FACTORY STORES OF AMERICA, INC.
                             1995 OUTSIDE DIRECTORS'
                                STOCK AWARD PLAN



                                Table of Contents
Section                                                               Page
-------                                                               ----
1        Purposes                                                        1
2        Definitions                                                     1
3        Administration                                                  2
4        Amount of Stock                                                 2
5        Eligibility                                                     2
6        Awards                                                          2
7        Terms and Conditions of Awards                                  2
S        Effect of Certain Transactions                                  3
9        Amendment or Discontinuance                                     3
10       Termination                                                     4
11       Miscellaneous Provisions                                        4
12       Approval of Plan                                                5



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                         FACTORY STORES OF AMERICA, INC.
                             1995 OUTSIDE DIRECTORS'
                                STOCK AWARD PLAN


         Factory Stores of America, Inc. hereby establishes the Factory Stores
of America, Inc. 1995 Outside Directors' Stock Award Plan for the benefit of
certain members of the Board of Directors of the Company, subject to the
following provisions:

         SECTION 1. PURPOSES. The purposes of the Plan are to secure for the
Company and its stockholders the benefits of the incentive inherent in increased
Common Stock ownership by the Outside Directors, and to provide the Outside
Directors with the opportunity to increase their proprietary interest in the
Company through the payment of a portion of the Retainer Fee in shares of Common
Stock.

         SECTION 2. DEFINITIONS. For the purposes of this Plan and any Award
agreement, the following words shall have the meanings indicated, unless the
context clearly requires otherwise:

                  "AWARD" means an award of shares of Common Stock pursuant to
         the terms and conditions of the Plan.

                  "AWARDEE" means an Outside Director granted an Award under the
         Plan.

                  "BOARD" means the Board of Directors of the Company.

                  "COMMITTEE" means a committee appointed by the Board. Unless
         and until otherwise appointed, the Committee shall be the Board.

                  "COMMON STOCK" means the common stock of the Company, par
         value $0.01 per share, subject to the right of the Company to change
         the authorized number of shares of such class and to provide no par or
         a change in par value for such stock.

                  "COMPANY" means Factory Stores of America, Inc., a Delaware
         corporation.

                  "DIRECTOR" means a member of the Board.

                  "EFFECTIVE DATE" means the date on which the Plan is adopted
         by the Company, subject to approval by the stockholders of the Company.

                  "FAIR MARKET VALUE" means, with respect to shares of Common
         Stock, the closing price of the Common Stock on the New York Stock
         Exchange or such other securities exchange which the Common Stock is
         listed on the relevant date.


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                  "OUTSIDE DIRECTOR" means any Director who is not an officer or
         employee of the Company or any Subsidiary.

                  "PLAN" means the Factory Stores of America, Inc. 1995 Outside
         Directors' Stock Award Plan, as amended from time to time in accordance
         herewith.

                  "RETAINER FEE" means the annual retainer fee earned by each
         Outside Director, which is paid in quarterly installments.

                  "SUBSIDIARY" means any corporation (other than the Company) in
         an unbroken chain of corporations beginning with the Company if each of
         the corporations other than the last corporation in such unbroken chain
         holds stock equal to fifty percent (50%) or more of the total combined
         voting power of all classes of stock in one of the other lower
         corporations in the unbroken chain.

         SECTION 3. ADMINISTRATION. The Plan shall be administered by the
Committee. The Committee shall have the powers vested in it by the terms of the
Plan, such powers to include authority (within the limitations described herein)
to prescribe the form of the Award agreement embodying Awards made under the
Plan. Subject to the provisions of the Plan, the Committee shall have the power
to construe the Plan, to determine all questions arising thereunder and to adopt
and amend such rules and regulations for the administration of the Plan as it
may deem desirable. Any decision of the Committee in the administration of the
Plan, as described herein, shall be final and conclusive. The Committee may act
only by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other officer
of the Company to execute and deliver documents on behalf of the Committee. No
member of the Committee shall be liable for anything done or omitted to be done
by such member or by any other member of the Board in connection with the Plan,
except for such member's own willful misconduct or as expressly provided by
statute.

         SECTION 4. AMOUNT OF STOCK. The stock which may be issued and sold
under the Plan will be the Common Stock, of a total number not exceeding
twenty-five thousand (25,000) shares, subject to adjustment as provided in
Section 8. The stock to be issued may be either authorized and unissued shares
or issued shares acquired by the Company or one of its Subsidiaries.

         SECTION 5. ELIGIBILITY. Each Outside Director shall receive Awards in
accordance with Section 6.

         SECTION 6. AWARDS. As of the date of each quarterly meeting of the
Board (commencing with the first quarterly meeting after May 1, 1995) each
Outside Director who is continuing as a Director as of the adjournment of such
meeting, shall automatically receive an Award representing shares of Common
Stock having a Fair Market Value equal to one-half (1/2) of the quarterly
installment of the Retainer Fee as of the trading date immediately preceding the
date of the relevant quarterly meeting. Each such quarterly Award shall be made
in lieu of onehalf (1/2) of the quarterly

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cash payment of the Retainer Fee. Notwithstanding the foregoing, the Company
shall not be required to issue fractional shares; in lieu thereof, any
fractional share shall be rounded to the next whole number.

         SECTION 7.        TERMS AND CONDITIONS OR AWARDS.

                  (a) Each Awardee shall enter into an Award agreement with the
         Company in a form specified by the Committee agreeing to the terms and
         conditions of the Award and such other matters consistent with the Plan
         as the Committee in its sole discretion shall determine. Such
         conditions may include, but shall not be limited to, restrictions on
         the transferability of the shares of Common Stock granted. Such shares
         of Common Stock may not be sold, transferred, pledged, assigned or in
         any manner disposed of during the six-month period following the date
         the Award is granted, and Awardees shall not be entitled to delivery of
         certificates representing the shares of Common Stock awarded until the
         expiration of such six-month period. Certificates shall bear a legend
         in substantially the following form:

"THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS
AND  CONDITIONS  (INCLUDING
RESTRICTIONS  AGAINST  TRANSFER)
CONTAINED IN THE FACTORY STORES OF
AMERICA, INC. 1995 OUTSIDE DIRECTORS'
STOCK AWARD PLAN, A COPY OF WHICH IS
AVAILABLE FROM THE SECRETARY OF
FACTORY STORES OF AMERICA, INC."

                  (b) As of the date of an Award, the Awardee shall become a
         stockholder of record of the Company and shall immediately become
         entitled to all dividends and other distributions paid on the Common
         Stock and to all voting rights with respect to the shares of Common
         Stock awarded. In addition, as of the date of an Award, the Awardee
         shall be deemed to be the beneficial owner of the shares of Common
         Stock covered by such Award for purposes of reporting beneficial
         ownership under Section 16(a) of the Securities Exchange Act of 1934,
         as amended.

         SECTION 8. EFFECT OF CERTAIN TRANSACTIONS. The number of shares of
Common Stock reserved for issuance under the Plan shall be appropriately
adjusted by the Committee, whose determination shall be conclusive, to reflect
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, a consolidation or shares, the payment of a stock
dividend, or any other capital adjustment affecting the number of issued shares
of Common Stock. In the event that the outstanding shares of Common Stock shall
be changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or another corporation, whether through
reorganization, recapitalization, merger, consolidation, or otherwise, then
there shall be substituted for each share of Common Stock reserved for issuance
under the Plan,

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but not yet awarded under the Plan, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock shall be so
changed or for which each such share shall be exchanged.

         SECTION 9. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any
time and from time to time by the Board as the Board shall deem advisable
including, but not limited to, amendments necessary to qualify for any exemption
or to comply with applicable law or regulations; provided, however, that except
as provided in Section 7, the Board may not, without further approval by the
stockholders of the Company, increase the maximum number of shares of Common
Stock as to which Awards may be granted under the Plan, increase the number of
shares subject to an Award, extend the period during which Awards may be granted
under the Plan, or change the class of persons eligible to receive Awards under
the Plan; and provided further, however, that the Plan may not be amended within
six (6) months after its adoption and may be amended no more than once every six
(6) months thereafter other than to bring the Plan into compliance with changes
in the Internal Revenue Code of 1986, as amended, or the Employee Retirement
Income Security Act of 1974, as amended, including regulations and rulings
thereunder. No amendment of the Plan shall materially and adversely affect any
right of any Awardee with respect to any Award theretofore granted without such
Awardee's written consent. Any such action to amend or discontinue the Plan
shall be adopted by formal action of the Board and executed by an officer or
person authorized to act on behalf of the Company.

         SECTION 10. TERMINATION. This Plan shall terminate upon the earlier of
the following dates or events to occur:

                  (a) upon the adoption of a resolution of the Board terminating
         the Plan; or

                  (b) ten years from the date the Plan is initially approved and
         adopted by the stockholders of the Company in accordance with Section
         12.

Any action under Section 10(a) to terminate the Plan shall be adopted by formal
action of the Board and executed by an officer or person authorized to act on
behalf of the Company.

         SECTION 11.       MISCELLANEOUS PROVISIONS.

                  (a) Except as expressly provided for in the Plan, no Outside
         Director or other person shall have any claim or right to be granted an
         Award under the Plan. Neither the Plan nor any action taken hereunder
         shall be construed as giving any Outside Director any fight to be
         retained in the service of the Company.

                  (b) An Awardee's right and interest under the Plan may not be
         assigned or transferred in whole or in part either directly or by
         operation of law or otherwise (except in the event of an Awardee's
         death, by will or the laws of descent and distribution), including, but
         not by way of limitation, execution, levy, garnishment, attachment,
         pledge, bankruptcy,

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         or in any other manner, and no such right or interest of any
         participant in the Plan shall be subject to any obligation or liability
         of such participant.

                  (c) No shares of Common Stock shall be issued hereunder unless
         counsel for the Company shall be satisfied that (i) such issuance will
         be in compliance with applicable federal and state securities laws,
         including, but not limited to, listing requirements and New York Stock
         Exchange requirements, and any other laws or regulations applicable to
         the delivery of such shares, and (ii) the certificates representing
         shares of Common Stock awarded bear any and all legends (in addition to
         the one set forth in Section 7(a)) necessary in order to comply with
         such laws and regulations.

                  (d) It shall be a condition to the obligation of the Company
         to issue an Award, that the Awardee pay to the Company, upon its
         demand, such amount as may be requested by the Company for the purpose
         of satisfying any liability to withhold federal, state, local income or
         other taxes. If the amount requested is not paid, the Company may
         refuse to issue an Award.

                  (e) The expenses of the Plan shall be borne by the Company.

                  (f) The Plan shall be unfunded. The Company shall not be
         required to establish any special or separate fund or to make any other
         segregation of assets to assure the issuance of Awards under the Plan
         and the issuance of Awards shall be subordinate to the claims of the
         Company's general creditors.

                  (g) By accepting any Award or other benefit under the Plan,
         each Awardee and each person claiming under or through such person
         shall be conclusively deemed to have indicated his or her acceptance
         and ratification of, and consent to, any action taken under the Plan by
         the Company or the Board.

                  (h) All section references herein refer to sections of this
         Plan unless specifically noted otherwise.

                  (i) Any notice or other communication provided for herein
         shall be given in writing by registered or certified mail, return
         receipt requested, or by facsimile, telecopy, or other means of
         electronic communication, reasonably calculated in any instance to be
         received by the receiving party or his, her or its authorized agent at
         the receiving party's last- known address. The notice or communication
         shall be deemed as delivered when it arrives at such address.

         SECTION 12. APPROVAL OF PLAN. The effectiveness of this Plan is subject
to its approval and ratification by the stockholders of the Company within one
year from the date of adoption hereof by the Company.


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