Document:

EXHIBIT 4.1

                             SUBSCRIPTION AGREEMENT

     THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made as of this 6th day of
March 2003,  by and between  FACTORY 2-U  STORES,  a Delaware  corporation  (the
"Company"), and _____________ (the "Investor").

                              W I T N E S S E T H:

     WHEREAS,  the Investor desires to subscribe for,  purchase and acquire from
the  Company and the Company  desires to sell and issue to the  Investor  ______
shares (the "Shares") of the Company's  Common Stock,  par value $0.01 per share
(the  "Common  Stock"),  upon  the  terms  and  conditions  and  subject  to the
provisions hereinafter set forth.

     NOW,  THEREFORE,  for and in consideration of the mutual premises contained
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

     1.   PURCHASE AND SALE OF THE SHARES.  Subject to the terms and  conditions
of this  Agreement,  the  Investor  subscribes  for and agrees to  purchase  and
acquire  from the  Company  and the  Company  agrees  to sell  and  issue to the
Investor the Shares,  in the manner set forth in SECTION 2 hereof, at a purchase
price of ______ per Share,  yielding an aggregate  purchase  price of __________
(the "Purchase Price").

     2.   TERMS  OF  PURCHASE  AND  SALE  OF  THE  SHARES.  The  closing  of the
transactions  contemplated  hereby (the "Closing") shall take place at such time
and place as the  Investor  and the Company may agree upon;  provided,  however,
that in no event  shall the  Closing  take  place  later  than  March 31,  2003.
Contemporaneously  with the  delivery  of this  Agreement,  the  Investor  shall
deliver to the  Company  the  Purchase  Price by wire  transfer  of  immediately
available funds pursuant to wire transfer  instructions given to the Investor by
the  Company.  At the  Closing,  the  Company  shall  deliver to the  Investor a
certificate, registered in the name of the Investor, representing the Shares.

     3.   REPRESENTATIONS  AND WARRANTIES OF THE COMPANY. In order to induce the
Investor to enter into this Agreement,  the Company  represents and warrants the
following:

          (A)  AUTHORITY.  The Company is a corporation duly organized,  validly
     existing, and in good standing under the laws of the State of Delaware, and
     has all  requisite  right,  power,  and  authority to execute,  deliver and
     perform this Agreement.

          (B)  ENFORCEABILITY.  The execution, delivery, and performance of this
     Agreement  by the  Company  have  been  duly  authorized  by all  requisite
     corporate  action.  This  Agreement has been duly executed and delivered by
     the Company, and, upon its execution by the Investor,  shall constitute the

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     legal,  valid,  and  binding  obligation  of the  Company,  enforceable  in
     accordance with its terms,  except to the extent that its enforceability is
     limited by bankruptcy,  insolvency,  reorganization, or other laws relating
     to or affecting  the  enforcement  of  creditors'  rights  generally and by
     general principles of equity.

          (C)  NO VIOLATIONS.  The execution,  delivery, and performance of this
     Agreement  by the Company do not and will not violate or conflict  with any
     provision of the Company's Restated  Certificate of Incorporation or Bylaws
     and do not and will not,  with or without the passage of time or the giving
     of  notice,  result in the breach of, or  constitute  a default,  cause the
     acceleration of performance, or require any consent under, or result in the
     creation of any lien,  charge or encumbrance upon any property or assets of
     the Company pursuant to, any material  instrument or agreement to which the
     Company  is a party or by which the  Company or its  properties  are bound,
     except such consents as have been obtained as of the date hereof.

          (D)  CAPITALIZATION.  The  authorized  capital  stock  of the  Company
     consists of:  35,000,000  shares of Common Stock, of which  13,473,400 were
     issued  and  outstanding  as of  February  21,  2003,  7,500,000  shares of
     preferred stock, $0.01 par value, none of which were issued and outstanding
     on February 21, 2003.  As of January 31, 2003,  the Company has (i) granted
     options to  purchase  1,421,807  shares of Common  Stock,  including  4,520
     performance-based  options, and (ii) issued currently  exercisable warrants
     to purchase 82,690 shares of Common Stock, with an exercise price of $19.91
     per share.  Upon  issuance in accordance  with the terms of this  Agreement
     against  payment of the Purchase Price therefor the Shares will be duly and
     validly issued,  fully paid, and nonassessable  with no personal  liability
     attaching to the ownership  thereof and free and clear of all liens imposed
     by  or  through  the   Company,   and,   assuming   the   accuracy  of  the
     representations  and  warranties  of  the  Investor,   will  be  issued  in
     accordance  with a valid exemption from the  registration or  qualification
     provisions  of the  Securities  Act of 1933,  as amended  (the  "Securities
     Act"), and any applicable state securities laws (the "State Acts").

          (E)  EXCHANGE ACT FILING.  All reports and  statements  required to be
     filed by the Company with the Securities and Exchange  Commission under the
     Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), and the
     rules  and  regulations  thereunder,  due at or  prior  to the date of this
     Agreement  have  been  made.  Such  filings,  together  with all  documents
     incorporated  by  reference  therein,  are  referred  to as  "Exchange  Act
     Documents."  Each  Exchange  Act  Document,  as amended,  conformed  in all
     material respects to the requirements of the Exchange Act and the rules and
     regulations  thereunder,  and no Exchange Act Document,  as amended, at the
     time each such  document  was filed,  included  any untrue  statement  of a
     material  fact or omitted to state any 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.

          (F)  COMPANY FINANCIAL  STATEMENTS.  The audited financial statements,
     together  with the  related  notes of the  Company at  February 2, 2002 and

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     February 3, 2001,  and for the years then ended,  included in the Company's
     Annual  Report of Form 10-K for the year ended  February  2, 2002,  and the
     unaudited financial  statements of the Company at November 2, 2002, and for
     the  nine  months  then  ended,   (collectively,   the  "Company  Financial
     Statements")  included in the Company's  Quarterly  Report on Form 10-Q for
     the quarter ended  November 2, 2002,  respectively,  fairly  present in all
     material respects, on the basis stated therein and on the date thereof, the
     financial position of the Company at the respective dates therein specified
     and its results of  operations  and cash flows for the  periods  then ended
     (subject to, in the case of unaudited  financial  statements,  normal audit
     adjustments).  To the knowledge of the Company, such statements and related
     notes have been prepared in accordance with generally  accepted  accounting
     principles  in the United  States  applied on a consistent  basis except as
     expressly noted therein.

          (G)  NO MATERIAL LIABILITIES.  Except as contemplated by the Company's
     press  release  dated  February 26, 2003 or as described on Schedule  3(g),
     since  November  2,  2002,  the  Company  has  not  incurred  any  material
     liabilities or  obligations,  direct or contingent,  except in the ordinary
     course of business and except for  liabilities or obligations  reflected or
     reserved  against on the Company's  balance sheet as November 2, 2002,  and
     there has not been any material adverse change,  or to the actual knowledge
     of the Company,  any development  involving a prospective  material adverse
     change, in the condition (financial or otherwise),  business, prospects, or
     results  of  operations  of the  Company  or any  change in the  capital or
     increase  in the  long-term  debt  of the  Company,  nor  has  the  Company
     declared,  paid,  or made any dividend or  distribution  of any kind on its
     capital stock.

          (H)  NO DISPUTES AGAINST COMPANY.  Except as disclosed in the Exchange
     Act  Documents  there is no material  pending or, to the  knowledge  of the
     Company,  threatened (a) action, suit, claim, proceeding,  or investigation
     against  the  Company,  at law or in equity,  or before or by any  Federal,
     state,  municipal,  or other governmental  department,  commission,  board,
     bureau,  agency or  instrumentality,  domestic or foreign,  (b) arbitration
     proceeding  against  the  Company,  (c)  governmental  inquiry  against the
     Company,  or (d) any action or suit by or on behalf of the Company  pending
     or threatened against others.

     4.   REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. In order to induce the
Company to enter into this Agreement,  the Investor  represents and warrants the
following:

          (A)  AUTHORITY.  The  Investor has all  requisite  right,  power,  and
     authority to execute, deliver, and perform this Agreement.

          (B)  ENFORCEABILITY.  The execution, delivery, and performance of this
     Agreement  by the  Investor  have been  duly  authorized  by all  requisite
     partnership  or corporate  action,  as the case may be. This  Agreement has
     been duly executed and  delivered by the Investor,  and, upon its execution
     by the Company,  shall constitute the legal,  valid, and binding obligation
     of the Investor,  enforceable in accordance  with its terms,  except to the
     extent  that its  enforceability  is  limited  by  bankruptcy,  insolvency,

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     reorganization,  or other laws relating to or affecting the  enforcement of
     creditors' rights generally and by general principles of equity.

          (C)  NO VIOLATIONS.  The execution,  delivery, and performance of this
     Agreement by the Investor do not and will not,  with or without the passage
     of time or the giving of notice,  result in the breach of, or  constitute a
     default,  cause the  acceleration  of  performance,  or require any consent
     under,  or result in the creation of any lien,  charge or encumbrance  upon
     any property or assets of the Investor pursuant to, any material instrument
     or  agreement  to which the Investor is a party or by which the Investor or
     its properties may be bound or affected, and, do not or will not violate or
     conflict  with any  provision of the articles of  incorporation  or bylaws,
     partnership  agreement,  operating agreement,  trust agreement,  or similar
     organizational or governing document of the Investor, as applicable.

          (D)  KNOWLEDGE OF INVESTMENT AND ITS RISKS. The Investor has knowledge
     and  experience  in  financial  and  business  matters  as to be capable of
     evaluating the merits and risks of Investor's investment in the Shares. The
     Investor  understands  that an investment in the Company  represents a high
     degree of risk and there is no  assurance  that the  Company's  business or
     operations  will be successful.  The Investor has considered  carefully the
     risks attendant to an investment in the Company, and that, as a consequence
     of such risks, the Investor could lose Investor's  entire investment in the
     Company.

          (E)  INVESTMENT  INTENT.  The Investor hereby  represents and warrants
     that (i) the Shares are being  acquired for  investment  for the Investor's
     own  account,  and not as a  nominee  or  agent  and not with a view to the
     resale or distribution  of all or any part of the Shares,  and the Investor
     has no present  intention  of selling,  granting any  participation  in, or
     otherwise  distributing  any  of  the  Shares  within  the  meaning  of the
     Securities  Act  and  (ii)  the  Investor  does  not  have  any  contracts,
     understandings,  agreements,  or arrangements with any person and/or entity
     to sell,  transfer,  or grant  participations to such person and/or entity,
     with respect to any of the Shares.

          (F)  ACCREDITED INVESTOR.  The Investor is an "Accredited Investor" as
     that term is  defined by Rule 501 of  Regulation  D  promulgated  under the
     Securities Act.

          (G)  DISCLOSURE. The Investor has reviewed information provided by the
     Company in connection with the decision to purchase the Shares,  consisting
     of the  Company's  publicly  available  filings  with  the  Securities  and
     Exchange Commission and the information  contained therein. The Company has
     provided  the  Investor  with all the  information  that the  Investor  has
     requested  in  connection  with the  decision to purchase  the Shares.  The
     Investor further represents that the Investor has had an opportunity to ask
     questions  and receive  answers from the Company  regarding  the  business,
     properties,  prospects,  and  financial  condition of the  Company.  To the
     Investor's knowledge, the Company has not disclosed any material non-public
     information  to the Investor.  All such questions have been answered to the
     full satisfaction of the Investor.

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          (H)  NO  REGISTRATION.  The Investor  understands that Investor may be
     required to bear the economic risk of Investor's  investment in the Company
     for an indefinite period of time. The Investor further understands that (i)
     neither the offering nor the sale of the Shares has been  registered  under
     the Securities Act or any applicable State Acts in reliance upon exemptions
     from the  registration  requirements  of such laws, (ii) the Shares must be
     held by he, she or it indefinitely  unless the sale or transfer  thereof is
     subsequently  registered  under the Securities Act and any applicable State
     Acts, or an exemption  from such  registration  requirements  is available,
     (iii) except as set forth in the Registration  Rights Agreement between the
     Company and the  Investor,  the Company is under no  obligation to register
     any of the Shares on the  Investor's  behalf or to assist the  Investor  in
     complying with any exemption from  registration,  and (iv) the Company will
     rely upon the  representations  and warranties made by the Investor in this
     Subscription  Agreement  in order to  establish  such  exemptions  from the
     registration  requirements  of the Securities Act and any applicable  State
     Acts.

          (I)  TRANSFER RESTRICTIONS.  The Investor will not transfer any of the
     Shares unless such transfer is registered or exempt from registration under
     the Securities Act and such State Acts, and, if requested by the Company in
     the case of an exempt transaction, the Investor has furnished an opinion of
     counsel  reasonably  satisfactory  to the Company that such  transfer is so
     exempt.  The  Investor  understands  and agrees  that (i) the  certificates
     evidencing  the  Shares  will  bear  appropriate  legends  indicating  such
     transfer  restrictions  placed upon the Shares, (ii) the Company shall have
     no obligation to honor  transfers of any of the Shares in violation of such
     transfer restrictions,  and (iii) the Company shall be entitled to instruct
     any transfer agent or agents for the securities of the Company to refuse to
     honor such transfers.

          (J)  PRINCIPAL  ADDRESS.  The Investor's  principal  residence,  if an
     individual,  or principal  executive  office, if an entity, is set forth on
     the signature page of this Subscription Agreement.

     5.   FURTHER ASSURANCES. The parties will, upon reasonable request, execute
and deliver all such further  assignments,  endorsements  and other documents as
may be necessary in order to perfect the purchase by the Investor of the Shares.

     6.   REGISTRATION RIGHTS AGREEMENT;  POWER OF ATTORNEY. The Investor agrees
to be  bound  by the  terms  of and  hereby  executes  the  Registration  Rights
Agreement among the Company and the purchasers of the Shares (the  "Registration
Rights Agreement").

     7.   ENTIRE  AGREEMENT;  NO ORAL MODIFICATION.  This Agreement contains the
entire  agreement  among the parties  hereto with respect to the subject  matter
hereof and  supersedes  all prior  agreements  and  understandings  with respect
thereto and may not be amended or modified except in a writing signed by both of
the parties hereto.

     8.   BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their  respective  heirs,  successors
and  assigns;  however,  nothing in this  Agreement,  expressed  or implied,  is

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intended to confer on any other person other than the parties  hereto,  or their
respective heirs,  successors or assigns, any rights,  remedies,  obligations or
liabilities under or by reason of this Agreement.

     9.   COUNTERPARTS.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of which shall be deemed to be an original  and all of which
together shall be deemed to be one and the same instrument.

     10.  GOVERNING LAW. This Agreement  shall be governed by, and construed and
enforced in  accordance  with,  the laws of the United States of America and the
State of Delaware,  both  substantive  and  remedial.  Any  judicial  proceeding
brought  against either of the parties to this agreement or any dispute  arising
out of this  Agreement or any matter related hereto may be brought in the courts
of the State of Texas or in the United  States  District  Court for the Southern
District of Texas and, by its  execution  and delivery of this  agreement,  each
party to this Agreement accepts the jurisdiction of such courts.

     11.  PREVAILING PARTIES. In any action or proceeding brought to enforce any
provision of this Agreement,  or where any provision  hereof is validly asserted
as a  defense,  the  prevailing  party  shall be  entitled  to  receive  and the
nonprevailing party shall pay upon demand reasonable attorneys' fees in addition
to any other remedy.

     12.  HEADINGS.  The section  headings  herein are included for  convenience
only and are not to be deemed a part of this Agreement.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first written above.

                                         FACTORY 2-U STORES, INC.,
                                         a Delaware corporation

                                         By:
                                            ------------------------------------
                                         Name:
                                              ----------------------------------
                                         Its:
                                             -----------------------------------

                                         INVESTOR

                                         ---------------------------------------EXHIBIT 4.2

THIS  WARRANT  HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE "ACTS"). NEITHER
THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT
WITH RESPECT HERETO UNDER ALL OF THE  APPLICABLE  ACTS, OR AN OPINION OF COUNSEL
SATISFACTORY TO FACTORY 2-U STORES,  INC. TO THE EFFECT THAT SUCH  REGISTRATIONS
ARE NOT REQUIRED.

                                     WARRANT

                           to Purchase Common Stock of

                            FACTORY 2-U STORES, INC.

                            Expiring on March 6, 2006

     THIS IS TO CERTIFY THAT, for value received,  SANDERS MORRIS HARRIS INC., a
Texas corporation,  or permitted  assigns,  is entitled to purchase from FACTORY
2-U STORES, INC., a Delaware corporation (the "COMPANY"), at the place where the
Warrant  Office  designated  pursuant to Section  2.1 is located,  at a purchase
price per share of $3.50 (as adjusted pursuant to the terms of this Warrant, the
"EXERCISE PRICE"), 75,000 shares of duly authorized,  validly issued, fully paid
and  nonassessable  shares of Common Stock,  $.01 par value, of the Company (the
"COMMON STOCK"),  and is entitled also to exercise the other appurtenant rights,
powers and privileges  hereinafter set forth. The number of shares of the Common
Stock purchasable  hereunder and the Exercise Price are subject to adjustment in
accordance  with  Article III hereof.  This  Warrant  shall expire at 5:00 p.m.,
C.S.T., on March 6, 2006.

     Certain Terms used in this Warrant are defined in Article IV.

                                    ARTICLE I

                               EXERCISE OF WARRANT

     1.1  METHOD  OF  EXERCISE.  This  Warrant may be exercised as a whole or in
part from time to time until  March 6, 2006,  at which time this  Warrant  shall
expire and be of no further force or effect; provided, however, that the minimum
number of Warrant  Shares that may be  purchased on a single  exercise  shall be
10,000  or  the  entire  number  of  shares  remaining  available  for  exercise
hereunder,  whichever is less. To exercise  this  Warrant,  the holder hereof or
permitted  assignees of all rights of the registered  owner hereof shall deliver
to the Company,  at the Warrant Office  designated in Section 2.1, (a) a written
notice in the form of the  Subscription  Notice  attached  as  Exhibit A hereto,

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stating  therein the election of such holder or such permitted  assignees of the
holder to  exercise  this  Warrant in the manner  provided  in the  Subscription
Notice,  (b)  payment in full of the  Exercise  Price (in the  manner  described
below) for all Warrant Shares purchased hereunder, and (c) this Warrant. Subject
to  compliance  with  Section  3.1(a)(vi),  this  Warrant  shall be deemed to be
exercised  on the date of receipt by the  Company  of the  Subscription  Notice,
accompanied  by payment for the Warrant  Shares to be purchased and surrender of
this Warrant, as aforesaid, and such date is referred to herein as the "EXERCISE
DATE." Upon such exercise  (subject as  aforesaid),  the Company shall issue and
deliver to such holder a certificate  for the full number of the Warrant  Shares
purchasable by such holder hereunder,  against the receipt by the Company of the
total Exercise Price payable hereunder for all such Warrant Shares,  (a) in cash
or by  certified or  cashier's  check or (b) if the Common  Stock is  registered
under the Securities  Exchange Act of 1934, as amended (the "EXCHANGE  ACT"), by
surrendering  Warrant Shares having a Current Market Price equal to the Exercise
Price for all the  Warrant  Shares so  purchased.  The  Person in whose name the
certificate(s) for Common Stock is to be issued shall be deemed to have become a
holder of record of such Common Stock on the Exercise Date.

     1.2  NET EXERCISE.  Notwithstanding  any provisions herein to the contrary,
if the Common Stock is registered under the Exchange Act, and the Current Market
Price of one share of Common Stock is greater  than the  Exercise  Price (at the
date of calculation as set forth below),  in lieu of exercising  this Warrant by
payment of cash,  the holder may elect to receive  Warrant  Shares  equal to the
value (as  determined  below) of this  Warrant  (or the  portion  thereof  being
canceled) by surrender of this Warrant at the Warrant  Office  together with the
properly endorsed Subscription Notice in which event the Company shall issue the
holder a number of shares of Common Stock computed as follows:

                                   X = Y(A-B)
                                       ------
                                          A

Where:    X =  the number of shares of Common Stock to be issued to the holder.
          Y =  the  number  of  shares of  Common  Stock  purchasable  under the
               Warrant or, if only a portion of the Warrant is being  exercised,
               the portion of the Warrant  being  canceled  (at the date of such
               calculation)
          A =  the  Current  Market  Price of one share of Common  Stock (at the
               date of such  calculation)
          B =  Exercise Price (as adjusted to the date of such calculation)

     1.3  FRACTIONAL  SHARES.  No  fractional  shares of Common  Stock  shall be
issued upon exercise of this Warrant. Instead of any fractional shares of Common
Stock that would  otherwise  be  issuable  upon  exercise of this  Warrant,  the
Company shall pay a cash adjustment in respect of such fractional interest equal
to the fair market value of such fractional interest as determined in good faith
by the Board of Directors.

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                                   ARTICLE II

                            WARRANT OFFICE; TRANSFER

     2.1  WARRANT  OFFICE.  The  Company  shall  maintain  an office for certain
purposes specified herein (the "WARRANT  OFFICE"),  which office shall initially
be the Company's  office at 4000 Ruffin Road, 6th Floor,  San Diego,  California
92123-1866,  and may  subsequently be such other office of the Company or of any
transfer  agent of the Common Stock in the  continental  United  States of which
written  notice has  previously  been given to the holder of this  Warrant.  The
Company shall  maintain,  at the Warrant  Office,  a register for the Warrant in
which the Company  shall record the name and address of the person in whose name
this Warrant has been issued,  as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.

     2.2  OWNERSHIP  OF  WARRANT.  The  Company may deem and treat the person in
whose  name  this  Warrant  is   registered  as  the  holder  and  owner  hereof
(notwithstanding  any  notations of  ownership or writing  hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article II.

     2.3  TRANSFER OF  WARRANTS.  The Company  agrees to maintain at the Warrant
Office books for the registration and transfer of this Warrant. This Warrant may
be  transferred  in whole or in part only in compliance  with the applicable law
and only to shareholders,  officers, and employees of Sanders Morris Harris Inc.
or to any person who succeeds to all of the assets of Sanders Morris Harris Inc.
The Company,  from time to time,  shall register the transfer of this Warrant in
such books  upon  surrender  of this  Warrant at the  Warrant  Office,  properly
endorsed,  together with a written assignment of this Warrant,  substantially in
the form of the Assignment attached as Exhibit B hereto. Upon any such transfer,
a new Warrant  shall be issued to the  transferee,  and the Company shall cancel
the  surrendered  Warrant.  The registered  holder of this Warrant shall pay all
taxes and all other expenses and charges payable in connection with the transfer
of Warrants pursuant to this Section 2.3.

     2.4  REGISTRATION  RIGHTS. The Company agrees to include the Warrant Shares
on any  registration  statement  filed by the Company  with respect to shares of
Common  Stock of the  Company  issued  and  sold  pursuant  to the  terms of the
Placement Agent Agreement dated as of October __, 2002,  between the Company and
Sanders Morris Harris Inc.; provided, however, that the Company need not include
on any such registration  statement any Warrant Shares sold to the public either
pursuant to a registration statement or Rule 144 or that may be sold immediately
under Rule 144(k).

     2.5  ACKNOWLEDGMENT  OF  RIGHTS.  The  Company  will,  at the  time  of the
exercise of this Warrant in accordance  with the terms hereof,  upon the request
of  the  registered  holder  hereof,   acknowledge  in  writing  its  continuing
obligation to afford to such holder any rights  (including  without  limitation,
any right to  registration  of the Warrant  Shares) to which such  holder  shall
continue to be entitled after such exercise in accordance with the provisions of

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this Warrant, provided that if the holder of this Warrant shall fail to make any
such  request,  such failure shall not affect the  continuing  obligation of the
Company to afford to such holder any such rights.

     2.6  EXPENSES OF DELIVERY  OF  WARRANTS.  Except as provided in Section 2.3
above, the Company shall pay all reasonable expenses, taxes (other than transfer
taxes) and other charges  payable in connection with the  preparation,  issuance
and delivery of Warrants and related Warrant Shares hereunder.

     2.7  COMPLIANCE  WITH  SECURITIES  LAWS. The holder hereof  understands and
agrees that the following  restrictions  and limitations  shall be applicable to
all  Warrant  Shares and  resales or other  transfers  thereof  pursuant  to the
Securities Act:

     (a)  The  holder hereof agrees that the Warrant Shares shall not be sold or
otherwise  transferred  unless  the  Warrant  Shares  are  registered  under the
Securities Act and state securities laws or are exempt therefrom.

     (b)  A  legend  in  substantially  the  following  form has been or will be
placed on the certificate(s) evidencing the Warrant Shares:

          "The shares  represented by this  certificate have not been registered
     under the Securities Act of 1933, as amended, or the securities laws of any
     state  (collectively,  the  "Acts").  Neither  the shares nor any  interest
     therein may be offered, sold,  transferred,  pledged, or otherwise disposed
     of in the absence of an effective  registration  statement  with respect to
     the  shares  under all of the  applicable  Acts,  or an  opinion of counsel
     satisfactory to  Infocrossing,  Inc. to the effect that such  registrations
     are not required."

     (c)  Stop  transfer  instructions have been or will be imposed with respect
to the  Warrant  Shares  so as to  restrict  resale or other  transfer  thereof,
subject to this Section 2.7.

                                   ARTICLE III

                            ANTI-DILUTION PROVISIONS

     3.1  ADJUSTMENT  OF  EXERCISE  PRICE AND  NUMBER  OF  WARRANT  SHARES.  The
Exercise  Price shall be subject to adjustment  from time to time as hereinafter
provided in this Article III. Upon each adjustment of the Exercise Price, except
pursuant to Sections  3.1(a)(iii),  (iv), and (v), the registered  holder of the
Warrant  shall  thereafter  be  entitled  to  purchase,  at the  Exercise  Price
resulting  from such  adjustment,  the  number of  shares  of the  Common  Stock
obtained by multiplying the Exercise Price in effect  immediately  prior to such
adjustment  by the number of shares of the  Common  Stock  purchasable  pursuant
hereto  immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.

     (a)  EXERCISE  PRICE  ADJUSTMENTS.  The Exercise  Price shall be subject to
adjustment from time to time as follows:

<PAGE>

          (i)  ADJUSTMENT  FOR STOCK  SPLITS AND  COMBINATIONS.  If the  Company
     shall at any time or from time to time after the date hereof (the "ORIGINAL
     ISSUE DATE")  effect a subdivision  of the  outstanding  Common Stock,  the
     Exercise  Price in effect  immediately  before  such  subdivision  shall be
     proportionately decreased.  Conversely, if the Company shall at any time or
     from time to time after the  Original  Issue Date  combine the  outstanding
     shares of Common Stock into a smaller number of shares,  the Exercise Price
     in effect  immediately  before such  combination  shall be  proportionately
     increased.  Any  adjustment  under  this  Section  3.1(a)(i)  shall  become
     effective  at  the  close  of  business  on the  date  the  subdivision  or
     combination becomes effective.

          (ii) ADJUSTMENT  FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS.  If the
     Company  at any time or from time to time  after the  Original  Issue  Date
     makes,  or fixes a record date for the  determination  of holders of Common
     Stock  entitled to receive,  a dividend  or other  distribution  payable in
     additional  shares of Common Stock,  in each such event the Exercise  Price
     that is then in effect shall be  decreased as of the time of such  issuance
     or, in the event such record date is fixed,  as of the close of business on
     such record date,  by  multiplying  the Exercise  Price then in effect by a
     fraction (i) the numerator of which is the total number of shares of Common
     Stock issued and outstanding immediately prior to the time of such issuance
     or the close of business on such record date,  and (ii) the  denominator of
     which is the total number of shares of Common Stock issued and  outstanding
     immediately  prior to the time of such issuance or the close of business on
     such  record  date plus the number of shares of Common  Stock  issuable  in
     payment of such dividend or distribution;  PROVIDED,  HOWEVER, that if such
     record  date is  fixed  and  such  dividend  is not  fully  paid or if such
     distribution  is not fully made on the date fixed  therefor,  the  Exercise
     Price shall be recomputed  accordingly  as of the close of business on such
     record date, and  thereafter the Exercise Price shall be adjusted  pursuant
     to this Section  3.1(a)(ii) to reflect the actual  payment of such dividend
     or distribution.

          (iii) ADJUSTMENT FOR RECLASSIFICATION,  EXCHANGE AND SUBSTITUTION.  If
     at any time or from time to time after the Original  Issue Date, the Common
     Stock is changed into the same or a different number of shares of any class
     or  classes  of stock,  whether by  recapitalization,  reclassification  or
     otherwise  (other  than an  Acquisition,  Asset  Transfer,  subdivision  or
     combination   of   shares,   stock   dividend,   reorganization,    merger,
     consolidation,  or sale of assets  provided  for  elsewhere in this Section
     3.1(a)),  in any  such  event  the  holder  hereof  shall  have  the  right
     thereafter  to  convert  such  stock  into the kind and amount of stock and
     other  securities  and  property  receivable  upon  such  recapitalization,
     reclassification or other change by holders of the maximum number of shares
     of Common  Stock  into which such  shares of Common  Stock  could have been
     converted immediately prior to such  recapitalization,  reclassification or
     change,  all  subject  to further  adjustment  as  provided  herein or with
     respect to such other securities or property by the terms thereof.

          (iv) REORGANIZATIONS,  MERGERS,  CONSOLIDATIONS OR SALES OF ASSETS. If
     at any time or from time to time after the Original Issue Date,  there is a
     capital  reorganization  of the Common  Stock  (other than an  Acquisition,
     Asset   Transfer,    recapitalization,    or   subdivision,    combination,

<PAGE>

     reclassification,   exchange,   or  substitution  of  shares  provided  for
     elsewhere   in  this   Section   3.1(a)),   as  a  part  of  such   capital
     reorganization,  provision shall be made so that the holder of this Warrant
     shall  thereafter be entitled to receive upon exercise hereof the number of
     shares of stock or other  securities  or property of the Company to which a
     holder of the number of shares of Common Stock  deliverable  upon  exercise
     immediately  prior to such event  would have been  entitled  as a result of
     such capital reorganization, subject to adjustment in respect of such stock
     or  securities  by  the  terms  thereof.  In  any  such  case,  appropriate
     adjustment  shall  be made in the  application  of the  provisions  of this
     Section  3.1(a) with  respect to the rights of the holder  hereof after the
     capital  reorganization  to the end that  the  provisions  of this  Section
     3.1(a)  (including  adjustment of the Exercise Price then in effect and the
     number of shares  issuable upon  exercise)  shall be applicable  after that
     event and be as nearly equivalent as practicable.

          (v)  ROUNDING OF CALCULATIONS;  MINIMUM  ADJUSTMENT.  All calculations
     under this  Section  3.1(a) and under  Section  3.1(b) shall be made to the
     nearest   cent.   Any  provision  of  this  Section  3.1  to  the  contrary
     notwithstanding,  no adjustment in the Exercise  Price shall be made if the
     amount  of such  adjustment  would be less than one  percent,  but any such
     amount shall be carried  forward and an  adjustment  with  respect  thereto
     shall be made at the time of and together  with any  subsequent  adjustment
     which, together with such amount and any other amount or amounts so carried
     forward, shall aggregate one percent or more.

          (vi)  TIMING  OF  ISSUANCE OF  ADDITIONAL  COMMON  STOCK UPON  CERTAIN
     ADJUSTMENTS.  In any case in which the  provisions  of this Section  3.1(a)
     shall require that an adjustment shall become effective immediately after a
     record date for an event,  the Company  may defer until the  occurrence  of
     such event issuing to the holder of this Warrant after such record date and
     before the occurrence of such event the  additional  shares of Common Stock
     or other property  issuable or  deliverable  upon exercise by reason of the
     adjustment required by such event over and above the shares of Common Stock
     or other property  issuable or deliverable upon such exercise before giving
     effect to such adjustment; PROVIDED, HOWEVER, that the Company upon request
     shall  deliver to such  holder a due bill or other  appropriate  instrument
     evidencing such holder's right to receive such  additional  shares or other
     property,  and such cash,  upon the occurrence of the event  requiring such
     adjustment.

     (b)  CURRENT MARKET PRICE. The "CURRENT MARKET PRICE" shall mean, as of any
date, 5% of the sum of the average,  for each of the 20 consecutive Trading Days
immediately prior to such date, of either:  (i) the high and low sales prices of
the Common Stock on such Trading Day as reported on the  composite  tape for the
principal  national  securities  exchange on which the Common  Stock may then be
listed,  or (ii) if the Common  Stock shall not be so listed on any such Trading
Day,  the high and low  sales  prices of  Common  Stock in the  over-the-counter
market as reported by the Nasdaq Stock Market for National Market Securities, or
(iii) if the Common Shares shall not be included in the Nasdaq Stock Market as a
National  Market  Security on any such Trading Day, the  representative  bid and
asked  prices at the end of such  Trading  Day in such market as reported by the
Nasdaq Stock Market or (iv) if there be no such  representative  prices reported
by the Nasdaq Stock  Market,  the lowest bid and highest asked prices at the end

<PAGE>

of such  Trading  Day in the  over-the-counter  market  as  reported  by the OTC
Electronic  Bulletin Board or National Quotation Bureau,  Inc., or any successor
organization.  For  purposes  of  determining  Current  Market  Price,  the term
"TRADING  DAY"  shall  mean a day on which an  amount  greater  than zero can be
calculated  with  respect  to the  Common  Stock  under  any  one or more of the
foregoing  categories (i), (ii), (iii) and (iv), and the "end" thereof,  for the
purposes  of  categories  (iii) and  (iv),  shall  mean the exact  time at which
trading shall end on the New York Stock  Exchange.  If the Current  Market Price
cannot be determined  under any of the foregoing  methods,  Current Market Price
shall mean the fair value per share of Common  Stock on such date as  determined
by the  Board  of  Directors  in  good  faith,  irrespective  of any  accounting
treatment.

     (c)  STATEMENT REGARDING ADJUSTMENTS.  Whenever the Exercise Price shall be
adjusted as provided  in Section  3.1(a),  and upon each change in the number of
shares of the Common Stock  issuable upon exercise of this Warrant,  the Company
shall  forthwith  file, at the office of any transfer agent for this Warrant and
at the principal office of the Company,  a statement showing in detail the facts
requiring  such  adjustment  and the  Exercise  Price  and new  number of shares
issuable  that shall be in effect after such  adjustment,  and the Company shall
also cause a copy of such  statement to be given to the holder of this  Warrant.
Each  such  statement  shall be  signed  by the  Company's  chief  financial  or
accounting officer. Where appropriate, such copy may be given in advance and may
be included as part of a notice  required to be mailed under the  provisions  of
Section 3.1(d).

     (d)  NOTICE TO HOLDERS.  In the event the Company shall propose to take any
action of the type  described  in clause  (iii) or (iv) of Section  3.1(a),  the
Company shall give notice to the holder of this Warrant, in the manner set forth
in Section 6.6, which notice shall specify the record date, if any, with respect
to any such  action and the  approximate  date on which  such  action is to take
place. Such notice shall also set forth such facts with respect thereto as shall
be  reasonably  necessary  to indicate  the effect of such action (to the extent
such effect may be known at the date of such notice) on the  Exercise  Price and
the number,  kind or class of shares or other securities or property which shall
be  deliverable  upon exercise of this Warrant.  In the case of any action which
would  require the fixing of a record date,  such notice shall be given at least
10 days prior to the date so fixed, and in case of all other action, such notice
shall be given at least 15 days  prior to the  taking of such  proposed  action.
Failure  to give such  notice,  or any  defect  therein,  shall not  affect  the
legality or validity of any such action.

     (e)  TREASURY  STOCK.  For the  purposes of this  Section  3.1, the sale or
other  disposition  of any Common Stock of the Company  theretofore  held in its
treasury shall be deemed to be an issuance thereof.

     3.2  COSTS.   The   registered   holder  of  this  Warrant  shall  pay  all
documentary,  stamp,  transfer or other  transactional taxes attributable to the
issuance or delivery of shares of Common Stock of the Company  upon  exercise of
this Warrant.  Additionally,  the Company shall not be required to pay any taxes
which may be payable in respect of any  transfer  involved  in the  issuance  or
delivery of any  certificate  for such shares.  The holder of this Warrant shall
reimburse the Company for any such taxes assessed against the Company.

<PAGE>

     3.3  RESERVATIONS OF SHARES. The Company shall reserve at all times so long
as this Warrant remains  outstanding,  free from preemptive  rights,  out of its
treasury  Common Stock or its authorized but unissued shares of Common Stock, or
both,  solely  for the  purpose  of  effecting  the  exercise  of this  Warrant,
sufficient shares of Common Stock to provide for the exercise hereof.

     3.4  VALID  ISSUANCE.  All shares of Common  Stock which may be issued upon
exercise of this Warrant  will upon  issuance by the Company be duly and validly
issued,  fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof  attributable to any act or omission by the
Company, and the Company shall take no action which will cause a contrary result
(including without  limitation,  any action which would cause the Exercise Price
to be less than the par value, if any, of the Common Stock).

                                   ARTICLE IV

                                  TERMS DEFINED

     As used  in this  Warrant,  unless  the  context  otherwise  requires,  the
following  terms have the respective  meanings set forth below or in the Section
indicated:

     ACQUISITION -- any  consolidation or merger of the Company with or into any
other   corporation  or  other  entity  or  Person,   or  any  other   corporate
reorganization,  in which the stockholders of the Company  immediately  prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation,  merger or reorganization, or
any  transaction  or series of related  transactions  to which the  Company is a
party in which in excess of 50% of the Company's voting power is transferred.

     ASSET  TRANSFER  --  a  sale,   lease  or  other   disposition  of  all  or
substantially all of the assets of the Company.

     BOARD OF DIRECTORS -- the Board of Directors of the Company.

     COMMON STOCK -- the Company's  authorized Common Stock, $0.01 par value per
share.

     COMPANY - Factory 2-U Stores, Inc., a Delaware  corporation,  and any other
corporation  assuming  or  required  to assume  the  obligations  undertaken  in
connection with this Warrant.

     CURRENT MARKET PRICE - See Section 3.1(b).

     EXCHANGE ACT - See Section 1.1.

     EXERCISE DATE - See Section 1.1.

     EXERCISE PRICE - Preamble.

     ORIGINAL ISSUE DATE - See Section 3.1(a)(i).

<PAGE>

     OUTSTANDING  -- when used with  reference to Common Stock at any date,  all
issued shares of Common Stock (including, but without duplication, shares deemed
issued  pursuant to Article  III) at such date,  except  shares then held in the
treasury of the Company.

     PERSON -- any individual,  corporation,  partnership,  trust, organization,
association or other entity.

     SECURITIES ACT -- the Securities Act of 1933 and the rules and  regulations
promulgated thereunder, all as the same shall be in effect at the time.

     TRADING DAY - See Section 3.1(b).

     WARRANT -- this Warrant and any successor or replacement  Warrant delivered
in accordance with Section 2.3 or 6.8.

     WARRANT OFFICE - See Section 2.1.

     WARRANT  SHARES  -- shall  mean the  shares of Common  Stock  purchased  or
purchasable by the registered holder of this Warrant or the permitted  assignees
of such holder upon exercise of this Warrant pursuant to Article I hereof.

                                    ARTICLE V

                             COVENANT OF THE COMPANY

     The Company  covenants  and agrees that this Warrant  shall be binding upon
any  corporation  succeeding  to  the  Company  by  merger,  consolidation,   or
acquisition of all or substantially all of the Company's assets.

                                   ARTICLE VI

                                 MISCELLANEOUS

     6.1  ENTIRE  AGREEMENT.  This Warrant contains the entire agreement between
the holder hereof and the Company with respect to the Warrant Shares that it can
purchase upon exercise  hereof and the related  transactions  and supersedes all
prior arrangements or understanding with respect thereto.

     6.2  GOVERNING  LAW.  This  Warrant  shall be governed by and  construed in
accordance  with the internal laws of the State of Delaware,  without  regard to
its conflict of law provisions.

     6.3  WAIVER  AND  AMENDMENT.  Any term or  provision of this Warrant may be
waived at any time by the party which is entitled to the benefits  thereof,  and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any

<PAGE>

term or condition, or any amendment or supplementation,  of this Warrant must be
in  writing.  A waiver of any breach or  failure to enforce  any of the terms or
conditions of this Warrant shall not in any way affect, limit or waive a party's
rights hereunder at any time to enforce strict compliance  thereafter with every
term or condition of this Warrant.

     6.4  ILLEGALITY.  In the  event  that  any one or  more  of the  provisions
contained  in this  Warrant  shall  be  determined  to be  invalid,  illegal  or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability  of any such  provision  in any other  respect and the  remaining
provisions  of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.

     6.5  COPY  OF  WARRANT.  A copy of this  Warrant  shall be filed  among the
records of the Company.

     6.6  NOTICE. Any notice or other document required or permitted to be given
or delivered to the holder hereof shall be delivered at, or sent by certified or
registered  mail to such holder at, the last  address  shown on the books of the
Company maintained at the Warrant Office for the registration of this Warrant or
at any more recent  address of which the holder  hereof shall have  notified the
Company in writing.  Any notice or other  document  required or  permitted to be
given or delivered to the Company,  other than such notice or documents required
to be  delivered  to the  Warrant  Office,  shall be  delivered  at,  or sent by
certified or registered  mail to, the office of the Company at 4000 Ruffin Road,
6th Floor,  San Diego,  California  92123-1866 or any other  address  within the
continental United States of America as shall have been furnished by the Company
to the holder of this Warrant.

     6.7  LIMITATION  OF  LIABILITY;  NOT  STOCKHOLDERS.  No  provision  of this
Warrant  shall be construed as  conferring  upon the holder  hereof the right to
vote,  consent,  receive  dividends  or  receive  notices  other  than as herein
expressly  provided in respect of meetings of  stockholders  for the election of
directors of the Company or any other matter  whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder  hereof,  shall give rise to any liability of
such  holder  for the  purchase  price of any  shares  of  Common  Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.

     6.8  EXCHANGE, LOSS, DESTRUCTION, ETC. OF WARRANT. Upon receipt of evidence
satisfactory  to the Company of the loss,  theft,  mutilation or  destruction of
this  Warrant,  and in the case of any such  loss,  theft  or  destruction  upon
delivery of a bond of indemnity  in such form and amount as shall be  reasonably
satisfactory  to the Company,  or in the event of such mutilation upon surrender
and  cancellation  of this  Warrant,  the  Company  will make and  deliver a new
Warrant of like tenor,  in lieu of such lost,  stolen,  destroyed  or  mutilated
Warrant;  PROVIDED,  HOWEVER,  that the original recipient of this Warrant shall
not be required to provide any such bond of  indemnity  and may in lieu  thereof
provide his agreement of indemnity.  Any Warrant  issued under the provisions of
this Section 6.8 in lieu of any Warrant alleged to be lost, destroyed or stolen,
or in lieu of any mutilated  Warrant,  shall constitute an original  contractual
obligation on the part of the Company.  This Warrant shall be promptly  canceled

<PAGE>

by the Company  upon the  surrender  hereof in  connection  with any exchange or
replacement.  The  registered  holder  of  this  Warrant  shall  pay  all  taxes
(including securities transfer taxes) and all other expenses and charges payable
in connection with the preparation,  execution and delivery of Warrants pursuant
to this Section 6.8.

     6.9  HEADINGS.  The Article and Section and other  headings  herein are for
convenience  only and are not a part of this  Warrant  and shall not  affect the
interpretation thereof.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name.

     Dated: March 6, 2003

                                         FACTORY 2-U STORES, INC.

                                         By
                                           -------------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------

<PAGE>

                                    Exhibit A

                               SUBSCRIPTION NOTICE

     The  undersigned,  the holder of the  foregoing  Warrant,  hereby elects to
exercise  purchase  rights  represented  by said  Warrant  for,  and to purchase
thereunder  __________  shares of the Common  Stock  covered by said Warrant and
herewith makes payment in full therefor pursuant to Section 1.1 of such Warrant,
and requests (a) that  certificates for such shares (and any securities or other
property  issuable  upon such  exercise) be issued in the name of, and delivered
to,  __________________,  _____________________ and (b) if such shares shall not
include  all of the shares  issuable as  provided  in said  Warrant,  that a new
Warrant of like tenor and date for the balance of the shares issuable thereunder
be delivered to the undersigned.

     The undersigned  represents  that (1) the aforesaid  shares of Common Stock
are being  acquired for the account of the  undersigned  for investment not with
view to, or for resale in connection with, the distribution thereof and that the
undersigned  has no present  intention of distributing or reselling such shares;
(2) the  undersigned  is aware of the Company's  business  affairs and financial
condition and has acquired sufficient  information about the Company to reach an
informed and knowledgeable decision regarding its investment in the Company; (3)
the  undersigned is experienced in making  investments of this type and has such
knowledge and background in financial and business  matters that the undersigned
is capable of evaluating the merits and risks of this  investment and protecting
the undersigned's own interests; (4) the undersigned understands that the shares
of Common Stock issuable upon exercise of this Warrant have not been  registered
under the Securities Act of 1933, as amended (the  "SECURITIES  ACT"), by reason
of a specific exemption from the registration  provisions of the Securities Act,
which exemption  depends upon,  among other things,  the bona fide nature of the
investment  intent as expressed  herein,  and,  because such securities have not
been registered under the Securities Act, they must be held indefinitely  unless
subsequently  registered  under the  Securities  Act or an  exemption  from such
registration  is  available;  (5) the  undersigned  is aware that the  aforesaid
shares of Common  Stock may not be sold  pursuant to Rule 144 adopted  under the
Securities Act unless certain  conditions are met and until the  undersigned has
held the shares for the number of years  prescribed  by Rule 144, that among the
conditions for use of the Rule is the availability of current information to the
public  about  the  Company,  and the  Company  has not  made  such  information
available and has no present plans to do so; and (6) the undersigned  agrees not
to make any  disposition  of all or any part of the  aforesaid  shares of Common
Stock unless and until there is then in effect a  registration  statement  under
the Securities Act covering such proposed  disposition  and such  disposition is
made in accordance  with said  registration  statement,  or the  undersigned has
provided  the Company  with an opinion of counsel  satisfactory  to the Company,
stating that such registration is not required.

                                         --------------------------------
Dated:____________________, 200_

<PAGE>

                                    Exhibit B

                                   ASSIGNMENT

     For value received,  _____________________________,  hereby sells,  assigns
and transfers unto  _______________________________ the within Warrant, together
with  all  right,  title  and  interest  therein  and  does  hereby  irrevocably
constitute and appoint attorney,  to transfer said Warrant on the books
of the Company, with full power of substitution.

                                         --------------------------------

Dated: ___________________, 200_

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