Document:

EX-10.18

Exhibit 10.18

NINTH MODIFICATION TO

CREDIT AGREEMENT (RESTATED) AND PROMISSORY NOTE

THIS NINTH MODIFICATION TO CREDIT AGREEMENT (RESTATED) AND PROMISSORY NOTE (the “Amendment”) is
dated this the 16th day of September, 2008 by and among FRED’S, INC., a Tennessee
corporation (the “Borrower”), FRED’S STORES OF TENNESSEE, INC. (the “Guarantor”), and REGIONS BANK
(the “Administrative Agent” and a “Lender”).

RECITALS:

     A. The Borrower and the Lender entered into a Credit Agreement (Restated) dated as of April 3,
2000 (as amended and restated from time to time, the “Credit Agreement”). In connection
with the Credit Agreement, the Borrower executed that certain Promissory Note in the original
principal amount not exceeding $40,000,000, dated April 3, 2000 (as amended and restated from time
to time, the “Note”).

     B. The Borrower and the Lender previously entered into: (i) a Modification Agreement (the
“First Modification”) dated May 26, 2000; (ii) a Second Modification Agreement (the “Second
Modification”) dated April 30, 2002; (iii) a Third Modification Agreement (the “Third
Modification”) dated July 31, 2003; (iv) a Fourth Modification Agreement (the “Fourth
Modification”) dated June 28, 2004; (v) a Fifth Modification Agreement (the “Fifth Modification”)
dated October 19, 2004, effective October 20, 2004; (vi) a Sixth Modification Agreement (the “Sixth
Modification”) dated July 29, 2005, effective June 29, 2005; (vii) a Seventh Modification Agreement
dated September 30, 2005, effective October 10, 2005; and (viii) an Eighth Modification Agreement
to Credit Agreement (Restated) and Promissory Note dated October 30, 2007, effective November 1,
2007.

     C. The Borrower, the Lender, and the Guarantor desire to further amend the Credit Agreement
and Note as set forth in this Amendment.

     D. Terms not defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.

     NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:

     1. Additional Definitions. Section 2.1 of the Credit Agreement concerning
“Definitions” is amended by adding the following new definitions of “Applicable Margin”, “Capital
Lease Obligations” and “Fixed Charge Coverage Ratio” in the appropriate alphabetical order:

     “Applicable Margin” shall mean the percentage designated in Annex I for LIBOR
Loans or Prime Rate Loans, as applicable, based on the Borrower’s Fixed Charge
Coverage Ratio measured on a consolidated basis for the most recent fiscal quarter and
the three preceding fiscal quarters. The Applicable Margin for LIBOR Loans shall
initially be 1.25%; provided however, that upon delivery to the Administrative
Agent of Borrower’s financial statements for the third fiscal quarter ending in
November of 2008, the Applicable Margin shall be reset to the percentage designated in
Annex I based on the Borrower’s Fixed Charge Coverage Ratio for such quarter and the
preceding three fiscal quarters. The Applicable Margin shall be effective as of the
second business day following the date that the Agent receives the Borrower’s
applicable financial statements.

     “Capital Lease Obligations” shall mean all obligations of such Person to pay rent
or other amounts under any lease (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of such Person
under GAAP, and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

     “Fixed Charge Coverage Ratio” shall mean, for any four consecutive fiscal
quarters of Borrower on a consolidated basis, the ratio of (i) EBITDAR for such period
to (ii) Fixed Charges.

22

 

     2. Change in Definitions. Section 2.1 of the Credit Agreement concerning “Definitions”
is amended to delete the prior definitions of “Commitment,” “EBITDA,” “EBITDAR” and “Maturity Date”
and the following is substituted in lieu thereof:

     “Commitment” means the sum of $60,000,000. Notwithstanding the use of the term
“commitment” with respect to the calculation of fees, the actual amount which the
Lender has agreed to lend or provide credit to the Borrower shall be limited to the
ratios and conditions in this Credit Agreement.

     “EBITDA” shall mean, for the Borrower and its subsidiaries for any period, an
amount equal to the sum of (a) consolidated Net Income for such period plus
(b) to the extent deducted in determining Net Income for such period, (i) any
provision (or less any benefit from) income or franchise taxes, plus (ii) interest
expense (including the interest portion of Capital Lease Obligations), (iii)
depreciation and amortization and (iv) all other non-cash charges (provided
however, cash expended in subsequent periods which originated from a non-cash
charge shall be subtracted during the period in which such cash was expended),
determined on a consolidated basis in accordance with GAAP in each case for such
period.

     “EBITDAR” shall mean, for the Borrower and its subsidiaries for any period, an
amount equal to the sum of (a) EBITDA plus (b) operating lease and rent
expenses (including rent expenses from operating leases which are treated as financing
for all purposes other than accounting purposes).

     “Maturity Date” shall mean July 31, 2011.

     3. Revision of Commitment Amount. Section 4.1 of the Credit Agreement concerning
“Commitment” is deleted and the following is substituted in lieu thereof:

     4.1 Commitment. Subject to and upon the terms and conditions herein set
forth, the Lender agrees to lend to the Borrower, and the Borrower may borrow from the
Lender an amount not exceeding Sixty Million Dollars ($60,000,000.00) (the
“Commitment”) the same to be advanced from time to time and repaid in accordance with
the terms hereof (the “Loan”). The Loan shall be used to finance its acquisition of
inventory, for general business purposes, to repurchase shares of the common stock of
Borrower and to generally finance the business operations of the Borrower.

     4. Amendment to Interest Rate Determination. Section 4.3 of the Credit Agreement
concerning “Interest Rate” is deleted and the following is substituted in lieu thereof:

     4.3 Interest Rate. Interest shall accrue on each Advance or other
segregated portion of the outstanding principal balance as the same may increase or
decrease during the term thereof, or as any Advance may be prepaid or reborrowed, at
an annual floating or temporarily fixed rate of interest equal to the Borrower’s
selection of:

     4.3.1 A rate fixed for a LIBOR Period by the Borrower’s selection of 30,
60, or 90 day LIBOR in effect on the date of such selection plus the
Applicable Margin. Such rate shall remain in effect for the remainder of the
applicable LIBOR Period and shall, at the LIBOR Change Date revert to the
Prime Rate unless instructions to the contrary are given the Bank by the
Borrower; or

     4.3.2 A rate equal to the Prime Rate plus the Applicable Margin.

     4.3.3 An Index Rate plus the Applicable Margin. “Index Rate”
means the rate per annum effective on any Index Rate Determination Date which
is equal to 30 day LIBOR. “Index Rate Determination Date” means the first
business day of each calendar month.

The Interest Rate shall be adjusted daily (with respect to Prime Rate indices) or on
a LIBOR Change Date (with respect to Section 4.3.1) in accordance with any increase
or decrease in the calculation of the amounts above, but no adjustment shall be made
which may result in the imposition of interest at a rate in excess of that rate which
the Bank is permitted by law to charge.

     5. Unused Fee. Section 4.9 of the Credit Agreement concerning “Reserve/Unused Fee” is
deleted and the following is substituted in lieu thereof:

23

 

     “Reserve/Unused Fee” shall be payable monthly in arrears on the average daily
unused portion of the Commitment, in an amount equal to the percentage designated in
Annex I for Unused Fee based on the Borrower’s Fixed Charge Coverage Ratio. The
Unused Fee percentage shall initially be 0.25%, provided, however, that upon delivery
to the Agent of Borrower’s financial statements for the third fiscal quarter ending
in November of 2008, the Unused Fee percentage shall be reset to the percentage
designated in Annex I for Unused Fee based on the Borrower’s Fixed Charge Coverage
Ratio for the preceding four fiscal quarter period then ending, measured quarterly.

     6. Amendment to Note. The Note is amended to revise the principal amount thereof
available from Seventy-Five Million Dollars ($75,000,000) to an amount not exceeding Sixty Million
Dollars ($60,000,000).

     7. Other Documents. All other documents executed and delivered in connection with the
Credit Agreement are hereby amended to the extent necessary to conform to this Amendment.

     8. Representations and Warranties. To induce the Lender to enter into this Amendment,
the Borrower hereby represents and warrants to the Lender that:

     (a) Reaffirmation. As of the date of this Amendment and after giving effect to
this Amendment, the representations and warranties set forth in Article 3 of the
Credit Agreement are true and correct in all material respects (except to the extent that any
such representation or warranty relates to a specified earlier date, and except for changes
in facts and circumstances that are not prohibited by the terms of the Credit Agreement); and

     (b) No Default. As of the date hereof and after giving effect to this
Amendment, no Event of Default has occurred and is continuing.

     9. Conditions. The effectiveness of this Amendment is subject to the satisfaction of
the following conditions precedent:

     (a) The Administrative Agent shall have received this Amendment duly executed by the
Borrower and the Guarantor;

     (b) No Default shall exist; and

     (c) The Borrower shall pay to the Administrative Agent, concurrently with the execution
hereof, the fees set forth in that certain Fee Letter dated August 7, 2008 executed by the
Borrower, Administrative Agent and Regions Capital Markets, including the upfront fee payable
to each of the Lenders (on a pro rata basis) equal to twenty basis points (.20%) calculated
on the total Commitment.

     10. Payment of Expenses. The Borrower agrees to pay or reimburse the Lender for all
its reasonable out-of-pocket costs and expenses incurred in connection with the preparation and
execution of this Amendment, not to exceed $2,500.00.

     11. Counterparts. This Amendment may be executed by one or more of the parties hereto
on any number of separate counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.

     12. Severability; Headings. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability, without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The section and subsection headings used
in this Amendment are for convenience of reference only and are not to affect the construction
hereof or to be taken into consideration in the interpretation hereof.

     13. Continuing Effect of Other Documents. This Amendment shall not constitute an
amendment or waiver of any other provision of the Credit Agreement and Note not expressly referred
to herein and, except to the extent that the Credit Agreement and Note has been amended hereby,
shall not be construed as a waiver or consent to any further or future action on the part of the
Borrower that would require a waiver or consent of the Lender. Except as expressly amended,
modified or supplemented hereby, the provisions of the Credit Agreement, the Note and the Loan
Documents are and shall remain in full force and effect.

24

 

     14. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TENNESSEE.

IN WITNESS WHEREOF, the parties hereto have duly executed this Ninth Modification to Credit
Agreement (Restated) and Promissory Note as of the day and date first set forth above.

	 	 	 	 	 
	 	FRED’S, INC., the Borrower

 	 
	 	By:  	/s/ Jerry A. Shore
 	 
	 	 	Title: EVP and Chief Financial Officer 	 
	 	 	 	 
	 
	 	REGIONS BANK, as Lender and Administrative Agent

 	 
	 	By:  	/s/ Bryan Ford
 	 
	 	 	Title: Sr. VP Corporate Banking 	 
	 	 	 	 

CONSENT OF GUARANTOR

The undersigned, as Guarantor, hereby executes this Amendment to evidence its consent thereto, as
well as the transactions contemplated thereby, and agrees that the Guaranty Agreement dated March
27, 2000, effective April 3, 2000, remains in full force and effect.

	 	 	 	 	 
	 	FRED’S STORES OF TENNESSEE, INC.

 	 
	Date: September 16, 2008 	By:  	/s/ Jerry A. Shore
 	 
	 	 	Title: EVP and Chief Financial Officer 	 
	 	 	 	 
	 

25exv10w7

    Exhibit 10.7

 

    MODIFICATION
    AGREEMENT

 

    DATE:      February
    12, 2008
    

 

	 	 	 	 	 
	

    PARTIES:

	
 
	
    Borrower:
	
 
	
    WHITE ELECTRONIC DESIGNS CORPORATION, 

    an Indiana corporation

	
 
	
 
	
    Bank:
	
 
	
    JPMORGAN CHASE BANK, N.A., as Administrative 

    Agent and Lender

 

    RECITALS:

 

    A. Bank has extended to Borrower credit (“Loan”)
    under that Credit Agreement, dated as of April 3, 2007
    (“Credit Agreement”) in the original principal amount
    of $30,000,000.00 as evidenced by that Note (Revolving Loans)
    dated as of April 3, 2007 (the “Note”). As of
    February 12, 2008, the outstanding principal balance of the
    Loan is $.00. All undefined capitalized terms used herein shall
    have the meaning given them in the Credit Agreement.

 

    B. The Loan is secured by, among other things, the Security
    Documents. The agreements, documents, and instruments securing
    the Loan and the Credit Agreement are referred to individually
    and collectively as the “Security Documents.”

 

    C. Borrower has requested that Bank modify the Loan and the
    Credit Documents as provided herein. Bank is willing to so
    modify the Loan and the Credit Documents, subject to the terms
    and conditions herein.

 

    AGREEMENT:

 

    For good and valuable consideration, the receipt and sufficiency
    of which are hereby acknowledged, Borrower and Bank agree as
    follows:

 

    Section 1.  ACCURACY
    OF RECITALS, ACKNOWLEDGEMENTS.

 

    1.1 Borrower acknowledges the accuracy of the Recitals.

 

    Section 2.  MODIFICATION
    OF CREDIT DOCUMENTS; OTHER AGREEMENTS.

 

    2.1 Section 6.06
    of the Credit Agreement is hereby amended to read as
    follows:

 

    Section 6.06  Restricted
    Payments.  The Borrower will not, and will not
    permit any of its Subsidiaries to, declare or make, or agree to
    pay or make, directly or indirectly, any Restricted Payment,
    except (a) the Borrower may declare and pay dividends with
    respect to its Equity Interests payable solely in additional
    shares of its common stock, (b) Subsidiaries may declare
    and pay dividends ratably with respect to their Equity
    Interests, (c) the Borrower may make Restricted Payments
    pursuant to and in accordance with stock option plans or other
    benefit plans for management or employees of the Borrower and
    its Subsidiaries, (d) the Borrower may purchase, redeem or
    otherwise acquire up to, but no more than, thirty-five percent
    (35%) of its common stock prior to the termination of this
    Agreement, and (e) cash dividends and distributions paid on
    the common stock of Borrower; provided, for purpose of this
    clause (e), that (i) no Default has occurred and is
    continuing at the time such dividend or distribution is paid,
    (ii) the aggregate amount of all such Restricted Payments
    pursuant to this clause (e) made by Borrower in any fiscal
    year does not exceed 50% of Net Income (if greater than $0)
    earned during the immediately preceding fiscal year, and
    (iii) if Restricted Payments made pursuant to this
    clause (e) in any fiscal year are less than permitted in
    such fiscal year, the excess permitted amount for such fiscal
    year may be carried forward to the next succeeding fiscal year.

 

    Section 3.  RATIFICATION
    OF CREDIT DOCUMENTS AND COLLATERAL.

 

    The Credit Documents are ratified and affirmed by Borrower and
    shall remain in full force and effect as modified herein. Any
    property or rights to or interests in property granted as
    security in the Credit Documents shall remain as security for
    the Loan and the obligations of Borrower in the Credit Documents.

 

    Section 4.  BORROWER
    REPRESENTATIONS AND WARRANTIES.

 

    Borrower represents and warrants to Bank:

 

    4.1 No default or event of default under any of the Credit
    Documents as modified herein, nor any event, that, with the
    giving of notice or the passage of time or both, would be a
    default or an event of default under the Credit Documents as
    modified herein has occurred and is continuing.

 

    4.2 There has been no material adverse change in the
    financial condition of Borrower or any other person whose
    financial statement has been delivered to Bank in connection
    with the Loan from the most recent financial statement received
    by Bank.

 

    4.3 Each and all representations and warranties of Borrower
    in the Credit Documents are accurate on the date hereof.

 

    4.4 Borrower has no claims, counterclaims, defenses, or
    set-offs with respect to the Loan or the Credit Documents as
    modified herein.

 

    4.5 The Credit Documents as modified herein are the legal,
    valid, and binding obligation of Borrower, enforceable against
    Borrower in accordance with their terms.

 

    4.6 Borrower is validly existing under the laws of the
    State of its formation or organization and has the requisite
    power and authority to execute and deliver this Agreement and to
    perform the Credit Documents as modified herein. The execution
    and delivery of this Agreement and the performance of the Credit
    Documents as modified herein have been duly authorized by all
    requisite action by or on behalf of Borrower. This Agreement has
    been duly executed and delivered on behalf of Borrower.

 

    Section 5.  BORROWER
    COVENANTS.

 

    Borrower covenants with Bank:

 

    5.1 Borrower shall execute, deliver, and provide to Bank
    such additional agreements, documents, and instruments as
    reasonably required by Bank to effectuate the intent of this
    Agreement.

 

    5.2 Borrower fully, finally, and absolutely and forever
    releases and discharges Bank and its present and former
    directors, shareholders, officers, employees, agents,
    representatives, successors and assigns, and their separate and
    respective heirs, personal representatives, successors and
    assigns, from any and all actions, causes of action, claims,
    debts, damages, demands, liabilities, obligations, and suits, of
    whatever kind or nature, in law or equity of Borrower, whether
    now known or unknown to Borrower, and whether contingent or
    matured, (i) in respect of the Loan, the Credit Documents,
    or the actions or omissions of Bank in respect of the Loan or
    the Credit Documents and (ii) arising from events occurring
    prior to the date of this Agreement.

 

    Section 6.  CONDITIONS.

 

    6.1 The agreements of Bank and the modifications contained
    herein shall not be binding upon Bank until Bank has executed
    and delivered this Agreement and Bank has received, at
    Borrower’s expense, all of the following, all of which
    shall be in form and content satisfactory to Bank and shall be
    subject to approval by Bank:

 

    (a) An original of this Agreement fully executed by the
    Borrower and Guarantors.

 

    (b) Such resolutions or authorizations and such other
    documents as Bank may require relating to the existence and good
    standing of that corporation, partnership or trust, and the
    authority of any person executing this Agreement or other
    documents on behalf of that corporation, limited liability
    company, partnership or trust.

    

    2

 

    (c) Payment of all the internal and external costs and
    expenses incurred by Bank in connection with this Agreement
    (including, without limitation, inside and outside attorneys,
    appraisal, appraisal review, processing, title, filing, and
    recording costs, expenses, and fees).

 

    Section 7.  INTEGRATION,
    ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
    WAIVER.

 

    The Credit Documents as modified herein contain the complete
    understanding and agreement of Borrower and Bank in respect of
    the Loan and supersede all prior representations, warranties,
    agreements, arrangements, understandings, and negotiations. No
    provision of the Credit Documents as modified herein may be
    changed, discharged, supplemented, terminated, or waived except
    in a writing signed by the parties thereto.

 

    Section 8.  BINDING
    EFFECT.

 

    The Credit Documents as modified herein shall be binding upon
    and shall inure to the benefit of Borrower and Bank and their
    successors and assigns and the executors, legal administrators,
    personal representatives, heirs, devisees, and beneficiaries of
    Borrower, provided, however, Borrower may not assign any of its
    right or delegate any of its obligation under the Credit
    Documents and any purported assignment or delegation shall be
    void.

 

    Section 9.  CHOICE
    OF LAW.

 

    This Agreement shall be governed by and construed in accordance
    with the laws of the State of Arizona, without giving effect to
    conflicts of law principles.

 

    Section 10.  COUNTERPART
    EXECUTION.

 

    This Agreement may be executed in one or more counterparts, each
    of which shall be deemed an original and all of which together
    shall constitute one and the same document. Signature pages may
    be detached from the counterparts and attached to a single copy
    of this Agreement to physically form one document.

 

    DATED as of the date first above stated.

 

    WHITE ELECTRONIC DESIGNS

    CORPORATION, an Indiana corporation

 

    By: /s/  Roger
    A. Derse

    Name: Roger A. Derse

    Title: VP/CFO

 

    BORROWER

 

    JPMORGAN CHASE BANK, N.A., individually 

    and as Administrative Agent

 

    By: /s/  Steve
    P. Reinhart

    Name: Steve P. Reinhart

    Title: Senior Vice President

 

    BANK

    

    3

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