GALEY & LORD, INC.

                           1996 RESTRICTED STOCK PLAN
                 (As Adopted Effective as of November 12, 1996)


         1. Purpose. The purpose of the Galey & Lord, Inc., 1996 Restricted
Stock Plan (the "Plan") is to induce certain non-employee directors to continue
to serve as directors of Galey & Lord, Inc. (the "Corporation"), to encourage
ownership of shares in the Corporation by such non-employee directors and to
provide additional incentive for such directors to promote the success of the
Corporation's business.

         2. Effective Date of the Plan. The Plan became effective on November
12, 1996, by action of the Board of Directors (the "Board") subject to approval
by the stockholders of the Corporation.

         3. Stock Subject to Plan. 150,000 of the authorized but unissued shares
of the common stock, $.01 par value, of the Corporation (the "Common Stock") are
hereby reserved for issuance under the Plan; provided, however, that the number
of shares so reserved may from time to time be reduced to the extent that a
corresponding number of issued and outstanding shares of the Common Stock are
purchased by the Corporation and set aside for issuance under the Plan. If any
shares of the Common Stock issued under the Plan ("Restricted Shares") are
reacquired by the Corporation as provided in Section 9, such shares shall again
be available for the purposes of the Plan.


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         4. Committee. The committee (the "Committee") shall consist of two or
more members of the Board. The Chief Executive Officer of the Corporation shall
also be a member of the Committee, ex-officio, whether or not he or she is
otherwise a member of the Committee. The Committee shall be appointed annually
by the Board, which may at any time and from time to time remove any members of
the Committee, with or without cause, appoint additional members to the
Committee and fill vacancies, however caused, in the Committee. In the event
that no Committee shall have been appointed, the Board shall act as the
Committee. A majority of the members of the Committee shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members
present at a meeting duly called and held. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully effective as if it had been made at a meeting duly called and
held.

         5. Administration. Subject to the provisions of the Plan, the Committee
shall have authority to interpret the Plan and to prescribe, amend and rescind
rules and regulations relating to it. Any determination by the Committee in
carrying out, administering or construing the Plan shall be final and binding
for all purposes and upon all interested persons and their heirs, successors and
personal representatives.

         6. Eligibility. An allocation of Restricted Shares may only be made to
persons who are directors of the Corporation and

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who are not common law employees of the Corporation.

         7. Grants of Restricted Shares. A. On December 30, 1996 and continuing
annually thereafter on the third Trading Day after the date of the Annual
Meeting of stockholders of the Corporation, through and including the Annual
Meeting of stockholders of the Corporation held in 2005, and on the third
Trading Day after the date on which each person described below first becomes a
director (if such date is a date other than the Annual Meeting of Stockholders
of the Corporation), each person who (a) is serving as a director of the
Corporation on the date of grant, (b) is not a common law employee of the
Corporation and (c) has filed an election with the Corporation (at such time and
in such manner as may be prescribed by the Corporation) to receive an allocation
of Restricted Shares for the current year in lieu of an option under the Amended
and Restated 1989 Stock Option Plan of Galey & Lord, Inc. (or any other stock
option plan subsequently adopted by the Corporation), shall automatically be
allocated 1,200 Restricted Shares, subject to availability under the Plan.

         B. On the third Trading Day after January 1, 1997 and on the third
Trading Day after each January 1 thereafter, through and including January 1,
2006, and at the time each person described below first becomes a director, each
person who (a) is serving as a director of the Corporation on such date, (b) is
not a common law employee of the Corporation on such date and (c) filed an
election with the Corporation on or prior to the

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preceding December 1, or at the time a person first became a director (at such
time and in such manner as may be prescribed by the Corporation) to receive all
of his or her annual director's fee for the subsequent calendar year (or, for
the remainder of the current calendar year, in the case of a person who first
becomes a director during such calendar year) in the form of a combination of
cash and Restricted Shares in lieu of (i) cash or (ii) a grant of options under
the Amended and Restated 1989 Stock Option Plan of Galey & Lord, Inc. (or any
other stock option plan subsequently adopted by the Corporation), shall be paid
for such subsequent calendar year (or, for the remainder of the current calendar
year, in the case of a person who first becomes a director during such calendar
year) in the form of a combination of ten thousand dollars ($10,000) of cash and
an allocation, subject to availability under the Plan, of the number of
Restricted Shares derived by dividing fifteen thousand (15,000) by the Fair
Market Value per Share of the Common Stock on the third Trading Day after
January 1 of such subsequent calendar year (or the third Trading Day after the
date on which such person first becomes a director, as the case may be), rounded
to the next highest share. Notwithstanding the foregoing provisions of this
Section 7B, the amount of the annual directors' fee to be paid (whether in the
form of cash, stock options or a combination of cash and Restricted Shares) with
respect to a calendar year to a director who first becomes a director during
such calendar year shall be reduced to an amount calculated by multiplying the
amount to which a director otherwise would be payable pursuant to


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the foregoing provisions of this Section 7B (whether in the form of cash, stock
options or a combination of cash and Restricted Shares) by a fraction, the
numerator of which is the number of calendar days remaining in such calendar
year measured from the date on which such person first becomes a director and
the denominator of which is three hundred sixty-five (365).

         8. Purchase Price. Each person who shall be allocated Restricted Shares
hereunder shall purchase the same from the Corporation at and for a purchase
price of $.01 a share. Failure by a Participant to purchase and pay for all of
the Restricted Shares allocated to him or her within thirty days after he or she
shall have been given written notice of such allocation shall result in a
cancellation of such allocation and he or she shall no longer have the right to
purchase the same hereunder.

         9. Restricted Shares. A. Except as otherwise provided in this Section,
the Restricted Shares allocated to a Participant may not be sold, assigned,
transferred or otherwise disposed of, and may not be pledged or hypothecated.
The Stock Restrictions shall terminate on the third anniversary of the date of
his or her Restricted Stock Agreement (as such term is defined in paragraph E.
of this Section 9).

         B. In addition, if the Participant to whom Restricted Shares have been
allocated as of any Allocation Date leaves the service of the Corporation and
its subsidiaries by reason of his or her Discharge for Cause prior to the
termination of the Stock



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Restrictions with respect to the Restricted Shares allocated to such Participant
as of such Allocation Date, he or she shall be obligated to redeliver such
Restricted Shares to the Corporation immediately and the Corporation shall pay
to him or her, in redemption of such shares, an amount equal to the price paid
by the Participant for such Restricted Shares.

         C. If the Participant to whom Restricted Shares have been allocated as
of any Allocation Date leaves the service of the Corporation and its
subsidiaries for any reason other than his or her Discharge for Cause prior to
the termination of the Stock Restrictions with respect to the Restricted Shares
allocated to such Participant as of such Allocation Date, such Participant (or,
in the event of his or her death, the executors or administrators of his or her
estate) shall retain all of his or her rights with respect to such Restricted
Shares; provided, however, that such Restricted Shares shall remain subject to
the terms of the Plan and of such Participant's Restricted Stock Agreement.

         D. Upon issuance of the certificate or certificates for the Restricted
Shares in the name of a Participant, the Participant shall thereupon be a
stockholder with respect to all the Restricted Shares represented by such
certificate or certificates and shall have the rights of a stockholder with
respect to such Restricted Shares, including the right to vote such Restricted
Shares and to receive all dividends and other distributions paid with respect to
such Restricted Shares.



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         E. Each Participant receiving Restricted Shares shall (a) agree that
such Restricted Shares shall be subject to, and shall be held by him or her in
accordance with all of the applicable terms and provisions of, the Plan, (b)
represent and warrant to the Corporation that he or she is acquiring such
Restricted Shares for investment for his or her own account (unless there is
then current a prospectus relating to the Restricted Shares under Section 10(a)
of the Securities Act of 1933, as amended) and, in any event, that he or she
will not sell or otherwise dispose of said shares except in compliance with the
Securities Act of 1933, as amended, and (c) agree that the Corporation may place
on the certificates representing the Restricted Shares or new or additional or
different shares or securities distributed with respect to the Restricted Shares
such legend or legends as the Corporation may deem appropriate and that the
Corporation may place a stop transfer order with respect to such Restricted
Shares with the Transfer Agent(s) for the Common Stock. The foregoing agreement,
representation and warranty shall be contained in an agreement in writing
("Restricted Stock Agreement") which shall be delivered by the Participant to
the Corporation. The Committee shall adopt, from time to time, such rules with
respect to the return of executed Restricted Stock Agreements as it deems
appropriate and failure by a Participant to comply with such rules shall
terminate the allocation of such Restricted Shares to such Participant.

         10. Adjustment of Number of Shares. A. In the event that


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a dividend shall be declared upon the Common Stock payable in shares of the
Common Stock, the number of shares of the Common Stock then subject to any
Restricted Stock Agreement and the number of shares of the Common Stock reserved
for issuance in accordance with the provisions of the Plan but not yet issued
shall be adjusted by adding to each such share the number of shares which would
be distributable thereon if such shares had been outstanding on the date fixed
for determining the stockholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Corporation or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, sale of assets, merger
or consolidation in which the Corporation is the surviving corporation, then,
there shall be substituted for each share of the Common Stock then subject to a
Restricted Stock Agreement and for each share of the Common Stock reserved for
issuance in accordance with the provisions of the Plan but not yet issued, the
number and kind of shares of stock or other securities into which each
outstanding share of the Common Stock shall be so changed or for which each such
share shall be exchanged.

         B. In the event that there shall be any change, other than as specified
in this Section 10, in the number or kind of outstanding shares of the Common
Stock, or of any stock or other


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securities into which the Common Stock shall have been changed, or for which it
shall have been exchanged, then, if the Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment in the number or
kind of shares then subject to a Restricted Stock Agreement and the number or
kind of shares reserved for issuance in accordance with the provisions of the
Plan but not yet issued, such adjustment shall be made by the Committee and
shall be effective and binding for all purposes of the Plan and of each
Restricted Stock Agreement entered into in accordance with the provisions of the
Plan.

         C. No adjustment or substitution provided for in this Section 10 shall
require the Corporation to deliver a fractional share under the Plan or any
Restricted Stock Agreement.

         11. Withholding and Waivers. In the event of the death of a
Participant, an additional condition to the Corporation's obligation to release
Restricted Shares to the executors or administrators of such Participant's
estate and to release the Stock Restrictions provided hereunder on any
Restricted Shares owned by such Participant as provided in Section 9 shall be
the delivery to the Corporation of such tax waivers, letters testamentary and
other documents as the Committee may reasonably determine.

         12. Definitions. For the purposes hereof:

                  A. The term "Allocation Date" shall mean the date as of which
         a Participant shall have received a grant of


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         Restricted Shares.

                  B. The term "Discharge for Cause" shall mean the termination
         of a Participant's service as a director of the Corporation by reason
         of (i) the commission by such Participant of any act or omission that
         would constitute a crime under federal, state or equivalent foreign
         law, (ii) the commission by such Participant of any act of moral
         turpitude, (iii) fraud, dishonesty or other acts or omissions that
         result in a breach of any fiduciary or other material duty to the
         Corporation or (iv) continued alcohol or other substance abuse that
         renders such Participant incapable of performing his or her material
         duties to the satisfaction of the Corporation.

                  C. The term "Fair Market Value per Share " shall mean the last
         reported sale price for Common Stock (regular way) or, in case no such
         reported sale takes place on such Trading Day, the average of the
         closing bid and asked prices (regular way) for the Common Stock for
         such Trading Day, in either case on the principal national securities
         exchange on which the Common Stock is listed or admitted to trading, or
         if the Common Stock is not listed or admitted to trading on any
         national securities exchange, but is traded in the over-the-counter
         market, the closing sale price of the Common Stock or, if no sale is
         publicly reported, the average of the closing bid and asked quotations
         for the Common Stock, as reported by the National Association of
         Securities



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         Dealers Automated Quotation System ("Nasdaq") or any comparable system
         or, if the Common Stock is not listed on Nasdaq or a comparable system,
         the closing sale price of the Common Stock, or, if no sale is publicly
         reported, the average of the closing bid and asked prices, as furnished
         by two members of the National Association of Securities Dealers, Inc.
         who make a market in the Common Stock selected from time to time by the
         Corporation for that purpose. In addition, for purposes of this
         definition and as otherwise used in the Plan, "Trading Day" shall mean,
         if the Common Stock is listed on any national securities exchange, a
         business day during which such exchange was open for trading and at
         least one trade of Common Stock was effected on such exchange on such
         business day, or, if the Common Stock is not listed on any national
         securities exchange but is traded in the over-the-counter market, a
         business day during which the over-the-counter market was open for
         trading and at least one "eligible dealer" quoted both a bid and asked
         price for the Common Stock. An "eligible dealer" for any day shall
         include any broker-dealer who quoted both a bid and asked price for
         such day, but shall not include any broker-dealer who quoted only a bid
         or only an asked price for such day.

                  D. The term "Stock Restrictions" shall mean the restrictions
         on the ability of a Participant to transfer Restricted Shares issued to
         such Participant hereunder





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         referred to in Section 9 and embodied in a Restricted Stock Agreement
         between the Corporation and such Participant.

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

         14. No Employment Right. Neither the existence of the Plan nor the
grant of any Restricted Shares hereunder shall require the Corporation or any
subsidiary to continue any Participant as a director of the Corporation or any
subsidiary.

         15. Amendment of Plan. The Board may, at any time and from time to
time, by a resolution appropriately adopted, make such modifications of the Plan
as it shall deem advisable. No amendment of the Plan may, without the consent of
the Participants to whom any Restricted Shares shall theretofore have been
allocated, adversely affect the rights or obligations of such Participants with
respect to such Restricted Shares. The Committee may, in its discretion, cause
the restrictions imposed in accordance with the provisions of Section 9 hereof
with respect to any Restricted Shares to terminate, in whole or in part, prior
to the time when they would otherwise terminate.

         16. Expiration and Termination of the Plan. The Plan shall terminate on
November 11, 2006 or at such earlier time as the Board may determine; provided,
however, that such termination shall not, without the consent of the
Participants to whom any Restricted Shares shall theretofore have been
allocated,


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adversely affect the rights or obligations of such Participants with respect to
such Restricted Shares.

         17. Governing Law. The Plan shall be governed by the laws of the State
of New York.

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