CERTIFICATE OF DESIGNATIONS
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
FRED'S, INC.
(Pursuant to Section 48-16-101 of the Tennessee Business Corporation Act)
Fred's, Inc. (the "Corporation"), a corporation organized and existing
under the Tennessee Business Corporation Act, in accordance with the provisions
of Section 48-12-103 thereof, does hereby certify:
1. The Charter of the Corporation fixes the total number of shares of all
classes of capital stock which the Corporation shall have authority to issue at
51,500,000 shares, of which 10,000,000 shall be shares of Preferred Stock, no
par value per share ("Preferred Stock"), and 41,500,000 shall be shares of
Common Stock, no par value per share ("Common Stock").
2. Pursuant to the authority vested in the Board of Directors in accordance
with the provisions of the Charter of the said Corporation, the said Board of
Directors on October 9, 1998, duly adopted a resolution creating a series of
shares of Preferred Stock designated as "Series A Junior Participating Preferred
Stock," which series has the designation and number of shares and the voting and
other powers, preferences and relative, participating, optional or other rights
and the qualifications, limitations and restrictions that follow:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred" (the "Series A
Preferred") and the number of shares constituting such series shall be the
number obtained by dividing by 100 the total number of shares of the Common
Stock, no par value per share, of the Corporation ("Common Shares") outstanding,
plus the number of Common Shares reserved for issuance pursuant to the
Corporation's 1993 Long Term Incentive Plan, all to be measured at the close of
business on October 12, 1998 (the "Record Date"), and such number of shares of
Series A Preferred shall be noted on the minutes of the Corporation in the
following space:
131,169 shares.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any series Preferred Shares ranking prior and superior to the shares of Series A
Preferred with respect to dividends, the holders of shares of Series A
Preferred, in preference to the holders of Common Shares, no par value per
share, of the Corporation (the "Common Shares") and of any other shares ranking
junior as to dividends to the Series A Preferred, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of September, December, March and June in each year (each such dated being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in Common Shares or a subdivision of the outstanding Common
shares (by reclassification or otherwise), declared on the Common Shares since
the immediately preceding Quarterly Dividend Payment Date, or with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Series A Preferred. In the event the Corporation shall
at any time declare or pay any dividend on Common Shares payable in Common
Shares, or effect a subdivision or combination or consolidation of the
outstanding Common Shares (by reclassification or otherwise than by payment of a
dividend in Common Shares) into a greater or lesser number of Common Shares,
then in each such case the amount to which holders of shares of Series A
Preferred were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
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the numerator of which is the number of Common Shares outstanding immediately
after such event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Shares
(other than a dividend payable in Common Shares); provided that, in the event no
dividend or distribution shall have been declared on the Common Shares during
the prior between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series A Preferred,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue and be cumulative from the date of issue of such shares,
or unless the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of Series A
Preferred entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A. Preferred
shall have the following voting rights:
(A) Each share of Series A Preferred shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the shareholders of
the Corporation.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Preferred and the holders of Common Shares shall vote
together as one class on all matters submitted to a vote of shareholders of the
Corporation.
(C) Except as set forth herein, holders of Series A Preferred
shall have no special voting rights and their consent shall not be required
(except forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred;
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred, except
dividends paid ratably on the Series A Preferred and all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled.
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(iii) redeem or purchase or otherwise acquire for
consideration shares ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred, provided that the
Corporation may at any time redeem, purchase or otherwise acquire any such union
shares in exchange for any shares of the Corporation ranking junior (either as
to dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred; or
(iv) purchase or otherwise acquire for consideration
any shares of Series A Preferred, or any shares ranking on a parity with the
Series A Preferred, except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as to the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued Preferred Shares and may be
reissued as part of a new series of Preferred Shares to be created by resolution
or resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (a)
to the holders of shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred unless, prior
thereto, the holders of shares of Series A Preferred shall have received $100
per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred shall be entitled to
receive an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of Common Shares, or (2) to the holders of shares ranking
on a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred, except distributions made ratable on the Series
A Preferred and all other such parity stock in proportion to the total amounts
to which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on Common Shares payable in Common Shares, or effect
a subdivision or combination or consolidation of the outstanding Common Shares
(by reclassification or otherwise than by payment of a dividend in Common
Shares) into a greater or lesser number of Common Shares, then in each such case
the aggregate amount to which holders of shares of Series A Preferred were
entitled immediately prior to such event under the provisions in clause (1) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the number of
Common Shares that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
Common Shares are exchanged for or changed into other shares or securities, cash
and/or any other property, then in any such case the shares of Series A
Preferred then outstanding shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of shares,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each Common Share is changed or exchanged. In the
event the Corporation shall at any time declare or pay any dividend on Common
Shares payable in Common Shares, or effect a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a greater or lesser number of Common Shares, then in each such
case the amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series A Preferred shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common
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Shares that were outstanding immediately prior to such event.
Section 8. No Redemption. The share of Series A Preferred shall not be
redeemable.
Section 9. Rank. The Series A Preferred shall rank junior to all other
series of the Preferred Shares, as to the payment of dividends and the
distribution of assets, unless the terms of such other series specifies to the
contrary.
Section 10. Amendment. The Charter of the Corporation shall not be amended
in any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred so as to affect them adversely without
the affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Preferred, voting together as a single class.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designations this _____ day of October, 1998.
ATTEST: FRED'S, INC.
___________________________ By:__________________________________
Name: Richard B. Witaszak, Executive
Title: Vice-President and Chief Financial Officer
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