Exhibit 10.1

 

SEVENTH AMENDMENT TO CREDIT AGREEMENT,
SECOND AMENDMENT TO AMENDED AND RESTATED ADDENDUM TO
CREDIT AGREEMENT, SECOND AMENDMENT TO SECURITY AGREEMENT, AND

RATIFICATION, REAFFIRMATION AND ASSUMPTION

 

THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT, SECOND AMENDMENT TO AMENDED AND
RESTATED ADDENDUM TO CREDIT AGREEMENT, SECOND AMENDMENT TO SECURITY AGREEMENT,
AND RATIFICATION, REAFFIRMATION AND ASSUMPTION (this “Amendment”) is dated as of
August 23, 2018, by and among (A) FRED’S, INC., a Tennessee corporation
(“Parent”); (B) the Subsidiaries of Parent identified on the signature pages
hereto as Borrowers (each of such Subsidiaries, together with Parent, jointly
and severally, “Borrowers” and, each, a “Borrower”); (C) the Subsidiaries of
Parent identified as Guarantors on the signature pages hereto (each of such
Subsidiaries, jointly and severally, “Guarantors” and, each, a “Guarantor”; it
being understood that, as of the date hereof, there are no Guarantors); (D) the
Lenders party to the Credit Agreement defined below; and (E) REGIONS BANK, an
Alabama bank, in its capacity as administrative agent for Lenders, LC Issuers
and other Secured Parties (as defined in the Credit Agreement) (in such
capacity, “Administrative Agent” or “Agent”).

W I T N E S S E T H :

WHEREAS, (a) Borrowers, Guarantors, Lenders, Swingline Lender, LC Issuers,
Co-Collateral Agents and Administrative Agent are parties to that certain Credit
Agreement dated as of April 9, 2015, as amended by that certain First Amendment
to Credit Agreement dated as of October 23, 2015; that certain Second Amendment
to Credit Agreement dated as of December 28, 2016; that certain Third Amendment
to Credit Agreement dated as of January 27, 2017; that certain Fourth Amendment
to Credit Agreement, First Amendment to Amended and Restated Addendum to Credit
Agreement, and First Amendment to Security Agreement dated as of July 31, 2017;
that certain Fifth Amendment to Credit Agreement dated as of August 22, 2017;
and that certain Sixth Amendment to Credit Agreement and Ratification,
Reaffirmation and Assumption dated as of April 5, 2018 (as so amended, and as
the same may be further amended, restated, supplemented, or otherwise modified
from time to time, the “Credit Agreement”), (b) Borrowers, Guarantors, Lenders,
Administrative Agent and certain other parties are parties to that certain
Amended and Restated Addendum to Credit Agreement dated as of January 27, 2017,
as amended by that certain Fourth Amendment to Credit Agreement, First Amendment
to Amended and Restated Addendum to Credit Agreement, and First Amendment to
Security Agreement dated as of July 31, 2017 (as so amended, and as the same may
be further amended, restated, supplemented, or otherwise modified from time to
time, the “Addendum”), and (c) Borrowers, Guarantors and Administrative Agent
are parties to that certain Security Agreement dated as of April 9, 2015, as
amended by that certain Fourth Amendment to Credit Agreement, First Amendment to
Amended and Restated Addendum to Credit Agreement, and First Amendment to
Security Agreement dated as of July 31, 2017 (as so amended, and as the same may
be further amended, restated, supplemented, or otherwise modified from time to
time, the “Security Agreement”);

WHEREAS, Borrowers have advised Administrative Agent and Lenders that Borrowers
and their Subsidiaries intend to consummate certain entity dissolutions and
mergers in connection with an internal corporate reorganization, as described on
Annex I hereto, which is hereby incorporated by reference into this Amendment
and made an integral part hereof (collectively, the “Corporate Reorganization”);

WHEREAS, Borrowers have advised Administrative Agent and Lenders that the
Corporate Reorganization is permitted pursuant to Sections 5.2 and 7.3 of the
Credit Agreement, so long as, at the time thereof and immediately after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing;

 

 

WHEREAS, Borrowers have further requested that Administrative Agent and Lenders
amend certain provisions of the Credit Agreement, the Addendum and the Security
Agreement as set forth herein; and

WHEREAS, Administrative Agent and Lenders have agreed to such amendments,
subject to the terms and conditions hereof.

NOW, THEREFORE, for and in consideration of the above premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, Borrowers, Administrative Agent and Lenders
hereby covenant and agree as follows:

SECTION 1.      Definitions. Unless otherwise specifically defined herein, each
term used herein (and in the recitals above) which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement.
Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each other
similar reference and each reference to “this Agreement” and each other similar
reference contained in the Credit Agreement, the Addendum and the Security
Agreement shall from and after the date hereof refer to the Credit Agreement,
the Addendum and the Security Agreement, respectively, as amended hereby.

SECTION 2.       Ratification, Reaffirmation and Assumption. Each Borrower
(including the Surviving Borrower (as defined in Annex I hereto)) hereby:

(a)          acknowledges, stipulates, and agrees that:

(i)         the documents necessary to consummate the Corporate Reorganization
have been executed and submitted for filing with the Secretary of State or its
equivalent in the appropriate jurisdictions effective as of the date hereof and
the Corporate Reorganization will be consummated in accordance with Applicable
Law, and Borrowers have complied with all of the requirements of Sections 5.2
and 7.3 of the Credit Agreement with respect thereto;

(ii)        upon the effectiveness of the Dollar Store Merger (as defined in
Annex I hereto), (x) the Surviving Borrower, without further act, deed or other
transfer, shall have assumed and succeeded to all debts, liabilities,
obligations and duties of the Predecessor Borrower under the Credit Agreement
and the other Loan Documents, including, without limitation, the Obligations,
and all such debts, liabilities, obligations and duties of the Predecessor
Borrower shall thereafter be deemed to be held by the Surviving Borrower without
further act, deed or other transfer, and (y) all of the rights of Administrative
Agent, Lenders and the other Secured Parties as creditors of the Predecessor
Borrower shall be preserved unimpaired, and shall continue as rights of each
such Person as creditors of the Surviving Borrower, to the same extent and may
be enforced against it to the same extent as if all of such Obligations had been
incurred or contracted by it, and all Liens upon the Collateral of the
Predecessor Borrower granted to Administrative Agent, for the benefit of Secured
Parties, shall be preserved unimpaired and shall continue as Liens granted upon
such Collateral by the Surviving Borrower and may be enforced against it to the
same extent as if all of such Liens had been granted by it, and all Obligations
of the Predecessor Borrower shall thenceforth remain with the Surviving Borrower
and may be enforced against it to the same extent as if all of such Obligations
had been incurred or contracted by it;

(iii)       the Credit Agreement and the other Loan Documents executed by such
Borrower (including, in the case of the Surviving Borrower, as successor to the
Predecessor Borrower) are legal, valid and binding obligations of such Borrower
that are enforceable against such Borrower in accordance with the terms thereof,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity;

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(iv)      neither the Credit Agreement nor any of the other Loan Documents
executed by such Borrower (including, in the case of the Surviving Borrower, as
successor to the Predecessor Borrower) shall be impaired in any way by the
Corporate Reorganization, and Administrative Agent’s Liens in all of the
Collateral, for the benefit of Secured Parties, shall continue uninterrupted
notwithstanding the consummation of the Corporate Reorganization;

(v)       all of the Obligations are absolutely owing and payable by Borrowers
(including the Surviving Borrower) to Administrative Agent and the other Secured
Parties as of the date hereof without any right of offset, defense, deduction,
counterclaim, claim, or objection in favor of any Borrower (and, to the extent
any Borrower has any right of offset, defense, deduction, counterclaim, claim or
objection on the date hereof, the same is hereby waived by such Borrower);

(vi)      as of the date hereof, and immediately after giving effect to the
Corporate Reorganization, no Default or Event of Default has occurred and is
continuing;

(vii)     in the case of the Surviving Borrower, all representations,
warranties, terms, covenants, conditions, agreements, waivers and consents set
forth in the Credit Agreement and the other Loan Documents executed by the
Predecessor Borrower shall apply to the Surviving Borrower with the same force
and effect as if such Loan Documents had been originally executed in the name of
the Surviving Borrower;

(viii)    each reference in the Loan Documents to the Predecessor Borrower shall
hereafter be deemed to be a reference to the Surviving Borrower as successor in
interest thereto after giving effect to the Dollar Store Merger; and

(ix)       Annex II hereto sets forth the legal name, the jurisdiction of
incorporation or organization, and the percentage ownership of each Subsidiary
of Parent and whether such Subsidiary is a Loan Party or an Excluded Subsidiary,
in each case as of the Seventh Amendment Effective Date and after giving effect
to the Corporate Reorganization;

(b)       (i) restates, ratifies and reaffirms the Obligations, the Credit
Agreement and the other Loan Documents executed by such Borrower (including, in
the case of the Surviving Borrower, as successor to the Predecessor Borrower),
and each and every term, covenant, and condition of such Borrower (including, in
the case of the Surviving Borrower, as successor to the Predecessor Borrower)
set forth in the Credit Agreement and the other Loan Documents, effective as of
the date hereof; (ii) restates each and every representation and warranty
(including, in the case of the Surviving Borrower, as successor to the
Predecessor Borrower) in the Credit Agreement and the other Loan Documents in
all material respects (other than those representations and warranties that are
expressly qualified by a Material Adverse Effect or other materiality, in which
case such representations and warranties shall be true and correct in all
respects) as fully as if made on the date hereof, after giving effect to the
Corporate Reorganization, and with specific reference to this Amendment and any
other Loan Documents executed or delivered in connection herewith (except with
respect to representations and warranties made as of an expressed date, in which
case such representations and warranties shall be true and correct in all
material respects (or in all respects, as applicable) as of such date); and
(iii) ratifies and reaffirms the grant by such Borrower (including, in the case
of the Surviving Borrower, as successor to the Predecessor Borrower) of, and
hereby renews and continues, a continuing security interest in and to, and Lien
upon, all right, title, and interest in all of the Collateral in favor of
Administrative Agent, for the benefit of Secured Parties, and acknowledges and
stipulates that such security interests and Liens are duly perfected, first
priority security interests and Liens, subject to Liens permitted by Section 7.2
of the Credit Agreement, and that all of the Obligations continue to be secured,
without interruption, by such security interests and Liens; and

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(c)       represents and warrants that (i) the consummation of the Corporate
Reorganization has not required Governmental Approvals, or any other consent or
approval of, registration or filing with, or any action by, any Governmental
Authority or any other Person, except those as have been obtained or made and
are in full force and effect; (ii) the execution, delivery and performance by
such Borrower of this Amendment and the consummation of the transactions
contemplated hereby (w) are within such Borrower’s organizational powers and
have been duly authorized by all necessary organizational action, (x) to such
Borrower’s knowledge, do not require Governmental Approvals, or any other
consent or approval of, registration or filing with, or any action by, any
Governmental Authority, except those as have been obtained or made and are in
full force and effect, (y) will not violate any Organizational Document of such
Borrower or any of its Subsidiaries, any law, treaty, rule or regulation, or
determination of a Governmental Authority, in each case applicable to or binding
upon such Borrower or any of its Subsidiaries or any of such Person’s Property
or to which such Borrower or any of its Subsidiaries or any of such Person’s
Property is subject, or any judgment, order or ruling of any Governmental
Authority, and (z) will not violate or result in a default under any Material
Contract of such Borrower or any of its Subsidiaries or any of its assets or
give rise to a right thereunder to require any payment to be made by such
Borrower or any of its Subsidiaries; and (iii) this Amendment has been duly
executed and delivered by such Borrower and constitutes the valid and binding
obligation of such Borrower, enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.

SECTION 3.       Amendments to Credit Agreement.

(a)              Addition of New Definitions. Section 1.1 of the Credit
Agreement is hereby amended by adding each of the following new definitions in
appropriate alphabetical order:

“Anti-Corruption Laws” shall mean the Foreign Corrupt Practices Act, 15 U.S.C.
§§ 78dd-1, et seq, the UK Bribery Act of 2010 and all other laws, rules, and
regulations of any jurisdiction applicable to any Loan Party or any of its
Affiliates from time to time concerning or relating to bribery or corruption.

“Bail-In Action” shall mean the exercise of any Write-Down and Conversion Powers
by the applicable EEA Resolution Authority in respect of any liability of an EEA
Financial Institution.

“Bail-In Legislation” shall mean, with respect to any EEA Member Country
implementing Article 55 of Directive 2014/59/EU of the European Parliament and
of the Council of the European Union, the implementing law for such EEA Member
Country from time to time which is described in the EU Bail-In Legislation
Schedule.

“Beneficial Ownership Certification” shall mean a certification regarding
beneficial ownership as required by the Beneficial Ownership Regulation, and
otherwise to be in form and substance satisfactory to Administrative Agent.

“Beneficial Ownership Regulation” shall mean 31 CFR Section 1010.230.

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“Distribution Centers” shall mean Parent’s distribution centers located at (i)
4300 New Getwell Road, Memphis, Tennessee 38118 and (ii) 2815 GA Highway 257,
Dublin, Georgia 31021.

“EEA Financial Institution” shall mean (a) any credit institution or investment
firm established in any EEA Member Country which is subject to the supervision
of an EEA Resolution Authority, (b) any entity established in an EEA Member
Country which is a parent of an institution described in clause (a) of this
definition, or (c) any financial institution established in an EEA Member
Country which is a subsidiary of an institution described in clause (a) or (b)
of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” shall mean any of the member states of the European Union,
Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” shall mean any public administrative authority or any
Person entrusted with public administrative authority of any EEA Member Country
(including any delegee) having responsibility for the resolution of any EEA
Financial Institution.

“EU Bail-In Legislation Schedule” shall mean the EU Bail-In Legislation Schedule
published by the Loan Market Association (or any successor person), as in effect
from time to time.

“Mortgage Financing Subsidiary” shall mean any Subsidiary that is not a Loan
Party as of the Seventh Amendment Effective Date, does not own any Property
other than Real Estate purchased from, contributed by or otherwise transferred
from a Loan Party, and does not engage in any business other than the ownership,
leasing, financing, marketing or sale of such Real Estate.

“Permitted Mortgage Financing” shall mean Indebtedness incurred by any Mortgage
Financing Subsidiary that is secured by a mortgage on any Real Estate, so long
as each of the following conditions is satisfied as determined by Co-Collateral
Agents in their reasonable discretion:

(i)        at the time of incurring such Indebtedness, no Default or Event of
Default shall exist or would result therefrom;

(ii)      the terms and conditions (including interest and fees) of such
Indebtedness shall be on then-current market terms;

(iii)     Administrative Agent shall have received notice not less than 10 days
in advance of the incurrence of such Indebtedness;

(iv)      no Loan Party shall guaranty such Indebtedness or grant any Lien in
any of its Property to secure such Indebtedness;

(v)       in the case of any such Indebtedness secured by the Real Estate of any
Distribution Center, the mortgagee of such Real Estate shall deliver (x) to
Administrative Agent a Third Party Agreement, in form and substance reasonably
satisfactory to Administrative Agent, and (y) to the applicable Loan Party a
non-disturbance agreement, in form and substance reasonably satisfactory to
Administrative Agent; and

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(vi)       the aggregate principal amount of all Permitted Mortgage Financings
shall not exceed $25,000,000 at any time outstanding.

“Permitted Sale-Leaseback Transaction” shall mean a sale and leaseback
transaction by any Loan Party related to Real Estate, including any arrangement
whereby such Loan Party shall, directly or indirectly, sell or transfer any Real
Estate to another Person and, as part of such transaction, such Loan Party shall
then or thereafter rent or lease as lessee from such other Person such Real
Estate or any part thereof or other Real Estate which such Loan Party intends to
use for substantially the same purpose or purposes as the Real Estate sold or
transferred, so long as each of the following conditions is satisfied as
determined by Co-Collateral Agents in their reasonable discretion:

(i)         at the time of such transaction, no Default or Event of Default
shall exist or would result therefrom;

(ii)        the terms and conditions (including sale price and lease payments)
of such transaction shall be on then-current market terms;

(iii)      Administrative Agent shall have received notice not less than 10 days
in advance of the consummation of such transaction;

(iv)       such Loan Party shall receive at least fair market value for such
Real Estate sold or transferred in such transaction;

(v)        100% of the consideration for such sale or transfer of Real Estate
shall be in the form of cash, and all net proceeds of such transaction shall be
remitted by the purchaser directly to a Controlled Account;

(vi)       in the case of any such transaction with respect to any Distribution
Center, the landlord of such Real Estate shall deliver to Administrative Agent a
Third Party Agreement, in form and substance reasonably satisfactory to
Administrative Agent;

(vii)      in the case of any such transaction with respect to any Distribution
Center, any mortgagee of such Real Estate shall deliver (x) to Administrative
Agent a Third Party Agreement, in form and substance reasonably satisfactory to
Administrative Agent, and (y) to the applicable Loan Party a non-disturbance
agreement, in form and substance reasonably satisfactory to Administrative
Agent; and

(viii)       any Capital Lease Obligations incurred in connection with such
transaction shall be permitted under Section 7.1.

“Sanctioned Country” shall mean (a) a country or territory or a government of a
country or territory, (b) an agency of the government of a country or territory,
or (c) an organization directly or indirectly owned or controlled by a country
or territory or its government, in each case, that is subject to Sanctions.

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“Sanctions” shall mean economic or financial sanctions or trade embargoes
imposed, administered or enforced from time to time by (a) the U.S. government,
including those administered by OFAC or the U.S. Department of State, (b) the
United Nations Security Council, (c) the European Union, (d) any European Union
member state, (e) Her Majesty’s Treasury of the United Kingdom or (f) any other
relevant sanctions authority.

“Security Documents” shall mean, collectively, the Security Agreement, together
with any financing statements, each Deposit Account Control Agreement, each
intellectual property security agreement, any other security agreements and
notices of security interests filed or to be filed with any applicable filing
office or registry, any pledge agreement and all other documents, instruments,
and agreements now or hereafter executed or delivered by a Loan Party to any
Secured Party for purposes of securing (or intending to secure), or perfecting
(or intending to perfect) Liens securing, any Obligations.

“Seventh Amendment” shall mean that certain Seventh Amendment to Credit
Agreement, Second Amendment to Amended and Restated Addendum to Credit
Agreement, and Second Amendment to Security Agreement dated as of the Seventh
Amendment Effective Date, by and among Borrowers, Administrative Agent and
Lenders, which amends this Agreement.

“Seventh Amendment Effective Date” shall mean August 23, 2018.

“Write-Down and Conversion Powers” shall mean, with respect to any EEA
Resolution Authority, the write-down and conversion powers of such EEA
Resolution Authority from time to time under the Bail-In Legislation for the
applicable EEA Member Country, which write-down and conversion powers are
described in the EU Bail-In Legislation Schedule.

(b)           Amendments to Existing Definitions.

(i)       Section 1.1 of the Credit Agreement is hereby amended by deleting the
following definitions therein in their entirety and substituting the following
in lieu thereof, respectively:

“Aggregate Revolving Commitments” shall mean, collectively, the Revolving
Commitments of all Lenders. As of the Seventh Amendment Effective Date, the
amount of the Aggregate Revolving Commitments is $210,000,000.

“Anti-Terrorism Laws” shall mean any laws relating to the prevention of
terrorism or money laundering, including the PATRIOT Act and all OFAC rules and
regulations, including Executive Order 13224.

“Asset Disposition” shall mean, with respect to any Person, a sale, issuance,
assignment, lease, license, Consignment, transfer, abandonment, or other
disposition of such Person’s Property, including a disposition of Property (i)
in connection with a sale-leaseback transaction, synthetic lease, or similar
arrangement or (ii) arising out of or relating to any division of such Person
pursuant to Section 18-217 of the Delaware Limited Liability Company Act (or any
analogous action taken pursuant to Applicable Law with respect to any
corporation, limited liability company, partnership or other entity).

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“Availability Conditions” shall mean, at any time of determination in respect of
any Acquisition pursuant to Section 7.4(d), that, on a pro forma basis after
giving effect to such Acquisition, either (a) Excess Availability, tested for
each of the 180 days immediately preceding the date of such Acquisition, on the
date of such Acquisition, and for each of the 180 days immediately following
such Acquisition, shall not be less than the greater of 20% of the Aggregate
Revolving Commitments and $42,000,000 or (b) both (i) Excess Availability,
tested for each of the 180 days immediately preceding the date of such
Acquisition, on the date of such Acquisition, and for each of the 180 days
immediately following such Acquisition, shall not be less than the greater of
15% of the Aggregate Revolving Commitments and $31,500,000 and (ii) the Fixed
Charge Coverage Ratio, tested as of the end of the Fiscal Month ending most
recently before the date of such Acquisition for which financial statements are
required to have been delivered in accordance with Section 5.1, shall be at
least 1.00 to 1.00.

“Collateral” shall mean all Property described in any Security Documents as
security for any Obligations, and all other Property which now or hereafter
secures (or is intended to secure) any Obligations.

“Excluded Subsidiary” shall mean, after the Seventh Amendment Effective Date,
(a) National Equipment Management and Leasing, Inc., a Tennessee corporation,
(b) Summit Properties – Bridgeport, LLC, an Arkansas limited liability company,
and Summit Properties – Jacksboro, LLC, an Arkansas limited liability company,
in each case, so long as such Person does not own any Property that would
constitute Credit Card Receivables (as defined in the Security Agreement),
Inventory (as defined in the Security Agreement), Pharmacy Receivables (as
defined in the Security Agreement) or Pharmacy Scripts (as defined in the
Security Agreement) or any Proceeds thereof, and (c) any Mortgage Financing
Subsidiary.

“Loan Documents” shall mean, collectively, this Agreement, the Addendum, the
Security Agreement, the Notes, the Fee Letter, the Third Amendment Fee Letter,
the Fourth Amendment Fee Letter, any other fee letter executed in connection
with this Agreement, the Cardinal Intercreditor Agreement, the Co-Collateral
Agent Rights Agreement, each LC Document, each Deposit Account Control
Agreement, each intellectual property security agreement, each other Security
Document, and any and all other instruments, agreements, documents and writings
executed or delivered in connection with any of the foregoing.

“Restricted Payment” shall mean (a) any payment of (or declaration to pay) a
dividend or other distribution (whether in cash, securities, or other Property),
whether direct or indirect, on account of any Capital Stock issued by any Loan
Party or any of its Subsidiaries, as the case may be, whether now or hereafter
outstanding (including any such payment, or declaration of payment, made in
connection with any merger or consolidation or otherwise as part of any
Acquisition); (b) any return of capital, redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any Capital Stock issued by any Loan Party or any of its Subsidiaries, whether
now or hereafter outstanding (including any such payment, or declaration of
payment, made in connection with any merger or consolidation or otherwise as
part of any Acquisition), except for any redemption, retirement, sinking fund or
similar payment made solely in such other shares or units of the same class of
Capital Stock; or (c) any cash payment made to redeem, purchase, repurchase, or
retire, or obtain the surrender of, any outstanding warrants, options, or other
rights to acquire any Capital Stock issued by any Loan Party or any of its
Subsidiaries, whether now or hereafter outstanding.

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“Revolving Commitment” shall mean, with respect to each Lender, the commitment
of such Lender to make Revolving Loans to Borrowers as set forth in Section 2.2
and the commitment of such Lender to participate in Swingline Loans as set forth
in Section 2.4 and to participate in LC Obligations as set forth in Section
2.22, in an aggregate principal amount not exceeding the amount set forth with
respect to such Lender on Schedule 1, or, in the case of a Person becoming a
Lender after the Seventh Amendment Effective Date, the amount of the assigned
“Revolving Commitment” as provided in the Assignment and Acceptance executed by
such Person as an assignee, or the joinder executed by such Person, in each case
as such commitment may subsequently be increased or decreased pursuant to the
terms hereof.

“Sanctioned Person” shall mean (a) a Person named on the list of “Specially
Designated Nationals” or any other Sanctions related list of designated Persons
maintained by OFAC, the U.S. Department of State, the United Nations Security
Council, the European Union or any European Union member state, (b) any Person
operating, organized or resident in a Sanctioned Country or (c) any Person owned
or controlled by any such Person or Persons described in the foregoing clause
(a) or (b).

(ii)       The definition of “Defaulting Lender” in Section 1.1 of the Credit
Agreement is hereby amended by deleting clause (d) thereof in its entirety and
substituting the following in lieu thereof:

(d) has, or has a direct or indirect parent company that has, (i) become the
subject of any Insolvency Proceeding, (ii) had appointed for it a receiver,
custodian, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its
business or assets, including the Federal Deposit Insurance Corporation or any
other state or federal regulatory authority acting in such a capacity, or (iii)
become the subject of a Bail-In Action

(c)        Deletion of Existing Definition. Section 1.1 of the Credit Agreement
is hereby amended by deleting the definition of “Sanctioned Entity” therein in
its entirety.

(d)       Amendment to Section 4.6 (Compliance with Laws and Agreements).
Section 4.6 of the Credit Agreement is hereby amended by deleting such section
in its entirety and substituting the following in lieu thereof:

Section 4.6        Compliance with Laws and Agreements. Such Loan Party and each
of its Subsidiaries is in compliance with (a) all Anti-Terrorism Laws and all
Anti-Corruption Laws, (b) all other Applicable Laws and all judgments, decrees
and orders of any Governmental Authority, and (c) all indentures, agreements or
other instruments binding upon it or its properties, except, in each case of
clauses (b) and (c), where non-compliance could not reasonably be expected to
result in a Material Adverse Effect.

(e)          Amendment to Section 4.16 (OFAC). Section 4.16 of the Credit
Agreement is hereby amended by deleting such section in its entirety and
substituting the following in lieu thereof:

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Section 4.16.         OFAC; Sanctions; Anti-Corruption Laws.

(a)       Each Loan Party and its Subsidiaries has implemented and maintains in
effect policies and procedures designed to ensure compliance by such Loan Party,
its Subsidiaries and their respective directors, officers, employees and agents
with applicable Sanctions, and such Loan Party and its Subsidiaries and, to the
knowledge of such Loan Party, their respective directors, officers, employees
and agents are in compliance with applicable Sanctions and are not engaged in
any activity that would reasonably be expected to result in any Loan Party being
designated as a Sanctioned Person. None of the Loan Parties, their Subsidiaries
or their respective Affiliates is in violation of any of the country or list
based economic and trade sanctions administered and enforced by OFAC that are
described or referenced at http://www.ustreas.gov/offices/enforcement/ofac/ or
as otherwise published from time to time.

(b)       None of the Loan Parties or their Subsidiaries or, to the knowledge of
any Loan Party or its Subsidiaries, any of their respective directors, officers,
employees or Affiliates (i) is a Sanctioned Person, (ii) has any of its assets
located in a Sanctioned Country, or (iii) derives any of its operating income
from investments in, or transactions with, Sanctioned Persons. The proceeds of
any Loan, Letter of Credit, credit extension or other transaction contemplated
by this Agreement or any other Loan Document have not been used (x) in violation
of any Sanctions, (y) to fund any operations in, finance any investments or
activities in, or make any payments to, a Sanctioned Person or a Sanctioned
Country or (z) in any other manner that would result in a violation of Sanctions
by any Person (including Administrative Agent, LC Issuer, Lenders or any other
Person making, issuing or participating in such Loans, Letters of Credit, other
credit extensions or other transactions whether as an underwriter, advisor,
investor or otherwise).

(c)       Each Loan Party and its Subsidiaries and, to the knowledge of any Loan
Party or its Subsidiaries, each of their respective directors, officers,
employees and Affiliates, is in compliance with Anti-Corruption Laws. Each Loan
Party and its Subsidiaries has implemented and maintains in effect policies and
procedures designed to ensure compliance by such Loan Party, its Subsidiaries
and their respective directors, officers, employees and agents with
Anti-Corruption Laws. None of the Loan Parties or their Subsidiaries has made a
payment, offering, or promise to pay, or authorized the payment, of money or
anything of value (i) in order to assist in obtaining or retaining business for
or with, or directing business to, any foreign official, foreign political
party, party official or candidate for foreign political office, (ii) to a
foreign official, foreign political party or party official or any candidate for
foreign political office, or (iii) with the intent to induce the recipient to
misuse his or her official position to direct business wrongfully to such Loan
Party or any of its Subsidiaries or to any other Person, in each case, in
violation of any Anti-Corruption Law. No part of the proceeds of any Loans,
Letters of Credit, other credit extension or other transaction contemplated by
this Agreement or any other Loan Document will violate Anti-Corruption Laws.

(f)       Amendment to Section 4.17 (Anti-Terrorism Laws). Section 4.17 of the
Credit Agreement is hereby amended by deleting such section in its entirety and
substituting the following in lieu thereof:

-10- 

 

Section 4.17.         Anti-Terrorism Laws.

(a)       No Loan Party nor any of its Subsidiaries is an “enemy” or an “ally of
the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of
the United States of America (50 U.S.C. App. §§ 1 et seq.), as amended. To its
knowledge, no Loan Party or any of its Subsidiaries is in violation of (a) the
Trading with the Enemy Act, as amended, (b) any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto or (c) the PATRIOT Act. No Loan Party or any of its Subsidiaries (i) is
a Sanctioned Person or (ii) to its knowledge, engages in any dealings or
transactions with any Sanctioned Person.

(b)       To the extent applicable, each Loan Party and its Subsidiaries are in
compliance with the PATRIOT Act. Without limitation of the foregoing, all
information set forth in each Beneficial Ownership Certificate (if any) is true
and correct as of the Seventh Amendment Effective Date.

(g)       Amendment to Article 4 (Representations and Warranties). Article 4 of
the Credit Agreement is hereby amended by adding the following new Section 4.24
immediately after Section 4.23 thereof:

Section 4.24        EEA. No Loan Party is an EEA Financial Institution.

(h)       Amendment to Section 5.2 (Notices of Material Events). Section 5.2 of
the Credit Agreement is hereby amended by deleting the word “or” at the end of
clause (e) thereof, relettering clause (f) thereof as clause (h), and adding the
following new clauses (f) and (g) immediately after clause (e) thereof:

(f)        any violation or asserted violation of (i) any Anti-Terrorism Laws or
Anti-Corruption Laws or (ii) any other Applicable Laws (including ERISA, OSHA,
FLSA or any securities laws) if, in the case of this clause (ii), an adverse
resolution could reasonably be expected to have a Material Adverse Effect;

(g)       any change to the information set forth in any Beneficial Ownership
Certificate that would result in a change to the list of beneficial owners set
forth therein; or

(i)       Amendment to Section 5.4 (Compliance with Laws). Section 5.4 of the
Credit Agreement is hereby amended by deleting such section in its entirety and
substituting the following in lieu thereof:

Section 5.4        Compliance with Laws. Such Loan Party will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and
requirements of any Governmental Authority applicable to its business and
properties, including, without limitation, all Environmental Laws, ERISA, OSHA,
Anti-Terrorism Laws, Anti-Corruption Laws, securities laws and laws regarding
collection and payment of Taxes, except where the failure (other than failure to
comply with Anti-Terrorism Laws and Anti-Corruption Laws) to do so, either
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

-11- 

 

(j)       Amendment to Section 5.9 (Use of Proceeds; Margin Regulations).
Section 5.9 of the Credit Agreement is hereby amended by deleting the second
sentence thereof in its entirety and substituting the following in lieu thereof:

Without limitation of the foregoing, no portion of the proceeds of any Loan or
Letter of Credit shall be used, directly or indirectly, (i) to purchase or carry
any Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any Margin Stock
or for any other purpose which might constitute a “purpose credit” under
Regulation U, or in any manner or for any other purpose that causes or might
cause a violation of, or is inconsistent with, the provisions of Regulation T, U
or X or any other regulation of the Board of Governors of the Federal Reserve
System, or violation of the Exchange Act, (ii) to finance (or refinance) any
commercial paper, including, without limitation, any issued by a Loan Party, or
any other Indebtedness, except for Indebtedness that such Loan Party incurred
for general corporate or working capital purposes, if and to the extent that the
financing (and refinancing) thereof are expressly permitted herein, (iii) in
furtherance of an offer, payment, promise to pay, or authorization of the
payment or giving of money, or anything else of value, to any Person in
violation of any Anti-Corruption Laws, or (iv) for the purpose of funding,
financing or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Country, or, in any event, in violation
of any applicable Sanctions.

(k)       Amendment to Section 7.1 (Indebtedness). Section 7.1 of the Credit
Agreement is hereby amended by re-lettering clause (g) thereof as a new clause
(h) and adding the following new clause (g) immediately after clause (f)
thereof:

(g)       Permitted Mortgage Financings of Mortgage Financing Subsidiaries; and

(l)       Amendment to Section 7.2 (Liens). Section 7.2 of the Credit Agreement
is hereby amended by deleting the word “and” at the end of clause (g) thereof,
adding the word “and” at the end of clause (h) thereof, and adding the following
new clause (i) immediately after clause (h) thereof:

(i)       Liens solely on any Real Estate owned by any Mortgage Financing
Subsidiary (and not, for the avoidance of doubt, on any Property that would
constitute Collateral or any other Property of any Loan Party) that is subject
to a Permitted Mortgage Financing;

(m)       Amendment to Section 7.3 (Fundamental Changes). Section 7.3 of the
Credit Agreement is hereby amended by adding the following new sentence
immediately after the first sentence thereof:

Such Loan Party will not, and will not permit any of its Subsidiaries to, file a
certificate of division, adopt a plan of division or otherwise take any action
to effectuate a division pursuant to Section 18-217 of the Delaware Limited
Liability Company Act (or any analogous action taken pursuant to Applicable Law
with respect to any corporation, limited liability company, partnership or other
entity).

(n)       Amendment to Section 7.4 (Investments, Loans). Section 7.4(d) of the
Credit Agreement is hereby amended by deleting clause (iii) thereof in its
entirety and substituting the following in lieu thereof:

(iii)       if the aggregate amount of cash and non-cash consideration
(including all cash and Indebtedness, including contingent obligations, incurred
or assumed and the maximum amount of any earnout or similar payment in
connection therewith (whether or not actually earned)) for any individual
Acquisition is less than $5,000,000, Excess Availability shall not be less than
$21,000,000, on a pro forma basis after giving effect to such Acquisition, and
Borrowers shall certify thereto on the date of such acquisition;

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(o)       Amendment to Section 7.5 (Restricted Payments). Section 7.5 of the
Credit Agreement is hereby amended by deleting clause (c) thereof in its
entirety and substituting the following in lieu thereof:

(c)        Restricted Payments so long as (i) any such Restricted Payments
during any four consecutive Fiscal Quarters do not exceed $12,500,000 in the
aggregate, (ii) no Default or Event of Default exists at the time of any such
Restricted Payment or after giving effect thereto, (iii) any such Restricted
Payment is permitted by Applicable Law, (iv) Borrowers are Solvent both before
and after giving effect to any such Restricted Payment, and (v) Excess
Availability, on the date of any such Restricted Payment and after giving effect
thereto, shall not be less than $21,000,000;

(p)       Amendments to Section 7.6 (Sale of Assets).

(i)          Section 7.6 of the Credit Agreement is hereby amended by replacing
the word “or” at the end of clause (k) thereof with “;”, replacing the “.” at
the end of clause (l) thereof with “;”, and adding the following new clauses
(m), (n) and (o) immediately after clause (l) thereof:

(m)       Permitted Sale-Leaseback Transactions;

(n)       any sale, contribution or other transfer by any Loan Party of any Real
Estate to any Mortgage Financing Subsidiary in connection with any Permitted
Mortgage Financing, so long as (i) such Real Estate is leased by such Loan Party
from such Mortgage Financing Subsidiary on then-current market terms and (ii)
such Mortgage Financing Subsidiary agrees to remit to such Loan Party any and
all proceeds from any sale or other disposition of such Real Estate, net of any
reasonable transaction costs, within 10 days after receipt thereof; and

(o)        any sale or other disposition of any Real Estate (other than Real
Estate of any Distribution Center) for fair market value.

(ii)         Section 7.6 of the Credit Agreement is hereby amended by adding the
following new sentence immediately after clause (o) thereof:

In no event shall any Asset Disposition arising out of or relating to any
division of a Loan Party pursuant to Section 18-217 of the Delaware Limited
Liability Company Act (or any analogous action taken pursuant to Applicable Law
with respect to any corporation, limited liability company, partnership or other
entity) constitute a permitted Asset Disposition under this Section 7.6 or
otherwise be permitted under the Loan Documents.

(q)       Amendment to Section 7.7 (Transactions with Affiliates). Section 7.7
of the Credit Agreement is hereby amended by deleting the word “and” at the end
of clause (c) thereof, replacing the “.” at the end of clause (d) thereof with
“; and”, and adding the following new clause (e) immediately after clause (d)
thereof:

(e) any sale, contribution or other transfer of Real Estate permitted by Section
7.6(n).

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(r)       Amendment to Section 7.13 (Sales and Leasebacks). Section 7.13 of the
Credit Agreement is hereby amended by deleting such section in its entirety and
substituting the following in lieu thereof:

Section 7.13.        Sales and Leasebacks. Such Loan Party will not, and will
not permit any of its Subsidiaries to, enter into any arrangement whereby such
Person shall, directly or indirectly, sell or transfer any Property to another
Person and, as part of such transaction, such Person shall then or thereafter
rent or lease as lessee from such other Person such Property or any part thereof
or other Property which such Person intends to use for substantially the same
purpose or purposes as the Property sold or transferred, except Permitted
Sale-Leaseback Transactions.

(s)       Amendments to Section 8.1 (Events of Default).

(i)          Section 8.1 of the Credit Agreement is hereby amended by deleting
clause (h) thereof in its entirety and substituting the following in lieu
thereof:

(h)       (i) An Insolvency Proceeding shall be commenced against any Loan Party
or Subsidiary and (A) such Loan Party or Subsidiary shall consent to the
institution of such Insolvency Proceeding, (B) such Loan Party or Subsidiary
shall acquiesce in writing to the commencement of such Insolvency Proceeding, or
shall fail, in a timely and appropriate manner, to contest vigorously any
petition commencing such Insolvency Proceeding, (C) any such petition shall not
be dismissed within 60 days after the filing thereof or (D) an order for relief
shall be entered in such Insolvency Proceeding; or (ii) any Loan Party shall
become subject to a Bail-In Action; or

(ii)         Section 8.1 of the Credit Agreement is hereby amended by replacing
the “.” at the end of clause (p) thereof with “; or” and adding the following
new clause (q) immediately after clause (p) thereof:

(q)        Either (i) this Agreement or any other Loan Document, or any material
provision hereof or thereof, shall cease to be in full force or effect at any
time after its execution and delivery for any reason (other than as expressly
permitted hereunder or by waiver or release thereof by Administrative Agent, LC
Issuer, a Lender or the applicable Secured Bank Product Provider, as applicable,
made in accordance herewith), it being understood that the application of any
Write-Down and Conversion Powers by an EFA Resolution Authority (or the public
announcement of the impending application of such powers) with respect to any
liabilities of a Loan Party hereunder or under any other Loan Document shall be
deemed an Event of Default under this Section 8.1(q); (ii) any Security Document
shall for any reason fail or cease to create a valid, perfected, and, except to
the extent permitted by the terms hereof or thereof, first-priority Lien in
favor of Administrative Agent, for the benefit of Secured Parties, on any
material Collateral purported to be covered thereby; or (iii) any Hedging
Agreement entered into between any Loan Party or a Subsidiary, on the one hand,
and any Secured Bank Product Provider, on the other hand, shall be terminated as
a result of a default or event of default by such Loan Party or Subsidiary or
revoked; or

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(t)       Amendment to Article 10 (Miscellaneous). Article 10 of the Credit
Agreement is hereby amended by adding the following new Section 10.18
immediately after Section 10.17 thereof:

Section 10.18.          Acknowledgement of and Consent to Bail-In of EEA
Financial Institutions. Notwithstanding anything to the contrary in any Loan
Document or in any other agreement, arrangement or understanding among any such
parties, each party hereto acknowledges that any liability of any Lender that is
an EEA Financial Institution arising under any Loan Document, to the extent such
liability is unsecured, may be subject to the Write-Down and Conversion Powers
of an EEA Resolution Authority and agrees and consents to, and acknowledges and
agrees to be bound by, (a) the application of any Write-Down and Conversion
Powers by an EEA Resolution Authority to any such liabilities arising hereunder
which may be payable to it by any Lender that is an EEA Financial Institution;
and (b) the effects of any Bail-in Action on any such liability, including, if
applicable: (i) a reduction in full or in part or cancellation of any such
liability; (ii) a conversion of all, or a portion of, such liability into shares
or other instruments of ownership in such EEA Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise
conferred on it, and that such shares or other instruments of ownership will be
accepted by it in lieu of any rights with respect to any such liability under
this Agreement or any other Loan Document; or (iii) the variation of the terms
of such liability in connection with the exercise of the Write-Down and
Conversion Powers of any EEA Resolution Authority.

(u)        Amendment to Schedules. The Credit Agreement is hereby amended by
deleting Schedule 1 thereto in its entirety and substituting Schedule 1 attached
to this Amendment in lieu thereof.

SECTION 4.        Amendments to Addendum.

(a)         Amendments to Existing Definitions. Section 2 of the Addendum is
hereby amended by deleting the following definitions therein in their entirety
and substituting the following in lieu thereof, respectively:

“Account Control Event” means (a) the occurrence of an Event of Default or (b)
at any time of determination that Excess Availability is less than the greater
of (i) twelve and one-half percent (12.5%) of the Commitments and (ii)
$26,250,000.

“Account Control Period” means the period beginning on the occurrence of an
Account Control Event and ending on the first Business Day on which (a) no Event
of Default exists and (b) Excess Availability for the preceding sixty (60) days
has been greater than the greater of (i) twelve and one-half percent (12.5%) of
the Commitments and (ii) $26,250,000.

(b)       Amendment to Section 6 (Inspections; Appraisals). Section 6 of the
Addendum is hereby amended by deleting such section in its entirety and
substituting the following in lieu thereof:

Section 6.        Inspections; Appraisals. Until Payment in Full of the
Obligations, each Loan Party shall, and shall cause each Subsidiary to, as
applicable, reimburse Administrative Agent for all charges, costs, and expenses
of Administrative Agent and its agents in connection with (i) field examinations
of any Borrower or Subsidiary’s books and records or Collateral as
Administrative Agent deems appropriate and (ii) appraisals of Inventory and
Pharmacy Scripts, in each case, (a) once per Loan Year, if an Event of Default
has not occurred at any time during such Loan Year and Excess Availability is
not less than the greater of (x) twenty-five percent (25%) of the Aggregate
Revolving Commitments and (y) $52,500,000 at any time during such Loan Year, and
(b) twice per Loan Year, if an Event of Default has not occurred at any time
during such Loan Year but Excess Availability is less than the greater of (x)
twenty-five percent (25%) of the Aggregate Revolving Commitments and (y)
$52,500,000 at any time during such Loan Year; provided, however, that there
shall be no limit on the frequency of field examinations or appraisals
reimbursed by Borrowers if any Event of Default exists. Subject to and without
limiting the foregoing, Borrowers specifically agree to pay the standard charges
of Administrative Agent’s internal field examination group (including
Administrative Agent’s then standard per-person charges for each day that an
employee or agent of Administrative Agent or its Affiliates is engaged in any
field examination activities). This Section 6 shall not be construed to limit
Administrative Agent’s right to conduct field examinations, obtain appraisals at
any time in its reasonable discretion, or use third parties for such purposes at
Lenders’ expense.

-15- 

 

(c)       Amendment to Section 7 (Borrowing Base Reporting; Financial and Other
Information). Section 7 of the Addendum is hereby amended by deleting the first
sentence thereof in its entirety and substituting the following in lieu thereof:

Until Payment in Full of the Obligations, Borrowers shall deliver a fully
completed and executed Borrowing Base Certificate to Administrative Agent no
later than the 20th day of each Fiscal Month, prepared as of the end of the
immediately preceding Fiscal Month; provided that, if Excess Availability is
less than the greater of (x) fifteen percent (15%) of the Commitments and (y)
$31,500,000 or an Event of Default exists, Administrative Agent shall be
entitled to require Borrowers to deliver fully completed and executed Borrowing
Base Certificates to Administrative Agent at greater frequency and as of the end
of such periods as Administrative Agent may require from time to time.

(d)       Amendment to Section 10 (Financial Covenant). Section 10 of the
Addendum is hereby amended by deleting such section in its entirety and
substituting the following in lieu thereof:

Section 10.        Financial Covenant. Until Payment in Full of the Obligations,
Borrowers shall maintain at all times Excess Availability of at least the
greater of (i) $21,000,000 and (ii) ten percent (10%) of the Aggregate Revolving
Commitments.

SECTION 5.        Amendment to Security Agreement.

(a)       Amendment to Section 16 (Protective Advances). Section 16 of the
Security Agreement is hereby amended by deleting such section in its entirety
and substituting the following in lieu thereof:

Section 16.        Protective Advances.        From time to time, Administrative
Agent may, in its discretion, make one or more Base Rate Revolving Loans to
preserve, protect, or defend any Collateral or to increase or improve the
likelihood of collecting or obtaining repayment of any Obligations (in each
case, if Administrative Agent determines that doing so is necessary or
desirable) (a “Protective Advance”). Administrative Agent may make a Protective
Advance without regard to Excess Availability or the satisfaction of any
condition precedent to the making of Loans, unless (A) the Required Lenders
have, in writing, revoked Administrative Agent’s authority to do so or (B)
Administrative Agent would have actual knowledge that, after giving effect
thereto, the aggregate outstanding principal amount of all Loans made as
Protective Advances (i) would exceed $21,000,000 or (ii) would cause the amount
of the Revolving Credit Exposure outstanding to exceed the aggregate of the
Revolving Commitments at such time or any individual Lender’s Revolving
Commitment. If the terms of the foregoing clauses (A) and (B) are not
applicable, Administrative Agent’s determination that funding of a Protective
Advance is appropriate shall be conclusive. Each Lender shall participate based
on its Pro Rata Share in each Protective Advance. The provisions of this Section
16 are solely for the benefit of Administrative Agent and Lenders, and none of
the Loan Parties may rely on this Section 16 or have any standing to enforce its
terms.

-16- 

 

SECTION 6.        Conditions Precedent. This Amendment shall become effective
only upon satisfaction of the following conditions precedent, as determined by
Administrative Agent in its reasonable discretion:

(a)       Administrative Agent shall have received this Amendment, duly executed
and delivered by Borrowers and Lenders;

(b)       Administrative Agent shall have received amended and restated Notes,
duly executed and delivered by Borrowers, for each Lender that has requested the
issuance of a Note;

(c)       Administrative Agent shall have received a certificate, in form and
substance reasonably satisfactory to Administrative Agent, attaching true,
correct and complete copies of all articles of dissolution, certificates of
cancellation, articles of merger, agreements and plans of merger, and other
documents submitted for filing or executed in connection with the Corporate
Reorganization and shall have approved all material terms thereof;

(d)       Administrative Agent shall have received a certificate of a duly
authorized officer of each Loan Party, certifying (i) that an attached copy of
resolutions authorizing execution and delivery of the Loan Documents is true and
complete, and that such resolutions are in full force and effect, were duly
adopted by the appropriate governing body, have not been amended, modified, or
revoked, and constitute all resolutions adopted with respect to this Amendment
and the transactions contemplated hereby; and (ii) to the title, name, and
signature of each Person authorized to sign the Loan Documents on behalf of such
Loan Party;

(e)       Administrative Agent shall have received a Beneficial Ownership
Certificate in relation to each Loan Party and any other Obligor that qualifies
as a “legal entity customer” under the Beneficial Ownership Regulation; and

(f)       Administrative Agent shall have received all other documents,
instruments, certificates and agreements (if any) as Administrative Agent shall
have reasonably requested in connection with the foregoing, each in form and
substance reasonably satisfactory to Administrative Agent.

SECTION 7.        Post-Closing Covenants.

(a)       On or before October 19, 2018 (or such later date as agreed to by
Co-Collateral Agents in writing in their respective sole discretion), Borrowers
shall deliver to Administrative Agent a duly executed Collateral Disclosure
Certificate from all Borrowers, after giving effect to the Corporate
Reorganization and in form and substance satisfactory to Administrative Agent.

SECTION 8.        Miscellaneous Terms.

(a)       Loan Document. For avoidance of doubt, the parties hereto hereby
acknowledge and agree that this Amendment is a Loan Document.

-17- 

 

(b)       Effect of Amendment. All amendments set forth herein shall become
effective as of the Seventh Amendment Effective Date. Except as otherwise may be
set forth expressly hereinabove, all terms of the Credit Agreement and the other
Loan Documents shall be and remain in full force and effect, and shall
constitute the legal, valid, binding, and enforceable obligations of Borrowers.
Except to the extent otherwise expressly set forth herein, the amendments set
forth herein shall have prospective application only from and after the Seventh
Amendment Effective Date.

(c)       No Novation or Mutual Departure. Borrowers expressly acknowledge and
agree that (i) there has not been, and this Amendment does not constitute or
establish, a novation with respect to the Credit Agreement or any of the other
Loan Documents, or a mutual departure from the strict terms, provisions, and
conditions thereof, other than with respect to the limited amendments contained
in Sections 2, 3 and 4 above, and (ii) nothing in this Amendment shall affect or
limit Administrative Agent’s or Lenders’ right to demand payment of liabilities
owing from Borrowers to Administrative Agent or Lenders under, or to demand
strict performance of the terms, provisions and conditions of, the Credit
Agreement and the other Loan Documents, to exercise any and all rights, powers,
and remedies under the Credit Agreement or the other Loan Documents or at law or
in equity, or to do any and all of the foregoing, immediately at any time after
the occurrence of a Default or an Event of Default under the Credit Agreement or
the other Loan Documents.

(d)       Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument. This Amendment may be executed by each party on separate copies,
which copies, when combined so as to include the signatures of all parties,
shall constitute a single counterpart of this Amendment.

(e)       Fax or Other Transmission. Delivery by one or more parties hereto of
an executed counterpart of this Amendment via facsimile, telecopy, or other
electronic method of transmission pursuant to which the signature of such party
can be seen (including, without limitation, Adobe Corporation’s Portable
Document Format) shall have the same force and effect as the delivery of an
original executed counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by facsimile, telecopy, or other
electronic method of transmission shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability, or binding effect of this Amendment.

(f)       Recitals Incorporated Herein. The preamble and the recitals to this
Amendment are hereby incorporated herein by this reference.

(g)       Section References. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the amendments and other agreements among the parties
hereto evidenced hereby.

(h)       Further Assurances. Each Borrower agrees to take, at such Borrower’s
expense, such further actions as Administrative Agent shall reasonably request
from time to time to evidence the Corporate Reorganization, the amendments and
other agreements set forth herein and the transactions contemplated hereby.

-18- 

 

(i)       Governing Law. This Amendment shall be governed by and construed and
interpreted in accordance with the laws of the State of Georgia, without giving
effect to any conflict of law principles or other rule of law which would cause
the application of the law of any jurisdiction other than the laws of the State
of Georgia (but giving effect to federal laws relating to national banks).

(j)       Severability. Any provision of this Amendment which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.

[Remainder of page intentionally left blank;

signatures appear on the following pages]

 

-19- 

 

 

IN WITNESS WHEREOF, each party hereto has caused this Amendment to be duly
executed and delivered under seal by its duly authorized officer or other
representative as of the day and year first above written.

        BORROWERS:      

FRED’S, INC., a Tennessee corporation,

as “Borrower Agent” and a “Borrower”

      By: /s/ Joseph Anto   Name: Joseph Anto   Title: Interim Chief Executive
Officer and
Chief Financial Officer

  [CORPORATE SEAL]       FRED’S STORES OF TENNESSEE, INC.,
a Delaware corporation, as a “Borrower” and
the “Surviving Borrower”       By: /s/ Joseph Anto   Name: Joseph Anto   Title:
Interim Chief Executive Officer and Chief Financial Officer

  [CORPORATE SEAL]       NATIONAL PHARMACEUTICAL NETWORK, INC., a Florida
corporation, as a “Borrower”       By: /s/ Joseph Anto   Name: Joseph Anto  
Title: Interim Chief Executive Officer and Chief Financial Officer        
[CORPORATE SEAL]

Seventh Amendment to Credit Agreement, Second Amendment to Amended and Restated
Addendum to Credit Agreement,
Second Amendment to Security Agreement, and Ratification, Reaffirmation and
Assumption (Fred’s)

 

 

 

 

       

REEVES-SAIN DRUG STORE, INC.,
a Tennessee corporation, as a “Borrower”

      By: /s/ Joseph Anto   Name: Joseph Anto   Title: Interim Chief Executive
Officer and
Chief Financial Officer         [CORPORATE SEAL]

 

[Signatures continue on following pages.]

 

Seventh Amendment to Credit Agreement, Second Amendment to Amended and Restated
Addendum to Credit Agreement,
Second Amendment to Security Agreement, and Ratification, Reaffirmation and
Assumption (Fred’s)

 

 

 

        ADMINISTRATIVE AGENT:       REGIONS BANK, as “Administrative Agent”    
  By: /s/ Daniel J. Wells   Name: Daniel J. Wells   Title: Director

 

[Signatures continue on following pages.]

 

Seventh Amendment to Credit Agreement, Second Amendment to Amended and Restated
Addendum to Credit Agreement,
Second Amendment to Security Agreement, and Ratification, Reaffirmation and
Assumption (Fred’s)

 

 

        LENDERS:       REGIONS BANK       By: /s/ Daniel J. Wells   Name: Daniel
J. Wells   Title: Director

 

[Signatures continue on following page.]

 

Seventh Amendment to Credit Agreement, Second Amendment to Amended and Restated
Addendum to Credit Agreement,
Second Amendment to Security Agreement, and Ratification, Reaffirmation and
Assumption (Fred’s)

 

 

 

        LENDERS:       BANK OF AMERICA, N.A.       By: /s/ Roger Malouf   Name:
Roger Malouf   Title: Director

 

Seventh Amendment to Credit Agreement, Second Amendment to Amended and Restated
Addendum to Credit Agreement,
Second Amendment to Security Agreement, and Ratification, Reaffirmation and
Assumption (Fred’s)

 

 

 

ANNEX I

 

Description of Corporate Reorganization

 

Dissolutions of Certain Subsidiaries

 

(a)       Dublin Aviation, Inc., a Tennessee corporation, assigned and
transferred all of its assets to Fred’s, Inc., a Tennessee corporation, and will
subsequently dissolve once tax clearance from the Tennessee Department of
Revenue is obtained;

 

(b)       TT Transport, LLC, a Delaware limited liability company, assigned and
transferred all of its assets to Fred’s Stores of Tennessee, Inc., a Delaware
corporation (the “Surviving Borrower”), and subsequently dissolved;

 

(c)       National Pharmaceutical Network, Inc., a Tennessee corporation,
assigned and transferred all of its assets to the Surviving Borrower and will
subsequently dissolve once tax clearance from the Tennessee Department of
Revenue is obtained; and

 

(d)       Drugs For Less, Inc., a Florida corporation, assigned and transferred
all of its assets to National Pharmaceutical Network, Inc., a Florida
corporation, and subsequently dissolved.

 

The dissolutions described in clauses (a), (b), (c) and (d) above are
collectively referred to in this Amendment as the “Entity Dissolutions”.

 

Mergers of Certain Borrowers and Subsidiaries

 

(a)       Fred’s Dollar Store of McComb, Inc., a Mississippi corporation and a
Borrower (the “Predecessor Borrower”), merged with and into the Surviving
Borrower, with the Surviving Borrower as the surviving Person (such merger, the
“Dollar Store Merger”);

 

(b)        each of ARI-Alabama Four, LLC and ARI-Glennville, LLC, each a Georgia
limited liability company, merged with and into the Surviving Borrower, with the
Surviving Borrower as the surviving Person; and

 

(c)       each of Summit Properties – Anderson, LLC, Summit Properties –
Augusta, LLC, Summit Properties – Baldwyn, LLC, Summit Properties – Batesville,
LLC, Summit Properties – Bonifay, LLC, Summit Properties – Chatsworth, LLC,
Summit Properties – Chatsworth II, LLC, Summit Properties – Daingerfield, LLC,
Summit Properties – Dumas, LLC, Summit Properties – Harrisburg, LLC, Summit
Properties – Haskell, LLC, Summit Properties – Hayti, LLC, Summit Properties –
Kilgore, LLC, Summit Properties – Malvern, LLC, Summit Properties – Manila, LLC,
Summit Properties – McGregor, LLC, Summit Properties – Osceola, LLC, Summit
Properties – Shelby, LLC, Summit Properties – Sheridan, LLC, Summit Properties –
Stamps, LLC, Summit Properties – Wagoner, LLC, and Summit Properties –
Yellville, LLC, each an Arkansas limited liability company, merged with and into
the Surviving Borrower, with the Surviving Borrower as the surviving Person.

 

The mergers described in clauses (a), (b) and (c) above are collectively
referred to in this Amendment as the “Entity Mergers”.

 

 

 

 

ANNEX II

 

Subsidiaries after Corporate Reorganization

 

Name Jurisdiction Parent Entity Percent Ownership Loan Party or Excluded
Subsidiary Fred’s Stores of Tennessee, Inc. Delaware Fred’s, Inc. 100% Loan
Party National Pharmaceutical Network, Inc. Florida Fred’s Stores of Tennessee,
Inc. 100% Loan Party Reeves-Sain Drug Store, Inc. Tennessee Fred’s Stores of
Tennessee, Inc. 100% Loan Party Summit Properties – Bridgeport, LLC Arkansas
Fred’s Stores of Tennessee, Inc. 100% Excluded Subsidiary Summit Properties –
Jacksboro, LLC Arkansas Fred’s Stores of Tennessee, Inc. 100% Excluded
Subsidiary National Equipment Management and Leasing, Inc. Tennessee Fred’s,
Inc. 100% Excluded Subsidiary

 

 

 

SCHEDULE 1

to Credit Agreement

 

Commitments

 

Lender

Revolving Commitment    

Regions Bank

$105,000,000.00    

Bank of America, N.A.

$105,000,000.00    

Aggregate Revolving Commitments

$210,000,000.00