Committee shall consist of individuals who are members of the Board and Disinterested Persons. Committee members may also be appointed for such limited purposes as may be provided by the Board. 2.8 "Corporation" means Rose's Stores, Inc., a Delaware corporation, and its successors and assigns. 2.9 "Deferred Stock" means the stock awarded under Article IX of the Plan. 2.10 "Disability" means a disability as determined under procedures established by the Committee or in any Award. 2 2.11 "Discount Stock Options" means Nonqualified Stock Options which provide for an exercise price of less than the Fair Market Value of the Stock at the date of the Award. 2.12 "Disinterested Person" shall have the meaning set forth in Rule 16b- 3 under the Act. 2.13 "Early Retirement" means retirement from active employment with the Corporation, with the express consent of the Committee, pursuant to the early retirement provisions established by the Committee or in any Award. 2.14 "Eligible Participant" means any executive or key employee of the Corporation, as shall be determined by the Committee, as well as any other person, other than a person designated as a Disinterested Person, whose participation the Committee determines is in the best interest of the Corporation, subject to limitations as may be provided by the Code, the Act or the Committee. 2.15 "Fair Market Value" means, with respect to any given day, the closing price of the Stock reported on the NASDAQ National Market System for such day, or if the Stock was not traded on the NASDAQ National Market System on such day, then on the next day on which the Stock was traded, all as reported by such source as the Committee may select. The Committee may establish an alternative method of determining Fair Market Value. 2.16 "Incentive Stock Option" means a Stock Option granted under Article IV of the Plan, and as defined in Section 422 of the Code. 2.17 "Limited Stock Appreciation Rights" means a Stock Right which is exercisable only in the event of a Change in Control and/or a Potential Change in Control, as described in Section 6.9 of this Plan, which provides for an amount payable solely in cash, equal to the excess of the Stock Appreciation Right Fair Market Value of a share of Stock on the day the Stock Right is surrendered over the price at which a Participant could exercise a related Stock Option to purchase the share of Stock. 2.18 "Nonqualified Stock Option" means a Stock Option granted under Article V of the Plan. 2.19 "Normal Retirement" means retirement from active employment with the Corporation on or after age 65, or pursuant to such other requirements as may be established by the Committee or in any Award. 3 2.20 "Option Grant Date" means, as to any Stock Option, the latest of: (a) the date on which the Committee grants the Stock Option by entering into an Award Agreement with the Participant; (b) the date the Participant receiving the Stock Option becomes an employee of the Corporation, to the extent employment status is a condition of the grant or a requirement of the Code or the Act; or (c) such other date (later than the dates described in (a) and (b) above) as the Committee may designate. 2.21 "Participant" means an Eligible Participant to whom an Award has been granted and who has entered into an Agreement evidencing the Award. 2.22 "Performance Share" means an Award under Article XI of the Plan of a unit valued by reference to a designated number of shares of Stock, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Stock, or any combination thereof, upon achievement of such Performance Objectives during the Performance Period as the Committee shall establish at the time of such Award or thereafter. 2.23 "Plan" means the Rose's Stores, Inc. New Equity Compensation Plan, as amended from time to time. 2.24 "Restricted Stock" means an Award of Stock under Article VIII of the Plan, which Stock is issued with the restriction that the holder may not sell, transfer, pledge, or assign such Stock and with such other restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any restriction on the right to vote such Stock, and the right to receive any cash dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate. 2.25 "Restriction Period" means the period commencing on the date an Award of Restricted Stock is granted and ending on such date as the Committee shall determine. 2.26 "Retirement" means Early Retirement or Normal Retirement. 2.27 "Stock" means no par shares of common stock of the Corporation, as may be adjusted pursuant to the provisions of Section 3.11. 4 2.28 "Stock Appreciation Right" means a Stock Right, as described in Article VI of this Plan, which provides for an amount payable in Stock and/or cash, as determined by the Committee, equal to the excess of the Fair Market Value of a share of Stock on the day the Stock Right is exercised over the price at which the Participant could exercise a related Stock Option to purchase the share of Stock. 2.29 "Stock Appreciation Right Fair Market Value" means a value established by the Committee for the exercise of a Stock Appreciation Right or a Limited Stock Appreciation Right. If such exercise occurs during any quarterly "window period," as specified by Rule 16b-3 under the Act, the Committee may establish a common value for exercises during such window period. 2.30 "Stock Award" means an Award of Stock granted in payment of compensation, as provided in Article X of the Plan. 2.31 "Stock Option" means an Award under Article IV or V of the Plan of an option to purchase Stock. A Stock Option may be either an Incentive Stock Option or a Nonqualified Stock Option. 2.32 "Stock Right" means an Award under Article VI of the Plan. A Stock Right may be either a Stock Appreciation Right or a Limited Stock Appreciation Right. 2.33 "Termination of Employment" means the discontinuance of employment of a Participant with the Corporation for any reason. The determination of whether a Participant has discontinued employment shall be made by the Committee in its discretion. In determining whether a Termination of Employment has occurred, the Committee may provide that service as a consultant or service with a business enterprise in which the Corporation has a significant ownership interest shall be treated as employment with the Corporation. The Committee shall have the discretion, exercisable either at the time the Award is granted or at the time the Participant terminates employment, to establish as a provision applicable to the exercise of one or more Awards that during the limited period of exercisability following Termination of Employment, the Award may be exercised not only with respect to the number of shares of Stock for which it is exercisable at the time of the Termination of Employment but also with respect to one or more subsequent installments for which the Award would have become exercisable had the Termination of Employment not occurred. 5 ARTICLE III - ADMINISTRATION 3.1 This Plan shall be administered by the Committee. A Committee member who is not a Disinterested Person, with respect to action to be taken by the Committee, shall not be able to participate in the decision to the extent prescribed by Rule 16b-3 under the Act. The Committee, in its discretion, may delegate to one or more of its members such of its powers as it deems appropriate. The Committee also may limit the power of any member to the extent necessary to comply with Rule 16b-3 under the Act or any other law. Members of the Committee shall be appointed originally, and as vacancies occur, by the Board, to serve at the pleasure of the Board. The Board may serve as the Committee, if by the terms of the Plan all Board members are otherwise eligible to serve on the Committee. 3.2 The Committee shall meet at such times and places as it determines. A majority of its members shall constitute a quorum, and the decision of a majority of those present at any meeting at which a quorum is present shall constitute the decision of the Committee. A memorandum signed by all of its members shall constitute the decision of the Committee without necessity, in such event, for holding an actual meeting. 3.3 The Committee shall have the exclusive right to interpret, construe and administer the Plan, to select the persons who are eligible to receive an Award, and to act in all matters pertaining to the granting of an Award and the contents of the Agreement evidencing the Award, including, without limitation, the determination of the number of Stock Options, Stock Rights, shares of Stock or Performance Shares subject to an Award and the form, terms, conditions and duration of each Award, and any amendment thereof consistent with the provisions of the Plan. Notwithstanding the foregoing, the Committee shall issue awards under the Plan in accordance with the terms of the Consummation Bonus Plan adopted by the Corporation and approved by the United States Bankruptcy Court for the Eastern District of North Carolina. All acts, determinations and decisions of the Committee made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all Participants, Eligible Participants and their beneficiaries. 6 3.4 The Committee may adopt such rules, regulations and procedures of general application for the administration of this Plan, as it deems appropriate. 3.5 Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and notwithstanding any other provisions of the Plan, the Committee is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to an Award in the event of an Acceleration Event as defined in Article XIII. Such action may include, but shall not be limited to, establishing, amending or waiving the forms, terms, conditions and duration of an Award and the Award Agreement, so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for calculating payments, alternate forms and amounts of payment, an accelerated release of restrictions or other modifications. The Committee may take such actions pursuant to this Section 3.5 by adopting rules and regulations of general applicability to all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in an Award and the Award Agreement, or by taking action with respect to individual Participants. 3.6 The aggregate number of shares of Stock which are subject to an Award under the Plan shall be seven hundred thousand (700,000) shares. Such shares of Stock shall be made available from authorized and unissued or treasury shares of the Corporation. (a) If, for any reason, any shares of Stock or Performance Shares awarded or subject to purchase under the Plan are not delivered or purchased, or are reacquired by the Corporation, for reasons including, but not limited to, a forfeiture of Restricted Stock or termination, expiration or cancellation of a Stock Option, Stock Right or Performance Share, or any other termination of an Award without payment being made in the form of Stock (whether or not Restricted Stock), such shares of Stock or Performance Shares shall not be charged against the aggregate number of shares of Stock available for Award under the Plan, and shall again be available for Award under the Plan. (b) For all purposes under the Plan, each Performance Share awarded shall be counted as one share of Stock subject to an Award. (c) To the extent a Stock Right granted in connection with a Stock Option is exercised 7 without payment being made in the form of Stock (whether or not Restricted Stock), the shares of Stock which otherwise would have been issued upon the exercise of such related Stock Option shall not be charged against the aggregate number of shares of Stock subject to an Award under the Plan, and shall again be available for Award under the Plan. 3.7 Each Award granted under the Plan shall be evidenced by a written Award Agreement. Each Award Agreement shall be subject to and incorporate (by reference or otherwise) the applicable terms and conditions of the Plan, and any other terms and conditions (not inconsistent with the Plan) required by the Committee. 3.8 The Corporation shall not be required to issue or deliver any certificates for shares of Stock prior to: (a) the listing of such shares on any stock exchange on which the Stock may then be listed; and (b) the completion of any registration or qualification of such shares of Stock under any federal or state law, or any ruling or regulation of any government body which the Corporation shall, in its discretion, determine to be necessary or advisable. 3.9 All certificates for shares of Stock delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed and any applicable federal or state laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. In making such determination, the Committee may rely upon an opinion of counsel for the Corporation. 3.10 Subject to the restrictions on Restricted Stock, as provided in Article VIII of the Plan and in the Restricted Stock Award Agreement, each Participant who receives an Award of Restricted Stock shall have all of the rights of a stockholder with respect to such shares of Stock, including the right to vote the shares to the extent, if any, such shares possess voting rights and receive dividends and other distributions. Except as provided otherwise in the Plan or in an Award Agreement, no Participant awarded a Stock Option, Stock Right, Deferred Stock, Stock Award or Performance Share shall have any right as a stockholder with respect to any shares of Stock 8 covered by his or her Stock Option, Stock Right, Deferred Stock, Stock Award or Performance Share prior to the date of issuance to him or her of a certificate or certificates for such shares of Stock. 3.11 If any reorganization, recapitalization, reclassification, stock split-up, stock dividend, or consolidation of shares of Stock, merger or consolidation of the Corporation or sale or other disposition by the Corporation of all or a portion of its assets, any other change in the Corporation's corporate structure, or any distribution to stockholders other than a cash dividend results in the outstanding shares of Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of Stock or other securities of the Corporation, or for shares of Stock or other securities of any other corporation; or new, different or additional shares or other securities of the Corporation or of any other corporation being received by the holders of outstanding shares of Stock, then equitable adjustments shall be made by the Committee in: (a) the limitation of the aggregate number of shares of Stock that may be awarded as set forth in Section 3.6 of the Plan; (b) the number and class of Stock that may be subject to an Award, and which have not been issued or transferred under an outstanding Award; (c) the purchase price to be paid per share of Stock under outstanding Stock Options and the number of shares of Stock to be transferred in settlement of outstanding Stock Rights; and (d) the terms, conditions or restrictions of any Award and Award Agreement, including the price payable for the acquisition of Stock; provided, however, that all adjustments made as the result of the foregoing in respect of each Incentive Stock Option shall be made so that such Stock Option shall continue to be an Incentive Stock Option, as defined in Section 422 of the Code. 3.12 In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee shall be indemnified by the Corporation against reasonable expenses, including attorney's fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any 9 action taken or failure to act under or in connection with the Plan or any Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment or settlement in any such action, suit or proceeding, except as to matters as to which the Committee member has been negligent or engaged in misconduct in the performance of his duties; provided, that within sixty (60) days after institution of any such action, suit or proceeding, a Committee member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same. 3.13 The Committee may require each person purchasing shares of Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Corporation in writing that he is acquiring the shares of Stock without a view to distribution thereof. The certificates for such shares of Stock may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. 3.14 The Committee shall be authorized to make adjustments in a performance based criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Corporation or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem desirable to carry it into effect. In the event the Corporation shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Plan as it shall deem appropriate. 3.15 The Committee shall have full power and authority to determine whether, to what extent and under what circumstances, any Award shall be canceled or suspended. In particular, but without limitation, all outstanding Awards to any Participant shall be canceled if (a) the Participant, without the consent of the Committee, while employed by the Corporation or after termination of such employment, becomes associated with, employed by, renders services to, or owns any interest in (other than any insubstantial interest, as determined by the Committee), any business that is in competition with the Corporation or with any business in which the Corporation has a substantial interest as determined by the Committee; or 10 (b) is terminated for cause as determined by the Committee. 11 ARTICLE IV - INCENTIVE STOCK OPTIONS 4.1 Each provision of this Article IV and of each Incentive Stock Option granted hereunder shall be construed in accordance with the provisions of Section 422 of the Code, and any provision hereof that cannot be so construed shall be disregarded. 4.2 Incentive Stock Options shall be granted only to Eligible Participants who are in the active employment of the Corporation, each of whom may be granted one or more such Incentive Stock Options at such time or times determined by the Committee following the Effective Date until the date which is ten years following the Effective Date, subject to the following conditions: (a) The Incentive Stock Option price per share of Stock shall be set in the Award Agreement, but shall not be less than one hundred percent (100%) of the Fair Market Value of the Stock at the time of the Option Grant Date. (b) The Incentive Stock Option and its related Stock Right, if any, may be exercised in full or in part from time to time within ten (10) years from the Option Grant Date, or such shorter period as may be specified by the Committee in the Award; provided, that in any event, the Incentive Stock Option and related Stock Right shall lapse and cease to be exercisable upon a Termination of Employment or within such period following a Termination of Employment as shall have been determined by the Committee and specified in the Incentive Stock Option Award Agreement or its related Stock Right Award Agreement, which period shall in no event exceed three (3) months unless: (i) employment shall have terminated as a result of death or Disability, in which event such period shall not exceed one (1) year after the date of death or Disability; or (ii) death shall have occurred following a Termination of Employment and while the Incentive Stock Option or Stock Right was still exercisable, in which event such period shall not exceed one (1) year after the date of death; provided, further, that such period following a Termination of Employment shall in no event extend 12 the original exercise period of the Incentive Stock Option or any related Stock Right. (c) To the extent the aggregate Fair Market Value, determined as of the Option Grant Date, of the shares of Stock with respect to which Incentive Stock Options (determined without regard to this subsection) are first exercisable during any calendar year by any Eligible Participant exceed one hundred thousand dollars ($100,000), such options shall be treated as Nonqualified Stock Options granted under Article V. (d) Incentive Stock Options shall be granted only to an Eligible Participant who, at the time the Option Grant Date, does not own stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation. (e) The Committee may adopt any other terms and conditions which it determines should be imposed for the Incentive Stock Option to qualify under Section 422 of the Code, as well as any other terms and conditions not inconsistent with this Article IV as determined by the Committee. 4.2 The Committee may at any time offer to buy out for a payment in cash, Stock, Deferred Stock or Restricted Stock an Incentive Stock Option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the Participant at the time that such offer is made. 4.3 If the Incentive Stock Option Award Agreement so provides, the Committee may require that all or part of the shares of Stock to be issued upon the exercise of an Incentive Stock Option shall take the form of Deferred or Restricted Stock, which shall be valued on the date of exercise, as determined by the Committee, on the basis of the Fair Market Value of such Deferred Stock or Restricted Stock determined without regard to the deferral limitations and/or forfeiture restrictions involved. 13 ARTICLE V - NONQUALIFIED STOCK OPTIONS 5.1 One or more Stock Options may be granted as Nonqualified Stock Options to Eligible Participants to purchase shares of Stock at such time or times determined by the Committee, following the Effective Date, subject to the terms and conditions set forth in this Article V. 5.2 The Nonqualified Stock Option price per share of Stock shall be established in the Award Agreement and may be less than one hundred percent (100%) of the Fair Market Value at the time of the grant, or at such later date as the Committee shall determine. 5.3 The Nonqualified Stock Option and its related Stock Right, if any, may be exercised in full or in part from time to time within such period as may be specified by the Committee or in the Award Agreement; provided, that, in any event, the Nonqualified Stock Option and the related Stock Right shall lapse and cease to be exercisable upon a Termination of Employment or within such period following a Termination of Employment as shall have been determined by the Committee and specified in the Nonqualified Stock Option Award Agreement or Stock Right Award Agreement, which period shall in no event exceed three (3) months unless employment shall have terminated: (a) as a result of Retirement or Disability, in which event, such period shall not exceed one year after the date of Retirement or Disability, or within such longer period as the Committee may specify; and (b) as a result of death, or death shall have occurred following a Termination of Employment and while the Nonqualified Stock Option or Stock Right was still exercisable, in which event such period may exceed one year after the date of death, as provided by the Committee or in the Award Agreement. 5.4 The Nonqualified Stock Option Award Agreement may include any other terms and conditions not inconsistent with this Article V or in Article VII, as determined by the Committee. 14 ARTICLE VI - STOCK APPRECIATION RIGHTS 6.1 A Stock Appreciation Right may be granted to an Eligible Participant in connection with an Incentive Stock Option or a Nonqualified Stock Option granted under Article IV or Article V of this Plan, or may be granted independent of any related Stock Option. 6.2 A related Stock Appreciation Right shall entitle a holder of a Stock Option, within the period specified for the exercise of the Stock Option, to surrender the unexercised Stock Option (or a portion thereof) and to receive in exchange therefor a payment in cash or shares of Stock having an aggregate value equal to the amount by which the Fair Market Value of each share of Stock exceeds the Stock Option price per share of Stock, times the number of shares of Stock under the Stock Option, or portion thereof, which is surrendered. 6.3 Each related Stock Appreciation Right granted hereunder shall be subject to the same terms and conditions as the related Stock Option, including limitations on transferability, and shall be exercisable only to the extent such Stock Option is exercisable and shall terminate or lapse and cease to be exercisable when the related Stock Option terminates or lapses. The grant of Stock Appreciation Rights related to Incentive Stock Options must be concurrent with the grant of the Incentive Stock Options. With respect to Nonqualified Stock Options, the grant either may be concurrent with the grant of the Nonqualified Stock Options, or in connection with Nonqualified Stock Options previously granted under Article V, which are unexercised and have not terminated or lapsed. 6.4 The Committee shall have sole discretion to determine in each case whether the payment with respect to the exercise of a Stock Appreciation Right will be in the form of all cash, all Stock, or any combination thereof. If payment is to be made in Stock, the number of shares of Stock shall be determined based on the Fair Market Value of the Stock on the date of exercise. If the Committee elects to make full payment in Stock, no fractional shares of Stock shall be issued and cash payments shall be made in lieu of fractional shares. 6.5 The Committee shall have sole discretion as to the timing of any payment made in cash, Stock, or a combination thereof, upon exercise of Stock Appreciation Rights. Payment may be made in a lump sum, in annual installments 15 or may be otherwise deferred; and the Committee shall have sole discretion to determine whether any deferred payments may bear amounts equivalent to interest or cash dividends. 6.6 Upon exercise of a Stock Appreciation Right, the number of shares of Stock subject to exercise under any related Stock Option shall automatically be reduced by the number of shares of Stock represented by the Stock Option or portion thereof which is surrendered. 6.7 Notwithstanding any other provision of the Plan, the exercise of a Stock Appreciation Right is required to satisfy the applicable requirements under Rule 16b-3 of the Act. 6.8 The Committee, in its sole discretion, may also provide that, in the event of a Change in Control and/or a Potential Change in Control, as defined in Article XIII, the amount to be paid upon the exercise of a Stock Appreciation Right or Limited Stock Appreciation Right shall be based on the Change in Control Price, as defined in Section 13.9, subject to such terms and conditions as the Committee may specify at grant. 6.9 In its sole discretion, the Committee may grant Limited Stock Appreciation Rights under this Article VI. Limited Stock Appreciation Rights become exercisable only in the event of a Change in Control and/or a Potential Change in Control, subject to such terms and conditions as the Committee, in its sole discretion, may specify at grant. Such Limited Stock Appreciation Rights shall be settled solely in cash. A Limited Stock Appreciation Right shall entitle the holder of the related Stock Option to surrender such Stock Option, or any portion thereof, to the extent unexercised in respect of the number of shares of Stock as to which such Limited Stock Appreciation Right is exercised, and to receive a cash payment equal to the difference between (a) the Stock Appreciation Right Fair Market Value (at the date of surrender) of a share of Stock for which the surrendered Stock Option or portion thereof is then exercisable, and (b) the price at which a Participant could exercise a related Stock Option to purchase the share of Stock. Such Stock Option shall, to the extent so surrendered, thereupon cease to be exercisable. A Limited Stock Appreciation Right shall be subject to such further terms and conditions as the Committee shall, in its sole discretion, deem appropriate, including any restrictions necessary to comply with Section 16(b) of the Act. 16 ARTICLE VII - INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS 7.1 Each Stock Option and Stock Right shall be granted subject to such terms and conditions, if any, not inconsistent with this Plan, as shall be determined by the Committee, including any provisions as to continued employment as consideration for the grant or exercise of such Stock Option or Stock Right and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority. 7.2 A Stock Option or Stock Right shall not be transferable by the Participant other than by will or by the laws of descent and distribution, or, to the extent otherwise allowed by Rule 16b-3 under the Act, or other applicable law, pursuant to a qualified domestic relations order as defined by the Code or the Employee Retirement Income Security Act, or the rules thereunder, and shall be exercisable during the lifetime of the Participant only by him or by his guardian or legal representative. 7.3 Shares of Stock purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Committee, subject to limitations set forth in the Stock Option Award Agreement. Without limiting the foregoing, the Committee may establish payment terms for the exercise of Stock Options which permit the Participant to deliver shares of Stock (or other evidence of ownership of Stock satisfactory to the Corporation) with a Fair Market Value equal to the Stock Option price as payment. 7.4 No cash dividends shall be paid on shares of Stock subject to unexercised Stock Options. The Committee may provide, however, that a Participant to whom a Stock Option has been granted which is exercisable in whole or in part at a future time for shares of Stock shall be entitled to receive an amount per share equal in value to the cash dividends, if any, paid per share on issued and outstanding Stock, as of the dividend record dates occurring during the period between the date of the grant and the time each such share of Stock is delivered pursuant to exercise of such Stock Option or the related Stock Right. Such amounts (herein called "dividend equivalents") may, in the discretion of the Committee, be: (a) paid in cash or Stock either from time to time prior to, or at the time of the delivery of, such Stock, or upon expiration of the Stock Option if it shall not have been fully exercised; or 17 (b) converted into contingently credited shares of Stock (with respect to which dividend equivalents may accrue) in such manner, at such value, and deliverable at such time or times, as may be determined by the Committee. Such Stock (whether delivered or contingently credited) shall be charged against the limitations set forth in Section 3.6. 7.5 The Committee, in its sole discretion, may authorize payment of interest equivalents on dividend equivalents which are payable in cash at a future time. 7.6 In the event of death or Disability, the Committee, with the consent of the Participant or his legal representative, may authorize payment, in cash or in Stock, or partly in cash and partly in Stock, as the Committee may direct, of an amount equal to the difference at the time between the Fair Market Value of the Stock subject to a Stock Option and the Option price in consideration of the surrender of the Stock Option. 7.7 If a Participant is required to pay to the Corporation an amount with respect to income and employment tax withholding obligations in connection with exercise of a Nonqualified Stock Option, and/or with respect to certain dispositions of Stock acquired upon the exercise of an Incentive Stock Option, the Committee, in its discretion and subject to such rules as it may adopt, may permit the Participant to satisfy the obligation, in whole or in part, by making an irrevocable election that a portion of the total Fair Market Value of the shares of Stock subject to the Nonqualified Stock Option and/or with respect to certain dispositions of Stock acquired upon the exercise of an Incentive Stock Option, be paid in the form of cash in lieu of the issuance of Stock and that such cash payment be applied to the satisfaction of the withholding obligations. The amount to be withheld shall not exceed the statutory minimum Federal and State income and employment tax liability arising from the Stock Option exercise transaction. Notwithstanding any other provision of the Plan, any election under this Section 7.7 is required to satisfy the applicable requirements under Rule 16b-3 of the Act. 7.8 The Committee may permit the voluntary surrender of all or a portion of any Stock Option granted under the Plan to be conditioned upon the granting to the Participant of a new Stock Option for the same or a different number of shares of Stock as the Stock Option surrendered, or may require such voluntary surrender as a condition precedent to a 18 grant of a new Stock Option to such Participant. Subject to the provisions of the Plan, such new Stock Option shall be exercisable at the same price, during such period and on such other terms and conditions as are specified by the Committee at the time the new Stock Option is granted. Upon surrender, the Stock Options surrendered shall be canceled and the shares of Stock previously subject to them shall be available for the grant of other Stock Options. 19 ARTICLE VIII - RESTRICTED STOCK 8.1 Restricted Stock Awards may be made to certain Participants as an incentive for the performance of future services that will contribute materially to the successful operation of the Corporation. Awards of Restricted Stock may be made either alone, in addition to or in tandem with other Awards granted under the Plan and/or cash payments made outside of the Plan. 8.2 With respect to Awards of Restricted Stock, the Committee shall: (a) determine the purchase price, if any, to be paid for such Restricted Stock, which may be equal to or less than par value and may be zero, subject to such minimum consideration as may be required by applicable law; (b) determine the length of the Restriction Period; (c) determine any restrictions applicable to the Restricted Stock such as service or performance, other than those set forth in this Article VIII; (d) determine if the restrictions shall lapse as to all shares of Restricted Stock at the end of the Restriction Period or as to a portion of the shares of Restricted Stock in installments during the Restriction Period; and (e) determine if dividends and other distributions on the Restricted Stock are to be paid currently to the Participant or withheld by the Corporation for the account of the Participant. 8.3 Awards of Restricted Stock must be accepted within a period of sixty (60) days (or such shorter periods as the Committee may specify at grant) after the Award date, by executing a Restricted Stock Award Agreement and paying whatever price (if any) is required. The prospective recipient of a Restricted Stock Award shall not have any rights with respect to such Award, unless such recipient has executed a Restricted Stock Award Agreement and has delivered a fully executed copy thereof to the Committee, and has otherwise complied with the applicable terms and conditions of such Award. 20 8.4 Except when the Committee determines otherwise, or as otherwise provided in the Restricted Stock Award Agreement, if a Participant terminates employment with the Corporation for any reason before the expiration of the Restriction Period, all shares of Restricted Stock still subject to restriction shall be forfeited by the Participant and shall be reacquired by the Corporation. 8.5 Except as otherwise provided in this Article VIII, no shares of Restricted Stock received by a Participant shall be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of during the Restriction Period. 8.6 To the extent not otherwise provided in a Restricted Stock Award Agreement, in cases of death, Disability or Retirement or in cases of special circumstances, the Committee, if it finds that a waiver would be appropriate, may elect to waive any or all remaining restrictions with respect to such Participant's Restricted Stock. 8.7 In the event of hardship or other special circumstances of a Participant whose employment with the Corporation is involuntarily terminated (other than for cause), the Committee may waive in whole or in part any or all remaining restrictions with respect to any or all of the Participant's Restricted Stock, based on such factors and criteria as the Committee may deem appropriate. 8.8 The certificates representing shares of Restricted Stock may either: (a) be held in custody by the Corporation until the Restriction Period expires or until restrictions thereon otherwise lapse, and the Participant shall deliver to the Corporation a stock power endorsed in blank relating to the Restricted Stock; and/or (b) be issued to the Participant and registered in the name of the Participant, and shall bear an appropriate restrictive legend and shall be subject to appropriate stop-transfer orders. 8.9 Except as provided in this Article VIII, a Participant receiving a Restricted Stock Award shall have, with respect to the shares of Restricted Stock covered by any Award, all of the rights of a shareholder of the Corporation, including the right to vote the shares to the extent, if any, such shares possess voting rights, and the right to receive any dividends; provided, however, the Committee may require that any dividends on such shares of Restricted Stock shall be automatically deferred and reinvested in additional Restricted Stock subject to the 21 same restrictions as the underlying Award, or may require that dividends and other distributions on Restricted Stock shall be withheld by the Corporation for the account of the Participant. The Committee shall determine whether interest shall be paid on amounts withheld, the rate of any such interest, and the other terms applicable to such withheld amounts. 8.10 If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, unrestricted certificates for such shares shall be delivered to the Participant. 8.11 In order to better ensure that Award payments actually reflect the performance of the Corporation and the service of the Participant, the Committee may provide, in its sole discretion, for a tandem performance-based or other Award designed to guarantee a minimum value, payable in cash or Stock to the recipient of a Restricted Stock Award, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee. 22 ARTICLE IX - DEFERRED STOCK 9.1 Shares of Deferred Stock (together with cash dividend equivalents, if so determined by the Committee) may be issued either alone or in addition to other Awards granted under the Plan in the discretion of the Committee. The Committee shall determine the individuals to whom, and the time or times at which, such Awards will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient of a Deferred Stock Award, the time or times within which such Awards may be subject to forfeiture, and all other conditions of the Awards. The Committee may condition Awards of Deferred Stock upon the attainment of specified performance goals or such other factors or criteria as the Committee may determine. 9.2 Deferred Stock Awards shall be subject to the following terms and conditions: (a) Subject to the provisions of this Plan and the applicable Award Agreement, Deferred Stock Awards may not be sold, transferred, pledged, assigned or otherwise encumbered during the period specified by the Committee for purposes of such Award (the "Deferral Period"). At the expiration of the Deferral Period (or the Elective Deferral Period defined in Section 9.3), share certificates shall be delivered to the Participant, or his legal representative, in a number equal to the number of shares of Stock covered by the Deferred Stock Award. Based on service, performance and/or such other factors or criteria as the Committee may determine, the Committee, however, at or after grant, may accelerate the vesting of all or any part of any Deferred Stock Award and/or waive the deferral limitations for all or any part of such Award. (b) Unless otherwise determined by the Committee, amounts equal to any dividends that would have been payable during the Deferral Period with respect to the number of shares of Stock covered by a Deferred Stock Award if such shares of Stock had been outstanding shall be automatically deferred and deemed to be reinvested in additional Deferred Stock, subject to the same deferral limitations as the underlying Award. (c) Except to the extent otherwise provided in this Plan or in the applicable Award Agreement, upon Termination of Employment during the Deferral Period 23 for a given Award, the Deferred Stock covered by such Award shall be forfeited by the Participant; provided, however, the Committee may provide for accelerated vesting in the event of Termination of Employment due to death, Disability or Retirement, or in the event of hardship or other special circumstances as the Committee deems appropriate. (d) The Committee may require that a designated percentage of the total Fair Market Value of the shares of Deferred Stock held by one or more Participants be paid in the form of cash in lieu of the issuance of Stock and that such cash payment be applied to the satisfaction of the federal and state income and employment tax withholding obligations that arise at the time the Deferred Stock becomes free of all restrictions. The designated percentage shall be equal to the income and employment tax withholding rate in effect at the time under federal and applicable state laws. (e) The Committee may provide one or more Participants subject to the mandatory cash payment with an election to receive an additional percentage of the total value of the Deferred Stock in the form of a cash payment in lieu of the issuance of Deferred Stock. The additional percentage shall not exceed the difference between fifty percent (50%) and the designated percentage cash payment. (f) The Committee may impose such further terms and conditions on partial cash payments with respect to Deferred Stock as it deems appropriate, including any restrictions necessary to comply with Section 16(b) of the Act. 9.3 A Participant may elect to further defer receipt of Deferred Stock for a specified period or until a specified event (the "Elective Deferral Period"), subject in each case to the Committee's approval and to such terms as are determined by the Committee. Subject to any exceptions adopted by the Committee, such election must generally be made at least twelve (12) months prior to completion of the Deferral Period for the Deferred Stock Award in question (or for the applicable installment of such an Award). 9.4 Each Award shall be confirmed by, and subject to the terms of, a Deferred Stock Award Agreement. 9.5 In order to better ensure that the Award actually reflects the performance of the Corporation and the service of the 24 Participant, the Committee may provide, in its sole discretion, for a tandem performance-based or other Award designed to guarantee a minimum value, payable in cash or Stock to the recipient of a Deferred Stock Award, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee. 25 ARTICLE X - STOCK AWARDS 10.1 A Stock Award shall be granted only in payment of compensation that has been earned or as compensation to be earned, including, without limitation, compensation awarded concurrently with or prior to the grant of the Stock Award. 10.2 For the purposes of this Plan, in determining the value of a Stock Award, all shares of Stock subject to such Stock Award shall be valued at not less than one hundred percent (100%) of the Fair Market Value of such shares of Stock on the date such Stock Award is granted, regardless of whether or when such shares of Stock are issued or transferred to the Participant and whether or not such shares of Stock are subject to restrictions which affect their value. 10.3 Shares of Stock subject to a Stock Award may be issued or transferred to the Participant at the time the Stock Award is granted, or at any time subsequent thereto, or in installments from time to time, as the Committee shall determine. If any such issuance or transfer shall not be made to the Participant at the time the Stock Award is granted, the Committee may provide for payment to such Participant, either in cash or shares of Stock, from time to time or at the time or times such shares of Stock shall be issued or transferred to such Participant, of amounts not exceeding the dividends which would have been payable to such Participant in respect of such shares of Stock (as adjusted under Section 3.11) if such shares of Stock had been issued or transferred to such Participant at the time such Stock Award was granted. Any issuance payable in shares of Stock under the terms of a Stock Award, at the discretion of the Committee, may be paid in cash on each date on which delivery of shares of Stock would otherwise have been made, in an amount equal to the Fair Market Value on such date of the shares of Stock which would otherwise have been delivered. 10.4 A Stock Award shall be subject to such terms and conditions, including, without limitation, restrictions on the sale or other disposition of the Stock Award or of the shares of Stock issued or transferred pursuant to such Stock Award, as the Committee shall determine; provided, however, that upon the issuance or transfer of shares pursuant to a Stock Award, the Participant, with respect to such shares of Stock, shall be and become a shareholder of the Corporation fully entitled to receive dividends, to vote to the extent, if any, such shares possess voting 26 rights and to exercise all other rights of a shareholder except to the extent otherwise provided in the Stock Award. Each Stock Award shall be evidenced by a written Award Agreement in such form as the Committee shall determine. 27 ARTICLE XI - PERFORMANCE SHARES 11.1 Awards of Performance Shares may be made to certain Participants as an incentive for the performance of future services that will contribute materially to the successful operation of the Corporation. Awards of Performance Shares may be made either alone, in addition to or in tandem with other Awards granted under the Plan and/or cash payments made outside of the Plan. 11.2 With respect to Awards of Performance Shares, which may be issued for no consideration or such minimum consideration as is required by applicable law, the Committee shall: (a) determine and designate from time to time those Participants to whom Awards of Performance Shares are to be made; (b) determine the performance period (the "Performance Period") and/or performance objectives (the "Performance Objectives") applicable to such Awards; (c) determine the form of settlement of a Performance Share; and (d) generally determine the terms and conditions of each such Award. At any date, each Performance Share shall have a value equal to the Fair Market Value, determined as set forth in Section 2.15. 11.3 Performance Periods may overlap, and Participants may participate simultaneously with respect to Performance Shares for which different Performance Periods are prescribed. 11.4 The Committee shall determine the Performance Objectives of Awards of Performance Shares. Performance Objectives may vary from Participant to Participant and between Awards and shall be based upon such performance criteria or combination of factors as the Committee may deem appropriate, including for example, but not limited to, minimum earnings per share or return on equity. If during the course of a Performance Period there shall occur significant events which the Committee expects to have a substantial effect on the applicable Performance Objectives during such period, the Committee may revise such Performance Objectives. 11.5 The Committee shall determine for each Participant the number of Performance Shares which shall be paid to the 28 Participant if the applicable Performance Objectives are exceeded or met in whole or in part. 11.6 If a Participant terminates service with the Corporation during a Performance Period because of death, Disability, Retirement or under other circumstances in which the Committee in its discretion finds that a waiver would be appropriate, that Participant, as determined by the Committee, may be entitled to a payment of Performance Shares at the end of the Performance Period based upon the extent to which the Performance Objectives were satisfied at the end of such period and pro rated for the portion of the Performance Period during which the Participant was employed by the Corporation; provided, however, the Committee may provide for an earlier payment in settlement of such Performance Shares in such amount and under such terms and conditions as the Committee deems appropriate or desirable. If a Participant terminates service with the Corporation during a Performance Period for any other reason, then such Participant shall not be entitled to any payment with respect to that Performance Period unless the Committee shall otherwise determine. 11.7 Each Award of a Performance Share shall be paid in whole shares of Stock, or cash, or a combination of Stock and cash as the Committee shall determine, with payment to be made as soon as practicable after the end of the relevant Performance Period. 11.8 The Committee shall have the authority to approve requests by Participants to defer payment of Performance Shares on terms and conditions approved by the Committee and set forth in a written Award Agreement between the Participant and the Corporation entered into in advance of the time of receipt or constructive receipt of payment by the Participant. 29 ARTICLE XII - OTHER STOCK-BASED AWARDS 12.1 Other awards of Stock and other awards that are valued in whole or in part by reference to, or are otherwise based on, Stock ("Other Stock-Based Awards"), including, without limitation, convertible preferred stock, convertible debentures, exchangeable securities, phantom stock and Stock awards or options valued by reference to book value or performance, may be granted either alone or in addition to or in tandem with Stock Options, Stock Rights, Restricted Stock, Deferred Stock or Stock Awards granted under the Plan and/or cash awards made outside of the Plan. Subject to the provisions of the Plan, the Committee shall have authority to determine the Eligible Participants to whom and the time or times at which such Awards shall be made, the number of shares of Stock subject to such Awards, and all other conditions of the Awards. The Committee also may provide for the grant of shares of Stock upon the completion of a specified Performance Period. The provisions of Other Stock-Based Awards need not be the same with respect to each recipient. 12.2 Other Stock-Based Awards made pursuant to this Article XII shall be subject to the following terms and conditions: (a) Subject to the provisions of this Plan and the Award Agreement, shares of Stock subject to Awards made under this Article XII may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses. (b) Subject to the provisions of this Plan and the Award Agreement and unless otherwise determined by the Committee at the time of the Award, the recipient of an Award under this Article XII shall be entitled to receive, currently or on a deferred basis, interest or dividends or interest or dividend equivalents with respect to the number of shares covered by the Award, as determined at the time of the Award by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Stock or otherwise reinvested. 30 (c) Any Award under this Article XII and any Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award Agreement, as determined by the Committee, in its sole discretion. (d) Upon the Participant's Retirement, Disability or death, or in cases of special circumstances, the Committee may, in its sole discretion, waive in whole or in part any or all of the remaining limitations imposed hereunder (if any) with respect to any or all of an Award under this Article XII. (e) Each Award under this Article XII shall be confirmed by, and subject to the terms of, an Award Agreement. (f) Stock (including securities convertible into Stock) issued on a bonus basis under this Article XII may be issued for no cash consideration. 12.3 Other Stock-Based Awards may include a phantom stock Award, which is subject to the following terms and conditions: (a) The Committee shall select the Eligible Participants who may receive phantom stock Awards. The Eligible Participant shall be awarded a phantom stock unit, which shall be the equivalent to a share of Stock. (b) Under an Award of phantom stock, payment shall be made on the dates or dates as specified by the Committee or as stated in the Award Agreement and phantom stock Awards may be settled in cash, Stock, or some combination thereof. (c) The Committee shall determine such other terms and conditions of each Award as it deems necessary in its sole discretion. 31 ARTICLE XIII - ACCELERATION EVENTS 13.1 For the purposes of the Plan, an Acceleration Event shall occur in the event of a "Potential Change in Control," or "Change in Control" or a "Board-Approved Change in Control", as those terms are defined below. 13.2 A "Change in Control" shall be deemed to have occurred if: (a) Any "Person" as defined in Section 3(a)(9) of the Act, including a "group" (as that term is used in Sections 13(d)(3) and 14(d)(2) of the Act), but excluding the Corporation and any employee benefit plan sponsored or maintained by the Corporation (including any trustee of such plan acting as trustee) who: (i) makes a tender or exchange offer for any shares of the Corporation's Stock (as defined below) pursuant to which any shares of the Corporation's Stock are purchased (an "Offer"); or (ii) together with its "affiliates" and "associates" (as those terms are defined in Rule 12b-2 under the Act) becomes the "Beneficial Owner" (within the meaning of Rule 13d-3 under the Act) of at least twenty percent (20%) of the Corporation's Stock (an "Acquisition"); (b) The stockholders of the Corporation approve a definitive agreement or plan to merge or consolidate the Corporation with or into another corporation, to sell or otherwise dispose of all or substantially all of its assets, or to liquidate the Corporation (individually, a "Transaction"); or (c) When, during any period of twenty-four (24) consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such twenty-four (24) month period shall be deemed to have satisfied such twenty-four (24) month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors 32 either actually (because they were directors at the beginning of such twenty-four (24) month period) or by prior operation of this Section 13.2(c). 13.3 A "Board-Approved Change in Control" shall be deemed to have occurred if the Offer, Acquisition or Transaction, as the case may be, is approved by a majority of the Directors serving as members of the Board at the time of the Potential Change in Control or Change in Control. 13.4 A "Potential Change in Control" means the happening of any one of the following: (a) The approval by stockholders of an agreement by the Corporation, the consummation of which would result in a Change in Control of the Corporation, as defined in Section 13.2; or (b) The acquisition of Beneficial Ownership, directly or indirectly, by any entity, person or group (other than the Corporation or any Corporation employee benefit plan (including any trustee of such plan acting as such trustee)) of securities of the Corporation representing five percent (5%) or more of the combined voting power of the Corporation's outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Corporation has occurred for the purposes of this Plan. 13.5 Upon the occurrence of an Acceleration Event, subject to the approval of the Committee if the Acceleration Event results from a Board-Approved Change in Control, all then outstanding Performance Shares with respect to which the applicable Performance Period has not been completed shall be paid as soon as practicable as follows: (a) all Performance Objectives applicable to the Award of Performance Shares shall be deemed to have been satisfied to the extent necessary to result in payment of one hundred percent (100%) of the Performance Shares covered by the Award; and (b) the applicable Performance Period shall be deemed to have ended on the date of the Acceleration Event; (c) the payment to the Participant shall be the amount determined either by the Committee, in its sole discretion, or in the manner stated in the Award Agreement. This amount shall then be multiplied by a fraction, the numerator of which is the number of full calendar months of the applicable Performance 33 Period that have elapsed prior to the date of the Acceleration Event, and the denominator of which is the total number of months in the original Performance Period; and (d) upon the making of any such payment, the Award Agreement as to which it relates shall be deemed canceled and of no further force and effect. 13.6 Upon the occurrence of an Acceleration Event, subject to the approval of the Committee if the Acceleration Event results from a Board-Approved Change in Control, the Committee in its discretion may declare any or all then outstanding Stock Options (and any or all related Stock Rights outstanding for at least six (6) months) not previously exercisable and vested as immediately exercisable and fully vested, in whole or in part. 13.7 Upon the occurrence of an Acceleration Event, subject to the approval of the Committee if the Acceleration Event results from a Board-Approved Change in Control, the Committee in its discretion, may declare the restrictions applicable to Awards of Restricted Stock, Deferred Stock or Other Stock-Based Awards to have lapsed, in which case the Corporation shall remove all restrictive legends and stop-transfer orders applicable to the certificates for such shares of Stock, and deliver such certificates to the Participants in whose names they are registered. 13.8 The value of all outstanding Stock Option, Stock Rights, Restricted Stock, Deferred Stock, Performance Shares, Stock Awards and Other Stock-Based Awards, in each case to the extent vested, shall, unless otherwise determined by the Committee in its sole discretion at or after grant but prior to any Change in Control, be cashed out on the basis of the "Change in Control Price," as defined in Section 13.9 as of the date such Change in Control or such Potential Change in Control is determined to have occurred or such other date as the Committee may determine prior to the Change in Control. 13.9 For purposes of Section 13.8, "Change in Control Price" means the highest price per share of Stock paid in any transaction reported on the NASDAQ National Market System, or paid or offered in any bona fide transaction related to a Potential or actual Change in Control of the Corporation at any time during the sixty (60) day period immediately preceding the occurrence of the Change in Control (or, where applicable, the occurrence of the Potential Change in Control event), in each case as determined by the Committee except that, in the case of Incentive Stock Options and Stock Appreciation Rights (or Limited Stock 34 Appreciation Rights) relating to such Incentive Stock Options, such price shall be based only on transactions reported for the date on which the optionee exercises such Stock Appreciation Rights (or Limited Stock Appreciation Rights). 35 ARTICLE XIV - AMENDMENT AND TERMINATION 14.1 The Board, upon recommendation of the Committee, or otherwise, at any time and from time to time, may amend or terminate the Plan as may be necessary or desirable to implement or discontinue this Plan or any provision thereof. To the extent required by Rule 16b-3 under the Act, no amendment, without approval by the Corporation's stockholders, shall: (a) alter the group of persons eligible to participate in the Plan; (b) except as provided in Section 3.6, increase the maximum number of shares of Stock or Stock Options or Stock Rights which are available for Awards under the Plan; (c) extend the period during which Incentive Stock Option Awards may granted beyond the date which is ten (10) years following the Effective Date; (d) limit or restrict the powers of the Committee with respect to the administration of this Plan; (e) change the definition of an Eligible Participant for the purpose of an Incentive Stock Option or increase the limit or the value of shares of Stock for which an Eligible Participant may be granted an Incentive Stock Option; (f) materially increase the benefits accruing to Participants under this Plan; (g) materially modify the requirements as to eligibility for participation in this Plan; or (h) change any of the provisions of this Article XIV. 14.2 No amendment to or discontinuance of this Plan or any provision thereof by the Board or the stockholders of the Corporation shall, without the written consent of the Participant, adversely affect, as shall be determined by the Committee, any Award theretofore granted to such Participant under this Plan; provided, however, the Committee retains the right and power to: (a) annul any Award if the Participant is terminated for cause as determined by the Committee; 36 (b) provide for the forfeiture of shares of Stock or other gain under an Award as determined by the Committee for competing against the Corporation; and (c) convert any outstanding Incentive Stock Option to a Nonqualified Stock Option. 14.3 If an Acceleration Event has occurred, no amendment or termination shall impair the rights of any person with respect to an outstanding Award as provided in Article XIII. 37 ARTICLE XV - MISCELLANEOUS PROVISIONS 15.1 Nothing in the Plan or any Award granted hereunder shall confer upon any Participant any right to continue in the employ of the Corporation (or to serve as a director thereof) or interfere in any way with the right of the Corporation to terminate his or her employment at any time. Unless specifically provided otherwise, no Award granted under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Corporation for the benefit of its employees unless the Corporation shall determine otherwise. No Participant shall have any claim to an Award until it is actually granted under the Plan. To the extent that any person acquires a right to receive payments from the Corporation under the Plan, such right shall, except as otherwise provided by the Committee, be no greater than the right of an unsecured general creditor of the Corporation. All payments to be made hereunder shall be paid from the general funds of the Corporation, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts, except as provided in Article VIII with respect to Restricted Stock and except as otherwise provided by the Committee. 15.2 The Corporation may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Corporation is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Stock Option or the exercise thereof, any Stock Right or the exercise thereof, or in connection with any other type of equity-based compensation provided hereunder or the exercise thereof, including, but not limited to, the withholding of payment of all or any portion of such Award or another Award under this Plan until the Participant reimburses the Corporation for the amount the Corporation is required to withhold with respect to such taxes, or canceling any portion of such Award or another Award under this Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or selling any property contingently credited by the Corporation for the purpose of paying such Award or another Award under this Plan, in order to withhold or reimburse itself for the amount it is required to so withhold. 38 15.3 The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. Any provision herein relating to compliance with Rule 16b-3 under the Act shall not be applicable with respect to participation in the Plan by Participants who are not subject to Section 16(b) of the Act. 15.4 The terms of the Plan shall be binding upon the Corporation, and its successors and assigns. 15.5 Neither a Stock Option, Stock Right, nor any other type of equity- based compensation provided for hereunder, shall be transferable except as provided for herein. Unless otherwise provided by the Committee or in an Award Agreement, transfer restrictions shall only apply to Incentive Stock Options as required in Article IV and to the extent otherwise required by federal or state securities laws. If any Participant makes such a transfer in violation hereof, any obligation of the Corporation shall forthwith terminate. 15.6 This Plan and all actions taken hereunder shall be governed by the laws of the State of North Carolina. 15.7 The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Corporation, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Corporation. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver shares of Stock or payments in lieu of or with respect to Awards hereunder; provided, however, that, unless the Committee otherwise determines with the consent of the affected Participant, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan. 15.8 Each Participant exercising an Award hereunder agrees to give the Committee prompt written notice of any election made by such Participant under Section 83(b) of the Code, or any similar provision thereof. 15.9 If any provision of this Plan or an Award Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be 39 construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award Agreement, it shall be stricken and the remainder of the Plan or the Award Agreement shall remain in full force and effect. IN WITNESS WHEREOF, this Plan is executed on this the day of , 199 . ROSE'S STORES, INC. ATTEST: By: _____________________________ Authorized Officer (Corporate Seal) __________________________ Secretary 40 EX-5 6 EXHIBIT 5(A) UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO. 93-01365-5-ATS ROSE'S STORES, INC. (CHAPTER 11) (TAX ID #56-0382475) Debtor ___________________________ ORDER APPROVING SHORT-TERM INCENTIVE PLAN THIS MATTER is before the Court upon the "Motion For Order Approving Short-Term Incentive Plan" (the "Motion") filed by Rose's Stores, Inc, debtor and debtor in possession in the above- captioned case (the "Debtor"). The Motion was served on the "Official Service List" as established in the Court's "Ex Parte Order Establishing Notice Requirements With Respect To All Proceedings In This Case," entered on or about September 7, 1993. Based upon a review of the record, the Court hereby finds and concludes as follows: 1. The Debtor filed for relief under chapter 11 of the Bankruptcy Code on September 5, 1993 (the "Petition Date"). Since that time, the Debtor has been operating as a debtor in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. As of the date the Motion was filed, the Debtor's operations were directed by an officer group comprised of the president and chief executive officer ("CEO"), two (2) executive vice presidents and one (1) senior vice president (collectively hereinafter referred to as "Executive Officers") and eleven (11) vice presidents and one (1) treasurer ("Vice Presidents"). The Executive Officers and the Vice Presidents are collectively hereinafter referred to as "Officers." 3. In the Motion, the Debtor requested an order authorizing it to implement a Short-Term Incentive Plan, effective January 30, 1994, to assist the Debtor in motivating its Officers throughout the reorganization by rewarding them for achieving and exceeding designated performance targets. 4. The Short-Term Incentive Plan motivates employees to achieve designated performance goals during the reorganization by awarding bonuses based on the Debtor's ability to achieve and exceed specified cash flow targets for the performance period. These cash flow targets are referred to as "EBITDA" ("Earnings Before Interest, Taxes, Depreciation and Amortization"). 5. Under the Short-Term Incentive Plan, Officers can earn "incentive awards," the amounts of which are based on the Debtor's ability to achieve the designated EBITDA for the performance period.1 The Plan provides for two (2) six (6) month performance periods during each fiscal year which are based on the Debtor's selling seasons. Eligible Officers may earn Incentive Awards in either or both performance periods. Incentive Awards for both performance periods will be paid within thirty (30) days of the Effective Date (simultaneously with the distribution to the general unsecured creditors), as defined in the Debtor's draft plan of reorganization dated July 15, 1994; provided, however, that if the 1 The Chairman of the Board is not eligible to participate in the Short-Term Incentive Plan. -2- Debtor fails to reach the Effective Date, no payments will be made to the Officers and the Officers will have no claim against the Debtor arising from the Short Term Incentive Plan. 6. Each fiscal year, Executive Officers can earn a maximum Incentive Award of thirty-five percent (35%) of annual base salary, and Vice Presidents can earn a maximum Incentive Award of thirty percent (30%) of annual base salary. Each performance period, the Officers can earn only one-half of their annual maximum Incentive Award. 7. Incentive Awards are earned by the Officers during each of the two (2) six (6) month performance periods as follows: (a) If the Debtor achieves 100% of the targeted EBITDA for the performance period, eligible Officers will receive 50% of the maximum annual Incentive Award (or 8.75% of annual base salary for Executive Officers and 7.5% of annual base salary for Vice Presidents). (b) If the Debtor achieves 120% of the targeted EBITDA for the performance period, eligible Officers will receive 100% of the maximum annual Incentive Award (or 17.5% of annual base salary for Executive Officers and 15% of annual base salary for Vice Presidents). (c) If the Debtor achieves between 100% and 120% of the targeted EBITDA for the performance period, eligible Officers will receive between 50% and 100% of the maximum -3- annual Incentive Award2. 8. The target cost of the plan is $446,080.00 at one hundred percent (100%) of targeted EBITDA performance and the maximum cost is $892,160.00 based on the assumptions that all Officers are eligible to participate in the Plan and the Debtor attains one hundred and twenty percent (120%) of the targeted EBITDA for both performance periods for the fiscal year. 9. To be eligible to participate in the Short-Term Incentive Plan, each Officer must be employed at the time of payment and must have performed at or above expectations against performance evaluations. The Short-Term Incentive Plan would replace any other annual incentives or bonuses currently offered to the Officers. 10. The Short-Term Incentive Plan will assist the Debtor tremendously in its efforts to reorganize. The Short-Term Incentive Plan will maximize operating results by instilling in the Officers a sense of participation in the success of the entire organization and incentives to not only achieve, but exceed the financial objectives of the Debtor for the fiscal year. 11. Currently, the Debtor's total compensation package is significantly below industry practices due to the lack of short and long-term incentives, making the Debtor vulnerable to turnover. Other similar bankrupt companies facing this problem have typically responded by use of performance/retention incentives to close the gap in compensation. The implementation of the Short-Term 2 The amount of the Incentive Award will be determined by use of linear interpolation. -4- Incentive Plan will begin to close the gap between the Debtor's compensation package and the industry standards. The Debtor plans to further close the gap in its compensation package by proposing a long-term incentive plan in its plan of reorganization. 12. The cost of the Short-Term Incentive Plan is significantly less than the costs which would result should the Debtor lose a significant number of its key Officers. Recruiting and replacing officers during chapter 11 would not only be time- consuming and expensive, but would also significantly distract management from its efforts to implement the business plan. Further, continuity of staff is essential to a rapid and successful emergence from chapter 11. By implementing a compensation package which is comparable to industry practices and that of other similar bankrupt companies, the Debtor will lessen its chances of losing key personnel. 15. The Official Committee for the Unsecured Creditors has reviewed the Short-Term Incentive Plan, as described herein and supports its implementation. NOW, THEREFORE, for good cause shown, it is hereby ordered as follows: 1. The Debtor is authorized to implement the Short-Term Incentive Plan as in the Debtor's Motion and herein, effective January 30, 1994. 2. No charge or assessment shall be made or allowed against the Pre-Petition Lenders or General Electric Capital Corporation ("GE Capital") or their respective collateral for any obligations -5- arising under the Short-Term Incentive Plan pursuant to 11 U.S.C. (section mark) 506(c), or otherwise. DATED: August 4, 1994 /s/ A. Thomas Small Bankruptcy Judge -6- EX-5 7 EXHIBIT 5(B) UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO. 93-01365-5-ATS ROSE'S STORES, INC., CHAPTER 11 (TAX ID #56-0382475), Debtor ____________________________ ORDER AUTHORIZING INCREASED COMPENSATION OF R. EDWARD ANDERSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD THIS MATTER is before the Court upon the "Motion for Order Authorizing Increased Compensation of R. Edward Anderson, President and Chief Executive Officer and Chairman of the Board" (the "Motion"), filed by Rose's Stores, Inc., debtor and debtor-in-possession in the above-captioned case (the "Debtor"). The Motion was served on the "Official Service List" as established in the Court's "Ex Parte Order Establishing Notice Requirements With Respect To All Proceedings In This Case," entered on or about September 7, 1993. Based upon a review of the record, the Court hereby finds and concludes as follows: 1. The Debtor filed for relief under chapter 11 of the Bankruptcy Code on September 5, 1993 (the "Petition Date"). Since that time, the Debtor has been operating as a debtor in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. At the Petition Date, the Debtor operated a chain of two hundred and fifteen (215) discount retail stores, known as "Roses," located in eleven (11) Mid-Atlantic and Southeastern states. At the time this motion was filed, the Debtor operated one hundred and thirteen (113) on-going stores located in ten (10) states. 3. On August 19, 1994, George L. Jones resigned from his position with the Debtor as president and chief executive officer. At that time, Mr. Jones was paid an annual base salary of $595,000.00, which was approved by Bankruptcy Court order dated June 7, 1994. 4. On August 22, 1994, the Board of Directors for the Debtor (the "Board") called a meeting and elected Mr. R. Edward Anderson to the position of president and chief executive officer. The Board also elected Mr. Anderson to the position of chairman of the board. Mr. Anderson will replace Mr. Lucuis H. Harvin who resigned from that position effective August 23, 1994. 5. Representatives of the Senior Secured Noteholders,(1) the Bank of Tokyo, Ltd., the Official Committee of the Unsecured Creditors, the Official Committee of Equity Security Holders (collectively the "Creditor Constituencies") attended the Board (1) The "Senior Noteholders" hold approximately $70,500,000 principal amount of the Debtor's 11% Senior Secured Notes due December 31, 1998, and include Nationwide Life Insurance Company, Wausau Preferred Health Insurance Company, Equitable Variable Life Insurance Company, The Equitable Life Assurance Society of the United States, Jefferson-Pilot Life Insurance Company, The Franklin Life Insurance Company, The Franklin United Life Insurance Company, Great-West Life & Annuity Insurance Company, American Family Life Insurance Company, State Mutual Life Assurance Company of America, SMA Life Assurance Company, Merrill Lynch Life Insurance Company, ML Life Insurance Company of New York, Woodmen of the World Life Insurance Society, Knights of Columbus, Washington National Insurance Company, The Stonehill Investment Corp., Central Life Assurance Company, and Lazard Freres & Co., or their successor and assigns. -2- meeting and unanimously recommended that the Board elect Mr. Anderson as the new president and chief executive officer. Counsel for General Electric Capital Corporation attended the Board meeting and stated that the election of Mr. Anderson to the position of president and chief executive officer would not constitute a default under the existing Debtor-In-Possession Loan Agreement, dated as of September 20, 1993, as amended. 6. Mr. Anderson joined Rose's in 1978 as controller, having previously been a C.P.A. with the accounting firm of Peat, Marwick, Mitchell. Prior to his recent promotion, Mr. Anderson served as the chief financial officer of the Debtor and was paid an annual base salary of $270,000.00. In this position, Mr. Anderson's job responsibilities included supervising company finances, accounting information systems, distribution, and risk management. A native of Goldsboro, North Carolina, Mr. Anderson earned a bachelor's degree in business and accounting from the University of North Carolina at Chapel Hill. 7. The Board authorized the Debtor to enter into an employment agreement with Mr. Anderson, employing Mr. Anderson for a term effective immediately and expiring upon the earlier of thirty (30) days after the "Effective Date," as that term is used in the Debtor's Joint Plan of Reorganization, filed with this Court on August 1, 1994 or April 30, 1994. 8. In the Motion, the Debtor requested authority to compensate Mr. Anderson for his services as president and chief -3- executive officer and chairman of the board at an annual base salary of $395,000.00, effective August 22, 1994. While this salary reflects an increase from his salary as chief financial officer, it is $200,000.00 less than that approved by this Court for Mr. Jones. Further, because Mr. Anderson will also serve as chairman of the board, his job responsibilities will be greater than those undertaken by Mr. Jones while serving as president and chief executive officer. 9. Mr. Anderson will continue to receive all other benefits offered by the Debtor to its officers, including, without limitation, participation in the Debtor's Severance Program and Short-Term Incentive Plan, both of which were approved by this Court by earlier order. 10. The Debtor believes that Mr. Anderson is the candidate most qualified for the position of president and chief executive officer and chairman of the board. Mr. Anderson has approximately sixteen years of experience with the Debtor. Mr. Anderson has been a critical participant in the chapter 11 reorganization, particularly with respect to formulation of the Debtor's plan of reorganization. Further, the unanimous recommendation of Mr. Anderson by the Creditor Constituencies is a strong indicator of their confidence in Mr. Anderson's ability to lead the Debtor through confirmation and consummation of the Joint Plan of Reorganization. -4- NOW, THEREFORE, for good cause shown, it is hereby ordered that the Debtor is authorized to increase Mr. Anderson's compensation to $395,000.00, effective August 22, 1994 to compensate him for his services as president and chief executive officer and chairman of the board. Dated: October 12, 1994 /s/ A. Thomas Small UNITED STATES BANKRUPTCY JUDGE -5- EX-5 8 EXHIBIT 5(C) UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO. 93-01365-5-ATS ROSE'S STORES, INC., CHAPTER 11 (TAX ID #56-0382475), Debtor ____________________________ ORDER AUTHORIZING INCREASED COMPENSATION OF (i) KATHY M. HURLEY, SENIOR VICE PRESIDENT, MERCHANDISING; (ii) JEANETTE R. PETERS, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER; AND (iii) GEORGE T. BLACKBURN, II, VICE PRESIDENT, REAL ESTATE, GENERAL COUNSEL, AND SECRETARY THIS MATTER is before the Court upon the "Motion for Order Authorizing Increased Compensation of (i) Kathy M. Hurley, senior vice president, merchandising; (ii) Jeanette R. Peters, senior vice president, chief financial officer; and (iii) George T. Blackburn, II, vice president, real estate, general counsel, and secretary" (the "Motion"), filed by Rose's Stores, Inc., debtor and debtor-in-possession in the above-captioned case (the "Debtor"), pursuant to Local Bankruptcy Rule No. 4002.3(b)(1), EDNC. Notice having been provided to creditors and parties in interest and no objections having been filed, and having reviewed the Motion, the Court hereby finds as follows: 1. The Debtor filed for relief under chapter 11 of the Bankruptcy Code on September 5, 1993 (the "Petition Date"). Since that time, the Debtor has been operating as a debtor in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. The Debtor currently operates a chain of one hundred and thirteen (113) discount retail stores, known as "Rose's." The stores are located in ten (10) states across the Mid-Atlantic and Southeast. A. Kathy M. Hurley, Senior Vice President, Merchandising 3. Effective November 11, 1994, Rob Gruen resigned from his position as senior vice president, merchandising. At the time of his resignation, Mr. Gruen was paid an annual base salary of $228,000.00 and an annual automobile allowance of $5,528.00. 4. With the approval of the board of directors, the Debtor promoted Kathy M. Hurley to the position of senior vice president, merchandising. Ms. Hurley came to Rose's in 1992 as vice president, general merchandise manager for the softlines division. She has nearly 24 years experience in the retail industry and, before joining Rose's, served in a key management position with Weathervane Stores. Her background also includes management positions at Gold Circle, Montgomery Ward, Service Merchandise, Hechts and Lane Bryant. Ms. Hurley holds a bachelor's degree from Ohio University. 5. Prior to her promotion to senior vice president, merchandising, Ms. Hurley directed the merchandising functions for the softlines division (including apparel for women, men, boys, girls, fashion accessories, jewelry and cosmetics) and the domestics division. Ms. Hurley was paid an annual base salary of $170,000.00. 2 6. The Debtor believes that Ms. Hurley is the candidate best qualified to replace Mr. Gruen due to her experience in the merchandising industry, her proven record of success at the Debtor and her familiarity with the operations and merchandising strategy of the Debtor. In the Motion, the Debtor requested an order authorizing it to compensate Ms. Hurley for her services as senior vice president, merchandising with an annual base salary of $200,000.00 and an automobile allowance of $5,528.00. Ms. Hurley would also be eligible to receive the standard employee benefits awarded to the officers of the Debtor. 7. Ms. Hurley's salary is approximately $28,000.00 less than that originally approved by this Court for Mr. Gruen. Further, the Debtor does not intend to fill the position vacated by Ms. Hurley as a result of her promotion. Accordingly, through the promotion of Ms. Hurley, the Debtor will save approximately $198,000.00 per year. B. Jeanette R. Peters, Senior Vice President, Chief Financial Officer 8. On August 19, 1994, George L. Jones resigned from his position with the Debtor as president and chief executive officer. Subsequently, the board of directors elected R. Edward Anderson to the position of president and chief executive officer. Prior to his promotion, Mr. Anderson held the position of executive vice president, chief financial officer and was paid an annual base salary of $270,000.00 and an annual automobile allowance of $5,528.00. 3 9. With the approval of the board of directors, the Debtor promoted Jeanette R. Peters to the position of senior vice president, chief financial officer. Ms. Peters joined Rose's in 1983 as manager of financial planning. She also served as senior manager of financial planning and senior financial analysis manager. Ms. Peters graduated from the Virginia Polytechnic Institute with a bachelor of science degree in accounting. She became a certified public accountant wile working for the accounting firm of Peat, Marwick & Mitchell Co. 10. Prior to her promotion to chief financial officer, Ms. Peters' job responsibilities included accounting and financial reporting and control functions, such as sales and inventory audit, accounts payable, payroll processing, tax, financial analysis and financial reporting. Her annual base salary was $96,700.00. In her new position, Ms. Peters' job responsibilities will include supervising company finances, accounting information systems, and assets protection. 11. The Debtor believes that Ms. Peters is the candidate best qualified to replace Mr. Anderson due to her experience and familiarity with the Debtor's finances. In the Motion, the Debtor requested an order authorizing it to compensate Ms. Peters for her services as senior vice president, chief financial officer with an annual base salary of $150,000.00 and an annual automobile allowance of $5,528.00. Ms. Peters would also be eligible to receive the standard employee benefits awarded to the officers of the Debtor. 4 12. Ms. Peters' salary is approximately $120,000.00 less than that originally approved by this Court for Mr. Anderson. Further, the Debtor does not intend to fill the position vacated by Ms. Peters as a result of her promotion. Accordingly, through the promotion of Ms. Peters, the Debtor will save approximately $216,000.00 per year. C. George T. Blackburn, II, Vice President, Real Estate, General Counsel and Secretary 13. Prior to the Petition Date, the Debtor's vice president of real estate resigned. Lois S. Williams, senior manager, real estate, assumed the majority of the responsibilities performed by the former vice president. In August, 1994, Ms. Williams resigned from her position. 14. With the approval of the board of directors, the Debtor has assigned the title and responsibilities of vice president, real estate to George T. Blackburn, II, in addition to his other responsibilities. Mr. Blackburn joined Rose's as vice president, general counsel in 1991 and was elected secretary of the corporation in February 1993. Before joining Rose's, he was a partner in the law firm of Perry, Kittrell, Blackburn and Blackburn of Henderson, North Carolina where he served for over 12 years as legal counsel for Rose's. He completed undergraduate studies and received his Juris Doctorate degree from the University of North Carolina at Chapel Hill. Prior to his promotion, Mr. Blackburn was paid an annual base salary of $77,000.00. 5 15. As vice president, real estate, Mr. Blackburn's job responsibilities will include the supervision and reconciliation of the claims filed by the lessors of non-residential real property in the pending chapter 11 case. Due to his close involvement in the case, he is the person with the most knowledge about these claims and, thus, is the individual best suited to assume these responsibilities, as well as the other duties associated with the position. 16. In the Motion, the Debtor requested an order authorizing it to compensate Mr. Blackburn for his services as vice president, real estate, general counsel and secretary with an annual base salary of $100,000.00. Mr. Blackburn would continue to be eligible to receive the standard employee benefits awarded to the officers of the Debtor. 17. If approved, Mr. Blackburn's salary would increase by only $23,000.00 per year which is small in comparison to the numerous job responsibilities associated with his three positions and his critical involvement in the chapter 11 case. Further, this increase in salary is much less than the annual salary previously paid to Ms. Williams who performed similar job responsibilities. Thus, the Debtor will actually save money by promoting Mr. Blackburn. NOW, THEREFORE, for good cause shown, the Court hereby orders that the Debtor is authorized to increase the compensation of (i) Kathy M. Hurley to an annual base salary of $200,000.00 per year plus an annual automobile allowance of $5,528.00 for her services as 6 senior vice president, merchandising; (ii) Jeanette R. Peters to an annual base salary of $150,000.00 plus an annual automobile allowance of $5,528.00 for her services as senior vice president, chief financial officer; and (iii) George T. Blackburn, II, to $100,000.00 for his services as vice president, real estate, general counsel and secretary. Dated: December 15, 1994 /s/ A. Thomas Small UNITED STATES BANKRUPTCY JUDGE 7 EX-5 9 EXHIBIT 5(D) UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO. 93-01365-5-ATS ROSE'S STORES, INC., CHAPTER 11 (TAX I.D. #56-0382475), Debtor ____________________________ ORDER AUTHORIZING ENTRY INTO EMPLOYMENT AGREEMENT WITH R. EDWARD ANDERSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER THIS MATTER is before the Court upon the Motion for Authority to Enter into Employment Agreement with R. Edward Anderson, President and Chief Executive Officer (the "Motion"), filed by Rose's Stores, Inc., debtor in possession in the above-captioned case (the "Debtor"). Notice having been provided to creditors and parties and interest and no objections having been filed, and upon a review of the Motion, the Court hereby finds as follows: 1. The Debtor filed for relief under chapter 11 of the Bankruptcy Code on September 5, 1993 (the "Petition Date"). Since that time, the Debtor has been operating as a debtor in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. The Debtor currently operates a chain of one hundred and thirteen (113) discount retail stores, known as "Rose's." The stores are located in ten (10) states across the Mid-Atlantic and Southeast. 3. On August 19, 1994, George L. Jones resigned from his position with the Debtor as president and chief executive officer. At the time of his resignation, Mr. Jones was paid an annual base salary of $595,000.00 and was a party to an employment agreement with the Debtor which was approved by this Court on June 7, 1994. On August 22, 1994, the board of directors for the Debtor elected R. Edward Anderson, formerly the executive vice president, chief financial officer, to replace Mr. Jones. By order dated September 28, 1994, this Court authorized the Debtor to pay Mr. Anderson an annual base salary of $395,000.00. 4. At the time the Debtor filed the motion seeking approval to increase Mr. Anderson's compensation, the proposed employment agreement with Mr. Anderson had not been finalized. Accordingly, in the Motion, the Debtor sought Court approval to enter into an employment agreement with Mr. Anderson. A copy of the proposed employment agreement (the "Employment Agreement") is attached to the Motion as Exhibit "A" and is incorporated herein by reference. 5. The terms of the Employment Agreement are substantially similar to those of the employment agreement entered into by the Debtor with Mr. Jones, except with respect to the events triggering the payment of severance. 6. Entry into the Employment Agreement is critical to the continued success of the Debtor's reorganization efforts. The Joint Plan requires the Debtor to achieve certain conditions, financial and otherwise, between the filing of the Joint Plan and the Effective Date. Mr. Anderson's leadership during the upcoming months is crucial to the Debtor's ability to achieve these conditions. If the Debtor were required to replace Mr. Anderson at 2 this juncture, it would likely be devastating to its efforts to achieve confirmation and consummation of the Joint Plan. 7. The terms of the Employment Agreement are substantially similar to those of the employment agreement previously approved by this Court for Mr. Jones. While the Employment Agreement does provide for a greater number of triggering events for the payment of severance, this change is appropriate in light of Mr. Anderson's willingness to assume the leadership of the Debtor during this critical time. Moreover, Mr. Anderson's annual base salary is $200,000.00 less than that previously approved by this Court for payment to Mr. Jones, the predecessor to Mr. Anderson. NOW, THEREFORE, for good cause shown, the Court hereby orders that the Debtor is authorized to enter into an employment agreement with R. Edward Anderson in a form substantially similar to that of the employment agreement attached to the Motion as Exhibit A. Dated: December 15, 1994 /s/ A. Thomas Small UNITED STATES BANKRUPTCY JUDGE 3 EX-5 10 EXHIBIT 5(E) UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO.: 93-01-365-S-ATS ROSE'S STORES, INC. CHAPTER 11 Debtor (TAX I.D. #56-0382475) ___________________________ ORDER APPROVING CONSUMMATION BONUS AND STOCK OPTION AWARDS THIS MATTER is before the Court upon the Motion for Order Approving Consummation Bonus and Stock Option Awards (the "Motion"), filed by Rose's Stores, Inc., debtor and debtor in possession in the above-captioned case (the "Debtor") on December 9, 1994, pursuant to Local Bankruptcy Rule No. 4002.3(b)(1), EDNC, authorizing the Debtor to award its officers a consummation bonus and stock options. The Official Committee of Equity Security Holders filed an objection to the Motion. Proper notice having been provided to creditors and parties in interest, and based upon a review of the record, the Court hereby finds and concludes as follows: I. BACKGROUND 1. The Debtor filed for relief under chapter 11 of the Bankruptcy Code on September 5, 1993 (the "Petition Date"). Since that time, the Debtor has been operating as a debtor in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. The Debtor currently operates a chain of one hundred and thirteen (113) discount retail stores, known as "Rose's." The stores are located in ten (10) states across the Mid-Atlantic and Southeast. 3. The Debtor's operations are directed by an officer group of only fourteen individuals comprised of the president and chief executive officer ("CEO"), one (1) executive vice president and two (2) senior vice presidents (collectively hereinafter referred to as "Executive Officers") and ten (10) vice presidents ("Vice Presidents"). The Executive Officers and the Vice Presidents are collectively hereinafter referred to as "Officers." Since the Petition Date, the Debtor has decreased its officer group by almost one-half. 4. The Officers are currently compensated through a combination of base salary, severance pay and eligibility to receive bonuses biannually pursuant to the Short-Term Incentive Plan. The Short-Term Incentive Plan, approved by the Bankruptcy Court, awards bonuses to the Officers based on the financial performance of the Debtor in the Debtor's two selling seasons. The Officers did not earn any bonus in the first selling season of 1994. 5. In the Motion, the Debtor requested an order authorizing it to award a bonus consisting of stock or cash (the "Consummation Bonus") and to issue stock options (the "Stock Option Awards") to the Officers upon achieving the consummation of the First Amended Joint Plan of Reorganization, dated October 5, 1994, as may be thereafter amended (hereinafter the "Joint Plan"), assuming the Alternative Treatment Provisions of the Joint Plan are not 2 effective, or, if said provisions are effective, the Debtor is sold. Seven hundred thousand (700,000) shares of common stock of Reorganized Rose's will be authorized for issuance to the Officers in the form of stock or stock options. 6. The Joint Plan contemplates two possible scenarios-- reorganization or liquidation--depending upon the non-occurrence of certain events between the filing of the Joint Plan and April 30, 1995, referred to in the Joint Plan as Alternative Treatment Events.(1) If an Alternative Treatment Event occurs (which is not waived by the necessary parties), the Alternative Treatment Provisions of the Joint Plan will be effective, and the company will liquidate. The Consummation Bonus and Stock Option Awards will be payable only in the event the Alternative Treatment Provisions of the Joint Plan are not effective or the company is sold pursuant to a modification of the Joint Plan or the Alternative Treatment Provisions of the Joint Plan. II. CONSUMMATION BONUS AND STOCK OPTION AWARDS A. Consummation Bonus 7. The Debtor requested authority to award a consummation bonus consisting of stock or cash to the Officers either upon consummation of the Joint Plan or a sale of the Debtor, depending upon the events of the chapter 11 case. Within thirty (30) days of the Effective Date, the Officers will be awarded an aggregate number (1) All capitalized terms used herein but not defined shall have the meaning ascribed to them in the Joint Plan unless otherwise noted. 3 of shares of New Rose's Common Stock equal to 1.5% of the total number of shares of New Rose's Common Stock to be issued on the Effective Date (150,000 shares, hereinafter referred to as "Consummation Shares");(2) provided, however, such shares will not be issued if the Alternative Treatment Provisions of the Joint Plan are effective. 8. The Consummation Shares will be allocated to the participants based on targeted awards. Individual awards, other than to the CEO, will vary above and below the targeted level. The CEO will be awarded a fixed number of shares equal to 41.09% of the Consummation Shares (a total of 61,635 shares). 9. Alternatively, in the event that the Debtor is sold as a going concern pursuant to a modification of the Joint Plan or the assets of the Debtor are sold pursuant to the Alternative Treatment Provisions of the Joint Plan, a bonus payable from the proceeds of sale will be awarded to the Officers. The bonus payable to the Officers will be an amount equal to a percentage of the ultimate proceeds of sale after payment of Allowed Administrative Claims, Tax Claims, GE Obligations and Allowed Claims in Classes 1, 2A and 2B of the Joint Plan (hereinafter referred to as the "Ultimate Proceeds of Sale"). The following table sets forth the range of the Ultimate Proceeds of Sale and the corresponding percentages to be used to calculate the bonuses to be distributed to the Officers in the event (2) The Joint Plan provides that on the Effective Date, 10,000,000 shares of the common stock of Reorganized Rose's, referred to as New Rose's Common Stock, will be issued. 4 that the Debtor is sold. Sales Price Percent of the Ultimate Proceeds of Sale $0 to $24,999,999 0.5% $25,000,000 to $59,999,999 1.5% $60,000,000 and above 2.0% 11. The bonus will be allocated among the Officers in a manner identical to the allocation of the Consummation Shares, as discussed in paragraph 8 herein. B. Stock Option Awards 12. The Debtor also seeks authority to award the Officers stock options. Ninety (90) days after the Effective Date, the Officers will be issued incentive stock options (or to the extent required by law, non- qualified stock options); provided, however, such options will not be issued if the Alternative Treatment Provisions of the Joint Plan are effective. These options will grant to the Officers the right to purchase an aggregate amount of shares of New Rose's Common Stock equal to 5.5% of the total number of shares of New Rose's Common Stock issued on the Effective Date (550,000 shares, assuming 10 million shares are issued on the Effective Date). One-half of the options will be granted with an exercise price equal to the fair market value of the stock on the date of the grant and will have a term of five (5) years. The remainder of the options will be granted with an exercise price equal to two times the fair market value of the stock on the date of 5 the grant and will have a term of seven (7) years. (3) All of the stock options will vest in equal thirds beginning on the first anniversary of the consummation of the Joint Plan. 13. The stock options will be allocated based on the face value of the stock under the option and targeted multiples of salary. Individual grants, other than to the CEO, will vary above and below targeted levels. The CEO will be awarded a fixed award equal to 25% of the total stock options to be awarded. III. NEED FOR THE CONSUMMATION BONUS AND STOCK OPTION AWARDS 14. The Consummation Bonus and Stock Option Awards are beneficial for a number of reasons. First, they reward the management team for their intense efforts to bring about a successful reorganization. If the Alternative Treatment Events do not occur, the awards also motivate the Officers to work diligently, upon consummation of the Joint Plan, to increase the value of the New Rose's Common Stock to be issued on the Effective Date by providing the management team with a stake in the future success of the business. The increased value of the New Rose's Common Stock, in turn, will benefit the holders of allowed unsecured claims and/or (3) The Debtor has drafted a "New Equity Compensation Plan" which is the formal structure by which the Consummation Bonus and Stock Options will be awarded to the Officers pursuant to the terms of this order. The New Equity Compensation Plan defines "Fair Market Value" to mean "with respect to any given day, the closing price of the Stock reported on the NASDAQ National Market System for such day, or if the Stock was not traded on the NASDAQ National Market System on such day, then on the next day on which the Stock was traded, all as reported by such source as the [Compensation] Committee may select. The [Compensation] Committee may establish an alternative method of determining Fair Market Value." 6 common stock interests depending on who is the recipient of the New Rose's Common Stock under the Joint Plan. If the Alternative Treatment Events do occur, the Debtor will seek to maximize the return to the creditors through a sale of the business. The awards will certainly have a motivational effect relative to the sale effort. 15. The Consummation Bonus and Stock Option Awards will also cause the Debtor's total compensation package to be more comparable to industry practices, thereby reducing the Debtor's vulnerability to turnover of key personnel. 16. The Official Committee for the Unsecured Creditors has reviewed the terms of the Debtor's issuance of the Consummation Bonus and Stock Option Awards, as described herein, and has no objection to their issuance. NOW, THEREFORE, for good cause shown, the Court hereby authorizes the Debtor to issue the Consummation Bonus and Stock Option Awards in a manner substantially similar to that described herein. Dated: February 14, 1995 /s/ A. Thomas Small UNITED STATES BANKRUPTCY JUDGE 7 EX-5 11 EXHIBIT 5(F) UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION IN RE: CASE NO. 93-01365-5-ATS ROSE'S STORES, INC. (CHAPTER 11) (TAX ID #56-0382475) Debtor __________________________ AMENDED ORDER APPROVING REJECTION OF TERMINATION AGREEMENTS AND IMPLEMENTATION OF SEVERANCE PROGRAM THIS MATTER is before the Court upon the "Motion For Order Approving Rejection Of Termination Agreements, Modification of Executive Employment Agreement, and Implementation of Severance Program" (the "Motion") filed by Rose's Stores, Inc. (the "Debtor"), debtor in possession in the above- captioned case. The Motion was served on the "Official Service List" as established in the Court's "Ex Parte Order Establishing Notice Requirements With Respect To All Proceedings In This Case," entered on or about September 7, 1993. Based upon a review of the record, arguments of counsel, and evidence presented at the hearing on the Motion, the Court hereby finds and concludes as follows: 1. The Debtor filed for relief under chapter 11 of the Bankruptcy Code on September 5, 1993 (the "Petition Date"). Since that time, the Debtor has been operating as a debtor in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 2. As of the Petition Date, the Debtor operated a chain of two hundred and fifteen (215) discount retail stores, known as "Roses" located in eleven (11) southeastern states, and generated approximately 1.4 billion in revenue per year. 3. As of the Petition Date, the Debtor was the fifth largest non-public employer in North Carolina. Of the approximately eighteen thousand (18,000) individuals employed by the Debtor at that time, ten thousand (10,000) were located in North Carolina. At its headquarters in Henderson, North Carolina, the Debtor employed over one thousand four hundred (1,400) associates, making it one of the largest employers in Vance County. 4. As of the Petition Date, the Debtor's operations were directed by an officer group comprised of only twenty-two individuals ("Officers"). The name of each officer, his or her respective position and a short biographical summary is attached to the Debtor's Motion as Exhibit "A." 5. Pursuant to several orders entered on November 18, 1993, this Court authorized payment of base compensation to the Officers (including an automobile allowance for senior Officers) and continuation of the Debtor's Officer Medical Reimbursement Plan. By Order dated October 25, 1993, this Court deferred consideration of the Debtor's assumption of an Executive Employment Agreement between the Debtor and the President and Chief Executive Officer ("Employment Agreement") effective July 25, 1991 and the termination agreements between the Debtor and each of the remaining Officers ("Termination Agreements") until at least sixty (60) days from the date of the entry of the Order. Among other things, the Employment Agreement and the Termination Agreements provided severance pay to the Officers under certain terms and conditions. -2- 6. In its Motion, the Debtor sought to reject the Termination Agreements and to implement, as a replacement, a severance program discussed more fully in the Debtor's Motion. The Debtor also requested that this Court enter an order prohibiting any Officer from asserting a claim for damages due to the rejection of the Termination Agreements. In its Motion, the Debtor did not seek to assume or reject the Employment Agreement with Mr. George L. Jones, President and Chief Executive Officer. Instead, it sought to modify the agreement to allow the provisions of the proposed severance program to supersede and control any provisions for severance in the Employment Agreement. 7. As a result of discussions with the Bank Group1, the Senior Noteholders(2), the Bank of Tokyo (collectively the "Pre-Petition Lenders"), the Official Unsecured Creditors' Committee and the Official Committee of Equity Security Holders regarding the (1) NationsBank of North Carolina, N.A. ("NationsBank"), Wachovia Bank of North Carolina, N.A. ("Wachovia"), Branch Banking and Trust Company, Crestar Bank, The Bank of New York, Central Carolina Bank, Credit Lyonnais. Collectively referred to as the "Bank Group." (2) The Franklin Life Insurance Company, The Franklin United Life Insurance Company, Jefferson-Pilot Life Insurance Company, Nationwide Life Insurance Company, Knights of Columbus, Great-West Life & Annuity Insurance Company, Wausau Life Insurance Company, Woodmen of the World Life Insurance Society, Guarantee Mutual Life Company, The Lafayette Life Insurance Company, Central Life Assurance Company, Equitable Variable Life Insurance Company, The Equitable Life Assurance Society of the United States, Merrill Lynch Life Insurance Co., ML Life Insurance Company of New York, Washington National Insurance Company, American Family Life Insurance Company, State Mutual Life Assurance Company of America, and SMA Life Assurance Company. Collectively referred to as the "Senior Noteholders." -3- proposed severance program, the Debtor has modified the program to address and, to the extent possible, eliminate the concerns voiced by the various constituencies. A copy of the revised Severance Program ("Severance Program") is attached hereto as Exhibit "A" and is incorporated in full into this Order. The Severance Program includes all Officers and Salaried Employees, but excludes the President and Chief Executive Officer.(3) 8. The Severance Program will provide severance pay, pursuant to certain terms and conditions, to all Officers (except for the President and Chief Executive Officer) and Salaried Employees(4) and will remain in effect from the date of entry of this Order until one (1) year after confirmation of the Debtor's plan of reorganization, a creditor's plan of reorganization, a plan of liquidation, or the conversion of the case to Chapter 7 of the Bankruptcy Code. 9. To briefly summarize the terms of the Severance Program, the Officers, excluding the President and Chief Executive Officer, and Salaried Employees are divided into three tiers, each of whom are awarded severance benefits on the basis of their classification. (3) The Debtor plans to address the treatment of the Executive Employment Agreement entered into by the Debtor with the Mr. George L. Jones, including any provision for severance, at a later date. (4) Salaried Employees include the following: a) Directors (does not include the Board of Directors), Senior Managers, Senior Buyers (approximately 57 employees) b) Buyers, Store Managers (approximately 213 employees) c) Exempt Managers, Other Exempt Associates (approximately 112 employees) d) Exempt Associates (approximately 707 employees). -4- (a) Tier 1 consists of the Executive Vice Presidents and Senior Vice Presidents who, if eligible, would receive eighteen (18) months salary and a maximum reimbursement of $10,000.00 for reasonable expenses incurred in seeking another job, including outplacement assistance. (b) Tier 2 consists of the Vice Presidents and Treasurer who, if eligible, would receive twelve (12) months salary and a maximum reimbursement of $7,500.00 for reasonable expenses incurred in seeking another job, including outplacement assistance. Tiers 1 and 2 would also continue receiving benefits of medical, dental and disability coverage (or the present value of the lump sum equivalent thereof) for a period of three months following termination. (c) Tier 3 consists of all Salaried Employees who, if eligible, would receive severance pay on the basis of their position and length of service to the Debtor. Exhibit A sets forth the positions classified as Salaried Employees and the corresponding amount of severance pay for each position. 10. Severance pay awarded to Tiers 1 and 2 would be payable one-half in a lump sum immediately upon termination and one-half in monthly installments commencing on the first day of either the seventh or tenth month following the date of termination depending on the level of the Officer. Severance pay awarded to Tier 3 will be payable in weekly installments. As a condition to receiving the full severance award, all associates must execute a general release; otherwise, the severance award will be one week's pay. -5- 11. Any portion of severance payable in installments will cease if the terminated associate obtains another job. As a condition to receiving severance pay, the terminated associate must immediately notify the Personnel Department in writing should such associate obtain new employment. Among any other rights the Debtor might have, the Debtor is authorized to terminate any severance payments and to recover that portion of severance pay awarded erroneously due to the terminated associate's failure to provide timely or accurate written notice of re-employment. 12. An associate is eligible to participate in the Severance Program upon the occurrence of certain "triggering" events which are set forth in detail in Exhibit A. Triggering events include elimination of an associate's position unless the associate is offered a comparable or better position with the Debtor; termination of an associate's position other than for misconduct; constructive or voluntary termination due to a material reduction in salary or change in job responsibilities; termination due to a chapter 11 liquidation; and termination due to conversion of the Debtor's case to chapter 7 of the Bankruptcy Code. 13. The Debtor reserves the right to implement this Severance Program by entering into an agreement with each of the Officers covered by the Severance Program which solely embodies the terms and conditions of the Severance Program and to retain the Severance Program as a corporate policy for the Salaried Employees. -6- NOW, THEREFORE, for good cause shown, it is hereby ordered as follows: 1. The Severance Program shall, for all purposes, be deemed to replace the Termination Agreements. The Debtor is authorized to implement the Severance Program in its entirety as described herein and in Exhibit A attached hereto. 2. The Debtor is authorized to reject the Termination Agreements entered into by the Debtor with each of the Officers. 3. The participating Officers may not assert any claim for damages due to the rejection of said Termination Agreements, or arising under or otherwise connected with the Termination Agreements, or any other claim for severance other than pursuant to the Severance Program approved by the entry of this Order. 4. To be eligible to participate in the Severance Program, the participating Officers must agree in writing to release any claims they may have against the Debtor due to the rejection of said Termination Agreements, or arising under or otherwise connected with the Termination Agreements, or any other claim for severance other than pursuant to the Severance Program approved by the entry of this order. 5. The Severance Program shall be deemed to replace any earlier severance program or policy offered by the Debtor, and entry of this Order shall bar any Salaried Employee from asserting any claim for severance other than pursuant to the Severance Program approved by the entry of this Order. -7- 6. No charge or assessment shall be made or allowed against the Pre- Petition Lenders or General Electric Capital Corporation ("GE Capital") or their respective collateral for any obligations arising under the Severance Program pursuant to 11 U.S.C. (Section Mark) 506(c), or otherwise. To the extent the Pre-Petition Lenders hold allowed administrative claims, other than that provided for in paragraph 7 of the decretal clause of this Order, the Pre-Petition Lenders will be treated for distribution purposes on par with other cost of administration claims, including cost of administration claims under the Severance Program. Allowed general unsecured claims, including any such claims held by the Pre-Petition Lenders, will be subordinate to cost of administration claims which arise under the Severance Program. 7. The Debtor's obligations under the Severance Program are a cost of administration subordinate to the "Post-Petition Obligations" of GE Capital and the Pre-Petition Lenders and the $2,000,000.00 professional carveout each as provided for and/or defined in the "Final Order Authorizing Debtor-In-Possession To Borrow Funds With Priority Over Administrative Expenses and Secured By Liens On Property Of The Estate" (the "Final DIP Order"). Notwithstanding anything to the contrary herein, without the future consent of GE Capital, the Debtor is not authorized to pay any obligation or to take any other action under this Order or the Severance Program which would result in any breach of the Final DIP Order, the DIP Loan Agreement (as defined in the Final DIP Order) or -8- any covenants thereunder. Further, the entry of this Order shall not alter, modify or amend the provisions of the Final DIP Order. Dated: April 1, 1994 /s/ A. Thomas Small Bankruptcy Judge -9- EXHIBIT "A" ROSE'S STORES, INC. SEVERANCE PROGRAM Section 1 Purpose of the Program Rose's Stores, Inc. (the "Company") intends by this Severance Program (the "Program") to provide a method which, in the discretion of the Program Administrator, can be utilized to provide Officers and Salaried Associates of the Company with temporary protection against economic hardship if they are separated from employment by the Company on account of severance as defined in Section 3 herein. This Program shall supersede, replace and control any and all prepetition termination agreements and the corporate severance pay policy, except for the employment agreement between the Company and the President and Chief Executive Officer effective July 25, 1991. This Program shall be effective as of the date of approval of this Program by the court with jurisdiction over the bankruptcy filing and shall cease to be effective one (1) year from: (a) the date of confirmation of the Company's plan of reorganization under chapter 11 of the Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"); (b) a creditor's plan of reorganization; (c) a plan of liquidation under the provisions of Chapter 11 of the Bankruptcy Code; or (d) a conversion to Chapter 7 of the Bankruptcy Code. Section 2 Definitions As used in this Program, the following words and phrases shall have the following meanings, unless the context clearly indicates otherwise: (a) "Associate" shall mean any person in the employment of the Company. (b) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. (c) "Length of Service" or "Active Service" shall mean the total -10- combined months of an Associate's active employment with the Company and is limited only to that time for which the Associate received pay from the Company for the actual performance of services. If an Associate works over one-half of the working days in a calendar month, he shall be credited with a full month of Active Service for such month. Calculations shall be based on a forty (40) hour work week for a regular full-time Associate and on the average weekly hours worked during the three (3) months immediately preceding the Associate's Termination Date for a regular part-time Associate. The period for which Severance Allowance benefits are paid shall not be counted in determining Length of Service. (d) "Misconduct" shall mean the conviction of, or the entering of a plea of, nolo contendere by the Associate for any felony arising out of acts of fraud or dishonesty committed against the Company; or willful gross misconduct deemed to be materially and demonstrably injurious to the Company as determined by the Program Administrator. The Program Administrator's determination that a separation from employment is due to Misconduct shall be final and binding. (e) "Officer" shall mean any of the following Associates of the Company: (i) Executive Vice Presidents, (ii) Senior Vice Presidents, (iii) Vice Presidents, and (iv) Treasurer. (f) An Associate shall be deemed to be "Permanently Disabled" six (6) months after the first date on which he is disabled by bodily or mental illness, disease, or injury, to the extent that he is prevented from performing his material and substantial duties of employment provided that such disability has continued uninterrupted for such six (6) month period. The Program Administrator shall determine that an Associate is "Permanently Disabled". The Program Administrator's determination that an Associate is "Permanently Disabled" shall be final and binding. (g) "Program Administrator" shall mean the Human Resources Department of the Company. (h) "Salaried Associate" shall mean any of the following Associates of the Company: (i) Directors (not the Company Board of Directors), (ii) Senior Managers, -11- (iii) Senior Buyers, (iv) Buyers, (v) Store Managers, (vi) Exempt Managers, and (vii) Other Exempt Associates. (i) "Salary" shall mean an Associate's regular annual salary from the Company on his Termination Date exclusive of overtime, bonuses, awards, imputed income or extraordinary payments. When used in connection with the computation of the amount of an Associate's Severance Allowance, the Program Administrator shall employ the following guidelines: the monthly Salary rate shall be computed by dividing the Associate's Salary by 12, the weekly Salary rate shall be computed by dividing the Associate's Salary by 52, and the daily Salary rate shall be computed by dividing the weekly Salary rate by five. An Associate's Salary shall be determined by the Program Administrator and its determination shall be final and binding on all parties. (j) "Severance Allowance" shall mean a payment or payments as may be provided herein to an Associate upon termination of active employment in consideration of the Associate's tenure and performance with the Company and the probability that the Associate will suffer economic hardship until the Associate obtains a new income-earning position and in further consideration of the execution of such release as shall be determined to be necessary by the Program Administrator. The amount of any Severance Allowance may be reduced by any monies arising out of the employment relationship which the Associate may owe to the Company. Payments shall be reduced by any required deduction for taxes, withholding or benefits provided or elected hereunder. Such pay shall not be extended by holidays occurring during the covered period. Any portion of the severance allowance to be paid in installments shall not be paid if the Associate shall become actively employed as determined by the Program Administrator. (k) "Severance Allowance Period" shall mean the period beginning on the Associate's Termination Date through and including the ending date used as the basis for the calculation of the Severance Allowance benefit, or, if earlier, the date the Associate becomes actively employed as determined by the Program Administrator. (l) "Termination Date" shall mean the last official work day for which an Associate receives pay for Active Service, excluding any period for which Severance Allowance or other benefit payments hereunder are made. -12- Section 3 Eligibility for Severance Allowance Any Officer or Salaried Associate who is separated from employment shall be eligible for Severance Allowance in accordance with the following rules and restrictions: (a) If an Associate ceases employment for any of the following reasons, he will be entitled to receive a Severance Allowance as described below: (i) elimination of his or her position, unless the Associate is offered a comparable or better position with the Company as determined by the Program Administrator, (ii) termination of his or her employment other than for Misconduct, (iii) constructive or voluntary termination, within sixty (60) days of such termination, due to a material reduction in salary, (iv) constructive or voluntary termination, within sixty (60) days of such termination, due to a material change in job responsibilities, (v) termination of his or her employment with the Company on account of the Associate's Permanent Disability, or (vi) termination due to liquidation of the Company under the provisions of chapter 11 of the Bankruptcy Code or a conversion to a proceeding under chapter 7 of the Bankruptcy Code. Section 4 Calculation of Severance Allowance The amount of any Severance Allowance, shall be calculated as follows: Tier 1: Executive Vice Presidents and Senior Vice Presidents The Severance Allowance shall consist of: (a) Eighteen (18) months' Salary, one-half (1/2) payable in a lump sum payment made as soon as administratively possible after the Associate's Termination Date and one-half (1/2) payable in substantially equal monthly -13- installments over a nine (9) month period with installment payments commencing on the first day of the tenth month following the Termination Date; or, if the Associate shall not execute a general release acceptable to the Program Administrator, one week's salary; (b) Reimbursement for reasonable expenses, as determined by the Program Administrator, incurred by the Associate in the pursuit of subsequent employment, including any reputable outplacement assistance, up to a maximum of $10,000. The Associate shall be entitled to such payments until the first day of the month following the month in which the Associate is reemployed or the end of the six-month period beginning on the Termination Date, whichever shall occur first; and (c) Continued medical, dental and disability coverage under the current Company plans for a period of three (3) months following the Associate's Termination Date. In lieu of continued coverage pursuant to this provision of the Program, an Associate may elect to receive the present value of the continued coverage in a lump sum payment made as soon as administratively possible after the Associate's Termination Date by filing his choice with the Company in writing within fourteen (14) days following the Termination Date. Any benefits or payments under this section shall be in addition to any extended group health plan coverage to which the Associate is entitled under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. Tier 2: Vice Presidents and Treasurer The Severance Allowance shall consist of: (a) Twelve (12) months' Salary, one-half (1/2) payable in a lump sum payment made as soon as administratively possible after the Associate's Termination Date and one-half (1/2) payable in substantially equal monthly installments over a six (6) month period with installment payments commencing on the first day of the seventh month following the Termination Date; or, if the Associate shall not execute a general release acceptable to the Program Administrator, one week's salary; (b) Reimbursement for reasonable expenses, as determined by the Program Administrator, incurred by the Associate in the pursuit of subsequent employment, including any -14- reputable outplacement assistance, up to a maximum of $7,500. The Associate shall be entitled to such payments until the first day of the month following the month in which the Associate is reemployed or the end of the six-month period beginning on the Termination Date, whichever shall occur first; and (c) Continued medical, dental and disability coverage under the current Company plans for a period of three (3) months following the Associate's Termination Date. In lieu of continued coverage pursuant to this provision of the Program, an Associate may elect to receive the present value of the continued coverage in a lump sum payment made as soon as administratively possible after the Associate's Termination Date by filing his choice with the Company in writing within fourteen (14) days following the Termination Date. Any benefits or payments under this section shall be in addition to any extended group health plan coverage to which the Associate is entitled under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. Tier 3: All Salaried Associates The Severance Allowance payable to a Salaried Associate shall be based upon the Associate's Length of Service and shall be determined according the following schedule: ASSOCIATE CLASSIFICATION SEVERANCE ALLOWANCE Class A: Directors, Senior Three (3) weeks' Salary Managers, Senior Buyers for each year of Active (Pay Grades 10 and above) Service, but in no event less than 12 weeks' Salary or in excess of 26 weeks' Salary (minimum 12 weeks, maximum 26 weeks) Class B: Buyers, Store Managers Two (2) weeks' salary for each year of Active Service, but in no event less than 12 weeks' Salary or in excess of 26 weeks' Salary (minimum 12 weeks, maximum 26 weeks) Class C: Exempt Managers, Other Two (2) weeks' Salary for -15- Exempt Associates each year of Active (Pay Grades 7 through 9) Service, but in no event less than 6 weeks' Salary or in excess of 26 weeks' Salary (minimum 6 weeks, maximum 26 weeks) -16- Class D: Exempt Associates One (1) week's Salary for (Pay Grades 1 through 6) each year of Active Service, but in no event less than 4 weeks' Salary or in excess of 12 weeks' Salary (minimum 4 weeks, maximum 12 weeks) The above severance amounts shall be payable in weekly installments with the initial installment beginning as soon as possible after the Termination Date. Installment payments made under Tiers 1, 2 and 3 shall cease upon such date that the Associate shall become actively employed as determined by the Program Administrator. Furthermore, if the Associate shall not execute a general release acceptable to the Program Administrator the maximum severance amounts shall be one week's salary. Section 5 General Provisions Governing Severance Allowances (a) The terms of this Program shall not affect the provision of benefits under other plans or programs of the Company which other plans or programs shall be governed solely by their terms and applicable law. The benefits under any other plan or program of the Company are not continued as a result of a Severance Allowance other than those mandated by Federal or state regulations. (b) Any portion of a Severance Allowance payable in installments shall cease at such time as the Associate obtains employment with another employer. (c) An Associate who is dismissed due to Misconduct shall not be eligible for a Severance Allowance or any other benefits hereunder. (d) In no event shall any Severance Allowance (1) be paid over a period longer than twenty-four (24) months; (2) exceed 200% of the Associate's annual compensation as of the Termination Date; or (3) be structured so that the payments constitute an employee pension benefit plan as defined by Title I, Section 3 of ERISA. (e) As a condition to receiving a Severance Allowance from the Corporation, an Associate must immediately notify in writing the Personnel Department of the Company if the Associate shall obtain new employment. If the Associate fails to timely or accurately provide written notification, as determined by the Program Administrator, the Company shall be entitled to terminate Severance Allowance payments to the Associate and to recover from -17- the Associate the amount of any Severance Allowance payments previously made to the Associate equal to the amount which was erroneously paid on account of the failure to provide timely notice. (f) The fact that an Associate is employed in a secondary part-time position with another employer at the time of his termination of employment with the Company shall have no adverse effect on his eligibility for Severance Allowance under this Program, as determined by the Program Administrator in its discretion. Section 6 Administrative Information The Program Administrator shall have the responsibility for the administration of the Program, and shall have the discretionary authority to determine eligibility for benefits under the Program, to otherwise administer the Program and to construe the terms of the Program, and its decisions shall be final and binding on all affected parties. Section 7 Powers and Duties of Program Administrator In addition to any implied powers and duties that may be needed to carry out the provisions of the Program, the Program Administrator shall have the following specific powers and duties, which powers and duties it may exercise in its discretion: (a) To make and enforce such rules and regulations as it shall deem necessary and proper for the efficient administration of the Program; (b) To interpret the Program and to decide any and all matters arising hereunder, including the right to interpret and remedy possible ambiguities, inconsistencies or omissions (c) To determine and compute the amount of benefits that shall be payable to any Associate, in accordance with the provisions of the Program; (d) To appoint other persons to perform such responsibilities under the Program as it may determine; and (e) To employ one or more persons to render advice with respect to any of its responsibilities under the Program. Section 8 Appeals Procedure -18- If an Associate eligible for a Severance Allowance or his legal representative or other person designated by the Program Administrator to receive payment on the Associate's behalf (the "claimant") is denied benefits under this Program or disagrees with the amount of or the determination of his entitlement to a Severance Allowance, if any, he may request a review of his claim by notifying the Program Administrator in writing. The request shall be reviewed and the claimant shall be notified of the Program Administrator's decision within ninety (90) days. If the appeal is denied, the notice shall explain the reason of the denial, quoting the sections of the Program or other pertinent documents, if any, used to arrive at this decision; shall provide a description of any additional material or information that would be helpful to the Program Administrator in further review of the claim and reasons why such material or information is necessary; and shall provide an explanation of the claims review procedure. If the notice does not resolve the claim to the claimant's satisfaction, he may appeal the decision by filing a written request for a hearing before the Program Administrator. This written request must be filed with the Program Administrator within 60 days after the claimant has received the written decision of the Program Administrator. The claimant may review any applicable documents and may also submit points of disagreement or other comments in writing. The Program Administrator, in its discretion, may schedule a meeting with the claimant and/or his representative within sixty (60) days after the claimant has filed the request for review. Within sixty (60) days of the date of the receipt of the appeal by the Program Administrator, the claimant shall receive written notice of the Program Administrator's final decision. However, if a hearing is held or there are other special circumstances involved, the decision shall be given no later than within one hundred and twenty (120) days of the date of the receipt of the appeal. The Program Administrator shall interpret the appeals procedure set forth in this Section 8 so as to conform to the requirements of the claims review provisions of Part 5, Title I of ERISA. Section 9 Miscellaneous Provisions (a) Payments hereunder shall be made from the general assets of the Company pursuant to Program provisions. (b) Service of legal process may be made upon the secretary of the Company at the office of the Company, or upon such other person as shall be designated by the Company. -19- (c) Except to the extent preempted by ERISA, the Program shall be construed in accordance with the laws of the State of North Carolina. (d) Every fiduciary shall, unless exempt by ERISA, be bonded in accordance with the requirements of ERISA. The bond shall provide protection to the Program against any loss by reason of acts of fraud or dishonesty by the fiduciary or in connivance with others. The cost of the bond shall be an expense of the Company. (e) When any person entitled to benefits under the Program is under legal disability or, in the Program Administrator's opinion, is in any way incapacitated so as to be unable to manage his or her affairs, the Program Administrator may cause such person's benefits to be paid to such person's legal representative for his or her benefit or to be applied for the benefit of such person in any other manner that the Program Administrator may determine. Such payments of benefits shall completely discharge the liability of the Program Administrator or the Company for such benefits. (f) The records of the Program shall be maintained on the basis of the taxable year of the Company. (g) The Program Administrator shall cause the timely filing with proper governmental authorities and timely furnishing to all participants of all documents required by ERISA to be so filed and furnished. (h) Except for the right to receive any benefit payable under the Program, no person shall have any right, title or interest in or to the assets of the Company because of the Program. (i) Rights of any Associate to be employed shall not be deemed to be enlarged or diminished by reason of the establishment of the Program, and no Associate shall have any right to be retained in the service of the Company by way of this Program that he would not otherwise have. (j) Nothing contained in the Program shall impose on the Program Administrator, the Company, or any directors, officers or employees of the Company any liability for the payment of benefits under the Program other than liabilities resulting from willful neglect or fraud. The liability of the Company for benefits shall be limited to the benefits provided under the Program. Persons entitled to benefits under the plan shall look only to the Company for payment. (k) Where the context permits, words in the masculine gender -20- shall include the feminine gender and the singular shall include the plural. (l) The headings and subheadings of the Program have been inserted for convenience of reference and shall be disregarded in any construction of the provisions hereof. (m) The Company agrees to indemnify and to defend to the fullest extent permitted by law any employee serving as the Program Administrator or as a member of a committee designated as Program Administrator (including any employee or former employee who formerly served as Program Administrator or as a member of such Committee) against all liabilities, damages, costs and expenses (including attorney's fees and amounts paid in settlement of any claims approved by the Employer) occasioned by any act or omission to act in connection with the Program, if such act or omission is in good faith. (n) If any provision of the Program shall be invalid or unenforceable for any reason, the remaining provisions shall nevertheless be carried into effect. This ____ day of ____________, 1994. ROSE'S STORES, INC. ATTEST: By:__________________________ President ___________________________ Secretary (Corporate Seal) -21- -----END PRIVACY-ENHANCED MESSAGE-----