EXHIBIT 10.1

FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT
 
This First Amendment and Waiver to Credit Agreement, dated as of
September 4, 2014 (this “Agreement”), is entered into by and among ALCO STORES,
INC., a Kansas corporation (the “Lead Borrower”); ALCO HOLDINGS, a Texas limited
liability company (“Holdings” and, together with the Lead Borrower, the
“Borrowers”); the lenders identified on the signature pages hereto
(individually, a “Lender” and collectively, the “Lenders”); WELLS FARGO BANK,
NATIONAL ASSOCIATION, as administrative agent and collateral agent (in such
capacities, the “Agent”); and WELLS FARGO BANK, NATIONAL ASSOCIATION, as term
loan agent (in such capacity, the “Term Loan Agent”).
 
Recitals
 
A. The Borrowers, the Lenders, the Agent and the Term Loan Agent are party to
that certain Amended and Restated Credit Agreement, dated as of May 30, 2014 (as
amended, modified and in effect from time to time, the “Credit Agreement”),
pursuant to which Lenders agreed, subject to the terms and conditions set forth
therein, to make certain loans and provide other financial accommodations to the
Borrowers.  Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Credit Agreement.
 
B. The Borrowers have defaulted in their obligations set forth in Section
8.01(k) of the Credit Agreement, as a result of a Change of Control pursuant to
clause (b) of the definition of Change of Control (the “Existing Event of
Default”).
 
C. By reason of the occurrence of the Existing Event of Default, the Agent, the
Term Loan Agent and the Lenders have certain rights and remedies under the terms
of the Credit Agreement and the other Loan Documents as well as applicable law,
including, without limitation, the right to (i) accelerate the payment of all
Obligations and demand immediate payment thereof, (ii) implement the Default
Rate in accordance with Section 2.08(b)(ii) of the Credit Agreement, and (iii)
exercise any other rights or remedies available under the Credit Agreement and
the other Loan Documents, at law, in equity or otherwise.
 
D. Notwithstanding the foregoing, the Borrowers have requested that the Agent,
the Term Loan Agent and the Lenders agree to waive the Existing Event of Default
and amend certain provisions of the Loan Documents, and the Agent, the Term Loan
Agent and the Lenders are willing to do so, but only to the extent, and on the
terms and conditions, expressly set forth herein.
 
Agreement
 
Now, Therefore, in consideration of the foregoing recitals and the mutual
covenants herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, and to induce the Agent, the Term Loan Agent and the Lenders to
enter into this Agreement, the Borrowers, the Agent, the Term Loan Agent and the
Lenders hereby agree as follows:
 
1. Acknowledgement of Existing Event of Default; Acknowledgement of Outstanding
Obligations.
 
(a) Each Borrower acknowledges and agrees that the Existing Event of Default has
occurred and continues to exist as of the date of this Agreement.
 
 
 
 

--------------------------------------------------------------------------------

 
 
(b) Each Borrower acknowledges and agrees that, as of the date hereof, the
Borrowers are indebted, jointly and severally, (i) to the Revolving Lenders for
the Revolving Credit Loans in an aggregate outstanding principal amount equal to
$70,462,326.43 plus accrued and unpaid interest thereon, as provided in the
Credit Agreement and the other Loan Documents, (ii) to the Term Lenders for the
Term Loan in an aggregate outstanding principal amount equal to $12,187,500 plus
accrued and unpaid interest thereon, as provided in the Credit Agreement and the
other Loan Documents, (iii) to the Real Estate Term Lenders for the Real Estate
Term Loan in an aggregate outstanding principal amount equal to $4,750,000 plus
accrued and unpaid interest thereon, as provided in the Credit Agreement and the
other Loan Documents, (v) to the Revolving Lenders for L/C Obligations in an
aggregate outstanding principal amount equal to 12,019,663.43, and (v) for
accrued and unpaid fees and expenses of the Agent, the Term Loan Agent and the
Lenders (and any other amounts due under the Credit Agreement and the other Loan
Documents, including, but not limited to, the reasonable fees and disbursements
of counsel).
 
2. Ratification and Reaffirmation of Obligations and Liens.
 
(a) Each Borrower hereby ratifies and reaffirms the validity and enforceability
of all of the Obligations and of the Credit Agreement and the other Loan
Documents, and agrees that its obligations under the Credit Agreement, the other
Loan Documents and this Agreement are its legal, valid and binding obligations
enforceable against it in accordance with the respective terms thereof.  Each
Borrower further acknowledges and agrees that it has no defense (whether legal
or equitable), set-off or counterclaim to the payment or performance of the
Obligations in accordance with the terms of the Credit Agreement and the other
Loan Documents.
 
(b) Each Borrower hereby ratifies and reaffirms all of the liens and security
interests heretofore granted pursuant to the Credit Agreement and the other Loan
Documents as collateral security for the indebtedness incurred pursuant to the
Credit Agreement and the other Loan Documents, and acknowledges that all of such
liens and security interests, and all collateral heretofore pledged as security
for such indebtedness, continues to be and remains collateral for such
indebtedness from and after the date hereof.
 
3. The Agent’s, the Term Loan Agent’s and Lenders’ Agreement to Waive Existing
Event of Default.  Subject to the Loan Parties’ compliance with the terms and
conditions contained herein, the Agent, the Term Loan Agent and the Required
Lenders hereby waive the Existing Event of Default.  Each Borrower acknowledges
and agrees that the foregoing waiver relates solely to the Existing Event of
Default specified herein and shall in no way be deemed or construed as a waiver
by the Agent, the Term Loan Agent and the Lenders of any other Default or Event
of Default under the Credit Agreement or any of the other Loan Documents now
existing or occurring subsequent to the date of this Agreement.  The Agent, the
Term Loan Agent and the Lenders expressly reserve the full extent of their
rights under the Credit Agreement, the other Loan Documents and applicable law
in respect of any Default or Event of Default, whether existing on the date
hereof or occurring after the date hereof, not specified herein as an Existing
Event of Default.
 
4. Amendments to Credit Agreement.
 
(a) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
adding the following defined terms in the appropriate alphabetical order
therein:
 
 
 
 

--------------------------------------------------------------------------------

 
 
““Availability Block” means an amount equal to $500,000 on the First Amendment
Effective Date and increasing by $500,000 on the first Business Day of each week
thereafter; provided, that in no event shall the Availability Block exceed
$5,000,000.
 
“Budget” means the thirteen (13) week budget prepared by the Lead Borrower and
furnished to the Agent on the First Amendment Effective Date and thereafter
updated on a weekly basis for the following thirteen (13) weeks, including a
comparison of the budget to the actual cash disbursements for the preceding
weeks, such budget and any update, modification, or supplement thereto to be in
form and substance reasonably acceptable to the Agent.
 
 “Equity Contribution” means receipt by the Lead Borrower on or after the First
Amendment Effective Date of not less than $10,000,000 in cash contributions to
the equity of the Lead Borrower and/or Subordinated Indebtedness, or a
combination thereof, in each case on terms and conditions reasonably
satisfactory to the Agent.
 
“First Amendment” means that certain First Amendment and Waiver to Credit
Agreement dated as of the First Amendment Effective Date.
 
“First Amendment Effective Date” means September 4, 2014.
 
“Real Estate Term Loan Prepayment Fee” means, with respect to any payment or
prepayment of the Real Estate Term Loan (including upon acceleration of the
maturity of the Real Estate Term Loan but excluding payments pursuant to Section
2.07(c), an amount equal to (a) on or prior to the first anniversary of the
First Amendment Effective Date, three percent (3%) of the principal amount of
the Real Estate Term Loan required to be repaid or prepaid (other than pursuant
to Section 2.07(c)), (b) after the first anniversary of the First Amendment
Effective Date and on or prior to the second anniversary of the First Amendment
Effective Date, two percent (2%) of the principal amount of the Real Estate Term
Loan required to be repaid or prepaid (other than pursuant to Section 2.07(c)),
(c) after the second anniversary of the First Amendment Effective Date and on or
prior to the third anniversary of the First Amendment Effective Date, one
percent (1%) of the principal amount of the Real Estate Term Loan required to be
repaid or prepaid (other than pursuant to Section 2.07(c)), and (d) after the
third anniversary of the First Amendment Effective Date, $0.”
 
(b) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting the defined term “Alternative Term Loan Interest Rate” appearing
therein and inserting in lieu thereof the following:
 
““Alternative Term Loan Interest Rate” means, at any time, a per annum rate
equal to the sum of (a) the greater of (i) the Base Rate in effect at such time
and (ii) two percent (2%) plus (b) seven percent (7%).”
 
(c) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting clause (b) of the definition of “Applicable Margin” appearing therein
and inserting in lieu thereof the following:
 
“(b)          From and after the first Adjustment Date, the Applicable Margin
shall be determined from the pricing grid below based upon the Average Daily
Uncapped Excess Availability for the Fiscal Quarter ended immediately preceding
such Adjustment Date; provided, however, that
 
 
 

--------------------------------------------------------------------------------

 
 
notwithstanding anything to the contrary set forth herein, upon the occurrence
of an Event of Default, the Agent may, and at the direction of the Required
Lenders shall, immediately increase the Applicable Margin to that set forth in
Level IV (even if the Average Daily Uncapped Excess Availability requirements
for a different Level have been met) and interest shall accrue at the Default
Rate; provided, further if the foregoing financial statements or any Borrowing
Base Certificates are at any time restated or otherwise revised (including as a
result of an audit) or if the information set forth in such financial statements
or any Borrowing Base Certificates otherwise proves to be false or incorrect
such that the Applicable Margin would have been higher than was otherwise in
effect during any period, without constituting a waiver of any Default or Event
of Default arising as a result thereof, interest due under this Agreement shall
be immediately recalculated at such higher rate for any applicable periods and
shall be due and payable on demand.”
 
(d) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting the grid following clause (b) of the defined term “Applicable Margin”
appearing therein and inserting in lieu thereof the following:
 
Level
Average Daily Uncapped Excess Availability
LIBOR Margin for Revolving Loans
Base Rate Margin for Revolving Loans
Commercial Letter of Credit Fee
Standby Letter of Credit Fee
I
Equal to or greater than $80,000,000
1.75%
0.75%
1.25%
1.75%
II
Equal to or greater than $40,000,000 but less than $80,000,000
2.00%
1.00%
1.50%
2.00%
III
 Equal to or greater than $15,000,000 but less than $40,000,000
2.25%
1.25%
1.75%
2.25%
IV
 Less than $15,000,000
2.50%
1.50%
1.75%
2.25%

 
(e) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting the defined term “Cash Dominion Event” appearing therein and inserting
in lieu thereof the following:
 
““Cash Dominion Event” means (a) the First Amendment Effective Date, or (b) the
occurrence and continuance of any Default, or (c) the failure of the Borrowers
to maintain Excess Availability of at least fifteen percent (15%) of the
Revolving Loan Cap (without giving effect to
 
 
 

--------------------------------------------------------------------------------

 
 
the Real Estate Term Loan Reserve or the Term Loan Reserve) at any time.  For
purposes of this Agreement, the occurrence of a Cash Dominion Event shall be
deemed continuing (1) pursuant to clause (a) above unless and until the Agent,
the Term Loan Agent and the Lenders otherwise consent, and (2) pursuant to
clauses (b) or (c) above (i) so long as such Default has not been waived, and/or
(ii) if the Cash Dominion Event arises as a result of the Borrowers’ failure to
achieve Excess Availability as required hereunder, until Excess Availability has
been equal to or exceeded the greater of (A) fifteen percent (15%) of the
Revolving Loan Cap (without giving effect to the Real Estate Term Loan Reserve
or the Term Loan Reserve); or (B) $18,000,000, in each case for twenty (20)
consecutive Business Days, in which case a Cash Dominion Event shall no longer
be deemed to be continuing for purposes of this Agreement; provided that a Cash
Dominion Event shall be deemed continuing (even if a Default is no longer
continuing and/or Excess Availability exceeds the required amount for twenty
(20) consecutive Business Days) at all times after a Cash Dominion Event has
occurred and been discontinued on two (2) occasions after the Closing Date.”
 
(f) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting the defined term “Reporting Activation Event”.
 
(g) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting the defined term “Revolving Borrowing Base” appearing therein and
inserting in lieu thereof the following:
 
““Revolving Borrowing Base” means, at any time of calculation, an amount equal
to:
 
(a)           the face amount of Eligible Credit Card Receivables multiplied by
the Credit Card Advance Rate;
 
plus
 
(b)           the Cost of Eligible Inventory, net of Inventory Reserves,
multiplied by the Appraisal Percentage of the Appraised Value of Eligible
Inventory, provided, that the total Cost of Eligible In-Transit Inventory
included in the calculation in this clause (b) shall not exceed $10,000,000 at
any time;
 
minus
 
(c)           the Real Estate Term Loan Reserve;
 
minus
 
(d)           the Term Loan Reserve;
 
minus
 
(e)           at all times prior to the Equity Contribution, the Availability
Block;
 
minus
 
(f)           the then amount of all Availability Reserves.”
 
(h) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting the defined term “Term Loan Interest Rate” appearing therein and
inserting in lieu thereof the following:
 
 
 

--------------------------------------------------------------------------------

 
 
 
““Term Loan Interest Rate” means a per annum rate equal to (a) the sum of (i)
the greater of (A) LIBO Rate and (B) one percent (1%) plus eight percent (8%),
or (b) if the LIBO Rate is not available at such time for any reason, the
Alternative Term Loan Interest Rate.”
 
(i) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by
deleting the defined term "Term Loan Prepayment Fee" appearing therein and
inserting in lieu thereof the following:
 
““Term Loan Prepayment Fee” means, with respect to any payment or prepayment of
the Term Loan (including upon acceleration of the maturity of the Term Loan but
excluding payments pursuant to Section 2.07(d)), an amount equal to (a) on or
prior to the first anniversary of the First Amendment Effective Date, four
percent (4%) of the principal amount of the Term Loan required to be repaid or
prepaid (other than pursuant to Section 2.07(d)), (b) after the first
anniversary of the First Amendment Effective Date and on or prior to the second
anniversary of the First Amendment Effective Date, two percent (2%) of the
principal amount of the Term Loan required to be repaid or prepaid (other than
pursuant to Section 2.07(d)), (c) after the second anniversary of the First
Amendment Effective Date and on or prior to the third anniversary of the First
Amendment Effective Date, one percent (1%) of the principal amount of the Term
Loan required to be repaid or prepaid (other than pursuant to Section 2.07(d)),
and (d) after the third anniversary of the First Amendment Effective Date, $0.”
 
(j) Section 2.05 (Prepayments) of the Credit Agreement is hereby amended by
deleting in clause (g) thereof the reference to “2.05(j)” and inserting in lieu
thereof “2.05(h)”.
 
(k) Section 2.05 (Prepayments) of the Credit Agreement is hereby amended by
deleting clause (h) as it appears therein and inserting in lieu thereof the
following:
 
“(h)           Prepayments made pursuant to Section 2.05(g) above, first, shall
be applied to the outstanding Real Estate Term Loan, including additional
amounts required pursuant to Section 2.09(c)(ii), first to such additional
amounts (if any), second to the amount due on the Maturity Date and then in
inverse order of the payments due pursuant to Section 2.07(c) in accordance with
the Applicable Percentages of each Real Estate Term Lender, second, shall be
applied ratably to the outstanding Swing Line Loans, third, shall be applied
ratably to the outstanding Revolving Credit Loans, fourth, shall be used to Cash
Collateralize the remaining L/C Obligations, fifth, shall be applied to the
outstanding Term Loan, including additional amounts required pursuant to Section
2.09(c)(i), first to such additional amounts, second to the amount due on the
Maturity Date and then in inverse order of the payments due pursuant to
Section 2.07(c) in accordance with the Applicable Percentages of each Term
Lender, and sixth, the amount remaining, if any, after prepayment in full of the
Real Estate Term Loan, all Swing Line Loans and Revolving Credit Loans
outstanding at such time, the Cash Collateralization of the remaining L/C
Obligations in full, and the prepayment of the Term Loan, may be retained by the
Borrowers for use in the ordinary course of their business.  Upon the drawing of
any Letter of Credit that has been Cash Collateralized, the funds held as Cash
Collateral shall be applied (without any further action by or notice to or from
the Borrowers) to reimburse the L/C Issuer or the Revolving Lenders, as
applicable.”
 
(l) Section 2.05 (Prepayments) of the Credit Agreement is hereby amended by
deleting clause (j) as it appears therein and inserting in lieu thereof the
following:
 
“(j)           Prepayments made pursuant to Section 2.05(i) above, first, shall
be applied to the outstanding Term Loan, including additional amounts required
pursuant to Section 2.09(c)(i), first to such additional amounts, second to the
amount due on the Maturity Date and then in
 
 
 
 

--------------------------------------------------------------------------------

 
 
inverse order of the payments due pursuant to Section 2.07(c) in accordance with
the Applicable Percentages of each Term Lender, second, shall be applied ratably
to the outstanding Swing Line Loans, third, shall be applied ratably to the
outstanding Revolving Credit Loans, fourth, shall be used to Cash Collateralize
the remaining L/C Obligations, fifth, shall be applied to the outstanding Real
Estate Term Loan, including additional amounts required pursuant to Section
2.09(c)(ii), first to such additional amounts (if any), second to the amount due
on the Maturity Date and then in inverse order of the payments due pursuant to
Section 2.07(c) in accordance with the Applicable Percentages of each Real
Estate Term Lender, and sixth, the amount remaining, if any, after prepayment in
full of the Real Estate Term Loan, the Term Loan, all Swing Line Loans and
Revolving Credit Loans outstanding at such time, and the Cash Collateralization
of the remaining L/C Obligations in full, may be retained by the Borrowers for
use in the ordinary course of their business.  Upon the drawing of any Letter of
Credit that has been Cash Collateralized, the funds held as Cash Collateral
shall be applied (without any further action by or notice to or from the
Borrowers) to reimburse the L/C Issuer or the Revolving Lenders, as applicable.”
 
(m) Section 2.07 (Repayment of Loans) of the Credit Agreement is hereby amended
by deleting clause (c) as it appears therein and inserting in lieu thereof the
following:
 
“(c)           The Borrowers shall make quarterly principal payments on the Real
Estate Term Loan in the amount of (i) $250,000 each, commencing on August 1,
2014, and on the first day of each November, February, May and August occurring
thereafter prior to the First Amendment Effective Date, and (ii) $300,000 each,
commencing on November 1, 2014, and on the first day of each November, February,
May and August occurring thereafter.  The Borrowers shall repay the Agent, for
the account of the Real Estate Term Lenders on the Termination Date the
aggregate principal amount of the Real Estate Term Loan outstanding on such
date, along with accrued but unpaid interest and all other Obligations
outstanding with respect to the Real Estate Term Loan.”
 
(n) Section 2.07 (Repayment of Loans) of the Credit Agreement is hereby amended
by deleting clause (d) as it appears therein and inserting in lieu thereof the
following:
 
“(d)           The Borrowers shall make quarterly principal payments on the Term
Loan in the amount of (i) $312,500 each, commencing on August 1, 2014, and on
the first day of each November, February, May and August occurring thereafter
prior to the First Amendment Effective Date, (ii) $400,000 each, on November 1,
2014, February 1, 2015, May 1, 2015 and August 1, 2015, and (iii) $312,500 each,
commencing on November 1, 2015, and on the first day of each February, May,
August and November occurring thereafter.  The Borrowers shall repay the Term
Loan Agent, for the account of the Term Lenders on the Termination Date the
aggregate principal amount of the Term Loan outstanding on such date, along with
accrued but unpaid interest and all other Obligations outstanding, including
pursuant to Section 2.09(c), with respect to the Term Loan.”
 
(o) Section 2.09 (Fees) of the Credit Agreement is hereby amended by deleting
clause (b) as it appears therein and inserting in lieu thereof the following:
 
“(b)           Early Termination Fee.  In the event that the Termination Date
occurs, for any reason, prior to the Maturity Date, or in the event that the
Borrowers reduce (but do not terminate) the Aggregate Revolving Commitments
prior to the Maturity Date, the Borrowers shall pay to the Agent, for the
account of each Revolving Lender in accordance with its Applicable Percentage, a
fee (the “Early Termination Fee”) in respect of amounts which are or become
payable by reason thereof equal to the following:  (i) three percent (3%) of the
 
 
 
 

--------------------------------------------------------------------------------

 
Revolving Credit Commitments then in effect (without regard to any termination
thereof) or of the amount of any reduction in the Aggregate Revolving
Commitments, as applicable, if the Termination Date or reduction shall occur at
any time on or before the first anniversary of the First Amendment Effective
Date; (ii) two percent (2%) of the Revolving Credit Commitments then in effect
(without regard to any termination thereof) or of the amount of any reduction in
the Aggregate Revolving Commitments, as applicable, if the Termination Date or
reduction shall occur at any time after the first anniversary of the First
Amendment Effective Date and on or prior to the second anniversary of the First
Amendment Effective Date; (iii) one percent (1%) of the Revolving Credit
Commitments then in effect (without regard to any termination thereof) or of the
amount of any reduction in the Aggregate Revolving Commitments, as applicable,
if the Termination Date or reduction shall occur at any time after the second
anniversary of the First Amendment Effective Date and on or prior to the third
anniversary of the First Amendment Effective Date and (iii) zero percent (0%) of
the Revolving Credit Commitments then in effect (without regard to any
termination thereof) or of the amount of any reduction in the Aggregate
Revolving Commitments, as applicable, if the Termination Date or reduction shall
occur at any time after the third anniversary of the Closing Date.  All parties
to this Agreement agree and acknowledge that the Revolving Lenders will have
suffered damages on account of the early termination of this Agreement or any
portion of the Revolving Credit Commitments and that, in view of the difficulty
in ascertaining the amount of such damages, the Early Termination Fee
constitutes reasonable compensation and liquidated damages to compensate the
Revolving Lenders on account thereof.”
 
(p) Section 2.09 (Fees) of the Credit Agreement is hereby amended by deleting
clause (c) as it appears therein and inserting in lieu thereof the following:
 
“(c)           Prepayment Fees.
 
(i)             In the event that, at any time prior to third anniversary of the
First Amendment Effective Date, (i) the Termination Date occurs, or (ii) in the
event that the Borrowers prepay, or are required to prepay, the Term Loan in
whole or in part, then, on the Termination Date or the effective date of such
prepayment, as applicable, the Borrowers shall pay to the Agent, for the ratable
benefit of the Term Lenders, an amount equal to the applicable Term Loan
Prepayment Fee.  All parties to this Agreement agree and acknowledge that the
Term Lenders will have suffered damages on account of the early termination of
this Agreement or prepayment of any portion of the Term Loan and that, in view
of the difficulty in ascertaining the amount of such damages, the Term Loan
Prepayment Fee constitutes reasonable compensation and liquidated damages to
compensate the Term Lenders on account thereof.
 
(ii)             In the event that, at any time prior to third anniversary of
the First Amendment Effective Date, (i) the Termination Date occurs, or (ii) in
the event that the Borrowers prepay, or are required to prepay, the Real Estate
Term Loan in whole or in part, then, on the Termination Date or the effective
date of such prepayment, as applicable, the Borrowers shall pay to the Agent,
for the ratable benefit of the Real Estate Term Lenders, an amount equal to the
applicable Real Estate Term Loan Prepayment Fee.  All parties to this Agreement
agree and acknowledge that the Real Estate Term Lenders will have suffered
damages on account of the early termination of this Agreement or prepayment of
any portion of the Real Estate Term Loan and that, in view of the difficulty in
ascertaining the amount of such damages, the Real Estate Term Loan Prepayment
Fee constitutes reasonable compensation and liquidated damages to compensate the
Real Estate Term Lenders on account thereof.”
 
 
 
 

--------------------------------------------------------------------------------

 
 
(q) Section 6.02 (Certificate; Other Information) of the Credit Agreement is
hereby amended by deleting clause (c) as it appears therein and inserting in
lieu thereof the following:
 
“(c)           on Wednesday of each week (or, if Wednesday is not a Business
Day, on the next succeeding Business Day), and each date that the Lead Borrower
makes a request for a Credit Extension hereunder, by 1 p.m. on such date, a
certificate in the form of Exhibit H (a “Borrowing Base Certificate”) showing
the Borrowing Base as of the close of business on the immediately preceding
Sunday, each Borrowing Base Certificate to be certified as complete and correct
by a Responsible Officer of the Lead Borrower;”
 
(r) Section 6.10 (Inspection Rights) of the Credit Agreement is hereby amended
by deleting clause (b) as it appears therein and inserting in lieu thereof the
following:
 
“(b)           Upon the request of the Agent after reasonable prior notice,
permit the Agent or professionals (including investment bankers, consultants,
accountants, lawyers and appraisers) retained by the Agent to conduct
appraisals, commercial finance examinations and other evaluations, including,
without limitation, evaluations of (i) the Loan Parties’ practices in the
computation of the Borrowing Base and (ii) the assets included in the Borrowing
Base and related financial information such as, but not limited to, sales, gross
margins, payables, accruals and reserves.  Subject to the limitations set forth
below, the Loan Parties shall pay the fees and expenses of the Agent or such
professionals with respect to such evaluations, appraisals and assessments.  The
Loan Parties acknowledge that the Agent may, in its discretion, undertake up to
one (1) appraisal of any Eligible Real Estate, three (3) inventory appraisals
and three (3) commercial finance examinations each Fiscal Year at the Loan
Parties’ expense; provided that, if Excess Availability at any time is less than
seventeen and one-half percent (17.5%) of the Revolving Loan Cap (without giving
effect to the Real Estate Term Loan Reserve or the Term Loan Reserve) the Loan
Parties shall pay for one (1) additional appraisal and one (1) additional
commercial finance examination each Fiscal Year undertaken by the Agent or such
professionals pursuant to this Section 6.10.  Notwithstanding the foregoing, the
Agent may cause additional appraisals and commercial finance examinations to be
undertaken (i) as it in its discretion deems necessary or appropriate, at its
own expense or, (ii) if required by applicable Law or if a Default shall have
occurred and be continuing, at the expense of the Borrowers.  In the event that
the Agent has not conducted an inventory appraisal in accordance with this
Section in any two hundred and ten (210) day period but has the right to do so,
the Agent shall commission such inventory appraisal within five (5) Business
Days of receiving a written request from the Term Loan Agent to do so.”
 
(s) Article VI (Affirmative Covenants) of the Credit Agreement is hereby amended
by adding the following Section 6.20 at the end thereof:
 
“6.20                      Budget/Financial Advisor.
 
(a)           Deliver to the Agent, in form and detail satisfactory to the Agent
on Wednesday of each week (or, if Wednesday not a Business Day, on the next
succeeding Business Day) commencing on September 4, 2014, an updated Budget,
reviewed by Deloitte Consulting LLP (“Deloitte”).
 
(b)           At all times retain and employ Deloitte or another financial
advisor which is reasonably acceptable to the Agent, the terms and scope of such
engagement and the responsibilities of such financial advisor which are also
reasonably acceptable to the Agent; provided, that the Loan Parties shall not be
required to retain such advisor if (i) no
 
 
 

--------------------------------------------------------------------------------

 
 
Default or Event of Default has occurred and is continuing, (ii) the Lead
Borrower has hired a chief financial officer who is engaged on a full time basis
and (iii) the Lead Borrower has received the Equity Contribution.  The Loan
Parties shall authorize the financial advisor to communicate directly with the
Agent and furnish the Agent with such information as the Agent may reasonably
request.”
 
(t) Section 7.15 (Excess Availability) of the Credit Agreement is hereby amended
by deleting such section in its entirety and inserting in lieu thereof the
following:
 
“7.15                      Excess Availability.  Permit Excess Availability at
any time to be less than the greater of (a) $10,000,000 or (b) 10% of the
Revolving Loan Cap (without giving effect to the Real Estate Term Loan Reserve,
the Term Loan Reserve or the Availability Block ) plus 10% of the Outstanding
Amount of the Real Estate Term Loan plus 10% of the Outstanding Amount of the
Term Loan.”
 
(u) Section 9.12 (Reports and Financial Statements) of the Credit Agreement is
hereby amended by deleting clause (b) as it appears therein and inserting in
lieu thereof the following:
 
(b) is deemed to have requested that the Agent furnish such Lender, promptly
after they become available, copies of all financial statements and Budgets
required to be delivered by the Lead Borrower hereunder and all commercial
finance examinations and appraisals of the Collateral received by the Agent
(collectively, the “Reports”)
 
(c) Schedule 6.02 of the Credit Agreement is hereby amended by deleting such
schedule in its entirety, and inserting in lieu thereof the schedule set forth
on Annex A attached hereto.
 
5. Conditions to Effectiveness.  This Agreement shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the “Effective
Date”):
 
(a) Borrowers shall have delivered to the Agent:
 
(i)  an executed copy of this Agreement;
 
(ii) such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of each Loan Party as the
Agent may require evidencing (A) the authority of each Loan Party to enter into
this Agreement and (B) the identity, authority and capacity of each Responsible
Officer thereof authorized to act as a Responsible Officer in connection with
this Agreement and the other Loan Documents to which such Loan Party is a party
or is to become a party;
 
(iii) copies of each Loan Party's Organization Documents and such other
documents and certifications as the Agent may reasonably require to evidence
that each Loan Party is duly organized or formed, and that each Loan Party is
validly existing, in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to so qualify in such
 
 
 

--------------------------------------------------------------------------------

 
 
jurisdiction could not reasonably be expected to have a Material Adverse Effect;
 
(iv) favorable opinions of DLA Piper LLP (US), counsel to Holdings , and Lathrop
& Gage, LLP, counsel to the Lead Borrower , addressed to the Agent and the Term
Loan Agent and each Lender, as to such matters concerning Holdings and the Lead
Borrower and the Loan Documents as the Agent and the Term Loan Agent may
reasonably request;
 
(b) the Borrowers shall have paid to the Agent, for the ratable benefit of the
Revolving Lenders, a revolving amendment fee in an amount equal to $75,000,
which shall be fully earned, due and payable in full on the First Amendment
Effective Date and is not refundable for and reason or under any circumstances;
 
(c) the Borrowers shall have paid to the Term Loan Agent, for the account of the
Term Loan Agent and the Term Lenders, a term loan amendment fee in an amount
equal to $75,000, which shall be fully earned, due and payable in full on the
First Amendment Effective Date and is not refundable for and reason or under any
circumstances; and
 
(d) the Borrowers shall have paid in full all fees and expenses (including,
without limitation, the fees and expenses of Choate, Hall & Stewart LLP, counsel
to the Agent) required to be paid pursuant to the Credit Agreement.
 
6. Post-Closing Agreement.  By its signature below, each Borrower hereby
covenants and agrees, that the Borrowers shall deliver, on or before November 3,
2014, updated projections for the Fiscal Years ended February 1, 2015 and
January 31, 2016, each in form and substance satisfactory to the Agent, and that
the failure to do so shall constitute an Event of Default under Section 8.01(b)
of the Credit Agreement.  Each Borrower further acknowledges and agrees that
this Agreement shall be a Loan Document for all purposes.
 
7. Representations and Warranties.  Each Borrower represents and warrants that:
 
(a)  the execution, delivery and performance of this Agreement, the Credit
Agreement and the other Loan Documents, and the transactions contemplated
hereunder and thereunder, are all within such Borrower’s limited liability
company or corporate powers, as applicable, have been duly authorized and are
not in contravention of law or the terms of such Borrower’s operating agreement
or bylaws, as applicable, or other constitutive documents, or any indenture,
agreement or undertaking to which such Borrower is a party or by which such
Borrower or its property are bound;
 
(b) except for the Existing Event of Default and the circumstances giving rise
thereto or as contemplated hereunder, no event or circumstance has occurred and
is continuing that would constitute a Default or an Event of Default;
 
(c) except as a result of the Existing Event of Default, the representations and
warranties contained in the Credit Agreement and the other Loan Documents were
true and correct in all material respects as of the date made and, except to the
extent that such representations and warranties relate expressly to an earlier
date, remain true and correct in all material respects as of the date hereof
(provided, that in the case of any representation and
 
 
 
 

--------------------------------------------------------------------------------

 
 
warranty qualified by materiality, such representation and warranty shall be
true and correct in all respects (after giving effect to such materiality
qualification)) except with respect to those circumstances giving rise to the
Existing Event of Default or as contemplated hereunder, remain true and correct
as of the date hereof;
 
(d) each Borrower has read and fully understands each of the terms and
conditions of this Agreement and is entering into this Agreement freely and
voluntarily, without duress, after having had an opportunity for consultation
with independent counsel of its own selection and not in reliance upon any
representations, warranties or agreements made by the Agent, the Term Loan Agent
or any Lender and not set forth in this Agreement; and
 
(e) all other information delivered by the Borrowers to the Agent, the Term Loan
Agent and the Lenders is true and correct in all material respects as of the
date delivered.
 
8. Rights of the Agent, the Term Loan Agent and Lenders in Bankruptcy; Tolling
of Certain Time-Related Defenses.
 
(a) Each Borrower hereby admits, acknowledges and agrees that the Agent’s, the
Term Loan Agent’s and the Lenders’ entry into, and covenants to perform in
accordance with, this Agreement and the Agent’s, the Term Loan Agent’s and the
Lenders’ consummation of the transactions contemplated hereby, constitute “new
value” and “reasonably equivalent value,” as those terms are used in Section 547
and 548 of Title 11 of the United States Code (the “Bankruptcy Code”), received
by the Borrowers as of the effective date of this Agreement in contemporaneous
exchange for the Borrowers’ entry into, and covenants to perform in accordance
with, this Agreement, and the Borrowers’ consummation of the transactions
contemplated hereby.
 
(b) Each Borrower acknowledges and agrees that all time-related defenses, such
as statutes of limitations, doctrines of estoppel, doctrines of laches or any
other rules of law or equity of similar nature, are hereby tolled with respect
to all rights, claims and causes of action of any kind whatsoever that the
Agent, the Term Loan Agent and the Lenders may have against Borrowers under the
Credit Agreement and the other Loan Documents as of the First Amendment
Effective Date through and including the date which is sixty (60) days after the
First Amendment Effective Date.  Each Borrower hereby waives all such
time-related defenses to the extent such defenses are hereby tolled.
 
9. Costs and Expenses.  Upon demand, the Borrowers shall reimburse the Agent,
the Term Loan Agent and the Lenders directly for all costs and expenses incurred
by the Agent, the Term Loan Agent and the Lenders in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the Agent’s, the Term Loan Agent’s and the Lenders’ reasonable
attorneys’ fees and expenses).
 
10. Full Force and Effect; Entire Agreement.  Except to the extent expressly
provided in this Agreement, the terms and conditions of the Credit Agreement and
each other Loan Document shall remain in full force and effect.  This Agreement,
the Credit Agreement and the other Loan Documents constitute and contain the
entire agreement of the parties hereto and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the subject matter
hereof.
 
11. Definitions and Construction.  Capitalized terms used but not otherwise
defined herein shall have the respective meanings given to such terms in the
Credit Agreement, as amended
 
 
 

--------------------------------------------------------------------------------

 
 
hereby.  Upon and after the effectiveness of this First Amendment, each
reference in the Credit Agreement to “this Agreement”, “hereunder”, “herein”,
“hereof” or words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to “the Credit Agreement”, “thereunder”,
“therein”, “thereof”, or words of like import referring to the Credit Agreement,
shall mean and be a reference to the Credit Agreement as amended hereby
 
12. Release.
 
(a) Except with respect to the matters, rights and obligations specified in
Section 12(b) below, each Borrower hereby releases and forever discharges the
Agent, the Term Loan Agent and the Lenders and their respective parents,
subsidiaries and affiliates, past or present, and each of them, as well as their
respective directors, officers, agents, servants, employees, shareholders,
representatives, attorneys, administrators, executors, heirs, assigns,
predecessors and successors in interest, and all other persons, firms or
corporations with whom any of the former have been, are now, or may hereafter be
affiliated, and each of them (collectively, the “Releasees”), from and against
any and all claims, demands, liens, agreements, contracts, covenants, actions,
suits, causes of action in law or equity, obligations, controversies, debts,
costs, expenses, damages, judgments, orders and liabilities of whatever kind or
nature in law, equity or otherwise, whether known or unknown, fixed or
contingent, suspected or unsuspected by such Borrower, and whether concealed or
hidden (collectively, “Claims”), which such Borrower now owns or holds or has at
any time heretofore owned or held, which are based upon or arise out of or in
connection with any matter, cause or thing existing at any time prior to the
date hereof or anything done, omitted or suffered to be done or omitted at any
time prior to the date hereof in connection with the Credit Agreement or the
other Loan Documents (collectively the “Released Matters”).
 
(b) It is expressly understood and agreed that it is the intent of Borrowers to
forever release claims against Releasees arising out of the Released Matters,
but that nothing herein shall affect the obligations of the Agent, the Term Loan
Agent and the Lenders arising subsequent to the date hereof, including, but not
limited to, compliance subsequent to the date hereof with all terms and
conditions of this Agreement, the Credit Agreement and the other Loan Documents.
 
(c) Each Borrower represents, warrants and agrees that in executing and entering
into this release, it is not relying and has not relied upon any representation,
promise or statement made by anyone which is not recited, contained or embodied
in this Agreement, the Credit Agreement or the other Loan Documents.  Each
Borrower has reviewed this release with such Borrower’s legal counsel, and
understands and acknowledges the significance and consequence of this release
and of the specific waiver thereof contained herein.  Each Borrower understands
and expressly assumes the risk that any fact not recited, contained or embodied
therein may turn out hereafter to be other than, different from, or contrary to
the facts now known to such Borrower or believed by such Borrower to be
true.  Nevertheless, each Borrower intends by this release to release fully,
finally and forever all Released Matters and agrees that this release shall be
effective in all respects notwithstanding any such difference in facts, and
shall not be subject to termination, modification or rescission by reason of any
such difference in facts.
 
13. Counterparts; Effectiveness.  This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument.
 
14. No Third Parties Benefited. This Agreement is made and entered into for the
sole benefit of the Loan Parties, the Agent, the Term Loan Agent and the
Lenders, and their permitted
 
 
 

--------------------------------------------------------------------------------

 
 
successors and assigns, and except as otherwise expressly provided in this
Agreement, no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with, this
Agreement.
 
(a) Governing Law; Jurisdiction; Waiver of Jury Trial.  THIS AGREEMENT AND,
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, THE CREDIT AGREEMENT AND EACH
OTHER LOAN DOCUMENT, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND
SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF SAID STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW).  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT
COURT OF THE SOUTHERN DISTRICT AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE LOAN PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS
IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN
SUCH FEDERAL COURT.  EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL
AFFECT ANY RIGHT THAT ANY LOAN PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY
LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.  EACH LOAN PARTY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE.  EACH OF THE LOAN
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).
 
15. Severability.  In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
 
[SIGNATURE PAGES FOLLOW.]
 

 
 

--------------------------------------------------------------------------------

 

In Witness Whereof, each of the parties hereto has caused this Agreement to be
executed and delivered by its duly authorized officer as of the date first
written above.
 
LEAD BORROWER:

ALCO STORES, INC.

By: /s/ Brian Assmus
Name: Brian Assmus
Title: Vice President and Controller

OTHER BORROWERS:

ALCO HOLDINGS, A TEXAS LIMITED LIABILITY COMPANY

By: /s/ Brian Assmus
Name: Brian Assmus
Title: Vice President and Controller

[ SIGNATURE PAGE – AMENDMENT AND WAIVER AGREEMENT ]
 
 
 

--------------------------------------------------------------------------------

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and as
Collateral Agent

By: /s/ Danielle M. Baldinelli
Name: Danielle M. Baldinelli
Title:  Director

[ SIGNATURE PAGE – AMENDMENT AND WAIVER AGREEMENT ]
 
 
 

--------------------------------------------------------------------------------

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Revolving Lender, Real Estate Term
Lender, L/C Issuer and Swing Line Lender
 

 
By: /s/ Danielle M. Baldinelli
Name:  Danielle M. Baldinelli
Title:   Director

[ SIGNATURE PAGE – AMENDMENT AND WAIVER AGREEMENT ]
 
 
 

--------------------------------------------------------------------------------

 

CIT BANK, as a Revolving Lender and Real Estate Term Lender
 

 
By: /s/ Renee M. Singer
Name:  Renee M. Singer
Title:   Managing Director

[ SIGNATURE PAGE – AMENDMENT AND WAIVER AGREEMENT ]
 
 
 

--------------------------------------------------------------------------------

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Term Loan Agent and as a Term Lender
 

By: /s/ Sally A. Sheehan
Name:  Sally A. Sheehan
Title:  Director

[ SIGNATURE PAGE – AMENDMENT AND WAIVER AGREEMENT ]
 
 
 

--------------------------------------------------------------------------------

 

ANNEX A
 
SCHEDULE 6.02

Financial and Collateral Reporting

Monthly (within 30 days after month end):

·  
Inventory Certificate

·  
Stock Ledger (Consolidated Summary)

·  
Open to Buy

·  
Store Activity

·  
Inventory Reconciliation

·  
Gross Margin Reconciliation

·  
Top Ten Vendor Concentration

·  
A/P Aging

·  
On Order Summary Report

·  
Officer’s Compliance Certificate and Monthly Financial Statements for the Fiscal
Months of February, March, May, June, August, September, November and December

Monthly (within 60 days after month end):

·  
Officer’s Compliance Certificate and Monthly Financial Statements for the Fiscal
Months of January, April, July and October

·  
Management’s Discussion and Analysis

·  
Insurance Coverage Report

Annually (within 45 days after year end):

·  
Insurance Coverage Report

Annually (within 60 days after year end):

·  
Management Forecast for the Following Year

Annually (within 90 days after year end):

·  
Audited Annual Financial Statements

·  
Certificate of Registered Public Accounting Firm

·  
Officer’s Compliance Certificate

·  
Management’s Discussion and Analysis

Mailed or emailed to:

Agent:                                                     Wells Fargo Bank,
National Association
    One Boston Place, 18th Floor
    Boston, MA 02108
    Attn:  Danielle M. Baldinelli
    E-Mail:  Danielle.m.baldinelli@wellsfargo.com
and
 
 
 
 

--------------------------------------------------------------------------------

 

Term Loan Agent:                                            Wells Fargo Bank,
National Association
One Boston Place, 19th Floor
Boston, Massachusetts 02108
Attn:  Sally A. Sheehan
Telephone:  (617) 624-4407
Facsimile:  (866) 944-8034
Email:  sally.a.sheehan@wellsfargo.com