FACTORY STORES OF AMERICA, INC.
                           1996 RESTRICTED STOCK PLAN


         Factory Stores of America, Inc., a Delaware corporation (the
"Corporation") does herein set forth the terms of the Factory Stores of America,
Inc. 1996 Restricted Stock Plan (this "Plan"), which was adopted by the Board of
Directors (the "Board") of the Corporation and the Executive Compensation
Committee of the Board (the "Committee") on January 16, 1996.

         1.  Purpose of this Plan

         The purpose of this Plan is to provide to selected directors, officers,
and employees of the Corporation ("Participants" or singularly, "Participant")
an ownership interest in the Corporation, in consideration of their past or
anticipated future contributions to the profitability of the Corporation by
making awards ("Awards"or singularly, "Award") of shares of common stock of the
Corporation (the "Common Stock"). The Board believes that participation in the
ownership of the Corporation will induce Participants to serve the Corporation
as directors, officers, or employees and encourage them to contribute to the
future growth and profits of the Corporation. In addition, the existence of this
Plan will make it possible for the Corporation to attract capable individuals to
serve as directors, officers, or employees of the Corporation.

         2.  Administration of this Plan

                  (a) This Plan shall be administered by the Committee. The
         Committee shall have full power and authority to construe, interpret,
         and administer this Plan. All actions, decisions, determinations, or
         interpretations of the Committee shall be final, conclusive, and
         binding upon all parties.

                  (b) The Committee shall decide to whom Awards shall be made
         under this Plan except as provided in subparagraphs 3(b) and 5(a)
         below, the number of shares of Common Stock subject to each Award
         except as provided in subparagraph 5(a) below, and such additional or
         different terms and conditions for any or all Awards as the Committee
         shall deem appropriate.

                  (c) The Committee may designate any officers or employees of
         the Corporation to assist in the administration of this Plan. The
         Committee may authorize such individuals to execute documents on its
         behalf and may delegate to them such other ministerial and limited
         discretionary duties as the Committee may see fit.

         3.  Shares of Common Stock Available Under the Plan

                  (a) The Corporation shall provide funding to the Plan to
         purchase Three Hundred Fifty Thousand (350,000) shares of the Common
         Stock of the Corporation (the "Initial Plan Shares"). Such shares shall
         be held or delivered by the Corporation pursuant to the terms of this
         Plan. The Initial Plan Shares may be (i) issued from the Corporation's
         reserve of

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         authorized but unissued shares of Common Stock or (ii) purchased on the
         open market, subject to any limitations of the federal securities laws,
         as may be determined by the Committee.

                  (b) Subsequent to the purchase of the Initial Plan Shares as
         provided in subparagraph (a) above, One Hundred Ninety-Six Thousand Six
         Hundred Sixty-Seven (196,667) of such shares (the "Allocated Initial
         Plan Shares") shall be allocated as provided in Paragraph 5 below. If
         shares once allocated to an Initial Participant (as hereinafter
         defined) are forfeited as provided in Paragraph 6 below, then such
         forfeited shares shall be retained in the Plan and they shall again be
         available for making additional Awards to Participants as provided in
         Paragraph 2 above.

                  (c) At any time, and from time to time, the Board may resolve
         to issue or purchase additional shares of Common Stock for making
         Awards under this Plan. Such shares shall be held by the Corporation
         pursuant to the terms of this Plan and shall be available for making
         additional Awards to Participants as provided in Paragraph 2 above.

                  (d) The shares referred to in (i) the last sentence of
         subparagraph (b) above; (ii) subparagraph (c) above; and (iii) the last
         sentence of this subparagraph (d) and any unallocated Initial Plan
         Shares shall be treated collectively as a pool of shares available (the
         "Available Shares") for making additional Awards to Participants as
         provided in Paragraph 2 above. With respect to the Available Shares, if
         any such shares once allocated to a Participant are forfeited as
         provided in Paragraph 6 below, then such forfeited shares shall be
         available again for grants to Participants as provided in Paragraph 2
         above.

         4.  Eligibility

         The Participants in this Plan to whom Awards may be made shall be the
members of the Board and such officers and employees of the Corporation as may
be designated by the Committee.

         5.  Award of Allocated Initial Plan Shares; Additional Awards

                  (a) Subject to the provisions of Paragraph 7 below, all of the
         Allocated Initial Plan Shares shall be awarded to the persons listed on
         Schedule 5(a) (the "Initial Participants") in the number indicated
         opposite their respective names, based upon past service and the
         continued service of such individuals or their anticipated future
         service as members of the Board, officers, or employees of the
         Corporation.

                  (b) The Available Shares shall be held by the Corporation
         under this Plan and shall be available for the making of additional
         Awards to Participants during the remaining term of this Plan, upon
         such terms and conditions as may be determined by the Committee.



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         6.  Vesting of Shares

                  (a) Unless otherwise determined by the Committee pursuant to
         Paragraph 2(b) above, shares granted under this Plan shall vest and the
         right of a Participant to the shares shall be nonforfeitable in
         accordance with the following schedule.

                  Date When Such Shares                     Percentage of Such
                      Become Vested                            Shares Vested

              First anniversary of Date of Award                   331/3
              Second anniversary of Date of Award                  662/3
              Third anniversary of Date of Award                    100

                  (b) In determining the number of shares vested under the above
         vesting schedule, a Participant shall not receive fractional shares. If
         the product resulting from multiplying the vested percentage times the
         allocated shares results in a fractional share, then a Participant's
         vested right shall be to the whole number of shares disregarding any
         fractional share.

                  (c) In the event the employment or board membership, as
         applicable, of any Participant is terminated for any reason other than
         as provided in subparagraphs (d), (e), and (f) below, and such
         Participant does not have a 100% vested interest in an Award, then any
         shares which are not vested, based upon the schedule in subparagraph
         (a) above, shall be forfeited and shall be available again for Awards
         to Participants as may be determined by the Committee.

                  (d) Unless otherwise determined by the Committee pursuant to
         Paragraph 2(b) above, in the event that the membership of a Participant
         on the Board or the employment of a Participant with the Corporation
         should terminate because of such Participant's retirement, disability,
         or death prior to the date when all shares allocated to the Participant
         would be 100% vested in accordance with the schedule in subparagraph
         (a) above then, notwithstanding the schedule in subparagraph (a) above,
         all shares allocated to such Participant shall immediately become fully
         vested and nonforfeitable. For purposes of this Plan, the term
         "retirement" shall mean termination of a Participant's membership on
         the Board or employment with the Corporation (i) with respect to
         Participants who are employees of the Corporation, (A) simultaneously
         with or subsequent to the termination of employment under conditions
         which would constitute retirement under any tax qualified retirement
         plan maintained by the Corporation or (B) attaining age 65; (ii) with
         respect to Participants who are nonemployee directors of the
         Corporation, at any time after attaining age 75 with approval of the
         Committee. For purposes of this Plan, the term "disability" shall be
         defined in the same manner as such term is defined in Section 22(e)(3)
         of the Internal Revenue Code of 1986, as amended; provided, however,
         that in the event the employment

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         of a Participant by the Corporation is governed by a written employment
         agreement that contains a definition of "disability," "permanent
         disability," or similar term for purposes of such agreement, then the
         definition of such term as set forth therein shall define "disability"
         for purposes of this Plan.

                  (e) Unless otherwise determined by the Committee pursuant to
         Paragraph 2(b) above, in the event that the membership of a Participant
         on the Board or the employment of a Participant with the Corporation
         should terminate because of a "change in control" of the Corporation
         prior to the date when all shares allocated to the Participant would be
         100% vested in accordance with the schedule in subparagraph (a) above
         then, notwithstanding the schedule in subparagraph (a) above, all
         shares allocated to such Participant shall immediately become fully
         vested and nonforfeitable. When used herein, the phrase "change in
         control" means the first to occur of the following events: (i) any
         person or group of commonly controlled persons owns or controls,
         directly or indirectly, fifty percent (50%) or more of the voting
         control or value of the capital stock of the Corporation following the
         grant date of the Award; (ii) any person or group of commonly
         controlled persons owning less than five percent (5%) of the voting
         control or value of the capital stock of the Corporation within 30 days
         following the grant date of the Award owns or controls, directly or
         indirectly, more than twenty percent (20%) of the voting control or
         value of the capital stock of the Corporation; or (iii) following the
         grant date of the Award, the stockholders of the Corporation approve an
         agreement to merge or consolidate with another corporation or other
         entity resulting (whether separately or in connection with a series of
         transactions) in a change in ownership of twenty percent (20%) or more
         of the voting control or value of the capital stock of the Corporation,
         or an agreement to sell or otherwise dispose of all or substantially
         all of the Corporation's assets (including without limitation, a plan
         of liquidation or dissolution), or otherwise approve of a fundamental
         alteration in the nature of the Corporation's business; provided,
         however, a pledge, hypothecation, or other similar disposition for the
         purpose of providing collateral security made at the time the
         Corporation enters into a bona fide financing transaction with a party
         which at the time of such transaction is not an affiliate of the
         Corporation would not constitute a change in control; provided,
         further, that in the event the employment of a Participant by the
         Corporation is governed by a written employment agreement that contains
         a definition of "change in control" for purposes of such agreement,
         then the definition of "change in control" as set forth therein shall
         define "change in control" for purposes of this Plan. Notwithstanding
         the foregoing provisions of this subparagraph (e) the ownership or
         acquisition of capital stock of the Corporation by J. Dixon Fleming,
         Jr., C. Cammack Morton, Connell L. Radcliff, and/or their respective
         affiliates, shall not be deemed to result in a "change in control" of
         the Corporation.

                  (f) Unless otherwise determined by the Committee pursuant to
         Paragraph 2(b) above, in the event that the employment of a Participant
         by the Corporation is governed by a written employment agreement and
         the employment of that Participant is terminated

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         "without cause" as defined in such employment agreement then,
         notwithstanding the schedule in subparagraph (a) above, all shares
         allocated to such Participant shall immediately become fully vested and
         nonforfeitable.

         7.  Action Required of Participants

                  (a) Each Participant receiving an Award of shares under this
         Plan shall represent to and agree with the Corporation that the
         Participant (i) is acquiring such shares on the Participant's behalf as
         an investment and not with a present intention of distribution or
         resale and (ii) agrees to have placed upon the certificates
         representing such shares a legend setting forth these representations
         and agreements or a reference thereto. Such shares shall be
         transferable thereafter only if the proposed transfer shall be
         permissible under this Plan and if, in the opinion of counsel for the
         Corporation, such transfer shall at such time be in compliance with all
         applicable federal and state securities laws and regulations.

                  (b) Each Participant receiving an Award of shares under this
         Plan shall deliver to the Corporation a Restricted Stock Agreement
         substantially in the form attached hereto as Exhibit A modified as
         necessary to reflect any additional or different terms and conditions
         or such Award deemed appropriate by the Committee pursuant to
         subparagraph 2(b) above, which shall be signed by such Participant. In
         the event of any inconsistency between this Plan and any such
         Restricted Stock Agreement, the terms of the Restricted Stock Agreement
         shall prevail.

         8.  Restriction

                  (a) Shares subject to an Award made under this Plan shall
         forthwith, after the making of the representations required by
         Paragraph 7 above, be issued and a certificate or certificates for such
         shares shall be prepared in the name of such Participant. Such
         Participant shall thereupon be a stockholder with respect to all the
         shares represented by such certificate or certificates and shall have
         all the rights of a stockholder with respect to a such shares,
         including the right to vote such shares and to receive all dividends
         and other distributions (subject to the provisions of subparagraph 8(b)
         below) paid with respect to such shares; provided, however, that such
         shares shall be subject to the restrictions described in Paragraph 6
         above. Certificates of stock representing shares subject to an Award
         made under this Plan shall be imprinted with a legend to the effect
         that the shares represented are subject to restrictions on transfer and
         potential forfeiture in accordance with the terms of the Restricted
         Stock Agreement, and the transfer agent for Common Stock shall be
         instructed to that effect with respect to such shares. In furtherance
         of such restrictions, the Participant shall, immediately upon receipt
         of the certificate or certificates, deposit such certificate or
         certificates together with a stock power or other instrument of
         transfer, appropriately endorsed in blank with the Corporation.



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                  (b) In the event that, as the result of a stock split or stock
         dividend or combination of shares or any other change or exchange for
         other securities by reclassification, reorganization, merger,
         consolidation, recapitalization, or otherwise, a Participant shall, as
         the owner of the shares subject to an Award made under this Plan and
         subject to the restrictions hereunder, be entitled to new or additional
         or different shares of Common Stock or other securities, the
         certificate or certificates for, or other evidence of, such new or
         additional or different shares or other securities, together with a
         stock power or other instrument of transfer appropriately endorsed,
         shall also be imprinted with a legend as provided in subparagraph 8(a)
         above and deposited by such Participant with the Corporation, and all
         provisions of this Plan relating to vesting, restrictions, and lapse of
         restrictions herein set forth shall thereupon be applicable to such
         flaw or additional or different shares or other securities to the
         extent applicable to the shares with respect to which they were
         distributed; provided, however, that if a Participant should receive
         rights warrants, or fractional interests in respect of any such shares
         then being held under the terms of this Plan, such rights or warrants
         may be held, exercised, sold, or otherwise disposed of, and such
         fractional interests may be settled, by such Participant free and clear
         of the restrictions herein set forth.

                  (c) The restriction to which shares subject to an Award made
         under this Plan shall be subject is that if the directorship or
         employment of a Participant should be terminated for any reason during
         the "restricted period" (as defined in subparagraph 12(b) ) below),
         except as otherwise specifically provided in Paragraph 6 above, the
         Participant's interest in the shares issued under this Plan shall be
         forfeited as provided in the applicable schedule in subparagraph l2(b)
         below.

                  (d) The restrictions imposed on shares issued under this Plan
         may at any time be modified, reduced, relaxed, or eliminated altogether
         as the Committee shall from time to time determine, if, in its
         discretion, the Committee considers such action to be in furtherance of
         the purposes of this Plan. Notice of any change in restrictions shall
         be given to affected Participants and the Corporation's transfer agent.

         9.  Effect of Award on Status of Participant. The fact that an Award is
made to a Participant under this Plan shall not confer on such Participant any
right to continued service on the Board, nor right to continued employment with
the Corporation; nor shall it limit the right of the directors or the
stockholders to remove such Participant from the Board, or to terminate the
Participant's employment at any time.

         10.  Voting Rights; Dividends; Other Distributions. A Participant shall
have the full power to vote all of the shares 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 such shares 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
such shares 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 Plan and shall be redelivered to

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a Participant or delivered as instructed by the Committee under the same
circumstances as the shares with respect to, or in substitution for, which they
were issued, provided, however, that if a Participant should receive rights,
warrants, or fractional interests in respect of any of the shares 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 such Participant free and clear of the restrictions herein set
forth. The Board shall have the full power to vote all Available Shares. Cash
dividends declared upon Available Shares shall be deposited in an interest
bearing account established for this Plan and shall be available to fund future
Awards or any other purpose determined by the Committee to be appropriate;
including, without limitation, payment over to the Corporation.

         11.  Adjustment  Upon  Changes  in  Capitalization;   Dissolution;   or
Liquidation

                  (a) In the event of a change in the number of shares of Common
         Stock outstanding 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
         this Plan and the realization of its objectives, the Committee may make
         such adjustments in the terms, conditions, or restrictions of this Plan
         and in any Restricted Stock Agreement then in effect, as the Committee
         shall deem equitable and just.

                  (b) The making of an Award under this Plan shall 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 its 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.

         12.  Nontransferability

                  (a) Any shares subject to an Award made under this Plan shall
         not be sold, exchanged, transferred, pledged, hypothecated or otherwise
         disposed of during the "restricted period." Nothing herein shall
         preclude a Participant from making a gift of any such shares to a
         spouse, child, stepchild, grandchild, parent, or sibling, or legal
         dependent of such Participant, or to a trust of which the beneficiary
         or beneficiaries of the trust shall be either a person designated
         herein or such Participant; provided, however, that any such shares so
         given by a Participant shall remain subject to the restrictions,
         obligations, and conditions set forth in this Plan. In addition, such
         shares may be tendered in response to a tender offer for or a request
         or invitation to tenders of greater than fifty (50%) percent of the
         outstanding Common Stock and may be surrendered in a merger,
         consolidation, or share exchange involving the corporation; provided,
         however, in each case, that except as otherwise provided

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         herein, the securities or other consideration received in exchange
         therefor shall thereafter be subject to the restrictions and conditions
         set forth in this Plan.

                  (b) The term "restricted period" with respect to shares
         subject to an Award made under this Plan shall be the period commencing
         on the date of making such Award of such shares to a Participant and
         ending on the date on which such shares are no longer subject to
         forfeiture as provided in paragraph 6(a) above. The date of making an
         Award with respect to the Initial Plan Shares shall be the date
         determined by the Board which shall be no sooner than the Effective
         Date (as hereinafter defined). The date of making an Award with respect
         to Available Shares shall be the date of execution by a Participant of
         a Restricted Stock Agreement in the form referred to in subparagraph
         7(b) above.

         13.  Tax Withholding. The Corporation shall have the right to deduct or
otherwise effect a withholding of any amount required by federal or state laws
to be withheld with respect to the making of an Award or the sale of shares
acquired under this Plan in order for the Corporation to obtain a tax deduction
otherwise available as a consequence of such Award or sale, as the case may be.

         14.  Exculpation and Indemnification. In connection with this Plan, no
member of the Board or the Committee shall be personally liable for any act or
omission to act in such person's capacity as a member of the Board or the
Committee, nor for any mistake in judgment made in good faith, unless arising
out of, or resulting from, such person's own bad faith, gross negligence,
willful misconduct or criminal acts. To the extent permitted by applicable law
and regulation, the Corporation shall indemnify and hold harmless the members of
the Board and the Committee and each other officer or employee of the
Corporation to whom any duty or power relating to the administration or
interpretation of this Plan may be assigned or delegated, from and against any
and all liabilities (including any amount paid in settlement of a claim with the
approval of the Board) and any costs or expenses (including counsel fees)
incurred by such persons arising out of or as a result of, any act or omission
to act in connection with the performance of such person's duties,
responsibilities, and obligations under this Plan, other than such liabilities,
costs, and expenses as may arise out of, or result from, the bad faith, gross
negligence, willful misconduct, or criminal acts of such persons.

         15. Amendment and Modification of this Plan. The Board may at any time,
and from  time to  time,  amend  or  modify  this  Plan  (including  the form of
Restricted Stock Agreement) in any respect; provided, however, that no amendment
or  modification  shall be made that  increases  the total  number of  Allocated
Initial  Plan  Shares  covered  by  this  Plan,  changes  the  list  of  Initial
Participants or the number of Allocated  Initial Plan Shares  allocated to each,
or effects  any change in the  category  of persons  who may  receive  Awards of
shares under this Plan. Any amendment or  modification of this Plan shall not in
any manner affect any Award of shares  theretofore  made to a Participant  under
this Plan without the consent of such Participant or the transferee in the event
of the death of such Participant.


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         16.  Termination and Expiration of this Plan. This Plan may be
abandoned, suspended, or terminated, in whole or in part at any time by the
Board; provided, however, that abandonment, suspension, or termination of this
Plan shall not affect any Awards theretofore made under this Plan. Unless sooner
terminated this Plan shall terminate at the close of business on the day that is
the tenth (10th) anniversary of the Effective Date (as hereinafter defined), or
the next business day thereafter; and no Award of shares may be made under this
Plan thereafter but such termination shall not effect any Award of shares
theretofore made. In the event that the Board terminates this Plan in whole, any
Available Shares that had not been allocated to eligible Participants together
with any other trust assets, shall revert to the Corporation.

         17.  Effective  Date.  This Plan has been  adopted by the Board and the
Committee to be effective as of January 16, 1996 (the "Effective Date").

         18.  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 Plan. 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.

         19. Expenses of Administration of Plan. All costs and expenses incurred
in the  operation  and  administration  of  this  Plan  shall  be  borne  by the
Corporation.

         20.  Governing  Law.  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 Plan.

         21.  Inspection  of  Plan.  A copy of  this  Plan,  and any  amendments
thereto,  shall be maintained by the Secretary of the  Corporation  and shall be
shown to any proper person making inquiry about it.



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