ADDENDUM TO NOTE PURCHASE AGREEMENT


                  AGREEMENT dated November 12,1996, by and among FAC REALTY,
INC. (formerly, FACTORY STORES OF AMERICA, INC)., a Delaware corporation with
offices at 230 North Equity Drive, Smithfield, North Carolina 27577 (the
"Borrower"), BLACKACRE BRIDGE CAPITAL L.L.C., a Delaware limited liability
company with offices at 950 Third Avenue, New York, New York 10022
("Blackacre"), GILDEA MANAGEMENT COMPANY, a Delaware corporation with offices at
115 E. Putnam Avenue, Greenwich, Connecticut 06530 ("Gildea") and NATIONAL UNION
FIRE INSURANCE COMPANY OF PITTSBURGH (the "Designee").


                              PRELIMINARY STATEMENT

                  Borrower, Blackacre and Gildea have entered into a Note
Purchase Agreement dated as of April 2, 1996, as amended (the "Note Purchase
Agreement"), pursuant to which, among other things, Borrower has agreed to sell
and issue to designees of Blackacre and Gildea, and Blackacre and Gildea have
agreed to cause their designees to purchase from Borrower, certain exchangeable
subordinated notes and senior notes million from Borrower. Borrower, Blackacre
and Gildea desire that the Designee be substituted as the purchaser of certain
of such notes as contemplated by section 17 of the Note Purchase Agreement.

                  Accordingly, the parties hereto agree as follows.

1.       DEFINED TERMS. All capitalized terms used herein which are not
         otherwise expressly defined herein shall have the meanings set forth in
         the Note Purchase Agreement.

2.       IDENTIFICATION OF THE DESIGNEE.  The Designee is hereby identified as a
         designee in accordance with section 17 of the Note Purchase Agreement.

3.       PURCHASE AND SALE.

         a.       Borrower hereby agrees to issue and sell to the Designee at
                  the Closing the type and principal amount of Notes set forth
                  opposite such Designee's name on Exhibit A hereto.

         b.       The Designee agrees to purchase such Notes from the Borrower
                  at the Closing.



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4.       PURCHASE PRICE AND PAYMENT.

         a.       The aggregate purchase price payable to Borrower for the Notes
                  shall be the amount set forth opposite such Designee's name on
                  Exhibit A hereto under the caption "Purchase Price" (the
                  "Purchase Price").

         b.       At the Closing the Purchase Price payable to Borrower shall be
                  paid by. the Designee in accordance with the instructions set
                  forth on Exhibit A under the caption "Wire Transfer
                  Instructions For Borrower" by wire transfer of immediately
                  available funds to the account indicated by the Borrower in
                  such instructions.

5.       NOTE PURCHASE AGREEMENT. By its execution and delivery hereof each of
         the undersigned agrees and acknowledges that for all purposes hereof
         the Designee shall be deemed to be a Designee party to, and shall be
         bound by the terms and conditions of and shall be entitled to all of
         the rights, privileges, benefits and remedies of, the Note Purchase
         Agreement as though such Designee had been a Designee party to the Note
         Purchase Agreement. In addition, Designee shall be deemed to have made
         (with respect to itself only) each of the representations and
         warranties set forth in Section 7 of the Note Purchase Agreement. The
         Designee shall be entitled to the rights privileges, benefits and
         remedies including, without limitation, the representations,
         warranties, covenants, agreements, indemnifications and undertakings of
         the Borrower as well as the remedies upon an Event of Default, of a
         Designee, and shall fulfill all of the obligations of Blackacre and
         Gildea or the Designees, as the case may be, relating to the Notes
         purchased by the Designee.



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         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                      FAC REALTY, INC


                      By:   /s/ C. Cammack Morton
                      Name: C. Cammack Morton
                      Title:   President and Chief Operating Officer



                      BLACKACRE BRIDGE CAPITAL, L.L.C.

                      By:      Blackacre Capital Management Corp.,
                               managing member



                      By: /s/ Jeffrey B. Citrin
                      Name: Jeffrey B. Citrin
                      Title:   President



                      GILDEA MANAGEMENT COMPANY



                      By: /s/ William P. O'Donnell
                      Name: William P. O'Donnell
                      Title: Vice President



                      NATIONAL UNION FIRE INSURANCE
                      COMPANY OF PITTSBURGH



                      By: /s/ David B. Pinkerton
                      Name: David B. Pinkerton
                      Title: Vice President

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