FACTORY 2 U STORES INC
EMPLOYMENT AGREEMENT FOR NORMAN PLOTKIN
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>exhempagtnp.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT FOR NORMAN PLOTKIN
<TEXT>
                                                                   Exhibit 10.18

                              EMPLOYMENT AGREEMENT

         THIS  EMPLOYMENT  AGREEMENT,  dated as of May 20, 2003,  by and between
Factory 2-U  Stores,  Inc.  (the "Company"), a Delaware corporation, and
Norman G. Plotkin ("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 May 19, 2004; 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 Executive Vice President-Store
Development and Human Resources and General Counsel of the Company. Executive
shall report to the Chief Executive Officer of the Company ("CEO") and shall
have such duties and authority, consistent with his position as Executive Vice
President-Store Development and Human Resources & General Counsel of the
Company, as shall be assigned to him from time to time by the CEO.

                  (b) During the -Employment Term, Executive shall, without
additional compensation, perform such executive and consulting services for, or
on behalf of, such subsidiaries or affiliates of the Company as the CEO 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 CEO, which approval shall not be unreasonably
withheld.

<PAGE>

         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 Two Hundred
Eighty-Five Thousand Dollars ($285,000). 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 CEO and may be increased, but
not decreased, from time to time at the discretion of the CEO. The base salary,
as determined as aforesaid from time to time, shall constitute "Base Salary" for
purposes of this Agreement.

         4. Annual Bonus. Not later than 30 days after the Effective Date,
Executive shall prepare and present to the CEO 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 CEO, Executive's target bonus for such fiscal year shall be
equal to 50% 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 CEO 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 CEO,
Executive's target bonus for such fiscal years shall be based on 50% of
Executive's Base Salary in effect as of the start of such fiscal year. In the
event of any disagreement between the CEO and Executive concerning the
acceptance and approval of Performance Objectives, the CEO and Executive shall
negotiate in good faith to attempt to resolve such differences. Annual bonuses
shall be reduced pro rata for any fiscal year that is not a full year (based on
the actual number of days of such year included in the Employment Term). Each
annual bonus shall be paid no later than 30 days after the Company's audited
financial statements with respect to the year for which the annual bonus is
awarded are available. If the Performance Objectives accepted by the CEO are
exceeded in any year, the annual bonus shall be increased by 1% of Base Salary
for each 1% of excess, up to a maximum bonus of 100% of Base Salary for the
achievement of 150% of the Performance Objectives. If the Performance Objectives
accepted by the CEO are not met, the Executive shall not be entitled to any
bonus.

         5.       Equity Compensation.

                  (a) Non-Qualified Stock Options. The Company will grant to
Executive, pursuant to the Company's Amended and Restated 1997 Stock Option
Plan, as in effect as of the Effective Date (the "Plan"), nonqualified options
entitling Executive to acquire a total of 50,000 shares of the Company's common
stock at the closing market price of such common stock on the commencement date
of the Employment Term. Subject to Executive's continued employment under this
Agreement, such nonqualified stock options will vest in increments of 3,125
shares (each, a "Tranche") on each March, June, September and December 30 during
the first four years of the Employment Term. The non-qualified options in each
such Tranche shall be exercisable for a period of five years after the vesting
of such Tranche. During any period of time after one year from the date of this
Agreement that shares acquired upon exercise of such non-qualified options would
not be saleable by Executive pursuant to Rule 144 under the Act or pursuant to
an effective registration statement under the Act, the Company shall file with
the Securities and Exchange Commission and maintain the effectiveness of a
registration statement on Form S-8 (or such successor or replacement form as may
be applicable) to permit Executive to resell shares of common stock acquired
upon exercise of such non-qualified stock options. The terms of such
nonqualified stock options will be more specifically set forth in a Stock Option
Agreement substantially in the form attached as Exhibit A.

<PAGE>

                  (b) Restricted Stock. The Company will grant to Executive
pursuant to the Plan, if an appropriate amendment thereto is approved by the
stockholders at the Company's next annual meeting of stockholders, and as of
such date, a total of 50,000 restricted shares of the Company's common stock
(the "Restricted Stock") at a cost to Executive of Five Hundred Dollars ($500).

                  (c) Vesting. The Restricted Stock shall vest in installments
as follows: 16,666.7 shares of Restricted Stock shall vest at such time as the
closing market price of the Company's common stock equals or exceeds $10 per
share for 20 consecutive trading days in any three-month period; an additional
16,666.7 shares of restricted common stock shall vest at such time as the
closing market price of the Company's common stock equals or exceeds twenty
dollars ($20) per share for 20 consecutive trading days in any three-month
period; and the final 16,666.7 shares of the Company's common stock shall vest
at such time as the closing market price of the Company's common stock equals or
exceeds thirty dollars ($30) per share for 20 consecutive trading days in any
three-month period. Executive's right to receive any shares of Restricted Stock
that have not so vested prior to April 10, 2008 shall terminate and any such
Restricted Stock shall be retained by the Company. Notwithstanding the
foregoing, Executive shall not be entitled to sell any such vested shares of
Restricted Stock until the expiration of two years from the Effective Date (the
"Holding Period"). The terms of such Restricted Stock will be more specifically
set forth in a Restricted Stock Agreement substantially in the form attached as
Exhibit B.

                  (d) Restrictions on Restricted Stock. Until Restricted Stock
has vested and the Holding Period has expired, it may not be sold, transferred,
assigned or pledged. Shares of Restricted Stock shall be evidenced by stock
certificates bearing appropriate legends referring to the applicable terms,
conditions and restrictions. Stock certificates representing the Restricted
Stock will be registered in the name of Executive as of the date of this
Agreement, but such certificates will be held by the Company until the shares
vest and the Holding Period has expired, and Executive shall deliver to the
Company a stock power, endorsed in blank, relating to the shares of Restricted
Stock. At such time as Restricted Stock vests, and the expiration of the Holding
Period with regard to such vested shares of Restricted Stock, a certificate
representing such shares (less any shares retained by the Company to satisfy
Executive's tax withholding obligations) will be delivered to Executive as soon
as practicable.

                  (e) Dividends and Voting. From and after the date of issuance
of the Restricted Stock, Executive will have, with respect to the Restricted
Stock, all the rights of a holder of common stock, including the right to
receive any dividends or distributions paid on the common stock and the right to
vote the shares of Restricted Stock.

                  (f) Income Tax. Executive shall be required to make
arrangements satisfactory to the Company to satisfy any applicable federal,
state or local tax liability arising with respect to the Restricted Stock. Such
arrangements may be satisfied by either making a cash payment to the Company of
the required amount or by having the Company retain Restricted Stock having a
value equal to the amount of Executive's federal, state and local tax obligation
from the shares of Restricted Stock otherwise deliverable to Executive upon the
vesting of such Restricted Stock and expiration of the Holding Period. If
Executive fails to satisfy the obligations in a time and manner satisfactory to
the Company, the Company may withhold all required amounts from Executive's
compensation or other amounts payable under this Agreement to satisfy such
federal, state and local tax obligations. Executive shall be solely responsible
for determining whether to make, and for making, any election under Section
83(b) of the Internal Revenue Code of 1986 (as amended) with respect to the
Restricted Stock.

<PAGE>

                  (g) Effect and Other Benefits. Income recognized by Executive
as the result of the grant or vesting of Restricted Stock, the expiration of the
Holding Period or the receipt of dividends, unrestricted stock will not be
included in any formula for calculating benefits under this Agreement or any
benefit plan of the Company.

         6. Employment Benefits and Vacation.

                  (a) During the Employment Term, Executive shall also be
entitled to participate in all pension, retirement, savings, welfare and other
pension and welfare employee benefit plans and arrangements and fringe benefits
and perquisites generally maintained by the Company from time to time for the
benefit of senior executives of the Company, in accordance with their respective
terms as in effect from time to time (other than any special arrangement entered
into by contract with an executive).

                  (b) During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from time
to time, but in no event less than four (4) weeks paid vacation per calendar
year. Executive shall also be entitled to such sick leave as is customarily
provided by the Company for its senior executive employees.

         7. [Intentionally Omitted.]

         8. Business Expenses; Vehicle Allowance.

                  (a) Executive shall be reimbursed for the travel,
entertainment and other business expenses incurred in the performance of his
duties hereunder, in accordance with policies generally applicable to senior
executives of the Company as in effect from time to time.

                  (b) During the Employment Term, the Company shall provide a
vehicle allowance to Executive in the amount of $750.00 per month.

         9. Termination.

                  (a) The employment of Executive under this Agreement shall
terminate on the expiration of the Employment Term and earlier upon the
occurrence of any of the following events:

                           (i) the death of Executive;

                           (ii) the termination by the Company of Executive's
employment due to Executive's
Disability pursuant to Section 9(b) hereof;

                           (iii) the termination by Executive of Executive's
employment for Good Reason
pursuant to Section 9(c) hereof;

                           (iv) the termination by the Company of Executive's
employment without Cause;

                           (v) the termination by Executive of Executive's
employment without Good Reason
upon sixty (60) days prior written notice; or

                           (vi) the termination by the Company of Executive's
employment for Cause pursuant to
Section 9(e) hereof.

<PAGE>

                  (b) Disability. If, by reason of the same or related physical
or mental reasons, Executive is unable to carry out his material duties pursuant
to this Agreement for more than three (3) months in any twelve (12) consecutive
month period, the Company may terminate Executive's employment for Disability
upon thirty (30) days prior written notice.

                  (c) Termination for Good Reason. A Termination for Good Reason
means a termination by Executive by written notice given within ninety (90) days
after the occurrence of the Good Reason event. For purposes of this Agreement,
"Good Reason" shall mean the occurrence or failure to cause the occurrence, as
the case may be, without Executive's express written consent, of any of the
following circumstances, unless such circumstances are corrected prior to the
date of termination specified in the Notice of Termination for Good Reason (as
defined in Section 9(d) hereof): (i) the material breach by the Company of any
of its obligations to Executive under this Agreement; (ii) any material
diminution of Executive's positions, duties or responsibilities hereunder, as of
the Effective Date (except in each case in connection with the termination of
Executive's employment for Cause or Disability or as a result of Executive's
death, or temporarily as a result of Executive's illness or other absence and
provided that a reduction in the size or number of the units reporting to
Executive as a result of dispositions, shall not be a material diminution), or
the assignment to Executive of duties or responsibilities that are inconsistent
with Executive's position as the Executive Vice President-Store Development and
HR & General Counsel of the Company; (iii) removal of, or the nonreelection of,
the Executive from his position as the E.V.P.- Store Dev. and H.R. & General
Counsel of the Company; (iv) a relocation of the principal executive offices of
the Company to a location more than seventy-five (75) miles from its current
location in San Diego, California, or a relocation of Executive away from such
principal executive office; (v) failure by the CEO and Executive to agree on
Performance Objectives, after good faith negotiations, within 60 days after
submission to the CEO by Executive; or (vi) any change in the Company's
Certificate of Incorporation or Bylaws not approved by Executive that materially
and adversely diminish Executive's rights to indemnification in his capacity as
an officer or director of the Company.

                  (d) Notice of Termination of Good Reason. A Notice of
Termination for Good Reason shall mean a notice that shall indicate the specific
termination provision in Section 9(c) relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason. The Notice of Termination for Good Reason shall
provide for a date of termination not less than ten (10) nor more than sixty
(60) days after the date such Notice of Termination for Good Reason is given.

<PAGE>

                  (e) Cause. Subject to the notification provisions of Section
9(f) below, Executive's employment hereunder may be terminated by the Company
for Cause. For purposes of this Agreement, the term "Cause" shall be limited to
(i) willful misconduct by Executive with regard to the Company; (ii) the refusal
of Executive to follow the proper written direction of the Board; provided,
however, that the foregoing refusal shall not be "Cause" if Executive in good
faith believes that such direction is illegal, unethical or immoral and promptly
so notifies in writing the entity or person giving the direction; (iii)
Executive being convicted of a felony; (iv) the willful breach by Executive of
any fiduciary duty owed by Executive to any Constituent Corporation which has a
material adverse effect on the Company; or (v) Executive's material fraud with
regard to any Constituent Corporation.

                  (f) Notice of Termination for Cause. A Notice of Termination
for Cause shall mean a notice that shall indicate the specific termination
provision in Section 9(e) relied upon and shall set forth in reasonable detail
the facts and circumstances which provide a basis for Termination for Cause. The
date of termination for a Termination for Cause shall be the date indicated in
the Notice of Termination. Any purported Termination for Cause which is held by
a court not to have been based on the grounds set forth in this Agreement shall
be deemed a Termination without Cause.

         10. Consequences of Termination of Employment.

                  (a) Death. If Executive's employment is terminated during the
Employment Term by reason of Executive's death, the employment period under this
Agreement shall terminate without further obligations to the Executive's legal
representatives under this Agreement except for (i) any compensation earned but
not yet paid, including and without limitation, any declared but unpaid bonus,
any amount of Base Salary or deferred compensation accrued or earned but unpaid,
any accrued vacation pay payable pursuant to the Company's policies and any
unreimbursed business expenses payable pursuant to Section 8, which amounts
shall be promptly paid in a lump sum to Executive's estate; (ii) the product of
(x) the target annual bonus for the fiscal year of Executive's death, multiplied
by (y) a fraction, the numerator of which is the number of days of the current
fiscal year during which Executive was employed by the Company, and the
denominator of which is 365, which bonus shall be paid if and when bonuses for
such period are paid to the other executive officers of the Company; (iii)
subject to Section 11 hereof, any other amounts or benefits owing to Executive
under the then applicable employee benefit plans or policies of the Company,
which shall be paid in accordance with such plans or policies; and (iv) payment
of the spouse's and dependent's COBRA coverage premiums to the extent, and as
long as, they remain eligible for COBRA coverage, but in no event more than
three (3) years.

                  (b) Disability. If Executive's employment is terminated by
reason of Executive's Disability, Executive shall be entitled to receive the
payments and benefits to which his representatives would be entitled in the
event of a termination of employment by reason of his death; provided that the
payment of Base Salary shall be reduced by the projected amount he would receive
under any long-term disability policy maintained by the Company or program
maintained by the Company during the twelve (12) month period during which Base
Salary is being paid.

                  (c) Termination by Executive for Good Reason or for Change in
Control. If (i) Executive terminates his employment hereunder for Good Reason
during the Employment Term; or (ii) a Change in Control occurs and within 180
days thereafter Executive terminates his employment for any reason, Executive
shall be entitled to receive the payments and benefits to which his
representatives would be entitled in the event of a termination of employment by
reason of his death plus payment on a monthly basis of twelve (12) months of
Base Salary in effect as of the start of the fiscal year in which such
termination occurs, in accordance with usual Company payroll practices. In
addition, in the event Executive terminates his employment as a result of a
Change of Control, Executive's non-qualified stock options shall immediately
vest and become exercisable and Executive's Restricted Stock shall immediately
vest.

<PAGE>

                  (d) Termination With Cause or Voluntary Resignation Without
Good Reason. If Executive's employment hereunder is terminated (i) by the
Company for Cause; or (ii) by Executive without Good Reason except within 180
days following a Change in Control, the Executive shall be entitled to receive
only his Base Salary through the date of termination, any earned but unpaid
bonus for such year, any unreimbursed business expenses payable pursuant to
Section 8 and any other benefits subject to Section 10(a)(iii) hereof to which
he is entitled by law. All other benefits (including, without limitation, rights
to retain Restricted Stock and rights to exercise options) due Executive shall
terminate upon such termination of employment.

                  (e) Non Renewal by the Company or Termination by the Company
Without Cause. If this Agreement is not renewed by the Company at the end of the
Employment Term or Executive's employment is terminated by the Company without
Cause, Executive shall be entitled to receive the payment and benefits to which
his representatives would be entitled in the event of a termination of
employment by reason of his death plus payment on a monthly basis of twelve (12)
months of Base Salary in effect as of the start of such fiscal year, in equal
shares all in accordance with usual Company payroll practices, subject to the
execution, delivery and non-revocation by the Executive of a general release of
claims in favor of the Company and its officers, directors, shareholders and
affiliates in a form reasonably acceptable to the Company and the Executive.

                  (f) Parachute Payments. Notwithstanding the foregoing, the
benefits provided to the Executive under Section 10(c) on account of a Change in
Control shall be reduced if and to the extent that a nationally recognized firm
of compensation consultants or auditors designated by the Company determines
that such reduction will result in a greater net after-tax benefit to the
Executive than the Executive would obtain in the absence of such reduction,
taking into account any excise tax payable by the Executive under Internal
Revenue Code Section 4999. The allocation of the reduction required hereby among
the benefits shall be determined by the Executive.

         11. No Mitigation: No Set-Off. In the event of any termination of
employment under Section 9, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due Executive under
this Agreement on account of any remuneration attributable to any subsequent
employment that Executive may obtain. Any amounts due under Section 10 are in
the nature of severance payments, or liquidated damages, or both, and are not in
the nature of a penalty. Such amounts are inclusive and in lieu of any amounts
payable under any other salary continuation or cash severance arrangement of the
Company or any affiliate thereof and to the extent paid or provided under any
other such arrangement shall be offset from the amount due hereunder.

<PAGE>

         12. Change in Control. Subject to the provisions of Section 12(b)
hereof, for purposes of this Agreement, the term "Change in Control" shall mean
(a) any "person" (as defined in the Act) not an affiliate of the Company on the
Effective Date becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company's then
outstanding securities; (b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in this
paragraph) whose election by the Board of the Company or nomination for election
by the Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning of
the two-year period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority of the
Board; (c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; or (d) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
other than the sale of all or substantially all of the assets of the Company to
a person or persons who beneficially own, directly or indirectly, at least fifty
percent (50%) or more of the combined voting power of the outstanding voting
securities of the Company at the time of the sale.

         13. Confidential Information, Non-Competition and Non-Solicitation of
the Company.

                  (a) (i) Executive acknowledges that, as a result of his
employment hereunder, Executive will obtain secret and confidential information
of the Company and the Company will suffer substantial damage, which would be
difficult to ascertain and in an amount which would be difficult to compute, if
Executive should use any of such confidential information and that because of
the nature of the information that will be known to Executive, it is necessary
for the Company to be protected by the prohibition against Competition as set
forth herein, as well as the Confidentiality restrictions set forth herein.

                           (ii) Executive acknowledges that the retention of
non-clerical employees of the
Company, in which the Company has invested training and on which the Company
depends for the operation of its business, is important to the businesses of the
Company; Executive will obtain unique information as to such employees as an
executive of the Company and will develop a unique relationship with such
persons as a result of being an executive of the Company; and, therefore, it is
necessary for the Company to be protected from Executive's Solicitation of such
employees as set forth below.

                           (iii) Executive acknowledges that the provisions of
this Agreement are reasonable and necessary for the protection of the business
of the Company and that part of the compensation paid under this Agreement and
the agreement to pay severance in certain instances is in consideration for the
agreements in this Section 13.

<PAGE>

                  (b) As used herein, "Competition" shall mean: participating,
directly or indirectly, as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender, consultant or in
any capacity whatsoever (within the United States of America, or in any other
country where any Constituent Corporation does business) in a business that owns
or operates off price apparel and housewares stores (or any other business in
which any Constituent Corporation is then engaged); provided, however, that such
participation shall not include (i) the ownership of not more than one percent
(1%) of the total outstanding stock of a publicly-held company; or (ii) any
activity engaged in with the prior written approval of the Board.

                  (c) As used herein, "Solicitation" shall mean recruiting,
soliciting or inducing any non-clerical employee of any Constituent Corporation
to terminate his or her employment with, or otherwise cease his or her
relationship with, such Constituent Corporation or hiring, or assisting another
person or entity to hire, any non-clerical employee of any Constituent
Corporation or any person who, within six (6) months before, had been a
non-clerical employee of any Constituent Corporation, unless the employment of
such person by a Constituent Corporation was terminated involuntarily and
without cause.

                  (d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or an arbitrator,
to be unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographical area, it shall be
interpreted to extend over the maximum period of time, range of activities or
geographic area as to which it may be enforceable. If any provision of this
Section 13 shall be declared to be invalid or enforceable, in whole or in part,
as a result of the foregoing, as a result of public policy or for any other
reason, such invalidity shall not affect the remaining provisions of this
Section, which shall remain in full force and effect.

                  (e) During and after the Employment Term, Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company and its
business, including any confidential information as to suppliers (i) obtained by
Executive during his employment by the Company and (ii) not otherwise in the
public domain. Executive shall not, without prior written consent of the
Company, unless compelled pursuant to the order of a court or other government
or legal body having jurisdiction over such matter, communicate or divulge any
such information, knowledge or data to anyone other than the Company, and those
designated by it. In the event Executive is compelled by order of a court or
other governmental or legal body to communicate or divulge any such information,
knowledge or data to anyone other than the foregoing, he shall promptly notify
the Company of any such order and he shall cooperate fully with the Company in
protecting such information to the full extent, possible under applicable law,

                  (f) Upon termination of his employment with the Company, or at
any time the Company may request, Executive will promptly deliver to the
Company, as requested, all documents (whether prepared by the Company, Executive
or a third party) relating to the Company or any of its business or property
which he may possess or have under his direction or control, other than his
personal employment and personnel records.

                  (g) During the Employment Term and for one (1) year
thereafter, Executive will not enter into Competition with the Company;
provided, however, that Executive's obligation under this sentence shall be
suspended during any time when the Company is in breach of any payment
obligation under Section 10(c) or 10(e) of this Agreement. Furthermore, in the
event of any termination of Executive's employment for any reason whatsoever,
whether by the Company or by the Executive and whether or not for Cause, Good
Reason or expiration of the Employment Tem, the Executive will not engage in
Solicitation for one (1) year thereafter.

<PAGE>

                  (h) Executive acknowledges that in the event of a breach of
this Section 13, the Company will be caused irreparable injury and money damages
may not be an adequate remedy. Consequently, Executive agrees that the Company
shall be entitled to seek injunctive relief (in addition to its other remedies
at law) to have the provisions of this Section 13 enforced.

         14.      Indemnification.

                  (a) The Company agrees that if Executive is made a party to or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director or officer of any Constituent Corporation or
is or was serving at the request of any Constituent Corporation as a director,
officer, member, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including, without
limitation, service with respect to employee benefit plans, whether or not the
basis of such Proceeding is alleged action in an official capacity as a
director, officer, member, employee, fiduciary or agent while serving as a
director, officer, member, employee, fiduciary or agent, he shall be indemnified
and held harmless by the applicable company to the fullest extent authorized by
applicable law against all Expenses incurred or suffered by Executive in
connection therewith, and such indemnification shall continue as to Executive
even if Executive has ceased to be an officer, director, member, fiduciary or
agent, or is no longer employed by such company, and shall inure to the benefit
of his heirs, executors and administrators.

                  (b) As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements and costs, attorneys' fees, accountants'
fees and disbursements and costs of attachment or similar bonds, investigations
and any expenses of establishing a right to indemnification under this
Agreement.

                  (c) To the extent permitted by applicable law, Expenses
incurred by Executive in connection with any Proceeding shall be paid in advance
upon request of Executive and the giving by the Executive of any undertakings
required by applicable law.

                  (d) Executive shall give the Company notice of any claim made
against him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall give the Company such information and cooperation as
it may reasonably require and as shall be within Executive's power and at such
times and places as are reasonably convenient for Executive.

                  (e) With respect to any Proceeding involving Executive:

                           (i) The Company will be entitled to participate
therein at its own expense; and

<PAGE>

                           (ii) Except as otherwise provided below, to the
extent that it may wish, the
Company will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Executive, in which case Executive also shall have the right to
participate and employ his own counsel in such action, suit or proceeding, but
only at his own cost and expense, provided that the Company shall only be
permitted to assume defense of a Proceeding if (l) the Proceeding could not
result in imposition of criminal penalties against Executive and (2) the Company
acknowledges that it is liable to indemnify Executive with respect to all
Expenses with respect to such Proceedings, except as provided earlier in this
sentence with regard to Executive's own counsel.

                  (f) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner which would impose any penalty on Executive (except a
penalty in respect of which Executive is fully indemnified hereunder) without
Executive's written consent. Neither the Company nor Executive will unreasonably
withhold or delay consent to any proposed settlement.

                  (g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 14 shall not be exclusive of any other right which Executive may
have or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreements, vote of stockholders or
disinterested directors or otherwise.

                  (h) The Company shall obtain officer and director liability
insurance policies covering Executive in the same aggregate amount and under the
same terms as are currently maintained by the Company for senior officers and
directors and use commercially reasonable efforts to maintain such policies or
replacement policies with substantially the same limits in effect during the
term of Executive's employment by the Company.

         15.      Miscellaneous.

                  (a) Entire Arrangement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of the parties
with respect to the employment of Executive by the Company, and supersede all
prior understandings and agreements (written or oral) with respect thereto,
subject to the last sentence of this Section 15(a). There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter hereof other than those expressly set forth
herein and therein. This Agreement may not be altered, modified or amended
except by written instrument signed by the parties hereto. Anything to the
contrary contained herein notwithstanding, all prior understandings and
agreements between the Company and Executive relating to stock options shall
continue in full force and effect, such options being in addition to (and not in
lieu of) the options to be granted hereunder.

                  (b) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.

<PAGE>

                  (c) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company, but only to
another Constituent Corporation and only if such Constituent Corporation
promptly assumes all of the obligations hereunder of the Company in a writing
delivered to the Executive and otherwise complies with the provisions hereof
with regard to such assumption. Upon such assignment and assumption, all
obligations of the Company herein shall be the obligations of the assignee
entity or acquiror, as the case may be, but the Company shall remain secondarily
liable for the obligations hereunder.

                  (d) Successors; Binding Agreement. This Agreement shall inure
to the benefit of and be binding upon the personal or legal representatives,
executors, administrators, successor, heirs, distributees, devisees legatees and
permitted assignees of the parties hereto.

                  (e) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given (i) when faxed or delivered in
person; or (ii) two business days after mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the signature page of this Agreement, provided
that all notices to the Company shall be directed to the CEO of the Company or
to such other address as any party may have furnished to the other in writing in
accordance herewith. Notice of change of address shall be effective only upon
receipt.

                  (f) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement to Executive such Federal, state and
local taxes as may be required to be withheld pursuant to any applicable law or
regulation.

                  (g) Survival. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment to the
extent necessary to the agreed preservation of such rights and obligations.

                  (h) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

                  (i) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provisions of this Agreement.

                   (j) Notwithstanding anything to the contrary in this
Agreement, the Company shall not be required to take any action or make any
payment to the extent such action or payment would be inconsistent with or
violate the provisions of the Sarbanes-Oxley Act of 2002.

<PAGE>


         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written,



                                FACTORY 2-U STORES, INC.



                                By: /s/William R. Fields
                                    --------------------
                                    William R. Fields, Chief Executive Officer
                                    Address:   4000 Ruffin Road
                                               San Diego, California 92123-1866
                                    Telephone: (858)627-1800
                                    Fax:       (858)637-4199



                                    /s/Norman G. Plotkin
                                    --------------------
                                    Norman G. Plotkin
                                    Address:      4000 Ruffin Road
                                                  San Diego, California  92123
                                    Office Phone: (858)637-4126
                                    Office Fax:   (858)966-2126




</TEXT>
</DOCUMENT>
