Document:

SECOND AMENDMENT TO DEBTOR IN POSSESSION
                           LOAN AND SECURITY AGREEMENT
                           ---------------------------

         THIS SECOND AMENDMENT TO DEBTOR IN POSSESSION LOAN AND SECURITY
AGREEMENT (this "Second Amendment") is entered into and effective as of August
__, 1999, by and among Factory Card Outlet of America Ltd., an Illinois
corporation and a debtor and debtor in possession (the "Borrower"), on the one
hand, and Foothill Capital Corporation, as Agent ("Foothill") and the financial
institutions listed on the signature page of the Loan Agreement referred to
below (such financial institutions, together with their respective successors
and assigns, are collectively referred to herein as the "Lenders"), on the other
hand. This Second Amendment amends certain provisions of the Debtor in
Possession Loan and Security Agreement dated as of March 23, 1999 by and among
the Borrower and Foothill, as Agent, and the Lenders (as amended by and through
the date of this Second Amendment, and as hereafter amended and/or restated from
time to time, the "Loan Agreement"). Capitalized terms used herein and not
otherwise defined shall have the same meanings herein as in the Loan Agreement.

                                   BACKGROUND
                                   ----------

         This Second Amendment is entered into to amend certain of the
provisions governing the availability of "Special Sub-Line Advances" under the
Loan Agreement, in accordance with the terms and conditions hereof.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Agent and the
Lenders hereby agree as follows:

         1.       Amendments to Loan Agreement.
                  ----------------------------

         (a) Amendment to Subsection 2.1(a)(ii). Subsection 2.1(a)(ii) of the
Loan Agreement is hereby amended by deleting such subsection in its entirety and
inserting in lieu thereof the following:

                  "(a)(ii) Special Sub-Line Advances. The term "Borrowing Base"
         shall also include amounts available in respect of the Special Sub-Line
         Advances in accordance with this Section 2.1(a)(ii). Subject to the
         terms and conditions of this Agreement, each Lender agrees to make
         special sub-line advances ("Special Sub-Line Advances") to Borrower in
         an amount at any one time outstanding not to exceed such Lender's Pro
         Rata Share of an amount equal to 10% of the Cost value of Eligible
         Inventory, provided that during the period August 20, 1999 through and
         including November 20, 1999, the Special Sub-Line Advances to Borrower
         may be in an amount at any one time outstanding not to exceed such
         Lender's Pro Rata Share of an amount equal to 15% of the Cost value of
         Eligible Inventory,

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<PAGE>

         provided further, however, that, except as expressly set forth in the
         next succeeding sentence, in no event will Advances (on a combined
         basis under Sections 2.1(a)(i)(y) and 2.1(a)(ii)) exceed 82.5% of the
         Net Retail Liquidation Value of Eligible Inventory. Notwithstanding the
         foregoing, the Lenders agree that: (i) during the period August 20,
         1999 through and including September 30, 1999, Advances (on a combined
         basis under Sections 2.1(a)(i)(y) and 2.1(a)(ii)) shall not exceed 90%
         of the Net Retail Liquidation Value of Eligible Inventory, and (ii)
         during the period October 1, 1999 through and including October 31,
         1999, Advances (on a combined basis under Sections 2.1(a)(i)(y) and
         2.1(a)(ii)) shall not exceed 92% of the Net Retail Liquidation Value of
         Eligible Inventory, and (iii) during the period November 1, 1999
         through and including November 20, 1999, Advances (on a combined basis
         under Sections 2.1(a)(i)(y) and 2.1(a)(ii)) shall not exceed 85% of the
         Net Retail Liquidation Value of Eligible Inventory."

         2.       Representations and Warranties; Confirmation of
                  Representations, Warranties.
                  -------------------------------------------------------------

         This Second Amendment has been duly authorized, executed and delivered
by the Borrower. The Loan Agreement, as amended hereby, and each of the other
Loan Documents, as amended by and through the date hereof, constitute legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms. The Borrower, by execution of this
Second Amendment, certifies to the Agent and each of the Lenders that each of
the representations and warranties set forth in the Loan Agreement and the other
Loan Documents is true and correct as of the date hereof, except to the extent
such representations and warranties expressly relate to an earlier date, as if
fully set forth in this Second Amendment, and that, as of the date hereof, no
Default or Event of Default has occurred and is continuing under the Loan
Agreement or any other Loan Document. The Borrower acknowledges and agrees that
this Second Amendment shall become a part of the Loan Agreement and shall be a
Loan Document.

         3.       No Novation; Effect; Counterparts; Governing Law.
                  ------------------------------------------------

         Except to the extent specifically amended hereby, the Loan Agreement
and each of the other Loan Documents shall be unaffected hereby and shall remain
in full force and effect; this Second Amendment shall not be deemed a novation
of the Loan Agreement or any other Loan Document. The Borrower hereby
acknowledges, confirms and ratifies its obligations under the Loan Agreement and
each of the other Loan Documents. This Second Amendment may be executed in any
number of counterparts, and by the different parties on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all the
counterparts shall together constitute one instrument. This Second Amendment
shall be governed by the internal laws of The Commonwealth of Massachusetts
(without reference to conflicts of law principles) and the United States
Bankruptcy Code and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The
Borrower acknowledges that the reasonable out-of-pocket expenses of the Agent
and the Lenders incurred in connection with the preparation, execution and
delivery of this Second Amendment shall be "Lender Group Expenses," as such term
is defined in the Loan Agreement.

                                        2

<PAGE>

         4.       Construction.
                  ------------

         The Borrower, by execution hereof, acknowledges and confirms that for
all purposes of the Loan Agreement and the other Loan Documents, the term "Loan
Agreement" shall mean the Loan Agreement as amended by and through the date of
this Second Amendment and as further amended and/or restated from time to time
hereafter.

         IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Loan and Security Agreement as a sealed instrument as of the date
first above written.

                                 FACTORY CARD OUTLET OF AMERICA,
                                 LTD.

                                 By:
                                    ----------------------------------
                                 Name:
                                      ----------------------------------
                                 Title:
                                       ----------------------------------

                                 FOOTHILL CAPITAL CORPORATION, for
                                 itself and as Agent for the Lenders

                                 By:
                                    ----------------------------------
                                                           (Title)

                                 PARAGON CAPITAL, LLC, as a Lender

                                 By:
                                    ----------------------------------
                                                           (Title)

                                        3THIRD AMENDMENT TO DEBTOR IN POSSESSION
                           LOAN AND SECURITY AGREEMENT

         THIS THIRD AMENDMENT TO DEBTOR IN POSSESSION LOAN AND SECURITY
AGREEMENT (this "Third Amendment") is entered into and effective as of September
24, 1999, by and among Factory Card Outlet of America Ltd., an Illinois
corporation and a debtor and debtor in possession (the "Borrower"), on the one
hand, and Foothill Capital Corporation, as Agent ("Foothill") and the financial
institutions listed on the signature page of the Loan Agreement referred to
below (such financial institutions, together with their respective successors
and assigns, are collectively referred to herein as the "Lenders"), on the other
hand. This Third Amendment amends certain provisions of the Debtor in Possession
Loan and Security Agreement dated as of March 23, 1999 by and among the Borrower
and Foothill, as Agent, and the Lenders (as amended by and through the date of
this Third Amendment, and as hereafter amended and/or restated from time to
time, the "Loan Agreement"). Capitalized terms used herein and not otherwise
defined shall have the same meanings herein as in the Loan Agreement.

                                   BACKGROUND
                                   ----------

         This Third Amendment is entered into to amend certain of the provisions
governing the availability of "Special Sub-Line Advances" under the Loan
Agreement, in accordance with the terms and conditions hereof.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Agent and the
Lenders hereby agree as follows:

         1.       Amendments to Loan Agreement.
                  ----------------------------

         (a) Amendment to Subsection 2.2(a). Subsection 2.2(a)(ii) of the Loan
Agreement is hereby amended by deleting such subsection in its entirety and
inserting in lieu thereof the following:

                                    "(ii) the aggregate amount of all undrawn or
                           unreimbursed Letters of Credit would exceed the lower
                           of: (x) the Maximum Revolving Amount minus the amount
                           of outstanding Advances (including any Agent Advances
                           and Agent Loans); or (y)(1) for the period September
                           24, 1999 through November 23, 1999, $12,500,000, or
                           (2) at all other times during the term of this
                           Agreement, $10,000,000;"

         2.       Representations and Warranties; Confirmation of
                  Representations, Warranties.
                  -------------------------------------------------------------

         This Third Amendment has been duly authorized, executed and delivered
by the Borrower. The Loan Agreement, as amended hereby, and each of the other
Loan Documents, as amended by and through the date hereof, constitute legal,
valid and binding obligations of

                                        1
NY2:\3048140v1\44336.0003
<PAGE>

the Borrower, enforceable against the Borrower in accordance with their
respective terms. The Borrower, by execution of this Third Amendment, certifies
to the Agent and each of the Lenders that each of the representations and
warranties set forth in the Loan Agreement and the other Loan Documents is true
and correct as of the date hereof, except to the extent such representations and
warranties expressly relate to an earlier date, as if fully set forth in this
Third Amendment, and that, as of the date hereof, no Default or Event of Default
has occurred and is continuing under the Loan Agreement or any other Loan
Document. The Borrower acknowledges and agrees that this Third Amendment shall
become a part of the Loan Agreement and shall be a Loan Document.

         3. Amendment Fee. Prior to or concurrently with the execution by the
Agent and the Lenders of this Third Amendment, and as a condition to the
obligation of the Lenders to execute this Third Amendment and make the
accomodations to the Borrower described herein:

         (a) This Third Amendment shall have been executed and delivered by each
of the parties hereto; and

         (b) The Borrower shall have paid to the Agent for the ratable benefit
of the Lenders an amendment fee of $12,500. Such fee shall be fully earned when
paid to the Agent and shall not be refunded to the Borrower under any
circumstances.

         4.       No Novation; Effect; Counterparts; Governing Law.
                  ------------------------------------------------

         Except to the extent specifically amended hereby, the Loan Agreement
and each of the other Loan Documents shall be unaffected hereby and shall remain
in full force and effect; this Third Amendment shall not be deemed a novation of
the Loan Agreement or any other Loan Document. The Borrower hereby acknowledges,
confirms and ratifies its obligations under the Loan Agreement and each of the
other Loan Documents. This Third Amendment may be executed in any number of
counterparts, and by the different parties on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all the
counterparts shall together constitute one instrument. This Third Amendment
shall be governed by the internal laws of The Commonwealth of Massachusetts
(without reference to conflicts of law principles) and the United States
Bankruptcy Code and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The
Borrower acknowledges that the reasonable out-of-pocket expenses of the Agent
and the Lenders incurred in connection with the preparation, execution and
delivery of this Third Amendment shall be "Lender Group Expenses," as such term
is defined in the Loan Agreement.

                                        2

<PAGE>

         4.       Construction.
                  ------------

         The Borrower, by execution hereof, acknowledges and confirms that for
all purposes of the Loan Agreement and the other Loan Documents, the term "Loan
Agreement" shall mean the Loan Agreement as amended by and through the date of
this Third Amendment and as further amended and/or restated from time to time
hereafter.

         IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment to Loan and Security Agreement as a sealed instrument as of the date
first above written.

                                 FACTORY CARD OUTLET OF AMERICA,
                                 LTD.

                                 By:
                                    ----------------------------------
                                 Name:
                                      ----------------------------------
                                 Title:
                                       ----------------------------------

                                 FOOTHILL CAPITAL CORPORATION, for
                                 itself and as Agent for the Lenders

                                 By:
                                    ----------------------------------
                                                           (Title)

                                 PARAGON CAPITAL, LLC, as a Lender

                                 By:
                                    ----------------------------------
                                                           (Title)

                                        3

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