EMPLOYMENT AGREEMENT



     THIS  EMPLOYMENT  AGREEMENT,  dated as of November 7, 2002,  by and between

Factory 2-U Stores, Inc. (the "Company"), a Delaware corporation, and William R.

Fields, who currently resides in Austin, Texas ("Executive").



                               W I T N E S S E T H

                               - - - - - - - - - -



     WHEREAS, the Company desires to employ Executive,  and Executive desires to

accept such employment on the terms and conditions set forth in this Agreement.



     NOW,  THEREFORE,  in  consideration  of the promises  and mutual  covenants

contained herein and for other good and valuable consideration,  the Company and

Executive agree as follows:



     1. TERM OF  EMPLOYMENT.  Except  upon  earlier  termination  as provided in

Section 9 hereof,  Executive's  employment  under this Agreement  shall be for a

one-year term  commencing on the date of this Agreement (the  "Effective  Date")

and terminating on November 6, 2003;  provided,  however,  that at the scheduled

end of the employment term, and on each anniversary of such date, the employment

term shall automatically be extended for a one-year period unless the Company or

the Executive  gives notice to the other at least 90 days before an extension is

to take effect that they do not desire the employment  term to be extended.  The

term of  employment,  as so extended  from time to time,  is referred to in this

Agreement as the "Employment Term."



     2. POSITIONS.



        (a) Executive shall serve as Chairman and Chief Executive Officer of the

Company.  Executive  shall  report to the Board of Directors of the Company (the

"Board") and shall have such duties and authority,  consistent with his position

as the Chief Executive Officer of the Company,  as shall be assigned to him from

time to time by the Board.



        (b) During the -Employment  Term,  Executive shall,  without  additional

compensation,  also  serve on the Board  of,  and  perform  such  executive  and

consulting services for, or on behalf of, such subsidiaries or affiliates of the

Company as the Board  may,  from time to time,  request.  The  Company  and such

subsidiaries and affiliates are hereinafter  referred to,  collectively,  as the

"Company" and,  individually,  as a "Constituent  Corporation."  For purposes of

this  Agreement,  the  term  "Affiliate"  shall  have the  meaning  given in the

Securities Exchange Act of 1934, as amended (the "Act").



        (c) During the Employment Term, Executive shall devote substantially all

of his business  time and efforts to the  performance  of his duties  hereunder;

PROVIDED,  HOWEVER,  that Executive shall be permitted,  to the extent that such

activities do not materially  interfere  with the  performance of his duties and

responsibilities  hereunder,  to manage his personal financial and legal affairs

and to serve on not more than three  corporate,  civic or  charitable  boards or

committees.  Notwithstanding the foregoing, the Executive shall not serve on any

corporate  board  of  directors  or  similar  body  if  such  service  would  be

inconsistent with his fiduciary  responsibilities to any Constituent Corporation







and in no event  shall  Executive  serve on any such board or other body  unless

approved  by the  Board,  which  approval  shall not be  unreasonably  withheld.

Executive's  current  service  on the boards of  directors  of  Lexmark,  Bauger

Investments/Bonus  and Everyday Wealth are hereby approved;  provided,  however,

that if current or future rules or  regulations  of the  Securities and Exchange

Commission,  New York  Stock  Exchange  or Nasdaq  limit the number of boards of

directors of public companies on which an individual may serve,  Executive shall

reduce his  commitments  such that he may  continue to serve on the Board of the

Company.  Executive shall,  within six months after the Effective Date, relocate

his  principal  residence  to a location not more than fifty (50) miles from the

Company's executive offices in San Diego, California.



     3. BASE SALARY.  During the  Employment  Term, the Company shall pay to the

Executive a base  salary at the annual  rate of not less than Seven  Hundred and

Fifty Thousand  Dollars  ($750,000).  Base salary shall be payable in accordance

with the usual payroll  practices of the Company.  Executive's base salary shall

be subject to annual review by the  Compensation  Committee of the Board and may

be  increased,  but not  decreased,  from time to time at the  discretion of the

Compensation Committee. The base salary, as determined as aforesaid from time to

time, shall constitute "Base Salary" for purposes of this Agreement.



     4. ANNUAL BONUS.



        (a) For the first year of the Employment Term,  Executive's annual bonus

will be Three Hundred Seventy-Five Thousand Dollars ($375,000),  equal to 50% of

the Base Salary, payable in 12 monthly installments in accordance with the usual

payroll practices of the Company. Not later than four months after the Effective

Date, Executive shall prepare and present to the Compensation  Committee written

financial,  operational and other objectives (the "Performance  Objectives") for

the  Company's  fiscal  year  ending  February  3,  2004.  If  such  Performance

Objectives are approved and accepted by the Compensation Committee,  Executive's

target  bonus for such fiscal year shall be equal to 75% of  Executive's  annual

Base  Salary for such year.  For each fiscal  year  during the  Employment  Term

thereafter,  Executive  shall prepare and submit  Performance  Objectives to the

Compensation  Committee during the normal course of the Company's planning cycle

and  before  the  commencement  of the  new  fiscal  year.  If  such  subsequent

Performance Objectives are accepted and approved by the Compensation  Committee,

Executive's  target  bonus  for  such  fiscal  years  shall  be based on 100% of

Executive's  Base Salary in effect as of the start of such fiscal  year.  In the

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