<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1998
REGISTRATION NO. 333-58797
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
FAMILY BARGAIN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
------------------------
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
<TABLE>
<S> <C>
5651 50-0299573
(Primary Standard Industrial Classification Code Number) (I.R.S. Employee Identification Number)
</TABLE>
4000 RUFFIN ROAD
SAN DIEGO, CALIFORNIA 92123
(619) 627-1800
(Address, Including Zip Code and
Telephone Number, Including Area Code of Registrant's Executive Offices)
MICHAEL SEARLES
FAMILY BARGAIN CORPORATION
4000 RUFFIN ROAD
SAN DIEGO, CALIFORNIA 92123
(619) 627-1800
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code of Agent for Service)
------------------------
COPIES TO:
DAVID W. BERNSTEIN
ROGERS & WELLS LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-2 LOCATION OR HEADING IN PROSPECTUS
---------------------------------------------- ------------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................ Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Changes.............. Outside Front Cover Page; Prospectus Summary; Risk Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Outside Front Cover Page; Underwriting
6. Dilution.................................... Not Applicable
7. Selling Security Holders.................... Not Applicable
8. Plan of Distribution........................ Outside Front Cover Page
9. Description of Securities to be
Registered................................ Inside Front Cover Page
10. Interests of Named Experts and Counsel...... Not Applicable
11. Information with Respect to the
Registrant................................ Inside Front Cover Page; Prospectus Summary; The Company;
Selected Consolidated Historical and Pro Forma Financial
Data; Management's Discussion and Analysis of Financial
Condition and Results of Operation; Business;
Operations; Management
12. Incorporation of Certain Information By
Reference................................. Information Incorporated by Reference.
13....... Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 13, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
800,000 SHARES
FAMILY BARGAIN CORPORATION
COMMON STOCK, PAR VALUE $.01
We are offering to sell a total of 800,000 shares of our Common Stock, after
completion of a recapitalization, to holders of transferable rights ("Rights")
which we are distributing to our stockholders. Each Right entitles the holder to
purchase one share of post-Recapitalization Common Stock for $13.00. If our
stockholders do not approve a merger that will result in the recapitalization,
each Right will entitle the holder to purchase 3.75 shares of
pre-recapitalization Common Stock for $3.467 per share (a total of $13 per
Right). See "The Restructuring of Our Capitalization" on page 15. Holders who
exercise Rights will have the privilege to oversubscribe to purchase Common
Stock that is offered to holders of Rights, but not purchased because Rights are
not exercised. THE RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
NOVEMBER 30, 1998, UNLESS WE EXTEND THE EXPIRATION TIME.
Our Common Stock is traded on the Nasdaq Small-Cap Market under the symbol
"FBAR". The last reported price at which our Common Stock was sold on October 9,
1998 was $1.719. We have applied to have the Rights quoted on the Nasdaq
Small-Cap Market under the symbol "FBARR."
SEE "RISK FACTORS", WHICH BEGINS ON PAGE 12, FOR A DISCUSSION OF SOME
IMPORTANT FACTORS YOU SHOULD CONSIDER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC COMMISSIONS COMPANY (1)
<S> <C> <C> <C>
Per Share...................................... $13.00(2) Not applicable $13.00(2)
Total.......................................... $10,400,000 Not applicable $10,400,000
</TABLE>
(1) Before deducting our expenses, estimated at approximately $300,000.
(2) If our stockholders do not approve a merger which will result in a
recapitalization, the per share price will be $3.467.
The date of this Prospectus is October , 1998.
<PAGE>
INFORMATION ABOUT US
This Proxy Statement/Prospectus incorporates important business and
financial information about us that is not included in or delivered with this
Proxy Statement/Prospectus. That is described under "Information Incorporated by
Reference."
We will provide the information incorporated into this Proxy
Statement/Prospectus without charge to stockholders upon written or oral
request, to the extent it does not already accompany this Proxy
Statement/Prospectus. Requests should be addressed to Jonathan Spatz, Chief
Financial Officer, Family Bargain Corporation, 4000 Ruffin Road, San Diego, CA
92123; Telephone No. (619) 627-1800; Facsimile No. (619) 637-4180. TO BE SURE OF
OBTAINING TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION BY NOVEMBER 20,
1998.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary..................................................................... 3
Summary Financial Information.......................................................... 7
The Offering........................................................................... 9
Risk Factors........................................................................... 12
The Company............................................................................ 15
The Restructuring of our Capitalization................................................ 15
Use of Proceeds........................................................................ 17
Capitalization......................................................................... 18
Stock Prices........................................................................... 19
Dividend Policy........................................................................ 19
Business............................................................................... 19
Management............................................................................. 24
Description of Capital Stock........................................................... 27
Legal Matters.......................................................................... 29
Experts................................................................................ 29
Information Incorporated by Reference.................................................. 29
</TABLE>
2
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. A PROSPECTIVE
PURCHASER OF COMMON STOCK SHOULD READ THE ENTIRE PROSPECTUS BEFORE REACHING AN
INVESTMENT DECISION.
THE COMPANY
<TABLE>
<S> <C>
BUSINESS.......................... We operate chains of 124 Family Bargain Center and 38
Factory 2-U off-price retail apparel and housewares
stores in Arizona, California, New Mexico, Nevada,
Oregon, Texas and Washington.
RECAPITALIZATION.................. We are offering shares to holders of Rights as part of a
restructuring of our capitalization. When this
restructuring of our capitalization is completed, (1) we
will have restructured much of our debt and redeemed
part of it, (2) we will have sold Common Stock to
holders of Rights for slightly more than $10 million and
(3) if our stockholders give their approval, we will
have undergone a recapitalization by which, among other
things, all of our Series A Preferred Stock and Series B
Preferred Stock will have been converted into Common
Stock. If our stockholders do not approve the
recapitalization, we may cause our subsidiary, General
Textiles, Inc., to make an exchange offer to our
stockholders. If it does, at least a substantial portion
of our Common Stock and Series B Preferred Stock, and
possibly some of our Series A Preferred stock, will be
exchanged for General Textiles common stock and instead
of owning all of General Textiles (which operates our
two store chains), our only significant assets will be a
minority shareholding in General Textiles and
subordinated notes from General Textiles. See "The
Restructuring of our Capitalization."
If the recapitalization is approved by our stockholders,
it will be carried out by a merger of General Textiles,
Inc. into ourselves. As a result of that merger, each
share of Common Stock will be converted into .30133
shares of post-recapitalization Common Stock, each share
of Series A Preferred Stock will be converted into one
share of post-recapitalization Common Stock and each
share of Series B Preferred Stock will be converted into
173.33 shares of post-recapitalization Common Stock. As
a result of the merger, our name will be changed to
Factory 2-U Stores, Inc. The merger must be approved by
holders of a majority of our outstanding Common Stock
and Series B Preferred Stock, voting as a single class,
and by the holders of a majority of our outstanding
Series A Preferred Stock, voting separately.
Three funds ("Three Cities Investors") advised by Three
Cities Research, Inc. ("Three Cities"), which hold 15%
of our Common Stock and 63% of our Series B Preferred
Stock, have committed to vote in favor of the merger.
This will assure that the merger will be approved by the
holders of our Common Stock and Series B Preferred
Stock. However, there is no similar
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
assurance that the merger will be approved by holders of
a majority of our Series A Preferred Stock. If the
merger is not approved by holders of a majority of the
Series A Preferred Stock, General Textiles may (but will
not be committed to) offer to issue its common stock in
exchange for any or all of our stock in essentially the
same ratios as those in the proposed merger. In response
to that exchange offer, the three Three Cities Investors
will exchange all their Common Stock and Series B
Preferred Stock for General Textiles common stock. That
will reduce our ownership of General Textiles to 74% or
less of its common stock, even if none of our
stockholders other than the three Three Cities Investors
exchange our stock for General Textiles common stock. We
will then exchange General Textiles stock that we own
for our stock which General Textiles acquires through
the exchange offer. The number of General Textiles
shares which we exchange for our stock will depend on
(i) the number and type of our shares which General
Textiles is holding and (ii) the extent to which the
existence of General Textiles subordinated notes we are
holding reduces the value of General Textiles shares
below what it would otherwise have been. The exchange
would reduce our ownership of General Textiles shares to
less than a majority.
PRINCIPAL OFFICE.................. Our principal office is at 4000 Ruffin Road, San Diego,
California 92123. Our telephone number is (619)
827-1800.
THE OFFERING
OFFERING OF COMMON STOCK.......... We are offering 800,000 shares of our
post-recapitalization Common Stock (or 3,000,000 shares
of our pre-recapitalization Common Stock) to people who
exercise Rights, including the oversubscription
privilege in the Rights.
THE RIGHTS........................ We issued the Rights to our stockholders. Each Right
entitles the holder to purchase one share of
post-recapitalization Common Stock for $13.00. Rights
are evidenced by Rights Certificates and are
transferable.
If our stockholders do not approve merger of General
Textiles, Inc. into us, each Right will entitle the
holder to purchase 3.75 shares of pre-recapitalization
Common Stock for $3.467 per share (a total of $13 per
Right).
EXPIRATION OF RIGHTS.............. The Rights will expire at 5:00 P.M., New York City time,
on November 30, 1998, unless we extend the period during
which Rights may be exercised.
OVERSUBSCRIPTION PRIVILEGE........ A holder who exercises all the Rights evidenced by a
Rights Certificate will have the privilege to
oversubscribe for Common Stock which is offered to
holders of Rights, but is not purchased through exercise
of Rights. There is no limit to the number of shares as
to which a holder may exercise the oversubscription
privilege. If the total number of shares as to which
holders exercise the oversubscription privilege exceeds
the total number
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
of shares which are not otherwise purchased through
exercise of Rights, the available shares will be issued
to people who exercise the oversubscription privilege in
proportion to the respective numbers of shares as to
which they exercise the oversubscription privilege. The
three Three Cities Investors have committed to exercise
all the Rights issued to them, which will result in
their purchasing 305,490 shares of post-recapitalization
Common Stock (or 1,145,587 shares of
pre-recapitalization Common Stock), and to exercise the
oversubscription privilege as to all 494,510 shares of
post-recapitalization Common Stock (or 1,854,413 shares
of pre-recapitalization Common Stock) which are subject
to Rights issued to people other than the three Three
Cities Investors. Therefore, the entire 800,000 post-
recapitalization, or 3,000,000 pre-recapitalization,
shares being offered to holders of Rights will be sold,
even if no one other than the three Three Cities
Investors exercises Rights.
</TABLE>
<TABLE>
<CAPTION>
NOT GIVING
EFFECT GIVING EFFECT
TO THE TO THE
RECAPITALIZATION RECAPITALIZATION
---------------- ---------------
<S> <C> <C> <C>
COMMON STOCK OUTSTANDING.................. Before the Offering 5,004,122 11,275,381
After the Offering N/A 12,075,381
After the Offering,
if the recapitalization
does not take place 8,004,122 N/A
USE OF PROCEEDS........................... $3,250,000 to redeem Subordinated Notes due 2003. The amount not used
for these purposes will be added to our working capital.
NASDAQ SMALL-CAP MARKET SYMBOLS........... Common Stock Purchase Rights FBARR
</TABLE>
RISK FACTORS
See "Risk Factors", which begins on page 12, for a discussion of some
important factors you should consider. Those factors include:
a) We have had net losses for most years in our history, and for the first
two fiscal quarters of the current year.
b) We had significant write-offs during the year ended January 31, 1997
c) We cannot be sure an active market for the Rights will develop.
d) The exercise price of the Rights is higher than the highest price at
which our Common Stock has traded for almost four years, even taking
account of the fact that the recapitalization could be viewed as
effecting a 1-for-3.75 reverse split of our Common Stock.
e) If holders of a majority of our Series A Preferred Stock do not approve
the merger which will result in the recapitalization, that merger (and,
therefore, the recapitalization) will not take place. If the merger does
not take place, our subsidiary, General Textiles, Inc. may make an
exchange offer, and General Textiles and we will take other steps, which
would reduce our holding of General Textiles shares to less than a
majority.
5
<PAGE>
f) We compete with large retail discount chains which could, if they wanted
to do so, target merchandise at our typical customers.
g) Our business is seasonal. This makes it particularly difficult to
predict our full year results on the basis of interim results during our
first and second fiscal quarters.
h) We have a Shareholder Rights Plan and there are other factors about us
(including the fact that Three Cities Investors own a majority in voting
power of our stock) which could deter or substantially delay possible
takeover attempts, even if they were favored by a majority of our
stockholders.
i) The Nasdaq Stock Market has told us we no longer meet the requirements
for continued listing. The recapitalization will cure the problem. If the
recapitalization is not approved, the sale of shares to holders of Rights
probably will cure the problem. However, if our stock price falls below
its current levels, we might fail to meet the requirement for continued
listing despite the sale of shares to holders of Rights.
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following is a summary of financial information about us. It should be
read in conjunction with the financial statements and notes included in our
amended annual report on Form 10-K/A-2 and quarterly report on Form 10-Q, which
accompany this Prospectus. The financial information as of and for the year
ended January 31, 1998 has been derived from financial statements audited by
Arthur Andersen LLP, and the financial information as of and for the years ended
February 1, 1997, and January 27, 1996 has been derived from the financial
statements audited by KPMG Peat Marwick LLP, independent certified public
accountants. The financial information at and for the fiscal periods ended
August 1, 1998 and August 2, 1997 has not been audited. However, we believe it
contains all adjustments (which are only normal recurring accruals) which are
necessary so that it presents fairly our financial conditions and results of
operations. Those interim results do not necessarily indicate what our full year
results will be. See "Risk Factors--Seasonality."
<TABLE>
<CAPTION>
26 WEEKS ENDED FISCAL YEAR ENDED
---------------------- -------------------------------------
AUGUST 1, AUGUST 2, JANUARY 31, FEBRUARY 1, JANUARY 27,
1998 1997 1998 1997(1) 1996
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales........................................ $ 139,951 $ 129,811 $ 300,592 $ 252,165 $ 179,820
Operating income (loss).......................... (1,396) (2,924) 5,097 (27,939) 5,153
Income (loss) from continuing operations......... (3,867) (5,530) (129) (36,564) 1,478
Net income (loss) before extraordinary item...... (3,867) (5,530) (129) (37,390) 978
Net income (loss)................................ (6,617) (5,530) (129) (37,390) 978
Dividends on Series A preferred stock............ (1,728) (1,728) (3,456) (3,509) (3,040)
Dividends on Series B preferred stock............ (1,431) (1,292) (2,661) -- --
Net loss applicable to common stock.............. (9,776) (8,550) (6,246) (40,899) (2,062)
Weighted average common shares outstanding (basic
and diluted)................................... 4,967 4,873 4,901 4,507 4,006
Net loss per common share from continuing
operations before extraordinary item........... (1.42) (1.75) (1.27) (8.89) (0.39)
Net loss per common share before extraordinary
item (1.42) (1.75) (1.27) (9.07) (0.51)
Net loss per common share(2)..................... (1.97) (1.75) (1.27) (9.07) (0.51)
Diluted net loss per common share(2)............. (1.97) (1.75) (1.27) (9.07) (0.51)
BALANCE SHEET DATA
Working capital (deficit)........................ 6,072 (2,749) (2,749) 248 4,314
Total assets..................................... 98,620 84,817 84,817 80,669 87,152
Long-term debt and revolving credit notes,
including current portion...................... 44,984 42,134 29,076 37,894 30,120
Stockholders' equity............................. 9,663 17,218 17,218 11,208 27,717
OPERATING DATA
Number of stores................................. 162 165 166 150 131
Total selling square footage..................... 1,722,000 1,673,000 1,788,000 1,567,000 1,367,000
Sales per square foot............................ 81 77 180 172 161
Comparable store sales growth.................... 4.5% 0.9% 3.4% 5.3% 2.8%
</TABLE>
- ------------------------
(1) 53 weeks.
(FOOTNOTES CONTINUED ON NEXT PAGE)
7
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(2) In December 1997, we adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share." The statement specifies the
computation, presentation and disclosure requirements for earnings per share
(EPS) and diluted earnings per share (DEPS). The statement requires
retroactive adoption for all prior periods presented.
Some of the changes made to simplify the EPS computations include: (a)
eliminating the presentation of primary EPS and replacing it with basic EPS,
with the principal difference being that common stock equivalents are not
considered in computing basic EPS, (b) eliminating the modified treasury
stock method and the three percent materiality provision and (c) revising
the contingent share provisions and the supplemental EPS data requirements.
The computation of diluted EPS is similar to the computation of basic EPS
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the dilutive potential
common shares had been issued. In addition, in computing the dilutive effect
of convertible securities, the numerator is adjusted to add back (a) any
convertible preferred dividends and (b) the after-tax amount of interest
recognized in the period associated with any convertible debt.
8
<PAGE>
THE OFFERING
We are offering 800,000 shares of our post-recapitalization Common Stock
(or, if our stockholders do not approve a merger which will result in the
recapitalization, 3,000,000 shares of our pre-recapitalization Common Stock) to
holders of Rights which we distributed to our stockholders. We are distributing
to our stockholders one Right for each 41.16 shares of Common Stock, one Right
for each 16.07 shares of Series A Preferred Stock and 12.7823 Rights for each
share of Series B Preferred Stock, except that we are not issuing fractional
Rights. The Rights are evidenced by Rights Certificates, which are being mailed
to our stockholders of record on October 5, 1998 (except as discussed under "The
Offering--Foreign Restrictions and Restrictions in Certain States").
A HOLDER OF RIGHTS MAY PURCHASE ONE SHARE OF POST-RECAPITALIZATION COMMON
STOCK FOR EACH RIGHT AT A SUBSCRIPTION PRICE OF $13.00 PER SHARE. If our
stockholders do not approve the merger which will result in a recapitalization
of our stock, a holder of Rights may purchase 3.75 shares of
pre-recapitalization Common Stock for each Right at a subscription price of
$3.467 per share (a total of $13 per Right). The Rights are transferable and may
be exercised at any time before 5:00 P.M., New York City time, on November 30,
1998, or on a later date if we extend the offer (the "Expiration Time"). At the
Expiration Time, all unexercised Rights will terminate and all Rights
Certificates will become void.
OVERSUBSCRIPTION PRIVILEGE
Any holder of Rights who exercises all the Rights evidenced by a Rights
Certificate will have the privilege to subscribe for additional shares which are
offered to holders of Rights but are not purchased through exercise of Rights.
There is no limit to the number of shares as to which a holder may
oversubscribe. If there are not sufficient shares to fill all oversubscriptions,
the shares which are available will be allocated among people who elect to
oversubscribe in proportion to the respective numbers of shares for which they
elect to oversubscribe. To exercise the oversubscription privilege, a person
must complete the appropriate block on the Rights Certificate. People who
exercise the oversubscription privilege will be notified by mail (or, if they
have provided facsimile numbers, by facsimile) of the numbers of shares of
Common Stock they have purchased through exercise of the oversubscription
privilege. Payments for those shares must be made within 10 days after the
notice is mailed (or sent by facsimile). If payment with regard to an
oversubscription is not received by the Subscription Agent by 5:00 P.M. New York
City time on the last day of that 10 day period, the oversubscription will be
canceled. Three funds ("Three Cities Investors") advised by Three Cities
Research, Inc. ("Three Cities") have agreed to purchase all shares which are the
subject of oversubscriptions which are canceled because payment is not made
within the 10 day period.
HOW TO EXERCISE RIGHTS
To exercise Rights, a person must mail or deliver to the Subscription Agent
a properly executed Rights Certificate, together with payment in full of the
exercise price of $13.00 per post-recapitalization share (or $13.00 per 3.75
pre-recapitalization shares) as to which Rights are exercised. Except as
described under "The Offering--Late Delivery of Rights," Rights Certificates
must arrive on or before the Expiration Date and we will not honor any
subscriptions received after the Expiration Date. A holder must pay the exercise
price in United States dollars in cash, by certified or bank cashier's check, or
by wire transfer of good funds, payable to the order of the Subscription Agent.
Once a holder has exercised a Right, the exercise is irrevocable. We will
deliver certificates representing the shares purchased upon exercise of Rights
as soon as practicable after the Expiration Date.
9
<PAGE>
The Subscription Agent is American Stock Transfer and Trust Company. The
address to which Rights Certificates and payments should be mailed or delivered
is:
<TABLE>
<S> <C>
IF BY MAIL OR BY HAND: IF BY FACSIMILE:
- ------------------------------------------------ -------------------------
American Stock Transfer and Trust Company (for Eligible
40 Wall Street Institutions Only)
46th Floor 718-234-5001
New York, New York 10005
</TABLE>
The Subscription Agent's telephone number is: 1-800-937-5449, Attention:
Shareholder Services Department.
You should read the instructions in the Rights Certificate and follow them
carefully. Do not send Rights Certificates or payment to the Company. Except as
described under "The Offering--Late Delivery of Rights," no exercise of Rights
will be accepted until the Subscription Agent has received a duly executed
Rights Certificate and payment of the exercise price. You, not the Company or
the Subscription Agent, will bear the risk of delivery of Rights Certificates
and payments to the Subscription Agent. We recommend that, if you use the mail
to exercise Rights, you use insured, registered mail. You should direct any
questions or requests for assistance concerning the method of subscribing for
shares or for additional copies of this Prospectus to the Subscription Agent.
We will resolve all questions as to the validity, form, eligibility and
acceptance of any exercise of Rights, and our determination will be final. We
may waive any defect or irregularity, permit a defect or irregularity to be
corrected within such time as we may determine, or reject any exercise of a
Right which we determine to have been made improperly.
LATE DELIVERY OF RIGHTS
If on or before the Expiration Date, the Subscription Agent receives the
full exercise price of Rights together with a letter or telegraphic guaranty
from a bank, broker, dealer, credit union, savings association or other entity
that is a member in good standing of the Securities Transfer Agents Medallion
Program that the Rights Certificate evidencing the Rights will be delivered to
the Subscription Agent within three New York Stock Exchange trading days after
the Expiration Date, the exercise of Rights will be accepted, subject to receipt
of the properly executed Rights Certificate within the three New York Stock
Exchange trading days.
PURCHASE AND SALE OF RIGHTS
The Rights are transferable and are expected to be traded on the Nasdaq
SmallCap Market and in the over-the-counter market. If you want to sell Rights,
either you may sell them directly or you may deliver the Rights to the
Subscription Agent, who will sell them on your behalf at prevailing market
prices. Rights may be transferred at the office of the Subscription Agent. Prior
to this Offering, there has been no public market for the Rights.
FOREIGN RESTRICTIONS AND RESTRICTIONS IN CERTAIN STATES
Rights Certificates were not mailed to our stockholders whose record
addresses are outside the continental United States or Canada, or are APO or FPO
addresses. The Subscription Agent is holding the Rights to which those Rights
Certificates would have related for those stockholders' accounts until the
Subscription Agent receives instructions to sell or transfer the Rights. Unless
the Subscription Agent receives instructions from holders by 12:00 Noon New York
City time on November 18, 1998, the Subscription Agent will sell those
stockholders' Rights, together with the Rights of stockholders whose addresses
are not known by the Subscription Agent, and remit the net proceeds to the
stockholders (or hold them for stockholders whose addresses are not known).
The Subscription Agent will also retain the Rights Certificates which
otherwise would have been mailed to our stockholders who have addresses of
record in the states of , , or
10
<PAGE>
, in which the Offering is not permitted to be made, and will hold the
Rights to which those Rights Certificates relate for the accounts of those
stockholders until the Subscription Agent receives instructions to sell or
transfer the Rights. If the Subscription Agent does not receive instructions
from a stockholder by 12:00 Noon New York City time on November 18, 1998, the
Subscription Agent will sell that stockholder's Rights and will remit the net
proceeds to the stockholder. If we are subsequently permitted to make the
Offering in any of those states, the Subscription Agent will promptly mail the
Rights Certificates to stockholders with addresses in the states in which the
Offering becomes permissible, unless it has already sold their Rights. The
Company will not accept exercises of Rights by people with addresses in any
state in which the Offering is not permitted, and if any of those people
presents Rights Certificates for exercise, the Subscription Agent will retain
the Rights Certificates and apply the procedures set forth above to the Rights
they represent.
EXERCISE PROCEEDS
The Subscription Agent will retain all funds it receives from the exercise
of Rights until the Expiration Time. If the Offering is cancelled or terminated
for any reason, the Subscription Agent will return to each person who exercised
Rights all funds it is holding for that person's account. No interest will be
paid on funds returned due to cancellation of the Offering. Funds the
Subscription Agent receives from exercises of the oversubscription privilege
will be paid to the Company as they are received.
TAX CONSEQUENCES
Rogers & Wells LLP has advised the Company that under the Internal Revenue
Code of 1986, as amended, and the Regulations under it, as currently in effect,
and applicable court decisions, the Federal income tax consequences to holders
of our stock with respect to the Offering will be as follows:
1. NEITHER THE DISTRIBUTION OF RIGHTS TO OUR STOCKHOLDERS NOR THE EXERCISE
OF RIGHTS BY THEM WILL BE TAXABLE TO OUR STOCKHOLDERS.
2. The basis of a Right will be (a) to a holder of our stock to whom the
Right is issued, a portion of the stockholder's basis in the shares with
regard to which the Right was issued determined by allocating that basis
between the shares and the Rights on the basis of their respective market
values immediately after the Rights are issued (except that, if the
market value of the Rights immediately after they are issued is less than
15% of the market value of the shares with respect to which they are
issued, none of the basis in the shares will be allocated to the Rights
and the basis in the Rights will be zero), and (b) to anyone who
purchases a Right in the market, the purchase price of the Right.
3. The holding period of a Right we issue to a holder of our stock will
include the period the stockholder held the stock with respect to which
the Right was issued. The holding period of a Right purchased in the
market will begin on the date of the purchase.
4. Any gain or loss on sale of a Right will be treated as a capital gain or
loss if the Right is a capital asset in the hands of the seller. A Right
issued with regard to our stock will be a capital asset in the hands of
the person to whom it is issued if our stock is a capital asset in the
hands of that person.
5. If a Right is exercised, the basis of the Common Stock issued to the
holder who exercises the Right will include the holder's basis in the
Right and the amount paid upon exercise of the Right.
6. If a Right is exercised, the holding period of the Common Stock acquired
by exercising the Right will begin on the day the Right is exercised.
What is said above is only a summary of the applicable Federal income tax
law. It does not discuss any state or local tax consequences or any consequences
under the law of any jurisdiction outside the United States. It also does not
discuss special tax considerations which may apply to particular taxpayers.
People who receive Rights or are considering exercising, acquiring or selling
Rights should consult their own tax advisors concerning the tax consequences of
doing so.
11
<PAGE>
RISK FACTORS
THERE ARE A NUMBER OF FACTORS ABOUT THE COMPANY OF WHICH A PERSON WHO IS
CONSIDERING EXERCISING RIGHTS SHOULD BE PARTICULARLY AWARE. THEY INCLUDE THE
FOLLOWING:
SIGNIFICANT NET LOSSES
We have incurred net losses most years since we were formed in 1994, and
General Textiles, our principal operating subsidiary, has incurred significant
losses since its inception in 1987. Those losses led General Textiles to
commence a proceeding under Chapter 11 of the Bankruptcy Code in 1992. We had
net losses of $40.9 million, $6.2 million and $9.8 million, after payment of
preferred stock dividends, in fiscal 1996 and 1997 and the twenty-six weeks
ended August 1, 1998. But see "Risk Factors--Seasonality." There is no assurance
that we will have profits in any future periods.
SIGNIFICANT WRITE-OFFS DURING YEAR ENDED FEBRUARY 1, 1997
During the year ended February 1, 1997 (our fiscal 1996), we had significant
write-offs and unusual charges. The largest of these was a $9.2 million charge
relating to termination of employment of our former senior management and
principal stockholders and benefits they received as a result of, or in
connection with, that termination of employment. Another $8.4 million was a
write-off of goodwill which had arisen when we acquired Factory 2-U, Inc.,
because subsequent operating results caused us to determine that goodwill was
impaired. Additional charges related to inventory, both because of obsolescence
and because of higher inventory shrinkage, which the Company believes was
related primarily to its integration of Factory 2-U. Also, there were charges of
$2.8 million to increase the liability for future payment of notes issued under
General Textiles' 1993 Plan of Reorganization (reflecting an acceleration of our
estimate of when the notes would be paid, and therefore, an increase in their
discounted value), $1.9 million to write-off capitalized costs of a public
offering which did not take place, $1.5 million as an allowance for store
closings and $0.5 million to write-off of capitalized store pre-opening costs.
MARKET FOR THE RIGHTS
We expect that the Rights will be traded on the Nasdaq SmallCap Market. We
cannot be sure an active market for Rights will develop.
EXERCISE PRICE OF THE RIGHTS EXCEEDS RECENT MARKET PRICE OF COMMON STOCK
The exercise price of the Rights was determined by our Board of Directors
based primarily upon its view of the value of our Common Stock. That price is
higher than the highest price at which our Common Stock has traded for almost
four years, even taking account of the fact that the recapitalization could be
viewed as effecting a 1-for-3.75 reverse split of our Common Stock. On June 1,
1998, which was the day before we announced the proposed merger with General
Textiles and resulting recapitalization, as well as the offering made by this
Prospectus, the last reported sale price of our Common Stock was $3.092 and 3.75
times that price would be $11.595. The last reported sale price of our Common
Stock on October 9, 1998 was $1.72, and 3.75 times that price would be $6.45.
Three of the seven members of our Board of Directors are (and were when the
exercise price of the Rights was determined) designees of Three Cities, which
advises investors which own 18% of our Common Stock and 88% of our Series B
Preferred Stock. Three of these investors (i.e., the three Three Cities
Investors), which own 15% of our Common Stock and 63.4% of our Series B
Preferred Stock, have committed to exercise all the Rights they will receive as
stockholders and to oversubscribe so they will acquire all the shares offered to
other holders of Rights, to the extent those shares are not purchased through
exercise of Rights or exercise by persons in addition to the three Three Cities
Investors of the oversubscription privilege included in Rights. While this
indicates that Three Cities believes the exercise price of the Rights represents
at least a fair price to pay for our Common Stock, it is nonetheless possible
that the trading price of our Common Stock will continue to be less than the
exercise price of the Rights. If that is the case, it would be less expensive
for someone who
12
<PAGE>
wanted to acquire our Common Stock (or increase the person's holding of our
Common Stock) to buy our Common Stock in the market than to obtain it by
exercising Rights.
POSSIBILITY THAT THE GENERAL TEXTILES MERGER WILL NOT TAKE PLACE
Our merger with General Textiles must be approved both by holders of a
majority of our Common Stock and Series B Preferred Stock, voting together as a
single class, and by holders of a majority of our Series A Preferred Stock,
voting as a separate class. Because the three Three Cities Investors have
committed to vote in favor of the merger, approval by the holders of our Common
Stock and Series B Preferred Stock is assured. However, approval by the holders
of our Series A Preferred Stock is not assured, and if holders of a majority of
the outstanding Series A Preferred Stock do not vote in favor of the merger, the
merger will not take place. In addition to owning all General Textiles'
outstanding stock, we own General Textiles Subordinated Notes with a current
principal balance of $11.8 million. If we merge with General Textiles, the
Subordinated Notes we own will, in effect, be eliminated. If that merger does
not take place, the General Textiles stock and Subordinated Notes we own will
continue to be outstanding. See "Capitalization." However, General Textiles may
offer to exchange its common stock for any or all of our outstanding stock and
the three Three Cities Investors, have said they will exchange all their Common
Stock and Series B Preferred Stock for General Textiles common stock. The
exchange by the three Three Cities Investors alone would reduce our ownership of
General Textiles to 74% or less of its outstanding common stock. The percentage
of the General Textiles common stock we own would be even less than that to the
extent stockholders in addition to the three Three Cities Investors exchange our
stock for General Textiles common stock, or to the extent the three Three Cities
Investors increase their holdings of our Common Stock through exercise of the
over-subscription privilege. Also, if our merger with General Textiles does not
take place, and therefore General Textiles makes an exchange offer for our
stock, we will exchange some of our General Textiles stock for our stock which
General Textiles acquires through the exchange offer. That will probably reduce
our holding of General Textiles common stock to less than a majority. See "The
Restructuring of our Capitalization".
COMPETITION
Our stores compete with large discount retail chains (such as Wal-Mart,
K-Mart, Mervyn's and Target) and regional off-price chains (such as
MacFrugal's), many of which are better known and have substantially greater
resources than our two chains. While our off-price marketing strategy differs
from the strategy of most of our competitors, many of our competitors could, if
they wanted to do so, compete directly with us in offering merchandise targeted
at the typical Family Bargain Center and Factory 2-U customers. See
"Business--Operations--Competition."
SEASONALITY
Our business is seasonal in nature, with its highest levels of sales in the
"Back-to-School" (August and September) and Christmas (November and December)
seasons. Because of this, our working capital requirements fluctuate during the
year and are highest between mid-summer and the beginning of the Christmas
season. The seasonality of our business makes it particularly difficult to
predict our full year results on the basis of interim results during our first
and second fiscal quarters.
POTENTIAL ANTI-TAKEOVER EFFECTS OF RIGHTS PLAN AND CLASSIFIED BOARD OF
DIRECTORS; POSSIBLE ISSUANCES OF PREFERRED STOCK
We have a Shareholder Rights Plan which could substantially dilute the
holdings of anyone who acquires 15% or more of our Common Stock without approval
of our Board of Directors. This may deter or substantially delay mergers, tender
offers or other possible takeover attempts, even if they are favored by a
majority of our stockholders. See "Description of Capital Stock--Shareholder
Rights Plan." Also, our Board of Directors is "classified," with only one-third
of the directors coming up for election each year. The existence of a classified
board may deter or delay mergers, tender offers or other possible takeover
13
<PAGE>
attempts favored by holders of a majority of our stock. In addition, our Board
of Directors can authorize us, without stockholder action, to issue preferred
stock with whatever rights and preferences (and subject to whatever limitations)
the Board may determine. The Board could authorize the issuance of a preferred
stock at a time, and with terms, which would discourage a tender offer or other
takeover attempt. Finally, investors advised by Three Cities own a majority in
voting power of our stock, and therefore it would be difficult or impossible for
anyone to acquire us if the investors advised by Three Cities (or most of them)
did not favor the acquisition. Anything which makes an acquisition of us more
difficult could reduce the price investors will be willing to pay for our Common
Stock.
FAILURE TO MEET NASDAQ LISTING REQUIREMENT
The Nasdaq Stock Market has told us that we do not meet the requirement for
continued listing on the Nasdaq SmallCap Market. The recapitalization resulting
from the merger will cure this by raising our market capitalization to well
above $35 million. Even if the merger does not take place, at the current prices
of our Common Stock and Series A Preferred, after the Offering, our market
capitalization will be above $35 million, and we will be eligible for continued
listing on the Nasdaq SmallCap Market. However, if our stock prices should fall
significantly below their current levels, our market capitalization might fall
below $35 million despite the sale of shares in the Offering. If that occurred,
our Nasdaq SmallCap Market listing probably would be terminated. If our Common
Stock is not listed on the Nasdaq SmallCap Market, any trades will have to take
place in the over the counter market or in other markets (such as the Nasdaq
Over-the-Counter Bulletin Board or regional securities exchanges), if any, in
which our Common Stock may be traded.
SHARES ELIGIBLE FOR FUTURE SALE
After completion of the Offering, the shares issued to holders of Rights
will be freely tradeable without restriction under the Securities Act of 1933,
except for shares acquired by "affiliates," as that term is defined in Rule 144
under the Securities Act. Under Rule 144, each affiliate will be permitted to
sell in ordinary brokerage transactions in any three month period a number of
shares of Common Stock equal to the greater of one percent of the outstanding
Common Stock or the average weekly trading volume in our Common Stock during the
four weeks preceding notice to the Securities and Exchange Commission that the
affiliate intends to sell some of our Common Stock, subject to certain
limitations and other requirements of Rule 144. Sales of substantial amounts of
our Common Stock, or the perception that such sales could occur, could adversely
affect the market price of our Common Stock and could impair our ability to
raise capital through the sale of additional equity securities.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus, or in documents incorporated into
this Prospectus, are forward-looking statements. Those forward-looking
statements are subject to uncertainties that may cause the actual results to
differ from the results anticipated by the forward-looking statements. Factors
which may cause actual results to differ from those anticipated by forward
looking statements include, among others, general economic and business
conditions, both nationally and in the regions in which we operate; government
regulations (including regulations regarding temporary immigration of
agricultural workers and minimum wages of agricultural and other workers);
claims asserted against us; competition; changes in our business strategy or
development plans; difficulties attracting and retaining qualified personnel;
and the other factors described under the caption "Risk Factors," or in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections of our Annual Report on Form 10-K and our Quarterly Report
on Form 10-Q.
14
<PAGE>
THE COMPANY
We operate a chain of 112 Family Bargain Center off-price retail apparel and
housewares stores in California, Nevada, New Mexico, Oregon, and Washington and
a similar chain of 51 Factory 2-U off-price retail apparel and housewares stores
in Arizona, Nevada, New Mexico and Texas.
We acquired General Textiles (the predecessor of our principal operating
subsidiary) in 1993, while it was operating under Chapter 11 of the Bankruptcy
Code. At that time, General Textiles was operating only the Family Bargain
Center chain. Between December 31, 1992 and March 1, 1998, the Family Bargain
Center chain expanded from 108 stores in four states to 124 stores in six
states. In November 1995, we acquired Factory 2-U, Inc. and began to coordinate
the purchasing, warehousing and delivery operations for the Family Bargain
Center and Factory 2-U chains. Between November 1995 and March 1998, the Factory
2-U chain increased from 33 stores in three states to 38 stores in three states.
Subsequently, we have converted a number of Family Bargain Center stores into
Factory 2-U stores. On September 1, 1998, we had 112 Family Bargain Center
stores in six states and 51 Factory 2-U stores in five states. We expect
increasingly to focus on the Factory 2-U chain. In July 1998, we merged General
Textiles and Factory 2-U, Inc. into a new General Textiles, Inc., which now
operates both chains.
Family Bargain Center and Factory 2-U stores both sell primarily first
quality, in-season clothing for men, women and children and homegoods at prices
which generally are lower than the prices of competing discount and regional
off-price stores. The price of most items in our stores is below $35. The two
chains sell merchandise at bargain prices by purchasing in-season, excess
inventory and close-out merchandise at substantial discounts from normal
wholesale prices and by setting retail prices which pass along the savings to
their customers.
Both Family Bargain Center stores, which average 12,000 square feet, and
Factory 2-U stores, which average 17,350 square feet, are designed in a
self-service format that affords easy access to merchandise displayed on bargain
tables, hanger racks and open shelves. Stores are stocked with new merchandise
at least weekly. Prices are clearly marked, often with a comparable retail
price. Most stores display signs in English and Spanish and are staffed with
bilingual personnel. Store atmosphere is enhanced by the playing of locally
popular music, the use of brightly colored pennants and occasional festive
outdoor promotions.
Our target market consists primarily of low-income families, including
agricultural, service and other blue collar workers, a significant portion of
whom are of Hispanic origin or members of other ethnic groups. The Company's
store merchandising selection, everyday low price strategy and store format are
designed to reinforce the concept of value and enhance the customers' shopping
experience while maximizing inventory turns.
Our principal office is at 4000 Ruffin Road, San Diego, CA 92123. Our
telephone number is 619-627-1800.
THE RESTRUCTURING OF OUR CAPITALIZATION
Our offer to sell Common Stock to holders of Rights is one step in a
restructuring of our capitalization, the results of which have been, or will be,
to (1) cause all our business activities to be conducted by a single operating
company, (2) exchange $22,235,098 of notes which had been issued in 1993 as part
of General Textiles' reorganization plan, and which could absorb a substantial
portion of General Textiles' cash flow, for $20,585,098 of fixed payment notes
plus Common Stock and warrants, (3) provide approximately $10,100,000 of net
stock sale proceeds, which will be used to redeem $3,250,000 of the fixed
payment notes before they begin to require substantial interest payments, to pay
the costs of the recapitalization and to increase our working capital, and (4)
if our stockholders give necessary approvals, cause our Series A Preferred Stock
and Series B Preferred Stock to be converted into Common Stock while, in effect,
carrying out a reverse split of our Common Stock. If our stockholders do not
approve the transaction which will convert the Series A Preferred Stock and
Series B Preferred Stock into Common Stock, we may cause our subsidiary, General
Textiles, Inc., to make an exchange offer to our stockholders
15
<PAGE>
which will result in at least a substantial portion of our Common Stock, Series
A Preferred Stock and Series B Preferred Stock being exchanged for General
Textiles common stock. The steps in this restructuring and recapitalization,
some of which have already been completed are as follows:
- - On April 30, 1998, General Textiles issued (i) $3,250,000 principal amount of
Subordinated Notes due 2003 in satisfaction of $4,900,000 principal amount
of Subordinated Reorganization Notes, and (ii) $17,335,097.65 principal
amount of Junior Subordinated Notes due 2005, as well as 75,000 shares of
our Common Stock and warrants entitling the holders to purchase 274,418
shares of our pre-recapitalization Common Stock for $6.00 per share, in
satisfaction of $17,335,097.65 principal amount Junior Subordinated
Reorganization Notes.
- - On July 31, 1998, we merged Factory 2-U, Inc. and the corporation that was
then General Textiles into a new Delaware corporation, General Textiles,
Inc., in a transaction in which we, as the sole stockholder of both Factory
2-U, Inc. and General Textiles, received all the shares of General Textiles,
Inc.
- - We are distributing to our stockholders transferrable Rights entitling
holders to purchase a total of 800,000 shares of our post-recapitalization
(i.e., post-merger with General Textiles, Inc.) Common Stock for $13.00 per
share (or 3,000,000 shares of our pre-recapitalization Common Stock for
$3.75 per share if our stockholders do not approve a merger of General
Textiles, Inc. into us) on or before November 30, 1998, or a later date if
we extend the offer. This Prospectus relates to the offering of Common Stock
to holders of Rights. Our stockholders are receiving one Right for each
41.16 shares of Common Stock, one Right for each 16.67 shares of Series A
Preferred Stock and 12.7823 Rights for each share of Series B Preferred
Stock. The Rights provide that any holder who exercises the Rights evidenced
by a Rights Certificate may "oversubscribe" to purchase, in addition to the
shares as to which the Rights are exercised, up to any specified number of
shares of Common Stock which are offered to holders of Rights but are not
purchased through exercise of Rights, with the total number of shares as to
which Rights are not exercised to be allocated among people who exercise the
oversubscription privilege on the basis of the respective numbers of shares
as to which they exercise the oversubscription privilege. The three Three
Cities Investors, which have received Rights to purchase 305,490
post-recapitalization (or 1,145,587 pre-recapitalization) shares of Common
Stock, have committed to exercise the Rights they received, and to exercise
their oversubscription privilege as to 494,510 post-recapitalization (or
1,854,413 pre-recapitalization) shares of Common Stock (the entire number of
shares subject to Rights which are being issued to our stockholders other
than the three Three Cities Investors). Therefore, all 800,000
post-recapitalization (or 3,000,000 pre-recapitalization) shares of Common
Stock which are being offered to holders of Rights will be purchased, even
if no one but the three Three Cities Investors exercises Rights.
- - At a meeting to be held on November 23, 1998, our stockholders will be asked
to vote upon a merger of General Textiles, Inc. (the current General
Textiles) into us, in which, among other things, (i) each outstanding share
of our pre-recapitalization Common Stock will be converted into .30133
shares of post-recapitalization Common Stock, (ii) each outstanding share of
our Series A Preferred Stock will be converted into one share of
post-recapitalization Common Stock, and (iii) each outstanding share of our
Series B Preferred Stock will be converted into 173.33 shares of
post-recapitalization Common Stock. These conversion ratios are essentially
the same as though (a) each share of pre-recapitalization Common Stock were
converted into 1.13 shares of Common Stock, (b) each share of Series A
Preferred Stock were converted into 3.75 shares of Common Stock, (c) each
share of Series B Preferred Stock were converted into 650 shares of Common
Stock and (d) there were a 1-for-3.75 reverse split of the Common Stock. The
merger will also change our name to Factory 2-U Stores, Inc. The merger must
be approved by the holders of a majority in voting power of our Common Stock
and Series B Preferred Stock, voting as a single class, and by the holders
of a majority of the outstanding Series A Preferred Stock voting as a
separate class. If the merger is approved, it will take place on or shortly
after the day of the meeting at which it is approved.
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<PAGE>
- - If the merger with General Textiles Inc. is not approved by our stockholders:
- Each Right will entitle the holder to purchase 3.75 shares of
pre-recapitalization Common Stock for $3.467 per share (a total of $13 per
Right).
- General Textiles may (but will not be committed to) make an exchange offer
in which holders of all three classes or series of our stock will be given
the opportunity to exchange their Family Bargain stock for General
Textiles common stock, at the rate of .30133 shares of General Textiles
common stock for each share of our Common Stock, one share of General
Textiles common stock for each share of our Series A Preferred Stock and
173.33 shares of General Textiles common stock for each share of our
Series B Preferred Stock. If General Textiles makes the exchange offer,
the three Three Cities Investors will exchange all their Family Bargain
Common Stock and Series B Preferred Stock for a total of 4,303,923 shares
of General Textiles common stock (or a higher number of shares if the
three Three Cities Investors purchase additional shares of our Common
Stock by exercising the oversubscription privilege in their Rights). If no
shares of our stock owned by anyone other than the three Three Cities
Investors were exchanged, the issuance of General Textiles common stock to
the three Three Cities Investors as a result of the exchange offer would
reduce our ownership of General Textiles to 74% or less of its common
stock. Any exchanges of our stock by other stockholders would further
reduce our percentage ownership of General Textiles. Our interest in
General Textiles and $11.8 million of Subordinated Notes from General
Textiles (which are carried at their discounted value of $11.25 million)
would be our only significant assets. Because it is unlikely General
Textiles will pay dividends on its common stock which are sufficient to
provide the funds we need to meet our obligations with regard to our debts
and expenses and pay dividends on the Series A Preferred Stock which is
not exchanged (to do so, General Textiles would have to pay the same per
share dividend with regard to the shares we do not own as it pays to us),
our principal (and perhaps our only) source of funds with which to meet
our obligations with regard to our debts and expenses, and with regard to
the Series A Preferred Stock, would be payments we receive under the
General Textiles Subordinated Notes, and if they are not sufficient,
proceeds of sales of some of our General Textiles stock.
- If General Textiles makes the exchange offer, as promptly as possible
after the exchange offer terminates, we will hold a stockholders meeting
at which our stockholders will (x) elect new directors (who will not
include anyone affiliated with Three Cities) and (y) be asked to vote upon
a proposal to exchange shares of General Textiles which we own for the
shares of our stock which General Textiles acquired through the exchange
offer. In the exchange of shares, we would give General Textiles, in
exchange for all our shares which General Textiles owns, a number of
shares of General Textiles stock equal to (i) the number of shares General
Textiles issues as a result of the exchange offer to acquire the shares it
transfers back to us and (ii) a number of shares of General Textiles stock
which reflects the extent to which the existence of the General Textiles
Subordinated Notes we hold reduces the value of General Textiles common
stock below what it would be if those Subordinated Notes were not
outstanding. At the stockholders meeting, General Textiles would vote its
Common Stock and Series B Preferred Stock pro rata with our other
stockholders with regard to the election of directors, but would vote all
our stock which it owns in favor of the proposal to exchange some of our
General Textiles common stock for our stock which General Textiles owns.
That exchange would eliminate the interlocking relationship in which we
may own as much as 74% of General Textiles common stock and General
Textiles would own at least 53.3% in voting power of our Common Stock and
Series B Common Stock. However, it would reduce our ownership of General
Textiles to less than 50%.
USE OF PROCEEDS
We will receive estimated net proceeds of $10,100,000 from the sale of
Common Stock to people who exercise Rights (including the oversubscription
privilege). We will use $3,250,000 of that amount to redeem our Subordinated
Notes due 2003. We will add the remainder of the net proceeds to our working
capital.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of August 1, 1998, and
as adjusted to give effect to (a) either (i) the conversion of
pre-recapitalization Common Stock, Series A Preferred Stock and Series B
Preferred Stock, into post-recapitalization Common Stock, and the sale of
800,000 shares of Common Stock on exercise of Rights, if the Merger with General
Textiles is approved or (ii) the sale of 3,000,000 shares of Common Stock on
exercise of Rights, if the Merger with General Textiles is not approved and (b)
application of a portion of the proceeds of sale of the Common Stock to redeem
our Subordinated Notes due 2003 as described under "Use of Proceeds."
<TABLE>
<CAPTION>
(UNAUDITED; IN THOUSANDS)
-------------------------------------
ACTUAL AS ADJUSTED AS ADJUSTED
AUGUST 1, WITH WITHOUT
1998 GT MERGER GT MERGER
----------- ----------- -----------
<S> <C> <C> <C>
DEBT:
Revolving credit notes.................................................. $ 26,991 $ 26,991 $ 26,991
Long-term debt, including current maturities............................ 17,993 14,743 14,743
Capital lease and other long-term obligations........................... 6,172 6,172 6,172
----------- ----------- -----------
Total debt............................................................ 51,156 47,906 47,906
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, $.01 par value, 4,500,000 shares
authorized, 3,638,690 shares issued and outstanding (aggregate
liquidation preference of $36,387).................................... 36 -- 36
Series B junior convertible, exchangeable preferred stock, $.01 par
value, 40,000 shares authorized, 35,360 shares issued and outstanding
(aggregate liquidation preference of $43,360)......................... -- -- --
Common Stock, $.01 par value, 80,000,000 shares authorized, 5,004,122,
12,075,381, and 8,004,122 shares issued and outstanding............... 50 121 80
Additional paid-in capital.............................................. 89,618 99,773 99,778
Stock subscription notes receivable..................................... (4,087) (4,087) (4,087)
Accumulated deficit..................................................... (75,954) (75,954) (75,954)
----------- ----------- -----------
Total stockholders' equity............................................ 9,663 19,853 19,853
----------- ----------- -----------
Total debt and stockholders' equity................................... $ 60,819 $ 67,759 $ 67,759
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
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PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee.................................................. $ 4,310
Printing and Engraving Expenses................................... 100,000
Legal Fees and Expenses........................................... 100,000
Blue Sky Fees and Expenses........................................ 10,000
Accountant's Fees and Expenses.................................... 30,000
Miscellaneous..................................................... 55,690
---------
Total......................................................... $ 300,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-laws provide for indemnification of directors, officers,
employees and agents, among other things, in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are directors, officers,
employees or agents of the Company, if they acted in good faith and in a manner
they believed to be in or not opposed to the best interests of the Company and,
with respect to a criminal action or proceedings, if they had no reasonable
cause to believe the action or proceedings, if they had no reasonable cause to
believe the action was unlawful.
Family Bargain Company carries directors' and officers' liability insurance
that covers certain liabilities and expenses of the Company's directors and
officers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
(b) Exhibits
<TABLE>
<S> <C>
2.1 Plan and Agreement of Merger dated June 18, 1998 between Family Bargain
Corporation and General Textiles, Inc.
5. Opinion of Rogers & Wells LLP*
8 Opinion of Rogers & Wells LLP with respect to tax matters*
10.1 Stock Purchase Agreement, dated as of August 29, 1995, among the Registrant,
certain shareholders of Capin Mercantile Corporation and Sellers Agent ("F2U
Sellers") (1-Exhibit 10.1)
10.2 Amendment to Stock Purchase Agreement, dated November 10, 1995, between the
Registrant and F2U Sellers (3-Exhibit 10.2)
10.3(a) Loan and Security Agreement dated as of October 14, 1993, between General
Textiles and Greyhound Financial Capital Corporation (1-Exhibit 10.15)
10.3(b) Amendment No. 1 to Loan and Security Agreement, dated as of July 14, between
General Textiles and Greyhound Financial Capital Corporation (2-10.15(3))
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
10.3(c) Amendment No. 5 to Loan and Security Agreement, dated April 18, between General
Textiles and Finova Capital Corporation (4-10.15(b))
10.3(d) Amendment No. 6 to Loan and Security Agreement, dated July 10, 1996, between
General Textiles and Finova Capital Corporation (5-Exhibit 10.15(c))
10.3(e) Amendment No. 7 to Loan and Security Agreement, dated December 31, 1996,
between General Textiles and Finova Capital Corporation (5-Exhibit 10.15(d))
10.3(f) Amendment No. 8 to Loan and Security Agreement, dated April 23, 1997, between
General Textiles and Finova Capital Corporation (6-Exhibit 10.2(b))
10.3(g) Amendment No. 9 to Loan and Security Agreement, dated May 30, 1997, between
General Textiles and Finova Capital Corporation (6-Exhibit 10.1(b))
10.3(h) Amendment No. 10 to Loan and Security Agreement, dated September 24, 1997,
between General Textiles and Finova Capital Corporation (7-Exhibit 10.2)
10.4(a) Loan and Security Agreement dated November 13, 1995 between Factory 2-U and
Finova Capital Corporation (4-Exhibit 10.30(a))
10.4(b) Amendment No. 1 to Loan and Security Agreement, dated April 18, 1996, between
Factory 2-U, Inc. and Finova Capital Corporation (4-Exhibit 10.30(b))
10.4(c) Amendment No. 2 to Loan and Security Agreement, dated April 22, 1996, between
Factory 2-U, Inc. and Finova Capital Corporation (5-Exhibit 10.30(c))
10.4(d) Amendment No. 3 to Loan and Security Agreement, dated July 10, 1996, between
Factory 2-U, Inc. and Finova Capital Corporation (5-Exhibit 10.30(d))
10.4(e) Amendment No. 4 to Loan and Security Agreement, dated December 31, 1996,
between Factory 2-U, Inc. and Finova Capital Corporation (5-Exhibit 10.30(e))
10.4(f) Amendment No. 5 to Loan and Security Agreement, dated April 23, 1997, between
Factory 2-U, Inc. and Finova Capital Corporation (6-Exhibit 10.1(a))
10.4(g) Amendment No. 6 to Loan and Security Agreement, dated May 30, 1997, between
Factory 2-U, Inc. and Finova Capital Corporation (6-Exhibit 10.1(b))
10.4(h) Amendment No. 7 to Loan and Security Agreement, dated May 30, 1997, between
Factory 2-U, Inc. and Finova Capital Corporation (7-Exhibit 10.1)
10.4(i) Modifications to Loan and Security Agreement, dated August 28, 1997 between
Finova Capital Corporation and both General Textiles and Factory 2-U (6-Exhibit
10.6)
10.5(a) Acknowledgement and Reaffirmation (Re: Affiliate Debt, Management Fees,
Intercreditor Agreement) dated as of April 23, 1997, between Family Bargain
Corporation and Finova Capital Corporation (6-Exhibit 10.3(a))
10.5(b) Acknowledgement and Reaffirmation (Re: Affiliate Debt, Management Fees,
Intercreditor Agreement) dated as of September 24, 1997, between Family Bargain
Corporation and Finova Capital Corporation (6-Exhibit 10.3(b))
10.6 Subordinated Promissory Note ($6.35 MM), dated as of April 30, 1997 between
General Textiles and Family Bargain Corporation (6-Exhibit 10.5)
10.7 Subordination and Standstill Agreement (RE: $6.35 MM Debt), dated as of May 30,
1997, between Family Bargain Corporation and Finova Capital Corporation
(6-Exhibit 10.4)
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.8 Securities Purchase Agreement dated December 30, 1996 among Family Bargain
Corporation, Three Cities Fund II, L.P., Three Cities Offshore II, C.V. and
Terfin International Ltd. (5-Exhibit 2.4)
10.9 Note Exchange Agreement dated April 27, 1998 among General Textiles, Family
Bargain Corporation, American Endeavour Fund Limited and London Pacific Life &
Annuity Company.
10.10 Junior Subordinated Note Agreement dated April 30, 1998 among General Textiles,
American Endeavour Fund Limited and London Pacific Life & Annuity Company.
10.11 Subordinated Note Agreement dated April 30, 1998 among General Textiles,
American Endeavour Fund Limited and London Pacific Life & Annuity Company.
10.12 Form of Warrant dated April 30, 1998
10.13 Registration Rights Agreement dated April 30, 1998 among Family Bargain
Corporation, American Endeavour Fund Ltd. and London Pacific Life Annuity
Company.
10.14 Agreement dated June 18, 1998 of Three Cities Fund II L.P., Three Cities
Offshore II C.V. and Quilvest American Equity Ltd. to exercise Rights and vote
for merger.*
11.1 Computation of per share earnings.
13.1 Form 10-K for the year ended January 31, 1998.
13.2 Form 10-K/A amending Form 10-K for the year ended January 31, 1998.
13.3 Form 10-Q for the period ended May 2, 1998.
23. Consents
(a) Rogers & Wells LLP (counsel)--included in Exhibit 5
(b) Arthur Andersen LLP (accountants)*
(c) KPMG Peat Marwick LLP (accountants)*
24 Powers of Attorney--on signature page.
</TABLE>
- ------------------------
* Filed with this amendment.
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-1, No. 33-77488 filed with the Commission on April 7, 1994.
(2) Incorporated by reference to General Textiles' Registration Statement on
Form S-4, No. 33-92176 filed with the Commission on May 11, 1995.
(3) Incorporated by reference to the Registrant's Form 8-K and 8-K/A dated
November 28, 1995.
(4) Incorporated by reference to the Registrant's Form 10-K/A for fiscal year
ended January 27, 1996.
(5) Incorporated by reference to the Registrant's Form 10-K for fiscal year
ended February 1, 1997.
(6) Incorporated by reference to the Registrant's Form 10-Q for the 13 weeks
ended August 2, 1997.
(7) Incorporated by reference to the Registrant's Form 10-Q for the 13 weeks
ended November 1, 1997.
ITEM 17. UNDERTAKINGS
(a) As to documents subsequently filed that are incorporated by reference:
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to Section
II-3
<PAGE>
13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, that
is incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 20, or otherwise,
the registrant 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
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by a director, officer or controlling person in
connection with the securities being registered, the registrant 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 be
governed by the final adjudication of such issue.
(c) As to the Rights offering:
The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, any transactions by underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by underwriters,
and the terms of any subsequent reoffering thereof. If any public offering by
the underwriters is to be made on terms differing from those set forth on the
cover page of the prospectus, a post-effective amendment will be filed to set
forth the terms of such offering.
II-4
<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-2 and has duly caused this Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of San Diego, State of California, on this 12th day of October, 1998.
FAMILY BARGAIN CORPORATION
BY: /S/ JAMES D. SOMERVILLE
-----------------------------------------
James D. Somerville
CHAIRMAN OF THE BOARD
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael Searles, Jonathan W. Spatz and J. William
Uhrig and each of them, as his or her true and lawful attorney-in-fact and
agent, with sole power of substitution, to sign for him 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, and
to file all such amendments and all exhibits to them and other documents to be
filed in connection with them, with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by or on behalf of the following persons
in the capacities and on the date indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ JAMES D. SOMERVILLE Chairman of the Board
- ------------------------------ (Principal Executive October 12, 1998
James D. Somerville Officer)
/s/ JONATHAN W. SPATZ Executive Vice President
- ------------------------------ (Principal Financial and October 12, 1998
Jonathan W. Spatz Accounting Officer)
JOHN J. BORER III* Director
- ------------------------------ October 12, 1998
John J. Borer III
PETER V. HANDAL* Director
- ------------------------------ October 12, 1998
Peter V. Handal
RONALD RASHKOW* Director
- ------------------------------ October 12, 1998
Ronald Rashkow
MICHAEL SEARLES* Director
- ------------------------------ October 12, 1998
Michael Searles
J. WILLIAM UHRIG* Director
- ------------------------------ October 12, 1998
J. William Uhrig
H. WHITNEY WAGNER* Director
- ------------------------------ October 12, 1998
H. Whitney Wagner
THOMAS G. WELD* Director
- ------------------------------ October 12, 1998
Thomas G. Weld
*By: /s/ JONATHAN W. SPATZ
----------------------------
Jonathan W. Spatz
Attorney-in-fact
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ---------- ----------------------------------------------------------------------------------- -----------
<C> <S> <C>
2.1 Plan and Agreement of Merger dated June 18, 1998 between Family Bargain Corporation
and General Textiles, Inc.
5. Opinion of Rogers & Wells LLP*
8. Opinion of Rogers & Wells LLP with respect to tax matters*
10.1 Stock Purchase Agreement, dated as of August 29, 1995, among the Registrant,
certain shareholders of Capin Mercantile Corporation and Sellers Agent ("F2U
Sellers") (1-Exhibit 10.1)
10.2 Amendment to Stock Purchase Agreement, dated November 10, 1995, between the
Registrant and F2U Sellers (3-Exhibit 10.2)
10.3(a) Loan and Security Agreement dated as of October 14, 1993, between General Textiles
and Greyhound Financial Capital Corporation (1-Exhibit 10.15)
10.3(b) Amendment No. 1 to Loan and Security Agreement, dated as of July 14, between
General Textiles and Greyhound Financial Capital Corporation (2-10.15(3))
10.3(c) Amendment No. 5 to Loan and Security Agreement, dated April 18, between General
Textiles and Finova Capital Corporation (4-10.15(b))
10.3(d) Amendment No. 6 to Loan and Security Agreement, dated July 10, 1996, between
General Textiles and Finova Capital Corporation (5-Exhibit 10.15(c))
10.3(e) Amendment No. 7 to Loan and Security Agreement, dated December 31, 1996, between
General Textiles and Finova Capital Corporation (5-Exhibit 10.15(d))
10.3(f) Amendment No. 8 to Loan and Security Agreement, dated April 23, 1997, between
General Textiles and Finova Capital Corporation (6-Exhibit 10.2(b))
10.3(g) Amendment No. 9 to Loan and Security Agreement, dated May 30, 1997, between General
Textiles and Finova Capital Corporation (6-Exhibit 10.1(b))
10.3(h) Amendment No. 10 to Loan and Security Agreement, dated September 24, 1997, between
General Textiles and Finova Capital Corporation (7-Exhibit 10.2)
10.4(a) Loan and Security Agreement dated November 13, 1995 between Factory 2-U and Finova
Capital Corporation (10-Exhibit 10.30(a))
10.4(b) Amendment No. 1 to Loan and Security Agreement, dated April 18, 1996, between
Factory 2-U, Inc. and Finova Capital Corporation (10-Exhibit 10.30(b))
10.4(c) Amendment No. 2 to Loan and Security Agreement, dated April 22, 1996, between
Factory 2-U, Inc. and Finova Capital Corporation (5-Exhibit 10.30(c))
10.4(d) Amendment No. 3 to Loan and Security Agreement, dated July 10, 1996, between
Factory 2-U, Inc. and Finova Capital Corporation (5-Exhibit 10.30(d))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ---------- ----------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.4(e) Amendment No. 4 to Loan and Security Agreement, dated December 31, 1996, between
Factory 2-U, Inc. and Finova Capital Corporation (5-Exhibit 10.30(e))
10.4(f) Amendment No. 5 to Loan and Security Agreement, dated April 23, 1997, between
Factory 2-U, Inc. and Finova Capital Corporation (6-Exhibit 10.1(a))
10.4(g) Amendment No. 6 to Loan and Security Agreement, dated May 30, 1997, between Factory
2-U, Inc. and Finova Capital Corporation (6-Exhibit 10.1(b))
10.4(h) Amendment No. 7 to Loan and Security Agreement, dated May 30, 1997, between Factory
2-U, Inc. and Finova Capital Corporation (7-Exhibit 10.1)
10.4(i) Modifications to Loan and Security Agreement, dated August 28, 1997 between Finova
Capital Corporation and both General Textiles and Factory 2-U (6-Exhibit 10.6)
10.5(a) Acknowledgement and Reaffirmation (Re: Affiliate Debt, Management Fees,
Intercreditor Agreement) dated as of April 23, 1997, between Family Bargain
Corporation and Finova Capital Corporation (6-Exhibit 10.3(a))
10.5(b) Acknowledgement and Reaffirmation (Re: Affiliate Debt, Management Fees,
Intercreditor Agreement) dated as of September 24, 1997, between Family Bargain
Corporation and Finova Capital Corporation (6-Exhibit 10.3(b))
10.5 Subordination and Standstill Agreement (RE: $6.35 MM Debt), dated as of May 30,
1997, between Family Bargain Corporation and Finova Capital Corporation (6-Exhibit
10.4)
10.6 Subordinated Promissory Note ($6.35 MM), dated as of April 30, 1997 between General
Textiles and Family Bargain Corporation (6-Exhibit 10.5)
10.7 Subordination and Standstill Agreement (Re: $6.35 million debt) dated as of May 30,
1997, between Family Bargain Corporation and Finova Capital Corporation (6-Exhibit
10.4)
10.8 Securities Purchase Agreement dated December 30, 1996 among Family Bargain
Corporation, Three Cities Fund II, L.P., Three Cities Offshore II, C.V. and Terfin
International Ltd. (5-Exhibit 2.4)
10.9 Note Exchange Agreement dated April 27, 1998 among General Textiles, Family Bargain
Corporation, American Endeavour Fund Limited and London Pacific Life & Annuity
Company.
10.10 Junior Subordinated Note Agreement dated April 30, 1998 among General Textiles,
American Endeavour Fund Limited and London Pacific Life & Annuity Company.
10.11 Subordinated Note Agreement dated April 30, 1998 among General Textiles, American
Endeavour Fund Limited and London Pacific Life & Annuity Company.
10.12 Form of Warrant dated April 30, 1998
10.13 Registration Rights Agreement dated April 30, 1998 among Family Bargain
Corporation, American Endeavour Fund Ltd. and London Pacific Life Annuity Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ---------- ----------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.14 Agreement dated June 18, 1998 of Three Cities Fund II L.P., Three Cities Offshore
II C.V. and Quilvest American Equity Ltd. to exercise Rights and vote for merger.*
11.1 Computation of per share earnings.
13.1 Form 10-K for the year ended January 31, 1998.
13.2 Form 10-K/A-2 amending Form 10-K for the year ended January 31, 1998.
13.3 Form 10-Q/A-1 for the period ended August 1, 1998.
23. Consents
(a) Rogers & Wells LLP (counsel)--included in Exhibit 5
(b) Arthur Andersen LLP (accountants)*
(c) KPMG Peat Marwick LLP (accountants)*
24 Powers of Attorney--on signature page.
</TABLE>
- ------------------------
* Filed with this amendment.
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-1, No. 33-77488 filed with the Commission on April 7, 1994.
(2) Incorporated by reference to General Textiles' Registration Statement on
Form S-4, No. 33-92176 filed with the Commission on May 11, 1995.
(3) Incorporated by reference to the Registrant's Form 8-K and 8-K/A dated
November 28, 1995.
(4) Incorporated by reference to the Registrant's Form 10-K/A for fiscal year
ended January 27, 1996.
(5) Incorporated by reference to the Registrant's Form 10-K for fiscal year
ended February 1, 1997.
(6) Incorporated by reference to the Registrant's Form 10-Q for the 13 weeks
ended August 2, 1997 (2nd Quarter).
(7) Incorporated by reference to the Registrant's Form 10-Q for the 13 weeks
ended November 1, 1997 (3rd Quarter).
<PAGE>
Exhibit 5
[Letterhead]
October 12, 1998
Family Bargain Corporation
4000 Ruffin Road
San Diego, CA 92123-1866
Dear Sirs:
We have acted as counsel to Family Bargain Corporation (the "Company"), a
Delaware corporation, in connection with (i) a proposed merger (the "Merger") of
General Textiles, Inc., into Family Bargain Corporation in accordance with a
Plan and Agreement of Merger dated June 18, 1998, and (ii) a proposed issuance
of 800,000 shares of post-Merger Common Stock, par value $.01 per share, of the
Company (or, if the Merger does not take place, 3,000,000 shares of current
Common Stock, par value $.01 per share) to holders of stock purchase rights
("Rights") to be issued to the Company's stockholders in a transaction
registered under the Securities Act of 1933, as amended, in Registration
Statement File No. 333-58797 (the "Registration Statement"). In that capacity,
we are familiar with the proceedings, corporate and other, of the Company
relating to the Merger and relating to the authorization of issuance of
pre-Merger Common Stock or current Common Stock to holders of Rights.
Based upon the foregoing, and such examination of law as we have deemed
necessary, we are of the opinion that when shares of pre-Merger Common Stock or
current Common Stock are issued to holders of Rights as described in the
Registration Statement, those shares will be legally issued, fully paid and
non-assessable.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the references to us under the captions "The Offering-Tax
Consequences" and "Legal Matters" in the prospectus which is a part of the
Registration Statement.
Very truly yours,
<PAGE>
Exhibit 8
[Letterhead]
October 12, 1998
Family Bargain Corporation
4000 Ruffin Road
San Diego, California 92123-1866
Re: Rights Offering of Family Bargain Corporation
Ladies and Gentlemen:
You have requested our opinion with respect to certain federal income tax
matters in connection with (i) a proposed merger (the "Merger") of General
Textiles, Inc., into Family Bargain Corporation (the "Company") in accordance
with a Plan and Agreement of Merger dated June 18, 1998, and (ii) a proposed
issuance of 800,000 shares of post-Merger Common Stock, par value $.01 per
share, of the Company (or, if the Merger does not take place, 3,000,000 shares
of current Common Stock, par value $.01 per share) to holders of stock purchase
rights ("Rights") to be issued to the Company's stockholders in a transaction
registered under the Securities Act of 1933, as amended, in Registration
Statement File No. 333-58797 (the "Registration Statement").
In rendering the opinion stated below, we have examined and relied, with your
consent, upon the following:
(i) The Plan and Agreement of Merger dated June 18, 1998;
(ii) The Registration Statement; and
(iii) Such other documents, records and instruments as we have deemed
necessary in order to enable us to render the opinions expressed
in this letter.
In our examination of the foregoing documents, we have assumed, with your
consent, that (i) all documents reviewed by us are original documents, or true
and accurate copies of original documents, and have not been subsequently
amended, (ii) the signatures on each original document are genuine, (iii) each
party who executed the document had proper authority and capacity, (iv) all
representations and statements set forth in such documents are true and correct,
(v) all obligations imposed by any such documents on the parties thereto have
been or will be performed or satisfied in accordance with
<PAGE>
[Letterhead]
Family Bargain Corporation
October 12, 1998 Page 2
their terms and (vi) the Company has at all times been, and will at all times
continue to be, organized and operated in accordance with the terms of such
documents. We have further assumed, with your consent, the accuracy of the
statements and descriptions of the Company's activities as described in the
Registration Statement.
Based upon and subject to the foregoing, we are of the opinion that:
1) Neither the distribution of Rights to the Company's stockholders nor
the exercise of Rights will be taxable to the Company's stockholders. Section
305 of the Internal Revenue Code of 1986, as amended (the "Code").
2) The basis of a Right will be (i) with respect to a stockholder to whom
the Right is issued, a portion of the stockholder's basis in the current Common
Stock determined by allocating that basis between the Common Stock and the
Rights on the basis of their respective market values immediately after the
Rights are issued (except that, if the market value of the Rights immediately
after issuance is less than 15% of the market value of the Common Stock, none of
the basis in the Common Stock will be allocated to the Rights and the basis in
the Rights will be zero), and (b) with respect to a stockholder who purchases a
Right in the market, the purchase price of the Right. Code Section 307.
3) The holding period of a Right issued by the Company to a stockholder
will include the period the stockholder held the Common Stock. The holding
period of a Right purchased in the market will begin on the date of the
purchase. Code Section 1223(5).
4) Any gain or loss on the sale of a Right will be treated as a capital
gain or loss if the Right is a capital asset in the hands of the seller. A
Right issued with regard to Common Stock will be a capital asset in the hands of
the stockholder if the Common Stock is a capital asset in the hands of such
stockholder. Code Section 1221.
5) If a Right is exercised, the basis of the Common Stock issued to the
holder who exercises the Right will include the holder's basis in the Right and
the amount paid upon exercise of the Right. Code Section 307.
6) If a Right is exercised, the holding period of the Common Stock
acquired by exercising the Right will begin on the day the Right is exercised.
Code Section 1223(6).
The opinion stated above represent our conclusions as to the application of
federal income tax laws existing as of the date of this letter to the proposed
issuance contemplated in the Registration Statement and we can give no assurance
that legislative enactments, administrative changes or court decisions may not
be forthcoming that would modify or supersede our opinion. An opinion of
counsel merely represents counsel's judgement with respect to the probable
outcome on the merits and is not binding on the Internal Revenue Service or the
courts. There can be no assurance that positions contrary to such opinion will
not be taken by the Internal Revenue Service, or that a court considering the
issues would not hold contrary to such opinion.
<PAGE>
[Letterhead]
Family Bargain Corporation
October 12, 1998 Page 3
The opinion set forth above represents our conclusions based upon the documents,
facts and representations referred to above. Any material amendments to such
documents, changes in any significant facts or inaccuracy of such
representations could affect the opinion referred to herein. Although we have
made such inquiries and performed such investigations as we have deemed
necessary to fulfill our professional responsibilities as counsel, we have not
undertaken an independent investigation of all of the facts referred to in this
letter.
The opinion set forth in this letter: (i) is limited to those matters expressly
covered; no opinion is to be implied in respect of any other matter; (ii) is as
of the date hereof; and (iii) may not be relied on by any other person or entity
other than you or your stockholders without our prior written consent. We
hereby consent to the filing of this opinion as an Exhibit to the Registration
Statement.
Very truly yours,
/s/ Rogers & Wells LLP
<PAGE>
Exhibit 10.14
AGREEMENT
June 18, 1998
Family Bargain Corporation
4000 Ruffin Road
San Diego, California 92123-1866
Dear Sirs:
In order to induce Family Bargain Corporation (the "Company") to (i)
enter into a merger with General Textiles, Inc. (the "Merger") in which each
pre-Merger share of Common Stock of the Company will be converted into .3013
shares of post-Merger Common Stock, each share of Series A 9.5% Cumulative
Convertible Preferred Stock ("Series A Preferred") will be converted into one
share of post-Merger Common Stock and each share of Series B Junior Convertible
Exchangeable Preferred Stock ("Series B Preferred") will be converted into
173.33 shares of post-Merger Common Stock and (ii) to distribute to its
stockholders rights ("Rights") entitling them to purchase a total of 800,000
shares of post-Merger Common Stock for $13 per share (or, if the Merger is not
approved by the Company's stockholders, to purchase a total of 3,000,000 shares
of pre-merger Common Stock for $3.467 per share), each of the stockholders of
the Company which signs this Agreement agrees, as to itself but not as to any
other stockholder, as follows:
1. The stockholder will vote all shares of stock of the Company the
stockholder owns which are entitled to be voted with regard to the Merger in
favor of approving the Merger.
2. The stockholder will exercise all Rights which the stockholder
receives.
3. The stockholder will exercise the over-subscription privilege in
the Rights which the stockholder receives to the extent necessary so that if all
the stockholders who execute this Agreement exercise their Rights as
contemplated by Paragraph 2 and exercise the over-subscription privilege in
their Rights as contemplated by this Paragraph, even if no other holders of
Rights exercise their Rights, Rights (including the over-subscription privilege)
will be exercised as to the entire 800,000 shares of post-Merger Common Stock
(or the entire 3,000,000 shares of pre-Merger Common Stock) which are offered to
holders of Rights.
4. If the Company's stockholders do not approve the Merger, but
General Textiles, Inc. offers to exchange its common stock for stock of the
Company at the rate of .3013 shares of General Textiles common stock for each
share of the Company's Common Stock, one share of General Textiles common stock
for each share of Series A Preferred and
<PAGE>
173.33 shares of General Textiles common stock for each share of Series B
Preferred, the stockholder will tender all the Common Stock and Series B
Preferred which the stockholder owns in response to that exchange offer.
Very truly yours,
THREE CITIES FUND II L.P.
By _______________________
THREE CITIES OFFSHORE II C.V.
By ________________________
QUILVEST AMERICAN EQUITY, LTD.
By _________________________
2
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 18, 1998 (and to all references to our Firm) included in or made
a part of Family Bargain Corporation's Registration Statement No 333-58797.
/s/ Arthur Andersen LLP
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ARTHUR ANDERSEN LLP
San Diego, California
October 14, 1998
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Exhibit 23(c)
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Family Bargain Corporation:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the headings "Summary Financial Information"
and "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
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KPMG Peat Marwick LLP
San Diego, California
October 13, 1998
