Exhibit 10.1

 

October 15, 2018

 

Fred’s, Inc.

4300 New Getwell Road

Memphis, Tennessee 38116

Attention: Chief Financial Officer

 

RE:Third Amendment to Amended and Restated Addendum to Credit Agreement

 

Ladies and Gentlemen:

 

Reference is made to (i) that certain Credit Agreement dated as of April 9, 2015
(as amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”) by and among FRED’S, INC., a Tennessee corporation
(“Parent”), certain Subsidiaries of Parent as borrowers (each of such
Subsidiaries, together with Parent, jointly and severally, “Borrowers” and,
each, a “Borrower”); certain Subsidiaries of Parent as guarantors (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); the
Lenders party thereto; the Co-Collateral Agents party thereto; and REGIONS BANK,
an Alabama bank, in its capacity as administrative agent for Lenders, LC Issuer
and other Secured Parties (as defined therein) (in such capacity,
“Administrative Agent” or “Agent”); and (ii) that certain Amended and Restated
Addendum to Credit Agreement dated as of January 27, 2017 (as amended, restated,
supplemented or otherwise modified from time to time, the “Addendum”) by and
among Borrowers, Guarantors, Lenders, Co-Collateral Agents and Administrative
Agent. Unless otherwise specifically defined herein, each term used herein which
is defined in the Credit Agreement or the Addendum shall have the meaning
assigned to such term in the Credit Agreement or the Addendum, as applicable.

 

Borrowers have requested that Administrative Agent and Lenders amend certain
provisions of the Addendum as set forth herein. Administrative Agent and Lenders
have agreed to such amendments, subject to the terms and conditions hereof.

 

NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:

 

1.              Amendments to Addendum. By their execution of this letter
agreement and subject to the terms and conditions contained herein, the parties
hereto hereby agree that the Addendum is hereby amended as follows:

 

(a)             Section 2 of the Addendum is hereby amended by adding the
following new definition in appropriate alphabetical order:

 

“Subject Period” means the period beginning on October 15, 2018 and ending on
the earlier of (i) any Tuesday that Borrowers fail to comply with Section 8 and
(ii) November 30, 2018.

 

(b)            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 (i)
during the Subject Period, the greater of (x) seven percent (7%) of the
Commitments and (y) $14,700,000 and (ii) at any other time, the greater of (x)
twelve and one-half percent (12.5%) of the Commitments and (y) $26,250,000.

 

 

 

 

“Pharmacy Scripts Availability” means, at any time, (x) during the Subject
Period, thirty percent (30%) and (y) at any other time, twenty percent (20%) of
(i) the product of the average per-Pharmacy Script NOLV of Pharmacy Scripts
based on the most recent Qualified Appraisal thereof, multiplied by (ii) the
number of Eligible Pharmacy Scripts for the period of twelve (12) calendar
months most recently ended.

 

(c)            Section 8 of the Addendum is hereby amended by deleting such
section in its entirety and substituting the following in lieu thereof:

 

Section 8.            Subject Period Reporting. Without limitation of the
reports and other information required to be delivered under Section 7, during
the Subject Period, Borrowers shall deliver to Administrative Agent, no later
than the Tuesday of each week, (i) a fully completed and executed Borrowing Base
Certificate, prepared as of the end of the immediately preceding week, and
(ii) a 13-week rolling cash flow forecast, including a variance report, in form
satisfactory to Administrative Agent and prepared in good faith by Borrowers.

 

(d)            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 (i) during the Subject Period, the greater of (x) $14,700,000 and (y)
seven percent (7%) of the Aggregate Revolving Commitments and (ii) at any other
time, the greater of (x) $21,000,000 and (y) ten percent (10%) of the Aggregate
Revolving Commitments.

 

2.              Conditions Precedent. This letter agreement shall become
effective only upon satisfaction of the following conditions precedent:

 

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

 

(b)            Administrative Agent shall have received, each in form and
substance satisfactory to Required Lenders, (i) a fully completed and executed
Borrowing Base Certificate, prepared as of the end of the immediately preceding
week, and (ii) a 13-week rolling cash flow forecast, commencing with the week
ending on October 6, 2018;

 

(c)            Borrowers shall have received the fee letter agreement among
Administrative Agent and Borrowers dated as of the date hereof, duly executed
and delivered by Borrowers, and Borrowers shall have paid all expenses to be
paid to Administrative Agent; and

 

(d)            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 satisfactory to Administrative Agent.

 

 

 

 

3.              Effect of Amendment; No Novation or Mutual Departure. Except as
otherwise may be set forth expressly hereinabove, nothing in this letter
agreement shall be deemed to amend or modify any provision of the Credit
Agreement, the Addendum or any of the other Loan Documents, and all terms of the
Credit Agreement, the Addendum 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. Borrowers expressly acknowledge and agree
that (i) there has not been, and this letter agreement 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, and (ii) nothing in this letter agreement 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, the Addendum and the other Loan Documents, to exercise any and all
rights, powers, and remedies under the Credit Agreement, the Addendum 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, the Addendum or the other Loan Documents.

 

4.              Governing Law. THIS LETTER AGREEMENT 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).

 

5.              Miscellaneous. This letter agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. This letter agreement 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 an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
Delivery by one or more parties hereto of an executed counterpart of this letter
agreement 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
letter agreement. Section titles and references used in this letter agreement
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreements among the parties hereto evidenced hereby.

 

5REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]

 

 

 

 

If this letter agreement is acceptable to Borrowers, please evidence Borrowers’
agreement with the terms hereof by executing and returning this letter agreement
to Administrative Agent.

 

  Very truly yours,         REGIONS BANK, as “Administrative Agent” and a
“Lender”         By: /s/ Daniel J. Wells   Name: Daniel J. Wells   Title:
Director

 

[Signatures continued on following pages.]

 

Third Amendment to Amended and Restated Addendum to Credit Agreement (Fred’s)

 

 

 

 

  BANK OF AMERICA, N.A., as a “Lender”         By: /s/ Roger Malouf   Name:
Roger Malouf   Title: Director

 

[Signatures continued on following page.]

 

Third Amendment to Amended and Restated Addendum to Credit Agreement (Fred’s)

 

 

 

 

 

Acknowledged and Agreed:

 

FRED’S, 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]

 

FRED’S STORES OF TENNESSEE, INC.,
a Delaware corporation, as a “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]

 

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]

 

Third Amendment to Amended and Restated Addendum to Credit Agreement (Fred’s)