FREDS, INC. (NASDAQ:FRED) Files An 8-K Entry into a Material Definitive Agreement

ME Staff 8-k
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FREDS, INC. (NASDAQ:FRED) Files An 8-K Entry into a Material Definitive Agreement

ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On April 21, 2017, Freds, Inc. (the Company) entered into
a Cooperation Agreement (the Cooperation Agreement) with
Alden Global Capital LLC, Strategic Investment Opportunities LLC,
and Heath B. Freeman (collectively, Alden).
Among other things, the Cooperation Agreement provides that:
the Board of Directors of the Company (the
Board) will increase the size of the Board to 13
members and appoint Steven B. Rossi and Timothy A.
Barton (the Alden Designees) to the Board with
immediate effect;
upon the conclusion of the 2017 annual meeting of
stockholders, the size of the Board will be reduced to
9 members (as previously announced, each of Mr. John R.
Eisenman, Mr. Michael J. Hayes, Mr. Jerry A. Shore and
Mr. Steven R. Fitzpatrick will not stand for
re-election at the Companys 2017 annual meeting of
stockholders);
the Board will have the right to increase the size of
the Board to 11 members to accommodate one additional
director approved by the Board and one additional
director designated by Alden;
Alden has the right to designate replacement candidates
for the Alden Designees subject to certain terms and
conditions;
one Alden Designee will resign from the Board if Aldens
ownership falls below 10% of the Companys issued and
outstanding shares, and the other Alden Designee will
resign from the Board if Aldens ownership falls below
5% of the Companys issued and outstanding shares;
the Board agrees to combine the Nominating Committee
and Governance Committees into a new Nominating and
Governance Committee, and each of the Companys
Nominating and Governance Committee and Compensation
Committee will have four members, including both Alden
Designees, with an Alden Designee chairing the
Compensation Committee;
Alden will vote all shares of the Company owned by
Alden in accordance with the Boards recommendations
with respect to each election of directors, the
ratification of the appointment of the Companys
independent registered public accounting firm, the
Companys say-on-pay proposal, and any other proposal to
be submitted to the stockholders of the Company, with
certain exceptions relating to business combination
transactions and certain equity issuances by the
Company;
Alden agrees to customary standstill provisions with
regards to share purchases, proxy contests and other
related matters during the term of the Cooperation
Agreement, with certain exceptions permitting Alden to
buy back shares to restore its ownership percentage if
and to the extent the Company issues equity of more
than 4.5% of the Companys issued and outstanding
shares;
each party agrees not to disparage the other party;
each party agrees not to sue the other party, subject
to certain exceptions;

Alden is permitted to participate pro rata in any
equity issuances by the Company, subject to certain
exceptions for equity issuance relating to compensation
of up to 4.5% of the issued and outstanding shares of
the Company, certain business combination transactions,
and stock splits, stock dividends, reclassifications or
recapitalizations of the Company, and the Company
agrees that it will not issue equity with special
voting or super majority voting power;
the Company agrees to grant Alden customary and
reasonable registration rights to a registration rights
agreement to be entered into promptly following the
date of the Cooperation Agreement;

Alden grants the Company a right of first refusal for
block sales of shares of the Companys common stock of
5% or more;
Alden agrees to cooperate with the Company in good
faith in connection with the Federal Trade Commissions
review of the divestiture of certain assets of Rite Aid
Corporation to the Company;
Alden will enter into a confidentiality agreement with
the Company;
either the Company or Alden may terminate the
Cooperation Agreement after February 1, 2019, except
that either party may terminate earlier if the Asset
Purchase Agreement among the Company and its
affiliates, Rite Aid Corporation and Walgreens Boots
Alliance, Inc. (or any material agreement that
supersedes such agreement) is terminated; and
the Company will reimburse Alden in an amount not to
exceed $600,000 for expenses incurred by Alden in
connection with the execution and effectuation of the
Cooperation Agreement.
The above summary is qualified in its entirety by reference to
the full text of the Cooperation Agreement, a copy of which is
filed herewith as Exhibit 10.1 to this Current Report on Form 8-K
and incorporated herein by reference.
ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION
OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY
ARRANGEMENTS OF CERTAIN OFFICERS.
Director Appointments
Appointment of Steven B. Rossi
to the Cooperation Agreement, Steven B. Rossi was appointed to
the Board on April 21, 2017. Mr. Rossi is the Chief Executive
Officer of Digital First Media. He previously served as Digital
First Medias 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
President of the Newspaper Division. Mr. Rossi holds an MBA
degree from The Wharton School of the University of Pennsylvania
and a B.A. in Economics from Ursinus College.
The Board determined that Mr. Rossi does not have any
relationship with the Company or its subsidiaries, either
directly or indirectly, that would be inconsistent with a
determination of independence under the applicable rules and
regulations of The NASDAQ Stock Market LLC and the U.S.
Securities and Exchange Commission. Mr. Rossi has been appointed
to each of the Nominating and Governance Committee and the
Compensation Committee of the Board, and Mr. Rossi will serve as
Chairman of the Compensation Committee. Mr. Rossi will receive
compensation for serving on the Board to the Companys
non-employee director compensation guidelines.
Except as described above in connection with the Cooperation
Agreement, Mr. Rossi was not appointed as a director to any
arrangement or understanding with any person, or is a participant
in any related party transaction required to be reported to Item
404(a) of Regulation S-K.
Appointment of Timothy A. Barton
to the Cooperation Agreement, Timothy A. Barton was appointed to
the Board on April 21, 2017. Mr. Barton founded Freightquote in
1998, and served as Chairman and CEO until the companys 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 Kanas and an
M.A. in Finance from Louisiana State University.
The Board determined that Mr. Barton does not have any
relationship with the Company or its subsidiaries, either
directly or indirectly, that would be inconsistent with a
determination of independence under the applicable rules and
regulations of The NASDAQ Stock Market LLC and the U.S.
Securities and Exchange Commission. Mr. Barton has been appointed
to each of the Nominating and Governance Committee and the
Compensation Committee of the Board. Mr. Barton will receive
compensation for serving on the Board to the Companys
non-employee director compensation guidelines.
Except as described above in connection with the Cooperation
Agreement, Mr. Barton was not appointed as a director to any
arrangement or understanding with any person, or is a participant
in any related party transaction required to be reported to Item
404(a) of Regulation S-K.
ITEM 7.01. REGULATION FD DISCLOSURE.
On April 24, 2017, the Company issued a press release regarding
the Cooperation Agreement described above. The full text of this
press release is attached to this report as Exhibit 99.1 and is
incorporated herein by reference.
to the rules and regulations of the U.S. Securities and Exchange
Commission, the information furnished to Item 7.01 of this report
is deemed to have been furnished and shall not be deemed to be
filed for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, or otherwise subject to the liabilities of
that section. Such information shall not be incorporated by
reference into any filing of the Company, whether made before or
after the date hereof, regardless of any general incorporation
language in such filing.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
Exhibit
No.
Description
10.1
Cooperation Agreement dated April 21, 2017
99.1
Press Release of Freds, Inc. dated April 24, 2017


About FRED’S, INC. (NASDAQ:FRED)

Fred’s, Inc. (Fred’s) is engaged in the sale of general merchandise through its retail discount stores and full service pharmacies. The Company sells general merchandise to its over 20 franchisees. The Company has approximately 660 retail stores, over 370 pharmacies, and approximately three specialty pharmacy facilities located in over 15 states mainly in the Southeastern United States. The Company is licensed to dispense pharmaceuticals in approximately 50 states. The Company operates approximately 640 company-owned stores, including over 60 express stores (or Xpress stores). Fred’s is a combination of pharmacy, dollar store and mass merchant strategically located in smaller markets. It offers various product categories, including consumables, such as tobacco, food and beverage, prescription pharmaceuticals, paper and cleaning supplies, pet supplies, health and beauty aids, and discretionary products, such as home decor, seasonal merchandise, auto and hardware, and lawn and garden.

FRED’S, INC. (NASDAQ:FRED) Recent Trading Information

FRED’S, INC. (NASDAQ:FRED) closed its last trading session up +0.55 at 13.83 with 795,597 shares trading hands.