FREDS, INC. (NASDAQ:FRED) Files An 8-K Material Modification to Rights of Security Holders

Item 3.03. Material Modification to Rights of Security Holders of
this Current Report on Form 8-K with respect to the entry into a
Rights Agreement (as described below) is incorporated into this
Item1.01 by reference.

Item3.03. Material Modification to
Rights of Security Holders.

On December 26, 2016, the Board of Directors (the Board)
of Freds, Inc., a Tennessee corporation (the Company),
declared a dividend of one right (a Right) for each of the
Companys issued and outstanding shares of Class A Common Stock,
no par value per share (Common Stock). The dividend will
be paid to the shareholders of record at the close of business on
January 5, 2017 (the Record Date). Each Right entitles the
holder, subject to the terms of the Rights Agreement (as defined
below), to purchase from the Company one one-thousandth of a
share of the Companys Series B Junior Participating Preferred
Stock (the Preferred Stock) at a price of $100.00 (the
Exercise Price), subject to certain adjustments. The
description and terms of the Rights are set forth in the Rights
Agreement dated as of December 26, 2016 (the Rights
Agreement) between the Company and American Stock Transfer
Trust Company, LLC as Rights Agent (the Rights Agent).

The Rights will not be exercisable until the earlier to occur of
(i)the close of business on the 10th business day following a
public announcement or filing that a person has, or a group of
affiliated or associated persons or persons acting in concert
have, become an Acquiring Person, which is defined as a
person or group of affiliated or associated persons or persons
acting in concert who, at any time after the date of the Rights
Agreement, have acquired, or obtained the right to acquire,
beneficial ownership of 10% or more of the Companys outstanding
shares of Common Stock, subject to certain exceptions, or (ii)the
close of business on the 10th business day (or such other date as
may be determined by action of the Board prior to such time as
any person or group of affiliated or associated persons or
persons acting in concert become an Acquiring Person) after the
commencement of, or announcement of an intention to commence, a
tender offer or exchange offer the consummation of which would
result in any person becoming an Acquiring Person (the earlier of
such dates being called the Distribution Date). Any
existing shareholder or group that beneficially owns 10% or more
of the Common Stock will be grandfathered at its current
ownership level, but the Rights will become exercisable if at any
time after the announcement of the Rights Agreement such
shareholder or group increases its ownership of the Common Stock
by one share or more. Certain synthetic interests in securities
created by derivative positions, whether or not such interests
are considered to be ownership of the underlying Common Stock or
are reportable for purposes of Regulation 13D of the Securities
Exchange Act of 1934, as amended, are treated as beneficial
ownership of the number of shares of Common Stock equivalent to
the economic exposure created by the derivative position, to the
extent actual shares of the Common Stock are directly or
indirectly held by counterparties to the derivatives contracts.

With respect to certificates representing shares of Common Stock
outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates for shares of
Common Stock registered in the names of the holders thereof, and
not by separate Rights Certificates, as described further below.
With respect to book entry shares of Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will
be evidenced by the balances indicated in the book entry account
system of the transfer agent for the Common Stock. Until the
earlier of the Distribution Date and the Expiration Date (as
defined below), the transfer of any shares of Common Stock
outstanding on the Record Date will also constitute the transfer
of the Rights associated with such shares of Common Stock. As
soon as practicable after the Distribution Date, separate
certificates evidencing the Rights (Right Certificates)
will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and such separate
Right Certificates alone will evidence the Rights.

The Rights, which are not exercisable until the Distribution
Date, will expire at the earliest to occur of (i)the close of
business on June 26, 2019; (ii)the time at which the Rights are
redeemed to the Rights Agreement; (iii)the time at which the
Rights are exchanged to the Rights Agreement; and (iv)the time at
which the Rights are terminated upon the closing of any merger or
other acquisition transaction involving the Company to a merger
or other acquisition agreement that has been approved by the
Board prior to any person becoming an Acquiring Person (the
earliest of (i), (ii), (iii) and (iv)is referred to as the
Expiration Date).

Each share of Preferred Stock will be entitled to receive, when,
as and if declared, a preferential per share quarterly dividend
payment equal to the greater of (i)$1.00 per share or (ii)1,000
times the aggregate per share amount of all cash dividends
declared per share of Common Stock, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or
other distributions declared per share of Common Stock. Each
share of Preferred Stock will entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the shareholders of
the Company. In the event of any merger, consolidation or other
transaction in which shares of Common Stock are converted or
exchanged, each share of Preferred Stock will be entitled to
receive 1,000 times the amount received per share of Common
Stock.

The Exercise Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent
dilution (i)in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Preferred
Stock, (ii)upon the grant to holders of the Preferred Stock of
certain rights, options or warrants to subscribe for or purchase
Preferred Stock or convertible securities at less than the
then-current market price of the Preferred Stock, or (iii)upon
the distribution to holders of the Preferred Stock of evidences
of indebtedness or assets (excluding regular periodic cash
dividends or dividends payable in Preferred Stock) or of
subscription rights, options or warrants (other than those
referred to above). The number of outstanding Rights and the
number of one one-thousandths of a share of Preferred Stock
issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split, reverse stock split,
stock dividends and other similar transactions.

In the event that, after a person or a group of affiliated or
associated persons or persons acting in concert have become an
Acquiring Person, the Company is acquired in a merger or other
business combination transaction, or 50% or more of the Companys
assets or earning power are sold, proper provision will be made
so that each holder of a Right (other than Rights owned by an
Acquiring Person) 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 having a market value at the time of that transaction
equal to two times the Exercise Price.

With certain exceptions, no adjustment in the Exercise Price will
be required unless such adjustment would require an increase or
decrease of at least one percent (1%)in the Exercise Price. No
fractional shares of Preferred Stock will be issued (other than
fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock, 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 Stock on the trading day immediately prior
to the date of exercise.

At any time after any person or group of affiliated or associated
persons or persons acting in concert become an Acquiring Person
and prior to the acquisition of beneficial ownership by such
Acquiring Person of 50% or more of the outstanding shares of
Common Stock, the Board, at its option, may exchange each Right
(other than Rights owned by such person or group of affiliated or
associated persons or persons acting in concert which will have
become void) in whole or in part, at an exchange ratio of one
share of Common Stock per outstanding Right (subject to
adjustment).

At any time before any person or group of affiliated or
associated persons or persons acting in concert become an
Acquiring Person, the Board may redeem the Rights in whole, but
not in part, at a price of $0.01 per Right (subject to certain
adjustments) (the Redemption Price). The redemption of the
Rights may be made effective at such time, on such basis and with
such conditions as the Board in its sole discretion may
establish.

Immediately upon the action of the Board electing to redeem or
exchange the Rights, the Company shall make announcement thereof,
and upon such election, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to
receive the Redemption Price.

Until a Right is exercised or exchanged, the holder thereof, as
such, will have no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive
dividends.

The Board may amend or supplement the Rights Agreement without
the approval of any holders of Rights, including, without
limitation, in order to (a)cure any ambiguity, (b)correct
inconsistent provisions, (c)alter time period provisions or
(d)make additional changes to the Rights Agreement that the Board
deems necessary or desirable. However, from and after any person
or group of affiliated or associated persons or persons acting in
concert become an Acquiring Person, the Rights Agreement may not
be supplemented or amended in any manner that would adversely
affect the interests of the holders of Rights.

The Rights Agreement is attached hereto as Exhibit 4.1 and is
incorporated herein by reference. The description of the Rights
Agreement herein does not purport to be complete and is qualified
in its entirety by reference to Exhibit4.1.

The information set forth below under Item 5.03 regarding certain
other amendments to the Bylaws of the Company is incorporated by
reference into this Item 3.03.

Item5.03. Amendments to Articles of
Incorporation or Bylaws; Change in Fiscal Year.

On December 26, 2016, in connection with the adoption of the
Rights Agreement, the Board approved Articles of Amendment to the
Charter of the Company (the Articles of Amendment). The
Articles of Amendment will be filed with the Secretary of State
of the State of Tennessee. See the description in Item 1.01
(which incorporates by reference Item 3.03) of this Current
Report on Form 8-K for a more complete description of the rights
and preferences of the Preferred Stock. The Articles of Amendment
are attached hereto as Exhibit 3.1 and are incorporated herein by
reference. The description of the Articles of Amendment herein
does not purport to be complete and is qualified in its entirety
by Exhibit 3.1.

On December 26, 2016, the Board amended and restated the Bylaws
of the Company (the Bylaws). The Bylaws were effective
immediately and include, among other things, the following
changes (the Amendments):

The foregoing description of the Bylaws is not complete and is
qualified in its entirety by reference to the complete text of
the Bylaws, a copy of which is filed as Exhibit 3.2 to this
Current Report on Form 8-K and incorporated by reference herein.

Item7.01. Regulation FD Disclosure.

On December 27, 2016, the Company issued a press release
announcing the adoption of the Rights Agreement, the declaration
of the dividend of the Rights and the Amendments. A copy of the
press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the
foregoing information, including Exhibit 99.1, shall not be
deemed filed for the purposes of Section18 of the Securities
Exchange Act of 1934 (the Exchange Act) or otherwise
subject to the liabilities of that section, nor shall such
information, including Exhibit 99.1, be deemed incorporated by
reference into any filing under the Securities Act of 1933 or the
Exchange Act, except as shall be expressly set forth by specific
reference in such filing.

Item9.01. Financial Statements and Exhibits.

(d) Exhibits.

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 down -0.29 at 19.34 with 1,274,853 shares trading hands.