Exhibit 10.32

 

MANAGEMENT COMPENSATION AGREEMENT
FOR THE PRESIDENT OF FRED’S INC.

 

MICHAEL BLOOM

 

This Management Compensation Agreement ( "Agreement"), is made, and entered into
and is effective as of January 12, 2015, by and between Fred’s Inc., a Tennessee
corporation, with offices at 4300 New Getwell Road, Memphis, Tennessee 38118
("Company") and Michael Bloom, whose address is 115 Green Street, Canton,
Massachusetts, 02021 ("Executive").

 

In consideration of the mutual covenants and conditions herein set forth, the
parties hereto agree and each of them agrees as follows:

 

1.Term

 

Company hereby agrees to employ Executive to serve as its “President and Chief
Operating Officer” for a term of three (3) years commencing from and after
January 12, 2015 (the "Initial Term"). At the end of the Initial Term and at the
end of each successive Additional Term (defined below), the term of this
Agreement shall be automatically extended annually for an additional one (1)
year term unless either party provides six (6) month’s notice to the other party
prior to the end of the term (each an "Additional Term").

 

2.Position and Duties

 

Executive agrees to serve as Company's "President and Chief Operating Officer"
during the term of this Agreement. As such, Executive shall have and agrees to
assume primary responsibility (subject at all time to the control of the
Chairman of the Board of Company) for matters assigned to him by the Chief
Executive Officer. In the performance of such duties, Executive agrees to make
available to Company his professional and managerial knowledge and skill and
such portion of his time as may be required for the proper fulfillment of his
duties. In addition, during the term of this Agreement, Executive agrees to
serve as Company’s President and Chief Operating Officer and in such other
offices and capacities to which he may be appointed or elected by the Board of
Directors of Company consistent with this Agreement.

 

3.Compensation and Benefits

 

(a)          Base Salary. As compensation for all of the services to be
performed hereunder, Company agrees to pay and Executive agrees to accept an
“Annual Base Salary” of $500,000 commencing the date of this Agreement.
Provided, however, that Executive's Annual Base Salary shall be increased to
$550,000 beginning with Company’s Fiscal Year 2016 and to $700,000 upon
promotion. The Annual Base Salary of Executive during the term of this Agreement
shall be reviewed annually and may adjust upward from the aforesaid level at the
discretion of the Chief Executive Officer and Board of Directors of Company.
Executive's compensation will be paid in conformity with Company's practice for
payment of its executives' compensation, as such practice may be established or
modified from time to time.

 

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(b)          Annual Cash Incentive. Executive shall be eligible to receive a
”Cash Incentive Bonus” under Company’s annual incentive plan of 75% - 150% of
Executive's Annual Base Salary. During the Initial Term, Executive shall receive
a minimum Cash Incentive Bonus under this paragraph of 50% of Executive’s Annual
Base Salary provided Company achieves minimum targets mutually agreed upon by
the CEO and Executive. Eligibility to receive a bonus under this paragraph shall
be contingent upon Executive remaining in continuous service and in good
standing throughout the performance year period and up to the payment date. The
amount of any Cash Incentive Bonus above the aforesaid minimum will be based
upon the achievement of pre-established performance goals agreed upon by the CEO
and Board of Directors and the Executive. (No bonus will be awarded for the
partial month of service at the end of FY2014.) It is anticipated that bonuses
under this section, if any, will be paid on or before April 15 following the
applicable performance year.

 

(c)          Annual Stock Incentive. Executive shall be eligible to receive an
“Annual Stock Incentive” under Company’s Restricted Stock Leadership Program in
the following amounts: Fiscal Year 2015, $400,000; Fiscal Year 2016, $450,000;
and Fiscal Year 2017, $600,000. During each Additional Term, Executive’s Annual
Stock Incentive shall be an amount equal to 80% of Executive’s Annual Base
Salary payable half in restricted stock of the Company and half in options to
purchase stock of the Company. The Annual Stock Incentive award will be based
upon the achievement of Company reaching pre-determined annual performance goals
agreed upon between the CEO and Board of Directors and Executive; these programs
may utilize the same or separate goals from the Annual Cash Incentive program.
The number of shares and options to be awarded will be determined using the fair
market value on the date of grant. Stock option and restricted shares will vest
ratably on an annual basis over a four year period beginning on the first
anniversary of the date of grant. Executive, will also be eligible to receive an
additional amount equal to $250,000 in Fiscal Year 2015; $250,000 in Fiscal Year
2016; $400,000 in Fiscal Year 2017; and 50% of Executive’s Annual Base Salary
during each Additional Term, payable in options to purchase stock of the Company
for achieving 125% of the mutually agreed upon pre-determined performance goals
to qualify for the Annual Stock Incentive.

 

(d)          Employment Incentive. Company shall, as an inducement to join the
Company do the following:

 

(i) Issue to Executive an amount of restricted shares equal to $1,000,000
divided by the fair market value on the grant date (calculated as the closing
price on the date of grant.) The shares shall be granted as of January 12, 2015.
Restrictions will lapse ratably on an annual basis over a four year period
beginning on the first anniversary of the date of grant, provided that Executive
has remained in continuous service and in good standing.

 

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(ii) Upon promotion, issue an amount of restricted shares equal to $500,000
divided by the fair market value on the grant date (calculated as the closing
price on the date of grant.). The shares shall be granted as of the day
Executive is promoted. Restrictions will lapse ratably over a four year period
beginning on the first anniversary of the date of grant, provided that Executive
has remained in continuous service and in good standing.

 

(e)          Other Benefits. Company will make available to Executive such
benefits on the same terms as are or shall be granted or made available by
Company to its other executive employees, to the extent that Executive shall
become qualified or eligible for such employee benefits or any of them,
including at Company’s discretion (i) be considered for any bonus awards on the
same basis as are other executives of Company, and (ii) be considered for and
granted qualified options and other consideration based upon shares of Company’s
Common Stock on the same basis as are other executives of Company; provided,
however, that Company shall seek to establish the terms of such bonus awards,
qualified options or other consideration so as not to subject Executive to
additional taxes under Section 409A. Company shall also provide Executive with
the following additional benefits:

 

(i) Relocation. Company shall assign a relocation specialist to work with
Executive and his family on relocating from Canton, Massachusetts to the greater
Memphis, TN Area. Fred's will provide reimbursement for the reasonable packaging
and transportation expenses of Executive's basic household items consistent with
Fred’s relocation policy. Company shall provide six (6) paid trips to Memphis,
TN, if needed, for Executive and his spouse to work with a corporate realtor.
Such expenses that shall be paid by Company included, but are not limited to,
coach airfare, accommodations, and normal house-hunting expenses. If Executive
voluntarily terminates his employment prior to completing two (2) years of
employment, Executive shall reimburse Company for the relocation reimbursements
provided pursuant to this paragraph.

 

(ii) Health Coverage. Executive shall be eligible for Company's health and
dental coverage, life insurance, flexible spending accounts, and other Company
benefits commencing on January 12, 2015. This plan is subject to IRS flexible
spending account guidelines; therefore, currently, the unused funds will not
roll over to the next calendar year.

 

(iv) 401(K). Executive shall be eligible to participate in Company's 401(K) plan
and the Employee Stock Purchase Plan after meeting the eligibility requirements
of each.

 

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(v) Temporary Housing. Company shall provide to Executive temporary housing in
the Memphis, TN area for up to one (1) year.

 

(vi) Car Allowance. Executive will be provided a Company car, or equivalent car
allowance, according to Company policy, which will be available for personal
use, as well as repairs and maintenance related to the Company car. You will be
responsible for any income taxes payable related to this benefit.

 

(vii) Vacation. Executive shall be eligible to take four (4) weeks of vacation
as of January 12, 2015, and Executive shall accrue vacation at the rate of four
(4) weeks per annum in accordance with Company's vacation plan; provided
further, that Executive shall not accrue more than four (4) weeks of vacation.

 

4.Expense Reimbursement.

 

Company shall reimburse Executive, upon the submission of receipts or vouchers
therefore, for all necessary expenses and disbursements reasonably incurred by
him for the proper performance of his duties with the Company. Executive, as a
condition to such reimbursement, shall submit reports of such expenses and
disbursements to the Chief Financial Officer of Company (i) not later than one
month from the date such expenses and disbursements are incurred and
determinable and (ii) in a form and with such detail as will constitute a proper
record of tax deductible expenses, (iii) together with proper vouchers and
receipts therefore.

 

5.Termination of Employment.

 

(a)          Upon Death. Executive's employment shall terminate upon his death.

 

(b)          By Company. Company may terminate Executive's employment hereunder
at any time with or without Cause.

 

(c)          By Executive. Executive may terminate his employment hereunder at
any time for Good Reason or Disability.

 

(d)          Notice of Termination, Payments. Any termination of Executive's
employment hereunder (other than by death) shall be communicated by thirty (30)
days' advance written Notice of Termination by the terminating party to the
other party to this Agreement; provided that no Notice of Termination is
required in advance if the Executive is terminated by Company for Cause.

 

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6.Payments in the Event of Termination of Employment.

 

(a)          Payments in the Event of Termination by Company for Cause or Death
or Disability. If Executive's employment hereunder is terminated by Company for
Cause, as a result of death or Disability, Company shall pay Executive (a) his
accrued and unpaid Base Salary through the Date of Termination and (b) any
vested or accrued and unpaid payments, rights or benefits Executive may be
otherwise entitled to receive pursuant to the terms of any accrued but unused
vacation or other employee benefit or compensation plan (but not any Annual
Stock or Cash Incentive Program) maintained by Company at the time or times
provided therein. In addition, in the event that Executive’s employment is
terminated by death or Disability, all stock options provided as an Employment
Incentive under Section 3(d) of this Agreement shall vest and all restrictions
on restricted stock provided as an Employment Incentive under Section 3(d) of
this Agreement shall immediately lapse.

 

(b)          Payments in the Event of Termination by Company other than for
Cause or by Executive for Good Reason. If Executive's employment hereunder is
terminated by Company other than for Cause, or by Executive for Good Reason, and
Executive experiences a Separation From Service:

 

(i) Company shall pay Executive (1) his accrued and unpaid Base Salary through
the Date of Termination, (2) any accrued and unpaid bonus or additional
compensation under any Annual Cash Incentive plan for any fiscal year ended
before the Date of Termination, and (3) any vested or accrued and unpaid
payments, rights or benefits Executive may be otherwise entitled to receive
pursuant to the terms of any accrued but unused vacation or other employee
benefit or compensation plan (but not any Annual Stock or Cash Incentive
Program) maintained by Company at the time or times provided therein.

 

(ii) In addition to the compensation and benefits described in Section 6(a)(i):

 

In the event of Executive’s involuntary Separation From Service by Company
action other than for Cause or Separation From Service by Executive for Good
Reason beyond the first two years of the Initial Term, Company shall pay
Executive, in substantially equal installments at Executive's regular pay
intervals in effect prior to such Separation From Service, over a period of
twelve (12) months beginning no later than the first regular Company payroll
payment date (the "First Severance Payment Date") which occurs within thirty
(30) days following the later of (x) Executive's Separation From Service and (y)
the lapse of any right of Executive to revoke the general release he will have
signed substantially (as determined by counsel to Company) in the form attached
hereto as Attachment "B" (the "General Release", which General Release must be
executed within twenty one (21) days following the Separation From Service for
any such amount to be payable), an aggregate amount equal to the Executive's
Annual Base Salary.

 

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In the event of Executive’s involuntary Separation From Service by Company
action other than for Cause or Separation From Service by Executive for Good
Reason, during the first two years of the Initial Term, Company shall pay an
aggregate amount equal to the Annual Base Salary multiplied by the number of
years remaining on the Initial Term and shall be paid in substantially equal
installments at Executive's regular pay intervals in effect prior to such
Separation From Service, over the period of time remaining under the Initial
Term.  For example, should Executive be terminated other than for cause after 10
months of service, the amount owed would be 2 and 1/6 years times Executive’s
Annual Base Salary and paid out over the next 26 months.

 

(iii)Until the earlier of the first anniversary of Executive's Separation From
Service or the date Executive is employed by a new employer, the Executive, his
dependents, beneficiaries and estate shall be entitled to all benefits under
Company's group medical and dental insurance plans as if the Executive were
still employed by Company hereunder during such period, with benefits or premium
payments, as applicable, to be paid with the same frequency and at the same time
as applies for active employees of the Company.

 

(iv)On the date of Separation From Service, Executive's rights under any
compensation or benefits programs shall become vested and any restrictions on
stock options or contractual rights granted to Executive shall be removed.

 

(v)All stock options provided as an Employment Incentive under Section 3(d) of
this Agreement shall vest and all restrictions on restricted stock provided as
an Employment Incentive under Section 3(d) of this Agreement shall immediately
lapse.

 

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(vi)Notwithstanding any other provision of this Agreement to the contrary, in
the case of any compensation which is subject to Code Section 409A, if the
Executive is a Specified Employee at the time of a Separation From Service and
the payment or provision of such compensation is made as a result of the
Separation From Service, then no portion of such benefits or other such
compensation shall be made before the date that is six (6) months after the date
of the Separation from Service or, if earlier, the date of death of the
Specified Employee. Any compensation which would otherwise be paid within such
six (6) month period after a Separation From Service shall be paid on the date
which is six (6) months and one day after the Separation From Service, or the
first business day thereafter. The provisions and application of this paragraph
will be construed and applied in a manner consistent with Code Section 409A and
Treasury Regulations of other guidance issued thereunder.

 

(c) Notwithstanding anything else to the contrary in this Agreement, Company's
obligation regarding the payments, benefit continuation and acceleration
provided for in this Section 6 is expressly conditioned upon the execution,
delivery and non-revocation of the General Release.

 

(d)          Payment in the Event of Termination Upon Change in Control of
Company.

 

(i) If in the eighteen-month period following the Change in Control, Executive
is terminated for any reason other than Cause, then upon any such Separation
From Service Company shall be obligated to make the payments and provide the
benefits to Executive as set forth in Section 6.

 

(ii) Nothing set forth in Section 6(d) is intended or shall be construed to
limit Executive's right to terminate his employment for Good Reason during the
aforementioned eighteen-month period or to limit Company's obligation to make
the payments or provide the benefits set forth in Section 6 upon events
described in Section 6.

 

(iii) Executive shall not be required to mitigate the amount of any payment
provided for in this Section 6 by seeking other employment or otherwise, and no
such payment shall be offset or reduced as a result of Executive obtaining new
employment.

 

7.Board/Committee Resignation.

 

Executive's termination of employment or Separation From Service for any reason,
shall constitute, as of the date of such termination and to the extent
applicable, a resignation as an officer of Company and a resignation from the
Board (and any committees thereof) and the Board of Directors (and any
committees thereof) of any of Company's affiliates and from the board of
directors or similar governing body of any corporation, limited liability
company or other entity in which Company or any affiliate holds an equity
interest and with respect to which board or similar governing body Executive
serves as Company's or such affiliate's designee or other representative.

 

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8.Confidentiality, Non-Competition, Non-Solicitation, Non-disparagement.

 

(a)          Confidentiality. While employed by Company and thereafter,
Executive shall not disclose any Confidential Information either directly or
indirectly, to anyone (other than appropriate Company employees and advisors),
or use such information for his own account, or for the account of any other
person or entity, without the prior written consent of Company or except as
required by law. This confidentiality covenant has no temporal or geographical
restriction. For purposes of this Agreement, "Confidential Information" shall
mean all non-public information respecting Company's business, including, but
not limited to, its services, pricing, scheduling, products, research and
development, processes, customer lists, marketing plans and strategies, and
financing plans, but excluding information that is, or becomes, available to the
public (unless such availability occurs through an unauthorized act on the part
of Executive). Upon termination of this Agreement, Executive shall promptly
supply to Company all property and any other tangible product or document that
has been produced by, received by or otherwise submitted to Executive during or
prior to his term of employment, and shall not retain any copies thereof.

 

(b)          Non-Competition. Executive acknowledges that his services are of
special, unique and extraordinary value to Company. Accordingly, the Executive
shall not at any time prior to the end of the Initial Term or twelve months
after the Date of Termination (whichever is later) become an employee,
consultant, officer, partner or director or provide services in any fashion to
any Competitor with Company (or any of its affiliates). If this Agreement is not
renewed pursuant to Section 1, this Section shall not apply after expiration of
the Agreement.

 

(c)          Non-Solicitation. Executive shall not, at any time prior to the end
of the Initial Term or at any time prior to twelve months after the Date of
Termination (whichever is later), whether on Executive's own behalf or on behalf
of or in conjunction with any person, company, business entity or other
organization whatsoever, directly or indirectly, (x) solicit or encourage any
employee of Company or its affiliates to leave the employment of Company or its
affiliates or (y), without permission of Company, knowingly hire a former
employee of Company or its affiliates.

 

(d)          Non-Disparagement. While employed by Company and at any time after
the Date of Termination, Executive agrees not to make any untruthful or
disparaging statements, written or oral, about Company, its affiliates, their
predecessors or successors or any of their past and present officers, directors,
stockholders, partners, members, agents and employees or Company's business
practices, operations or personnel policies and practices to any of Company's
customers, clients, competitors, suppliers, investors, directors, consultants,
employees, former employees, or the press or other media in any country.

 

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(e)          Condition and Remedies. Notwithstanding the foregoing, if Executive
is entitled to any payments under Sections 6(b) hereof, then Executive's
obligations pursuant to this Section 8 are specifically conditioned on Company
paying (whether in installments or as a lump sum, as required herein) any
amounts to which Executive may be entitled thereunder in the manner required.
Executive agrees that any breach of the terms of this Section 8 would result in
irreparable injury and damage for which there would be no adequate remedy at
law, and that, in the event of said breach or any threat of breach, Company
shall be entitled to (i) an immediate injunction and restraining order to
prevent such breach or threatened breach, without having to prove damages and
(ii) any other remedies to which Company may be entitled at law or in equity.
Executive further agrees that the provisions of the covenant not to compete are
reasonable. Should a court determine, however, that any provision of the
covenant not to compete is unreasonable, either in period of time, geographical
area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court deems
reasonable. The provisions of this Section 8 shall survive any termination of
this Agreement and Executive's term of employment. The existence of any claim or
cause of action or otherwise, shall not constitute a defense to the enforcement
of the covenants and agreements of this Section 8.

 

8.Successors and Assigns.

 

(a) This Agreement shall bind any successor to Company, whether by purchase,
merger, consolidation or otherwise, in the same manner and to the same extent
that Company would be obligated under this Agreement if no such succession had
taken place.

 

(b) This Agreement shall not be assignable by Executive. This Agreement and all
rights of Executive hereunder shall inure to the benefit of and be enforceable
by, Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributes, devises and legatees.

 

9.Term.

 

The term of this Agreement shall commence on the Effective Date and end upon
Executive's termination of employment. The rights and obligations of Company and
Executive shall survive the termination of this Agreement to the fullest extent
necessary to give effect to the terms hereof.

 

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10.Notices.

 

Notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered by hand or
e-mail, the day after delivery to Federal Express for overnight delivery, two
days after delivery to the United States Postal Service for mailing, addressed:

 

(a) if to Executive, to the address set forth on the signature page hereto, and

 

(b) if to Company, Fred’s Inc., 4300 New Getwell Road, Memphis TN 38118
Attention: Chairman of the Board of Directors, or, in each case, to such other
address as may have been furnished in writing.

 

11.Withholding.

 

All payments required to be made by Company hereunder shall be subject to the
withholding and/or deduction of such amounts as are required to be withheld or
deducted pursuant to any applicable law or regulation. Company shall have the
right and is hereby authorized to withhold or deduct from any compensation or
other amount owing to Executive, applicable withholding taxes and deductions and
to take such action as may be necessary in the opinion of Company to satisfy all
obligations for the payment of such taxes or deductions.

 

12.Certain Defined Terms.

 

As used herein, the following terms have the following meanings:

 

"Agreement" shall mean this Management Compensation Agreement, as the same may
be amended, supplemented or otherwise modified from time to time in accordance
herewith.

 

"Affiliate" shall mean any corporation, trust, partnership, limited liability
company or other organization which controls, is controlled by, or is under
common control with Company.

 

"Base Salary" shall mean the salary of Executive in effect from time to time
under Section 3.

 

"Board" shall mean the Board of Directors of Company.

 

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"Cause" shall mean with respect to termination by Company of Executive's
employment hereunder (i) an act or acts of dishonesty by Executive resulting in,
or intended to result in, directly or indirectly, any personal enrichment of
Executive, (ii) an act or acts of dishonesty by Executive intended to cause
substantial injury to Company, (iii) material breach (other than as a result of
a Disability) by Executive of Executive's obligations under this Agreement which
action was (a) undertaken without a reasonable belief that the action was in the
best interests of Company and (b) not remedied within a reasonable period of
time after receipt of written notice from Company specifying the alleged breach,
(iv) Executive's conviction of, or plea of nolo contendere to, (a) a crime
constituting a felony under the laws of any country, the United States or any
state thereof or (b) a misdemeanor involving moral turpitude, (v) a material
breach of (a) Company's policies and procedures in effect from time to time or
(b) the provisions of this Agreement; provided, however, that such breach shall
constitute "Cause" only if Company gives Executive notice pursuant to Section 9
hereof, which shall include a detailed and specific description of the alleged
material breach or breaches.

 

"Change in Control" shall have the meaning given such term in the Company’s
Long-Term Incentive Plan in effect on the effective date of this Agreement.

 

“Competitor” shall include, without limitation, the following businesses:
Wal-Mart, K-Mart/Sears, Family Dollar, Dollar General, Big Lots, Variety
Wholesalers, Retail Ventures, Inc. (including, without limitation, its
subsidiaries Value City Department Stores, DSW, and Filene’s Basement) and
Dollar Tree (and/or any other trade name or similar business used by any of the
foregoing businesses, their parents, affiliates, subsidiaries, successors or
assigns), and Walgreen’s, CVS, and Rite Aid (and/or any other trade name or
similar business used by any of the foregoing businesses, their parents,
affiliates, subsidiaries, successors or assigns). The parties expressly
recognize that the term “Competitor” shall not be limited by this Agreement and
that such term may expand to include other businesses, industries and/or markets
in which Company may engage from time to time.

 

"Date of Termination" shall mean, with respect to Executive, the date of
termination of Executive's employment hereunder after the notice period provided
by Section 5(d).

 

"Disability" shall mean Executive's physical or mental condition which prevents
continued performance of his duties hereunder, if Executive establishes by
medical evidence that such condition will be permanent and continuous during the
remainder of Executive's life or is likely to be of at least three (3) years
duration.

 

"Effective Date" shall mean January 12, 2015.

 

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"Good Reason" shall mean with respect to an Executive, any one or more of the
following:

 

(a)          a material reduction in Executive's Base Salary or level of target
bonus under the bonus plan or any successor bonus plan without Executive's
consent;

 

(b)          any substantial and sustained diminution in Executive's position,
authority, or responsibilities hereunder (unless due to Executive's disability);
or

 

(c)          a failure by Company to comply with any provision of this
Agreement; provided, however, that the foregoing events shall constitute Good
Reason only if Company fails to cure such event within thirty (30) days after
receipt from Executive of written notice of the event which constitutes Good
Reason; provided, further, that "Good Reason" shall cease to exist for an event
on the 90th day following the later of its occurrence or Executive's knowledge
thereof, unless Executive has given Company written notice thereof prior to such
date.

 

In order for Executive's termination of his employment to be considered for Good
Reason, such termination must occur within six (6) months after the event giving
rise to such Good Reason. Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder.

 

"Notice of Termination” shall mean a notice specifying the Date of Termination.

 

“Separation From Service” means the time at which the parties reasonably
anticipate that no further services will be performed by Executive after a
certain date, or that the level of bona fide services Executive would perform
after such date (whether as an employee or as an independent contractor) would
permanently decrease to no more than 20 percent of the average level of bona
fide services performed (whether as an employee or an independent contractor) by
the individual over the immediately preceding 36-month period. If Executive
provides services both as an employee and as an independent contractor,
Executive must separate from service both as an employee and as an independent
contractor to be treated as having a Separated From Service. If Executive ceases
providing services an employee and begins providing services as an independent
contractor, Executive will not be considered to have a Separation From Service
until Executive has ceased providing services in both capacities. The provisions
and application of this paragraph will be construed and applied in a manner
consistent with Code Section 409A and Treasury Regulations of other guidance
issued thereunder.

 

“Specified Employee” means a service provider who, as of the date of the service
provider’s Separation from Service, is a key employee of a service recipient any
stock of which is publicly traded on an established securities market or
otherwise. A key employee is any individual who is described in Code Section
416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the Regulations
thereunder and disregarding section 416(i)(5)) at any time during the 12-month
period ending on a Specified Employee identification date. The provisions and
application of this paragraph will be construed and applied in a manner
consistent with Code Section 409A and Treasury Regulations of other guidance
issued thereunder.

 

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13.Executive Representation.

 

Executive hereby represents to Company that the execution and delivery of this
Agreement by Executive and Company and the performance by Executive of
Executive's duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement or policy
to which Executive is a party or otherwise bound.

 

15Amendment.

 

No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by Executive
and an officer of Company authorized by the Board to do so. No waiver of any
provision of this Agreement shall be deemed a continuing waiver or a waiver of
any other provision, whether or not similar.

 

16.Governing Law.

 

The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Tennessee, without regard to
principles of conflicts of laws. The provisions of this Agreement are intended
to be construed and applied in a manner consistent with compliance with Code
Section 409A, where applicable. Accordingly, the provisions hereof shall be
construed and applied consistent with such intent, to the extent applicable.

 

17.Validity.

 

The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement which shall remain in full force and effect.

 

18.Specific Performance.

 

Notwithstanding Section 16 of this Agreement, if Executive breaches or threatens
to commit a breach of Section 8 of this Agreement, Company shall have the right
to specific performance (i.e., the right and remedy to have the terms and
conditions of Section 8 specifically enforced by a court of competent
jurisdiction), it being agreed that any breach or threatened breach of Section 8
would cause irreparable injury and that money damages may not provide an
adequate remedy. If Company exercises its right to seek specific performance in
a court of competent jurisdiction, Executive may assert any claims he may have
against Company or its affiliates in such action, and nothing set forth in
Paragraph 18 of this Agreement is intended or shall be construed to limit
Executive's right to assert such claims.

 

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19.Cooperation.

 

Executive shall provide his reasonable cooperation in connection with any
investigation, action or proceeding (or any appeal from any action or
proceeding) which relates to events occurring during Executive's employment
hereunder. This provision shall survive any termination of this Agreement.

 

20.Compensation Limitation

 

Notwithstanding the foregoing, Executive and Company agree that (i) to the
extent permitted by any Federal statute (the "Act") that limits compensation of
Executive hereunder, any payments or benefits payable to Executive under this
Agreement (including, without limitation, payments under Sections 2 and 4
hereof) or pursuant to any other compensation or benefit plan of Company or
other arrangement between Company and Executive that do not comply with the Act
shall be deferred until such payments or benefits may be paid under the Act, and
(ii) to the extent the Act does not permit the deferral of any such payments or
benefits, the maximum compensation and/or severance Executive may receive from
Company under this Agreement or any other compensation or benefit plan of
Company or other arrangement between Company and Executive will not exceed the
amount allowed under the Act.

 

21.Entire Agreement.

 

This Agreement, any award agreement between Company and Executive entered into
pursuant to Company's Long-Term Incentive Compensation Programs, and Company's
employee benefit plans in which Executive will continue to participate as
provided in this Agreement, contain the entire understanding between Company and
Executive with respect to Executive's employment with Company and supersede in
all respects any prior or other agreement or understanding between Company or
any affiliate of Company and Executive with respect to Executive's employment.

 

IN WITNESS WHEREOF, Company and Executive have executed this Agreement as of the
day and year first above written.

 

Fred’s, Inc.

 

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  By: /s/ Jerry A. Shore           Jerry A. Shore     Chief Executive Officer  
      EXECUTIVE:         /s/ Michael Bloom   Michael Bloom

 

General Release

 

This Release is made and entered into by Michael Bloom (the "Executive") and
Fred’s, Inc. (the "Company").

 

In consideration of the payments, benefit continuation and acceleration provided
for in Section 6(b)(ii)-(vi) of this Management Compensation Agreement,
Executive, on behalf of himself and for any person or entity who may claim by or
through him, irrevocably and unconditionally releases, waives, and forever
discharges Company, its past, present, and future subsidiaries, divisions,
affiliates, successors, and their respective officers, directors, attorneys,
agents, and present and past employees from any and all claims or causes of
action that Executive had, has, or may have relating to Executive's employment
with Company and/or termination therefrom up to and including the date of this
Agreement, including but not limited to any claims under Title VII of the Civil
Rights Act of 1964, as amended, the Tennessee Human Rights Act, the Age
Discrimination in Employment Act ("ADEA"), and claims under any other federal,
state, or local statute, regulation, or ordinance, including wrongful or
retaliatory discharge.

 

This Release shall not be construed as an admission by Company of any liability,
wrongdoing, or violation of any law, statute, regulation, agreement or policy,
and Company denies any such liability or wrongdoing.

 

Executive acknowledges and agrees that this Release includes a release and
waiver as to claims under the ADEA. Executive acknowledges and confirms that he
understands and agrees to the terms and conditions of this Release; that these
terms are written in layperson terms, and that he has been fully advised of his
rights to seek the advice and assistance of consultants, including an attorney,
to review this Release. Executive further acknowledges that he does not waive
any rights or claims under the ADEA that arise after the date this Release is
signed by him, and specifically, Executive understands that he is receiving
money and benefits beyond anything of value to which he is already entitled from
Company. Executive acknowledges that he has had up to 21 days to consider
whether to accept and sign this Release, and has had adequate time and
opportunity to review the Release and consult with any legal counsel or other
advisors of his choosing. Executive understands that if he signs this Release
before the expiration of the 21-day period, his signature will evidence his
voluntary election to forego waiting the full 21 days to sign this Release. If
Executive chooses not to accept, or the 21-day period expires without his
acceptance, then the offer in this Release is null and void. Executive further
acknowledges that in compliance with the Older Workers' Benefit Protection Act
of 1990, he has been fully advised by Company of his right to revoke and nullify
this Release, and that this revocation must be exercised, if at all, within
seven days of the date he signs this Release. Executive may revoke his
acceptance at any time within the seven days following his signing of this
Release by notifying Company of his decision to revoke the acceptance by writing
directed and delivered to Fred’s Inc., 4300 New Getwell Road, Memphis, TN 38118,
Attention Secretary.

 

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Acceptance of this offer is strictly voluntary. This Release shall become
effective and enforceable only after the seven-day revocation period has
expired. Should Executive decline to accept the benefits of this Release, or if
is revoked by him, Executive will not receive the proposed additional
compensation and benefits.

 

By his signature below, Executive accepts the terms of this Release.

 

FRED’S, INC.   EXECUTIVE             By:                   Name:     Name:      
      Title:     Address:                                                    
Date:     Date:  

 

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