AMENDMENT NO. 7 TO
                     LOAN AND SECURITY AGREEMENT AND WAIVER


                  This Amendment No. 7 to Loan and Security Agreement and Waiver
(this  "Amendment")  is entered into as of this 24th day of September,  1997, by
and between FACTORY 2-U, INC., an Arizona corporation  ("Borrower"),  and FINOVA
CAPITAL CORPORATION, a Delaware corporation ("Lender").

                              W I T N E S S E T H :


                  WHEREAS,  Borrower and Lender are parties to that certain Loan
and  Security  Agreement  dated as of November  10,  1995,  as amended by (i) an
Amendment No. 1 to Loan and Security  Agreement and Waiver dated as of April 18,
1996, (ii) an Amendment No. 2 to Loan and Security Agreement and Waiver dated as
of April 22, 1996,  (iii) an Amendment No. 3 to Loan and Security  Agreement and
Waiver  dated  July 10,  1996,  (iv) an  Amendment  No.  4 to Loan and  Security
Agreement and Waiver dated December 31, 1996, (v) an Amendment No. 5 to Loan and
Security  Agreement  and Waiver dated April 23, 1997 and (vi) an Amendment No. 6
to Loan and  Security  Agreement  dated as of May 30, 1997 (as so  amended,  the
"Loan Agreement") that evidences a loan from Lender to Borrower; and

                  WHEREAS,   Borrower  has  asked  Lender  to  modify  the  Loan
Agreement  in  accordance  with the  terms of,  and  subject  to the  conditions
contained  in,  this  Amendment  and  Lender  is  willing  so to amend  the Loan
Agreement, upon the terms and conditions set forth herein;

                  NOW,  THEREFORE,  in  consideration  of  these  recitals,  the
covenants  contained  in  this  Amendment,  and  for  other  good  and  valuable
consideration,  the receipt and  sufficiency  of which are hereby  acknowledged,
Lender and Borrower agree as follows:

                  1.  Definitions.  Unless otherwise  defined in this Amendment,
all capitalized terms used herein, which are defined in the Loan Agreement, have
the same meaning as set forth in the Loan Agreement.

                  2. Amendments to Loan Agreement. The Loan Agreement is amended
as follows:

                           2.1 That  subsection  of that Section of the Schedule
         to the Loan Agreement entitled "NEGATIVE COVENANTS (Section 14)", which
         subsection is entitled "Capital Expenditures", is hereby amended in its
         entirety to read as follows:

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     "Capital Expenditures.   Borrower shall not make or incur any Capital
                              Expenditure if, after giving effect thereto, the
                              aggregate amount of all Capital Expenditures  by
                              Borrower during any fiscal year would  exceed
                              One Million Six Hundred Thousand Dollars
                              ($1,600,000); provided, however, that before the
                              aggregate amount of Capital  Expenditures
                              incurred by Borrower and by General Textiles
                              during any fiscal year of Borrower  exceeds the
                              amount of Three Million Dollars ($3,000,000),
                              Borrower shall establish Availability of notless
                              than Three Hundred Thousand Dollars ($300,000)
                              and shall maintain such Availability for remaining
                              portion of such fiscal year.  The Availability
                              required to be maintained by Borrower pursuant
                              to this subsection shall be in  addition  to any
                              required Availability   which  Borrower  must
                              establish  and  maintain pursuant to other 
                              provisions of the Loan Documents."

                           2.2. All references to the "Loan  Documents" shall be
         deemed to refer to any such Loan  Documents  as the same may be amended
         as of the date the conditions  precedent to the  effectiveness  of this
         Amendment  described  in  Section  4 have been  fulfilled  as set forth
         therein, or as the same may be subsequently modified,  amended, renewed
         or restated.

                  3. Waivers.  Provided that the conditions  precedent described
in Section 4 hereof are met to the  satisfaction  of Lender,  and subject to the
terms of this Amendment, Lender hereby waives Borrower's non-compliance with (i)
the covenant with respect to Borrower's Capital Expenditures,  described in that
subsection  of that  Section  of the  Schedule  to the Loan  Agreement  entitled
"NEGATIVE  COVENANTS  (Section  14)",  which  subsection  is  entitled  "Capital
Expenditures",  for Borrower's fiscal  year-to-date  period ended July 31, 1997,
and (ii) the covenant  with respect to  Borrower's  consolidated-basis  ratio of
Operating  Cash  Flow to  Total  Contractual  Debt  Service,  described  in that
subsection  of that  Section  of the  Schedule  to the Loan  Agreement  entitled
"FINANCIAL  COVENANTS  (Section  13.14)",  which  subsection  is entitled  "Debt
Service  Coverage  Ratio",  for the calendar  month ended  August 31, 1997.  The
waivers set forth in this  Section 3 shall be  effective  only in this  specific
instance and for the specific purpose for which given, and Lender's  granting of
such  waivers  shall not entitle  Borrower to any further or other waiver in any
similar or other circumstances.

                  4.  Conditions  Precedent.  This  Amendment,  and the  waivers
described in Section 3 above, will not be effective unless and until each of the
following conditions

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precedent have been  satisfied,  in form,  manner and substance  satisfactory to
Lender prior to September 24, 1997:

         (a)  Borrower  shall have  delivered  or caused to be
         delivered  to Lender the  following  documents,  all of which  shall be
         properly completed, executed and otherwise satisfactory to Lender:

              (i)  This Amendment;

              (ii) Consent of Guarantor in the form attached hereto;

             (iii) Such  acknowledgments,  reaffirmations
                   and consents of third parties as Lender shall deem necessary;

              (iv) A  corporate  resolution  of  Borrower
                   approving the transactions contemplated hereby to which it is
                   a party;

              (v) A corporate resolution of Guarantor approving the transactions
                   contemplated hereby to which it is a party; and

              (vi) Such other  items as Lender may require or deem necessary.

                           (b) Lender and General  Textiles  shall have executed
         an Amendment No. 10 to the GenTex Loan  Agreement and each condition to
         the  effectiveness  thereof  shall have been  satisfied  other than the
         execution of this Amendment.

                           (c) There shall not then exist an Event of Default or
         any act or event  which with  notice,  passage  of time,  or both would
         constitute an Event of Default.

                           (d) All the  representations  and  warranties  of the
         Loan Parties in the Loan  Documents  shall be true and correct,  in all
         material respects, before and after giving effect to the making of this
         Amendment.

                           (e)  Borrower  shall  have  paid all  closing  costs,
         recording fees and taxes, appraisal fees and expenses, travel expenses,
         fees and expenses of Lender's counsel, and all other costs and expenses
         incurred by Lender in connection  with the  preparation  of, closing of
         and  disbursement  of the advances  pursuant to this  Amendment,  which
         costs,  fees and expenses  may be payable  from the first  advance made
         pursuant to this Amendment.

                  5. Indebtedness  Acknowledged.  Borrower acknowledges that the
indebtedness evidenced by the Loan Documents is just and owing and agrees to pay

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such  indebtedness in accordance with the terms of the Loan Documents.  Borrower
further  acknowledges and represents that no event has occurred and no condition
presently exists that would constitute a breach,  default or Event of Default by
Lender  under the Loan  Agreement  or any of the other Loan  Documents,  with or
without notice or lapse of time.

                  6. Validity of Documents. Borrower hereby ratifies, reaffirms,
acknowledges  and agrees that the Loan  Agreement  and the other Loan  Documents
represent valid,  enforceable and collectable  obligations of Borrower, and that
Borrower  presently has no existing claims,  defenses (personal or otherwise) or
rights of setoff  whatsoever  with respect to the  Obligations of Borrower under
the Loan  Agreement  or any of the other Loan  Documents.  Borrower  furthermore
agrees that it has no defense, counterclaim,  offset, cross-complaint,  claim or
demand  of any  nature  whatsoever  which  can be  asserted  as a basis  to seek
affirmative relief or damages from Lender.

                  7.  Reaffirmation of Warranties.  Borrower hereby reaffirms to
Lender each of the  representations,  warranties,  covenants  and  agreements of
Borrower  as set  forth in each of the Loan  Documents  with the same  force and
effect as if each were separately  stated herein and made as of the date hereof.
Borrower  represents and warrants to Lender that,  with respect to the financing
transaction herein  contemplated,  no Person is entitled to any brokerage fee or
other  commission  and  Borrower  agrees to indemnify  and hold Lender  harmless
against any and all such claims.

                  8. Ratification of Terms and Conditions. All terms, conditions
and  provisions of the Loan  Agreement,  and of each of the other Loan Documents
shall  continue  in full  force and  effect  and  shall  remain  unaffected  and
unchanged  except as specifically  amended hereby.  In the event of any conflict
between the terms and  conditions  of this  Amendment  and any of the other Loan
Documents,  the provisions of this Amendment shall control. Without limiting the
generality of the  foregoing,  Borrower  reaffirms its  obligation to deliver to
Lender Landlord's Consents with respect to all of Borrower's facilities in which
Collateral is or is intended to be kept or maintained  and further  acknowledges
that Lender has not waived its right to require the delivery of such  Landlord's
Consents.

                  9. Other Writings. Lender and Borrower will execute such other
writings as may be  necessary to confirm or carry out the  intentions  of Lender
and Borrower evidenced by this Amendment.

                  10. Benefit of the Amendment. The terms and provisions of this
Amendment  and the other Loan  Documents  shall be binding upon and inure to the
benefit of Lender and  Borrower  and their  respective  successors  and assigns,
except that  Borrower  shall not have any right to assign its rights  under this
Amendment or any of the Loan Documents or any interest therein without the prior
written consent of Lender.

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                  11. Choice of Law. The Loan Documents and this Amendment shall
be performed and construed in accordance with the laws of the State of Arizona.

                  12. Entire  Agreement.  Except as modified by this  Amendment,
the Loan  Documents  remain in full  force and  effect.  The Loan  Documents  as
modified by this Amendment embody the entire agreement and understanding between
Borrower and Lender,  and  supersede  all prior  agreements  and  understandings
between said parties relating to the subject matter thereof.

                  13.  Counterparts;  Telecopy Execution.  This Amendment may be
executed  in any  number  of  separate  counterparts,  all of which  when  taken
together shall constitute one and the same instrument, admissible into evidence,
notwithstanding  the fact that all parties have not signed the same counterpart.
Delivery of an executed  counterpart of this Amendment by telefacsimile shall be
equally as  effective  as delivery of a manually  executed  counterpart  of this
Amendment.  Any party  delivering an executed  counterpart  of this Amendment by
telefacsimile  shall  also  deliver  a  manually  executed  counterpart  of this
Amendment,  but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.

                            [SIGNATURE PAGE FOLLOWS]
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                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Amendment to be duly executed as of the day and year first written above.


                             FINOVA CAPITAL CORPORATION, a Delaware corporation


                             By:    /s/ Pete Martinez
                                    Name:  Pete Martinez
                                    Title: Vice President


                             FACTORY 2-U, INC., an Arizona corporation


                             By:    /s/ Jonathan W. Spatz
                                    Name:   Jonathan W. Spatz
                                    Title:  Executive Vice President


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                              CONSENT OF GUARANTOR

                  The undersigned ("Guarantor") hereby executes this Consent for
the  purpose  of  (i)  evidencing  Guarantor's  consent  to  the  execution  and
performance of the foregoing Amendment No. 7 to Loan and Security Agreement (the
"Seventh  Amendment") by Lender and Borrower,  (ii) reaffirming the terms of the
Guaranty Agreement executed by Guarantor, (iii) evidencing Guarantor's agreement
that the Borrower's  Obligations as set forth in the Guaranty  Agreement  shall,
for all  purposes,  include  the  Loan  Documents,  as  amended  by the  Seventh
Amendment,  and shall further include all additional amounts which may be funded
or advanced  to  Borrower  pursuant  to the Loan  Agreement  described  above as
amended by the Seventh Amendment, and (iv) ratifying and affirming all terms and
provisions of the Guaranty Agreement.  Except to the extent otherwise indicated,
terms used herein with initial capital letters shall have the meanings set forth
in the Loan Agreement, as amended by the Seventh Amendment.

                  Guarantor agrees that it has no defense, counterclaim, offset,
cross-complaint,  claim or demand of any nature whatsoever which can be asserted
as a basis to seek affirmative relief or damages from Lender.

                  IN WITNESS WHEREOF, the undersigned has hereunto executed this
Consent as of this 24th day of September, 1997.

                             FAMILY BARGAIN CORPORATION, a Delaware corporation


                              By:    /s/ Jonathan W. Spatz
                                     Name:  Jonathan W. Spatz
                                     Title: Executive Vice President

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