-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GyeHflWdak8FGMF6lX8/J6UUT7x8bfSSQPtqukA3hMF66htdHLqd0vRpC3LtEyHT +AY9MsBDOI/9D4C2vc9kSA== 0000950142-98-000215.txt : 19980310 0000950142-98-000215.hdr.sgml : 19980310 ACCESSION NUMBER: 0000950142-98-000215 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980309 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FAMILY BARGAIN CORP CENTRAL INDEX KEY: 0000813775 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 510299573 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-39314 FILM NUMBER: 98560527 BUSINESS ADDRESS: STREET 1: 4000 RUFFIN ROAD STREET 2: 6TH FLR CITY: SAN DIEGO STATE: CA ZIP: 92123-1866 BUSINESS PHONE: 6196271800 MAIL ADDRESS: STREET 1: 4000 RUFFIN ROAD CITY: SAN DIEG STATE: CA ZIP: 92123-1866 FORMER COMPANY: FORMER CONFORMED NAME: DRS INDUSTRIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: LONGWOOD GROUP LTD DATE OF NAME CHANGE: 19920527 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TERIBE LTD/THREE CITIES HOLDINGS LTD CENTRAL INDEX KEY: 0000905310 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 1285 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 MAIL ADDRESS: STREET 1: 1285 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10019 SC 13D 1 SCHEDULE 13D 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 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 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 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 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 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 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 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 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 CUSIP NO. 306889403 Schedule 1 QUILVEST AMERICAN EQUITY, LTD.
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 ---- ---------------- -------------------------- ----------- 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
Page 10 of 38 Pages CUSIP NO. 306889403 Schedule 2 QUILVEST OVERSEAS, LTD.
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 ---- ---------------- -------------------------- ----------- 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
Page 11 of 38 Pages CUSIP NO. 306889403 Schedule 3 QUILVEST S.A.
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 ---- ---------------- -------------------------- ----------- 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
Page 12 of 38 Pages CUSIP NO. 306889403
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 ---- ---------------- -------------------------- ----------- 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
Page 13 of 38 Pages 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 EX-1 2 EXHIBIT 1 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 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 EX-2 3 EXHIBIT 2 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 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 ---- 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 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 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 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 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. Page 23 of 38 Pages 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 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 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 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 9 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 10 (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 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 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 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 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. Page 33 of 38 Pages 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. Page 34 of 38 Pages 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 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. Page 36 of 38 Pages 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 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 -----END PRIVACY-ENHANCED MESSAGE-----