THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR REGISTERED OR QUALIFIED  UNDER THE  SECURITIES  LAWS OF ANY STATE
AND MAY NOT BE SOLD OR TRANSFERRED  EXCEPT IN COMPLIANCE WITH THE ACT, THE RULES
AND REGULATIONS PROMULGATED THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS.

PAYMENT OF ALL SUMS DUE UNDER THIS NOTE IS SUBJECT TO  SUBORDINATION  PROVISIONS
SET FORTH IN A SUBORDINATED  NOTE  AGREEMENT  AMONG GENERAL  TEXTILES,  AMERICAN
ENDEAVOUR FUND LIMITED AND LONDON PACIFIC LIFE & ANNUITY COMPANY DATED APRIL 30,
1998. A COPY OF THE SUBORDINATED  NOTE AGREEMENT IS ON FILE AT THE CORPORATION'S
PRINCIPAL OFFICE.

$1,698,636.67     April 30, 1998

                           SUBORDINATED NOTE DUE 2003

         FOR VALUE RECEIVED,  General  Textiles,  a California  corporation (the
"Corporation")  hereby  promises  to pay to the order of London  Pacific  Life &
Annuity Company, or its registered assigns (the "Holder"),  the principal sum of
one million six hundred ninety-eight thousand six hundred thirty-six dollars and
sixty-seven cents  ($1,698,636.67) which shall be due and payable to the Holder,
as follows:

                             ------------------------ -------------------------
                                                      Percentage of Original
                                                      Principal Amount Plus
                             Principal Payment        Interest Added to
                                    Date              Principal to be Paid
                             ------------------------ -------------------------
                             ------------------------ -------------------------
                             December 31, 1999        5.768644%
                             December 31, 2000        5.768644%
                             December 31, 2001        11.537287%
                             December 31, 2002        11.537287%
                             May 28, 2003             65.388138%
                                                      ----------
                                                      100.000000%
                             ------------------------ -------------------------
         All principal and interest which is not paid prior to May 28, 2003 will
be due and payable on that day.

         If the entire principal of the Notes is paid by May 28, 1998, the Notes
will not bear  interest.  After May 28,  1998,  this  Note  will bear  interest,
payable  quarterly in arrears not later than the fifteenth  (15th) day after the
end of each calendar quarter. Between May 29, 1998 and March 31, 1999, this Note
shall bear interest at the rate of nine and two-tenths  percent (9.2%) per annum
from May 28, 1998. If any principal balance remains  outstanding on this Note on
April 1, 1999,  the interest rate on this Note will  increase on such date,  and
thereafter  on the  first day of each  successive  calendar  quarter  thereafter
(i.e.,  April 1, July 1,  October 1 and so forth)  by one  hundred  (100)  basis
points (i.e., so that the per annum interest rate on this Note shall increase by
one full percent  (1%) of the  principal of the Note as of the first day of each
calendar quarter commencing April 1, 1999); provided, however, that the interest
rate on this Note shall not exceed  thirteen and two-tenths  percent (13.2%) per
annum. If any principal or interest of any of the Notes is not paid when due,

<PAGE> 61

the entire  principal  amount of this Note will bear  interest from the date the
overdue  principal  or interest is due until it is paid at the rate which is 300
basis points higher than the rate which would otherwise  apply.  Interest on the
principal  amount  of this Note  shall be  computed  on the basis of the  actual
number of days elapsed in a year of 360 days from the last day on which interest
has been paid (or, if no interest has been paid,  from the day on which interest
began to accrue).  Payments  on this Note shall be applied  first to accrued but
unpaid interest and then to principal.

         Each payment  with regard to this Note will be made in U.S.  Dollars in
cash or by wire transfer of funds which are  immediately  available at the place
of payment to the account of the Holder set forth in  Attachment  1 to this Note
or at any other  place of payment  that may be  designated  by the Holder in the
manner  described in the Note  Purchase  Agreement  at least two  Business  Days
before the day on which the payment is due.

         This Note is one of the  "Subordinated  Notes due 2003" referred to in,
and the Holder is entitled to all the rights,  preferences  and  privileges  set
forth in and other benefits of, that certain Subordinated Note Agreement of even
date herewith by and among the Corporation,  American Endeavour Fund Limited and
London  Pacific Life & Annuity  Company  (the  "Subordinated  Note  Agreement").
Capitalized  terms used without  definition in this Note shall have the meanings
given to them in the Subordinated Note Agreement.

         The  Corporation may prepay all or any portion of the principal of this
Note at any time without  prepayment  penalty or premium.  If this Note is to be
prepaid only in part, this Note shall be surrendered to the  Corporation  (with,
if the Corporation so requires,  due endorsement by, or a written  instrument of
transfer in form satisfactory to the Corporation duly executed by, the Holder or
its attorney duly authorized in writing),  and the Corporation shall execute for
the Holder 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.

         The Holder may assign,  pledge or  transfer  all or any portion of this
Note or such Holder's rights hereunder to the extent permitted by law, including
state and federal  securities laws. In the event of any such assignment,  pledge
or  transfer,  the assignee of this Note shall,  to the extent  provided in such
assignment,  pledge or transfer, be entitled to exercise the rights of a Holder.
Upon any transfer of all or any portion of this Note,  the Holder shall  present
this Note to the Corporation, accompanied by an executed form of assignment. The
Corporation  shall  thereupon  issue a new Note or Notes  to the  transferee  or
transferees  having a principal equal to the amount of this Note so transferred,
but otherwise in all other  respects  identical to this Note, and shall issue to
the Holder a new Note having a principal equal to the amount of this Note not so
transferred,  which Note shall  otherwise be identical to this Note in all other
respects.

         Except  as  otherwise  expressly  provided  in  the  Subordinated  Note
Agreement,  the Corporation waives presentment,  demand, notice, protest and all
other  demands  and  notices  in  connection  with  the  delivery,   acceptance,
performance,  default  or  enforcement  of this Note and the  Subordinated  Note
Agreement.  In any action on this  Note,  the  Holder or its  assignee  need not
produce or file the  original of this Note,  but need only file a  photocopy  of
this Note certified by the Holder or such assignee to be a true and correct copy
of this Note.

         The  Corporation  agrees  to pay  all  costs  and  expenses,  including
reasonable  attorneys' fees and expenses,  expended or incurred by the Holder in
connection  with  the  enforcement  of this  Note,  the  collection  of any sums
hereunder,  any actions for declaratory  relief in any way related to this Note,
or the protection or preservation of any rights of the Holder hereunder.

<PAGE> 62

         IN WITNESS WHEREOF,  the Corporation has caused this  Subordinated Note
due 2003 to be executed by its duly authorized  officer as of the date set forth
above.

                   GENERAL TEXTILES, a California corporation

                                       By: /s/ Jonathan W. Spatz

                                       Its: Executive Vice President

<PAGE> 63
                                                         Attachment 1


                                Place of Payment

Wire transfer payments should be made to the account of the Holder at:

         Bank:             NationsBank Customer Connection
                           Dallas, Texas
         ABA Number:       111000012
         Account Name:     London Pacific Life & Annuity Company
         Account Number:   3750326028
         Reference:        General Textiles