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 16
th 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”).
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.
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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 accordan
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