united States
Securities and Exchange Commission
Washington, DC 20549

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the Securities
Exchange Act Of 1934

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES

EXCHANGE ACT OF 1934

Filed by the Registrant x[X]

Filed by a Party other than the Registrant ¨[  ]

Check the appropriate box:

Fred’s, INC. 

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[  ]        Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

4300 NEW GETWELL ROAD

MEMPHIS, TENNESSEE 38118

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To be held on Tuesday,Monday, June 19, 201225, 2018

TO THE SHAREHOLDERS OF FRED’S, INC.:

Notice is hereby given that the Annual Meeting of Shareholders of FRED’S,Fred’s, Inc. (the “Company” or “FRED’S”“Fred’s”) will be held at the Holiday Inn Express, 2192 S. Highway 441, Dublin, Georgia,Hyatt Place Hotel at 1220 Primacy Parkway in Memphis, Tennessee, on Tuesday,Monday, June 19, 2012,25, 2018, at 5:4:00 p.m., EasternCentral Daylight Time, for the following purposes:

The accompanying Proxy Statement contains further information with respect to these matters.

Only shareholders of record at the close of business on April 20, 2012,May 1, 2018 will be entitled to vote at the meeting or any adjournment thereof.

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.

Our Proxy Statement, Annual Report to shareholders and proxy card are available onwww.fredsinc.com/shareholders.in the Investor Relations section of our website at www.fredsinc.com.

By order of the Board of Directors,
Charles S. Vail
	Joseph Anto
	Secretary

May 23, 2012

FRED’S, INC.

4300 NEW GETWELL ROAD

MEMPHIS, TENNESSEE 38118

PROXY STATEMENT

For the Annual Meeting of Shareholders to be held on June 19, 201225, 2018

The enclosed proxy is solicited by the Board of Directors (the “Board” or “Board of Directors”) of FRED’S,Fred’s, Inc. (the “Company” or “FRED’S”“Fred’s”) to be voted at the Annual Meeting of Shareholders to be held on Monday, June 19, 2012,25, 2018, at 5:4:00 p.m., EasternCentral Daylight Time, at the Holiday Inn Express, 2192 S. Highway 441, Dublin, Georgia,Hyatt Place Hotel at 1220 Primacy Parkway in Memphis, Tennessee, or any adjournment thereof (the “Annual Meeting”). At the Annual Meeting, the presence in person or by proxy of the holders of a majority of the total number of shares of outstanding Class A no par value common stock (“Common Stock”) will be necessary to constitute a quorum.

All shares represented by properly executed proxies will be voted in accordance with the instructions indicated thereon unless such proxies previously have been revoked. If any proxies of holders of Common Stock do not contain voting instructions, the shares represented by such proxies will be voted “FOR” Proposals 1, 2, 3 4 and 5 and “AGAINST” Proposal 6.4. The Board of Directors does not know of any business to be brought before the Annual Meeting, other than as indicated in the notice, but it is intended that, as to any other such business properly brought before the meeting,Annual Meeting, votes may be cast pursuant to the proxies in accordance with the judgment of the persons acting thereunder.

Any shareholder who executes and delivers a proxy may revoke it at any time prior to its use upon: (a) receipt by the Secretary of the Company of written notice of such revocation; (b) receipt by the Secretary of the Company of a duly executed proxy bearing a later date; or (c) appearance by the shareholder at the meeting (with proper identification) and his request for the return of his proxy or his request for a ballot.

A copy of this Proxy Statement and the enclosed Proxy Card are first being sent to shareholders on or about May 23, 2012.June [●], 2018.

Voting Securities

Only shareholders of record at the close of business on April 20, 2012,May 1, 2018 will be entitled to vote at the Annual Meeting. As of such date, the Company hadMay 1, 2018, there were 37,260,158 shares of Common Stock outstanding and entitled to vote at the Annual Meeting 36,828,009 shares of Common Stock.Meeting. Each share of Common Stock is entitled to one vote for all matters before the Annual Meeting.

Votes cast by proxy or in person at the Annual Meeting will be tabulated by the election inspectors appointed for the meeting.Annual Meeting. A quorum must be present in order for the Annual Meeting to be held. In order for the quorum requirement to be satisfied, a majority of the issued and outstanding shares of Common Stock entitled to vote at the meeting must be present in person or represented by proxy. The election inspectors will treat abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

If on the record date your shares of Common Stock were held in an account at a brokerage firm, bank, dealer or similar organization, then you are the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by that organization. The organization maintaining your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares of Common Stock in person at the Annual Meeting unless you request and obtain a valid proxy from your broker or other agent. If you plan to attend the Annual Meeting, you will need to bring a valid proxy from the organization maintaining your account to vote your shares at the Annual Meeting.

If you hold your shares in street name, and do not provide instructions, your shares may constitute “broker non-votes” on certain proposals. Generally, broker non-votes occur on a non-routine proposal where a broker indicates on the proxy that it doesis not have discretionary authority as to specified sharespermitted to vote on that proposal without instructions from the beneficial owner. Broker non-votes are counted as present for purposes of determining whether there is a particularquorum, but are not counted for purposes of determining whether a matter thosehas been approved. If you properly submit a proxy card to the organization maintaining your account, but do not provide voting instructions, that organization will be able to vote your shares on the ratification of BDO USA, LLP as our independent registered public accounting firm; however, that organization will not be considered as present and entitledpermitted to vote with respectyour shares on election of Directors, the advisory vote on executive compensation or the proposal to that matter. approve our Amended and Restated Rights Agreement. As a result, if you do not provide voting instructions to the organization maintaining your account, your shares will have no effect on the outcome of the election of Directors and the advisory vote on executive compensation.

The nominees for Director receiving a plurality of the votes cast at the Annual Meeting in person or by proxy will be elected. The ratification of BDO USA, LLP as our independent registered public accounting firm, the 2012 Long-Term Incentive Plan, the advisory vote on Executiveexecutive compensation and the continuation of the Shareholders Right Planproposal to approve our Amended and Restated Rights Agreement will be approved if the votes cast favoring the action exceed the votes cast opposing the action. The shareholder proposalratification of BDO USA, LLP as our independent registered public accounting firm and the advisory vote on executive compensation will be rejectedapproved if the votes cast against the action exceeds the votes cast favoring the action exceed the votes cast opposing the action. Abstentions and broker non-votes have no effect on the vote for the election of Directors the ratification of BDO USA, LLP as the independent registered public accounting firm of FRED’S, the vote for the approvalor any of the 2012 Long Term Incentive Plan,other matters being considered at the advisory vote on Executive compensation, the vote for the continuation of the Shareholders Rights Plan and the shareholder proposal.Annual Meeting.

Ownership of Common Stock by Directors,

Officers and Certain Beneficial Owners

The following table sets forth the beneficial ownership of Common Stock beneficial ownership known to the Company as of April 20, 2012,May 1, 2018, by (i) beneficial owners of more than five percent (5%) of the outstanding Common Stock, (ii) each director, (iii)Director, each of the persons named in the Summary Compensation Table,Named Executive Officers (as defined below), and (iv) all directorsDirectors and executive officers of FRED’SFred’s as a group. Except as noted below, the address for each beneficial owner is 4300 New Getwell Rd., Memphis, Tennessee 38118.

(5)

This information is based on Schedule 13G13D/A filed on February 10, 2012August 15, 2017 by Heartland Advisors, Inc.Alden Global Capital LLC which reported that as of December 31, 2011,August 11, 2017, it had shared power to vote or direct the vote and to dispose of 3,958,475or direct the disposition of 9,275,000 shares. The address of Alden Global Capital LLC is 885 Third Avenue, 34th Floor, New York, New York, 10022.

PROPOSAL 1 - ELECTION OF DIRECTORS

Eight directors, constituting the entire

The Board of Directors are to be electedcurrently consists of seven Directors. Five individuals have been nominated for election at the Annual Meeting to serve for a term of one year or until their successors are electedqualified and qualified.elected. Upon recommendation of the Nominating and Governance Committee, the Board of Directors nominated Heath B. Freeman, Timothy A. Barton, Steven B. Rossi, Dana Goldsmith Needleman and Thomas E. Zacharias, each current directors, to serve as directors on the Board. Additional information about each of these nominees can be found below. The nominees have indicated a willingness to serve as directors if elected. There are no family relationships among any director, executive officer or person nominated or chosen to be a director or executive officer known to us.

Director Nominees, Director Qualifications and Biographical Information

Board Nominees for Election as Directors at the 2018 Annual Meeting

Set forth below is a brief biographical description of each of our Director nominees. In selecting potential candidates for election to the Board of Directors the Nominating and Governance Committee considers the potential nominee’s judgment, integrity, experience, independence, understanding of the Company’s business and industry and other factors as more fully described below. The Board of Directors proposesbelieves that the electioncombinations of the following nominees:various qualifications, skills and experiences would contribute to an effective, balanced and well-functioning Board of Directors.

Business Experience, Directorships forHeath B. Freeman joined the last five yearsBoard on August 29, 2017. Mr. Freeman is the President and Reasons for Nomination

Michaela Founding Member, of Alden Global Capital LLC, a New York-based investment firm focused on deep value, catalyst driven investing. He has been with the firm since its founding in 2007, and has been its President since 2014. Mr. Freeman currently serves as Vice Chairman of MNG Enterprises, Inc. (‘MNG”), a Company that owns media properties such as The Denver Post, San Jose Mercury News, Orange County Register and the Boston Herald. Prior to Alden Global Capital LLC, Mr. Freeman worked as an Investment Analyst at Smith Management, a private investment firm. Mr. Freeman began his career as an analyst at Peter J. Hayes was electedSolomon Company, a Director of the Company in January 1987boutique investment bank with a focus on Retail and was namedConsumer, where he worked on mergers and acquisitions, restructurings and refinancing assignments. Currently, Mr. Freeman serves as Chairman of the Advisory Board for Jewish Life at Duke University’s Freeman Center. He is a graduate of Duke University. Mr. Freeman was selected as a Director nominee by Alden pursuant to the Amended and Restated Cooperation Agreement (described below) due to his deep retail, turnaround, and financial expertise.

Timothy A. Barton was appointed to the Board on April 21, 2017. Mr. Barton founded Freightquote in November 2001. Mr. Hayes was the Chief Executive Officer from October 1989 through January 20091998, and served as a Managing Director of the Company from 1989 to 2002 when that position was eliminated. He was previously employed by Oppenheimer & Company, Inc. in various capacities from 1976 to 1985, including Managing Director and Executive Vice President - Corporate Finance and Financial Services. Chairman Hayes’ considerable experience with Fred’s and his years spent on Wall Street position him to serve as Chairman and guideCEO until the company’s sale to C.H. Robinson Worldwide in 2015. Prior to founding Freightquote, Mr. Barton was the Co-Founder and President of UWI Association Programs, which grew into Network Long Distance before being acquired by IXC Communications/Broadwing in 1998. Mr. Barton earned his B.A. in Business from the University of Kansas and an M.A. in Finance from Louisiana State University. Mr. Barton was selected as a Director nominee by Alden pursuant to the Cooperation Agreement (described below) due to his extensive management, financial and operations experience.

Dana Goldsmith Needleman was appointed to the Board in its critical mission of protecting the shareholders.

John R. Eisenman is involved in real estate investment and development located in Greensboro, North Carolina. Mr. Eisenman has been engaged in commercial and industrial real estate brokerage and development since 1983. Previously, he founded and served as President of Sally’s, a chain of fast food restaurants, from 1976 to 1983, and prior thereto held various management positions in manufacturing and in securities brokerage. Mr. EisenmanDirectors on May 20, 2018. Since October 2009, Ms. Goldsmith Needleman has served as a Principal of The Cogent Group, a private real estate investment firm, where she is responsible for the origination, underwriting, financing, structuring, and closing of net lease transactions. From 1999 to 2009, Ms. Goldsmith Needleman was employed by Cardinal Capital Partners, a sale-leaseback frim, serving as Managing Director since the Company’s initial public offering in March 1992. Mr. Eisenmanfrom 2003 to 2009 and Vice President from 1999 to 2002. From 1997 to 1999, Ms. Goldsmith Needleman was an associate at Corporate Realty Investment Company, a private real estate company. Ms. Goldsmith Needleman earned her B.A. from Duke University and her J.D. from Boston University School of Law. Ms. Goldsmith Needleman was selected to serve on our Board because of this retail experience as well as his ability to advise the Board on real estate matters affecting the Company.

Roger T. Knox is President Emeritus of the Memphis Zoo and was its President and Chief Executive Officer from January 1989 through March 2003. Mr. Knox was the President and Chief Operating Officer of Goldsmith’s Department Stores, Inc. (a full-line department store in Memphis and Jackson, Tennessee) from 1983 to 1987 and its Chairman and Chief Executive Officer from 1987 to 1989. Prior thereto, Mr. Knox was with Foley’s Department Stores in Houston, Texas for 20 years. Mr. Knox has served as a Director since the Company’s initial public offering in March 1992. Additionally, Mr. Knox is a former Director of Hancock Fabrics, Inc. Mr. Knox bringsdue to the Board over thirty years ofher substantial retail experience as well as executive leadership experience.real estate and corporate management background.

Thomas H. Tashjian was elected a Director of the Company in March 2001. Mr. Tashjian is a private investor. Prior to 2001, he served as a Managing Director and Consumer Group Leader at Banc of America Montgomery Securities in San Francisco. Prior to that, Mr. Tashjian held similar positions at First Manhattan Company, Seidler Companies, and Prudential Securities. Mr. Tashjian’s earlier retail operating experience was in discount retailing at the Ayrway Stores, which were acquired by Target Corporation, and in the restaurant business at Noble Roman’s. Mr. Tashjian was selected to serve on our Board because of his discount retail experience as well as his standing as a financial expert.

B. Mary McNabb was elected a Director of the Company in April 2005. Most recently she served as Chief Executive Officer for Kid’s Outlet, California. Kid’s Outlet, California filed for bankruptcy on May 14, 2009. Previously, she served as Executive Vice President and a Director of The Mowbray Group from 2004-2005, a California-based retail consulting firm that specializes in problem-solving, cost reductions, importing, and retail management. She has served as a member of the Board of Directors of C-ME (Cyber Merchants Exchange). Ms. McNabb was formerly Executive Vice President of merchandising and marketing for Factory 2-U, Vice President of sourcing for S-Q of California, and West Coast Manager/Buyer for One Price Clothing, Inc. Ms. McNabb brings a wealth of retail experience to our Board, with specific experience in the soft lines areas of our business. Ms. McNabb also brings executive leadership experience to the Board.

Michael T. McMillan was elected a Director of the Company in February 2007. Mr. McMillan currently serves as Senior Director of Franchise Development for Pepsi-Cola North America, a Division of PepsiCo, where he has spent the last 26 years in various roles including marketing, sales, franchise development, and general management of its bottling operations. Mr. McMillan was chosen to serve on our Board because of his experience in sales and marketing.

Bruce A. Efird was elected a Director of the Company in June 2008. Mr. Efird joined the Company September 22, 2007 as President and became Chief Executive Officer effective February 1, 2009. Prior to joining the Company, Mr. Efird was Executive Vice-President-Merchandising at Meijer, Inc. as well as being responsible for marketing and advertising. Before joining Meijer, Inc. in 2005, Mr. Efird was Executive Vice-President /General Manager for Bruno’s Supermarkets, Inc. in Birmingham, Alabama beginning in 2003. He began his retail career with Food Lion, Inc. in 1984. Mr. Efird brings an entire career in the retail industry, with specific experience in the consumable areas of our business. Mr. Efird also brings executive leadership experience to the Board.

Steven R. FitzpatrickB. Rossi was electedappointed to the Board of Directors on April 27, 2012,21, 2017. In February 2018, Mr. Rossi retired as the Chief Executive Officer of Digital First Media. He previously served as Digital First Media’s Chief Operating Officer. Prior to joining Digital First Media, Mr. Rossi held several successive management positions over 19 years with Knight Ridder Inc., including Chief Financial Officer, Senior Vice President of Operations and will be presented as onePresident of the recommended director nominees atNewspaper Division. Mr. Rossi holds an MBA from The Wharton School of the 2012 Annual Meeting. Steven FitzpatrickUniversity of Pennsylvania and a B.A. in Economics from Ursinus College. Mr. Rossi was selected as a Director nominee by Alden pursuant to the Cooperation Agreement (described below) due to his substantial business and technology background and as well as his experience in growing successful companies.

Thomas E. Zacharias was appointed to the Board of Directors on May 20, 2018. Since 2017, Mr. Zacharias has served as the President of Accredo Health Group,Zacharias & Co. LLC, a real estate investment and advisory firm. From 2002 to 2017, Mr. Zacharias was employed by W.P. Carey Inc., Medco’s fast-growing specialty pharmacy organization, a positionglobal real estate investment trust, where he held until he retiredserved in June 2011.multiple capacities including Chief Operating Officer, Managing Director and Head of Asset Management. From 2000 to 2002, Mr. Fitzpatrick joined Accredo in 2001Zacharias served as Senior Vice President of its subsidiary, Sunrise Health Management, Inc.MetroNexus North America, a Morgan Stanley real estate fund. From 1998 to 2000, Mr. Zacharias served as Principle to Lend Lease Development U.S., and was nameda real estate development company. From 1981 to 1998, Mr. Zacharias served as a Vice President of Accredo Therapeutics, Inc., in February 2002. With the acquisitionCorporate Property Investors, a real estate development company. Mr. Zacharias presently serves as a director of Accredo by Medco HealthNexeo Solutions, Inc., in August 2005,a global chemical and plastics distributor, and Payless Holdings, LLC, a footwear retailer. Mr. Fitzpatrick assumed responsibility for both Accredo TherapeuticsZacharias received his B.A. from Princeton University and Accredo Specialty Care Services (formerly Medco Specialty Solutions). In March 2006, he became Chief Operating Officerholds a MBA from the Yale School of Accredo Health GroupManagement. Mr. Zacharias was selected as a Director due to his extensive experience with general management, financial analysis, strategic planning, value creation, operations, acquisitions, restructurings and was named President in June 2008. Prior to joining Accredo, Mr. Fitzpatrick held senior management positions with Abbott Laboratories, Block Medical, PharmaThera and Nations Healthcare.retail real estate.

If, for any reason, any of the nominees shall become unavailable for election, the individuals named in the enclosed proxy may exercise their discretion to vote for any substitutes chosen by FRED’Sthe Board of Directors, unless the Board of Directors should decide to reduce the number of directorsDirectors to be elected at the Annual Meeting. FRED’SFred’s has no reason to believe that any nominee will be unable to serve as a director.Director.

Although

The Company expects its Directors to attend the Company doesAnnual Meeting, however there is not have a formal policy regarding attendance by membersrequiring attendance. All of the Board ofour Director nominees who were Directors at the time of our 2017 Annual Meeting the Company encourages all of its directors to attend. All directors were present for the 2011 Annual Meeting of Shareholders.at such meeting.

For information concerning the number of shares of Common Stock owned by each director,Director, and all directorsDirectors and executive officers as a group as of April 20, 2012,May 1, 2018, see “Ownership of Common Stock by Directors, Officers and Certain Beneficial Owners.” There are no family relationships between any directors or executive officers of FRED’S.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE

ELECTION OF THE NOMINEES TO FRED’S BOARD OF DIRECTORS.

Cooperation Agreement with Alden Global Capital LLC and Appointment of Messrs. Freeman, Barton and Rossi to the Board

On April 21, 2017, we entered into a cooperation agreement (the “Cooperation Agreement”) with Alden and certain of its affiliates. Pursuant to the Cooperation Agreement, our Board of Directors appointed Messrs. Barton and Rossi (the “Alden Designees”) to the Board effective April 21, 2017. Among other things, the Cooperation Agreement provides that: 

On August 11, 2017, we entered into an Amended and Restated Cooperation Agreement (the “Amended and Restated Cooperation Agreement”) with Alden and certain of its affiliates. Among other things, the Amended and Restated Cooperation Agreement provides for the following: 

For additional details regarding the terms of the Cooperation Agreement and the Amended and Restated Cooperation Agreement, including copies of such agreements, see our Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 24, 2017 and August 14, 2017.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of reports of beneficial ownership of FRED’Sthe Common Stock and written representations furnished to FRED’SFred’s by its officers, directorsDirectors and principal shareholders, FRED’SFred’s is not aware of the failure of any such reporting person to file with the Securities and Exchange Commission (the “Commission”)SEC on a timely basis any required reports of changes in beneficial ownership during the last fiscal year except for the following instances of untimely reporting: Kevin Pitt was promoted

The Company is continuing to Regional VPdevelop and implement processes, procedures and training to ensure improved compliance on February 24, 2012.an on-going basis, including compliance with the requirements of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Board of Directors

During the last fiscal year, FRED’S2017, Fred’s Board of Directors held seven meetings. Allthirteen meetings, and each incumbent Director attended at least 75 percent of the directorstotal number of meetings of the Board, which were held during the portion of the year for which he or she was a Director. Additionally, each incumbent Director attended allat least 75 percent of the total number of committee meetings of the committees on which he or she served, except that, due to scheduling conflicts, Mr. Barton only attended two-thirds of the meetings of the Compensation Committee during fiscal 2017. As a regular part of the Board meetings, and the prior year’s annual meeting, and the Independent directors also held general meetings.independent Directors meet separately without management. Mr. HayesFreeman is Chairman of the Board of Directors. Non-employee Directors of FRED’S, with the exception of the Chairman of the Board of Directors,Fred’s are paid for their services as such $24,000 per year plus reasonable expenses for meeting attendance, and are granted stock options and/or restricted stock from time to time. John R. Eisenman, Roger T. Knox, Thomas H. Tashjian, B. Mary McNabb, and Michael T. McMillan were considered independent as defined in the listing standards of the National Association of Securities Dealers’ Automated Quotation System (“NASDAQ”) as of the end of fiscal 2011.

The Board of Directors has determined that, except as otherwise set forth below, each of the Company’s current directors, including Timothy A. Barton, Michael T. McMillan, Dana Goldsmith Needleman, Steven B. Rossi, Heath B. Freeman and Thomas E. Zacharias, and each of the Company’s other directors who served during a portion of fiscal 2017 or 2018, including Dr. Neeli Bendapudi, Peter J. Bocian, Christopher Bodine, John R. Eisenman, Michael J. Hayes, Linda Longo-Kazanova, Mary McNabb and Thomas Tashjian, is or was (in the case of any former director) independent under applicable NASDAQ listing standards for membership on the Board. The Board of Directors has also determined, as further described below, that each of these Directors is independent under applicable SEC rules and NASDAQ listing standards for service on the various committees of the Board on which they currently or previously served. Mr. Bloom, who served as a director during fiscal 2017 and until April 24, 2018, and Mr. Jerry Shore, who served as a director during fiscal 2017, were not independent during their respective tenures as directors of the Company as a result of their separate employment by the Company as Chief Executive Officer.

The following table sets forth the current members and chairman of each Committee of the Board.

Communication with the Board of Directors

The Board of Directors has established a process for shareholders to send communications to the Board. Shareholders may send communications to our Board by sending a lettercommunicate with Directors. Communications can be addressed to: Board of Directors, FRED’SFred’s Inc., c/o General Counsel,Corporate Secretary, 4300 New Getwell Rd., Memphis, TNTennessee 38118. All communication will be reviewed by our Legal Department and appropriate communications will be forwarded to the Board of Directors on a quarterly basis, unless requested by the Board on a more frequent basis. Shareholder communications will be treated confidentially, subject to applicable laws, regulations or legal proceedings, if so marked on the envelope or in the communication.

Leadership Structure

We currently have separate individuals serving as Chairman of the Board and as Chief Executive Officer. We believe that thisthe separation of thethese positions represents the appropriate structure for us at this time. The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board. The Board believes it is in the best interests of the Company and our stockholdersits shareholders to be free to make that determination based on the position and direction of the Company and the membership of the Board. Under our current structure, both the Chairman and the Chief Executive Officer have responsibility for our business strategy and financial performance. Our Chief Executive Officer is responsible for the strategic direction for the Company and the day to day leadership and performance of the Company, while our Chairman provides guidance to the Chief Executive Officer and presides over meetings of the full Board.

Lead Director

In the event that the Chairman of the Board is also a member of management of the Company, then (pursuant to the Company’s Corporate Governance Guidelines) the Board will elect an independent Director to serve as Lead Director. The role of the Lead Director is:

Because the Company’s Chairman is not a member of management of the Company, the Company does not have a Lead Director.

Board’s Role in Risk Management

The Board is elected by the shareholders to oversee the long-term health and overall success of the Company. In order to fulfill the Board’s roleresponsibilities, it oversees proper operation of the business, safeguarding of assets, maintenance of appropriate financial and internal controls, and compliance with applicable laws and regulations. Inherent in risk managementcarrying out these responsibilities is primarily one of oversight and occurs as an integral and continuous part of the Board’s oversight of our business.the various risks that may impact the Company. The primaryBoard understands that it is impossible to eliminate all risks. Nonetheless, the Board, through its oversight of the Company, undertakes to manage and mitigate risks as appropriate. Primary responsibility for the identification, assessment and management of the various risks that we face belongs with our management team. The entire Board regularly reviews information with management on our business strategy, financial position and operations and considers associated key risks (that can include business, legal, regulatory, compliance, public policy, reputational and other risks).

In addition, the Board executes its oversight role through its Audit Committee and other committees which report regularly to the whole Board on their activities. For our Audit Committee, some areas of specific committee level focus include risk associated with financial reporting and legal matters, internal control, and related party transactions.transactions and data security. The Compensation Committee reviews risks associated with our executive incentive compensation policies. Our Nominating and Governance Committee reviews risks inassociated with our corporate governance structure, business conduct and ethics.

Governance CommitteeCode of Conduct

The Board of Directors believes the Company observes sound corporate governance practices. However, following enactment of the Sarbanes-Oxley Act of 2002 and the adoption of new rules and regulations by the Financial Industry Regulatory Authority (formerly known as the National Association of Securities Dealers, Inc.) and the Securities and Exchange Commission, the Company, like many public companies, has addressed the changing governance environment by reviewing its policies and procedures and, where appropriate, modifying and/or adopting new practices.

The Company has adopted a code of ethics that applies to all of its directors,Directors, officers (including its ChiefNamed Executive Officer, President, Chief Financial Officer, Chief Information Officer, Senior Vice President of Finance, Controller and any person performing similar functions)Officers) and employees. Also, the Company has a vendor code of conduct that applies to its vendors.

The Company’s code of business conduct and ethics and vendor code of conduct areis available on the Company’s website at www.fredsinc.com and can be found under the Investor Relations and Corporate Governance links. The Board of Directors has adopted a written charter for the Governance Committee, which is also available on the Company’s website.link. The information contained on the website is not incorporated by reference in, or considered part of, this Proxy Statement.

TheNominating and Governance Committee makes recommendations

Pursuant to the terms of the Cooperation Agreement, the Board of Directors regarding corporate governance mattersagreed to combine the Nominating Committee of the Board and practices. Thethe Governance Committee is comprised of Michael T. McMillan, Chairman of the Board during fiscal 2017. Currently, the Nominating and Governance Committee Tom H. Tashjian,consists of Timothy A. Barton, Dana Goldsmith Needleman, Thomas E. Zacharias, Chairman, and Steven B. Mary McNabbRossi, all of whom meet the independence requirements of NASDAQ listing standards. standards and the independence criteria set forth in the SEC’s rules.

The Nominating and Governance Committee ofidentifies individuals qualified to become Board members, consistent with criteria approved by the Board, of Directors met five times during the Company’s latest fiscal year. Governance members are paid for their services $6,000 per year for the Chair and $1,500 per year for the other members, plus reasonable expenses for meeting attendance.

Prior to the vote on majority voting for the Board of Director elections at an earlier annual meeting of our shareholders, the shareholder proponents revised their proposal to be merely advisory. The Governance Committee outlined at that meeting their recommendation to adopt the SEC guidance when issued, which would put all companies on equal footing. The Committee’s recommendation was then adopted by the Board. Our Committee and Board of Directors are carefully monitoring the SEC for guidance and requirements in this regard. Recognizing our Directors are elected for one (1) year terms only (and not a staggered Board), and as of this date the SEC had not issued their position on the matter, there are no changes in the Directors election requirements for the 2012 Annual Shareholders Meeting. The Board of Directors will continue to monitor the matter and act in accordance with SEC guidance.

Nominating Committee

The Committee recommends nominees for election to the Board by the shareholders at the annual meeting. The committee is comprisedmeeting, develops and recommends to the Board the Corporate Governance Guidelines, leads the Board in its annual review of Roger T. Knox, ChairmanBoard performance, and periodically reviews the corporate governance structures and practices of the Committee, John R. Eisenman and Tom H. Tashjian, all of whom meetCompany.

In fiscal 2017, prior to its consolidation, the independence requirements of NASDAQ listing standards. The Nominating Committee met five times with all committee members in attendance.once and the Governance Committee met once and, after its consolidation, the Nominating members are paid for their services $6,000 per year for the Chair and $1,500 per year for the other members, plus reasonable expenses for meeting attendance.Governance Committee met once. The Board of Directors has adopted a written charter for the Nominating and Governance Committee, which is available on the Company’s website at www.fredsinc.com.website.

The Nominating and Governance Committee identifies candidates for nomination based upon its criteria for evaluation as described below. Additionally, the Nominating and Governance Committee may use the services of a search company in identifying nominees.nominees or evaluating nominees identified by members of the Nominating and Governance Committee and the Board. During fiscal 2017, the Company engaged Spencer Stuart, a leading executive search firm, to assist the Company identify candidates during the refreshment of the Board. Although the Nominating and Governance Committee has not determined specific minimum qualifications for its nominees, it evaluates candidates that it has identified based upon:

The Company does not have a formal policy with regardabout diversity as it pertains solely to the consideration of diversity in identifying director nominees, but the Nominating Committee strives to nominate directors with a variety of skills and experience so that the Board will havenot discriminate on the necessary expertise to oversee the Company’s business.basis of race, color, national origin, sexual orientation, religion, or disability in selecting nominees. 

The Nominating and Governance Committee has adoptedmeets at least annually and more often as necessary to make nominations to the following policy with regardBoard. The Nominating and Governance Committee will consider shareholder nominations to considering a shareholder’s nominee.the Board sent to the Nominating and Governance Committee, c/o Corporate Secretary, Fred’s Inc., 4300 New Getwell Road, Memphis, Tennessee 38118. To submit a nomineebe considered for consideration,nomination, a shareholder must provide the Nominating Committee:and Governance Committee the following:

In general, the Nominating Committeethese procedures will evaluate a candidate identified by a shareholderbe evaluated using the same standards as itthe Nominating and Governance Committee uses for candidates it identifies. Before recommending a shareholder’s candidate, the TheNominating Committee may also:

The NominatingGovernance Committeehas full discretion not to include a shareholder’s candidate in its recommendation to the Board, and the committee may require additional information as it deems reasonably necessary to determine the eligibility of nomineesthe Director candidate to serve as a member of the Board. If theNominating and Governance Committeedoes not recommend a shareholder’s candidate to the Board, it will not make public the reason or reasons for its decision.decisions. In addition to considering candidates suggested by shareholders, theNominating and Governance Committeeconsiders potential candidates recommended by current Directors, Company officers, employees and others and may engage consultants or third-party search firms in identifying and evaluating potential nominees. Before recommending any candidate, the Nominating and Governance Committee may also:

Audit Committee

The

Currently, the Audit Committee consists of the Board of Directors, which is comprised of John R. Eisenman,Thomas E. Zacharias, Chairman, of the Committee, Roger T. Knox, Thomas H. Tashjian,Dana Goldsmith Needleman, and Steven B. Mary McNabb, and Michael T. McMillan met five times during the last fiscal year. All of the members attended all of the Committee meetings.Rossi. Each of the members of the Audit Committee is an independent directorDirector as defined in the NASDAQ listing standards.standards and meets the independence criteria set forth in the SEC’s rules. The Audit Committee members are paid for their services $16,000 per year formet four times during the Chair and $4,500 per year for the other members plus reasonable expenses for meeting attendance.last fiscal year.

The Audit Committee is responsible for the engagement of the independent registered public accounting firm;firm, considering the range of audit and non-audit fees;fees, assisting the Board in fulfilling its oversight responsibilities by reviewing the financial reports and other financial information provided by the Company to any governmental body or the public;public, reviewing the Company’s system of internal controls regarding finance, accounting, legal compliance, risk, data security and ethics that management and the Board have established;established, and reviewing the Company’s auditing, accounting, and financial reporting processes, generally.

Audit Committee members have the requisite financial experience to serve on the Audit Committee. The management of the Company has the primary responsibility for the financial statements and reporting process. The independent registered public accounting firm is responsible for conducting and reporting on the audit of the Company’s financial statements and internal controls over financial reporting in accordance with generally accepted auditing standards. The Company’s independent registered public accounting firm is ultimately accountable to the Audit Committee. The Board of Directors has adopted a written charter for the Audit Committee, which is available on the Company’s website at www.fredsinc.com.website. The Board of Directors has determined that Mr. TashjianZacharias meets the Commission’sSEC’s definition of audit committee financial expert.

Audit Committee Report

In the context of the role of the Audit Committee as outlined above, the Audit Committee has reviewed and discussed the Company’s audited financial statements for fiscal 20112017 with management of the Company. BDO USA, LLP, the Company’s independent registered public auditing firm, is responsible for performing independent audits of the consolidated financial statements in accordance with generally accepted auditing standards and the effectiveness of the Company’s internal control over financial reporting.reporting in accordance with standards of the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee also discussed with BDO USA, LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended,1301, “Communications Audit Committees,” as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in rule 3200T,PCAOB, and other matters required by the Audit Committee’s charter. The Audit Committee has received the written disclosures and the letter from BDO USA, LLP as required by PCAOB Rule 3526 and has discussed with BDO USA, LLP their independence, including consideration of whether the payment to BDO USA, LLP of audit related, tax, and permissible non-audit fees is compatible with maintaining their independence. Based upon its review and discussions with Company management and BDO USA, LLP, the Audit Committee has recommended to the Board of Directors that FRED’S, Inc.the Company’s audited financial statements for fiscal 20112017 be included in the 20112017 Annual Report on Form 10-K for filing with the Securities and Exchange Commission,SEC, and that BDO USA, LLP be considered for selection as the Company’s independent registered public accounting firm for 2012.2017.

The members of the Audit Committee are not professionally engaged in the practice of accounting or auditing and, as such, rely without independent verification on the information provided to them and on the representations made

by management and BDO USA, LLP. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting processes or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s reviews and discussions referred to above do not assure that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards, that the Company’s audited consolidated financial statements are presented in accordance with generally accepted accounting principles, or that BDO USA, LLP is in fact independent.

John R. Eisenman, Audit Committee Chairperson

Roger T. Knox

Thomas H. Tashjian

B. Mary McNabb

Michael T. McMillan

Compensation Committee

The Compensation Committee reviews and approvesrecommends to the full Board the salaries and cash incentive compensation of executive officers and recommends the grants of stock-based incentive compensation under FRED’SFred’s long-term incentive plan. The Compensation Committee which is comprisedmembers currently consist of Timothy A. Barton, Dana Goldsmith Needleman, Steven B. Mary McNabb, ChairpersonRossi, Chairman, and Thomas E. Zacharias, all of whom meet the independence requirements of NASDAQ listing standards and the independence criteria set forth in the SEC’s rules.

The Compensation Committee Roger T. Knox and Michael T. McMillan, met fivesix times during the last fiscal year. All of the members attended all of the Committee meetings. Compensation Committee members are paid for their services, $7,500 per year for the Chair and $1,500 per year for the other members, plus reasonable expenses for meeting attendance. The Board of Directors receives the compensation and grant recommendations of the Compensation Committee and may approve, amend or reject the recommendations. The Board of Directors has not adopted a written charter for the Compensation Committee.Committee, which is available at the Company’s website.

Transactions with Related Persons and the Company’s Approval Policy

As of February 3, 2018, Fred’s leases three properties from Atlantic Retail Investors, LLC, which is wholly owned by Michael J. Hayes, a directorformer Director of the Company, and members of his family, purchased from unrelated partiesfamily. These leases were reviewed and owned the land and buildings occupied by thirteen Fred’s stores, until March 2011 when, as described below, a portion of these properties were purchasedapproved by the Company. The terms and conditions regarding the leases on these locations were consistent in all material respects with other stores leasesindependent Directors of the Company with unrelated landlords.

On March 30,in May 2011 Fred’s selected and purchased ten of the thirteen properties leased from Atlantic Retail Investors, LLC, one of which has an adjacent parcel and building that is leased to an unrelated party for a total of eleven properties, for $7.5 million in cash and assumed mortgage debt of $3.5 million. The Board of Directors approved these transactions after receivingconsidering an evaluation byfrom an independent real estate broker, who concludedbroker. Mr. Hayes did not take part in that all were acquired at comparable, and favorable, purchase prices to market value and were financially beneficial to Fred’s as the depreciation expense for the newly acquired assets will be less than the future valuedecision. The terms of the lease payments that would have been due.

In May 2011 after approximately 18 months of negotiation, Atlantic Retail Investors, LLC purchasedleases are consistent with the land and building of four additional properties that the Company had previously evaluated multiple times and eventually passed for purchase. These stores were subsequently purchased by Atlantic Retail Investors, LLC, from a lender who had foreclosed on the independent landlord/developer at terms and conditions favorable to those earlier evaluated by the Company. Upon closing, Atlantic Retail Investors, LLC informed the Company of the purchase and offered them at substantially the same terms. The terms and conditions regarding the leases on these locations were consistent or better, in all material respects withfor Fred’s other stores leases of the Company with unrelated landlords.

In June 2011, Fred’s purchased these four properties together with an adjacent parcel and building at an existing owned location for a total consideration of $2.4 million in cash. No mortgage debt was assumed in this transaction. The Board of Directors approved these transactions based on the financial terms that were more favorable to market value and financially beneficial to Fred’s as a result of the depreciation expense on the newly acquired assets being less than the future value of lease payments that would have been due.

As of January 28, 2012, Fred’s is leasing three properties from Atlantic Retail Investors, LLC.leased properties. The total rental payments for related party leases were $451.2 thousand$378,375 for the fiscal year ended January 28, 2012 and $1.3 million for the years ended January 29, 2011 and January 30, 2010, respectively.February 3, 2018.

The Board of Directors approved these transactions based on an evaluation by an independent real estate broker, who concluded that all were acquired at better than market value and financially beneficial to Fred’s.

Any future transactions which are required to be described by Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934 will be reviewed and either rejected or approved by the Audit Committee and/or Board of Directors. The Company has a policy that governs transactions with related persons that require prior disclosure and approval of such transactions.

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

This section of the Proxy Statement details the compensation plans for our executive team. In it we describe our compensation philosophy, policies and practices as they relate to our management team and, especially to our chief executive officer (CEO)Chief Executive Officer (our Principal Executive Officer), chief financial officer (CFO)Chief Financial Officer (our Principal Financial and Accounting Officer) and the threefour most highly compensated executive officers (collectively, the “Named Executive Officers” or “NEOs”). The Named Executive OfficersOur NEOs for 2011 include: Bruce A. Efird (CEO & President), Jerry A. Shore (CFO), Alan C. Crockett (EVP General Merchandise Manager), Rick A. Chambers (EVP Pharmacy Operations) and Reggie E. Jacobs (EVP Distribution & Corporate Services)fiscal 2017 were:

Changes to executive compensation as well as general guidelines for other employees are considered and approvedrecommended to the full Board by the Compensation Committee of the Company.Committee.

Summary of Fiscal 20112017

Fiscal 2011 was

The following information contains references to fiscal years 2017, 2016 and 2015, which represent fiscal years ended February 3, 2018, January 28, 2017 and January 31, 2016, respectively.

A comprehensive plan has been put in place to improve performance and the Fred’s team has worked diligently to implement a yearnumber of continued momentum for Fred’s. Despite a challenging economic climateinitiatives aligned with our focus on improving profitability, increasing cash flow and generally tough retail conditions, financial objectives were met and exceededreducing debt. Specifically, the Company’s focus in many cases. Through the efforts of our dedicated team, we made significant progress during 2011 in rebranding and upgradingnear term is on driving traffic into our stores, with the Core 5 Program,growing basket size, improving our in-stock positiongross margin, reducing operating costs, increasing free cash flow and merchandise selection and controlling promotional and clearance markdowns, which in turn helped drive increased sales and higher customer traffic. The following are some of the highlights of these efforts and some noteworthy 2011 accomplishments:reducing debt.

Our compensation program is designed to motivate and reward outstanding performance that benefits our stockholders.and to drive long-term value creation. We believe that when the Company performs well and achieves its operating goals, that our executive officers should receive rewards that are commensurate with those of our shareholders. Consistent with

For fiscal 2017, our philosophyoperating and financial results did not meet our goals, and we did not achieve targeted performance under our incentive programs. As a result, none of aligning executiveour NEOs received any compensation with company performance, the Company made bonus payments of approximately 70% of target tounder our executives for fiscal 2011.Management Incentive Program, which is described below.

Compensation Objectives

Objective

It is the philosophy of FRED’SFred’s that executive compensation be linked to corporate performance and increases in shareholder value. We have designed our compensation program to align our executives’ compensation with the long-term interests of our shareholders and to attract and retain talent. The following objectives have been adopted by the Compensation Committee as guidelines for compensation decisions:

Role of Compensation Committee

The Compensation Committee is responsible for setting the compensation philosophy of the Company and then evaluating and monitoring adherence to its objectives. In doing so, the compensation philosophy of the Company. It is responsible for balancingCompensation Committee must balance the financial requirements of the Company with the need to attract and retain high caliber individuals for key roles within the Company.

Risk Considerations

The Compensation Committee reviewed multiple retailersalso reviews the risks and rewards of the Company’s compensation programs, which are designed to reward prudent risk-taking over both the short and long-term. The Company has adopted clawback features for its senior executives in an effort to develop a peer group. The Compensation Committee was unable to identify enough companies comparable to Fred’s mixits compensation programs and has also established share ownership guidelines for members of general merchandise and pharmacy sales, overall sales volumethe Board of Directors, the Chief Executive Officer and the quantity, size and geographical locationChief Financial Officer. These features, along with the general design of our stores. Absent a defined peer group and based on its review of all relevant programs, the Compensation Committee believes that the total compensation program, forare meant to ensure appropriate level of risk taking by the Company’s executives of FRED’S is competitive withover the compensation programs provided by other companies with which FRED’S competes.long-term.

The Compensation Committee believes that our incentive compensation plans are appropriately relatedtie executive compensation opportunity to corporate and individual performance, yielding awards that are tied to the annual financial and operational results of FRED’SFred’s and consistent with the returns that are generated on behalf of FRED’SFred’s shareholders. After review by the Compensation Committee and management regarding the policies and practices with respect to risk-taking incentives and risk management, the Company does not believe that potential risks arising from its compensation policies or practices are reasonably likely to have a material adverse effect on the Company.

How We Determine Executive Compensation Philosophy

In setting executive compensation philosophy and practice, the Compensation Committee has from time to time engaged compensation consultants and reviewed benchmarking data of similar companies in the retail and pharmacy industries. While the Compensation Committee studies other similar companies in its industry to determine the competitiveness and appropriateness of its compensation programs, it has not identified a set peer group. The Compensation Committee is chargedrecognizes the difficulty in identifying enough companies comparable to Fred’s mix of general merchandise and pharmacy sales, overall sales volume and the quantity, size and geographical location of our stores. The Compensation Committee reviews survey compensation data and consults with oversightcompensation and industry advisors, when assessing the competitiveness of the Company’s executivetotal compensation strategy and practices. The Companyprogram provided to Fred’s executives compared to compensation programs provided by other companies with which Fred’s competes for talent.

In collaboration with management, the Compensation Committee has engaged independent consulting firms in the past for the purpose of evaluating the annual compensation review process. They providedset a standardized structure for salary performance reviews, tailored reviews to be more pertinent to the job function and defined and added structure to the review process. These evaluations encompassed interviews with key employees to determine the job responsibilities, skill level requirementsThe Compensation Committee determines what elements and importanceamounts are included as part of the function withinexecutive compensation opportunity for our executives to balance between short- and long-term compensation. The Company’s executive compensation program is reviewed annually by the organization.Compensation Committee and adjusted as needed.

Employment AgreementsRole of Management

We have amended employment agreements with Michael J. Hayes (April 30, 2003, amended December 16, 2008) and Bruce A. Efird (September 22, 2007, amended December 22, 2008 and February 16, 2009). The amendments are described below.

Michael J. Hayes. Mr. Hayes retired asOur Chief Executive Officer effective February 1, 2009. His employment agreement provided that he would receive continued paymentmeets with the Compensation Committee to review our compensation philosophy, present analyses based on the Compensation Committee’s requests and discuss the compensation recommendations the Compensation Committee makes to the Board. Our Chief Executive Officer presents management’s perspective on business objectives, discusses the effect of his most recent salarybusiness results on compensation recommendations, reviews executive compensation data, discusses the other Named Executive Officers’ performance and other Company-provided benefits (including a monthly allowancemakes recommendations as to the compensation of $6,000our Named Executive Officers. Our Chief Executive Officer attends Compensation Committee meetings from time to defray costs of an officetime, and assistant) for three years from the effective date of his separation from service. During this period Mr. Hayes was not compensated as a membermeetings of the Board, but he does not attend those portions of Directors. WithBoard and Compensation Committee meetings intended to be held without members of management present, including those relating to the exception of his health and dental benefits, which the Company will provide during the lives of Mr. and Mrs. Hayes, Mr. Hayes’ employment agreement expired in February 2012. Mr. Hayes agreed not to compete with Fred’s for a period of six months from the date of his separation from service.

Bruce A. Efird. Mr. Efird became Chief Executive Officer effective February 1, 2009. His employment agreement automatically extends for successive one year terms unless terminated by either party. The agreement provides that we will pay Mr. Efird an annual base salaryOfficer’s compensation.

Use of $650,000 annually. Also, Mr. Efird participates in any executive bonus plans of the Company. Should Mr. Efird be separated from service or die, his heirs will receive compensation at the same rate for the balance of the term (not less than 6 months and not more than twelve months salary). All stock options and the 25,000 shares of restricted stock shall accelerate and immediately vest and be payable to the Executive or his heirs.Independent Consultants

The Compensation Committee reviews Mr. Efird’s salarymakes use of analyses provided, at its request, by external consultants in determining executive compensation. For fiscal year 2017, the Compensation Committee utilized Pay Governance LLC for these services. The Compensation Committee has reviewed the independence of Pay Governance LLC’s advisory role relative to the six consultant independence factors adopted by the SEC to guide listed companies in determining the independence of their compensation consultants, legal counsel and bonus annually.other advisors. Following its review, the Compensation Committee concluded that Pay Governance LLC has no conflicts of interest, and provides the Compensation Committee with objective and independent executive compensation advisory services. Pay Governance LLC provides data relevant to reviewing executive compensation, discussions of compensation practices and observations to the Committee regarding compensation programs and pay levels. As appropriate, the Compensation Committee meets with its independent consultant in executive session without management present.

Consideration of Shareholder Votes on Executive Compensation

The elements of our executive compensation program have remained substantially the same for several years. We may terminate Mr. Efird’s employment with or without cause. Mr. Efird has agreed notbelieve our programs are effectively designed to competealign with the Companyinterests of our shareholders and are instrumental to achieving our business strategy.

In determining executive compensation for fiscal 2017, the Compensation Committee considered the overwhelming shareholder support that the “say-on-pay” proposal received at our 2017 Annual Meeting. As a result, the Compensation Committee continued to utilize the same elements it has used in previous years, with certain changes to encourage a mix of more long-term incentive compensation and to recruit, retain and incentivize key employees.

In accordance with the view expressed by our shareholders in an advisory vote at the 2017 Annual Meeting, our Board of Directors intend to provide for a period of one year following the termination of the employment agreement.

Perquisites“say on pay” vote on an annual basis and Other Personal Benefits

Other than the following item, the Company does not provide perquisites or other personal benefits for its executive officers. Mr. Hayes is permittedwill continue to use the Company plane for personal use, but did not do so during 2011. The value of past usage was recorded as taxable compensationconsider shareholder concerns and feedback in the year in which it occurred.future. We are holding an advisory vote on the frequency of such advisory votes on executive compensation during the 2018 Annual Meeting, and expect we will hold our next vote on the frequency of such advisory votes during the 2023 Annual Meeting.

EmployeeComponents of Executive Compensation Components

The Company and the Compensation Committee have implemented compensation programs designed to align our executives’ pay with the achievement of longshort- and short termlong-term performance goals that reinforce our business strategy. The Company uses three main components in compensating its executives: base salary, annual cash and stock based incentive compensation payable under the Company’s Management Incentive Program (the “MIP”). Base salary and cash bonusincentives are geareddesigned to near termreward near-term performance, whereas stock awards blend near-term performance with longer-term earnings that result in share price growth.

Additionally, the The Company believes that these compensation incentive plansalso provides to certain of its executives benefits and practices, based on balanced performance metrics, do not encourage excessive short-term risk takingperquisites and, do promote disciplined progress towards longer-term Company goals.

The elements of the executive compensation program have remained substantially the same for several years. We believe our programs are effectively designed and working well in alignment with the interests of our shareholders and are instrumental in achieving our business strategy. In determining executive compensation for 2011, the compensation committee considered the overwhelming shareholder support that the “say-on-pay” proposal received at our June 15, 2011 annual meeting of shareholders. As a result, the compensation committee continuedfrom time to utilize the same elements it has used in previous years and will continue to consider shareholder concerns and feedbacktime, special awards in the future. In accordance with the view expressed by our shareholders in an advisory vote at the 2011 Annual Meetingform of Shareholders, our Board of Directors currently intendscash or stock.

Base Salary

We pay base salaries to provide for a “say on pay” vote on an annual basis.

Base Salary

stable fixed amount of cash compensation and be competitive with standard market practice. Base salaries are determined through analysis of industry data and comparisons with other retailing companies trading within our areasimilar retail and pharmacy companies. Salaries are set to recognize individual skills, competencies, experience and organizational impact.impact within a defined job description. Base pay levels for the executive officers are competitive within the middle of a range that the Committee considers to be reasonable and necessary. Various

The table below reflects the annualized base salaries of the Named Executive Officers, who are currently employed or were employed by the Company during fiscal 2017.

All of our employees’ base salaries are reviewed annually. Any adjustments take into account the individual’s performance, responsibilities and experience, as well as external market practices. Salary increases for our Named Executive Officers, other than the Chief Executive Officer, are determined by the Compensation Committee in base salary were recommended byconsultation with the Chief Executive Officer. The Compensation Committee, in consultation with the Chairman of the Board, reviews and discusses the Board’s evaluation of the Chief Executive Officer and then makes recommendations to the Non-employee Directors regarding increases for the Chief Executive Officer’s salary.

Management Incentive Program Compensation

Through our annual MIP, we may pay annual cash and stock incentive compensation to senior executives to reward executive performance for the year upon achievement of pre-determined Company performance goals.. The participants only earn payment under the MIP if these specific pre-established goals are achieved. Consistent with our pay for performance philosophy, the pharmacy, merchandising and store operations departments must achieve their department goal before they are eligible to receive any bonus on the individual goal component of the MIP. For all other MIP participants, including the Chief Executive Officer, in fiscal 2011order to be eligible for any payment under the other Named Executives Officers,MIP, the Company must meet its threshold pre-tax income goal. The MIP is typically paid in part stock and part cash compensation, with the mix of cash and stock based on performance and competitive considerations, andlevel in the Committee considered those recommendations in making its determination and recommendationorganization, as shown below. Although no stock awards were earned under the 2017 MIP, such awards would have been granted pursuant to the Board.Company’s 2017 Long-Term Incentive Plan (the “2017 LTIP”) if earned.

Incentive Compensation

The2017 Management Incentive Plan (“MIP”) consists of two components; a cash bonus component and a restricted stock component, which includes qualifying performance thresholds over multiple years. Beginning in 2012, the components of the MIP have changed from a tiered EPS structure to a tiered Earnings before Interest and Taxes (“EBIT”) structure.

The following table represents the threshold, target and maximum cash bonus potentialWe did not achieve our goals under the 20122017 MIP, expressed as a percentage of salary based on EBIT levels recommended by the Compensation Committee and adopted by the Board of Directors.

FortyMIP awards were not paid to our NEOs. For 2017, fifty percent of the bonus payment isopportunity payable under the MIP was contingent upon the Company meeting its EBITpre-tax income corporate goal for the year, whileas approved by the Compensation Committee early in the year. Of the remaining sixtyfifty percent, isthirty percent of the bonus opportunity was contingent on achievement of department goals consisting of meeting either department gross profit, department corporate contribution, department operating profit, or department budget, depending on the department. The remaining twenty percent was contingent upon achievement of the employee’smeeting pre-determined, objective and measured individual and department goals for 2012. Should the Company fail to achieve its threshold EBIT goal, the entire cash component of the 2012 MIP would be null and void.goals.

The threshold and target tiers2017 MIP provided that Compensation Committee retained the discretion to pay bonuses earned under the 2017 MIP in any mix of cash, stock or options as the restricted stock component begin at $59.6 million of EBIT, which represents 20% to 40% of the Senior Executive’s salary. The maximum tier of the restricted stock component is $60.8 million of EBIT, which represents restricted stock bonus compensation for Senior ExecutivesCommittee determines, in a range of 25% to 50% of their salary. Should the Company fail to achieve its threshold tier EBIT goal, the entire grant is null and void.sole discretion. If the Company achieves its threshold tier EBIT goal, one fourthgranted as equity, one-third of the grant vestswould vest each year beginning on the first anniversary of the grant date. If the target EPS is achieved in each of the subsequent fiscal years, one fourth of the base year grant will vest on the anniversary date. The following table illustrates the EPS thresholds oftarget MIP awards for which our team was eligible under the multiple year performance requirements of2017 MIP, including the restrictedportion to be paid in cash and stock, component of the 2012 MIP plan.

The fiscal 2011 Management Incentive Plan (MIP) allowed for a graduated cash bonus payout based on a tiered Earnings per Share (“EPS”) structure and includes a potential restricted stock award with qualifying performance thresholds over subsequent years.

The following table represents the threshold, target and maximum EPS levels for the cash component of the 2011 MIP expressed as a percentage of salary based on recommendation bysalary:

Long-Term Incentive Plan Awards

In addition to equity granted through the MIP, we provide long-term incentive compensation to certain employees, including our Named Executive Officers, to directly align the interests of these individuals with the long-term interests of our shareholders. We believe that long-term equity compensation is an important retention tool. Our long-term incentive compensation awards typically consist of leadership grants, grants to new hires and recently promoted employees and other special bonuses, which may consist of equity awards.

Leadership Grants

In 2012, the Compensation Committee and adopted byfirst recommended that the Board of Directors.

Forty percentDirectors provide additional restricted stock and option awards (the “Leadership Grants”) to certain executive officers in recognition of the bonus payment was contingent upon the Company meeting its EPS corporate goal for the year, while the remaining sixty percent was contingent upon achievement of the employee’s individual and department goals for 2012. The EPS target for the cash component of the 2011 MIP was $0.86. Excluding the $0.02 impact of the shares repurchased during the fiscal year,such executive’s unique contributions to the Company’s 2011 EPS was $0.85, which resulted in earning approximately 70% of the cash component of the 2011 MIP.

The threshold and target tiers of the restricted stock component began at $0.86 of EPS, which represents 20%strategic initiatives to 40% of the Senior Executive’s salary. The maximum tier of the restricted stock component is $0.88 of EPS, which represents restricted stock bonus compensation for Senior Executives in a range of 25% to 50% of their salary. Since the Company exceeded its target EPS goal, the value of the grant was adjusted accordingly and one fourth of the grant vested on the first anniversary of the grant date, May 3, 2012. If the target EPS is achieved in each of the subsequent fiscal years, one fourth of the base year grant will vest on the anniversary date. The following table illustrates the EPS thresholds of the multiple year performance requirements of the restricted stock component of the 2011 MIP plan.

The fiscal 2010 Management Incentive Plan (MIP) allowed for a graduated cash bonus payout based on a tiered Earnings per Share (“EPS”) structure and introduced a potential restricted stock payout with qualifying performance thresholds over subsequent years. The EPS target for the 2010 MIP was $0.72, which the Company exceeded by $0.03. As a result, the Company earned 109% of the cash component of the 2010 MIP.

The threshold and target tiers of the restricted stock component began at $0.72 of EPS, which represented 20% to 40% of the Senior Executive’s salary. The maximum tier of the restricted stock component is $0.74 of EPS, which represents restricted stock bonus compensation for Senior Executives in a range of 25% to 50% of their salary. Since the Company exceeded its target EPS goal, the value of the grant was adjusted accordingly and one fourth of the grant vested on the first anniversary of the grant date, May 3, 2011. The Company also achieved its 2011 EPS target. Therefore, one fourth of the 2010 grant vested on the second anniversary of the grant date, May 3, 2012. If the target EPS is achieved in each of the subsequent fiscal years, one fourth of the base year grant will vest on the anniversary date. The following table illustrates the EPS thresholds of the multiple year performance requirements of the restricted stock component of the 2010 MIP plan.

The Plan is managed by the Compensation Committee of the Board of Directors. The Board of Directors reserves the right to determine eligibility, performance measurements, final award values, payment timing and terms based upon events of the fiscal year.

The Compensation Committee believes that targeted awards for executive officers of FRED’S under these plans are consistent with targeted awards of other retailing companies of similar size and complexity to FRED’S. Specified awards were recommended by the Chief Executive Officer for the other Named Executives Officers of FRED’S for fiscal 2010, based upon the Company’s performance, and the Committee considered these recommendations in making its determination.

2002 Long Term Incentive Plan

Stock Options.The Committee strongly believes that by providing those persons who have substantial responsibility for the management and growth of FRED’S with an opportunity to increase their ownership of Common Stock,align the interests of our executives with those of our shareholders and executives willincentivize value creation. The Company did not issue any Leadership Grants in fiscal 2017.

Grants to New Hires and Promoted Employees

In order to attract high caliber talent and offer competitive compensation packages, the Company may provide stock options and/or restricted stock to new hires. In addition, individuals who are promoted into an executive or senior executive role may be closely aligned. Therefore, executives and certain other senior level employees are eligible to participate and receive restricted stock options.

Annually, the Incentive Plan participants may receive an option grant which is contingent upon achieving the EPS corporate goal, which gives them the right to purchase sharesand/or options as part of Common Stock in the future at a specified price. Options to the executive group are awarded at the first Board meeting after the beginning of the fiscal year so as to provide ample timetheir compensation for performance of stated targets and goals.their new role. New hire and promotion grants are made as of theon a case-by-case basis and are generally effective dateas of the employment/promotion date. The number of stock options granted to executive officers is based on competitive practices, with the value of such options estimated by using a Black-Scholes pricing model.

The Company ties stock option grants to the Company’s performance for the respective fiscal year. After achieving the EPS goal, the stock options then commence vesting on a specified schedule over time. Vesting is intended to not only retain the employee, but provide an incentive to continually improve the profitability of the Company.

Restricted Stock.Restricted stock is granted as a component of some executive employment arrangements as well as special purpose incentives. A special purpose incentive was granted on January 18, 2005 and February 8, 2008, and each has a ten-year restriction period but allows accelerated vesting if the Operating Profit Margin reaches specific goals.

With the expiration of the 2002 Long Term Incentive Plan, the Company is offering its renewal as the 2012 Long Term Incentive Plan within this document as Proposal 3 – 2012 Long Term Incentive Plan.

Other Compensation

Guaranteed bonus. Certain positions, particularly newly hired, may be provided with a sign-on bonus or guaranteed bonus upupon completion of their first year. In Fiscal 2017, only one NEO new hire, Greg Froton, received a grant. The Compensation Committee approved the award to Mr. Froton of 20,260 shares of restricted stock on February 7, 2017. The shares vest over six years with twenty percent vesting on each anniversary of the grant date.

Special Bonuses Delivered as Cash or Equity

Above and Beyond Bonuses

In 2012, the Compensation Committee first recommended that the Board of Directors provide additional cash and/or option awards (“Above and Beyond Bonuses”) to employees who individually provide exemplary service to the Company in a manner that develops or improves a Company-wide process or system or otherwise improves the Company’s overall financial performance. The Compensation Committee believes the Above and Beyond Bonuses provided a retentive benefit to the Company and encourage innovation, forward thinking and an entrepreneurial spirit, which the Compensation Committee believes will benefit the Company and its shareholders. Employees are typically given the option to elect between cash or options, and Above and Beyond Bonuses are paid, in the Compensation Committee’s discretion, at 5%, 10% and 15% of the employee’s annual compensationrecipient’s base salary. No Above and Beyond Bonus were awarded in fiscal 2017.

Rite Aid Transaction-Related Bonuses

On December 19, 2016, Fred’s and its wholly-owned subsidiary, AFAE, LLC (“Buyer”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Rite Aid Corporation (“Rite Aid”) and Walgreens Boots Alliance, Inc. (“Walgreens”), pursuant to which Buyer agreed to purchase 865 stores, certain intellectual property and other tangible assets (collectively, the “Assets”) and to assume certain liabilities for a cash purchase price of $950 million (the “Rite Aid Transaction”). Pursuant to Section 8.01(g) of the Asset Purchase Agreement, each of Buyer, Walgreens or Rite Aid was permitted to terminate the Asset Purchase Agreement upon theirthe termination of that certain Agreement and Plan of Merger, dated as of October 27, 2015, among Walgreens, Rite Aid and the other parties thereto (as amended, the “Merger Agreement”). On June 29, 2017, the Merger Agreement was terminated and, accordingly, the Asset Purchase Agreement was also terminated, effective immediately. In connection with the termination of the Asset Purchase Agreement, the Company received a termination fee payment of $25 million on June 30, 2017 from Walgreens.

As previously disclosed, on April 5, 2017 and prior to the termination of the Asset Purchase Agreement, the Compensation Committee developed a special bonus program and granted awards to certain senior executives, including certain of our Named Executive Officers, in recognition of such executives’ efforts to date in connection with the Rite Aid Transaction and to incentivize performance that would lead to the successful completion of such transaction. This special bonus consisted of cash, shares of restricted stock and options. The shares of restricted stock and options vest twenty-five percent per year beginning on the first year anniversary.anniversary of the grant. Fifty percent of the shares of restricted stock and options were granted on April 5, 2017 at which time the cash award was paid. The executives were not eligible to earn the remaining fifty percent of the restricted stock and options because of the termination of the Rite Aid Transaction. These cash and equity-based special bonuses granted to certain our Named Executive Officers and other executive officers are further described in the table below:

Director CompensationBenefits and Perquisites

Base Salary

Non-employee Directors of FRED’S,The Company provides its full-time employees, including the Named Executive Officers with health insurance coverage, life insurance and an opportunity to participate in the exceptionFred’s 401(k) plan. The Fred’s 401(k) plan historically included matching contributions by the Company but presently, the Company does not make matching contributions. Additionally, the Company maintains an Employee Stock Purchase Plan, which provides participating employees a discount when purchasing shares of the ChairmanCompany’s stock. Currently, the Employee Stock Purchase Plan has been suspended. In addition, perquisites or other personal benefits are provided to some executive officers. These are more fully described as part of the Summary of Executive Compensation Table. During fiscal 2017, Mr. Bloom, as Chief Executive Officer, was permitted to use the plane owned by the Company at such time for personal use, but did not use the plane in such capacity. The Company’s plane was sold during the third quarter of 2017.

Executive Employment Agreements

Management Compensation Agreement with Michael K. Bloom

The Company and Michael K. Bloom were parties to a management compensation agreement, dated as of January 12, 2015, as amended on August 30, 2016 and April 10, 2017 (as amended, the “Management Compensation Agreement”). Effective on April 24, 2018, the Management Compensation Agreement was terminated.

Base Salary, Term and Renewal. The Management Compensation Agreement provided for a base salary of $700,000, a term of three years and renewed automatically for additional 30-month terms, unless either party provided notice of non-renewal to the other party at least 180 days prior to the end of the then-current term.

Bonus. Mr. Bloom was eligible to participate in the Company’s annual cash incentive bonus at 75% - 150% of his annual base salary. Eligibility to receive the cash incentive was based upon the achievement of pre-established performance goals determined by the Board of Directors. The Management Compensation Agreement also provided for a minimum cash incentive bonus for fiscal 2015 - 2017 of 50% of Mr. Bloom’s annual base salary, provided the Company achieves certain minimum performance goals.

Equity Incentives. Mr. Bloom was eligible to receive an annual stock incentive under Company’s stock incentive program in the following amounts: fiscal 2015, $400,000; fiscal 2016, $450,000; and fiscal 2017, $600,000. Thereafter, the incentive amount was equal to 80% of Mr. Bloom’s annual base salary. The amount was payable half in restricted stock of the Company and half in stock options. Eligibility to receive the stock incentive was based upon the achievement of pre-established performance goals determined by the Board of Directors. Mr. Bloom was eligible to receive an additional amount equal to $400,000 in fiscal 2017 and 50% of the annual base salary thereafter, payable in stock options upon the Company achieving 125% of the mutually agreed upon pre-determined performance goals.

Termination. The Management Compensation Agreement permitted Mr. Bloom to terminate the agreement for good reason or disability with at least 30 days prior notice, and it permitted the Company to terminate the agreement without cause upon at least 30 days prior notice or at any time with cause. The Management Compensation Agreement would also terminate upon Mr. Bloom’s death.

In the event Mr. Bloom was terminated without cause or Mr. Bloom terminated for good reason, Mr. Bloom would receive his base pay as of the date of termination for a period of 36 months as well as 36 months of benefits coverage and car allowance, and Mr. Bloom’s unvested shares of restricted stock and options would vest immediately. In addition, if Company’s current healthcare provider will not permit Mr. Bloom to continue coverage under the Company’s healthcare plan, the Company would purchase equivalent coverage from another provider.

In the event Mr. Bloom was terminated without cause within 18 months after a change in control, Mr. Bloom would have been entitled to receive the same severance and benefits as if Mr. Bloom had been terminated without cause or if Mr. Bloom had terminated for good reason.

As used in the Management Compensation Agreement, the term “change in control” means (i) any person or entity becoming the beneficial owner of shares of the Company’s stock representing 35% or more of the combined voting power of the then outstanding shares that may be voted for the election of Directors; (ii) as a result of any cash tender or exchange offer, merger or other business combination, sale of assets, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding shares of the Company entitled to vote in the election of Directors, is held in the aggregate by holders of the Company’s shares entitled to vote generally in the election of Directors immediately prior to such transactions; and (iii) during any period of two consecutive years, a majority of the Board of Directors are paid for their services as such $24,000 per year plus reasonable expenses for meeting attendance. Also, the non-employee Directors are paid an additional amount for their servicecease to serve on the Audit, Compensation, Nominating and Governance committees.

2002 Long Term Incentive Plan

Previouslyboard of Directors for any reason, unless the election of such new Directors was approved by a vote of at least two-thirds of the Directors were awardedin office at the beginning of such two year period.

Restrictive Covenants. The Management Compensation Agreement provided that Mr. Bloom was subject to non-competition and non-solicitation provisions during the term of his employment, and for one year after termination, as well as to a non qualified stock option grantperpetual covenant not to use or disclose confidential information or make disparaging statements about the Company.

Employment Agreements with Rick J. Hans, Jason Jenne, Craig L. Barnes, Timothy A. Liebmann and Greg Froton

On April 3, 2017, the Company entered into an employment agreement with Greg Froton and on April 10, 2017, the Company entered into substantially similar employment agreements (together with Mr. Froton’s employment agreement, the “NEO Employment Agreements”) with each of Rick J. Hans, Jason Jenne, Craig L. Barnes, and Timothy A. Liebmann.

Term and Renewal. The NEO Employment Agreements became effective on April 10, 2017 and continue for 3,000 sharesa term of immediately vested stock with a five year expiration. In fiscal 2010,two years. The NEO Employment Agreements renew automatically for additional two-year terms unless either the directors were awarded a non qualified grantCompany or the executive provides notice of 1,250 options that immediately vested. They also receivednon-renewal at least 180 days prior to the end of the then-current term.

Base Salary, Equity Incentives. Pursuant to the terms of the NEO Employment Agreements, each executive will receive his or her current base salary and will be eligible to participate in the Company’s management incentive program and in all employee benefit plans and programs made available to the Company’s employees. The NEO Employment Agreements provided for the firstfollowing base salary and management incentive compensation amounts:

Each executive will also be entitled to receive vacation, expense reimbursements and relocation expenses, to the extent required.

Termination. The NEO Employment Agreements permit each executive to terminate the NEO Employment Agreement for any reason or no reason upon at least 180 days prior notice, and permit the Company to terminate the Employment Agreement without cause upon at least 30 days prior notice or at any time with cause. Each NEO Employment Agreement will also terminate upon the executive’s death or disability.

In the event an executive is terminated without cause within 180 days after a grant of 1,250change in control, the executive will be entitled to receive a severance payment equal to his or her base pay for 24 months, medical and dental insurance coverage for 24 months, and such executive’s unvested shares of restricted stock whose restrictions lapseand options will vest immediately. In the event an executive is terminated within 180 days after a change in control and during the 24 month period following such termination the executive becomes employed by another employer, the Company will only be obligated to pay the executive the difference between the amount provided by the NEO Employment Agreement and any lesser amount received by the executive from his or her new employer. If the executive receives a greater salary than the payment provided by the NEO Employment Agreement, the Company will no longer be required to make such payments.

As used in the NEO Employment Agreements, the term “change in control” means (i) any person or entity becoming the beneficial owner of shares of the Company’s stock representing 35% or more of the combined voting power of the then outstanding shares that may be voted for the election of Directors; (ii) as a result of any cash tender or exchange offer, merger or other business combination, sale of assets, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding shares of the Company entitled to vote in the election of Directors, is held in the aggregate by holders of the Company’s shares entitled to vote generally in the election of Directors immediately prior to such transactions; and (iii) during any period of two years. consecutive years, a majority of the Board of Directors cease to serve on the board of Directors for any reason, unless the election of such new Directors was approved by a vote of at least two-thirds of the Directors in office at the beginning of such two year period.

In fiscal 2011, the directors receivedevent an executive is terminated by the Company without cause, the executive will be entitled to receive a grantseverance payment equal to his or her base pay for 24 months, 24 months of 2,500 sharesCOBRA coverage, and vesting of such executive’s unvested stock and options.

In the event the executive is terminated due to the executive’s death or disability, the executive (or the executive’s estate) will be entitled to receive an amount equal to 24 months of the executive’s base pay.

In the event the executive is terminated by the Company for cause, or the executive terminates his or her NEO Employment Agreement for any reason, the executive will be entitled to receive his or her base pay for the period ending on the effective date of termination, any unreimbursed expenses and payment of any employee benefit due but unpaid as of the date of termination, including all unused paid-time off.

Restrictive Covenants. Each of the NEO Employment Agreements provides that the executive is subject to non-competition and non-solicitation provisions during the term of his or her employment, and for one year after termination, as well as to a perpetual covenant not to use or disclose confidential information or make disparaging statements about the Company. Each NEO Employment Agreement includes a customary acknowledgement that any intellectual property developed by the executive in connection with his or her employment is the property of the Company.

Director Compensation

All Non-employee Directors except for the Chairman will receive an annual cash retainer of $75,000 per year and $125,000 of restricted stock, whose restrictions lapse only afterand the Chairman will receive $340,000 of restricted stock. Additionally, the Chairman of the Audit Committee will receive $25,000, the Chairman of the Compensation Committee will receive $20,000, the Chairman of the Nominating and Governance Committee will receive $15,000 and, to the extent a lead director ceases beingis named, such individual would receive an additional $25,000 retainer. In addition, Non-employee Directors will be provided a $10,000 retainer for each committee on which such Non-employee Director serves and a $2,000 per day fee for attending special trips/meetings at the request of management.

Other Important Compensation Information

Clawback Policy

Beginning with the 2013 MIP, the Board of Directors adopted a clawback policy for any incentive compensation under the MIP. It provides that in the event of an accounting restatement due to material noncompliance of the Company with financial reporting requirements under the U.S. federal securities laws as a result of intentional misconduct, the Board of Directors has the right to recover, from any of its current or former named executive officers who received a cash bonus during the twelve-month period preceding the date on which the Company is required to prepare an accounting restatement, the difference between the amount of any cash bonus paid to the executive officer with respect to the period(s) that such restatement was required, and the amount of the bonus such executive officer would have received had the amount of the bonus been calculated based on the restated financial statements.

Insider Trading Policy

All executive officers are subject to Fred’s insider trading policy, which prohibits the use or sharing of confidential information for trading in the stock of the Company. In addition, all persons subject to Section 16(a) of the Exchange Act, which includes all Named Executive Officers, may not engage in any transaction involving Fred’s stock (including a purchase or sale, gift, contribution to a trust, stock option grant or exercise, restricted stock grant, stock grant under a deferred compensation plan, intra-plan transfer involving a Fred’s stock fund, Rule 10(b)5-1 plan transaction, pledge or hedge, or any other transfer) without first obtaining pre-clearance of the transaction from the Chief Financial Officer.

Share Ownership Guidelines

The Board of Directors encourages Board members and senior executives to have ownership in the Company. Stock ownership aligns the interests of senior executives with the interests of shareholders and promotes a long-term focus toward management of the Company. In 2013, the Board of Directors adopted the following share ownership guidelines to encourage ownership. For purposes of these guidelines, shares of unrestricted stock, restricted stock and vested incentive or non-qualified stock options with a fair market value above the grant exercise price shall qualify as Common Stock.

Chief Executive Officer and Chief Financial Officer

The Chief Executive Officer is expected to acquire and hold during his or her tenure shares of the Company’s Common Stock equal in value to at least three times his or her base salary, and the Chief Financial Officer is expected to acquire and hold during his or her tenure shares of the Company’s Common Stock equal to at least two times his or her base salary. The Chief Executive Officer and Chief Financial Officer shall have five years from the effective date of implementation of the policy or their initial appointment to the position to meet the target stock ownership guideline, and they are expected to continuously own (i.e., retain) sufficient shares to meet the guideline once attained.

Non-Employee Directors

Non-employee Directors are expected to acquire and hold during their tenure as a Board member of the Board.

With the expirationCompany shares of the 2002 Long TermCompany’s Common Stock equal in value to at least four times the annual retainer for Non-employee Directors. Non-employee Directors shall have five years from the effective date of implementation of the policy or their initial election to the Board to meet the target stock ownership guideline, and they are expected to continuously own (i.e., retain) sufficient shares to meet the guideline once attained.

Long-Term Incentive Plans

All equity incentive awards granted prior to the 2017 Annual Meeting were made pursuant to the Company’s 2012 Long-Term Incentive Plan (the “2012 LTIP”), or a predecessor plan. The 2017 LTIP was approved by shareholders at the Company is offering its renewal as2017 Annual Meeting. In connection with such approval, all shares remaining available for issuance under the 2012 Long Term Incentive Plan within this document as Proposal 3 –LTIP were terminated and added to pool of shares available under the 2017 LTIP. The Compensation Committee has discretion to award stock options, stock appreciation rights, performance units or restricted stock pursuant to the 2017 LTIP; however, the equity awards previously granted under the 2012 Long Term Incentive Plan.LTIP will remain in place until such awards terminate or expire under their specific terms. The Compensation Committee may not adjust or amend the exercise price of stock options or stock appreciation rights. Shares will be available for award until July 15, 2027, unless the 2017 LTIP is terminated sooner.

The 2017 LTIP includes a number of specific terms and limitations that the Compensation Committee believes reflect our pay for performance philosophy and are consistent with the long-term interests of our shareholders. These features include:

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has at any time during the past year been one of our officers or employees. Furthermore, no member of the Compensation Committee has any relationship requiring disclosure under Item 404 of Regulation S-K. No executive officer of the Company served during 2011the past year as a directorDirector or a member of a compensation committee of any entity that had an executive officer serving as a directorDirector of the Company or a member of the Compensation Committee.

Compliance with Internal Revenue Code 162(m)

Section 162(m) of the Code limits publicly held companies to an annual deduction for federal income tax purposes of $1.0 million for compensation paid to each of its chief executive officer, chief financial officer and the next three most highly compensated executive officers whose compensation is required to be disclosed in the company’s annual proxy statement (referred to as “Covered Employees”). Historically, there has been an exception to this $1.0 million limitation for performance-based compensation that meets certain requirements, and the chief financial officer has been excluded from the definition of a Covered Employee. Effective January 1, 2018, under the recently enacted Tax Cuts and Jobs Act, the exception for performance-based compensation has been eliminated, and compensation paid to the chief financial officer is now subject to the $1.0 million deduction limitation. The amendments to Section 162(m) include a grandfather clause applicable to compensation paid pursuant to a written binding contract in effect on November 2, 2017 that is not materially modified after such date.

No formal policy has been adopted with respect to minimizing the risk that compensation paid to its executive officers will exceed the deduction limit. Although the Compensation Committee uses the requirements of Section 162(m) as a guideline, deductibility is not the sole factor it considers in assessing the appropriate levels and types of executive compensation and it will elect to forgo deductibility when it believes it is in our and our shareholders’ best interest.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the above Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

B. Mary McNabb, Compensation Committee Chairperson

Roger T. Knox

Michael T. McMillan

Summary Compensation Table

The following Summary Compensation Table sets forth the compensation earned by or paid to theour former Chief Executive Officer, those individuals who served as our Chief Financial Officer during fiscal 2017, and theour three other mostly highly compensated executive officers, collectively referred to as the Named Executive Officers (“NEOs”) for services rendered to us during the fiscal years indicated.

Grants of Plan-Based Awards

There were no grants of non-equity incentive plan-based awards made by the Company to any of its Named Executive Officers during fiscal 2017 other than certain signing and discretionary bonuses identified in the summary compensation table. The following table presents information with respect to the grants of plan-based equity incentive awards made by the Company to each of its Named Executive Officers during the fiscal year ended January 28, 2012.2017.

Outstanding Equity Awards at 20112017 Fiscal Year-End

The following table reflects stock option and restricted stock awards granted to the Named Executive Officers under the Company’s 2002 Long-Term Incentive PlanLTIP, 2012 LTIP and 2017 LTIP that were outstanding as of January 28, 2012.the end of fiscal 2017.