Execution Version
If to the Company: Fred’s, Inc. 4300 New Getwell Road Memphis, Tennessee 38118 Attention: General Counsel Facsimile: 901.366.6772 | with a copy (which shall not constitute notice) to: Vinson & Elkins L.L.P. 666 Fifth Avenue, 26th Floor New York, NY 10103-0040 Attention: Kai H. Liekefett, Esq., Lawrence S. Elbaum, Esq. Facsimile: 212.237.0100 |
If to Alden: Alden Global Capital LLC 885 Third Avenue New York, New York 10022 Attention: Heath Freeman Facsimile: 212.751.9501 | with a copy (which shall not constitute notice) to: Olshan Frome Wolosky LLP 1325 Avenue of the Americas New York, NY 10019 Attention: Steve Wolosky, Esq., Andrew M. Freedman, Esq. Facsimile: 212.451.2222 |
ALDEN GLOBAL CAPITAL LLC | ||
By: | /s/ Heath B. Freeman | |
Name: | Heath B. Freeman | |
Title: | President | |
STRATEGIC INVESTMENT OPPORTUNITIES LLC | ||
By: | Alden Global Capital LLC | |
Investment Manager | ||
By: | /s/ Heath B. Freeman | |
Name: | Heath B. Freeman | |
Title: | President | |
/s/ Heath B. Freeman | ||
Heath B. Freeman |
Fred’s, Inc.
4300 New Getwell Road
Memphis, Tennessee 38118
Very truly yours, | |
____________________________ [●] |
Fred’s Pharmacy Appoints Two New Independent Directors
Announces Cooperation Agreement with Alden Global Capital, Fred’s Largest Shareholder
Fred’s Leadership Team Is Poised to Continue Transforming Company and Maximizing Free Cash Flow Per Share
MEMPHIS, Tenn.--(BUSINESS WIRE)--April 24, 2017--Fred’s, Inc. (“Fred’s Pharmacy” or the “Company”) (NASDAQ:FRED) today announced that it has appointed Steven B. Rossi, Chief Executive Officer of Digital First Media, and Timothy A. Barton, former CEO of Freightquote.com, which he founded in 1998, to its Board of Directors, effective immediately.
Today’s announcement follows the recent additions of Linda Longo-Kazanova, Christopher W. Bodine, Peter J. Bocian and Michael K. Bloom, Chief Executive Officer, to the Fred’s Pharmacy Board. As a result of these announcements, following the conclusion of the 2017 Annual Meeting of Shareholders the newly reconstituted Board will be comprised of 9 directors, 8 of whom are independent and all of whom have track records of delivering shareholder value.
Mr. Rossi and Mr. Barton have been added to the Fred’s Pharmacy Board in connection with a Cooperation Agreement between Alden Global Capital LLC (“Alden”), the Company’s largest shareholder, and Fred’s Pharmacy. The Cooperation Agreement contains terms regarding the parties working together for the long-term success of Fred’s Pharmacy.
“We are excited to welcome Steve and Tim to the Fred’s Pharmacy Board of Directors,” said Thomas H. Tashjian, Chairman of the Board. “They add strong business, financial and operational expertise, and their perspectives will be instrumental as we continue the transformation of Fred’s Pharmacy. This includes moving expeditiously to complete the transaction with Walgreens and Rite Aid, pending approval by the Federal Trade Commission, which would make Fred’s Pharmacy the third largest drugstore chain in the nation. We look forward to continuing to work constructively with Alden and all of our shareholders as we focus on executing our strategic plan and delivering value for all Fred’s Pharmacy stakeholders.”
Mr. Bloom said, “I am thrilled to work with Steve, Tim, Alden and the entire Fred’s Pharmacy Board to capture the numerous value-creating opportunities that lie ahead for the Company. I am confident we have the right team in place to advance our new healthcare-focused strategy and drive returns for our shareholders while delivering on our mission to improve the lives of our patients and customers.”
Heath Freeman, President of Alden, commented, “I am pleased with today’s announcement and expect that Tim and Steve will immediately impact and contribute to the Fred’s Board. I, and the rest of the Alden team, look forward to working with Fred’s as we all continue to support and strengthen Fred’s business. Over the past few months, our team has spent considerable time with the Fred’s Pharmacy team. Having seen first-hand the progress that Mike Bloom and his team have made on the execution of the Company’s healthcare strategy, I have great confidence in the future of the business. With the right focus, Fred’s can generate significant free cash flow per share at the existing business; the pending Rite Aid transaction will provide extraordinary growth to Fred’s business and free cash flow.”
“Fred’s Pharmacy is executing on a transformation plan that is gaining momentum,” said Mr. Rossi. “I look forward to helping Fred’s Pharmacy with its compelling opportunities ahead.”
“I am honored to join the talented individuals on the Fred’s Pharmacy Board,” said Mr. Barton. “With its focused mission and first-class management team, I am confident the Company has a bright future.”
Under the terms of the Cooperation Agreement, Alden is subject to certain customary standstill and other provisions. The complete agreement between Fred’s Pharmacy and Alden will be included as an exhibit to a Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission.
Evercore is serving as financial advisor to Fred’s. Vinson & Elkins LLP and Baker Donelson Bearman Caldwell & Berkowitz P.C. are serving as legal advisors to Fred’s. Olshan Frome Wolosky LLP is serving as Alden’s legal advisor.
Steven B. Rossi
Steve Rossi brings to the Fred’s Pharmacy Board extensive financial and operations experience. Mr. Rossi is the Chief Executive Officer of Digital First Media, which has more than 300 print and digital products serving over 45 million Americans each month. He previously served as the company’s Chief Operating Officer. Prior to joining the company, Mr. Rossi held several successive management positions over 19 years with Knight Ridder Inc., including Chief Financial Officer, Senior Vice President of Operations and President of the Newspaper Division.
Timothy A. Barton
Tim Barton joins the Board with a substantial business and technology background and with experience in growing successful companies. Mr. Barton founded Freightquote in 1998, growing it into the largest online freight shipping provider in the United States with $600 million in annual revenue. Mr. Barton served as Chairman and CEO until the company’s sale to C.H. Robinson Worldwide in 2015. Prior to founding Freightquote.com, 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.
About Alden Global Capital LLC
Alden is a New York based investment firm focused on deep value, catalyst driven investing.
About Fred's Pharmacy
Tracing its history back to an original store in Coldwater, Mississippi, opened in 1947, today Fred’s Pharmacy is headquartered in Memphis, Tennessee, and operates 601 pharmacy and general merchandise stores and three specialty pharmacy-only locations, including 14 franchised Fred’s Pharmacy locations. With a unique store format and strategy that combines the best elements of a healthcare-focused drug store with a value-focused retailer, Fred’s Pharmacy stores offer more than 12,000 frequently purchased items that address the healthcare and everyday needs of its customers and patients. This includes nationally recognized brands, proprietary Fred’s Pharmacy label products, and a full range of value-priced selections. The company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.
As previously announced, on December 20, 2016, Fred's Pharmacy announced that it signed an agreement with Walgreens Boots Alliance, Inc. (NASDAQ: WBA) and Rite Aid Corporation (NYSE: RAD) to purchase 865 stores and certain assets related to store operations located across the eastern and western United States for $950 million in cash. Closing of the transaction is conditioned on the completion of Walgreens Boots Alliance's proposed acquisition of Rite Aid, approval by the Federal Trade Commission, as well as customary regulatory approvals and closing conditions.
For more information about the Company, visit Fred's website at www.fredsinc.com.
Forward Looking Statements
Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as "outlook," "guidance," "may," "should," "could," "believe," "anticipate," "plan," "expect," "estimate," "forecast," "goal," "intend," "committed," "continue," or "will likely result" and similar expressions that concern the Company's strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company's announced strategic plan, the success of announced acquisition activities and future growth trends in businesses acquired; general economic trends; risks related to the possibility that the transactions may not close, including because one or more closing conditions to the transactions, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transactions, or may require conditions, limitations or restrictions in connection with such approvals; the risk that the businesses and acquired stores, as applicable, will not be integrated successfully; the risk of litigation and/or regulatory actions related to the proposed transaction; changes in consumer demand or purchase patterns; delays or interruptions in the flow of merchandise between the Company's distribution centers and its stores or between the Company's suppliers and same; a disruption in the Company's data processing services; cyber-security threats; costs and delays in acquiring or developing new store sites; and the factors listed under "Risk Factors" in the Company's most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.
CONTACT:
Fred's Pharmacy
Rick Hans, 901-362-3733, Ext. 2232
Executive Vice President, Chief Financial Officer and Secretary
or
Joele Frank , Wilkinson Brimmer Katcher
Ed Trissel / Steve Frankel / Dan Moore
212-355-4449
BY ELECTRONIC MAIL
1. | Upon the terms of, and subject to the conditions in, this letter agreement, you and your Representatives, may receive certain information about the Company and its Affiliates from one or more Alden Designees or their Replacement Designees (collectively, the “Investor Directors”) in accordance with the Cooperation Agreement that is confidential and proprietary, the disclosure of which could harm the Company and its Affiliates. You understand and agree that the Investor Directors shall be subject in all cases to their fiduciary duties to the Company and its stockholders. It is understood and agreed that the Investor Directors shall not disclose to you or your Representatives (A) any confidential or proprietary information of any third party in the possession of the Company or any of its Affiliates that the Company or any of its Affiliates is prohibited from disclosing pursuant to a contractual or other legal obligation or duty of confidentiality that is either (a) identified as such to the Investor Directors by or on advice of legal counsel or the Company or (b) as to which it is reasonably apparent that the Company or any of its Affiliates is prohibited from disclosing pursuant to any contractual or other legal obligation or duty of confidentiality; provided, however, that, at the request of any Investor Director, the Company shall use commercially reasonable efforts to obtain a waiver or consent from any such third party to permit such Investor Director to share such information with you and your Representatives pursuant to the terms of this letter agreement; and (B) any legal advice or information that may be protected by the Company’s or any of its Affiliates’ attorney-client privilege or attorney work-product privilege (both with respect to internal or external legal counsel). |
2. | As a condition to your or any of your Representatives being furnished such information, you agree to treat, and to cause your Representatives to treat, any information, whether written or oral, concerning the Company or any of its Affiliates that is furnished to you or your Representatives by or on behalf of any Investor Director, the Company or its Representatives (herein collectively referred to as the “Confidential Information”) in accordance with the provisions of this letter agreement, and to take or abstain from taking, and to cause your Representatives to take or abstain from taking, certain other actions as set forth herein. The term “Confidential Information” includes, without limitation, all notes, analyses, data or other documents furnished to you or your Representatives or prepared by you or your Representatives to the extent such materials reflect or are based upon, in whole or in part, the Confidential Information. The term “Confidential Information” does not include information that (a) was within your or any of your Representatives’ possession on a nonconfidential basis prior to it being furnished to you by the Company or its Representatives; (b) is or becomes available to you or your Representatives on a nonconfidential basis from a source other than the Company or its Representatives, provided that such source is not known by you or your Representatives to be bound by a confidentiality agreement with, or other contractual, legal or fiduciary obligation to, the Company or any of its Affiliates that prohibits such disclosure; (c) is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives in violation of this letter agreement; or (d) has been or is independently developed by you or your Representatives without the use of the Confidential Information or in violation of the terms of this letter agreement. For purposes of this letter agreement, the term “Representatives” shall have the meaning ascribed to such term in the Cooperation Agreement. |
3. | You hereby agree that you shall keep the Confidential Information confidential and shall use the Confidential Information solely for the purpose of monitoring and evaluating your investment in the Company; provided, however, that you may disclose the Confidential Information (a) to any of your Representatives who need to know such information for the purpose of monitoring and evaluating your investment in the Company, (b) in accordance with paragraph 3 of this letter agreement, or (c) as the Company may otherwise consent in writing. Any such Representative shall (i) be informed by you of the confidential nature of the Confidential Information, (ii) agree to keep the Confidential Information strictly confidential, and (iii) be advised of the terms of this letter agreement. You agree to be responsible for any breaches of any of the provisions of this letter agreement by any of your Representatives as if they were party hereto (it being understood that such responsibility shall be in addition to and not by way of limitation of any right or remedy the Company may have against your Representatives with respect to such breach). |
4. | You hereby acknowledge that you and your Representatives are aware that the Confidential Information may contain material, non-public information concerning the Company, and that the U.S. securities laws restrict any person who has material, non-public information concerning an issuer from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities, and further acknowledge your obligations and those of your Representatives (as applicable) under Section 7 of the Cooperation Agreement. |
5. | Notwithstanding anything to the contrary provided in this letter agreement, in the event you or any of your Representatives receive a request or are required by deposition, interrogatory, request for documents, subpoena, court order, similar judicial process, civil investigative demand or similar process or pursuant to a formal request from a regulatory examiner (any such requested or required disclosure, an “External Demand”) or are otherwise required pursuant to applicable law, regulation or the rules of any national securities exchange (as determined based on advice of outside legal counsel) to disclose all or any part of the Confidential Information, you agree, and you agree to cause your Representatives, to the extent permitted by applicable law, to (a) promptly notify the Company of the existence, terms and circumstances surrounding such External Demand or other requirement and (b) in the case of any External Demand, cooperate with the Company, at the Company’s reasonable request and sole expense, in seeking a protective order or other appropriate remedy to the extent available under the circumstances. In the event that such protective order or other remedy is not obtained or not available or that the Company waives compliance with the provisions hereof, (i) you or your Representatives, as the case may be, may disclose only that portion of the Confidential Information which you or your Representatives are advised by outside legal counsel is legally required to be disclosed, and you or your Representatives shall inform the recipient of such Confidential Information of the existence of this letter agreement and the confidential nature of such Confidential Information and exercise reasonable efforts to obtain assurance that confidential treatment will be accorded, and (ii) you and your Representatives shall not be liable for such disclosure, unless such disclosure was caused by or resulted from a previous disclosure by you or your Representatives in violation of this letter agreement. For the avoidance of doubt, it is understood and agreed that there shall be no “applicable law,” “regulation” or “rule” requiring you or your Representatives to disclose any Confidential Information solely by virtue of the fact that, absent such disclosure, you or your Representatives would be prohibited from purchasing, selling or engaging in derivative or other voluntary transactions with respect to the securities of the Company or you or your Representatives would be unable to file any proxy materials or tender or exchange offer materials in compliance with Section 14 of the Exchange Act or the rules promulgated thereunder. |
6. | Upon the Company’s written demand following the termination of this letter agreement in accordance with its terms, you and your Representatives shall either promptly (at your option) (a) destroy the Confidential Information and any copies thereof, or (b) return to the Company all Confidential Information and any copies thereof, and, in either case, confirm in writing to the Company that all such material has been destroyed or returned, as applicable, in compliance with this letter agreement; provided, however, that you and your Representatives shall be permitted to retain Confidential Information to the extent necessary to comply with applicable law, professional standards or such person’s document retention policies of general application, or to the extent disclosed pursuant to an External Demand. Notwithstanding the destruction or return of Confidential Information, you and your Representatives shall continue to be bound by the obligations contained herein with respect to any Confidential Information retained by you or your Representatives for such period of time as you and such Representatives retain such Confidential Information until such Confidential Information is returned or destroyed or no longer constitutes Confidential Information pursuant to the terms hereof. |
7. | You acknowledge and agree that money damages would not be a sufficient remedy for any breach (or threatened breach) of this letter agreement by you or your Representatives and that the Company shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach (or threatened breach), without proof of damages, and you further agree to waive, and use your reasonable best efforts to cause your Representatives to waive any requirement for the securing or posting of any bond in connection with any such remedy. Such remedies shall not be the exclusive remedies for a breach of this letter agreement, but will be in addition to all other remedies available at law or in equity. |
8. | You agree that (a) none of the Company or its Representatives shall have any liability to you or any of your Representatives resulting from the selection, use or content of the Confidential Information by you or your Representatives and (b) none of the Company or its Representatives makes any representation or warranty, express or implied, as to the accuracy or completeness of any Confidential Information. This letter agreement shall not create any obligation on the part of the Company or its Representatives to provide you or your Representatives with any Confidential Information, nor shall it entitle you or your Representatives (other than any Investor Director in his capacity as a director of the Company) to participate in any meeting of the Board or any committee thereof. All Confidential Information shall remain the property of the Company and its Affiliates. Neither you nor any of your Representatives shall by virtue of any disclosure of and/or your or their use of any Confidential Information acquire any rights with respect thereto, all of which rights shall remain exclusively with the Company and its Affiliates. You and your Representatives shall not initiate contact with any officer or employee of the Company other than as permitted by the terms of the Cooperation Agreement, unless otherwise approved in writing by the Company, in each case, concerning Confidential Information; provided, however, the restrictions set forth in this sentence shall not apply to the Investor Director or any officer or employee of the Company who is also serving as a director; provided further, the restrictions set forth in this sentence shall not apply to communicaitons or contacts between Alden and the General Counsel pursuant to Section 9 below or relating to notices required or permitted under the Cooperaiton Agreement. |
9. | From time to time prior to the termination of this letter agreement, Alden shall be entitled to request, by written notice to the Company’s General Counsel, that the Company confirm whether or not members of the Board are then permitted to purchase or sell securities of the Company pursuant to the Company’s insider trading policy, in which case the Company will promptly inform Alden whether or not such members are then so permitted to purchase or sell such securities pursuant to the Company’s insider trading policy. |
10. | No failure or delay by any party or any of its Representatives in exercising any right, power or privilege under this letter agreement shall operate as a waiver thereof, and no modification hereof shall be effective, unless in writing and signed by the parties hereto. |
11. | The illegality, invalidity or unenforceability of any provision hereof under the laws of any jurisdiction shall not affect its legality, validity or enforceability under the laws of any other jurisdiction, nor the legality, validity or enforceability of any other provision. |
12. | This letter agreement, and any disputes arising out of or related to this letter agreement (whether for breach of contract, tortious conduct or otherwise), shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without reference to the conflict of laws principles thereof that would result in the application of the law of another jurisdiction. Each party hereto irrevocably agrees that any legal action or proceeding with respect to this letter agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this letter agreement and the rights and obligations arising hereunder brought by the Other Party or its successors or assigns, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware). Each party hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this letter agreement in any court other than the aforesaid courts. Each party hereto hereby irrevocably waives, and agrees not to assert in any action or proceeding with respect to this letter agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable legal requirements, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this letter agreement, or the subject matter hereof, may not be enforced in or by such courts. Each party hereto hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this agreement. |
13. | This letter agreement and the Cooperation Agreement (including the exhibits thereto) constitute the only agreement between the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written. This letter agreement may be amended only by an agreement in writing executed by the parties hereto. |
14. | This letter agreement may be executed in separate counterparts (including by fax, .jpeg, .gif, .bmp and .pdf), each of which when so executed shall be an original, but all such counterparts shall together constitute one and the same instrument. |
15. | Except as otherwise set forth herein, this letter agreement and the obligations and restrictions hereunder shall terminate eighteen months from the date on which the last Investor Director appointed or elected to the Board pursuant to the Cooperation Agreement ceases to be a director of the Company; provided that you and your Representatives shall maintain in accordance with the confidentiality obligations set forth herein any Confidential Information constituting trade secrets for such longer time as such information constitutes a trade secret of the Company or any of its Affiliates under applicable law; and provided further that any liability for breach of this letter agreement prior to such termination shall survive such termination. |
16. | Each party to this letter agreement acknowledges that it has been represented by counsel of its choice throughout all negotiations that have preceded the execution of this letter agreement, and that it has executed this letter agreement with the advice of such counsel. Each party and its counsel cooperated and participated in the drafting and preparation of this letter agreement and the documents referred to herein, and any and all drafts relating thereto exchanged among the parties hereto shall be deemed the work product of all of the parties and may not be construed against any party by reason of its drafting or preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this letter agreement against any party that drafted or prepared it is of no application and is hereby expressly waived by each of the parties hereto, and any controversy over interpretations of this agreement shall be decided without regards to events of drafting or preparation. |
Very truly yours, | |||
FRED’S, INC. | |||
By: | |||
Name: | Michael K. Bloom | ||
Title: | Chief Executive Officer |
Confirmed and Agreed to: | ||
ALDEN GLOBAL CAPITAL LLC | ||
By: | ||
Name: | Heath B. Freeman | |
Title: | President | |
STRATEGIC INVESTMENT OPPORTUNITIES LLC | ||
By: | Alden Global Capital LLC | |
Investment Manager | ||
By: | ||
Name: | Heath B. Freeman | |
Title: | President | |
HEATH B. FREEMAN | ||
Heath B. Freeman |