EXHIBIT 4.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made as of this 6th day of
March 2003, by and between FACTORY 2-U STORES, a Delaware corporation (the
"Company"), and _____________ (the "Investor").
W I T N E S S E T H:
WHEREAS, the Investor desires to subscribe for, purchase and acquire from
the Company and the Company desires to sell and issue to the Investor ______
shares (the "Shares") of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"), upon the terms and conditions and subject to the
provisions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual premises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF THE SHARES. Subject to the terms and conditions
of this Agreement, the Investor subscribes for and agrees to purchase and
acquire from the Company and the Company agrees to sell and issue to the
Investor the Shares, in the manner set forth in SECTION 2 hereof, at a purchase
price of ______ per Share, yielding an aggregate purchase price of __________
(the "Purchase Price").
2. TERMS OF PURCHASE AND SALE OF THE SHARES. The closing of the
transactions contemplated hereby (the "Closing") shall take place at such time
and place as the Investor and the Company may agree upon; provided, however,
that in no event shall the Closing take place later than March 31, 2003.
Contemporaneously with the delivery of this Agreement, the Investor shall
deliver to the Company the Purchase Price by wire transfer of immediately
available funds pursuant to wire transfer instructions given to the Investor by
the Company. At the Closing, the Company shall deliver to the Investor a
certificate, registered in the name of the Investor, representing the Shares.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce the
Investor to enter into this Agreement, the Company represents and warrants the
following:
(A) AUTHORITY. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and
has all requisite right, power, and authority to execute, deliver and
perform this Agreement.
(B) ENFORCEABILITY. The execution, delivery, and performance of this
Agreement by the Company have been duly authorized by all requisite
corporate action. This Agreement has been duly executed and delivered by
the Company, and, upon its execution by the Investor, shall constitute the
legal, valid, and binding obligation of the Company, enforceable in
accordance with its terms, except to the extent that its enforceability is
limited by bankruptcy, insolvency, reorganization, or other laws relating
to or affecting the enforcement of creditors' rights generally and by
general principles of equity.
(C) NO VIOLATIONS. The execution, delivery, and performance of this
Agreement by the Company do not and will not violate or conflict with any
provision of the Company's Restated Certificate of Incorporation or Bylaws
and do not and will not, with or without the passage of time or the giving
of notice, result in the breach of, or constitute a default, cause the
acceleration of performance, or require any consent under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of
the Company pursuant to, any material instrument or agreement to which the
Company is a party or by which the Company or its properties are bound,
except such consents as have been obtained as of the date hereof.
(D) CAPITALIZATION. The authorized capital stock of the Company
consists of: 35,000,000 shares of Common Stock, of which 13,473,400 were
issued and outstanding as of February 21, 2003, 7,500,000 shares of
preferred stock, $0.01 par value, none of which were issued and outstanding
on February 21, 2003. As of January 31, 2003, the Company has (i) granted
options to purchase 1,421,807 shares of Common Stock, including 4,520
performance-based options, and (ii) issued currently exercisable warrants
to purchase 82,690 shares of Common Stock, with an exercise price of $19.91
per share. Upon issuance in accordance with the terms of this Agreement
against payment of the Purchase Price therefor the Shares will be duly and
validly issued, fully paid, and nonassessable with no personal liability
attaching to the ownership thereof and free and clear of all liens imposed
by or through the Company, and, assuming the accuracy of the
representations and warranties of the Investor, will be issued in
accordance with a valid exemption from the registration or qualification
provisions of the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws (the "State Acts").
(E) EXCHANGE ACT FILING. All reports and statements required to be
filed by the Company with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder, due at or prior to the date of this
Agreement have been made. Such filings, together with all documents
incorporated by reference therein, are referred to as "Exchange Act
Documents." Each Exchange Act Document, as amended, conformed in all
material respects to the requirements of the Exchange Act and the rules and
regulations thereunder, and no Exchange Act Document, as amended, at the
time each such document was filed, included any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(F) COMPANY FINANCIAL STATEMENTS. The audited financial statements,
together with the related notes of the Company at February 2, 2002 and
February 3, 2001, and for the years then ended, included in the Company's
Annual Report of Form 10-K for the year ended February 2, 2002, and the
unaudited financial statements of the Company at November 2, 2002, and for
the nine months then ended, (collectively, the "Company Financial
Statements") included in the Company's Quarterly Report on Form 10-Q for
the quarter ended November 2, 2002, respectively, fairly present in all
material respects, on the basis stated therein and on the date thereof, the
financial position of the Company at the respective dates therein specified
and its results of operations and cash flows for the periods then ended
(subject to, in the case of unaudited financial statements, normal audit
adjustments). To the knowledge of the Company, such statements and related
notes have been prepared in accordance with generally accepted accounting
principles in the United States applied on a consistent basis except as
expressly noted therein.
(G) NO MATERIAL LIABILITIES. Except as contemplated by the Company's
press release dated February 26, 2003 or as described on Schedule 3(g),
since November 2, 2002, the Company has not incurred any material
liabilities or obligations, direct or contingent, except in the ordinary
course of business and except for liabilities or obligations reflected or
reserved against on the Company's balance sheet as November 2, 2002, and
there has not been any material adverse change, or to the actual knowledge
of the Company, any development involving a prospective material adverse
change, in the condition (financial or otherwise), business, prospects, or
results of operations of the Company or any change in the capital or
increase in the long-term debt of the Company, nor has the Company
declared, paid, or made any dividend or distribution of any kind on its
capital stock.
(H) NO DISPUTES AGAINST COMPANY. Except as disclosed in the Exchange
Act Documents there is no material pending or, to the knowledge of the
Company, threatened (a) action, suit, claim, proceeding, or investigation
against the Company, at law or in equity, or before or by any Federal,
state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (b) arbitration
proceeding against the Company, (c) governmental inquiry against the
Company, or (d) any action or suit by or on behalf of the Company pending
or threatened against others.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. In order to induce the
Company to enter into this Agreement, the Investor represents and warrants the
following:
(A) AUTHORITY. The Investor has all requisite right, power, and
authority to execute, deliver, and perform this Agreement.
(B) ENFORCEABILITY. The execution, delivery, and performance of this
Agreement by the Investor have been duly authorized by all requisite
partnership or corporate action, as the case may be. This Agreement has
been duly executed and delivered by the Investor, and, upon its execution
by the Company, shall constitute the legal, valid, and binding obligation
of the Investor, enforceable in accordance with its terms, except to the
extent that its enforceability is limited by bankruptcy, insolvency,
reorganization, or other laws relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity.
(C) NO VIOLATIONS. The execution, delivery, and performance of this
Agreement by the Investor do not and will not, with or without the passage
of time or the giving of notice, result in the breach of, or constitute a
default, cause the acceleration of performance, or require any consent
under, or result in the creation of any lien, charge or encumbrance upon
any property or assets of the Investor pursuant to, any material instrument
or agreement to which the Investor is a party or by which the Investor or
its properties may be bound or affected, and, do not or will not violate or
conflict with any provision of the articles of incorporation or bylaws,
partnership agreement, operating agreement, trust agreement, or similar
organizational or governing document of the Investor, as applicable.
(D) KNOWLEDGE OF INVESTMENT AND ITS RISKS. The Investor has knowledge
and experience in financial and business matters as to be capable of
evaluating the merits and risks of Investor's investment in the Shares. The
Investor understands that an investment in the Company represents a high
degree of risk and there is no assurance that the Company's business or
operations will be successful. The Investor has considered carefully the
risks attendant to an investment in the Company, and that, as a consequence
of such risks, the Investor could lose Investor's entire investment in the
Company.
(E) INVESTMENT INTENT. The Investor hereby represents and warrants
that (i) the Shares are being acquired for investment for the Investor's
own account, and not as a nominee or agent and not with a view to the
resale or distribution of all or any part of the Shares, and the Investor
has no present intention of selling, granting any participation in, or
otherwise distributing any of the Shares within the meaning of the
Securities Act and (ii) the Investor does not have any contracts,
understandings, agreements, or arrangements with any person and/or entity
to sell, transfer, or grant participations to such person and/or entity,
with respect to any of the Shares.
(F) ACCREDITED INVESTOR. The Investor is an "Accredited Investor" as
that term is defined by Rule 501 of Regulation D promulgated under the
Securities Act.
(G) DISCLOSURE. The Investor has reviewed information provided by the
Company in connection with the decision to purchase the Shares, consisting
of the Company's publicly available filings with the Securities and
Exchange Commission and the information contained therein. The Company has
provided the Investor with all the information that the Investor has
requested in connection with the decision to purchase the Shares. The
Investor further represents that the Investor has had an opportunity to ask
questions and receive answers from the Company regarding the business,
properties, prospects, and financial condition of the Company. To the
Investor's knowledge, the Company has not disclosed any material non-public
information to the Investor. All such questions have been answered to the
full satisfaction of the Investor.
(H) NO REGISTRATION. The Investor understands that Investor may be
required to bear the economic risk of Investor's investment in the Company
for an indefinite period of time. The Investor further understands that (i)
neither the offering nor the sale of the Shares has been registered under
the Securities Act or any applicable State Acts in reliance upon exemptions
from the registration requirements of such laws, (ii) the Shares must be
held by he, she or it indefinitely unless the sale or transfer thereof is
subsequently registered under the Securities Act and any applicable State
Acts, or an exemption from such registration requirements is available,
(iii) except as set forth in the Registration Rights Agreement between the
Company and the Investor, the Company is under no obligation to register
any of the Shares on the Investor's behalf or to assist the Investor in
complying with any exemption from registration, and (iv) the Company will
rely upon the representations and warranties made by the Investor in this
Subscription Agreement in order to establish such exemptions from the
registration requirements of the Securities Act and any applicable State
Acts.
(I) TRANSFER RESTRICTIONS. The Investor will not transfer any of the
Shares unless such transfer is registered or exempt from registration under
the Securities Act and such State Acts, and, if requested by the Company in
the case of an exempt transaction, the Investor has furnished an opinion of
counsel reasonably satisfactory to the Company that such transfer is so
exempt. The Investor understands and agrees that (i) the certificates
evidencing the Shares will bear appropriate legends indicating such
transfer restrictions placed upon the Shares, (ii) the Company shall have
no obligation to honor transfers of any of the Shares in violation of such
transfer restrictions, and (iii) the Company shall be entitled to instruct
any transfer agent or agents for the securities of the Company to refuse to
honor such transfers.
(J) PRINCIPAL ADDRESS. The Investor's principal residence, if an
individual, or principal executive office, if an entity, is set forth on
the signature page of this Subscription Agreement.
5. FURTHER ASSURANCES. The parties will, upon reasonable request, execute
and deliver all such further assignments, endorsements and other documents as
may be necessary in order to perfect the purchase by the Investor of the Shares.
6. REGISTRATION RIGHTS AGREEMENT; POWER OF ATTORNEY. The Investor agrees
to be bound by the terms of and hereby executes the Registration Rights
Agreement among the Company and the purchasers of the Shares (the "Registration
Rights Agreement").
7. ENTIRE AGREEMENT; NO ORAL MODIFICATION. This Agreement contains the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings with respect
thereto and may not be amended or modified except in a writing signed by both of
the parties hereto.
8. BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, successors
and assigns; however, nothing in this Agreement, expressed or implied, is
intended to confer on any other person other than the parties hereto, or their
respective heirs, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
10. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the United States of America and the
State of Delaware, both substantive and remedial. Any judicial proceeding
brought against either of the parties to this agreement or any dispute arising
out of this Agreement or any matter related hereto may be brought in the courts
of the State of Texas or in the United States District Court for the Southern
District of Texas and, by its execution and delivery of this agreement, each
party to this Agreement accepts the jurisdiction of such courts.
11. PREVAILING PARTIES. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party shall be entitled to receive and the
nonprevailing party shall pay upon demand reasonable attorneys' fees in addition
to any other remedy.
12. HEADINGS. The section headings herein are included for convenience
only and are not to be deemed a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
FACTORY 2-U STORES, INC.,
a Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
INVESTOR
---------------------------------------
