First Amendment to Forbearance Agreement and Ninth Amendment to Credit Agreement, dated as of June 20, 2019, by and among Freds, Inc. and certain of its subsidiaries, Regions Bank, in its capacity as administrative agent, co-collateral agent and lender, and Bank of America, N.A., in its capacity as co-collateral agent and lender

Exhibit 10.1

FIRST AMENDMENT TO

FORBEARANCE AGREEMENT AND NINTH AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO FORBEARANCE AGREEMENT AND NINTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as of June 20, 2019, 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”; Guarantors, together with Borrowers, jointly and severally, “Loan Parties” and, each, a “Loan Party”); (D) the Lenders party to the Credit Agreement defined below; (E) the Co-Collateral Agents party to the Credit Agreement defined below; and (F) 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”).

Recitals:

Loan Parties, 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, that certain Sixth Amendment to Credit Agreement and Ratification, Reaffirmation and Assumption dated as of April 5, 2018, that certain 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 dated as of August 23, 2018, and the Forbearance Agreement (as defined below) (as so amended, and as the same may be further amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”).

Loan Parties, Lenders, Co-Collateral Agents, and Administrative Agent and certain other parties are parties to that certain Forbearance Agreement, Eighth Amendment to Credit Agreement and Fourth Amendment to Amended and Restated Addendum to Credit Agreement dated May 15, 2019 (as amended, restated, supplemented, or otherwise modified from time to time, the “Forbearance Agreement”).

Loan Parties have requested that Administrative Agent, Co-Collateral Agents and Lenders amend certain provisions of the Forbearance Agreement and the Credit Agreement to reduce the Aggregate Revolving Commitments and to add the 49 “front stores” listed on Exhibit D attached to this Agreement to the Store Closure and Closed Store Property Liquidation.

Administrative Agent, Co-Collateral Agents and Lenders have agreed to such amendments, subject to the terms and conditions hereof.

Statement of Agreement:

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, Loan Parties, Administrative Agent, Co-Collateral Agents 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 and the Forbearance Agreement shall from and after the date hereof refer to the Credit Agreement and the Forbearance Agreement respectively, as amended hereby.

SECTION 2.    Amendments to Forbearance Agreement.

(a)    Amendments to Existing Definitions. Section 1(a) of the Forbearance Agreement is hereby amended by deleting the definitions of “Closed Stores” and “Continuing Stores” set forth therein and by substituting in lieu thereof the following, respectively:

“Closed Stores” shall mean (a) the 159 retail stores listed on Exhibit A attached to this Agreement, (b) the 104 retail stores listed on Exhibit B attached to this Agreement, and (c) the 49 “front stores” listed on Exhibit D attached to this Agreement. For the avoidance of doubt, as of June 20, 2019, the Closed Stores shall not include any pharmacy located at a location listed on Exhibit D attached hereto.

“Continuing Stores” shall mean the retail stores listed on Exhibit C attached to this Agreement, which stores do not include the Closed Stores. For the avoidance of doubt, as of June 20, 2019, the Continuing Stores shall include the pharmacies (but not any “front stores”) located at the 49 locations listed on Exhibit D attached hereto.

(b)    Amendment to Section 1(b). Section 1(b) of the Forbearance Agreement is hereby amended by adding the following new sentence to the end of such section:

Until the commencement of the Store Closure and Closed Store Property Liquidation, in each case with respect to the 49 “front stores” listed on Exhibit D attached to this Agreement, references to the “Store Closure,” “Store Closure Plan,” “Closed Store Property Liquidation” and “Liquidation Transactions” shall not be deemed to include the closure of such 49 “front stores” and the sale or other disposition outside the Ordinary Course of Business of the property located at such 49 “front stores.”

(c)    Amendment to Section 2. Section 2(c) of the Forbearance Agreement is hereby amended by deleting the parenthetical set forth therein and by adding the following new parenthetical in lieu thereof:

(other than with respect to the 104 retail stores listed on Exhibit B attached to this Agreement, for which the Store Closure commenced after the Eighth Amendment Effective Date but prior to June 20, 2019, and the 49 “front stores” listed on Exhibit D attached to this Agreement, for which the Store Closure is intended to commence after June 20, 2019)

(d)    Amendment to Section 7. Section 7(c) of the Forbearance Agreement is hereby amended by deleting such section and by substituting the following in lieu thereof:

(c)    Reduction of Aggregate Revolving Commitments. Loan Parties acknowledge and agree that the Aggregate Revolving Commitments shall be reduced from $210,000,000 to $150,000,000 effective as of the Eighth Amendment Effective Date, shall be further reduced from $150,000,000 to $125,000,000 effective as of June 15,

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2019, shall be further reduced from $125,000,000 to $115,000,000 effective as of June 17, 2019, and shall be further reduced from $115,000,000 to $100,000,000 effective as of July 6, 2019, with each Lender’s share of any such reduction effective after the Eighth Amendment Effective Date in an amount equal to such Lender’s Pro Rata Share of the Aggregate Revolving Commitments multiplied by the amount of such reduction. Borrowers agree to execute and deliver amended and restated Revolving Notes and Swingline Notes to evidence any such reductions, promptly upon request of Administrative Agent or the applicable Lender from time to time.

(e)    Amendments to Exhibits. The Exhibits to the Forbearance Agreement are hereby amended by (i) deleting Exhibit C to the Forbearance Agreement (Continuing Stores) and substituting in lieu thereof Exhibit C to this Amendment, and (ii) adding a new Exhibit D to the Forbearance Agreement (Closed Stores (Wave III)) in the form of Exhibit D to this Amendment.

SECTION 3.    Amendments to Credit Agreement.

(a)    Amendment to Existing Definition. Section 2 of the Credit Agreement is hereby amended by deleting the definition of “Aggregate Revolving Commitments” set forth therein and by substituting in lieu thereof the following:

“Aggregate Revolving Commitments” shall mean, collectively, the Revolving Commitments of all Lenders. As of June 17, 2019, the amount of the Aggregate Revolving Commitments is $115,000,000; provided, that the Aggregate Revolving Commitments shall be permanently reduced (without the consent or action of any party) on July 6, 2019, from $115,000,000 to $100,000,000, which reductions in the Aggregate Revolving Commitments shall be applied to reduce the Revolving Commitments of each Lender on a ratable basis in accordance with its Pro Rata Share of the Aggregate Revolving Commitments (immediately prior to giving effect to any such reduction). Effective as of the date of any such reduction in the Aggregate Revolving Commitments, Schedule 1 shall be deemed to be automatically amended to reflect such reduction.

(b)    Amendment to Schedules. Schedule 1 to the Credit Agreement (Commitments) is hereby amended by deleting such schedule and substituting in lieu thereof Schedule 1 to this Amendment.

SECTION 4.    Conditions Precedent. This Amendment shall become effective only upon satisfaction of the following conditions precedent, as determined by Administrative Agent in its discretion:

(a)    Administrative Agent shall have received this Amendment, duly executed and delivered by Loan Parties, Co-Collateral Agents and Lenders;

(b)    Administrative Agent shall have received amended and restated Revolving Notes to reflect the reduced Revolving Commitments of Lenders as contemplated hereby, duly executed and delivered by Borrowers;

(c)    Administrative Agent shall have received payment of any fees due and payable to Administrative Agent, any Co-Collateral Agent or any Lender pursuant to the Credit Agreement, this Amendment or any fee letter executed and delivered in connection therewith or herewith;

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(d)    Administrative Agent shall have received a certificate of a duly authorized officer of each Loan Party, certifying that an attached copy of resolutions authorizing execution and delivery of this Amendment and the Loan Documents contemplated hereby 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;

(e)    Loan Parties engage (and thereafter shall retain the services of) a nationally recognized third-party appraisal and liquidation advisor who has expertise in conducting store closure and liquidation sales similar to the Store Closure and Closed Store Property Liquidation and who is otherwise satisfactory to Co-Collateral Agents, pursuant to an engagement letter containing a scope of services that is satisfactory to Co-Collateral Agents but in any event to include conducting the Store Closure and Closed Store Property Liquidation, in each case with respect to the 49 “front stores” listed on Exhibit D attached to this Agreement; 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 5.    Acknowledgement and Stipulations by Loan Parties. Each Loan Party acknowledges, stipulates and agrees that (a) as of the close of business on June 13, 2019, the aggregate principal balance of Revolving Loans totaled $46,664,018.47, exclusive of costs and attorneys’ fees chargeable to Borrowers under the Loan Documents, and the LC Obligations totaled $17,357,225.00; (b) all of the Obligations are absolutely due and owing by Loan Parties to Administrative Agent, each Co-Collateral Agent, each Lender and each other Secured Party without any defense, deduction, offset or counterclaim (and, to the extent any Loan Party had any defense, deduction, offset or counterclaim on the date hereof, the same is hereby waived); (c) the Loan Documents executed by such Loan Party are legal, valid and binding obligations of such Loan Party enforceable against such Loan Party in accordance with their terms; (d) the security interests and other Liens granted by such Loan Party to Administrative Agent (for the benefit of the Secured Parties) in the Collateral are duly perfected, first priority security interests and Liens; (e) each of the recitals contained at the beginning of this Amendment is true and correct; and (f) prior to executing this Amendment, such Loan Party consulted with and had the benefit of advice of legal counsel of its own selection and such Loan Party has relied upon the advice of such counsel and in no part upon any representation of Administrative Agent, any Co-Collateral Agent, any Lender or any other Secured Party concerning the legal effects of this Amendment or any provision hereof. Further, each Loan Party represents and warrants that no breach of the Forbearance Conditions (as such term is defined in the Forbearance Agreement) has occurred prior to the date hereof.

SECTION 6.    Miscellaneous Terms.

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

(b)    Effect of Amendment. All amendments set forth herein shall become effective as of the date on which all of the conditions precedent set forth in Section 4 hereof are satisfied (the “Effective Date”). Except as otherwise may be set forth expressly hereinabove, all terms of the Credit Agreement, the Forbearance 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 Loan Parties. Except to the extent otherwise expressly set forth herein, the amendments set forth herein shall have prospective application only from and after the Effective Date.

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(c)    No Novation or Mutual Departure. Loan Parties 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, the Forbearance 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 and 3 above, and (ii) nothing in this Amendment shall affect or limit Administrative Agent’s, Co-Collateral Agents’ or Lenders’ right to demand payment of liabilities owing from Loan Parties to Administrative Agent, Co-Collateral Agents or Lenders under, or to demand strict performance of the terms, provisions and conditions of, the Credit Agreement, the Forbearance Agreement, and the other Loan Documents, to exercise any and all rights, powers, and remedies under the Credit Agreement, the Forbearance 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 breach of a Forbearance Condition (as such term is defined in the Forbearance Agreement).

(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 Loan Party agrees to take, at such Loan Party’s expense, such further actions as Administrative Agent shall request from time to time to evidence the amendments and other agreements set forth herein and the transactions contemplated hereby.

(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.

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(k)    Release of Claims. To induce Administrative Agent, each Co-Collateral Agent and each Lender to enter into this Amendment, each Loan Party hereby (i) RELEASES, ACQUITS AND FOREVER DISCHARGES Administrative Agent, each Lender, each Co-Collateral Agent and each other Secured Party, and all officers, directors, agents, employees, successors and assigns of Administrative Agent, each Lender, each Co-Collateral Agent and each other Secured Party, from any and all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that such Loan Party now has or ever had against Administrative Agent, any Lender, any Co-Collateral Agent or any other Secured Party arising under or in connection with any of the Loan Documents or otherwise and (ii) covenants and agrees not to institute or cause to be instituted or continue prosecution of any suit or other form of action or proceeding of any kind or nature whatsoever against Administrative Agent, any Lender, any Co-Collateral Agent or any other Secured Party, or any officer, director, agent, employee, successor or assign of Administrative Agent, any Lender, any Co-Collateral Agent or any other Secured Party, by reason of or in connection with any of the foregoing liabilities, claims, demands, actions or causes of action. Each Loan Party represents and warrants to Administrative Agent and each Lender that such Loan Party has not transferred or assigned to any Person any claim that such Loan Party ever had or claimed to have against Administrative Agent, any Lender, any Co-Collateral Agent or any other Secured Party.

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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.

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First Amendment to Forbearance Agreement and Ninth Amendment to Credit Agreement (Fred’s)

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First Amendment to Forbearance Agreement and Ninth Amendment to Credit Agreement (Fred’s)

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First Amendment to Forbearance Agreement and Ninth Amendment to Credit Agreement (Fred’s)

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First Amendment to Forbearance Agreement and Ninth Amendment to Credit Agreement (Fred’s)

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First Amendment to Forbearance Agreement and Ninth Amendment to Credit Agreement (Fred’s)

First Amendment to Forbearance Agreement and Ninth Amendment to Credit Agreement (Fred’s)

SCHEDULE 1

Commitments

EXHIBIT C

Continuing Stores

EXHIBIT D

Closed Stores (Wave III)