SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
FRED'S, INC.
----------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing
fee is calculated and state how it was determined.)
- -----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- -----------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0- 11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- -----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -----------------------------------------------------------------
(3) Filing Party:
- -----------------------------------------------------------------
(4) Date Filed:
- -----------------------------------------------------------------
<PAGE>
FRED'S, INC.
4300 NEW GETWELL ROAD
MEMPHIS, TENNESSEE 38118
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on Wednesday, June 17, 1998
-----------------------------
TO THE SHAREHOLDERS OF FRED'S, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of Fred's,
Inc. (the "Company" or "Fred's") will be held at the Memphis Marriott Hotel,
2625 Thousand Oaks Boulevard, Memphis, Tennessee 38118 on Wednesday, June 17,
1998, at 10:00 A.M., Central Daylight Time, for the following purposes:
1. To elect the Company's Board of Directors;
2. To ratify the designation of Price Waterhouse LLP as independent
auditors of the Company.
The accompanying Proxy Statement contains further information with respect to
these matters.
Only shareholders of record at the close of business on May 1, 1998, will be
entitled to vote at the meeting or any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By order of the Board of Directors,
Charles S. Vail
Secretary
May 26, 1998
<PAGE>
FRED'S, INC.
4300 NEW GETWELL ROAD
MEMPHIS, TENNESSEE 38118
PROXY STATEMENT
For Annual Meeting of Shareholders, June 17, 1998
The enclosed proxy is solicited by the Board of Directors (the "Board" or
"Board of Directors") of Fred's, Inc. (the "Company" or "Fred's") to be voted at
the Annual Meeting of Shareholders to be held on June 17, 1998, at 10:00 A.M.,
Central Daylight Time, at the Memphis Marriott Hotel, 2625 Thousand Oaks
Boulevard, Memphis, Tennessee 38118, or any adjournments thereof (the "Annual
Meeting"). At the Annual Meeting, the presence in person or by proxy of the
holders of a majority of the total number of shares of outstanding Class A
common stock ("Common Stock") will be necessary to constitute a quorum.
All Directors shall be elected by a majority of the votes cast by the
holders of Common Stock, all such shareholders being present in person or by
proxy, and being entitled to vote in the election.
All shares represented by properly executed proxies will be voted in
accordance with the instructions indicated thereon unless such proxies
previously have been revoked. If any proxies of holders of Common Stock do not
contain voting instructions, the shares represented by such proxies will be
voted FOR Proposals 1 and 2. The Board of Directors does not know of any
business to be brought before the Annual Meeting, other than as indicated in the
notice, but it is intended that, as to any other such business properly brought
before the meeting, votes may be cast pursuant to the proxies in accordance with
the judgment of the persons acting thereunder.
Any shareholder who executes and delivers a proxy may revoke it at any time
prior to its use upon (a) receipt by the Secretary of the Company of written
notice of such revocation; (b) receipt by the Secretary of the Company of a duly
executed proxy bearing a later date; or (c) appearance by the shareholder at the
meeting (with proper identification) and his request for the return of his proxy
or his request for a ballot.
A copy of this Proxy Statement and the enclosed Proxy Card are first being
sent to shareholders on or about May 26, 1998.
Voting Securities
-----------------
Only shareholders of record at the close of business on May 1, 1998 will be
entitled to vote at the Annual Meeting. As of such date, the Company had
outstanding and entitled to vote at the Annual Meeting 11,899,514 shares of
Common Stock. Each share of Common Stock is entitled to one vote for all matters
before the Annual Meeting.
Ownership of Common Stock
by Directors,
Officers and Certain Beneficial Owners
--------------------------------------
The following table sets forth the beneficial ownership of Common Stock as
of May 1, 1998, by (i) beneficial owners of more than five percent of Common
Stock, (ii) each director, (iii) each of the persons named in the Summary
Compensation Table, and (iv) all directors and executive officers of Fred's as a
group.
1
<PAGE>
Shares of Common
Stock Beneficially Owned (1)
----------------------------
Beneficial Owner Number of Shares Percent(2)
- ---------------- ---------------------------- ----------
Options(3) Total(4)
---------- --------
Michael J. Hayes (5)(8) 1,090,586 9.0
David A. Gardner (6)(8) 1,050,235 8.7
Memphis Retail Investors
Limited Partnership (5)(6)(8) 890,395 7.4
Franklin Resources, Inc. (7)(8) 890,000 7.4
Roger T. Knox 15,781 17,656 *
John R. Eisenman 15,781 17,031 *
Edwin C. Boothe 6,875 19,375 *
John A. Casey 7,500 19,375 *
D. Keith Curtis 6,250 12,187 *
Brett W. Little 5,338 42,900 *
All Directors and Officers as
a Group (10 persons including
the directors named above) 63,733 2,297,888 19.1
- -------------------------------
* Less than 1%
(1) As used in this table, beneficial ownership means the sole or shared
power to vote, or direct the voting of, a security, or the sole or
shared power to dispose, or direct the disposition, of a security.
Except as otherwise indicated, all persons listed above have (i) sole
voting power and investment power with respect to their shares of
Common Stock, except to the extent that authority is shared by spouses
under applicable law, and (ii) record and beneficial ownership with
respect to their shares of Common Stock. All figures in this table
reflect the Company's five-for-four stock split in December 1997.
(2) Calculated as the number of shares beneficially owned, divided by
12,058,299 which consists of the total outstanding shares of Common
Stock (11,899,514) and vested options (158,785) as of May 1, 1998.
(3) Represents stock options that are exercisable as of May 1, 1998.
(4) Includes stock options that are exercisable as of May 1, 1998.
(5) Includes 100,955 shares owned by Mr. Hayes' wife and 890,270 shares
owned by Memphis Retail Investors Limited Partnership ("MRILP") which
are attributable to Mr. Hayes, his wife and three children. Mr. Hayes
disclaims beneficial ownership of the 121,893 shares of Common Stock
owned directly by his three children, which are not included in the
table.
(6) Includes 125 shares owned by MRILP. Excludes 111,752 shares of Common
Stock owned by Mr. Gardner's wife, which Mr. Gardner disclaims
beneficial ownership.
(7) Amount is based on Franklin Resources, Inc. most recent filing with the
Commission with respect to Common Stock. The source of this information
is a schedule 13G filed by Franklin Resources, Inc. with the Commission
on February 4, 1998, and reflects their ownership as of January 27,
1998.
(8) The address of MRILP and Mr. Hayes is 4300 New Getwell Road, Memphis,
Tennessee 38118. Mr. Gardner's address is 445 Park Avenue, Suite 1600,
New York, New York 10022. The address of Franklin Resources, Inc.
is 777 Mariners Island Blvd., San Mateo, California 94404.
2
<PAGE>
FRED'S PROPOSAL 1 (ELECTION OF DIRECTORS)
Election of Directors
Four directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting to serve one year or until their successors are
elected. The Board of Directors proposes the election of the following nominees:
Principal Occupation,
Nominee Age Business and Directorships
- -------- --- --------------------------
Michael J. Hayes............... 56 Director and Managing Director (1)
David A. Gardner............... 50 Director and Managing Director (1)
John R. Eisenman............... 56 Director
Roger T. Knox.................. 60 Director
- -------------------------------
(1) According to the By-laws of Fred's, the Managing Directors (Messrs.
Hayes and Gardner) have general supervisory responsibility for the
business of Fred's.
Michael J. Hayes was elected a director of the Company in January 1987 and
has been a Managing Director of the Company since October 1989. Mr. Hayes has
been Chief Executive Officer since October 1989 and President since May 1991.
Additionally, Mr. Hayes is a Managing Director of Hayes Financial Corp. He was
previously employed by Oppenheimer & Company, Inc. in various capacities from
1976 to 1985, including Managing Director and Executive Vice President -
Corporate Finance and Financial Services.
David A. Gardner was elected a director of the Company in January 1987 and
has been a Managing Director of the Company since October 1989. Mr. Gardner has
been President of Gardner Capital Corporation, a real estate and venture capital
investment firm, since April 1980. Additionally, Mr. Gardner is a director of
NumeriX, LLC and Joyce International, Inc.
John R. Eisenman is involved in real estate investment and development with
REMAX Island Realty, Inc., located in Hilton Head Island, South Carolina. Mr.
Eisenman has been engaged in commercial and industrial real estate brokerage and
development since 1983. Previously, he founded and served as President of
Sally's, a chain of fast food restaurants, from 1976 to 1983, and prior thereto
held various management positions in manufacturing and in securities brokerage.
Roger T. Knox has served the Memphis Zoological Society as its President
and Chief Executive Officer since January 1989. Mr. Knox was the President and
Chief Operating Officer of Goldsmith's Department Stores, Inc. (a full- line
department store in Memphis and Jackson, Tennessee) from 1983 to 1989 and its
Chairman of the Board and Chief Executive Officer from 1987 to 1989. Prior
thereto, Mr. Knox was with Foley's Department Stores in Houston, Texas for 20
years.
If, for any reason, any of the nominees shall become unavailable for
election, the individuals named in the enclosed proxy may exercise their
discretion to vote for any substitutes chosen by the Fred's Board of Directors,
unless the Board of Directors should decide to reduce the number of directors to
be elected at the Annual Meeting. Fred's has no reason to believe that any
nominee will be unable to serve as a director.
For information concerning the number of shares of Common Stock owned by
each director, and all directors and executive officers as a group as of May 1,
1998, see "Ownership of Common Stock by Directors, Officers and Certain
Beneficial Owners." There are no family relationships between any directors or
executive officers of Fred's.
3
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of reports of beneficial ownership of Fred's
Common Stock and written representations furnished to Fred's by its officers,
directors and principal shareholders, Fred's is not aware of any such reporting
person who or which failed to file with the Securities and Exchange Commission
(the "Commission") on a timely basis any required reports of changes in
beneficial ownership.
During the last fiscal year, Fred's Board of Directors held five meetings.
Messers. Hayes, Gardner, Eisenman and Knox attended all of the Board meetings.
Non-employee directors of Fred's are paid for their services as such $12,000 per
year plus reasonable expenses for meeting attendance. The Board of Directors
does not have a nominating committee.
Audit Committee
The Audit Committee is responsible for recommending the independent public
accountants for Fred's, reviewing the scope of the audit and reviewing the
report of the independent public accountants. The Audit Committee, which is
comprised of Messers. Eisenman, Gardner and Knox, met one time during the last
fiscal year, and all Committee members were in attendance.
Compensation Committee
The Compensation Committee reviews and approves the salaries and incentive
compensation of officers and recommends the grants of restricted stock and stock
options under Fred's long-term incentive plans. The Compensation Committee,
which is comprised of Messers. Gardner, Eisenman, and Knox, met one time during
the last fiscal year, and all Committee members were in attendance. The Board of
Directors receives the grant recommendations of the Committee and may approve,
amend or reject the grant of restricted stock and stock options recommended by
the Committee.
Executive Compensation
The following table sets forth the cash compensation paid, as well as
certain other compensation paid or accrued, to Fred's chief executive officers
and to each of the other four most highly compensated executive officers whose
aggregate cash compensation exceeded $100,000 during the indicated fiscal years
(the "Named Executives").
4
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------ --------------------------------------------
Name and Restricted Option All Other
Principal Salary Bonus Stock Awards Awards(1) Compensation (2)
Position Year ($) ($) ($) (#) ($)
- ---------- ---- ------ ----- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Hayes 1997 180,000 -- -- -- 258
Managing Director, Chief 1996 180,000 -- -- -- 892
Executive Officer and 1995 180,000 -- -- -- 898
President
David A. Gardner(3) 1997 120,000 -- -- -- --
Managing Director 1996 120,000 -- -- -- --
1995 120,000 -- -- -- --
Edwin C. Boothe 1997 87,257 49,800 27,000 18,750 --
Executive Vice President and 1996 62,090 31,675 41,337 -- --
Chief Operating Officer 1995 56,523 -- -- -- --
John A. Casey 1997 83,864 49,800 13,500 18,750 455
Executive Vice President- 1996 75,000 15,000 32,125 -- 375
Store/Pharmacy Operations 1995 72,981 -- 39,000 -- 365
D. Keith Curtis 1997 80,617 45,650 27,000 18,750 --
Senior Vice President- 1996 68,269 14,556 12,903 -- --
Merchandising 1995 58,760 -- -- -- --
Brett W. Little(4) 1997 80,000 41,500 13,500 12,500 --
Senior Vice President- 1996 29,231 2,850 16,621 1,563 --
Merchandising 1995 -- -- -- -- --
- -------------------------
(1) All figures in this column reflect the Company's five-for-four stock split
in December 1997.
(2) Fred's contributions to defined contribution plans (401(k) and Incentive Plan).
(3) Payments for Mr. Gardner's services are made to Gardner Capital
Corporation under a contractual relationship between that company and
Fred's.
(4) Mr. Little joined Fred's on August 12, 1996.
</TABLE>
5
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information on stock option grants
pursuant to the Fred's, Inc. 1993 Long-Term Incentive Plan during the last
fiscal year for each of the Named Executives. The Company did not grant SARS in
the 1997 fiscal year.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(1)
----------------------------------------------------------------- -------------------
% of Total
Options/ Options/SARs Exercise
SARs Granted to or Base
Granted Employees Price(3) Expiration
Name (#)(2)(3) Fiscal Year ($/Sh) Date 5% ($) 10%($)
- ---- --------- ----------- -------- ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Edwin C. Boothe 18,750 5.4 $7.20 3/5/02 $37,298 $82,419
John A. Casey 18,750 5.4 $7.20 3/5/02 $37,298 $82,419
D. Keith Curtis 18,750 5.4 $7.20 3/5/02 $37,298 $82,419
Brett W. Little 12,500 3.6 $7.20 3/5/02 $24,865 $54,946
</TABLE>
(1) The potential gain is calculated from the closing price of Common Stock
on the date of grants until the end of the option period at certain assumed
rates of appreciation set by the Commission. They are not intended to forecast
possible future appreciation in the Common Stock and any actual gains on
exercise of options are dependent on the future performance of the Common Stock.
(2) All options vest and are exercisable in one-third increments on each of the
first three years, respectively, after the date of grant. The exercise price of
all options is the fair market value of the Common Stock at the time of the
grant.
(3) All figures in this column have been adjusted to reflect the
Company's five-for-four stock split in December 1997.
The following table shows the stock option exercises by the Named Executives
during the last fiscal year. In addition, this table includes the number of
exercisable and unexercisable stock options held by each of the Named Executives
as of January 31, 1998. The fiscal year-end value of "in-the-money" stock
options is the difference between the exercise price of the option and the fair
market value of the Common Stock (not including options with an exercise price
greater than the fair market value) on January 31, 1998 (the last trading date
before the fiscal year-end), which was $20.375 per share. No SARS were granted
in the last fiscal year.
6
<PAGE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Stock Option Exercises Options/SARS In-The-Money Options
Shares Acquired Value At Fiscal Year-End At Fiscal Year-End
Name On Exercise Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
------------------ ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edwin C. Boothe -- -- 625 18,750 $ 5,610 $247,031
John A. Casey 625 5,500 1,250 18,750 $11,219 $247,031
D. Keith Curtis 945 8,552 -- 18,750 -- $247,031
Brett W. Little -- -- 781 13,282 $ 9,977 $174,678
</TABLE>
(1) "Value Realized" is the difference between the fair market value of the
underlying shares on the exercise date and the exercise price of the
option.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Fred's, Inc. (the
"Committee") is pleased to present its report on executive compensation. This
Committee report documents the components of Fred's executive officer
compensation programs and describes the basis on which 1997 compensation
determinations were made by the Committee with respect to the executive officers
of Fred's, including the Named Executives.
Compensation Philosophy and Overall Objectives of Executive Compensation
Programs
It is the philosophy of Fred's that executive compensation be linked to
improvements in corporate performance and increases in shareholder value. The
following objectives have been adopted by the Committee as guidelines for
compensation decisions:
- Provide a competitive total compensation package that enables Fred's to
attract and retain key executives.
- Integrate all pay programs with Fred's annual and long-term business
objectives and strategy, and focus executive behavior on the fulfillment
of those objectives.
- Provide variable compensation opportunities that are linked with the
performance of Fred's and that align executive remuneration with the
interests of stockholders.
Compensation Program Components
The Committee reviews Fred's compensation program annually to ensure that
pay levels and incentive opportunities are competitive and reflect the
performance of Fred's. The particular elements of the compensation program for
executive officers are further explained below.
Base Salary - Base pay levels are largely determined through comparisons
with other retailing companies. Actual salaries are based on individual
performance contributions within a salary structure that is established through
job evaluation and job market considerations. Base pay levels for the executive
officers are competitive within the middle of a range that the Committee
considers to be reasonable and necessary. Various increases in base salary were
recommended by the Chief Executive Officer in fiscal 1997 for the Named
Executives, based on performance and competitive considerations, and the
Committee acted in accordance with the recommendation.
Incentive Compensation - Fred's officers are eligible to participate in an
annual incentive compensation plan with awards based primarily on the attainment
of various specified levels of operating profits. The objective of this plan is
to deliver competitive levels of compensation for the attainment of financial
objectives that the Committee believes are primary determinants of earnings
growth. Targeted awards for executive officers of Fred's under this plan are
consistent with targeted awards of other retailing companies of similar size and
complexity to Fred's. Specified awards were recommended by the Chief Executive
Officer for the Named Executives of Fred's for fiscal 1997, based upon the
Company's performance, and the Committee acted in accordance with the
recommendation.
Fred's Stock Option Program - The Committee strongly believes that by
providing those persons who have substantial responsibility for the management
and growth of Fred's with an opportunity to increase their ownership of Common
Stock, the best interests of stockholders and executives will be closely
aligned. Therefore, executives are eligible to receive stock options from time
to time, giving them the right to purchase shares of Common Stock in the future
at a specified price. The number of stock options granted to executive officers
is based on competitive practices, with the value of such options estimated by
using a Black-Scholes pricing model.
8
<PAGE>
Discussion of Compensation for the Chief Executive Officer
Mr. Hayes' compensation has not changed since the Common Stock was first
offered to the public in March 1992. The Committee has considered Mr. Hayes'
base compensation to be less than or equal to the base compensation paid to
other executives similarly situated, and has deemed his beneficial ownership of
Common Stock to provide adequate linkage between the interests of Fred's
stockholders and Mr. Hayes' personal interests.
Summary
After its review of all existing programs, the Committee continues to
believe that the total compensation program for executives of Fred's is
competitive with the compensation programs provided by other companies with
which Fred's competes. The Committee believes that any amounts paid under the
incentive compensation plan will be appropriately related to corporate and
individual performance, yielding awards that are linked to the annual financial
and operational results of Fred's. The Committee also believes that the stock
option program provides opportunities to participants that are consistent with
the returns that are generated on behalf of Fred's stockholders.
Compensation Committee members: David A. Gardner, John R. Eisenman and
Roger T. Knox
STOCK PRICE PERFORMANCE GRAPH
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Total Return Analysis
1/30/93 1/29/94 1/28/95 2/3/96 2/1/97 1/31/98
------- ------- ------- ------- ------ -------
Fred's, Inc. $100.00 $ 90.00 $ 62.00 $ 49.00 $ 64.00 181.00
Nasdaq Retail
Trade $100.00 $114.00 $110.00 $157.00 $203.00 240.00
Nasdaq Composite
(US) $100.00 $106.00 $ 95.00 $107.00 $132.00 154.00
9
<PAGE>
Comparison of Cumulative Total Return
-------------------------------------
The total cumulative return on investment assumes that $100 was invested in
Fred's, the NASDAQ Retail Trade Stocks Index and the NASDAQ Stock Market (U.S.)
Index on January 30, 1993 and that all dividends were reinvested.
Compensation Committee Interlocks and Insider Participation
Mr. Gardner, a managing director of Fred's, served as a member of the
Compensation Committee for fiscal 1997. See "Ownership of Common Stock by
Directors, Officers and Certain Beneficial Owners" for information concerning
MRILP. Fred's does not currently intend to enter into material transactions
involving its principal stockholders except for the continuing utilization of
the services of Messrs. Hayes and Gardner as Managing Directors, which services
management believes are on terms as favorable as those that could be obtained
from independent third parties.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES TO FRED'S BOARD OF DIRECTORS.
FRED'S PROPOSAL 2 (RATIFICATION OF SELECTION OF AUDITORS)
The Board of Directors has selected Price Waterhouse LLP to be the
independent accountants of Fred's for the year ending January 30, 1999. The
Board of Directors will offer a resolution at the Annual Meeting to ratify this
selection. Price Waterhouse LLP, which acted as independent accountants of
Fred's for the last fiscal year of Fred's, and is expected to be represented at
the Annual Meeting, will have the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast by the holders of
Common Stock on this proposal shall constitute ratification of the selection of
Price Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE "FOR" THE RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS FOR FISCAL
YEAR 1998.
OTHER BUSINESS
The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other matters properly come before the Annual
Meeting, it is intended that the persons named in the proxy will act in respect
thereof in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1999 Annual Meeting
---------------------------------------------------------------------------
must be received by the Company no later than January 20, 1999 and the proposals
- --------------------------------------------------------------------------------
must meet certain eligibility requirements of the Securities and Exchange
- --------------------------------------------------------------------------------
Commission. Proposals may be mailed to Fred's, Inc., to the attention of the
- --------------------------------------------------------------------------------
Secretary, 4300 New Getwell Road, Memphis, Tennessee 38118.
- -----------------------------------------------------------
10
<PAGE>
SOLICITATION OF PROXIES AND COST THEREOF
The cost of solicitation of the proxies will be borne by the Company. In
addition to solicitation of the proxies by use of the mails, employees of the
Company, without extra remuneration, may solicit proxies personally or by
telecommunications. The Company will reimburse brokerage firms, nominees,
custodians and fiduciaries for their out-of-pocket expenses for forwarding proxy
materials to beneficial owners and seeking instruction with respect thereto.
SHAREHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE (EXCEPT FOR
EXHIBITS), BY WRITING TO: FRED'S INC., ATTN: SECRETARY, 4300 NEW GETWELL ROAD,
MEMPHIS, TENNESSEE 38118.
By order of the Board of Directors,
Charles S. Vail
Secretary
May 26, 1998
11
<PAGE>
FRED'S, INC.
MEMPHIS MARRIOTT HOTEL
2625 THOUSAND OAKS BOULEVARD - MEMPHIS, TENNESSEE, 38118
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS - JUNE 17, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Charles S. Vail and Richard B. Witaszak, or either of them with full power
of substitution, are hereby authorized to represent and vote all the shares of
common stock of the undersigned at the Annual Meeting of the Shareholders of
Fred's, Inc., to be held June 17, 1998, at 10:00 a.m., local time, or any
adjournment thereof, with all powers which the undersigned would possess if
personally present, in the following manner:
1. Election of Directors for the term of one year.
[ ] FOR all nominees listed below [ ] WITHHOLD ALL AUTHORITY*
(except as marked to the to vote for all
contrary below) nominees listed below
*INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE THROUGH THE NOMINEE'S NAME BELOW.
Michael J. Hayes David A. Gardner
John R. Eisenman Roger T. Knox
2. Ratification of Price Waterhouse LLP as independent auditors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business (none at the time of the solicitation of this Proxy) as may properly
come before the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSITIONS.
THIS PROXY SHALL BE VOTED AS DIRECTED, IN THE ABSENCE OF A CONTRARY DIRECTION,
IT SHALL BE VOTED FOR THE PROPOSALS AND THE PROXIES MAY VOTE IN THEIR DISCRETION
UPON SUCH OTHER MATTERS AS PROPERLY MAY COME BEFORE THE MEETING OR ADJOURNMENT
THEREOF. The undersigned acknowledges receipt of Notice of said Annual Meeting
and the accompanying Proxy Statement, and hereby revokes all proxies heretofore
given by the undersigned for said Annual Meeting. THIS PROXY MAY BE REVOKED AT
ANY TIME PRIOR TO VOTING THEREOF.
Dated: ___________________, 1998
--------------------------------
Signature of Shareholder
--------------------------------
Signature of Shareholder
(if held jointly)
Please Date this Proxy and Sign Your Name or Names Exactly as Shown Hereon.
When signing as an Attorney, Executor, Administrator, Trustee or Guardian,
Please Sign Your Full Title as Such. If There Are More than One Trustee, or
Joint Owners, All must Sign. Please Return the Proxy Card Promptly Using the
Enclosed Envelope.
12
