UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
-----------------------
FAMILY BARGAIN CORPORATION
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01
(Title of Class of Securities)
306889403
(CUSIP Number)
-----------------------
ROBERT M. HIRSH, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NY 10019-6064
TEL. NO.: (212) 373-3000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
-----------------------
JULY 10, 1997
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 38 Pages
<PAGE>
SCHEDULE 13D
CUSIP NO. 306889403
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Quilvest American Equity, Ltd.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands
7 SOLE VOTING POWER
NUMBER OF 3,122,146
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON 0
WITH
9 SOLE DISPOSITIVE POWER
3,122,146
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,122,146
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
39.9%
14 TYPE OF REPORTING PERSON
CO
Page 2 of 38 Pages
<PAGE>
CUSIP NO. 306889403
ITEM 1. SECURITY AND ISSUER.
The title of the class of equity securities of Family Bargain
Corporation, a Delaware corporation (the "Company"), to which this Schedule 13D
(this "Statement") relates is the Company's common stock, par value $.01 per
share (the "Common Stock"). The address of the principal executive offices of
the Company is 4000 Ruffin Road, San Diego, California 92123.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Statement is filed by Quilvest American Equity, Ltd.,
a British Virgin Islands international business company ("QAE"). The principal
business of QAE is the investment and reinvestment of its resources, directly or
through affiliates, in the securities of enterprises in various parts of the
world, including the United States.
QAE is a wholly owned subsidiary of Quilvest Overseas, Ltd., a
British Virgin Islands international business company ("Quilvest Overseas"). The
principal business of Quilvest Overseas is the investment of its resources in
marketable securities and commodities and, through affiliates such as QAE, in
securities of other enterprises in various parts of the world.
Quilvest Overseas is a subsidiary of Quilvest S.A., a
Luxembourg holding company whose shares, which are issued in bearer form, are
listed and traded on the Paris and Luxembourg Stock Exchanges. Quilvest's
principal business is serving as an investment holding company.
The names of the directors and executive officers of QAE,
Quilvest Overseas and Quilvest are set forth on Schedules 1, 2 and 3 hereto,
respectively, which are incorporated herein by reference. No person controls or
shares in the control of Quilvest who is not a member of its board of directors.
(b) The address of the principal office of QAE and Quilvest
Overseas is Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin
Islands. The principal business address of Quilvest is 84, Grand-Rue, L-1660
Luxembourg. The business address of each of the other persons named in Item 2(a)
is set forth on Schedules 1, 2 and 3 hereto, which are incorporated herein by
reference.
(c) The present principal occupation of each individual set
forth in Item 2(a) is set forth on Schedules 1, 2 and 3 hereto, which are
incorporated herein by reference.
(d) Neither QAE nor, to the best of its knowledge, Quilvest
Overseas, Quilvest or any of the directors or executive officers of QAE,
Quilvest
Page 3 of 38 Pages
<PAGE>
CUSIP NO. 306889403
Overseas or Quilvest has been convicted during the last five years in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(e) Neither QAE nor, to the best of its knowledge, Quilvest
Overseas, Quilvest or any of the directors or executive officers of QAE,
Quilvest Overseas or Quilvest has been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
such individual was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
(f) The citizenship of each individual set forth in Item 2(a)
is set forth on Schedules 1, 2 and 3 hereto.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR
OTHER CONSIDERATION.
Quilvest Finance Ltd. ("Quilvest Finance"), an affiliate of
QAE, transferred (a) 155,544 shares of Common Stock for $3.32 per share and (b)
4,484 shares of Series B Junior Convertible, Exchangeable Preferred Stock
("Series B Preferred") at its then current value of $1000.06 per share to QAE on
July 10, 1997.
During the period beginning August 27, 1997 and ending
December 1, 1997, QAE purchased through open market purchases an aggregate of
70,000 shares of Common Stock for an aggregate purchase price of $88,026.06 as
follows:
Number
Date of of Shares Aggregate
Purchase Purchased Cost
-------- --------- ----------
August 27, 1997 8,100 $10,321.81
September 5, 1997 1,000 1,391.88
September 17, 1997 500 739.07
September 18, 1997 1,000 1,318.12
September 22, 1997 2,000 2,626.25
September 30, 1997 1,500 1,997.19
October 2, 1997 2,200 2,877.88
October 10, 1997 15,000 19,071.88
October 13, 1997 1,000 1,368.13
October 15, 1997 200 361.63
October 16, 1997 700 990.69
October 17, 1997 5,500 7,029.68
October 28, 1997 1,000 1,391.88
October 30, 1997 4,700 6,023.18
Page 4 of 38 Pages
<PAGE>
CUSIP NO. 306889403
Number
Date of of Shares Aggregate
Purchase Purchased Cost
-------- --------- ----------
October 31, 1997 4,500 5,771.57
November 4, 1997 1,100 1,493.94
November 11, 1997 1,000 1,242.32
November 12, 1997 11,500 13,186.60
November 13, 1997 3,500 4,073.10
November 14, 1997 1,000 1,242.32
December 1, 1997 3,000 3,506.94
--------- ----------
70,000 $88,026.06
========= ==========
During the period beginning September 23, 1997 and ending
November 24, 1997, QAE purchased through open market purchases an aggregate of
210,000 shares of Series A 9 1/2% Cumulative Convertible Preferred Stock
("Series A Preferred") for an aggregate purchase price of $1,491,823.90 as
follows:
Number
Date of of Shares Aggregate
Purchase Purchased Cost
-------- --------- ----------
September 23, 1997 500 $3,680.97
September 23, 1997 1,000 7,263.11
September 29, 1997 150 1,166.82
October 3, 1997 48,350 354,800.00
October 6, 1997 9,400 69,018.98
October 7, 1997 14,000 102,769.75
October 8, 1997 10,000 73,421.25
October 10, 1997 3,100 22,795.09
October 16, 1997 1,000 7,407.12
October 17, 1997 12,500 91,764.07
October 27, 1997 20,000 141,760.00
October 28, 1997 17,500 124,046.25
October 29, 1997 2,500 17,763.75
October 30, 1997 200 1,468.78
November 3, 1997 20,900 142,877.98
November 4, 1997 8,900 60,871.48
November 5, 1997 10,000 68,388.75
November 6, 1997 1,000 6,903.88
November 7, 1997 2,000 13,717.75
November 10, 1997 7,000 47,887.13
November 12, 1997 3,000 19,796.75
November 13, 1997 1,000 6,652.25
Page 5 of 38 Pages
<PAGE>
CUSIP NO. 306889403
Number
Date of of Shares Aggregate
Purchase Purchased Cost
-------- --------- ---------
November 14, 1997 1,100 7,306.47
November 17, 1997 1,000 6,652.25
November 19, 1997 3,500 23,087.87
November 21, 1997 6,000 39,543.50
November 24, 1997 4,400 29,011.90
------- -------------
210,000 $1,491,823.90
======= =============
QAE obtained the funds for the purchase of such Common Stock
and Series A Preferred entirely from its own resources.
ITEM 4. PURPOSE OF TRANSACTION.
QAE consummated the transactions described herein in order to
acquire an interest in the Company and for investment purposes.
QAE intends to review continuously its position in the
Company. Depending upon future evaluations of the business prospects of the
Company and upon other developments, including, but not limited to general
economic and business conditions, QAE may retain or from time to time increase,
or dispose of all or a portion of, its holdings, subject to any applicable legal
or other restrictions on its ability to do so.
In addition, the matters set forth in Item 6 below are
incorporated in this Item 4 by reference as if fully set forth herein.
Except as described above, QAE has no plans or proposals which
relate to or would result in:
(a) The acquisition by any person of additional securities of
the Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the
Company or any of its subsidiaries;
(d) Any change in the present board of directors or management
of the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
Page 6 of 38 Pages
<PAGE>
CUSIP NO. 306889403
(e) Any material change in the present capitalization or
dividend policy of the Company;
(f) Any other material change in the Company's business or
corporate structure;
(g) Changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) Causing a class of securities of the Company to be
delisted from a National Securities Exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered National Securities
Association;
(i) A class of equity securities of the Company becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"); or
(j) Any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) QAE may, pursuant to Rule 13d-3 of the Exchange Act, be
deemed to be the beneficial owner of 3,122,146 shares of Common Stock (including
2,359,002 shares of Common Stock issuable upon conversion of the 4,484 shares of
the Series B Preferred held by QAE and 537,600 shares of Common Stock issuable
upon conversion of the 210,000 shares of the Series A Preferred held by QAE),
which constitutes approximately 39.9% of the 7,826,424 shares of Common Stock
deemed outstanding with respect to QAE pursuant to Rule 13d-3(d)(1)(i) of the
Exchange Act.
(b) QAE has the sole power to vote, direct the vote of,
dispose of or direct the disposition of any and all Common Stock held by QAE.
(c) Except as set forth herein or in Exhibits filed herewith,
neither QAE nor, to the best knowledge of QAE, any of the persons listed in Item
2(a) has effected any transaction in the Common Stock of the Company within the
past 60 days.
(d) Except as set forth in this Item 5, to the best knowledge
of QAE, none of the persons named in Item 2(a) beneficially owns any shares of
Common Stock of the Company. On the basis of its control, through an
intermediate holding company, of QAE, the board of directors of Quilvest may be
deemed to have the ultimate power to direct the voting or disposition, as well
as the application of dividends from, or the proceeds of the sale of, the Common
Stock owned by QAE.
Page 7 of 38 Pages
<PAGE>
CUSIP NO. 306889403
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS
OR RELATIONSHIPS WITH RESPECT TO SECURITIES
OF THE ISSUER.
In connection with a Securities Purchase Agreement, dated
December 30, 1996, by and among the Company and the Persons (as defined therein)
set forth on Schedule 2.2 thereof (the "Purchasers"), including Quilvest
Finance, the Company and the Purchasers entered into a Registration Rights
Agreement, dated as of January 10, 1997 (the "Registration Rights Agreement").
The description of the Registration Rights Agreement that follows is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Registration Rights Agreement, a copy of which is attached hereto as
Exhibit 2. Pursuant to the Registration Rights Agreement, QAE, as a transferee
to which shares of Common Stock were transferred, and the other Purchasers
holding at least 25% of the Registrable Securities (as defined therein) have the
right, subject to certain limitations set forth in the Registration Rights
Agreement, to request the Company at any time to register under the Securities
Act of 1933, as amended (the "Securities Act"), at the Company's expense, all or
part of the shares of Common Stock owned by such Purchasers, QAE and their
respective transferees (a "Demand Registration"). The Company agreed to pay such
expenses in connection with three Demand Registrations; provided that such
Demand Registrations may be limited if the certain conditions set forth in
Section 3(f) of the Registration Rights Agreement are satisfied. The Purchasers
and QAE also have certain piggyback registration rights in connection with
registrations by the Company under the Securities Act.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Power of Attorney
Exhibit 2 Registration Rights Agreement
Page 8 of 38 Pages
<PAGE>
CUSIP NO. 306889403
SIGNATURE
After reasonable inquiry and to the best of the knowledge and
belief of the undersigned, the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Dated: March 9, 1998
QUILVEST AMERICAN EQUITY, LTD.
By: /s/ J. William Uhrig
------------------------
Name: J. William Uhrig
Title: Attorney-in-Fact
Page 9 of 38 Pages
<PAGE>
CUSIP NO. 306889403
Schedule 1
QUILVEST AMERICAN EQUITY, LTD.
<TABLE>
<CAPTION>
Principal Occupation or
Employment and the Name,
Principal Business and
Address of Organization in
Residence or which such Employment is
Name Business Address Conducted (if any) Citizenship
---- ---------------- -------------------------- -----------
<S> <C> <C> <C>
Christian Baillet 243, Blvd. St. Germain Company Director French
Director; President F-75007 Paris, France
Walter Knecht Regensdorferstrasse 144 Company Director Swiss
Director; Secretary CH-8049, Zurich
Switzerland
Kurt Sonderegger Birkenstrasse 18 Company Director Swiss
Director CH-8302, Kloten
Switzerland
Richard Diserens Segantinistrasse 51 Company Director Swiss
CH-8049, Zurich
Switzerland
</TABLE>
Page 10 of 38 Pages
<PAGE>
CUSIP NO. 306889403
Schedule 2
QUILVEST OVERSEAS, LTD.
<TABLE>
<CAPTION>
Principal Occupation or
Employment and the Name,
Principal Business and
Address of Organization in
Residence or which such Employment is
Name Business Address Conducted (if any) Citizenship
---- ---------------- -------------------------- -----------
<S> <C> <C> <C>
Julio E. Nunez 69 Chester Square Company Director Argentine
Director; President London SWI, England
Christian Baillet 243, Blvd. St. Germain Company Director French
Director; Treasurer F-75007 Paris, France
Walter Knecht Regensdorferstrasse 144 Company Director Swiss
Director CH-8049, Zurich
Switzerland
Kurt Sonderegger Birkenstrasse 18 Company Director Swiss
Director CH-8302, Kloten
Switzerland
Carlo Hoffman 84, Grand-Rue Secretary-General Luxembourg
Secretary General & L-1660 Luxembourg
Authorized Signatory
Richard Diserens Segantinistrasse 51 Company Director Swiss
CH-8409, Zurich
Switzerland
</TABLE>
Page 11 of 38 Pages
<PAGE>
CUSIP NO. 306889403
Schedule 3
QUILVEST S.A.
<TABLE>
<CAPTION>
Principal Occupation or
Employment and the Name,
Principal Business and
Address of Organization in
Residence or which such Employment is
Name Business Address Conducted (if any) Citizenship
---- ---------------- -------------------------- -----------
<S> <C> <C> <C>
Louis James de Viel Castel 25 bis rue de Constantine Company Director French
Chairman of the Board F-75007 Paris, France
Christian Baillet 243, Blvd. St. Germain Company Director French
Director; CEO F-75007 Paris, France
Peter Bemberg 31, Rue De Bellechasse Company Director French
Director F-75007 Paris, France
Charles de Montalembert 82 Blvd. Arago Company Director French
Director F-75013 Paris, France
Alvaro Sainz de Vicuna Calle Dr Fleming 3 Company Director Spanish
Director 8th Floor
Madrid 98036, Spain
Andre Elvinger 15 Cote d'Eich Attorney-at-Law Luxembourg
Director 1450 Luxembourg Luxembourg
Gd. Duchy of Luxembourg
</TABLE>
Page 12 of 38 Pages
<PAGE>
CUSIP NO. 306889403
<TABLE>
<CAPTION>
Principal Occupation or
Employment and the Name,
Principal Business and
Address of Organization in
Residence or which such Employment is
Name Business Address Conducted (if any) Citizenship
---- ---------------- -------------------------- -----------
<S> <C> <C> <C>
Paul de Ganay 57, Rue St. Dominique Company Director French
Director F-75007 Paris, France
Hans Jorg Furrer Bleicherweg 33 Company Director Swiss
Director CH-8002, Zurich
Switzerland
Norberto Morita TTE Genl Ricchieri 1221 Company Director Argentine
Director Hurlingham, Buenos Aires
Argentina
International Advisory Craigmuir Chambers Company Director British Virgin
Services (IAS) Road Town, Tortola Islands
British Virgin Islands
Carlo Hoffman 84, Grand-Rue Secretary-General Luxembourg
Secretary General L-1660 Luxembourg
</TABLE>
Page 13 of 38 Pages
<PAGE>
CUSIP NO. 306889403
EXHIBIT INDEX
Page on which
Number Document Exhibit Appears
- ------ -------- ---------------
1 Power of Attorney 15
2 Registration Rights Agreement 17
Page 14 of 38 Pages
Exhibit 1
QUILVEST AMERICAN EQUITY, LTD.
POWER OF ATTORNEY
Know all men by these presents, QUILVEST AMERICAN EQUITY,
LTD., a British Virgin Islands International Business company, does hereby
constitute and appoint J. William Uhrig and H. Whitney Wagner of Three Cities
Research, Inc., 135 East 57th Street, New York, New York 10022, its
attorney-in-fact with full power, discretion and authority to take on behalf of
the undersigned all actions which said attorney-in-fact shall in his sole
discretion determine to be appropriate to:
1. execute for and on behalf of the undersigned, with respect to
Family Bargain Corporation (the "Company"), Schedule 13D in
accordance with Schedule 13(d), and Forms 3, 4 and 5 in
accordance with Section 16(a), of the Securities and Exchange
Act of 1934, as amended (the "Act"), and the rules thereunder;
and
2. do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to complete
and execute any such Schedule 13D and Forms 3, 4 and 5 and
timely file such form with the United States Securities and
Exchange Commission and any stock exchange or similar
authority; and
3. take any other action of any type whatsoever in connection
with the foregoing which, in the opinion of such
attorney-in-fact, may be of benefit to, in the best interest
of, or legally required by, the undersigned, it being
understood that the documents executed by such
attorney-in-fact on behalf of the undersigned pursuant to this
Power of Attorney shall be in such form and shall contain such
terms and conditions as such attorney-in-fact may approve in
such attorney-in- fact's discretion.
In addition, the undersigned hereby gives and grants unto said attorney-in-fact
full power discretion and authority to do an perform any and every act and thing
whatsoever requisite, necessary or proper to be done in the exercise of the
rights and powers herein granted with respect to such Schedule 13D and Forms, 3,
4 and 5, as fully to all intents and purposes as the undersigned might do or
could do by its duly authorized officers if personally present, and the
undersigned does hereby confirm, approve and ratify all that said
attorney-in-fact or his delegates shall lawfully do or cause to be done by
virtue hereof. The undersigned acknowledges that the foregoing
attorneys-in-fact, in serving in such capacity at the request of the
undersigned, are not assuming, nor is the Company assuming, any of the
undersigned's responsibilities to comply with
Page 15 of 38 Pages
<PAGE>
2
Section 13 or Section 16 of the Act. This Power of Attorney shall remain in full
force and effect until the undersigned is no longer required to file Schedule
13D or Forms 3, 4 and 5 with respect to the undersigned's holdings of and
transactions in securities issued by the Company, unless earlier revoked by the
undersigned in a signed writing delivered to the foregoing attorneys-in-fact.
This instrument may not be changed orally and shall be
governed by and construed in accordance with the laws of the State of New York,
the United States of America.
Dated: February 26, 1998
QUILVEST AMERICAN EQUITY, LTD.
By: /s/ Kurt Sonderegger
------------------------
Kurt Sonderegger
By: /s/ Richard Diserens
------------------------
Richard Diserens
Page 16 of 38 Pages
Exhibit 2
CONFORMED COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
FAMILY BARGAIN CORPORATION,
THREE CITIES FUND II, L.P.,
THREE CITIES OFFSHORE II C.V.
and
TERFIN INTERNATIONAL LTD.
-----------------------------------
Dated as of January 10, 1997
----------------------------------
================================================================================
Page 17 of 38 Pages
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions.............................................................1
2. Securities Subject to this Agreement....................................3
(a) Registrable Securities.........................................3
(b) Holders of Registrable Securities..............................3
3. Demand Registration.....................................................4
(a) Request for Demand Registration................................4
(b) Effective Demand Registration..................................4
(c) Expenses.......................................................5
(d) Underwriting Procedures........................................5
(e) Selection of Underwriters......................................5
4. Piggy-Back Registration.................................................6
(a) Piggy-Back Rights..............................................6
(b) Priority of Registrations......................................7
(c) Expenses.......................................................7
5. Registration Procedures.................................................7
(a) Obligations of the Company.....................................7
(b) Seller Information............................................10
(c) Notice to Discontinue.........................................11
(d) Sale to Underwriter...........................................11
6. Registration Expenses..................................................11
7. Indemnification; Contribution..........................................12
(a) Indemnification by the Company................................12
(b) Indemnification by Holders....................................12
(c) Conduct of Indemnification Proceedings........................13
(d) Contribution..................................................14
8. Rule 144; Other Exemptions.............................................14
9. Certain Limitations on Registration Rights.............................15
i
Page 18 of 38 Pages
<PAGE>
Page
----
10. Miscellaneous...........................................................15
(a) Recapitalizations, Exchanges, etc..............................15
(b) No Inconsistent Agreements; Other Registration Rights..........15
(c) Remedies.......................................................15
(d) Amendments and Waivers.........................................16
(e) Notices........................................................16
(f) Successors and Assigns.........................................17
(g) Counterparts...................................................17
(h) Headings.......................................................17
(i) Governing Law..................................................17
(j) Jurisdiction...................................................17
(k) Severability...................................................18
(l) Rules of Construction..........................................18
(m) Entire Agreement...............................................18
(n) Further Assurances.............................................18
ii
Page 19 of 38 Pages
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of January ___, 1997,
among FAMILY BARGAIN CORPORATION, a Delaware corporation (the "COMPANY"), THREE
CITIES FUND II, L.P., a Delaware limited partnership ("FUND II"), THREE CITIES
OFFSHORE II C.V., a Netherland Antilles limited partnership ("OFFSHORE II") and
TERFIN INTERNATIONAL LTD., a British Virgin Islands corporation ("TERFIN").
This Agreement is made in connection with (i) the Securities
Purchase Agreement, dated as of December 30, 1996, among the Company, Fund II,
Offshore II and Terfin, relating to the acquisition by Fund II, Offshore II and
Terfin of an aggregate of 27,000 shares of Series B Convertible Exchangeable
Preferred Stock, $.01 par value per share, of the Company (the "CONVERTIBLE
PREFERRED STOCK"), for an aggregate purchase price of $27,000,000.00. In order
to induce Fund II, Offshore II and Terfin to acquire the Convertible Preferred
Stock, the Company has agreed to provide registration rights with respect to the
Registrable Securities (as hereinafter defined) as set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated hereunder.
"Approved Underwriter" has the meaning assigned such term
in Section 3(e).
"Approved Underwriter Amount" has the meaning assigned such
term in Section 3(d).
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" means the Common Stock, $0.01 par value, of
the Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Company Underwriter" has the meaning assigned such term in
Section 4(a).
Page 20 of 38 Pages
<PAGE>
2
"Convertible Preferred Stock" has the meaning assigned such
term in the second paragraph of this Agreement.
"Cumulative Convertible Preferred Stock" means the
Cumulative Convertible Preferred Stock, $.01 par value per share, of the
Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Demand Registration" has the meaning assigned such term in
Section 3(a).
"Designated Holder" means Fund II, Offshore II and Terfin
and any of their respective transferees to whom Registrable Securities have been
transferred other than the transferee to whom such securities have been
transferred pursuant to a registration statement under the Act or Rule 144 under
the Act.
"Exchange Act" means the Securities and Exchange Act of
1934, as amended, and the rules and regulations of the SEC thereunder.
"Holder" has the meaning assigned such term in Section
2(b).
"Holders' Counsel" means (a) with respect to any Demand
Registration that has been requested pursuant to Section 3, the one counsel
selected by the Initiating Holders holding a majority of the Registrable
Securities held by all Initiating Holders being registered in such registration,
and (b) with respect to a request for registration of Registrable Securities
pursuant to Section 4, the one counsel selected by the Holders holding a
majority of the Registrable Securities being registered in such registration.
"Indemnified Party" has the meaning assigned such term in
Section 7(c).
"Indemnifying Party" has the meaning assigned such term in
Section 7(c).
"Initiating Holders" has the meaning assigned to such term
in Section 3(a).
"Inspector" has the meaning assigned such term in Section
5(a)(viii).
"NASD" has the meaning assigned such term in Section
5(a)(xv).
"Other Investors" means holders of the Common Stock of the
Company not entitled to distribute such shares of Common Stock to the public
pursuant to Rule 144(k) (or any successor provision then in effect) under the
Act.
Page 21 of 38 Pages
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3
"Person" means any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind, and shall include any successor (by merger or
otherwise) of any such entity.
"Registrable Securities" means, subject to Section 2(a),
each of the following: (a) any shares of Common Stock issued or issuable upon
conversion of or in exchange for shares of the Convertible Preferred Stock and
(b) any shares of Common Stock issued or issuable in respect of shares of Common
Stock issued, issuable or held pursuant to clause (a) above by way of a stock
dividend or stock split or in connection with a combina tion of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"Registration Expenses" has the meaning assigned such term
in Section 6.
"SEC" means the Securities and Exchange Commission.
"Shares" means the Common Stock, the Convertible Preferred
Stock, the Cumulative Convertible Preferred Stock, any class of common stock of
the Company authorized after the date of this Agreement, or any other class of
stock resulting from successive changes or reclassifications of the Shares.
"Total Securities" has the meaning assigned such term in
Section 4(a).
"Underwriters" has the meaning assigned such term in
Section 5(d).
"Valid Business Reason" has the meaning assigned such term
in Section 3(f).
2. Securities Subject to this Agreement.
(a) Registrable Securities. For the purposes of this
Agreement, Registrable Securities will cease to be Registrable Securities when
(i) a registration statement covering such Registrable Securities has been
declared effective under the Act by the SEC and such Registrable Securities have
been disposed of pursuant to such effective registration statement or (ii) the
entire amount of Registrable Securities proposed to be sold in a single sale are
or, in the opinion of counsel satisfactory to the Company and the Holder, each
in their reasonable judgment, may, be distributed to the public pursuant to Rule
144 in compliance with the requirements of paragraphs (c), (e), (f) and (g) of
Rule 144 (notwithstanding the provisions of paragraph (k) of such Rule) (or any
successor provision then in effect) under the Act.
(b) Holders of Registrable Securities. A Person is deemed
to be a holder of Registrable Securities (a "HOLDER") whenever such Person (i)
is a party to this Agreement (or a permitted transferee thereof) and (ii) owns
of record Registrable Securities,
Page 22 of 38 Pages
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4
or holds a security convertible into or exercisable or exchangeable for,
Registrable Securities, whether or not such purchase or conversion has actually
been effected and disregarding any legal restrictions upon the exercise of such
rights. If the Company receives conflicting instructions, notices or elections
from two or more persons with respect to the same Registrable Securities, the
Company may act upon the basis of the instructions, notice or election received
from the registered owner of such Registrable Securities. Registrable Securities
issuable upon conversion of another security shall be deemed outstanding for the
purposes of this Agreement.
3. Demand Registration.
(a) Request for Demand Registration. Subject to Section
3(f) below, at any time the Designated Holders holding at least 25% of the
Registrable Securities held by all of the Designated Holders (the "INITIATING
HOLDERS") may request in writing the registration of Registrable Securities
under the Act, and under the securities or blue sky laws of any jurisdiction
designated by such holder or holders (each such registration under this Section
3(a) that satisfies the requirements set forth in Section 3(b) is referred to
herein as a "DEMAND REGISTRATION"). Notwithstanding the foregoing, in no event
shall the Company be required to effect more than three Demand Registrations.
Two or more registrations filed in response to one demand shall be counted as
one registration statement. Each request for a Demand Registration by the
Initiating Holders in respect thereof shall specify the amount of the
Registrable Securities proposed to be sold, the intended method of disposition
thereof and the jurisdictions in which registration is desired. Upon a request
for a Demand Registration, the Company shall promptly take such steps as are
necessary or appropriate to prepare for the registration of the Registrable
Securities to be registered. Within fifteen (15) days after the receipt of such
request, the Company shall give written notice thereof to all other Designated
Holders and include in such registration all Registrable Securities held by a
Designated Holder from whom the Company has received a written request for
inclusion therein at least ten (10) days prior to the filing of the registration
statement. Each such request will also specify the number of Registrable
Securities to be registered, the intended method of disposition thereof and the
jurisdictions in which registration is desired. Subject to Section 3(d), the
Company shall be entitled to include in any registration statement and offering
made pursuant to a Demand Registration, authorized but unissued shares of Common
Stock, shares of Common Stock held by the Company as treasury shares or shares
of Common Stock held by Stockholders other than the Holders; provided, that such
inclusion shall be permitted only to the extent that it is pursuant to and
subject to the terms of the underwriting agreement or arrangements, if any,
entered into by the Initiating Holders exercising the Demand Registration
rights.
(b) Effective Demand Registration. The Company shall use
its best efforts to cause any such Demand Registration to become effective not
later than ninety (90) days after it receives a request under Section 3(a). A
registration requested pursuant to Section 3(a) hereof shall not count as one of
the three demands to which the Designated Holders are entitled thereunder unless
such registration statement is declared effective and remains effective for at
least ninety (90) days.
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5
(c) Expenses. In any registration initiated as a Demand
Registration, the Company shall pay all Registration Expenses in connection
therewith, whether or not such requested Demand Registration becomes effective.
(d) Underwriting Procedures. If the Initiating Holders
holding a majority of the Registrable Securities held by all Initiating Holders
to which the requested Demand Registration relates so elect, the offering of
such Registrable Securities pursuant to such requested Demand Registration shall
be in the form of a firm commitment underwritten offering and the managing
underwriter or underwriters selected for such offering shall be the Approved
Underwriter selected in accordance with Section 3(e). In such event, if the
Approved Underwriter advises the Company in writing that, in its opinion, the
aggregate amount of such Registrable Securities requested to be included in such
offering (including those securities requested by the Company to be included in
such registration) is sufficiently large to have an adverse effect on the
success of such offering, then the Company shall include in such registration
only the aggregate amount of Registrable Securities that in the opinion of the
Approved Underwriter may be sold without any such effect on the success of such
offering (the "APPROVED UNDERWRITER AMOUNT"), and (i) each Designated Holder
shall be entitled to have included in such registration Registrable Securities
equal to its pro rata portion of the Approved Underwriter Amount, as based on
the amounts of Registrable Securities sought to be registered by the Designated
Holders in their requests for participation in the requested Demand Registration
and (ii) to the extent that the number of Registrable Securities to be included
by the Designated Holders is less than the Approved Underwriter Amount,
securities that the Company proposes to register shall also be included.
If, as a result of the proration provision of this Section
3(d), any Designated Holder shall not be entitled to include all Registrable
Securities in a registration that such Designated Holder has requested to be
included, such Designated Holder may elect to withdraw his request to include
Registrable Securities in such registration or may reduce the number requested
to be included; provided, however, that (x) such request must be made in writing
prior to the earlier of the execution of the underwriting agreement or the
execution of the custody agreement with respect to such registration and (y)
such withdrawal or reduction shall be irrevocable.
(e) Selection of Underwriters. If any requested Demand
Registration is in the form of an underwritten offering, the Initiating Holders
holding a majority of the Registrable Securities held by all Initiating Holders
to be included in the requested Demand Registration shall select and obtain an
investment banking firm of national reputation to act as the managing
underwriter of the offering (the "APPROVED UNDERWRITER"); provided, that such
underwriter shall be reasonably satisfactory to the Company.
(f) Limitations on Demand Registrations. The Demand
Registration rights granted to the Holders in Section 3(a) are subject to the
following limitations: (i) the Company shall not be required to cause a
registration pursuant to Section 3(a) to be declared effective within a period
of 90 days after the effective date of any registration statement of
Page 24 of 38 Pages
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6
the Company effected in connection with a Demand Registration; and (ii) if the
Board of Directors of the Company, in its good faith judgment, determines that
any registration of Registrable Securities should not be made or continued
because it would materially interfere with any material financing, acquisition,
corporate reorganization or merger or other transaction involving the Company or
any of its subsidiaries (a "VALID BUSINESS REASON"), the Company may postpone
filing a registration statement relating to a Demand Registration until such
Valid Business Reason no longer exists, but in no event for more than ninety
(90) days.
Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company that the Company has determined to
withdraw any registration statement pursuant to clause (ii) above, such Holder
will discontinue its disposition of Registrable Securities pursuant to such
registration statement and, if so directed by the Company, will deliver to the
Company (at the Company's expenses) all copies, other than permanent file
copies, then in such Holder's possession, of the prospectus covering such
Registrable Securities that was in effect at the time of receipt of such notice.
If the Company shall give any notice of postponement or withdrawal of a
registration statement, the Company shall, at such time as the Valid Business
Reason that caused such postponement or withdrawal no longer exists (but in no
event later than ninety (90) days after the date of the postponement), use its
best efforts to promptly effect the registration under the Act of the
Registrable Securities covered by the postponed or withdrawn registration
statement in accordance with this Section 3 (unless the Holder(s) delivering the
Demand Registration request shall have withdrawn such request, in which case the
Company shall not be considered to have effected an effective registration for
the purposes of this Agreement), and such registration shall not be postponed or
withdrawn pursuant to clause (ii) above.
4. Piggy-Back Registration.
(a) Piggy-Back Rights. If the Company proposes to file a
registration statement under the Act with respect to an offering by the Company
for its own account of any class of security (other than a registration
statement on Form S-4 or S-8 (or any successor form thereto)) under the Act,
then the Company shall give written notice of such proposed filing to each of
the Holders at least twenty (20) days before the anticipated filing date, and
such notice shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration under the securities or blue
sky laws is intended) and offer such Holders the opportunity to register the
number of Registrable Securities as each such Holder may request. The Company
shall use its best efforts (within ten (10) days of the notice provided for in
the preceding sentence) to permit the Holders who have requested to participate
in the registration for such offering to include such Registrable Securities in
such offering on the same terms and conditions as the securities of the Company
included therein. Notwithstanding the foregoing, if such registration involves
an underwritten offering and the managing underwriters or underwriters (the
"COMPANY UNDERWRITER") shall advise the Holders of Registrable Securities in
writing that, in its opinion, the total amount of securities requested to be
included in such offering (the "TOTAL SECURITIES") is sufficiently large so as
to have an adverse effect on the success of the
Page 25 of 38 Pages
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7
distribution of the Total Securities, then the Company shall include in such
registration, to the extent of the number of Registrable Securities which the
Company is so advised can be sold in (or during the time of) such offering,
first, all Common Stock or securities convertible into, or exchangeable or
exercisable for, Common Stock that the Company proposed to register for its own
account, second, all securities proposed to be registered by all Designated
Holders and Other Investors, pro rata among such Designated Holders and Other
Investors, and third, all other securities proposed to be registered.
Notwithstanding anything in this Section 4 to the contrary, the Company shall
not be required to include any Registrable Securities in its Initial Public
Offering.
(b) Priority of Registrations. Subject to the provisions of
Section 3(f)(ii), if the Company proposes to register securities pursuant to
Section 4(a) hereof on the same day that the Designated Holders request a
registration pursuant to Section 3(a) hereof, then the Demand Registration
requested pursuant to Section 3(a) hereof shall be given priority.
(c) Expenses. The Company shall bear all Registration
Expenses in connection with any registration pursuant to this Section 4.
(d) Conditions and Limitations on Piggyback Registrations.
If, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to all Holders of record
of Registrable Securities and (i) in the case of a determination not to
register, shall be relieved of its obligation to register the Registrable
Securities in connection with such abandoned registration, without prejudice,
however, to the rights of Holders under Section 3, and (ii) in the case of a
determination to delay the registration of its securities, shall be permitted to
delay the registration of such Registrable Securities for the same period as the
delay in registering such other equity securities.
Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 4 by giving written notice to the Company of its request to
withdraw; provided, however, that (i) such request must be made in writing prior
to the earlier of the execution of the underwriting agreement or the execution
of the custody agreement with respect to such registration and (ii) such
withdrawal shall be irrevocable and, after making such withdrawal, a Holder
shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.
5. Registration Procedures.
(a) Obligations of the Company. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 or 4 of this
Agreement, the Company shall use its best efforts to effect the registration and
sale of such Registrable
Page 26 of 38 Pages
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8
Securities in accordance with the intended method of distribution thereof as
quickly as prac ticable, and in connection with any such request, the Company
shall, as expeditiously as possible:
(i) prepare and file with the SEC (in any
event not later than sixty (60) Business Days after receipt of a request to file
a registration statement with respect to Registrable Securities) a registration
statement on any form on which registration is requested for which the Company
then qualifies, which counsel for the Company and Holders' Counsel shall deem
appropriate and which shall be available for the sale of such Registrable
Securities in accordance with the intended method of distribution thereof, and
use its best efforts to cause such registration statement to become effective;
provided, however, that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall (A) provide Holders'
Counsel with an adequate and appropriate opportunity to participate in the
preparation of such registration statement and each prospectus included therein
(and each amendment or supplement thereto) to be filed with the SEC, which
documents shall be subject to the review of Holders' Counsel, and (B) notify
Holders' Counsel and each seller of Registrable Securities pursuant to such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable action required to prevent the entry of such stop order or
to remove it if entered;
(ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with respect to
the disposition of all Registrable Securities covered by such registration
statement until the earlier of (a) such time as all of such Registrable
Securities and other securities have been disposed of in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement and (b) 180 days after the effective date of such
registration statement, except with respect to any such registration statement
filed pursuant to Rule 415 (or any successor Rule) under the Act if the Company
is eligible to file a registration statement on Form S-3, in which case such
period shall be two (2) years;
(iii) as soon as reasonably possible,
furnish to each seller of Registrable Securities, prior to filing a registration
statement, copies of such registration statement as it is proposed to be filed,
and thereafter such number of copies of such regis tration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as each such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(iv) use its best efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any seller of Registrable Securities may request, and
to continue such qualification in effect in each such jurisdiction for as long
as is permissible pursuant to the laws of such jurisdiction, or for as long as
any such seller requests or until all of such Registrable
Page 27 of 38 Pages
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Securities are sold, whichever is shortest, and do any and all other acts and
things which may be reasonably necessary or advisable to enable any such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided, however, that the Company shall not
be required to (A) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 5(a)(iv), (B)
subject itself to taxation in any such jurisdiction or (C) consent to general
service of process in any such jurisdiction;
(v) use its best efforts to obtain all other
approvals, covenants, exemptions or authorizations from such governmental
agencies or authorities as may be necessary to enable the sellers of such
Registrable Securities to consummate the disposition of such Registrable
Securities;
(vi) notify each seller of Registrable
Securities at any time when a prospectus relating thereto is required to be
delivered under the Act, upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, and the
Company shall promptly prepare a supplement or amendment to such prospectus and
furnish to each such seller a reasonable number of copies of a supplement to or
amendment of such prospectus as may be necessary so that, after delivery to the
purchasers of such Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which they were made;
(vii) enter into and perform customary
agreements (including an underwriting agreement in customary form with the
Approved Underwriter or Company Underwriter, if any, selected as provided in
Section 3 or 4; provided, that the underwriting agreement, if any, shall be
reasonably satisfactory in form and substance to the Company) and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
(viii) make available for inspection by any
seller of Registrable Securities, any managing underwriter participating in any
disposition pursuant to such registration statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "INSPECTOR" and, collectively, the "INSPECTORS"), all
financial and other records, pertinent corporate documents and properties of the
Company and any subsidiaries thereof as may be in existence at such time
(collectively, the "RECORDS") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's and any
subsidiaries' officers, directors and employees, and the independent public
accountants of the Company, to supply all information reasonably requested by
any such Inspector in connection with such registration statement; provided,
that such Inspector agrees to keep all such information confidential.
Page 28 of 38 Pages
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(ix) obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters, as Holders'
Counsel or the managing underwriter reasonably request;
(x) furnish, at the request of any seller of
Registrable Securities on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such request,
covering such legal matters with respect to the registration in respect of which
such opinion is being given as such seller may reasonably request and as are
customarily included in such opinions;
(xi) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable but no later than
fifteen (15) months after the effective date of the registration statement, an
earnings statement covering a period of twelve (12) months beginning after the
effective date of the registration statement, in a manner which satisfies the
provisions of Section 11(a) of the Act;
(xii) cause all such Registrable Securities
to be listed on each securities exchange on which similar securities issued by
the Company are then listed (if any) if the listing of such Registrable
Securities is then permitted under the rules of such exchange or, if no similar
securities are then so listed, cause all such Registrable Securities to be
listed on an exchange on which the Initiating Holders request that such
Registrable Securities be listed, subject to the satisfaction of the applicable
listing requirements of each such exchange;
(xiii) keep each seller of Registrable
Securities advised in writing as to the initiation and progress of any
registration under Section 3 or 4 hereunder;
(xiv) provide officers' certificates and
other customary closing documents;
(xv) cooperate with each seller of
Registrable Securities and each underwriter participating in the disposition of
such Registrable Securities and their respective counsel in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc. (the "NASD"); and
(xvi) use its best efforts to take all other
steps necessary to effect the registration of the Registrable Securities
contemplated hereby.
(b) Seller Information. The Company may require as a
condition precedent of the Company's obligations under this Section 5 that each
seller of Registrable Securities as to which any registration is being effected
furnish to the Company such
Page 29 of 38 Pages
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11
information regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Holder agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(a)(vi), such Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Sec tion 5(a)(vi) and,
if so directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
which is current at the time of receipt of such notice. If the Company shall
give any such notice, the Company shall extend the period during which such
registration statement shall be maintained effective pursuant to this Agreement
(including, without limitation, the period referred to in Section 5(a)(ii)) by
the number of days during the period from and including the date of the giving
of such notice pursuant to Section 5(a)(vi) to and including the date when the
Holder shall have received the copies of the supplemented or amended prospectus
contemplated by and meeting the requirements of Section 5(a)(vi).
(d) Sale to Underwriter. Subject to the limitations on
inclusion of Registrable Securities in a registration under Sections 3(d) and
4(a), in lieu of converting any shares of Convertible Preferred Stock into
Registrable Securities to be included in a registration under Section 3 or 4
prior to or simultaneously with the filing or the effectiveness of any
registration statement filed pursuant thereto, the holder of such Convertible
Preferred Stock may sell such Convertible Preferred Stock to the Approved
Underwriter or the Company Underwriter, as the case may be, and any other
underwriters of the offering being registered (collectively, the Approved
Underwriter or Company Underwriter, as the case may be, and such other
underwriters, the "UNDERWRITERS") if the Underwriters consent thereto and if the
Underwriters undertake to convert such shares of Convertible Preferred Stock
into Registrable Securities before making any distribution pur suant to such
registration statement and to include such Registrable Securities among the
Registrable Securities being offered pursuant to such registration statement.
Assuming timely delivery by the Holder of the Convertible Preferred Stock
certificates to or for the account of the Underwriters, the Company agrees to
cause the relevant Registrable Securities to be issued so as to permit the
Underwriters to make and complete the distribution (including the distribution
of such Registrable Securities) contemplated by the underwriting.
6. Registration Expenses. The Company shall pay all expenses
(other than underwriting discounts and commissions) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (a) SEC, stock exchange and NASD registration and filing fees, (b)
all fees and expenses incurred in complying with securities or blue sky laws
(including, without limitation, reasonable fees, charges and dis bursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (c) all printing, messenger and delivery expenses, (d) the fees,
charges and disbursements of counsel to the Company and of its independent
public accountants and any
Page 30 of 38 Pages
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12
other accounting and legal fees, charges and expenses incurred by the Company
(including, without limitation, any expenses arising from any special audits
incident to or required by any registration or qualification) and (e) the
reasonable fees, charges and expenses of any special experts retained by the
Company in connection with any requested Demand Registration or piggy-back
registration pursuant to the terms of this Agreement, regardless of whether the
registration statement filed in connection with such registration is declared
effective. In connection with each registration hereunder, the Company shall
reimburse the Holders of Registrable Securities being registered in such
registration for the reasonable fees, charges and disbursements of not more than
one Holders' Counsel. All of the expenses described in this Section 6 are
referred to in this Agreement as "REGISTRATION EXPENSES." Notwithstanding the
foregoing provisions of this Section 6, in connection with any registration
hereunder, each Holder of Registrable Securities being registered shall pay all
underwriting discounts and commissions and any capital gains, income or transfer
taxes, if any, attributable to the sale of such Registrable Securities, pro rata
with respect to payments of discounts and commissions in accordance with the
number of shares sold in the offering.
7. Indemnification; Contribution.
(a) Indemnification by the Company. In the event of any
proposed registration of securities of the Company pursuant to Section 3 or
Section 4, the Company agrees to indemnify and hold harmless each Holder, its
directors, officers, partners, employees, advisors and agents, and each Person
who controls (within the meaning of the Act or the Exchange Act) such Holder, to
the extent permitted by law, from and against any and all losses, claims,
damages, expenses (including, without limitation, reasonable costs of
investigation and fees, disbursements and other charges of counsel) or other
liabilities resulting from or arising out of or based upon any untrue, or
alleged untrue, statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or notification or offering
circular (as amended or supplemented if the Company shall have fur nished any
amendments or supplements thereto) or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as the
same are caused by or contained in any information furnished in writing to the
Company by or on behalf of such Holder expressly for use therein. The Company
shall also indemnify any underwriters of the Registrable Securities, their
officers, directors and employees, and each Person who controls any such
underwriter (within the meaning of the Act and the Exchange Act) to the same
extent as provided above with respect to the indemnification of the Holders of
Registrable Securities.
(b) Indemnification by Holders. In connection with any
proposed registration in which a Holder is participating pursuant to Section 3
or 4 hereof, each such Holder shall furnish to the Company in writing such
information with respect to such Holder as the Company may reasonably request or
as may be required by law for use in connection with any registration statement
or prospectus to be used in connection with such registration and each Holder
agrees to indemnify and hold harmless the Company, any underwriter retained by
the Company and their respective directors, officers, employees and each Person
Page 31 of 38 Pages
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13
who controls (within the meaning of the Act and the Exchange Act) the Company or
such underwriter to the same extent as the foregoing indemnity from the Company
to the Holders (subject to the proviso to this sentence and applicable law), but
only with respect to any such information furnished in writing by or on behalf
of such Holder expressly for use therein; provided, however, that the liability
of any Holder under this Section 7(b) shall be limited to the amount of the net
proceeds received by such Holder in the offering giving rise to such liability.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder (the "INDEMNIFIED PARTY") agrees to give
prompt written notice to the indemnifying party (the "INDEMNIFYING PARTY") after
the receipt by the Indemnified Party of any written notice of the commencement
of any action, suit, proceeding or investigation or threat thereof made in
writing for which the Indemnified Party intends to claim indemnification or
contribution pursuant to this Agreement; provided, that, the failure so to
notify the Indemnifying Party shall not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party hereunder. If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such Indemnified Party. The Indemnified Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
(other than reasonable costs of investi gation) shall be paid by the Indemnified
Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the
Indemnifying Party fails to assume the defense of such action with counsel
satisfactory to the Indemnified Party in its reasonable judgment, (iii) the
named parties to any such action (including any impleaded parties) have been
advised by such counsel that either (A) representation of such Indemnified Party
and the Indemnifying Party by the same counsel would be inappropriate under
applicable standards of professional conduct or (B) there may be one or more
legal defenses available to it which are different from or additional to those
available to the Indemnifying Party; provided, however, that the Indemnifying
Party shall only have to pay the fees and expenses of one firm of counsel for
all Indemnified Parties in each jurisdiction, except to the extent
representation of all Indemnified Parties by the same counsel is inappropriate
under applicable standards of professional conduct. In either of such cases the
Indemnifying Party shall not have the right to assume the defense of such action
on behalf of such Indemnified Party. No Indemnifying Party shall be liable for
any settlement entered into without its written consent, which consent shall not
be unreasonably withheld. No Indemnifying Party shall, without the written
consent of the Indemnified Party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the Indemnified Party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(A) includes an unconditional release of the Indemnified Party from all
liability arising out of such action or claim and (B) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any Indemnified Party. The rights accorded to any
Page 32 of 38 Pages
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14
Indemnified Party hereunder shall be in addition to any rights that such
Indemnified Party may have at common law, by separate agreement or otherwise.
(d) Contribution. If the indemnification provided for in
Section 7(a) from the Indemnifying Party is unavailable to an Indemnified Party
in respect of any losses, claims, damages, expenses or other liabilities
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, expenses or other
liabilities in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with the actions
which resulted in such losses, claims, damages, expenses or other liabilities,
as well as any other relevant equitable considerations. The relative faults of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, was made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the Indemnifying Party's and
Indemnified Party's relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, expenses or other liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Sections 7(a), 7(b) and 7(c), any legal or other fees, charges or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution pursuant to this
Section 7(d).
8. Rule 144; Other Exemptions. If the Company shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the Act
in respect of Common Stock or securities of the company convertible into or
exchangeable or exercisable for Common Stock, the Company covenants that it
shall file any reports required to be filed by it under the Exchange Act and the
rules and regulations adopted by the SEC thereunder, and that it shall take such
further action as each Holder may reasonably request (including, but not limited
to, providing any information necessary to comply with Rules 144 and 144A under
the Act), all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the
Act, as such rules may be amended from time to time, or (b) any other rules or
regulations now existing or hereafter adopted by the SEC. The Company shall,
upon the request of any Holder, deliver to such Holder a written statement as to
whether the Company has complied with such requirements.
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15
9. Certain Limitations on Registration Rights. In the case of
a registration under Section 4 if the Company has determined to enter into an
underwriting agreement in connection therewith, no person may participate in
such registration unless such person (a) agrees to sell such person's securities
on the basis provided therein and (b) completes and executes all questionnaires,
powers of attorney, indemnities, lock-up agreements, underwriting agreements and
other documents reasonably required under the terms of such underwriting
agreements.
10. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The provisions of
this Agreement shall apply, to the full extent set forth herein with respect to
the Shares, to any and all shares of capital stock of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for or in
substitution of, the Shares and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring after the date hereof.
(b) No Inconsistent Agreements; Other Registration Rights.
The Company shall not enter into any agreement with respect to its securities
that is inconsistent with or adversely affects the rights granted to the Holders
in this Agreement other than any lock-up agreement with the underwriters in
connection with an underwritten offering pursuant to which the Company agrees,
for a period not in excess of 180 days if such underwritten offering is an
Initial Public Offering or, for a period not in excess of 90 days if such
underwritten offering is not an Initial Public Offering, not to register for
sale, and not to sell or otherwise dispose of, Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock. The Company
shall not grant any other Person registration rights without the written consent
of the Designated Holders holding at least a majority of the Registrable
Securities held by all of the Designated Holders. If the Company shall at any
time hereafter provide to any holder of any securities of the Company rights
with respect to the registration of such securities and such rights are provided
on terms or conditions more favorable to such holder than the terms and
conditions applicable to the Designated Holders herein, the Company shall
provide (by way of amendment to this Agreement or otherwise) such more favorable
terms or conditions to the Designated Holders under this Agreement.
(c) Remedies. The Holders, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, shall be
entitled to specific performance of their rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive in any action for specific performance the defense
that a remedy at law would be adequate.
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16
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions of such
section may not be given unless the Company has obtained the prior written
consent of (i) the Designated Holders holding at least a majority of the
Registrable Securities held by all of the Designated Holders and (ii) the
Holders holding at least a majority of the Registrable Securities.
(e) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(i) if to Fund II, Offshore II or Terfin:
Three Cities Research, Inc.
135 East 57th Street
New York, New York 10022
Telecopier No.: (212) 980-1142
Attention: J. William Uhrig
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: Robert M. Hirsh, Esq.
(ii) if to the Company:
Family Bargain Corporation
4000 Ruffin Road
San Diego, California 92123-1866
Telecopier No.: (619) 637-4180
Attention: William W. Mowbray
with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Telecopier No.: (212) 878-8375
Attention: David W. Bernstein, Esq.
Page 35 of 38 Pages
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17
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of the parties
hereto; provided, however, that the registration rights and the other
obligations of the Company contained in this Agreement shall, with respect to
any Registrable Security, be automatically transferred from a Holder to any
subsequent holder of such Registrable Security (including any pledgee).
Notwithstanding any transfer of such rights, all of the obligations of the
Company hereunder shall survive any such transfer and shall continue to inure to
the benefit of all transferees.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law of such State.
(j) Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
may be brought in the courts of the State of New York or of the United States of
America for the Southern District of New York and hereby expressly submits to
the personal jurisdiction and venue of such courts for the purposes thereof and
expressly waives any claim of improper venue and any claim that such courts are
an inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 10(e), such service to
become effective 10 days after such mailing.
(k) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
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18
(l) Rules of Construction. Unless the context otherwise
requires, "or" is not exclusive, and references to sections or subsections refer
to sections or subsections of this Agreement.
(m) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings in respect of the subject matter contained
herein, other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(n) Further Assurances. Each of the parties shall execute
such documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
Page 37 of 38 Pages
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19
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed and delivered by their respective officers hereunto duly
authorized on the date first above written.
FAMILY BARGAIN CORPORATION
By: /s/ Jeffrey Gerstel
-----------------------
Name: Jeffrey Gerstel
Title: EVP
THREE CITIES FUND II, L.P.
By: TCR Associates, L.P.,
as General Partner
By: /s/ J. William Uhrig
------------------------
Name: J. William Uhrig
Title: Attorney-in-Fact
THREE CITIES OFFSHORE II C.V.
By: TCR Associates Offshore, L.P.,
as General Partner
By: /s/ J. William Uhrig
------------------------
Name: J. William Uhrig
Title: General Partner
TERFIN INTERNATIONAL LTD.
By: /s/ J. William Uhrig
------------------------
Name: J. William Uhrig
Title: Attorney-in-Fact
Page 38 of 38 Pages
