Registration No. 333-
As filed with the Securities and Exchange Commission on January 5, 2000
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
Registration Statement
Under
The Securities Act of 1933
FACTORY 2-U STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0299573
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4000 Ruffin Road, San Diego, California 92123
(Address of Principal Executive Offices) (Zip Code)
Employee Stock Purchase Plan
(Full title of the plan)
Michael M. Searles
Factory 2-U Stores, Inc.
4000 Ruffin Road, San Diego, California 92123
(858) 627-1800
(Name, address and telephone number of agent for service)
Copy to:
Theodore H. Latty, Esq.
Hughes Hubbard & Reed LLP
350 South Grand Avenue
Los Angeles, California 90071-3442
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Amount Proposed Maximum Proposed Amount of
Securities to be to be Offering Price Maximum Aggregate Registration
Registered Registered(1) Per Share(2) Offering Price(2) Fee
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<S> <C> <C> <C> <C>
Common Stock,
par value 350,000 shares $25.56 $8,946,000 $2,361.75
$.01 per share
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</TABLE>
(1) This Registration Statement also relates to such indeterminate number of
additional shares as may be issuable pursuant to stock splits, stock dividends,
or similar transactions.
(2) The proposed maximum offering price per share of Common Stock and the
proposed maximum aggregate offering price are calculated solely for the purpose
of determining the registration fee pursuant to Rule 457(h) under the Securities
Act of 1933, and are based on a price of $25.56 per share, which is the average
of the high and low sale prices of the Common Stock on January 4, 2000, as
quoted on the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE
---------------------------------------
The following documents filed by Factory 2-U Stores, Inc. (the
"Company") under the Securities Exchange Act of 1934 (the "Exchange Act") are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended January 30, 1999;
(b) The Company's Quarterly Reports on Form 10-Q (including any
amendments) for the quarters ended May 1, 1999, July 31, 1999 and October
30, 1999;
(c) All other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the Exchange Act since January 30, 1999; and
(d) The description of the Company's Common Stock contained in the
Company's Registration Statement filed with the SEC under the Exchange Act
and subsequent amendments and reports filed to update such description.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Registration
Statement and prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of the filing of such documents.
Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained in a
subsequently filed document which is also incorporated by reference herein
modifies or supersedes such statement.
Item 4. DESCRIPTION OF SECURITIES
-------------------------
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
--------------------------------------
Not applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The Company's certificate of incorporation provides for
indemnification of directors and officers, among other things, in instances in
<PAGE>
which they acted in good faith and in a manner they reasonably believe to be in,
or not opposed to, the best interests of the Company, and in which, with respect
to criminal proceedings, they had no reason to believe that conduct was
unlawful.
Directors and officers may also be entitled to additional
indemnification under Section 145 of the General Corporation Law of Delaware.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
-----------------------------------
Not applicable.
Item 8. EXHIBITS
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NUMBER DESCRIPTION METHOD OF FILING
- ------ ----------- ----------------
4.1 Certificate of Incorporation (1)
4.2 Bylaws (2)
4.3 Employee Stock Purchase Plan Filed herewith
5.1 Opinion of Hughes Hubbard & Reed LLP Filed herewith
23.1 Consent of Arthur Andersen LLP Filed herewith
23.2 Consent of KPMG LLP Filed herewith
23.3 Consent of Hughes Hubbard & Reed LLP Contained in Exhibit 5.1
24.1 Powers of Attorney On signature pages
- --------------------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-4, No. 333-65685, filed with the Commission on October 14, 1998.
(2) Incorporated by reference to Registrant's Registration Statement on
Form S-1 No. 33-77488, filed with the Commission on April 7, 1994.
Item 9. UNDERTAKINGS
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(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
<PAGE>
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represents a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Company
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The Company hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions,
or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on December 30, 1999.
FACTORY 2-U STORES, INC.
By: /S/ MICHAEL M. SEARLES
-----------------------------
Michael M. Searles
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael Searles, Douglas C. Felderman and
Wm. Robert Wright II, and each of them, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution, to sign for him or
her and in his or her name, in any and all capacities, all amendments (including
post-effective amendments) to the Registration Statement to which this power of
attorney is attached.
----------
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Michael M. Searles President, Chief December 30, 1999
- ---------------------------------- Executive Officer and
Michael M. Searles Director (Principal
Executive Officer)
/s/ Douglas C. Felderman Executive Vice President December 30, 1999
- ---------------------------------- (Principal Financial and
Douglas C. Felderman Accounting Officer)
/s/ Peter V. Handal Director December 30, 1999
- ----------------------------------
Peter V. Handal
/s/ Ira Neimark Director December 30, 1999
- ----------------------------------
Ira Neimark
/s/ Ronald Rashkow Director December 30, 1999
- ----------------------------------
Ronald Rashkow
/s/ H. Whitney Wagner Director December 30, 1999
- ----------------------------------
H. Whitney Wagner
/s/ Wm. Robert Wright II Director December 30, 1999
- ----------------------------------
Wm. Robert Wright II
<PAGE>
EXHIBIT INDEX
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NUMBER DESCRIPTION METHOD OF FILING
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4.1 Certificate of Incorporation (1)
4.2 Bylaws (2)
4.3 Employee Stock Purchase Plan Filed herewith
5.1 Opinion of Hughes Hubbard & Reed LLP Filed herewith
23.1 Consent of Arthur Andersen LLP Filed herewith
23.2 Consent of KPMG LLP Filed herewith
23.3 Consent of Hughes Hubbard & Reed LLP Contained in Exhibit 5.1
24.1 Powers of Attorney On signature pages
- --------------------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-4, No. 333-65685, filed with the Commission on October 14, 1998.
(2) Incorporated by reference to Registrant's Registration Statement on Form S-1
No. 33-77488, filed with the Commission on April 7, 1994.
FACTORY 2-U STORES, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE
1.1. NAME. This Stock Purchase Plan shall be known as the Employee Stock
Purchase Plan (the "Plan") and is dated as of December 8, 1999, the date on
which it received the approval of the Board.
1.2. PURPOSE. The Plan is intended to provide a method whereby employees
of Factory 2-U Stores, Inc., a Delaware corporation (the "Company") and its
participating subsidiaries will have an opportunity to acquire a proprietary
interest in the Company through the purchase of shares of the Common Stock of
the Company at a discount from market price.
1.3. QUALIFICATION. It is the intention of the Company to have the Plan
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan will
be construed in a manner consistent with the requirements of that section of the
Code.
1.4. DEFINITIONS. Capitalized terms used in this Plan document are defined
in ARTICLE X.
ARTICLE II
ADMINISTRATION
2.1. COMMITTEE POWERS. The Plan shall be administered by the Committee,
which is a committee comprised of two or more non-employee Board members
appointed from time to time by the Board. The Committee shall have full
authority to administer the Plan, including authority to interpret and construe
any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. The Committee
may correct any defect or omission or reconcile any inconsistency in the Plan,
in the manner and to the extent it shall deem desirable. Decisions of the
Committee shall be final and binding on all parties who have an interest in the
Plan. The Board may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee.
2.2. ACTION BY COMMITTEE. The Committee may select one of its members as
its Chairman and shall hold its meetings at such times and places as it shall
deem advisable and may hold telephonic meetings. A majority of its members shall
constitute a quorum. All determinations of the Committee at a meeting shall be
made by a majority of its members. Any decision or determination reduced to
writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made by a majority vote at a meeting duly called and
<PAGE>
held. The Committee may appoint a secretary and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
ARTICLE III
OFFERING PERIODS
3.1. GENERAL. Shares of Common Stock shall be offered for purchase under
the Plan through a series of successive offering periods (each, an "Offering
Period") until such time as (a) the maximum number of shares of Common Stock
available for issuance under the Plan shall have been purchased or (b) the Plan
shall have been sooner terminated in accordance with ARTICLE VIII. The initial
Offering Period shall commence upon the date specified by the Board and have a
duration of 5 months, and each subsequent Offering Period shall commence
immediately after the conclusion of the prior Offering Period and have a
duration of 6 months unless, prior to the start of the Offering Period, the
Committee establishes a different commencement date or a shorter duration for
the particular Offering Period.
3.2. PURCHASE RIGHTS. The Participant shall be granted a separate Purchase
Right for each Offering Period in which he/she participates. The Purchase Right
shall be granted on the Start Date of each Offering Period.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
4.1. SERVICE REQUIREMENT. An individual who is an Eligible Employee with
at least one year of Service prior to the Start Date of an Offering Period may
enter that Offering Period on its Start Date, provided he/she enrolls in the
Offering Period on or before such date in accordance with SECTION 4.2 below. An
Eligible Employee who completes his/her first year of Service during an Offering
Period may not participate in the Plan until the next Offering Period.
4.2. ENROLLMENT. To participate for a particular Offering Period, the
Eligible Employee must complete the enrollment forms prescribed by the Committee
(including a purchase agreement and payroll deduction authorization) and file
such forms with the Committee (or its designate) at least five business days
before the Start Date of the Offering Period.
4.3. PAYROLL DEDUCTION AMOUNT. The payroll deduction authorized by the
Participant for purposes of acquiring shares of Common Stock under the Plan may
be any multiple of one percent (1%) of the gross Earnings paid to the
Participant, up to a maximum of ten percent (10%). The payroll deduction rate so
authorized shall be applied to each pay period in the Offering Period, and shall
continue in effect for the remainder of the Offering Period and all subsequent
Offering Periods, except to the extent such rate is changed in accordance with
SECTIONS 4.4, 4.5 AND 4.6.
4.4. CHANGES DURING PERIOD. Any Participant may, at any time during an
Offering Period, increase or reduce his/her rate of payroll deduction. Such
increase or reduction shall become effective as soon as administratively
practicable after filing of the requisite change form with the Committee (or its
<PAGE>
designate), but the Participant may not effect more than one such change during
the same Offering Period.
4.5. CHANGES FOR SUBSEQUENT PERIODS. Any Participant may, prior to the
commencement of an Offering Period, increase or decrease the rate of his/her
payroll deduction effective for such Offering Period by filing the appropriate
form with the Committee (or its designate). If the form is filed at least 5
business days before the Start Date of the Offering Period, the new rate shall
become effective as of the Start Date of the first Offering Period following the
filing of such form.
4.6. TERMINATION OF PAYROLL DEDUCTIONS. Payroll deductions will
automatically cease upon the termination of the Participant's Purchase Right in
accordance with the applicable provisions of ARTICLE VI below. In addition, if a
Participant elects to reduce his/her payroll deductions to zero, this will cause
a termination of his/her Purchase Rights under SECTION 6.6. Any change pursuant
to this SECTION 4.6 shall be in addition to the changes permitted under SECTIONS
4.4 AND 4.5.
ARTICLE V
STOCK SUBJECT TO PLAN
5.1. SHARES AVAILABLE. Subject to adjustment under SECTION 5.2 below,
350,000 shares are reserved for issuance pursuant to the Plan. The Common Stock
purchasable under the Plan shall, solely in the discretion of the Committee, be
made available from either authorized but unissued shares of Common Stock or
from shares of Common Stock reacquired by the Company, including shares of
Common Stock purchased on the open market.
5.2. ADJUSTMENTS. In the event any change is made to the outstanding
Common Stock by reason of any stock dividend, stock split, combination of
shares, recapitalization, reorganization, merger in which the Company is the
surviving corporation, spin-off, extraordinary dividend or other change
affecting such outstanding Common Stock as a class without the Company's receipt
of consideration, adjustments shall be made by the Board or the Committee, as it
deems appropriate in its discretion, to (a) the class and maximum number of
securities issuable pursuant to the Plan, (b) the class and maximum number of
securities purchasable per Participant during any one Offering Period, and (c)
the class and number of securities and the price per share in effect under each
Purchase Right outstanding under the Plan. Such adjustments shall be designed to
preclude the enhancement or dilution of rights and benefits under the Plan. Any
determination under this SECTION 5.2 shall be binding and conclusive.
ARTICLE VI
PURCHASE RIGHTS
6.1. PURCHASE RIGHT. An Eligible Employee who participates in the Plan for
a particular Offering Period shall have the right to purchase shares of Common
Stock on the Purchase Date for such Offering Period, upon the terms and
conditions set forth below.
<PAGE>
6.2. PURCHASE PRICE. Common Stock shall be purchased at the end of each
Offering Period at a purchase price equal to eighty-five percent (85%) of the
lower of (a) the fair market value per share on the Start Date of that Offering
Period or (b) the fair market value per share on the Purchase Date of such
Offering Period.
6.3. CALCULATION OF FAIR MARKET VALUE OF COMMON STOCK. The fair market
value of a share of Common Stock on any relevant date shall be determined in
accordance with the following provisions:
(a) If the Common Stock is listed on a national securities exchange
or the Nasdaq National Market or the Nasdaq SmallCap Market, its fair market
value shall be the closing sales price for such stock on such exchange or market
as is determined by the Board to be the primary market for the Common Stock on
the date in question (or if shares of Common Stock were not traded on such date,
then on the next preceding trading day on which a sale of Common Stock
occurred).
(b) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its fair market value
shall be the mean of the highest bid and lowest asked prices for the Common
Stock on the date in question (or if there were no reported bid and asked prices
for such date, then on the next preceding trading day for which such quotations
exist).
6.4. NUMBER OF PURCHASABLE SHARES. Subject to the limitations set forth in
ARTICLE VII, the number of shares purchasable per Participant for an Offering
Period shall be the number of whole and fractional shares (to four decimal
places) obtained by dividing the amount collected from the Participant through
payroll deductions during that Offering Period by the purchase price in effect
for such Offering Period; provided, however, such number may not exceed 2,500
shares in any Offering Period. Under no circumstances shall Purchase Rights be
granted under the Plan to any Eligible Employee if such individual would,
immediately after the grant, own (within the meaning of Code Section 424(d)) or
hold outstanding options or other rights to purchase, stock possessing five
percent or more of the total combined voting power or value of all classes of
stock of the Company or any of its Corporate Affiliates.
6.5. PAYMENT. Payment for the Common Stock purchased under the Plan shall
be effected by means of the Participant's authorized payroll deductions. Such
deductions shall begin with the first pay date immediately following the Start
Date of the Offering Period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last business day of the Offering Period. The amounts so collected shall be
credited to the book account established for the Participant under the Plan. No
interest shall be paid on accumulated payroll deductions. The amounts collected
from a Participant may be commingled with the general assets of the Company and
may be used for general corporate purposes.
6.6. TERMINATION OF PURCHASE RIGHT. The following provisions shall govern
the termination of outstanding Purchase Rights:
<PAGE>
(a) A Participant may, at any time prior to the last five business
days of the Offering Period, terminate his/her outstanding Purchase Right under
the Plan for the Offering Period by filing the prescribed notification form with
the Committee (or its designate). No further payroll deductions shall be
collected from the Participant with respect to the terminated Purchase Right,
and any payroll deductions collected for the Offering Period in which such
termination occurs shall be refunded to the Participant (without interest) as
soon as administratively practicable. If a Participant elects to reduce his/her
payroll deductions to zero under SECTION 4.6, this will also constitute a
termination of his/her Purchase Right.
(b) The termination by a Participant of his/her Purchase Rights
under SECTION 6.6(A) shall be irrevocable, and the Participant may not
subsequently rejoin the Offering Period for which the terminated Purchase Right
was granted. In order to resume participation in any subsequent Offering Period,
such individual must re-enroll in the Plan (by making a timely filing of a new
purchase agreement and payroll deduction authorization) in accordance with
SECTION 4.2.
(c) If the Participant ceases to be employed by a Participating
Company or otherwise ceases to be an Eligible Employee while his/her Purchase
Right remains outstanding, then such Purchase Right shall immediately terminate,
and the payroll deductions collected from such Participant for the Offering
Period in which the Purchase Right so terminates shall be refunded to the
Participant as soon as administratively practicable.
6.7. STOCK PURCHASE. Shares of Common Stock shall automatically be
purchased on behalf of each Participant (other than Participants whose Purchase
Rights have been terminated in accordance with SECTION 6.6) on each Purchase
Date. The purchase shall be effected by applying each Participant's payroll
deductions for the Offering Period ending on such Purchase Date to the purchase
of whole and fractional shares of Common Stock (subject to the limitations on
the maximum number of purchasable shares set forth in SECTION 6.4 and ARTICLE
VII) at the purchase price in effect for such Offering Period. Any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitations on the maximum number of shares purchasable by the Participant for
the Offering Period shall be refunded to the Participant as soon as
administratively practicable.
6.8. PRORATION OF PURCHASE RIGHTS. Should the total number of shares of
Common Stock which are to be purchased pursuant to outstanding Purchase Rights
on any particular Purchase Date exceed the number of shares then available for
issuance under the Plan, the Committee shall make a pro rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded to such Participant as soon as administratively practicable.
6.9. RIGHTS AS SHAREHOLDER. A Participant shall have no shareholder rights
with respect to the shares subject to his/her outstanding Purchase Right until
the shares are actually purchased on the Participant's behalf in accordance with
the applicable provisions of the Plan. No adjustments shall be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
<PAGE>
6.10. ASSIGNABILITY. No Purchase Right granted under the Plan shall be
assignable or transferable by the Participant.
6.11. DEATH OF PARTICIPANT. If a Participant dies while his/her Purchase
Right remains outstanding, his/her accumulated payroll deductions shall be paid
to his/her designated beneficiary, or in the absence of a designated
beneficiary, to his/her estate as soon as is administratively practicable.
6.12. HOLDING PERIOD. Shares of Common Stock purchased under the Plan
shall not be sold until six months after the Purchase Date with respect to such
Common Stock. During such six-month period, stock certificates for the purchased
shares shall be held for the Participant in a brokerage account at a nationally
recognized brokerage firm designated by the Company. At the conclusion of the
six-month holding period, the Participant may instruct the broker to sell the
shares or to deliver the certificates to the Participant free of all
restrictions.
6.13. SALE OF STOCK. If a Participant sells, disposes, or in any way
transfers shares of Common Stock purchased under the Plan prior to (i) two years
after the Start Date of the Offering Period or (ii) one year after the Purchase
Date, the Participant shall immediately provide to the Company information,
including, without limitation, the manner of the transfer, the date of the
transfer, the number of shares involved and the transfer price, as well as other
such information the Company may request. By executing the enrollment forms,
each Participant obligates himself or herself to provide such information to the
Company.
6.14. CORPORATE TRANSACTIONS. Should a Corporate Transaction occur during
the Offering Period, unless the surviving or successor corporation shall have
agreed to assume the Plan, the Offering Period then in progress shall be
shortened by setting a new Purchase Date, which shall be a date determined by
the Board or the Committee which is before the effective date of the proposed
Corporate Transaction. In such event, all accumulated payroll deductions for
such Offering Period (which have not been timely withdrawn) shall be
automatically applied to purchase Common Stock on the newly designated Purchase
Date. The applicable share limitations of ARTICLES V, VI AND VII shall continue
to apply to any such purchase.
6.15. NOTICE OF CORPORATE TRANSACTION. The Company shall use its best
efforts to provide at least ten (10) days advance written notice of the
occurrence of a designation of a Purchase Date pursuant to SECTION 6.14, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding Purchase Rights in accordance with the applicable
provisions of this ARTICLE VI.
ARTICLE VII
LIMITATION ON PARTICIPATION
7.1. GENERAL. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any Purchase Right outstanding under this Plan if and
to the extent such accrual, when aggregated with (a) rights to purchase Common
Stock accrued under any other Purchase Right outstanding under this Plan and (b)
<PAGE>
similar rights accrued under other employee stock purchase plans (within the
meaning of Section 423 of the Code) of the Company or its Corporate Affiliates,
would otherwise permit such Participant to purchase more than $25,000 worth of
stock of the Company and its Corporate Affiliates (determined on the basis of
the fair market value of such stock on the date or dates such Purchase Rights
are granted the Participant) for each calendar year such rights are at any time
outstanding.
7.2. ACCRUAL OF PURCHASE RIGHTS. For purposes of applying the limitation
set forth in SECTION 7.1, the right to acquire Common Stock pursuant to each
Purchase Right outstanding under the Plan shall accrue as follows:
(a) The right to acquire Common Stock under a Purchase Right shall
accrue (i) on the Purchase Date for the applicable Offering Period, in the case
of this Plan, and (ii) when the Purchase Right first becomes exercisable, in the
case of any other employee stock purchase plan.
(b) No right to acquire Common Stock under any outstanding Purchase
Right shall accrue to the extent the Participant has already accrued in the same
calendar year the right to acquire $25,000 worth of Common Stock (determined on
the basis of the fair market value on the date or dates of grant) pursuant to
one or more Purchase Rights held by the Participant during such calendar year.
(c) If by reason of such limitation, any Purchase Right of a
Participant does not accrue for a particular Offering Period, then the payroll
deductions which the Participant made during that Offering Period with respect
to such Purchase Right shall be promptly refunded.
7.3. PRIORITY. In the event there is any conflict between the provisions
of this ARTICLE VII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this ARTICLE VII shall be controlling.
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1. AMENDMENTS. The Board may amend, suspend or discontinue the Plan at
any time or from time to time, provided that any such action which adversely
affects Purchase Rights previously granted shall only be effective following the
close of any Offering Period. Shareholder approval of any such action shall not
be required except as necessary to continue the Plan's qualification under
Section 423 of the Code or as required by law.
8.2. TERMINATION. The Plan shall terminate upon the date on which all
shares available for issuance under the Plan shall have been sold pursuant to
Purchase Rights exercised under the Plan. The Company shall have the right,
exercisable in the sole discretion of the Board, to terminate the Plan at any
earlier time. Upon termination of the Plan by the Board during an Offering
Period, the Offering Period then in progress shall be shortened by setting a new
<PAGE>
Purchase Date, which shall be a date determined by the Board. The Company shall
give Participants at least 10 business days notice of the new Purchase Date and
then all accumulated payroll deductions for such Offering Period, which have not
been withdrawn as of 5 business days before the new Purchase Date, shall be
automatically applied to purchase Common Stock on the newly designated Purchase
Date. Should the Company elect to exercise such right, then the Plan shall
terminate in its entirety, in which case no further Purchase Rights shall
thereafter be granted or exercised, and no further payroll deductions shall
thereafter be collected, under the Plan. All shares purchased under the Plan
prior to termination of the Plan shall be subject to the six-month holding
period under SECTION 6.12 unless the Board determines otherwise.
ARTICLE IX
GENERAL PROVISIONS
9.1. PLAN COMMENCEMENT. The Plan shall be effective as of February 1,
2000, subject to SECTION 9.2.
9.2. SHAREHOLDER APPROVAL. No shares shall be purchased under the Plan
prior to shareholder approval of the Plan. In the event shareholder approval has
not been obtained prior to the Purchase Date of the initial Offering Period,
then the initial Offering Period shall be extended until the time such
shareholder approval is obtained. The Plan and all rights to purchase Common
Stock granted pursuant to the Plan shall be void if the stockholders do not
approve the Plan within twelve (12) months from the date the Plan is approved by
the Board.
9.3. COSTS. The Company shall pay all costs and expenses incurred in the
administration of the Plan, except the costs of disposition, transfer or sale of
Common Stock (or stock certificates) by a Participant.
9.4. NO EMPLOYMENT RIGHTS. Neither the action of the Company in
establishing the Plan, nor any action taken under the Plan by the Board or the
Committee, nor any provision of the Plan itself shall be construed so as to
grant any person the right to remain in the employ of the Company or any of its
Corporate Affiliates for any period or interfere in any way with the right of
the Company and its Corporate Affiliates to terminate the employment of any
employee.
9.5. EQUAL RIGHTS AND PRIVILEGES. All Eligible Employees shall have equal
rights and privileges with respect to the Plan to the extent necessary to
satisfy the requirements of Section 423 of the Code. This provision shall take
precedence over any conflicting provision of the Plan.
9.6. CONFLICT OF LAWS. The provisions of the Plan shall be governed by the
laws of the State of Delaware without resort to that State's conflict-of-laws
rules.
ARTICLE X
DEFINITIONS
For purposes of the Plan, the following terms shall have the meanings
indicated:
"Board" means the Board of Directors of the Company.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Compensation Committee of the Board.
"Company" means Factory 2-U Stores, Inc., a Delaware corporation, and any
corporate successor to all or substantially all of the assets or voting stock of
Factory 2-U Stores, Inc., which shall by appropriate action adopt the Plan.
"Common Stock" means shares of the Company's common stock.
"Corporate Affiliate" means any parent or subsidiary corporation of the
Company (as determined in accordance with Code Section 424), including any
parent or subsidiary corporation which becomes such after the effective date of
the Plan.
"Corporate Transaction" means a merger or other reorganization in which
the Company will not be the surviving corporation (other than a reorganization
effected primarily to change the State in which the company is incorporated), a
sale of all or substantially all of the Company's assets, or a liquidation or
dissolution of the Company.
"Earnings" means the regular base salary or wages paid by the Company to
the Participant.
"Eligible Employee" means any person who is engaged, on a
regularly-scheduled basis of more than 20 hours per week for more than five
months per calendar year, in the rendition of personal services to the Company
or any other Participating Company for earnings considered wages under Section
3121(a) of the Code.
"Offering Period" means the designated period for accumulation of payroll
deductions as specified in SECTION 3.1 hereof. Except as otherwise designated by
the Committee, each Offering Period shall be six months (except for the initial
Offering Period, which shall be five) and shall end on the last business day of
June and December, respectively.
"Participant" means any Eligible Employee of a Participating Company who
is actively participating in the Plan.
"Participating Company" means the Company and those Corporate Affiliates
as may be designated from time to time by the Board for participation in the
Plan.
"Plan" means the Factory 2-U Stores, Inc. Employee Stock Purchase Plan as
from time to time in effect.
"Purchase Date" means the last business day of each Offering Period, on
which shares of Common Stock are automatically purchased for Participants under
the Plan.
"Purchase Right" means the right to purchase Common Stock at the end of an
Offering Period, which right is granted at the Start Date of such Offering
Period, subject to the terms of the Plan.
<PAGE>
"Service" means the period during which an individual performs services as
an employee of a Participating Company and shall be measured from his or her
hire date, whether that date is before or after the effective date of the Plan.
"Start Date" shall mean the first day of any Offering Period.
FACTORY 2-U STORES, INC.
By: /S/ MICHAEL M. SEARLES
---------------------------------
Michael M. Searles, President
Exhibit 5.1
January 5, 2000
15036.0200
Factory 2-U Stores, Inc.
4000 Ruffin Road
San Diego, California 92123-1866
Re: REGISTRATION STATEMENT ON FORM S-8
----------------------------------
Gentlemen:
We have represented Factory 2-U Stores, Inc., a Delaware corporation (the
"Company"), as special securities counsel in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of 350,000
shares of the Company's common stock, $.01 par value (the "Shares"), issuable in
connection with the Company's Employee Stock Purchase Plan (the "Plan"). The
Shares are being registered by the Company on a Registration Statement on Form
S-8 to be filed with the Securities and Exchange Commission (the "Commission")
on or about the date hereof (the "Registration Statement").
As such special securities counsel, and for the purpose of rendering this
opinion, we have reviewed such corporate records and other documents as we have
deemed necessary, including, but not limited to, the following:
(a) Articles of Incorporation, as currently in effect, of the Company;
(b) Bylaws, as currently in effect, of the Company;
(c) The Plan, as amended to date;
(d) Certain resolutions adopted by the Board of Directors of the Company
and related documents adopting and approving the Plan; and
(e) The Registration Statement, in the form proposed to be filed with the
Commission under the Act, together with exhibits to be filed in connection
therewith and the form of Prospectus related thereto.
In addition, we have consulted with officers and other representatives of
the Company and have obtained such representations with respect to such matters
of fact as we have deemed necessary or advisable; however, we have not
necessarily independently verified the content of factual statements made to us
in connection therewith or the veracity of such representations. We have assumed
without independent verification or investigation (i) the genuineness of all
signatures, (ii) the authenticity of all documents submitted to us as originals
and (iii) the conformity to authentic original documents of all documents
submitted to us as certified, conformed or photostatic copies.
<PAGE>
Factory 2-U Stores, Inc.
January 5, 2000
Page 2
On the basis of the foregoing, such examinations of law and such other
information as we have deemed relevant under the circumstances, we are of the
opinion as of the date hereof that the Shares, when issued and sold pursuant to
the Plan, will be validly issued, fully paid and nonassessable shares of common
stock of the Company.
The law covered by the opinion set forth above is limited to the laws of
the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Shares. In giving this consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act or the rules or regulations of the Commission
promulgated thereunder.
Very truly yours,
/S/ Hughes Hubbard & Reed LLP
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our reports dated
March 18, 1998 and March 19, 1999 included in Factory 2-U Stores, Inc.'s Form
10-K for the years ended January 31, 1998 and January 30, 1999, and to all
references to our Firm included in this registration statement and related
prospectus.
/S/ ARTHUR ANDERSEN LLP
San Diego, California
January 4, 2000
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Factory 2-U Stores, Inc. (formerly Family Bargain Corporation):
We consent to incorporation by reference in the registration statement (No.
333-_________) on Form S-8 of Factory 2-U Stores, Inc. of our report dated April
11, 1997, relating to the consolidated statements of operations, stockholders'
equity, and cash flows of Family Bargain Corporation and subsidiaries for the
year ended February 1, 1997, which report appears in the January 30, 1999,
annual report on Form 10-K of Factory 2-U Stores, Inc. We also consent to the
reference to our firm under the heading "Experts" in the prospectus.
/S/ KPMG LLP
San Diego, California
January 4, 2000
