NOTE EXCHANGE AGREEMENT

         This is an agreement  dated April 27, 1998 among General  Textiles (the
"Company"),  a  California  corporation,  Family  Bargain  Corporation  ("Family
Bargain") American  Endeavour Fund Ltd., a Jersey corporation  ("Endeavour") and
London  Pacific Life  Annuity  Company  ("London  Pacific,"  and  together  with
Endeavour,  the  "Noteholders"),  a North  Carolina  joint  stock life  insurer,
regarding the exchange by the Noteholders (a) of $4,900,000  principal amount of
Subordinated  Reorganization Notes (the "Old Subordinated Notes") for $3,250,000
principal amount of Subordinated Notes due 2003 ("New Subordinated  Notes"), and
(b)  a  total  of   $17,335,097.65   principal  amount  of  Junior   Subordinate
Reorganization  Notes (the "Old Junior Notes") for (i) $17,335,097.65  principal
amount of Junior  Subordinated  Notes due 2005 ("New  Junior  Notes"),  warrants
("Warrants")  entitling  the  holders to  purchase a total of 274,418  shares of
common  stock,  par value $.01 per share,  of the Company  ("Common  Stock") and
75,000 shares of Common Stock (the "Shares"). The agreement of the parties is as
follows:

                                     ARTICLE I

                                EXCHANGE OF NOTES

         SECTION 01 Exchange of Notes.  At the Closing  described  in  Paragraph
2.01,  each  of the  Noteholders  will  Exchange  the  principal  amount  of Old
Subordinated  Notes  and  Old  Junior  Notes  listed  next  to the  name of that
Noteholder on Exhibit 1.01 for the principal amounts of New Subordinated  Notes,
Junior  Notes  and  Warrants  or  shares   Common  Stock  shown   opposite  that
Noteholder's name on Exhibit 1.01.


                                     ARTICLE II

                                   THE CLOSING

         SECTION 2.01 Place and Time of the Closing. The closing of the exchange
of Old Subordinated  Notes and Old Junior Notes for New Subordinated  Notes, New
Junior Notes, Warrants and Shares (the "Closing") will take place at the offices
of Rogers & Wells,  200 Park Avenue,  New York, New York at 11:00 A.M., New York
City time, on April 30, 1998 (the "Closing Date").

         SECTION 2.02      Occurrences at the Closing.

                   At the Closing,  the Company will deliver to each  Noteholder
the following:

       (i)A copy, executed by the Company, of a Subordinated Note Agreement (the
"Subordinated Note Agreement") substantially in the form of Exhibit 2.02-A(1).

       (ii) A New  Subordinated  Note, in the principal  amount shown on Exhibit
1.01.

       (iii) A copy,  executed by the  Company,  of a Junior  Subordinated  Note
Agreement  (the "Junior Note  Agreement')  substantially  in the form of Exhibit
2.02-A(3).

<PAGE> 37

                           (iv) A New Junior  Subordinated Note in the principal
amount shown on Exhibit 1.01.

 The New Subordinated Notes will be in the form of Exhibit A to the Subordinated
Note  Agreement and the New Junior Notes will be in the form of Exhibit A to the
Junior Note Agreement.  The New Subordinated Note and the New Junior Note issued
to a Noteholder each will be registered in the name of that Noteholder, and each
may bear a legend to the effect  that it was issued in a  transaction  which was
not registered  under the Securities Act of 1933, as amended,  and it may not be
sold or transferred  except in a transaction  which is registered under that Act
or is exempt from the registration requirements of that Act.

                   (b)     At the  Closing,  Family  Bargain will deliver to the
Noteholders the following:

          (i) To Endeavour, a certificate,  registered in the name of Endeavour,
              representing the Shares.

          (ii)To London Pacific, a Warrant, substantially in the form of Exhibit
2.02-B(2),  registered in the name of London Pacific, relating to 274,418 shares
of Common Stock.

          (iii)To each of the Noteholders,  a copy,  executed by Family Bargain,
of  a  Registration  Rights  Agreement  (the  "Registration  Rights  Agreement")
substantially in the form of Exhibit 2.02-B(3).

                  The  certificates  representing  the  Shares  and the  Warrant
delivered  at the  Closing  each may bear a legend to the effect that the Shares
were, or the Warrant was, issued in a transaction which was not registered under
the  Securities  Act of 1933,  as  amended,  and may not be sold or  transferred
except in a transaction which is registered under that Act or is exempt from the
registration requirements of that Act.

                   (c)     At the Closing,  each  Noteholder will deliver to the
Company the following:

(i)Old Subordinated Notes and Old Junior Notes in the aggregate principal amount
shown on Exhibit  1.01, in proper form for transfer to the Company in accordance
with Article 8 of the Uniform  Commercial  Code as in effect in New York (or, if
Old Subordinated  Notes or Old Junior Notes have been lost, an affidavit of lost
notes in the form of Exhibit 2.02-C relating to the lost Old Subordinated  Notes
or  Old  Junior  Notes,  accompanied  by  a  document  assigning  the  lost  Old
Subordinated Notes or Old Junior Notes to the Company).

                              (ii) A copy,  executed by the Noteholder,  of the
Subordinated Note Agreement.

                (iii) A copy, executed by the Noteholder, of the
Junior Note Agreement.

                              (iv) A document,  executed by the Noteholder,  in
which the Noteholder states that
the New  Subordinated  Notes,  New  Junior  Notes and  Warrants  or  Shares  the
Noteholder  receives at the Closing are in full  satisfaction of all obligations
of the  Company  with  regard to the Old  Subordinated  Notes and the Old Junior
Notes being  delivered,  or which are the subject of the affidavit of lost notes
being  delivered,  by the  Noteholder  at the  Closing,  and with  regard to the
indebtedness  which resulted in the issuance of the Old  Subordinated  Notes and
the Old Junior Notes to the Noteholder or its predecessor in interest.

<PAGE> 38

(v)A letter stating that the Noteholder will be acquiring New Subordinated Note,
the New Junior  Note and the Warrant or Shares  which are being  issued to it at
the Closing for investment, and not with a view to the resale or distribution of
any of them.

(vi) A letter in which the Noteholder consents to any and all of (i) a merger of
the Company for the sole purpose of reincorporating  in Delaware,  (ii) a merger
of the Company  with  Factory 2-U and (iii) a merger of the Company  with Family
Bargain.

(vii) A copy, executed by the Noteholder of the Registration Rights Agreement.


                                     ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.01  Representations  and Warranties of the Company and Family
Bargain.  The Company and Family  Bargain  jointly and  severally  represent and
warrant to each Noteholder as follows:

The Company and Family Bargain each is a corporation duly incorporated,  validly
existing  and in good  standing  under  the  laws of the  state  in which it was
incorporated.

The  Company  and Family  Bargain  each has all  corporate  power and  authority
necessary  to  enable  it to  enter  into  this  Agreement  and  carry  out  the
transactions  contemplated by this Agreement. All corporate actions necessary to
authorize  each of the Company and Family  Bargain to enter into this  Agreement
and  carry  out the  transactions  contemplated  by it  have  been  taken.  This
Agreement has been duly  executed by the Company and by Family  Bargain and is a
valid and binding agreement of each of them, enforceable against each of them in
accordance with its terms.

Neither the  execution  or delivery of this  Agreement  or of any document to be
delivered  in  accordance  with  this  Agreement,  nor the  consummation  of the
transactions  contemplated  by this Agreement or by any document to be delivered
in  accordance  with this  Agreement,  will  violate,  result in a breach of, or
constitute a default (or an event  which,  with notice or lapse of time or both,
would  constitute a default) under, the Articles or Certificate of Incorporation
or by-laws of the Company or Family  Bargain,  any  agreement or  instrument  to
which the Company or Family Bargain or any of their respective subsidiaries is a
party  or by  which  any of  them is  bound,  any  law,  or any  order,  rule or
regulation  of  any  court  or  governmental  agency  or  any  other  regulatory
organization  having  jurisdiction  over the Company,  Family  Bargain or any of
their respective subsidiaries.

When executed and delivered at the Closing,  (i) the Subordinate  Note Agreement
and the Junior Note Agreement each will be a valid and binding  agreement of the
Company, enforceable against the Company in accordance with its terms, (ii) each
of the New Subordinated Notes and New Junior Notes which the Company is required
to deliver at the Closing  will be a valid and binding  debt  instrument  of the
Company,  enforceable against the Company in accordance with its terms and (iii)
the Warrant  issued at the Closing and the  Registration  Rights  Agreement each
will be a valid and binding  agreement of Family  Bargain,  enforceable  against
Family Bargain in accordance with its terms.

When issued at the Closing,  the Shares will be, and when shares of Common Stock
are issued upon exercise of Warrants,  those shares will be, validly authorized,
duly
issued, fully paid and non-assessable.

<PAGE> 39

No  governmental  filings,  authorizations,  approvals  or  consents,  or  other
governmental  actions,  are required to permit the Company or Family  Bargain to
fulfill all its obligations under this Agreement.

When it is filed with the Securities and Exchange  Commission,  Family Bargain's
Annual  Report on Form 10-K for the fiscal  period  ended  January 31, 1998 (the
"Family  Bargain  10-K")  will (i)  comply  in all  material  respects  with the
requirements  for a report on Form 10-K,  (ii) not contain a  misstatement  of a
material  fact or  omit  to  state  any  material  fact  necessary  to make  the
statements in it not misleading,  and (iii) not differ materially from the draft
which  is  Exhibit  3.01-G  to this  Agreement.  Since  the  dates  as of  which
information is provided in the Family  Bargain 10-K,  there has been no material
adverse  change  (other  than as a result of  normal  seasonal  factors)  in the
business, financial condition or results of operations of Family Bargain and its
subsidiaries taken as a whole.

SECTION 3.02 Noteholders'  Representations and Warranties.  Each Noteholder, for
itself but not for any other Noteholder,  represents and warrants to the Company
and to Family Bargain as follows:

The Noteholder is a corporation duly incorporated,  validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated.

The Noteholder has all corporate  power and authority  necessary to enable it to
enter into this Agreement and carry out the  transactions  contemplated  by this
Agreement.  All corporate actions necessary to authorize the Noteholder to enter
into this Agreement and carry out the  transactions  contemplated by it and have
been taken.  This  Agreement has been duly executed by the  Noteholder  and is a
valid  and  binding  agreement  of  the  Noteholder,   enforceable  against  the
Noteholder in accordance with its terms.

Neither the  execution  of this  Agreement  or any  document to be  delivered in
accordance  with  this  Agreement  nor  the  consummation  of  the  transactions
contemplated  by this Agreement or by any document to be delivered in accordance
with this Agreement will violate, result in a breach of, or constitute a default
(or an event  which,  with  notice or lapse of time or both would  constitute  a
default)  under the  Certificate  or  Articles of  Incorporation  or by-laws (or
comparable organic documents) of the Noteholder,  any agreement or instrument to
which the  Noteholder is a party or by which it is bound,  any law or any order,
rule or  regulation  of any court or  governmental  agency  or other  regulatory
organization having jurisdiction over the Noteholder.

When executed and delivered at the Closing, the Subordinated Note Agreement, the
Junior Note Agreement and the Registration Rights Agreement each will be a valid
and binding agreement of the Noteholder,  enforceable  against the Noteholder in
accordance with its terms.

The Noteholder owns the Old  Subordinated  Notes and the Old Junior Notes listed
opposite the  Noteholder's  name on Exhibit  1.01,  free and clear of any liens,
encumbrances  or claims by anyone else, the  Noteholder  has not  transferred to
anyone else any interest in those Old  Subordinated  Notes or Old Junior  Notes,
the Noteholder  has full power and authority to transfer those Old  Subordinated
Notes and the Old Junior Notes to the Company, and when the Noteholder transfers
those Old Subordinated Notes and Old Junior Notes to the Company, the Noteholder
will have no further  interest  in those Old  Subordinated  Notes and Old Junior
Notes,  and neither the  Noteholder  nor anyone else will be entitled to receive
any sum  (including  any sum which may be due at the time of the transfer)  with
regard to them.

<PAGE> 40

No  governmental  filings,  authorizations,  approvals  or  consents,  or  other
governmental  actions,  are required to permit the Noteholder to fulfill all its
obligations under this Agreement.


                                   ARTICLE IV

                                    COVENANT

         SECTION 4.01 Effort to Prepay New  Subordinated  Notes.  Family Bargain
and General  Textiles  will use their best efforts to complete by June 30, 1998,
or as soon as  practicable  after that,  a sale of equity  securities  of Family
Bargain or  General  Textiles  which will  provide  funds  sufficient  to enable
General Textiles to prepay the principal of the New Subordinated  Notes in full,
and  promptly  after  completion  of that  sale of  equity  securities,  General
Textiles will prepay the principal of the New Subordinated Notes in full.


                                     ARTICLE V

                         CONDITIONS PRECEDENT TO CLOSING

         SECTION 5.01  Conditions to Company's  Obligations.  The obligations of
the Company and Family Bargain at the Closing are subject to satisfaction of the
following conditions (any or all of which may be waived by Family Bargain):

The representations and warranties of each of the Noteholders  contained in this
Agreement will, except as contemplated by this Agreement, be true and correct in
all  material  respects at the Closing Date with the same effect as through made
on that date.

Each of the  Noteholders  will have  fulfilled in all material  respects all its
obligations under this Agreement  required to have been fulfilled prior to or at
the Closing.

No order will have been entered by any court or governmental authority and be in
force  which  invalidates  this  Agreement  or  restrains  the Company or Family
Bargain  from  completing  the  transactions  which  are  the  subject  of  this
Agreement.

         SECTION 5.02 Conditions to Noteholders' Obligations. The obligations of
each of the  Noteholders at the Closing are subject to the following  conditions
(any or all of which may be waived by any Noteholder as to itself):

The  representations  and warranties of the Company and Family Bargain contained
in this Agreement will,  except as  contemplated by this agreement,  be true and
correct in all material  respects at the Closing  Date,  with the same effect as
though made on that date.

The Company and Family Bargain each will have fulfilled in all material respects
all its  obligations to that  Noteholder  under this Agreement  required to have
been fulfilled prior to or at the Closing.

<PAGE> 41

No order will have been entered by any court or governmental authority and be in
force which  invalidates  this  Agreement  or  restrains  that  Noteholder  from
completing the transactions which are the subject of this Agreement.

                                   ARTICLE VI

                               ABSENCE OF BROKERS

         SECTION  6.01  Representations  and  Warranties  Regarding  Brokers and
Others.  The Company and Family Bargain jointly and severally  represent to each
of the  Noteholders,  and each  Noteholder  represents to the Company and Family
Bargain,as to that  Noteholder but not as to any other  Noteholder,  that nobody
acted  as a  broker,  a finder  or in any  similar  capacity  on its  behalf  in
connection with the  transactions  which are the subject of this Agreement.  The
Company  and  Family  Bargain  jointly  and  severally  indemnify  each  of  the
Noteholders against and agree to hold each of the Noteholders harmless from, and
each of the  Noteholders  indemnifies  each of the  Company  and Family  Bargain
against and agrees to hold each of the Company and Family Bargain harmless from,
all losses, liabilities and expenses,  including, but not limited to, reasonable
fees and expenses of counsel and costs of investigation) incurred because of any
claim by  anyone  for  compensation  as a  broker,  a finder  or in any  similar
capacity by reason of services  allegedly  rendered to the indemnifying party in
connection with the transactions which are the subject of this Agreement.


                                   ARTICLE VII

                                     GENERAL

         SECTION  7.01  Expenses.  The Company,  Family  Bargain and each of the
Noteholders will pay its own expenses in connection with transactions  which are
the subject of this Agreement,  except that the Company will reimburse Endeavour
for fees and expenses of legal counsel up to a maximum of $15,000.

         SECTION 7.02 Entire  Agreement.  This Agreement and the documents to be
delivered in accordance with this Agreement  contain the entire  agreement among
the  Company,  Family  Bargain and the  respective  Noteholders  relating to the
transactions  which are the subject of this Agreement and those other documents,
all prior negotiations,  understandings and agreements among the Company, Family
Bargain and the  respective  Noteholders  are  superseded by this  Agreement and
those  other   documents,   and  there  are  no   representations,   warranties,
understandings or agreements  concerning the transactions  which are the subject
of this Agreement or those other  documents other than those expressly set forth
in this Agreement or those other documents.

         SECTION 7.03 Captions.The captions of the articles and sections of this
Agreement   are  for  reference   only,   and  do  not  affect  the  meaning  or
interpretation of this Agreement.

         SECTION  7.04  Notices  and Other  Communications.  Any notice or other
communication  under this  Agreement must be in writing and will be deemed given
when  delivered  in person or sent by  facsimile  (with  proof of receipt at the
number to which it is  required to be sent) or on the third  business  day after
the day on which  mail by first  class mail from  within  the  United  States of
America, addressed if to the Company or Family Bargain, at 4000 Ruffin Road, San
Diego, CA 92123, Facsimile No. (619) 637-4180, and if to any Noteholder,  at the
address or facsimile number shown under that  Noteholder's name on the signature
page of this  Agreement  or as  otherwise  shown on the  Company's  register  of
Noteholders.  The address or facsimile number to which communications  should be
sent to the  Company or to a  Noteholder  may be  changed  by a notice  given as
provided in this Section.

<PAGE> 42

         SECTION 7.05  Governing  Law. This  Agreement  will be governed by, and
construed under, the substantive laws of the State of New York.

         SECTION  7.06  Amendments.  This  Agreement  may be  amended  only by a
document in writing  signed by the  Company  and,  if an  amendment  affects any
Noteholder, signed by that Noteholder.

         SECTION 7.07  Counterparts.  This  Agreement  may be executed in two or
more counterparts, some of which may be signed by fewer than all the parties and
may be  delivered  by  facsimile  transmission,  each of which will be deemed an
original, but all of which together will constitute one and the same agreement.

         IN WITNESS  WHEREOF,  the Company,  Family Bargain and the  Noteholders
have executed this  Agreement,  intending to be legally bound by it, on the date
shown on the first page of this Agreement.

THE COMPANY:                        GENERAL TEXTILES

                                     By:
                                     Title:


FAMILY BARGAIN:                     FAMILY BARGAIN CORPORATION

                                     By:
                                     Title:

                                     NOTEHOLDERS:
                                     AMERICAN   ENDEAVOUR   FUND LIMITED
                                     By:
                                     Title:
                          c/o Kleinwort Benson (US) Asset Managers LLC
                          75 Wall Street, 24th Floor
                          New York, New York 10005
                          Attention: Richard H. Wolf
                          Facsimile No.: (212) 429-3099

                      LONDON PACIFIC LIFE & ANNUITY COMPANY
                                       By:
                                     Title:
                          3109 Poplarwood Court, Suite 1800
                          Raleigh, North Carolina 27604
                          Attention: Susan Y. Gressel
                          Facsimile No.: (919) 981-2797


<PAGE> 43
                                  EXHIBIT 1.01


---------------------- --------------------------- ----------------------------
            Noteholder      Endeavour                  London Pacific
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Old Subordinated Notes    2,338,978.56                  2,561,021.44
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Old Junior Notes          8,274,779.95                  9,060,317.70
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
New Subordinated Notes    1,551,363.33                  1,698,636.67
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
New Junior Notes          8,274,779.94                  9,060,317.71
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Shares                       75,000                             0
---------------------- --------------------------- ----------------------------
---------------------- --------------------------- ----------------------------
Warrants                          0                       274,418
---------------------- --------------------------- ----------------------------