SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 21, 1998 (October 9, 1998)
FRED'S, INC.
(Exact name of registrant as specified in its charter)
Tennessee 000-19288 62-0634010
(State or other jurisdiction) (Commission file number) (IRS Employer
of incorporation Identification No.)
4300 New Get well Road, Memphis, Tennessee 38118
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (901) 365 - 8880
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Item 5. Other Events.
On October 9, 1998, the Board of Directors of Fred's, Inc. (the "Company")
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock, no par value per share (the "Common Shares"),
of the Company. The dividend is payable on October 12, 1998 (the "Record Date"),
to the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, no par value per share (the "Preferred
Shares"), of the Company at a price of $100 per one one-hundredth of a Preferred
Share (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and Union Planters Bank, N.A., as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 15% or more of the outstanding
Common Shares or (ii) 10 business days (or such later date as may be determined
by action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the outstanding Common Shares (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate with a copy of a Summary of Rights
attached thereto.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date upon transfer or new issuance of Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Shares outstanding as of the Record
Date, even without such notation or a copy of this Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on October 12, 2008 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $100 per share but, if greater than
$100 per share, will be entitled to an aggregate payment of 100 times the
payment made per Common Share. Each Preferred Share will have 100 votes, voting
together with the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend and liquidation
rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
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In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
("flip-over") which at the time of such transaction will have a market value of
two times the exercise price of the Right. In the event that any person or group
of affiliated or associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
("flip-in") having a market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one Common Share per Right (subject
to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Shares, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding Common Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%, except that from and after such
time as any person or group of affiliated or associated persons becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors since the Rights may be redeemed by the Company at the Redemption
Price prior to the time that a person or group has acquired beneficial ownership
of 15% or more of the Common Shares.
The Rights Agreement, the Certificate of Designations describing the
Preferred Shares and the press release announcing the declaration of the Rights
are attached hereto as exhibits and are incorporated herein by reference. The
foregoing description of the Rights is qualified in its entirety by reference to
such exhibits.
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Item 7. Exhibits.
1. Rights Agreement, dated as of October 9, 1998, between Fred's,
Inc. and Union Planters Bank, N.A., including the form of
Right Certificate and related form of Election to Purchase as
Exhibit A and the Summary of Rights to Purchase Preferred
Shares as Exhibit B.
2. Certificate of Designations of the rights and privileges of
the shares of junior participating preferred stock created on
October 9, 1998, to be made available to the shareholders
pursuant to Section 48-16- 206 of the Tennessee Business
Corporation Act.
3. Press Release dated October 12, 1998.
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SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 16, 1998.
FRED'S, INC.
By: /s/ Richard B. Witaszak
Richard B. Witaszak, Executive Vice-President
and Chief Financial Officer
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EXHIBIT LIST
1. Rights Agreement, dated as of October 9, 1998, between Fred's,
Inc. and Union Planters Bank, N.A., including the form of
Right Certificate and related form of Election to Purchase as
Exhibit A and the Summary of Rights to Purchase Preferred
Shares as Exhibit B.
2. Certificate of Designations of the rights and privileges of
the shares of junior participating preferred stock created on
October 9, 1998, to be made available to the shareholders
pursuant to Section 48-16- 206 of the Tennessee Business
Corporation Act.
3. Press Release dated October 12, 1998.
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