FOURTH MODIFICATION AGREEMENT
THIS FOURTH MODIFICATION AGREEMENT made and entered into this day of
August, 1998 to be effective as of the first day of September, 1998 by and
between UNION PLANTERS NATIONAL BANK, a national banking association with its
principal offices in Memphis, Tennessee ("Lender") and FRED'S, INC., a Tennessee
corporation having its offices at 0000 Xxx Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx
00000 (referred to herein as "Borrower").
WITNESSETH:
WHEREAS, Borrower is indebted to Lender for Advances made to Borrower
pursuant to a Revolving Loan made pursuant to that certain Revolving Loan and
Credit Agreement dated May 15, 1992 as amended and modified by a Modification
Agreement dated May 31, 1995 and a Second Modification Agreement dated July 31,
1995, and a Third Modification dated February , 1997 (herein the "Agreement")
providing for advances up to a maximum amount of $12,000,000.00 (the
"Commitment"); and,
WHEREAS, Borrower has requested and Lender has agreed to again modify
the terms of the Revolving Loan.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Agreement is amended and modified as follows:
a. Section 2.1 Definitions is amended and shall read as follows:
"Borrowing Base" is deleted.
"Borrowing Limit" shall mean the Commitment.
"Commitment" shall mean Seventeen Million Dollars ($17,000,000.00).
"Total Liabilities" shall mean, at any date, all liabilities, including
without limitation all contingent obligations and all obligations relative to
the face amount of Letters of Credit, whether or not drawn, any banker's
acceptances and reimbursement obligations, of the Borrower and its Subsidiaries,
calculated on a consolidated basis without duplication in accordance with
generally accepted accounting principles.
"Total Capitalization" shall mean, with any date, the sum of (a) Total
Liabilities plus (b) Net Worth of the Borrower and its Subsidiaries.
b. Section 4.3 Selection of Interest Rate. shall be amended to read as
follows:
A separate rate shall be assigned to each individual Advance (excluding
Credits issued and not drawn upon, but including any Advance made to honor a
draft presented under any Credit) based upon the Borrower's
selection of Interest Rate at the time of funding each individual Advance,
between the following:
4.3.1 The Lender's Prime Rate minus one and one-half percent, floating
(which rate of interest is referred to herein as the "Adjusted Prime Rate"), or
4.3.2 75 basis points in excess of the LIBOR. Available LIBOR periods were
defined in the Third Modification Agreement entered into as of the day of
February, 1997.
Selection of the Interest Rate by the Borrower shall result in the accrual
of interest on the subject Advance (excluding Credits issued and not drawn upon
) at the rate so selected for a period of thirty days, at the termination of
which, all rates shall be calculated upon the basis of the Lender's Prime Rate
minus one and one-half percent, floating. By notice to the Lender made at least
3 days prior to the end of any calendar month, the Borrower may elect to apply
the LIBOR based rate to all or any portion of the outstanding Advances (not
including any Credit issued and not drawn upon) then subject to the Prime Rate
for the following calendar month (not to extend beyond any maturity date of the
loan facility). Absent direction on the part of the Borrower, the interest rate
shall be the Lender's Prime Rate less one and one-half percent.
c. Section 4.6 Repayment of Principal and Interest. shall be amended to
read as follows:
The aggregate principal amount of all Advances and interest accrued thereon
shall be due and payable in full on demand, or if no demand is made, then as
follows:
4.6.1 Interest, in the full amount thereof accruing shall be due and
payable monthly, on the first day of each calendar month (with notice to
Borrower by Lender of the amount due and method of computation), commencing
October 1, 1998.
4.6.2 Principal shall be payable in full at the end of the term of this
Agreement, whether by maturity, demand or otherwise.
d. Section 4.10 Fees shall be amended to read as follows:
one quarter of one percent (.25%) shall be deleted and one eighteenth of
one percent (.18%) shall be substituted in each of subparagraphs 4.10.1 and
4.10.2.
e. Section 4.11.1 shall be amended to read as follows:
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Subject to the provisions of 4.11.2 below, the term of this Agreement and
Lender's Commitment hereunder shall continue until demand, or if no demand,
until June 1, 2003, at which time this Agreement shall be terminated, and the
entire principal balance of the Revolving Loan, together with interest, fees and
charges thereon shall be due and payable in full.
f. Section 4.12 Annual Reduction is deleted.
g. Section 6.4 Financial Covenants. is amend to add additional covenants
which read as follows:
6.4.3 The Consolidated Tangible Net Worth shall not be less than
$100,000,000.00.
6.4.4 Net Income together with depreciation and amortization shall equal at
least two percent (2%) of revenue measured quarterly on a trailing four fiscal
quarter basis.
6.4.5 The ratio of EBITDA to Debt Service shall be equal to or greater than
2.00 to 1.00, with EBITDA measured quarterly on a trailing four fiscal quarter
basis.
6.4.6 The Ratio of Total Liabilities to Total Capitalization shall not
exceed 0.50 to 1.00 as of any fiscal quarter end. Total Liabilities includes any
and all contingent liabilities.
h. Section 6.11 is added and shall read as follows:
Borrower Compliance Certificates Borrower shall deliver to Lender at the
end of each fiscal quarter during the term of this Agreement a Compliance
Certificate signed by the Chief Financial Officer or Treasurer of Borrower in
substantially the form of "Exhibit A" to this Fourth Modification.
i. Section 9.1.8 is added and shall read as follows:
Default shall be made by the Borrower under the terms of the Term Loan
Agreement, entered into by and between Borrower and Lender on the 5th day of
May, 1998.
j. Section 8.3 Exception is added and shall read as follows:
Notwithstanding any other provision of the Agreement, the Borrower shall be
permitted to grant title or liens in favor of the City of Memphis or Shelby
County, Tennessee, or entities created by either of them, for the purpose of
providing property tax reductions benefitting Borrower, so long as Borrower
retains economic benefits substantially equivalent to the economic benefits
which were enjoyed by Borrower before the assets were transferred or encumbered
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(such as retaining a long-term lease of the assets transferred). This exception
does not extend to the placement of a mortgage or other security device on the
fee or leasehold to secure bond or other financing, although it is acceptable
for the lease to obligate the lessee to make payments in lieu of taxes which
reflect property tax reductions benefitting Borrower.
2. Continuation of Terms. Except as amended and modified herein, the
Agreement and the Loan Documents remain in full force and effect and enforceable
according to their terms; and all Advances made by Lender and all other actions
taken by Lender pursuant to the Agreement prior to the date hereof are approved,
ratified and confirmed by Borrower. Borrower promises to pay the Revolving
Credit Note according to its terms.
3. Representations and Warranties of the Borrower. To induce Lender to
enter into this Modification Agreement and to make the loans and extend the
credit contemplated to be made pursuant to the Agreement as modified by this
Modification Agreement, Borrower hereby makes the representations and warranties
to Lender set forth in sections 3.1 through 3.15 of the Agreement (as the same
have been and are modified and amended by this Modification Agreement), all of
which representations and warranties are incorporated herein by reference and
all of which shall survive the execution and delivery of this Modification
Agreement.
4. Terms. The term "Agreement" as used in the Agreement shall mean the
Agreement as modified by this and prior Modification Agreements. The Agreement
and the Loan Documents constitute the complete and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof
5. Successors in Interest. This Fourth Modification Agreement shall be
binding upon and inure to the benefit of the parties hereto, their respective
successors, assigns, transferee and grantees.
6. Governing Law. The interpretation and performance of this Fourth
Modification Agreement shall be governed in all respects in accordance with the
laws of the State of Tennessee.
7. Undefined Terms. All capitalized terms not defined herein shall have
the same definitions as set forth in the Agreement.
IN WITNESS WHEREOF, the parties hereunto have executed this Fourth
Modification Agreement as of the day and year first above written.
BORROWER:
FRED'S, INC., a Tennessee Corporation
By:
Name:____________________________
Title:______________________________
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LENDER:
UNION PLANTERS NATIONAL BANK
By:
Name:____________________________
Title:______________________________
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