RESTRICTED STOCK AGREEMENT


         THIS RESTRICTED STOCK AGREEMENT (this "Agreement") is made and entered
into as of this12th day of August, 1996 (hereinafter referred to as the
"Effective Date"), by and between FAC REALTY, INC., a Delaware corporation (the
"Corporation"), and MICHAELA M. TWOMEY (the "Participant").

         WHEREAS, The FAC Realty, Inc. 1996 Restricted Stock Plan (the "Plan")
has been adopted by the Executive Compensation Committee (the "Committee") of
the Board of Directors of the Corporation (the "Board") and the Board; and

         WHEREAS, the Committee has determined that it is desirable and in the
best interest of the Corporation to make an award (the "Award") of certain
shares of common stock, par value $.01 per share of the Corporation ("Common
Stock"), under the Plan, to the Participant, subject to certain restrictions as
specified below; and

         WHEREAS, in order to enforce the aforesaid restrictions, Participant is
required under the terms of the Award to immediately deposit the certificate(s)
for the shares of Common Stock subject to the Award, together with stock powers
appropriately endorsed in blank, with the Corporation in accordance with the
requirements of this Agreement.

         NOW, THEREFORE, the Corporation and the Participant agree as follows:

         1. Date of Award. The date of making the Award under this Agreement is
the 12th day of August, 1996 (the "Effective Date").

         2. Receipt by Participant. The Participant acknowledges receipt from
the Corporation of 4,384 shares of Common Stock (the "Restricted Stock") and
agrees to the execution of stock powers or such other transfer authorizations as
the Corporation shall request, in blank, covering the Restricted Stock to be
held by the Corporation, prior to the distribution of certificates representing
the Restricted Stock to the Participant as hereinafter provided.

         3.       Investment Representation and Transfer Restrictions

                  (a) Investment Representation. Participant represents to the
         Corporation that the Participant is taking the Restricted Stock for
         investment and without any present intention to sell, transfer or
         otherwise dispose of the Restricted Stock.

                  (b) Securities Law Restrictions. The Participant agrees with
         the Corporation that the Restricted Stock shall be subject to such
         stop-transfer orders and other restrictions as the Committee may deem
         advisable under the rules, regulations, and other requirements of the
         Securities and Exchange Commission, any stock exchange upon which
         Common Stock is then listed and any other applicable federal or state
         securities laws, rules or regulations, and the Committee may cause a
         legend or legends to be placed on any certificate


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         representing any of the shares of Restricted Stock to make appropriate
         reference to such restrictions.

                  (c) Other Transfer Restrictions. The Participant agrees with
         the Corporation that each certificate representing any of the shares of
         Restricted Stock may bear a legend, substantially in the form attached
         as Exhibit A hereto, to the effect that the shares of Restricted Stock
         represented thereby are subject to potential forfeiture and may not be
         sold, exchanged, transferred, pledged, hypothecated or otherwise
         disposed of except in accordance with the terms of this Agreement, and
         shall be subject to such stop-transfer orders and other restrictions as
         the Committee shall deem advisable to ensure compliance with the terms
         of this Agreement.

                  (d) Registration. Prior to vesting pursuant to Paragraph 5
         below, the Corporation shall cause the Restricted Stock to be
         registered under the Securities Act of 1933 and to be listed on the New
         York Stock Exchange.

         4. Receipt by the Corporation. The Corporation acknowledges receipt
from the Participant of certificates representing the Restricted Stock,
registered in the name of the Participant, and acknowledges receipt of stock
powers executed in blank by the Participant covering all of the Restricted
Stock. Certificates representing the Restricted Stock shall be held by the
Corporation and distributed or transferred as directed by the Committee in
accordance with this Agreement.

         5.       Vesting and Delivery of Restricted Stock by the Corporation

                  (a) Periodic Vesting. Subject to subparagraph 5(b) below, the
         Restricted Stock shall vest and become nonforfeitable in accordance
         with the following schedule:

                  On the first anniversary
                  of the Effective Date:                         331/3% vested

                  On the second anniversary
                  of the Effective Date of Award:                331/3% vested

                  On the third anniversary
                  of the Effective Date of Award:                331/3% vested

                  (b) Accelerated Vesting. Notwithstanding subparagraph 5(a)
         above, all Restricted Stock previously not vested and subject to
         forfeiture shall vest and the right of the Participant to such shares
         of the Restricted Stock shall become nonforfeitable upon the occurrence
         of any of the following:

                           (i) Retirement of Participant. The termination of the
                  Participant's membership on the Board or employment by the
                  Corporation, as applicable, by reason of retirement (as
                  defined in the Plan).



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                           (ii) Disability of Participant. The termination of
                  the Participant's membership on the Board or employment by the
                  Corporation, as applicable, by reason of disability (as
                  defined in the Plan).

                           (iii) Death of Participant. The Participant's death
                  during the employment of the Participant by the Corporation.

                           (iv) Change in Control. The termination of the
                  Participant's membership on the Board or employment by the
                  Corporation, as applicable, by reason of a "change in control"
                  (as defined in the Plan) of the Corporation.

                  (c) Delivery of Restricted Stock Certificates to the
         Participant. Within thirty (30) days after a date on which shares of
         Restricted Stock have become vested as provided in subparagraphs 5(a)
         or 5(b) above, the Committee shall instruct the appropriate officer of
         the Corporation to deliver to the Participant, the Participant's
         designee, or such other person as shall have been designated as
         Participant's beneficiary in accordance with this Agreement, as
         applicable, certificates representing the shares of Restricted Stock
         which have become vested and nonforfeitable, free from any restrictions
         imposed by this Agreement other than such restrictions and conditions
         as may be deemed necessary by the Committee to assure compliance with
         all applicable securities laws, rules, regulations and listing
         requirements as set forth in subparagraph 3(b) above.

                  (d) Delivery of Forfeited Restricted Stock. If the
         Participant's employment with the Corporation terminates for any reason
         other than one of those provided in subparagraph 5(b) above, before all
         of the shares of Restricted Stock are vested in accordance with
         subparagraphs 5(a) and 5(b) above, all such shares then subject to
         forfeiture shall be deemed forfeited by the Participant and the
         Committee shall instruct the appropriate officer of the Corporation
         concerning the disposition of such forfeited shares. Thereafter such
         forfeited shares shall cease to be subject to this Agreement.

         6. Voting Rights: Dividends: Other Distributions. The Participant shall
have the full power to vote all of the Restricted Stock held by the Corporation
in the Participant's name from time to time and shall be entitled to receive all
cash dividends declared upon any of the Restricted Stock held by the Corporation
in the Participant's name from time to time. All shares of Common Stock or other
securities, including but not limited to stock dividends, issued in respect of
the Restricted Stock or in substitution thereof, whether by the Corporation or
by another issuer, shall be held by the Corporation and shall be subject to all
terms and conditions of this Agreement and shall be redelivered to the
Participant or delivered as instructed by the Committee under the same
circumstances as the Restricted Stock with respect to, or in substitution for,
which they were issued; provided, however, that if the Participant should
receive rights, warrants or fractional interests in respect of any of the
Restricted Stock held by the Corporation in the Participant's name, such rights
or warrants may be held, exercised, sold or otherwise disposed of, and such
fractional interests may be settled, by the Participant free and clear of the
restrictions herein set forth.



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         7. Designation of Beneficiary. The Participant may file with the
Committee a written designation of one or more persons as the beneficiary who
shall be entitled to receive the Restricted Stock, if any, distributable to the
Participant upon the Participant's death. The Participant may, from time to
time, revoke or change the Participant's beneficiary designation without the
consent of any prior beneficiary, if any, by filing a new designation with the
Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior to
such receipt.

         If no such beneficiary designation is in effect at the time of the
Participant's death, or if no designated beneficiary survives the Participant,
or if such designation conflicts with law, the Participant's estate shall be
deemed to have been designated the Participant's beneficiary and shall receive
the Restricted Stock, if any, distributable to the Participant upon the
Participant's death. If the Committee is in doubt as to the right of any person
to receive such distribution, the Committee may direct an appropriate officer of
the Corporation to retain the Restricted Stock, without liability for any
interest in respect thereof, until the rights thereto are determined, or the
Committee may direct the transfer of such Restricted Stock into any court of
appropriate jurisdiction and such transfer shall be deemed a complete discharge
of the obligations of the Corporation hereunder.

         8. Effect of Award on Status of Participant. The fact that an Award has
been made to the Participant under this Plan shall not confer on the Participant
any right to continued employment with the Corporation; nor shall it limit the
right of the Corporation to terminate the Participant's employment at any time.

         9. Adjustment Upon Changes in Capitalization; Dissolution or
Liquidation

                  (a) In the event of a change in the number or type of shares
         of Common Stock outstanding (or in the event of an exchange of such
         shares) by reason of a reclassification, recapitalization,
         reorganization, merger, or consolidation, or other similar capital
         adjustment, merger or consolidation of the Corporation, or the sale by
         the Corporation of all or a substantial portion of its assets, or the
         occurrence of any other event which could affect the implementation of
         the Plan and the realization of its objectives, the Committee shall
         make such adjustments in the terms, conditions, or restrictions of this
         Agreement as are equitable and just.

                  (b) The making of the Award under this Agreement does not
         affect in any way the right or power of the Corporation or its
         stockholders to make or authorize any adjustment, recapitalization,
         reorganization, or other change in the Corporation's capital structure
         or its business, or any merger or consolidation of the Corporation, or
         to issue bonds, debentures, preferred or other preference stock ahead
         of or affecting Common Stock or the rights thereof, or the dissolution
         or liquidation of the Corporation, or any sale or transfer of all or
         any part of the Corporation's assets or business.



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         10. Nontransferability. The Restricted Stock may not be sold,
exchanged, transferred, pledged, hypothecated, or otherwise disposed of by the
Participant until transferred to the Participant by the Corporation in
accordance with the terms of this Agreement. Nothing herein shall preclude the
Participant from making a gift of any Restricted Stock to a spouse, child,
stepchild, grandchild, parent, sibling, or legal dependent of the Participant,
or to a trust of which the beneficiary or beneficiaries of the trust shall be
either a person designated herein or the Participant, provided, however, that
any Restricted Stock so given shall remain subject to the restrictions,
obligations and conditions set forth in this Agreement. In addition, the
Restricted Stock may be tendered in response to a tender offer for or a request
or invitation to tender of greater than fifty percent (50%) of the common stock
of the Corporation and may be surrendered in a merger, consolidation or share
exchange involving the Corporation; provided, however, in each case, that except
as otherwise provided in Paragraph 6 above, the security or other consideration
received in exchange therefor shall thereafter be subject to the restrictions
and conditions set forth in this Agreement.

         11. Taxes. All Restricted Stock distributed pursuant to this Agreement,
and any amounts distributed with respect thereto prior to distribution of such
Restricted Stock by the Corporation, shall be subject to applicable federal,
state and local withholding for taxes. The Participant expressly acknowledges
and agrees to such withholding without regard to whether the Restricted Stock
may then be sold or otherwise transferred by the Participant.

         12. Notices. Any notices or other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been sufficiently given if delivered personally or when delivered to a
nationally recognized overnight courier service or deposited in the United
States mail as Certified Mail, return receipt requested, properly addressed and
postage prepaid, if to the Corporation at its principal office at 230 North
Equity Drive, Smithfield, North Carolina 27577; and, if to the Participant, at
the Participant's last address appearing on the books of the Corporation. The
Corporation and the Participant may change their address or addresses by giving
written notice of such change as provided herein. Any notice or other
communication hereunder shall be deemed to have been given on the date actually
delivered, as of the first (1st) business day following delivery to a nationally
recognized overnight courier service, or as of the third (3rd) business day
following the date mailed, as the case may be.

         13. Construction Controlled by Plan. This Agreement shall be construed
so as to be consistent with the Plan; and except as specifically provided herein
the provisions of the Plan shall be deemed to be controlling in the event that
any provision hereof should appear to be inconsistent therewith. The Participant
hereby acknowledges receipt of a copy of the Plan from the Corporation.

         14. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof, shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.



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         15. Modification of Agreement; Waiver. This Agreement may be modified,
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto. No waiver hereunder shall constitute a waiver with respect to any
subsequent occurrence or other transaction hereunder or of any other provision
hereof.

         16. Captions and Headings; Gender and Number. Captions and paragraph
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part hereof, and shall not serve as a
basis for interpretation or in construction of this Agreement. As used herein,
the masculine gender shall include the feminine and neuter, the singular number
the plural, and vice versa, whenever such meanings are appropriate.

         17. Governing Law: Venue and Jurisdiction. Without regard to the
principles of conflicts of laws, the laws of the State of North Carolina shall
govern and control the validity, interpretation, performance, and enforcement of
this Agreement. The parties hereto agree that any suit or action relating to
this Agreement shall be instituted and prosecuted in the courts of the County of
Johnston, State of North Carolina, and each party hereby does waive any right or
defense relating to such jurisdiction and venue.

         18. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the Corporation, and its successors and assigns, and
shall be binding upon and inure to the benefit of the Participant, and his
heirs, legatees, personal representatives, executors and administrators.

         19. Entire Agreement. This Agreement constitutes and embodies the
entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.

         20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.



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         IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed in its corporate name by a duly authorized officer, and attested by its
Secretary or any of its Assistant Secretaries, and its corporate seal to be
hereto affixed, all by authority of its Board of Directors first duly given; and
the individual party hereto has hereunto set such party's hand and adopted as
such party's seal the typewritten word "SEAL" appearing beside such party's
name, all done this the day and year first above written.

                                         FAC REALTY, INC.


                                         By: /s/ C. Cammack Morton
                                                  C. Cammack Morton
                                                  President


ATTEST:

(sig of secretary)
           Secretary

[Corporate Seal]


                                              /s/ Michaela M. Twomey (SEAL)
                                                MICHAELA M. TWOMEY




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                                    EXHIBIT A

                                 Form of Legend


         The shares represented by this certificate are subject to restrictions
on transfer and potential forfeiture under the terms of a Restricted Stock
Agreement dated ____________________, 1996, a copy of which agreement may be
obtained from the issuer by writing to:

                        FAC Realty, Inc.
                        230 North Equity Drive
                        Smithfield, North Carolina 27358
                        Attention: Corporate Secretary




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