JUNIOR SUBORDINATED NOTE AGREEMENT

         THIS JUNIOR  SUBORDINATED  NOTE AGREEMENT (the "Agreement") is made and
entered into as of this 30th day of April, 1998 by and among GENERAL TEXTILES, a
California  corporation  (the  "Company"),  AMERICAN  ENDEAVOUR FUND LIMITED,  a
Jersey corporation  ("Endeavour"),  and LONDON PACIFIC LIFE & ANNUITY COMPANY, a
North Carolina joint stock life insurer ("London Pacific"). Endeavour and London
Pacific shall sometimes be referred to herein collectively as the "Noteholders."


                                     RECITAL

         The Company  and the  Noteholders  have  entered  into a Note  Exchange
Agreement  in which they have agreed that the  Company  will issue,  among other
things, a total of  $17,335,097.65  principal amount of Notes to the Noteholders
in exchange  for a total of  $17,335,097.65  principal  amount of the  Company's
Junior Subordinated Reorganization Notes.


                                    AGREEMENT

         NOW, THEREFORE,  in consideration of the terms and conditions contained
herein, and of any extension of credit by the Noteholders to or on behalf of the
Company heretofore,  and for other good and valuable consideration,  the receipt
and  adequacy of which are hereby  acknowledged,  the  parties,  intending to be
legally bound, hereby agree as follows:

                                     ARTICLE

                   DEFINITIONS AND INCORPORATION BY REFERENCE

         "Actual  Knowledge" means the actual knowledge of any executive officer
of the Company;  provided,  however,  that each executive officer of the Company
shall be deemed to have  actual  knowledge  of any fact that  would have come to
such  officer's  attention  if  he or  she  had  exercised  reasonable  care  in
performing  his or her  duties,  given the  nature of his or her  duties and the
Company's business and organization.

         "Affiliate" means (i) any Person directly or indirectly  controlling or
controlled by or under direct or indirect common control with the Company,  (ii)
any spouse, immediate family member or other relative,  provided such individual
has the same principal  residence,  of any Person described in clause (i) above,
(iii) any trust in which any Person described in clauses (i) or (ii) above has a
beneficial interest, and (iv) any corporation or other organization of which the
Persons described in clauses (i) or (ii) above  individually or collectively own
a general  partnership  interest or equity securities or trust certificates with
more than  five  percent  (5%) of the total  voting  power for the  election  of
directors or persons  exercising  similar authority of such corporation or other
organization;  provided,  however, that the term Affiliate shall not include any
wholly  owned  subsidiary  of the Company.  For this  purpose,  "control"  means
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction  of the  management  or  policies  of a Person,  whether  through  the
ownership of voting securities, by contract or otherwise.

<PAGE> 65

         "Board  of  Directors"  means  the  Board of  Directors  of the  
Company  or any  committee  of the  Board authorized to act for it.

         "Business Day" means any day other than a Legal Holiday.

         "Company" means General Textiles, a California corporation, and its 
successors and assigns.

         "Custodian"  means  any  receiver,  trustee,  assignee,  liquidator  or
similar official under any Debtors' Laws.

         "Debtors'  Laws"  means all  applicable  liquidation,  conservatorship,
bankruptcy,  moratorium,  fraudulent  conveyance,   arrangement,   receivership,
insolvency,  reorganization or similar laws or general equitable principles from
time to time in effect affecting the rights of creditors generally.

         "Default"  means any event which is, or after notice or passage of time
or both would be, an Event of Default.

        "Endeavour" means American Endeavour Fund Limited, a Jersey corporation.

         "Event of Default" has the meaning assigned to such term in Section 
5.01 hereof.

         "Factory 2-U" means Factory 2-U, Inc., a Delaware corporation which, at
the date of this Agreement, is wholly owned by Family Bargain.

         "Family   Bargain"  means  Family  Bargain   Corporation,   a  Delaware
corporation which, at the date of this Agreement, is the sole stockholder of the
Company.

         "Indebtedness"   means,   with   respect  to  any  Person  and  without
duplication, all: (i) liabilities or obligations, direct and contingent, matured
or unmatured,  liquidated or unliquidated,  including, without limitation, trade
debt;  (ii)  liabilities  or  obligations  of others  for which  such  Person is
directly or indirectly  liable,  by way of guaranty (whether by direct guaranty,
suretyship, discount, endorsement,  take-or-pay agreement, agreement to purchase
or advance or keep in funds or other agreement  having the effect of a guaranty)
or otherwise; (iii) liabilities or obligations secured by liens on any assets of
such Person,  whether or not such  liabilities  or  obligations  shall have been
assumed by it; and (iv)  liabilities or  obligations  of such Person,  direct or
contingent,  with  respect to letters of credit  issued for the  account of such
Person  and  bankers'  acceptances  created  for  such  Person,  whether  now in
existence or hereafter incurred; and (v) the Notes and the Subordinated Notes.

         "IRS" means the United States Internal Revenue Service.

         "Legal  Holiday"  means a Saturday,  a Sunday or a day on which banking
institutions  are not  required  to be open in New York,  New York or San Diego,
California.

         "London Pacific" means London Pacific Life & Annuity Company, a North 
Carolina joint stock life insurer.

         "Maturity Date" means May 28, 2005.

         "Noteholders" has the meaning assigned to such term in the preamble to 
this Agreement.

<PAGE> 66

         "Notes"  means the Company's  Junior  Subordinated  Notes,  which Notes
shall be  substantially  in the form set forth in Exhibit A attached  hereto and
made a part hereof, and "Note" shall mean any one of the Notes.

         "Officer"  means the  Chairman of the Board,  the  President,  any  
Vice-President,  the  Treasurer or the Secretary of the Company.

         "Officers'  Certificate"  means a certificate signed by two Officers or
by an Officer  and an  Assistant  Treasurer  or an  Assistant  Secretary  of the
Company.

         "Person" means any individual, corporation, partnership, joint venture,
association,   joint-stock  company,  trust,  unincorporated  organization,   or
government or any agency or political subdivision thereof.

         "Senior  Indebtedness"  means the principal of and premium,  if any, on
all  Indebtedness  of the  Company,  whether  outstanding  on the date hereof or
hereafter  incurred  or  created,  for  money  borrowed  from  banks,  insurance
companies or other companies engaged in lending money as a regular part of their
business,  other than (i) the Notes, and (ii) any indebtedness of Family Bargain
which becomes  Indebtedness  of the Company solely because of a merger of Family
Bargain and the Company.

         "Subordinated  Notes"  means  the  Subordinated  Notes  due 2003 in the
aggregate  principal amount of $3,250,000  issued by the Company in exchange for
$4,900,000 principal amount of its Subordinated Reorganization Notes.

                                     ARTICLE 2.

                                    THE NOTES

         SECTION 2.01 The Junior  Subordinated  Notes. The Company is authorized
to execute and deliver Junior Subordinated Notes (each a "Note" and collectively
the "Notes"),  substantially in the form of Exhibit A attached hereto and made a
part hereof. The Notes shall have an aggregate principal amount of not more than
Seventeen Million Three Hundred Thirty-Five  Thousand  Ninety-Seven  Dollars and
Sixty-Five Cents ($17,335,097.65).

         SECTION 2.02      Interest.  The Notes shall not bear interest, except 
as provided in Section 2.05.

         SECTION 2.03      Payments of  Principal.  The Company will be required
to pay the  principal of each Note in installments as follows:

<PAGE> 67
                    ------------------------ ----------------------------------
                    Principal Payment        Percentage of Original
                           Date              Principal Amount to be Paid
                    ------------------------ ----------------------------------
                    ------------------------ ----------------------------------
                    December 31, 1999        5.768644%
                    December 31, 2000        5.768644%
                    December 31, 2001        11.537287%
                    December 31, 2002        11.537287%
                    December 31, 2003        17.305931%
                    December 31, 2004        17.305931%
                    Maturity Date            30.776276%
                                             ----------
                                             100.000000%
                    ------------------------ ----------------------------------

The Notes will mature on the Maturity  Date and all  principal  and interest (if
any) which has not been paid prior to the Maturity  Date will be due and payable
on the Maturity Date.

         SECTION 2.04  Prepayment.  The Company may prepay all or any portion of
the principal of the Notes at any time without prepayment penalty or premium. If
fewer than all of the Notes are to be prepaid,  the Company  shall  allocate the
total principal amount to be prepaid pro rata as nearly as practicable among the
Notes based on the outstanding  principal balances thereof. Any Note which is to
be prepaid  only in part  shall be  surrendered  to the  Company  (with,  if the
Company so requires,  due endorsement by, or a written instrument of transfer in
form  satisfactory  to the Company duly  executed by, the holder of such Note or
its attorney duly authorized in writing),  and the Company shall execute for the
holder  of such  Note a new Note  equal in  principal  amount  to the  unprepaid
portion of the Note  surrendered  and identical to the Note  surrendered  in all
other respects.

         SECTION 2.05 Overdue  Payments;  Business Days. If any principal amount
of any of the Notes is not paid  when due,  then  interest  shall  accrue on the
entire Note  outstanding from the date such sum is due until paid at the rate of
ten  percent  (10%) per annum,  compounded  quarterly,  or at the  maximum  rate
permitted by law,  whichever is less.  Interest shall be calculated on the basis
of the actual  number of days elapsed in a year of 360 days from the last day on
which interest was paid (or if no interest has been paid,  from the day on which
interest began to accrue).  Whenever any payment of principal or interest on any
of the Notes shall be stated to be due, or whenever  any date  specified in this
Agreement or in any of the Notes would otherwise occur on a Legal Holiday,  such
payment shall be made, and such other date shall occur,  on the next  succeeding
Business Day. Any such extension of time shall be included in the computation of
interest payable.

                                     ARTICLE 3.

                             SUBORDINATION OF NOTES

         SECTION 3.01 Agreement to  Subordinate.  The Company  agrees,  and each
holder of Notes,  by  accepting  Notes,  agrees,  that all Notes shall be issued
subject to the  provisions of this Article 3 and each holder of a Note,  whether
upon original issue or upon transfer or assignment  thereof,  accepts and agrees
to and shall be bound by such provisions.

         All Notes, to the extent and in the manner set forth in this Article 3,
shall be  subordinated  and subject in right of payment to the prior  payment in
full of the  principal  of,  premium,  if any,  on and  interest  on all  Senior
Indebtedness.

<PAGE> 68

         SECTION 3.02 No Payment on Notes if Senior  Indebtedness in Default. In
addition to the  restrictions  set forth in Section 2.03  hereof,  no payment on
account of the  principal of, or interest on, the Notes shall be made if, at the
time of such payment or immediately after giving effect thereto, (a) there shall
exist a default in the payment of principal,  premium, if any, sinking funds, or
interest  with  respect  to any  Senior  Indebtedness,  or (b) there  shall have
occurred  any other event of default (of which the Company  shall have  received
notice  from any holder or  trustee  with  respect  to any Senior  Indebtedness)
relating to any Senior  Indebtedness,  as defined  therein or in the  instrument
under  which  the  same  is  outstanding,  permitting  the  holders  thereof  to
accelerate the maturity  thereof,  and such event of default shall not have been
cured or waived or shall not have  ceased to exist.  In the event that the Notes
are declared  due and payable  before their  expressed  maturity  because of the
occurrence of an Event of Default,  the holders of Senior  Indebtedness shall be
entitled to receive  payment in full of all principal (and premium,  if any) and
interest with respect to such indebtedness before the holders of the Notes shall
be entitled to receive any payment on account of principal or otherwise.

         SECTION  3.03  Priority of Senior  Indebtedness  upon  Distribution  of
Assets. Upon any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors in the event of
any insolvency or bankruptcy  proceedings,  and any  receivership,  liquidation,
reorganization or other similar proceedings in connection therewith, relative to
the  Company  or to its  property,  or upon any  such  payment  in the  event of
proceedings  for  voluntary or  involuntary  liquidation,  dissolution  or other
winding up of the Company,  whether or not involving  insolvency or  bankruptcy,
all  principal,  premium,  if any,  and  interest  due or to become due upon all
Senior  Indebtedness  shall  first  be paid in full,  or  payment  thereof  duly
provided  for,  before  any  payment  is made  on  account  of the  Indebtedness
evidenced by the Notes. Upon any such proceedings (but subject to the power of a
court of competent  jurisdiction to make other equitable  provision with respect
to the rights of the holders of any Senior  Indebtedness  and the holders of the
Notes  pursuant to a lawful plan of  reorganization  under  applicable  Debtors'
Laws) any  payment  or  distribution  of assets  of the  Company  of any kind or
character,  whether in cash, property or securities, to which the holders of the
Notes would be entitled,  except for the  provisions of this Article 3, shall be
paid or delivered by the Company or by any Custodian or other Person making such
payment or  distribution,  or by the holders of the Notes if received by them or
it, directly to the holders of Senior Indebtedness (pro rata to each such holder
on the  basis of the  respective  amounts  of Senior  Indebtedness  held by such
holder)  or their  representatives  to the  extent  necessary  to pay all Senior
Indebtedness  in  full  after  giving  effect  to  any  concurrent   payment  or
distribution to or for the holders of Senior Indebtedness, before any payment or
distribution is made to the holders of the Notes.

         In the event that,  notwithstanding  the  foregoing  provisions of this
Section 3.03, any such payment or distribution of property or securities,  shall
be received by the holders of the Notes before all Senior  Indebtedness  is paid
in full, or provision made for such payment,  in accordance with its terms, such
payment or distribution shall be held for the benefit of, and shall be paid over
or   delivered   to,  the   holders  of  such  Senior   Indebtedness   or  their
representatives,   as  their  respective  interests  may  require,   ratably  as
aforesaid,  for application to the payment of all Senior Indebtedness  remaining
unpaid to the extent  necessary to pay all such Senior  Indebtedness  in full in
accordance  with its terms,  after giving  effect to any  concurrent  payment or
distribution to the holders of such Senior Indebtedness.

<PAGE> 69

         SECTION 3.04 Notice to Holders of Notes of Specified  Events;  Reliance
on  Certificate  of  Liquidating  Agent.  The Company shall give prompt  written
notice to the  registered  holders of the Notes of any  proceedings  of the type
specified in Section 3.03.  The holders of the Notes shall be entitled to assume
that no such event has occurred unless the Company or any one or more holders of
Senior  Indebtedness or any trustee  therefor or any other Person has given such
notice to the registered  holders of the Notes. Upon any payment or distribution
of assets of the Company  referred to in this Article 3, the registered  holders
of the Notes shall be entitled to rely upon a  certificate  of the  Custodian or
other Person making such payment or distribution, delivered to such holders, for
the  purpose  of  ascertaining  the  Persons  entitled  to  participate  in such
distribution,  the holders of the Senior  Indebtedness and other indebtedness of
the Company,  the amount thereof or payable thereon,  the amount or amounts paid
or distributed  thereon and all other facts pertinent thereto or to this Article
3. In the event that any holder of the Notes  determines,  in good  faith,  that
further evidence is required with respect to the right of any Person as a holder
of Senior  Indebtedness to participate in any payments or distribution  pursuant
to this  Article 3, such holder may request  such Person to furnish  evidence to
the  reasonable  satisfaction  of  such  holder  as  to  the  amount  of  Senior
Indebtedness  held by such  Person,  as to the  extent to which  such  Person is
entitled to participate in such payment or  distribution,  and as to other facts
pertinent  to the  rights  of such  Person  under  this  Article  3, and if such
evidence  is not  furnished,  such  holder may defer any  payment to such Person
pending  judicial  determination  as to the right of such person to receive such
payment.

         SECTION 3.05  Subrogation  of Notes.  Subject to the payment in full of
the principal of, premium,  if any, on and interest on all Senior  Indebtedness,
the  holders of the Notes  shall be  subrogated  to the rights of the holders of
Senior  Indebtedness  to  receive  payments  or  distributions  of assets of the
Company made on the Senior  Indebtedness  paid in full. For the purposes of such
subrogation,  no payments or distributions to the holders of Senior Indebtedness
of any cash, property,  or securities to which the holders of the Notes would be
entitled  except for the  provisions  of this  Article 3 shall,  as between  the
Company and the  holders of the Notes,  be deemed to be a payment by the Company
to or on account of Senior Indebtedness, it being understood that the provisions
of this  Article 3 are and are  intended  solely for the purpose of defining the
relative rights of the holders of the Notes, on the one hand, and the holders of
the Senior Indebtedness, on the other hand.

         SECTION  3.06  Obligation  to Pay Not  Impaired.  Except as provided in
Section  2.03 hereof,  nothing  contained in this Article 3 or elsewhere in this
Agreement,  or in the Notes, is intended to or shall impair as among the Company
and the holders of the Notes,  the obligation of the Company,  which is absolute
and unconditional,  to pay to the holders of the Notes the outstanding principal
amount of the  Notes,  as and when the same  shall  become  due and  payable  in
accordance  with their terms, or to affect the relative rights of the holders of
the Notes nor shall anything  herein or therein prevent the holders of the Notes
from exercising,  subject to the terms hereof, all remedies otherwise  permitted
by  applicable  law  upon the  occurrence  of an Event  of  Default  under  this
Agreement, subject to the rights, if any, under this Article 3 of the holders of
the Senior  Indebtedness  in  respect of cash,  property  or  securities  of the
Company received upon the exercise of any such remedy.

<PAGE> 70
                                     ARTICLE 4.

                                    COVENANTS

         SECTION 4.01  Corporate  Existence.  The Company will do or cause to be
done all  things  necessary  to  preserve  and keep in full force and effect its
corporate existence;  provided,  however, that the Company shall not be required
to preserve any right or privilege  if the Board of  Directors  shall  determine
that the  preservation  thereof  is no longer  desirable  in the  conduct of the
business of the Company and that the loss thereof is not  disadvantageous in any
material respect to the holders of the Notes.

         SECTION  4.02  Payment of Taxes.  The Company  will pay or discharge or
cause to be paid or  discharged,  (i) all taxes,  assessments  and  governmental
charges  levied or  imposed  upon the  Company  or upon the  income,  profits or
property  of the  Company;  provided,  however,  that the  Company  shall not be
required to pay or  discharge  or cause to be paid or  discharged  any such tax,
assessment  or charge  which is being  contested  in good  faith by  appropriate
proceedings.

         SECTION 4.03 Limitation on Dividends. Until the Notes are paid in full,
the Company will not pay  dividends or make other  distributions  with regard to
its  outstanding  stock of any  class,  unless  the  holders  of  two-thirds  in
aggregate principal amount of the Notes outstanding consent,  except that if all
or a portion of the principal of the Subordinated  Notes due 2003,  issued under
an Indenture  between  General  Textiles and IBJ Schroeder Bank & Trust Company,
held by Family  Bargain on April 30, 1998 ("FB 2003  Notes") are  eliminated  or
satisfied  without  payment by the Company  (whether  because that  principal is
contributed  to the  Company,  because  of a merger of the  Company  and  Family
Bargain or otherwise), the Company may at any time when (i) all the Subordinated
Notes have been paid in full and (ii) no Event of Default  has  occurred  and is
continuing,  without the consent of any holders of Notes,  declare  dividends or
make other  distributions  to stockholders in an amount not exceeding (a) in any
year, $4 million and (b) in total,  the amount of the principal of FB 2003 Notes
which is eliminated or satisfied  without  payment by the Company.  This Section
4.03 will not prevent the Company from making payments to a parent which files a
consolidated  Federal or state income tax return for an  affiliated  group which
includes  the  Company  equal to the Federal or state  income  taxes the Company
would have had to pay if it had filed a separate return, and those payments will
not be treated as dividends or other distributions to stockholders.

         SECTION 4.04 Compliance  Certificate.  The Company shall deliver to the
holders of the Notes  within 105 days after the end of each  fiscal  year of the
Company an Officers'  Certificate stating that, after a review of the activities
of the Company  during such period and of the Company's  performance  under this
Agreement, whether or not, to the best knowledge of the signers thereof based on
such  review,  there has been any  Default or Event of Default by the Company in
performing any of its obligations  under this Agreement or the Notes. If they do
know of any such Default or Event of Default, the certificate shall describe the
Default or Event of Default and its status.

         SECTION  4.05  Notice of Default.  In the event that any Default  under
this Agreement shall occur,  the Company will give prompt written notice of such
Default to each registered holder of the Notes, specifying the nature and status
of such default and the steps which the Company has taken or proposes to take in
order to cure such Default.

         SECTION 4.06 Reports. The Company shall (i) within forty-five (45) days
of the close of each fiscal quarter of the Company cause to be furnished to each
registered holder of the Notes a copy of its consolidated  balance sheet, income
statement  and cash  flow  statement  for the  preceding  fiscal  quarter,  each
prepared in accordance with generally accepted accounting  principles applied on
a consistent basis and (ii) if the Company becomes required to file reports with
the Securities and Exchange  Commission,  within ten (10) days after the Company
files a report with the  Securities  and Exchange  Commission,  the Company will
furnish a copy of that report to each registered holder of Notes.

<PAGE> 71
                                     ARTICLE 5.

                              DEFAULTS AND REMEDIES

         SECTION 5.01      Events of Default.  An "Event of Default" occurs if:
         the Company defaults in the payment of any installment of the principal
         or interest of any Note  when the same becomes due and payable;

                           the  Company  fails  to  observe  or  perform  in any
         material  respect any of its  covenants or  agreements  in the Notes or
         this Agreement,  which failure  continues for a period of 60 days after
         the earlier of (i) the date on which  written  notice of such  failure,
         requiring the Company to remedy the same,  shall have been given to the
         Company  by the  holders  of at  least  twenty-five  percent  (25%)  in
         aggregate  principal  amount  of the Notes at the time  outstanding  or
         (ii)Ethe  date on  which  the  Company  had  Actual  Knowledge  of such
         failure;

                           the  Company  commits  a  default  under  any  Senior
         Indebtedness  and as a result  the  obligation  of the  Company  to pay
         principal or interest with regard to any of that Senior Indebtedness is
         accelerated  so that it becomes  due and  payable  prior to the date on
         which  it  would  otherwise  have  been  due  and  payable,   and  that
         acceleration is not rescinded or annulled within 30 days after the date
         on which the Company had Actual Knowledge of the acceleration; provided
         that if an event  of  default  under  Senior  Indebtedness  is cured or
         waived, any Event of Default under this Section 5.01(c) relating to the
         event of  default  under  the  Senior  Indebtedness,  and any  Event of
         Default under Section 5.01(a) because of failure to make an accelerated
         payment of principal or a payment of interest  which becomes due solely
         because of the Event of Default  under this  Section  5.01(c),  will be
         deemed to have been cured at the same time the event of  default  under
         the Senior  Indebtedness is cured or waived,  without any action by any
         holders of Notes.

                           the entry of an order for relief  under any  Debtors'
         Laws  against  the  Company  by  any  bankruptcy   court  of  competent
         jurisdiction which shall

                                   approve as properly filed a petition seeking 
         reorganization, arrangement, adjustment or composition;

                            appoint a Custodian for any part of its property; or

                                    order the  dissolution of the Company or the
                  winding  up or  liquidation  of its  affairs  and  such  order
                  remains  unstayed  and in effect  for a period of thirty  (30)
                  consecutive days;

                           the  appointment  of  a  Custodian  for  all  or  any
         substantial  part of the property of the Company,  and such appointment
         shall  continue  unstayed  and in effect  for a period  of thirty  (30)
         consecutive days; and

                           the  entry  of  judgment  by  a  court  of  competent
         jurisdiction  against the Company and the  scheduling  of a sale of any
         substantial part of the Company's property which is not stayed prior to
         the scheduled date of such sale.

<PAGE> 72

         SECTION  5.02  Acceleration.  If an  Event  of  Default  occurs  and is
continuing or has occurred and has continued for a period of not less than three
(3) months  without  having been waived,  remedied or cured,  the holders of not
less than  two-thirds  in principal  amount of the Notes,  or, in the case of an
Event of Default  specified in Section 5.01(a) hereof,  the holder of any of the
Notes,  by notice to the Company,  may declare the  principal of the Notes to be
due and payable, and upon such declaration,  the principal of the Notes shall be
due and payable immediately, provided that with regard to an Event of Default of
the type  described in Section  5.01(c) or (d), the  principal of the Notes will
become immediately due and payable when the Event of Default occurs, without the
passage  of three (3)  months  time and,  as to an Event of  Default of the type
described in Section  5.01(d),  without  notice from, or any other action on the
part of, the holders of the Notes.  The holders of not less than  two-thirds  of
the  principal  amount  of  the  Notes  may  rescind  an  acceleration  and  its
consequences by notice to the Company if the rescission  would not conflict with
any judgment or decree and if each  outstanding  Event of Default has been cured
or waived except,  unless  theretofore  cured,  nonpayment of principal that has
become due solely because of the  acceleration.  No such rescission shall affect
any subsequent Default or impair any right or remedy with respect thereto.

         SECTION 5.03 Other  Remedies.  Notwithstanding  any other  provision of
this  Agreement,  if an Event of Default  occurs and is continuing and the Notes
have been  accelerated in accordance with Section 5.02 above,  the holder of any
of the Notes may pursue any  available  remedy by proceeding at law or in equity
to  collect  the  payment  of the  principal  of the  Notes  or to  enforce  the
performance of any provision of the Notes or this Agreement.

         The  holder of any of the Notes may  maintain a  proceeding  even if it
does  not  possess  any of the  Notes  or does  not  produce  any of them in the
proceeding.  A delay or  omission  by any or all of the  holders of the Notes in
exercising  any  right or remedy  accruing  upon an Event of  Default  shall not
impair  the right or remedy or  constitute  a waiver of or  acquiescence  in the
Event of Default.  No remedy is exclusive of any other remedy.  All remedies are
cumulative.

         In case any or all of the holders of the Notes shall have  proceeded to
enforce any rights under this  Agreement  and such  proceedings  shall have been
discontinued  or abandoned  because of  rescission or annulment or for any other
reason or shall have been determined  adversely to the holders who  participated
in such proceedings,  then in every such case the Company and the holders of the
Notes  shall,  subject to any  determination  in such  proceeding,  be  restored
respectively  to their former  positions and rights  hereunder,  and all rights,
remedies  and powers of the Company and the holders of the Notes shall  continue
as though no such proceeding had been taken.

                                     ARTICLE 6.

                                  MISCELLANEOUS

         SECTION 6.01 Successors and Assigns in General. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors  and assigns,  except that the Company may not assign or transfer its
rights  hereunder or any interest herein or delegate its duties hereunder (other
than in a merger or other  combination  of the type  described in Section  4.01)
without the prior  written  consent of the holders of the Notes.  Each holder of
the Notes may assign,  pledge or transfer all or any portion of its Notes or its
rights  hereunder to the extent  permitted by law,  including  state and federal
securities laws. In the event of any such assignment,  pledge or transfer,  such
assignee shall, to the extent provided in such  assignment,  pledge or transfer,
be  entitled  to  exercise  the  rights  of the  holder  of a Note  making  such
assignment, pledge or transfer and shall be deemed a holder of a Note under this
Agreement.

<PAGE> 73

         SECTION 6.02 Further Assurance. The Company shall, from time to time at
the  request of any holder of a Note,  execute  and deliver to such holder or to
such  Person or  Persons  as such  holder  may  designate,  any and all  further
instruments as may in the reasonable opinion of such holder be necessary to give
full force and effect to any  transfer  or  assignment  contemplated  by Section
6.01,  and shall  provide  to such  holder or to such  Person or Persons as such
holder  may  designate,  all such  information  as such  holder  may  reasonably
request.

         SECTION  6.03 No Waiver.  No delay,  failure or  discontinuance  of any
holder of any of the Notes, in exercising any right,  power or remedy under this
Agreement or any of the Notes shall affect or operate as a waiver of such right,
power or remedy;  nor shall any single or partial  exercise  of any such  right,
power or  remedy  preclude,  waive or  otherwise  affect  any  other or  further
exercise  thereof or the  exercise  of any other  right,  power or  remedy.  Any
waiver,  permit,  consent  or  approval  of any kind by any holder of any of the
Notes, of any breach of or default under this Agreement or any of the Notes must
be in  writing  and  shall be  effective  only to the  extent  set forth in such
writing.

         SECTION  6.04  Set-Off.  In  addition  to any rights  now or  hereafter
granted  under  applicable  law and not by way of limitation of any such rights,
upon the first  occurrence  and during the  continuance  of any Event of Default
(after the giving of any notice and the expiration of any grace period contained
in the definition thereof),  any holder of any of the Notes is hereby authorized
by the Company at any time or from time to time,  without notice to the Company,
or to any other Person,  any such notice being hereby expressly  waived,  to set
off and to appropriate and to apply to any and all Indebtedness at any time held
or owing by such  holder to or for the  credit or the  account  of the  Company,
against and on account of the obligations and liabilities of the Company to such
holder under this  Agreement and the Notes,  including,  but not limited to, all
claims of any  nature  or  description  arising  out of or  connected  with this
Agreement or the Notes irrespective of whether or not (a) such holder shall have
made any demand hereunder,  or (b) such holder shall have declared the principal
of and  interest  on the Notes and other  amounts  due  hereunder  to be due and
payable,  and although said obligations and liabilities,  or any of them, may be
contingent or unmatured.

         SECTION 6.05 Notices. Any notice or other communication provided for or
permitted  hereunder,  in order to be effective,  shall, unless otherwise stated
herein,  be in writing or by telex,  telegram,  telecopy  or cable and mailed or
sent or  delivered,  as to each party  hereto,  at its address set forth in this
Section 6.05 or at such other  address as shall be designated by such party in a
written  notice to the other parties hereto as provided  hereunder.  All notices
and communications  shall be effective,  in the case of written notice, (i) when
delivered by hand,  (ii) five days after  having been given by  certified  mail,
return receipt  requested,  (iii) when delivered to the telegraph company in the
case of  telegraphic  notice,  (iv) when sent in the case of telex or telecopied
notice,  or (v) three  Business Days after  deposit with a recognized  overnight
delivery service. The addresses of the parties hereto are as follows:

THE COMPANY:              GENERAL TEXTILES
                                4000 Ruffin Road
                               San Deigo, CA 92123
                              Attention: President
                            Telecopier (619) 637-4180

NOTEHOLDERS:              AMERICAN ENDEAVOUR FUND LIMITED
                              c/o Kleinwort Benson (US) Asset Managers LLC
                                                75 Wall Street, 24th Floor
                                                New York, New York  10005
                                                Attention: Richard H. Wolf
                                                Telecopier: (212) 429-3099

<PAGE> 74
                          With a copy to:

                                Greenberg Traurig Hoffman Lipoff Rosen & Quentel
                                                MetLife Building
                                                200 Park Avenue, 15th Floor
                                                New York, New York  10166
                                                Attn:  Spencer G. Feldman, Esq.
                                                Facsimile:  (212) 801-6400

                                LONDON PACIFIC LIFE & ANNUITY COMPANY
                                                3109 Poplarwood Court, Suite 108
                                                Raleigh, North Carolina 27604
                                                Attention: Susan Y. Gressel
                                                Telecopier: (919) 981-2797

                          with copies to:

                                BERKELEY INTERNATIONAL CAPITAL CORPORATION
                                650 California Street
                                   Suite 2800
                                San Francisco, California 94108
                                Attn: John W. Quarterman, Esq.
                                Telecopier: (415) 249-0553

Any notice delivered to an address outside the United States of America shall be
duplicated by counterpart telex or telecopy.

         SECTION 6.06 Cost,  Expenses and  Attorney's  Fees.  The Company  shall
promptly  reimburse  each  holder of the Notes for all  out-of-pocket  costs and
expenses, including, without limitation,  reasonable attorneys' fees expended or
incurred  by such  holder in the  enforcement  of this  Agreement  or any of the
Notes,  actions for  declaratory  relief in any way related to this Agreement or
any holder of the Notes or the  collection  of any sum which becomes due to such
holder on any of the Notes or pursuant to this Agreement.

         SECTION 6.07 Entire Agreement,  Amendment. The Notes and this Agreement
constitute  the entire  agreement  between  the Company and the persons who from
time to time are holders of Notes with respect to the subject  matter hereof and
thereof;  supersede  all prior  negotiations,  communications,  discussions  and
correspondence  concerning  the subject  matter  hereof and thereof;  and may be
amended or modified,  or any provision hereof may be waived, or any acceleration
rescinded,  only with the written  consent of the holders of  two-thirds  of the
principal amount of the Notes then outstanding, except that no such amendment or
modification  shall  become  effective if it extends the maturity or reduces the
rate of interest payable with respect to the Notes,  alters the terms of payment
of the  principal  or interest  under the Notes,  or reduces the  percentage  of
holders of principal  amount of the Notes necessary to approve  modifications or
amendments  to this  Agreement  without  the consent of each holder of the Notes
affected thereby.

         SECTION 6.08 Time.  Time is of the essence of each and every provision 
of this Agreement and the Notes.

<PAGE> 75

         SECTION 6.09 Good Faith and Fair Dealing. The Company agrees to perform
its  obligations  under  this  agreement  and the Notes in good faith and in the
spirit of fair dealing.

         SECTION  6.10  Severability  of  Provisions.  If any  provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be  ineffective  only to the  extent  of such  prohibition  or  invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

         SECTION 6.11 Governing Law.  This Agreement and the Notes shall be 
governed by and construed in accordance with the substantive laws of the State 
of New York.

         SECTION 6.12  Counterparts.  This Agreement may be signed in any number
of  counterparts  with the same effect as if the signatures to each  counterpart
were upon a single instrument.  All counterparts shall be considered an original
of this Agreement.

         IN WITNESS  WHEREOF,  the parties have caused this Junior  Subordinated
Note Agreement to be executed as of the date first above written.

THE COMPANY:                      GENERAL TEXTILES, a California corporation

                                     By: /s/ Jonathan W. Spatz
                                     Its: Executive Vice President


ENDEAVOUR:                        AMERICAN ENDEAVOUR FUND LIMITED,
                                  a Jersey corporation (Involuntary Liquidation)

                                     By:
                                     Its: Liquidator

LONDON PACIFIC:                   LONDON PACIFIC LIFE & ANNUITY COMPANY,
                                  a North Carolina joint stocklife insurer

                                     By: /s/ Susan Y. Gressel
                                     Its: V.P. & Treasurer