RESTRICTED STOCK AGREEMENT


     THIS RESTRICTED STOCK AGREEMENT (this "Agreement") is made and entered into
as of this 4th day of April,  1996  (hereinafter  referred to as the  "Effective
Date"), by and between FACTORY STORES OF AMERICA,  INC., a Delaware  corporation
(the "Corporation"), and C. CAMMACK MORTON (the "Participant").

     WHEREAS,  The Factory Stores of America,  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
4th day of April, 1996 (the "Effective Date").

     2. Receipt by Participant.  The Participant  acknowledges  receipt from the
Corporation of 90,000 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; and Registration

     (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


<PAGE>


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  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  (the
"NYSE").

     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 five (5) equal  installments  of
twenty percent (20%) per year provided the Participant  continues to be employed
by the Company at the relevant  vesting date,  commencing  (i.e.,  the first 20%
shall  vest) on the later to occur of (i) the  average  closing  price of Common
Stock on the NYSE being $16.00 per share (subject to appropriate  adjustment for
stock dividends, stock splits, or similar transactions) or more for any five (5)
consecutive trading days or (ii) December 14, 2000.

     (b) Accelerated Vesting.

          (i) If the condition set forth in clause (i) of subparagraph  5(a) has
     previously  during  the  term  of  this  Agreement  been  satisfied,   then
     notwithstanding  the  requirement of continued  employment in  subparagraph
     5(a)  above,  all  Restricted  stock not  previously  vested and subject to
     forfeiture  shall vest and the right of the  Participant  to such shares of
     Restricted Stock shall become  nonforfeitable upon the occurrence of any of
     the following:


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<PAGE>


               (A)  the  Participant's   death  during  his  employment  by  the
          Corporation;

               (B) the Participant's  disability (as defined in the Plan) during
          his employment by the Corporation;

               (C)   termination   of  the   Participant's   employment  by  the
          Corporation due to the Corporation's election not to extend the Second
          Amended and Restated Employment Agreement, dated December 15, 1995, by
          and between  the  Corporation  and the  Participant  (the  "Employment
          Agreement"), as permitted in Paragraph 2(a) thereof; or

               (D) termination of the Participant's  employment  "without cause"
          pursuant to Paragraph  2(c) or Paragraph  5(a)(iii) of the  Employment
          Agreement.

          (ii) If the condition set forth in clause (i) of subparagraph 5(a) has
     not  previously  during the term of this  Agreement  been  satisfied,  then
     notwithstanding  the  requirement of continued  employment in  subparagraph
     5(a) above, 74,000 shares of Restricted Stock shall be forfeited and 16,000
     shares of Restricted  Stock 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:

               (A)  the  Participant's   death  during  his  employment  by  the
          Corporation;

               (B) the Participant's  disability (as defined in the Plan) during
          his employment by the Corporation;

               (C)   termination   of  the   Participant's   employment  by  the
          Corporation  due to the  Corporation's  election  not  to  extend  the
          Employment Agreement as permitted in Paragraph 2(a) thereof; or

               (D) termination of the Participant's  employment  "without cause"
          pursuant to Paragraph 2(c) (other than pursuant to Paragraph 2(c)(iv))
          or Paragraph  5(a)(iii)  (other than within three (3) months prior to,
          at the time of or within one (1) year  following a "change of control"
          pursuant to Paragraph 2(e) or,  provided that such change is effected,
          the execution of a definitive  agreement  therefor) of the  Employment
          Agreement.

          (iii) If the  condition set forth in clause (i) of  subparagraph  5(a)
     has not previously  during the term of this Agreement been satisfied,  then
     notwithstanding  the  requirement of continued  employment in  subparagraph
     5(a)  above,  all  Restricted  Stock not  previously  vested and subject to
     forfeiture  shall vest and the right of the  Participant  to such shares of
     Restricted   Stock  shall  become   nonforfeitable   as  follows  upon  the
     termination by the Participant of his


                                      -3-
<PAGE>


     employment pursuant to Paragraph 2(c)(iv) of the Employment Agreement:

               (A)  16,000  shares  on  the  date  of  the  termination  of  the
          Participant's employment by the Corporation;

               (B) 37,000 shares on the first  anniversary of the termination of
          the Participant's employment; and

               (C) 37,000 shares on the second anniversary of the termination of
          the Participant's employment.

          (iv) If the condition set forth in clause (i) of subparagraph 5(a) has
     not  previously  during the term of this  Agreement  been  satisfied,  then
     notwithstanding  the  requirement of continued  employment in  subparagraph
     5(a)  above,  all  Restricted  Stock not  previously  vested and subject to
     forfeiture  shall vest and the right of the  Participant  to such shares of
     Restricted  Stock shall become  nonforfeitable  upon the termination of the
     Participant's  employment by the  Corporation  "without  cause" pursuant to
     Paragraph 5(a) (iii) of the Employment Agreement if such termination occurs
     within  three (3)  months  prior to, at the time of or within  one (1) year
     following  a  "change  of  control"  as  defined  in  Section  2(e)  of the
     Employment  Agreement  or,  provided  that  such  change is  effected,  the
     execution of a definitive agreement therefor.

     (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.

     (e) Limitation on Shares of Restricted Stock.  Except as otherwise provided
in Paragraph  6(a) or 9 of this  Agreement,  the  aggregate  number of shares of
Restricted  Stock which the  Participant  may be entitled to receive  under this
Agreement shall not exceed 90,000.


                                      -4-
<PAGE>


     6. Voting Rights: Dividends: Other Distributions.

     (a) 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.

     (b) The  Participant  shall use sixty percent  (60%) of the cash  dividends
paid on any unvested shares of Restricted Stock to purchase additional shares of
Common Stock  within  thirty (30) days of payment or as soon  thereafter  as the
Participant  may  purchase  shares of Common  Stock  without  penalty  under the
Federal securities law.

     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 


                                      -5-
<PAGE>


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.

     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


                                      -6-
<PAGE>


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.

     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.


                                      -7-
<PAGE>


     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.

     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.

                                    FACTORY STORES OF AMERICA, INC.

 
                                     By: _______________________________________
                                           J. Dixon Fleming, Jr.
                                           Chairman and Chief Executive Officer

ATTEST:

___________________

___________________ Secretary

[Corporate Seal]

                                                                             
                                      ____________________________________(SEAL)
                                             C. CAMMACK MORTON 


                                      -8-
<PAGE>

                                    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 April 4, 1996, a copy of which  agreement  may be obtained from
the issuer by writing to:

                                    Factory Stores of America, Inc.
                                    230 North Equity Drive
                                    Smithfield, North Carolina 27358
                                    Attention: Corporate Secretary


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