<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                ________________

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                ________________

                        Factory Card & Party Outlet Corp.
             (Exact name of Registrant as specified in its charter)

               DELAWARE                                  36-3652087
  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                    Identification No.)

                                 2727 Diehl Road
                         Naperville, Illinois 60563-2371
          (Address of principal executive offices, including zip code)

   Employment Agreements, Restricted Stock Agreements and Warrant Agreements,
                           dated as of April 8, 2002,
                    of the selling stockholders named herein
                            (Full title of the plan)

                              James D. Constantine
                          Executive Vice President and
                   Chief Financial and Administrative Officer
                        Factory Card & Party Outlet Corp.
                                 2727 Diehl Road
                         Naperville, Illinois 60563-2371
                                 (603) 579-2000
 (Name, address and telephone number, including area code, of agent for service)

                                With Copies To:
                            Neal I. Aizenstein, Esq.
                          Sonnenschein Nath & Rosenthal
                      8000 Sears Tower, 233 S. Wacker Drive
                             Chicago, Illinois 60606
                                 (312) 876-8000

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<TABLE>
<CAPTION>
                                      CALCULATION OF REGISTRATION FEE

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                                                               Proposed          Proposed
                                        Amount to be           Maximum            Maximum           Amount of
         Title of Securities             Registered         Offering Price       Aggregate        Registration
          to be Registered                  (1)              Per Share(2)      Offering Price          Fee
-----------------------------------------------------------------------------------------------------------------
      <S>                               <C>                 <C>                <C>                <C>
     Common Stock, $0.01 par value       77,700/1/            $10.50           $815,850           $75.06
     per share
-----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Pursuant to Rule 416 under the Securities Act of 1933, as amended, this
     Registration Statement also covers such indeterminate number of additional
     shares as may be issued under the agreements listed above as the result of
     any future stock split, stock dividends, merger, reorganization and any
     other dilutive events set forth in such agreements.

(2)  Estimated pursuant to Rule 457(c) and (h) under the Securities Act of 1933,
     as amended, solely for purposes of determining the registration fee and is
     based on the average of the high and low prices of the Common Stock as
     reported by the Nasdaq over the counter bulletin board on August 19, 2002.
     [The date needs to be within 5 business days prior to the filing date.]

___________________

/1/ See the table in the Selling Stockholders section for calculation of the
77,700 shares. Only the shares from the restricted stock grants and exercise of
management warrants for persons with Employment Agreements were included in
order to qualify within the meaning of employee benefit plans (i.e. agreements
awarding stock as compensation for services) although if restricted stock grants
to people other than the ones with the employment agreements were granted
pursuant to restricted stock agreements that recite that they were awarded for
services to the Company, we may be able to deem such agreements to also be
"employee benefit plans" and also include their shares.

<PAGE>

                                     PART I

              INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

This registration statement was prepared in accordance with Form S-8 and Part I
of Form S-3, and is registering 77,700 shares of common stock in the aggregate
which have been issued pursuant to (a) Employment Agreements dated as of April
8, 2002 of Gary W. Rada, James D. Constantine, Timothy F. Gower, William A.
Beyerl, Robert Krentzman, Joseph M. Cabon and Michael Perri, (b) Restricted
Stock Agreements dated as of April 8, 2002 attached as exhibits to the
Employment Agreements of Gary W. Rada, James D. Constantine, Timothy F. Gower,
William A. Beyerl, Robert Krentzman and Michael Perri and (c) Warrant Agreements
dated as of April 8, 2002 attached as exhibits to the Employment Agreements of
Gary W. Rada, James D. Constantine, Joseph M. Cabon and Michael Perri (the
"Warrant Agreements," together with the Employment Agreements and the Restricted
Agreements referred to as the "Agreements"). In accordance with the Note to Part
I of Form S-8, the information specified by Part I of Form S-8 has been omitted
from this registration statement. Pursuant to General Instruction C to Form S-8,
this prospectus may be used for reofferings and resales of shares of our common
stock acquired by employees, former employees and some transferees of these
employees.

<PAGE>

                               REOFFER PROSPECTUS

                        FACTORY CARD & PARTY OUTLET CORP.

                          77,700 SHARES OF COMMON STOCK

                         Issued or Issuable Pursuant to

Employment Agreements, Restricted Stock Agreements and Warrant Agreements, each
                         dated as of April 8, 2002, of

Gary W. Rada, James D. Constantine, Timothy F. Gower, William A. Beyerl, Robert
                  Krentzman, Joseph M. Cabon and Michael Perri

         This prospectus relates to the reoffer and resale of shares of our
common stock acquired pursuant to the Agreements which may be sold from time to
time by certain stockholders of Factory Card & Party Outlet Corp. (the
"Company") described under the caption "Selling Stockholders" in this
prospectus. The selling stockholders are current or former employees, officers
and directors of the Company who acquired the shares of common stock as
compensation for services performed, and to be performed, for the Company.

         The prices at which these selling stockholders may sell their shares
will be determined by the prevailing market price for our common stock or in
negotiated transactions. We will not receive proceeds from any of these sales.
We are paying the expenses incurred in registering the shares, but all selling
and other expenses incurred by each of the Selling Stockholders will be borne by
that Selling Stockholder.

         The shares of Common Stock offered pursuant to this prospectus are
"restricted securities" under the Securities Act of 1933, as amended (the
"Securities Act") before their sale under this prospectus. This prospectus has
been prepared for the purpose of registering the shares under the Securities Act
to allow for future sales by the Selling Stockholders, on a continuous or
delayed basis, to the public without restriction, subject to certain vesting
restrictions with respect to shares issued as restricted stock. See Selling
Stockholders and Item 4 of Part II of the registration statement. Each Selling
Stockholder may be deemed to be an "underwriter" within the meaning of the
Securities Act. Any commissions received by a broker or dealer in connection
with resales of the shares may be deemed to be underwriting commissions or
discounts under the Securities Act.

         Our common stock is currently quoted on the Nasdaq over the counter
bulletin board under the symbol "FCPO." On August 16, 2002, the closing price of
a share of our common stock on the Nasdaq over the counter bulletin board was
$9.25.

         You should consider carefully the risk factors beginning on page 3 of
this prospectus before purchasing any of the common stock offered.

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                 The date of this prospectus is August 19, 2002.

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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                          <C>
Where You Can Find More Information .......................................................     1

Incorporation of Documents by Reference ...................................................     1

The Company ...............................................................................     2

Risk Factors ..............................................................................     2

Special Note Regarding Forward-Looking Statements .........................................     8

Use of Proceeds ...........................................................................     9

Selling Stockholders ......................................................................     9

Plan of Distribution ......................................................................    10

Legal Matters .............................................................................    11

Experts ...................................................................................    11

Disclosure of Commission Position on Indemnification for Securities Act Liabilities .......    12
</TABLE>

         You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
any information different from that contained in this prospectus. Neither the
delivery of this prospectus nor the sale of common stock means that the
information contained in this prospectus is correct after the date of this
prospectus. The selling stockholders are offering to sell and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. This prospectus is not an offer to sell or a solicitation of an offer
to buy shares of our common stock in any circumstances under which the offer or
solicitation is unlawful.

         In this prospectus, the "Company," "we," "us" and "our" refer to
Factory Card & Party Outlet Corp. and our predecessors and subsidiaries, unless
the context specifically indicates otherwise.

<PAGE>


                       WHERE YOU CAN FIND MORE INFORMATION

         We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). These reports, proxy statements and other
information can be inspected and copied at the Public Reference Room of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago,
IL 60661-2511 and 233 Broadway, New York, NY 10279, at prescribed rates. The
Commission maintains a website that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission. The address of this website is
"http://www.sec.gov." In addition, you may obtain information from the Public
Reference Room by calling the Commission at 1-800-Commission-0330.

         We intend to furnish our stockholders with annual reports containing
additional financial statements and a report thereon by independent certified
public accountants.

         We have filed with the Commission a registration statement on Form S-8
with respect to the securities offered by this prospectus. This prospectus,
which constitutes part of the registration statement, does not contain all of
the information set forth in the registration statement and the attached
exhibits and schedules. You may refer to the registration statement, its
exhibits and schedules for further information with respect to the Company and
the securities offered by this prospectus. You may obtain copies of the
registration statement, its exhibits and schedule in the locations described
above.

                     INCORPORATION OF DOCUMENTS BY REFERENCE

         The Commission allows us to "incorporate by reference" into this
prospectus the information contained in the documents we file with them, which
means that we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be
part of this prospectus, and later information that we file with the Commission
will update and supersede this information. We are incorporating by reference
the following documents: (i) our Annual Report on Form 10-K for the fiscal year
ended February 2, 2002 filed with the Commission on April 9, 2002; (ii) our
Quarterly Report on Form 10-Q for the fiscal quarter ended May 4, 2002, filed
with the Commission on June 18, 2002; (iii) our Current Reports on Form 8-K
filed with the Commission on April 23, 2002 and June 13, 2002; and (iv) the
description of our common stock contained in our Registration Statement on Form
8-A filed with the Commission on June 13, 2002.

         In addition, all documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.

         A copy of any document incorporated by reference in this registration
statement of which this prospectus forms a part but which is not delivered with
this prospectus will be provided by us without charge to any person to whom this
prospectus has been delivered upon the oral or written request of that person.
Requests should be directed to the attention of James D. Constantine, Executive
Vice President and Chief

                                        1

<PAGE>

Financial and Administrative Officer, Factory Card & Party Outlet Corp., 2727
Diehl Road, Naperville, Illinois 60563-2371. Our telephone number at that
location is (630) 579-2000.


                                   THE COMPANY

         We are a chain of company-owned stores offering an extensive selection
of greeting cards, giftwrap, balloons, everyday and seasonal party supplies and
other special occasion merchandise at everyday value prices. As of June 8, 2002,
we operated 172 stores in 20 states. Based on the published number of stores of
our competitors as compiled by us from various business publications and other
publicly available information, we believe we are one of the largest chains of
company-owned stores in the greeting card, party supply and special occasion
industry. Our stores provide customers with a value-oriented, "one-stop"
shopping destination for greeting card, party supply and special occasion
merchandise for all major holidays and celebratory events, including birthdays,
graduations, weddings, baby showers and other family, religious and special
occasions. Our stores average approximately 12,000 square feet, with
approximately 80% of the space devoted to selling space, and are designed to
provide ease of shopping within an attractive, spacious and festive environment.

         Our principal executive offices are located at 2727 Diehl Road,
Naperville, Illinois 60563-2371. Our telephone number at that location is (630)
579-2000.

                                  RISK FACTORS

         The shares of our common stock being offered for resale by the selling
stockholders involve risk. You should carefully consider the risks described
below and the other information in this prospectus before deciding to invest in
the shares of common stock offered pursuant to this prospectus.

We recently emerged from a Chapter 11 plan of reorganization, have a history of
net losses and may not be profitable.

         On March 23, 1999, we filed voluntary petitions for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. The Bankruptcy Court confirmed an
amended joint plan of reorganization on February 5, 2002, as modified on March
20, 2002, and we emerged from our bankruptcy proceedings effective April 9,
2002. We incurred net losses of approximately $5.5 million, $8.7 million and
$28.9 million during the three fiscal years ended February 2, 2002, February 3,
2001 and January 29, 2000, respectively. Our equity ownership, board of
directors and a portion of our senior management was replaced in connection with
our reorganization. While our current senior management has concentrated on
refining our business strategy, there can be no assurance that we will attain
profitability or achieve growth in our operating performance. If our financial
performance does not exceed our historical results, the price of our common
stock could decline and your investment could be materially adversely affected.

Intense competition in our industry could prevent us from increasing or
sustaining our revenues and prevent us from achieving or sustaining
profitability.

         The greeting card, party supply and special occasion retailing business
is highly competitive. Increased competition by existing or future competitors
may reduce our sales and cause us to incur a loss. As a result of competition
from other specialty party supplies and paper goods retailers, we may need to
incur additional marketing and promotional expenses to achieve sales growth in
our existing stores. Our stores compete with a variety of smaller and larger
retailers, including:

                                       2

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     .   specialty party supplies and paper goods retailers, including other
         party superstores;
     .   card shops and designated departments in mass merchandisers;
     .   warehouse/merchandise clubs and discount general merchandise chains;
     .   toy stores;
     .   drug stores;
     .   supermarkets;
     .   department stores of local, regional and national chains; and
     .   Internet retailers.

     Many of our competitors have substantially greater financial and personnel
resources than we do. Some of our competitors have been, or may be, funded by
certain members of the vendor community. In addition, a trend toward discounting
the cost of party supplies and greeting cards is developing and we may encounter
additional competition from new entrants in the future in our existing markets.
Our competitors may be able to respond more quickly or adjust prices more
effectively to take advantage of new opportunities or customer requirements.
Increased competition could result in pricing pressures, reduced sales, reduced
margins or failure to achieve or maintain widespread market acceptance, any of
which could prevent us from increasing or sustaining our revenues and achieving
or sustaining profitability.

Customers' requirements are likely to evolve, and we will not retain customers
or attract new customers if we do not anticipate and meet specific customer
requirements and changes in merchandising trends.

     Our core operations rely on a stable customer base. Failure to maintain
existing customers and obtain new customers will adversely affect our market
position.

     Our success depends, in part, on our ability to anticipate and respond to
changing merchandise trends and consumer demands in a timely manner.
Accordingly, any delay or failure by us in identifying and responding to
emerging trends could adversely affect consumer acceptance of the merchandise in
our stores. If we are required to sell a significant amount of unsold inventory
at below average mark-ups over our cost or below cost, such action could have an
adverse effect on our financial condition and results of operations.

     Our success depends in part on our ability to anticipate and respond in a
timely manner to changing merchandise trends and consumer demands. We make
merchandising decisions well in advance of the seasons during which we will sell
the merchandise. As a result, if we fail to identify and respond quickly to
emerging trends, consumer acceptance of the merchandise in our stores could
diminish and we may experience a reduction in revenues. Significantly greater or
less-than-projected product demand could lead to one or more of the following:

     .  lost sales due to insufficient inventory;
     .  higher carrying costs associated with slower turning inventory; and
     .  reduced or eliminated margins due to mark downs on excess inventory.

     If consumer demand for single-use, disposable party goods were to diminish,
the party supplies and paper goods industry and our revenues would be negatively
affected. For example, if cost increases in raw materials such as paper,
plastic, cardboard or petroleum were to cause our prices to increase
significantly, consumers might decide to forgo the convenience associated with
single-use, disposable products. Similarly, changes in consumer preferences away
from disposable products and in favor of reusable products for environmental or
other reasons could reduce the demand for our products.

                                       3

<PAGE>

Our business depends on continued good relations with our suppliers.

         Our failure to maintain good relationships with our principal suppliers
or the loss of our principal suppliers would hurt our business. We purchase our
inventory from more than 300 vendors world-wide, with the largest supplier
representing approximately 11% and the ten largest suppliers representing
approximately 41% of our aggregate purchases in fiscal year 2001. Many of our
principal suppliers currently provide us with incentives like volume purchasing
allowances and trade discounts. If our suppliers were to reduce or discontinue
these incentives, prices from our suppliers would increase and our profitability
would be reduced. As is customary in our industry, we generally do not have
long-term contracts with any suppliers and any supplier could discontinue
selling to us at any time; however, pursuant to our bankruptcy plan of
reorganization, we have entered into agreements with certain of our trade
vendors to provide us with competitive trade terms, including, extended credit
limits, extended payment terms and seasonal advances. While we are not aware of
any reasons to question the operational or financial ability of such vendors
either to ship or provide such terms, the inability of any of such vendors to do
so could adversely affect our competitive financial performance.

We may need to raise additional capital to fund our operations and support our
long-term growth strategy.

         Our ability to make scheduled payments of principal of, or to pay the
interest on, or to refinance, indebtedness or to fund planned capital
expenditures, will depend upon our future performance, which, in turn, is
subject to general economic, financial, competitive and other factors that are
beyond our control. Based upon our current level of operations and anticipated
growth, we believe that future cash flow from operations, together with
available borrowings under our new financing facility, will be adequate to meet
our anticipated requirements for capital expenditures, working capital, interest
payments and scheduled principal payments. There can be no assurance that our
business will continue to generate sufficient cash flow from operations in the
future to service our debt and make necessary capital expenditures after
satisfying certain liabilities arising in the ordinary course of business. If
unable to do so, we may be required to refinance all or a portion of our
existing debt, sell assets or obtain additional financing. There can be no
assurance that any refinancing would be available or available on favorable
terms or that any sales of assets or additional financing could be obtained or
obtained on favorable terms. Financial difficulties of our competitors and our
recent losses may affect our ability to obtain financing. If adequate funds are
not available or are not available on acceptable terms, we may be unable to
develop or enhance our products and services, implement our long-term growth
strategy, take advantage of future opportunities or respond in a timely manner
to competitive pressures.

We are substantially leveraged and our new financing facility contains covenants
that could adversely affect our business.

         Our indebtedness restricts our ability to obtain additional financing
in the future and, because we may be more leveraged than some of our
competitors, may place us at a competitive disadvantage. Also, the new financing
facility that we entered into as part of our emergence from bankruptcy contains
covenants that impose operating and financial restrictions on us. These
covenants could adversely affect our ability to finance future operations,
potential acquisitions or capital needs or to engage in other business
activities that may be in our interest.

The seasonal nature of our business could adversely impact our operations.

         Our business is highly seasonal, with operating results varying from
quarter to quarter. We have historically experienced higher sales during the
second and fourth quarters primarily due to increased demand by customers for
our products attributable to special occasions and holiday seasons during these

                                       4

<PAGE>

periods. Lower sales than expected by us during this period, a lack of
availability of product, or a general economic downturn in sales could have a
material adverse effect on our business, financial condition and results of
operations for the full year. In addition, the timing of new store openings,
related pre-opening expenses and the amount of revenue contributed by new and
existing stores may cause our quarterly results of operations to fluctuate. Any
or all of these factors could also cause the price of our common stock to
decline.

Disruptions in supply of our inventory caused by labor issues involving
longshoremen at ports on the West Coast could adversely impact our operations.

         The deadline to agree on a new three-year contact between port operator
Pacific Maritime Association and the International Longshore and Warehouse Union
passed in early July 2002 without resolution. Any strike or work slowdown
involving longshoremen at the ports on the West Coast could affect our ability
to stock our stores and therefore adversely impact our operations.

We may not be able to profitably grow our business.

         In order to profitably grow our business, we need to increase sales in
our existing markets and open stores in new markets. Opening additional stores
in existing markets could reduce sales from our stores located in or near those
markets and stores opened in new markets may not be profitable. In addition, the
opening of additional stores could put additional strain on our existing store
base to leverage the new stores' fixed cost structure.

Higher administrative expenses could adversely affect our business and
operations.

         Higher selling, general and administrative expenses occasioned by the
potential need for additional advertising, marketing, administrative or
management information systems expenditures could negatively impact our business
and operations.

We may not be able to effectively execute our long-term growth strategy.

         Our long-term growth strategy requires effective planning and
management. Once a new geographic market is identified, we must obtain suitable
store sites on acceptable terms. Also, the competitive and merchandising
challenges we face in new geographic markets may be different from the
challenges we face in our existing geographic markets. We may have to adapt to
regional tastes and customs and compete against established and familiar local
businesses with innovative or unique techniques for marketing party supplies and
paper goods. Entering new markets may also place significant demands on our
management, financial controls, operations and information systems. This may
cause us to incur higher costs relating to marketing and operations. Expansion
will require an increase in our personnel, particularly store managers and sales
associates, to operate our new stores.

Adverse publicity could adversely affect our business.

         We generally operate in medium sized towns and suburban neighborhoods.
Adverse publicity or news coverage relating to us could negatively impact our
efforts to establish and promote name recognition and a positive image.

                                       5

<PAGE>

If we do not comply with the numerous laws and regulations that govern our
business, our business could be harmed.

         Each of our stores must comply with regulations adopted by Federal
agencies and with licensing and other regulations enforced by state and local
health, sanitation, safety, fire and other departments. More stringent and
varied requirements of local governmental bodies with respect to zoning, land
use and environmental factors, and difficulties or failures in obtaining the
required licenses or approvals, can delay and sometimes prevent, the opening of
a new store. In addition, we must comply with the Fair Labor Standards Act and
various state laws governing various matters such as minimum wage, overtime and
other working conditions. We also must comply with the provisions of the
Americans with Disabilities Act of 1990, as amended, which requires generally
that employers provide reasonable accommodation for employees with disabilities
and that stores be accessible to customers with disabilities. We believe that
the procedures currently in effect at our stores are in general compliance with
such laws and regulations. However, future violations of such laws, the
enactment of stricter laws or regulations or the implementation of more
aggressive enforcement policies could adversely affect our operations or
financial condition.

If our future results do not meet or exceed the projections and assumptions we
made for "Fresh Start Accounting" reporting purposes, we may have to write down
the values of some of our assets.

         On April 9, 2002, as a result of our emergence from bankruptcy, we
adopted "fresh start accounting" principles, which require us to restate all
assets and liabilities to their fair values and certain valuation studies. We
estimated that the value of our business for purposes of our plan of
reorganization was approximately $42.5 million based upon certain projections
and assumptions as well as our best estimates of expected future market
conditions. If our actual performance differs from our projections, the value of
your investment could decline.

If we are unable to hire additional qualified personnel or retain existing
personnel, we may not be able to operate our business successfully.

         Our success depends upon the efforts of our senior management and other
key personnel. The loss of the services of any member of our management team or
a key employee, or a failure to timely retain a replacement officer could have a
material adverse effect on us. Our future success will also depend in part on
attracting and retaining quality employees. Many of our employees are in entry
level or part-time positions with historically high rates of turnover. Our
ability to meet our labor needs while controlling costs is subject to external
factors, such as unemployment levels, minimum wage legislation and changing
demographics. There can be no assurance that we will be successful in retaining
our existing key personnel or in attracting and retaining additional employees
we may require. Any difficulties in obtaining, retaining and training qualified
personnel could have a material adverse effect on us.

Interruption or obsolescence of our management information systems could have a
negative effect on our competitive ability and our business generally.

         We believe that our management information systems are an important
factor in supporting our business and enhancing our competitive position in the
industry. Over the past three years, we have invested significant resources in
systems and infrastructure to support our business and make it more efficient.
We use a management information and control system, which is based on the JDA
Merchandise Management System software package ("JDA") and supports the complete
range of retail cycle functions in the areas of finance, merchandising and
distribution. All stores are linked to our headquarters through personal
computers, which interface with an IBM AS/400 and provide auto-replenishment of
inventory and the ability to enter payroll information and send and receive
electronic mail. These personal computers are also tied into our point-of-sale
system ("POS system"). The POS system provides sales information to our stores
and

                                       6

<PAGE>

central office and is used to enhance merchandise planning and buying programs.
Any obsolescence or continuing interruption in the functioning of these systems
could have a negative effect on our ability to compete effectively in the
industry and on our business.

Certain provisions of our charter may prevent or delay a change of control of
the Company.

         Our certificate of incorporation provides for a classified Board of
Directors. Any effort to obtain control of our Board of Directors by causing the
election of a majority of the board of directors may require more time than
would be required without a staggered election structure. Our certificate of
incorporation also imposes restrictions on the direct or indirect
transferability of the Common Stock for a period of two (2) years following
April 9, 2002, subject to certain exceptions, such that no person or certain
groups of persons (x) may acquire or accumulate five percent (5%) or more (as
determined under tax law principles governing the application of Section 382 of
the Internal Revenue Code of 1986, as amended) of the Common Stock or (y) who,
upon implementation of the Plan, owns 5% or more of the Common Stock, may
acquire additional Common Stock. These provisions would have the effect of
preventing a change of control for the duration of such restrictions.

Certain provisions of our bankruptcy plan of reorganization may have significant
dilutive effects on holders of common stock generally.

         In connection with our bankruptcy plan of reorganization, we issued
trade conversion notes in an aggregate amount equal to $3.13 million to certain
of our trade creditors which will be payable on the fourth anniversary of April
9, 2002. The trade conversion notes are convertible at the option of the holders
into an aggregate of up to 29.35% of our common stock outstanding (including for
such calculation only common stock, warrants and options issued pursuant to our
bankruptcy plan and assuming the conversion of all such trade conversion notes)
at any time between April 9, 2005 and April 9, 2006, subject to adjustments to
reflect any prepayments made by us. Although we currently intend to and
anticipate paying such notes, failure to meet our projected financial
performance could prevent us from making such payments in which event,
then-existing holders of Common Stock may be significantly diluted by a
conversion of the trade conversion notes.

         Pursuant to our bankruptcy plan, we also issued warrants to members of
our management exercisable for common stock. The holders of such warrants will
be entitled to receive additional shares of Common Stock on an annual basis,
upon the issuance of common stock upon the exercise of certain warrants issued
pursuant to the bankruptcy plan, the conversion of the trade conversion notes or
options issued under our 2002 Stock Option Plan for a four year period beginning
April 9, 2002. For a general description of the calculation of the number of
additional shares which may be issued to such warrant holders, see Item 4 of
Part II of the registration statement. Your holdings of Common Stock may be
further diluted in the event these warrant holders are issued additional shares
of Common Stock.

         Pursuant to our bankruptcy plan of reorganization, we also issued four
series of warrants to holders of our old pre-bankruptcy common stock to purchase
up to approximately 10% (subject to certain dilution events) of the common stock
issued under the bankruptcy plan (assuming exercise of all such warrants). These
four series of warrants will be exercisable for terms ranging from four to eight
years. We currently have stock option plans pursuant to which we may issue
options to our employees and directors exercisable for up to approximately
317,000 shares of our common stock. As of June 8, 2002, there were 1,512,459
shares of common stock issued and outstanding. The issuance of shares of common
stock pursuant to the exercise of the four series of warrants and the stock
options, conversion of the trade conversion notes and the antidilution rights
protection of the warrants issued to management could significantly dilute the
holders generally of common stock currently issued and outstanding.

                                        7

<PAGE>

Our stock price may be volatile, and you may not be able to resell your shares
at or above the price you paid, or at all.

         Since the effective date of our bankruptcy restructuring, our common
stock has had limited trading activity on the Nasdaq over the counter bulletin
board. We cannot predict the extent to which investor interest in our stock will
lead to the development of a more active trading market, how liquid that market
might become or whether it will be sustained. The trading price of our common
stock could be subject to wide fluctuations due to the factors discussed in this
risk factors section and elsewhere in this prospectus. In addition, the stock
markets in general have experienced extreme price and volume fluctuations. These
broad market and industry factors may decrease the market price of our common
stock, regardless of our actual operating performance.

We do not anticipate paying dividends.

         We have not paid dividends on our common stock and we do not anticipate
paying dividends in the foreseeable future. We intend to retain future earnings,
if any, to finance the expansion of our operations and for general corporate
purposes, including future acquisitions. In addition, our financing facility
prohibits us from paying dividends on our capital stock.

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This prospectus and the documents to which we refer you and incorporate
herein by reference contain forward-looking statements regarding our business
and prospects, such as projections of future performance, statements of
management's plans and objectives, forecasts of market trends, and other matters
that are forward-looking statements within the meaning of Sections 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of 1934. In
addition, from time to time, we or our representatives may make forward-looking
statements orally or in writing. We base these forward-looking statements on our
expectations and projections about future events, which we derive from the
information currently available to us.

         Statements containing the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimates," "projects,"
"believes," "expects," "anticipates," "intends," "target," "goal," "plans,"
"objective," "should" or similar expressions identify forward-looking
statements, which may appear in this prospectus and in documents, reports,
filings with the Commission, news releases, written or oral presentations made
by our officers or other representatives to analysts, stockholders, investors,
news organizations and others, and discussions with our management and other
company representatives. For these statements, we claim the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.

         Our future results, including results related to forward-looking
statements, involve a number of risks and uncertainties. No assurance can be
given that the results reflected in any forward-looking statements will be
achieved. Any forward-looking statements made by us or on our behalf speak only
as of the date on which this statement is made. Our forward-looking statements
are based upon assumptions that are sometimes based upon estimates, data,
communications and other information from suppliers, government agencies and
other sources that may be subject to revision. We do not undertake any
obligation to update or keep current either any forward-looking statement to
reflect events or circumstances arising after the date of such statement, or the
important factors that could cause our future results to differ materially from
historical results or trends, results anticipated or planned by us, or which are
reflected from time to time in any forward-looking statement which may be made
by us or on our behalf.

                                        8

<PAGE>

         In addition to other matters identified or described by us from time to
time in filings with the Commission, there are several important factors that
could cause our future results to differ materially from historical results or
trends, results anticipated or planned by us, or results that are reflected from
time to time in any forward-looking statement that may be made by us or on our
behalf. Some of these important factors we listed under the heading "Risk
Factors".

                                 USE OF PROCEEDS

         We will not receive any proceeds from the sale of shares that may be
sold pursuant to this prospectus for the respective accounts of the selling
stockholders. All of such proceeds will be received by the selling stockholders.
For more information about our selling stockholders, see "Selling Stockholders"
and "Plan of Distribution."

                              SELLING STOCKHOLDERS

         The 77,700 shares of our common stock to which this prospectus relates
are being registered for reoffers and resales by our present employees, officers
and directors named below, who acquired the shares of Common Stock pursuant to
our "employee benefit plan" as that term is defined in Rule 405 of Regulation C
under the Securities Act. The selling stockholders may resell all, a portion or
none of such shares of Common Stock from time to time.

         The table below sets forth with respect to the selling stockholders,
based upon information available to us as of August 8, 2002, the number of
shares of our common stock owned (including, where applicable, the common stock
covered by this prospectus, common stock not covered by this prospectus and
options to purchase common stock), the number of shares of Common Stock
registered by this prospectus and the number and percentage of outstanding
shares of common stock that will be owned after the sale of the registered
common stock assuming the sale of all of the registered common stock. The
inclusion in the table of the individuals named therein shall not be deemed to
be an admission that any such individuals are "affiliates" of the Company.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Name of Selling    Title                                  Number of        Number of       Number of        Percent of
Stockholder                                               Shares           Shares That     Shares to Be     Common Stock
                                                          Beneficially     May Be Offered  Beneficially     Owned if All
                                                          Owned (1) (2)    Hereby (2)      Owned if All     Shares
                                                                                           Shares Offered   Offered
                                                                                           Hereby Are Sold  Hereby Are
                                                                                                            Sold (3)
---------------------------------------------------------------------------------------------------------------------------
<S>                <C>                                    <C>              <C>             <C>              <C>
Gary W. Rada       President, Chief Operating Officer     45,000           20,000 (4)      25,000           1.7%
                   and Director
---------------------------------------------------------------------------------------------------------------------------
James D.           Executive Vice President, Chief        46,000           26,000 (4)      20,000           1.3%
Constantine        Financial and Administrative Officer
                   and Secretary
---------------------------------------------------------------------------------------------------------------------------
Timothy F. Gower   Senior Vice President of Stores        29,000           14,000          15,000           1.0%
---------------------------------------------------------------------------------------------------------------------------
Robert Krentzman   Vice President of Information          12,000            6,000           6,000           *
                   Technologies
---------------------------------------------------------------------------------------------------------------------------
Joseph M. Cabon    Former Vice President of Distribution     200              200 (4)           0           *
---------------------------------------------------------------------------------------------------------------------------
William A. Beyerl  Vice President of Human Resources      12,000            6,000           6,000           *
---------------------------------------------------------------------------------------------------------------------------
Michael Perri      Vice President of Merchandising        10,500            5,500 (4)       5,000           *
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Less than 1%

                                        9

<PAGE>

(1)  As of August 16, 2002, the number of shares owned by the listed individuals
includes options to purchase shares of Common Stock under our employee benefit
plans, whether or not exercisable as of, or within sixty days of, the date of
this prospectus as well as the shares of common stock offered pursuant to this
prospectus. Such options become exercisable in four equal annual installments
beginning on the first anniversary of April 23, 2002.

(2)  The number of shares owned by the listed individuals other than Joseph M
Cabon includes restricted stock which is scheduled to vest ratably over a four
year period commencing on April 9, 2002, subject to acceleration or forfeiture
under certain circumstances.

(3)  Percentage is based on 1,512,448 shares of Common Stock outstanding as of
August 16, 2002 and is calculated in accordance with Rule 13d-3(d) under the
Exchange Act.

(4)  The shares of common stock offered pursuant to this prospectus for the
listed individual also include such indeterminate number of additional shares as
may be issued as the result of certain dilutive events as set forth in certain
Rights Certificates issued in connection with the Warrant Agreement relating to
certain of the listed shares.

                              PLAN OF DISTRIBUTION

     We are registering the resale of 77,700 shares of our common stock on
behalf of certain selling stockholders. We issued all of the shares in
connection with the Agreements. We will not receive any proceeds from this
offering.

     The selling stockholders or their pledgees, donees, transferees, assigns or
other successors-in-interest selling shares received from a named selling
stockholder as a gift, partnership distribution or other non-sale-related
transfer after the date of this prospectus may sell any or all of their shares
from time to time on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. All of such persons are "selling
stockholders" as that term is used in this prospectus. These sales may be at
fixed or negotiated prices. The selling stockholders may effect such
transactions by selling the shares in one or more, or a combination, of the
following:

     .  a block trade in which the broker-dealer so engaged will attempt to sell
  the shares as agent but may position and resell a portion of the block as
  principal to facilitate the transaction;
     .  purchases by a broker-dealer as principal and resale by such
  broker-dealer for its account pursuant to this prospectus;
     .  an exchange distribution in accordance with the rules of the applicable
  exchange;
     .  ordinary brokerage transactions and transactions in which the broker
  solicits purchasers;
     .  privately negotiated transactions;
     .  broker-dealers may agree with the selling stockholder to sell a
  specified number of the shares at a stipulated price per share; and
     .  any other method permitted under applicable law.

     In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus.

     To the extent required, this prospectus may be amended or supplemented from
time to time in the manner discussed below to describe a specific plan of
distribution. In effecting sales, broker-dealers engaged by the selling
stockholders may arrange for other broker-dealers to participate in the resales.
The selling

                                       10

<PAGE>

stockholders may also enter into the hedging transactions similar to the
following with broker-dealers in connection with distributions of the shares:

        .  short sales against the box in the course of hedging the positions
    they assume with selling stockholders;
        .  sell shares short and redeliver the shares to close out such short
    positions;
        .  options, puts, calls or other transactions with broker-dealers which
    require the delivery to the broker-dealer of the shares, and the
    broker-dealer then reselling or otherwise transferring such shares pursuant
    to this prospectus;
        .  loan or pledge the shares to a broker-dealer; and
        .  the broker-dealer may sell the shares so loaned, or upon a default
    the broker-dealer may sell the pledged shares pursuant to this prospectus.

        Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
selling stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company is
not aware of any of the selling stockholders having entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities. There is no underwriter or coordinating broker
acting in connection with the proposed sale of shares by selling stockholders.

         The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.

         Because selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling stockholders
will be subject to the prospectus delivery requirements of the Securities Act.
We will make copies of this prospectus available to the selling stockholders and
have informed them of the need for delivery of copies of this prospectus to
purchasers at or prior to the time of any sale of the shares.

         We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares.

                                  LEGAL MATTERS

         The validity of the shares of Common Stock which are offered under the
Registration Statement of which this prospectus forms a part will be passed upon
by Sonnenschein, Nath & Rosenthal, Chicago, Illinois.

                                     EXPERTS

         The consolidated financial statements and schedule of the Company as of
February 2, 2002 and February 1, 2001 and for the fiscal years ended February 2,
2002, February 1, 2001 and January 29, 2000, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent accountants, incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing.

                                       11

<PAGE>


              DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
                         FOR SECURITIES ACT LIABILITIES

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.

                                       12

<PAGE>

                                     PART II
                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.

         The following documents filed by Factory Card & Party Outlet Corp., a
Delaware corporation (the "Registrant") with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference in this
Registration Statement on Form S-8 (the "Registration Statement"):

         (a) The Registrant's Annual Report on Form 10-K under the Exchange Act,
for the fiscal year ended February 2, 2002, filed with the Commission on April
9, 2002;

         (b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 4, 2002, filed with the Commission on June 18, 2002;

         (c) The Registrant's Current Reports on Form 8-K filed with the
Commission on April 23, 2002 and June 13, 2002; and

         (d) The description of the Common Stock, par value $0.01 per share,
contained in the Registrant's Registration Statement on Form 8-A filed with the
Commission on June 13, 2002 pursuant to the Securities Act, including any
amendments or reports for the purpose of updating such description.

         All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, after the date hereof and prior to the
filing of a post-effective amendment which indicates that the securities offered
hereby have been sold or which deregisters the securities covered hereby then
remaining unsold shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.

Item 4.  Description of Securities.

         See the Registrant's Registration Statement on Form 8-A filed with the
Commission on June 13, 2002 pursuant to the Securities Act for a description of
the Common Stock, par value $0.01 per share.

         Of the 77,700 shares of common stock registered pursuant to this
registration statement, 65,000 of such shares were granted as restricted stock
to the selling stockholders (other than Joseph M. Cabon) pursuant to Employment
Agreements and Restricted Stock Agreements which restricted shares are scheduled
to vest ratably over a four year period commencing on April 9, 2002 subject to
acceleration under certain circumstances set forth in such Agreements (including
in the event of certain changes in control of the Company or a termination of
the applicable selling stockholder's employment without "cause" or for "good
reason"). Such restricted shares are also subject to forfeiture to the extent
they have not vested in the event of a termination of the applicable selling
stockholder's employment for "cause" subject to the terms and conditions of the
applicable Agreements.

         Of the 77,700 shares of common stock registered pursuant to this
registration statement, 12,700 of such shares were granted pursuant to the
exercise of Warrant Agreements of Gary W. Rada, James D. Constantine, Joseph M.
Cabon and Michael Perri. Rights Certificates (which are non-transferable) were
issued to Messrs. Rada, Constantine, Cabon and Perri in connection with the
exercise of the Warrant Agreements which provide for the issuance of additional
shares of common stock in the event certain dilutive events should occur during
the four year period beginning April 9, 2002 through April 8, 2006. The Rights
Certificates are exercisable to the extent the Company has made issuances
(collectively, the "Additional Shares") of (a) Common Stock upon the exercise of
certain warrants or the conversion of certain trade

                                      II-1

<PAGE>

conversion notes or (b) options under the Company's 2002 Stock Option Plan. The
Rights Certificates are exercisable for the number of shares of Common Stock of
the Company derived by: (x) multiplying the number of shares of Common Stock
issued to the applicable warrant holder upon exercise of his Warrant Agreement
by (y) a number equal to the (i) the number of Additional Shares issued during
the applicable period of the applicable year, divided by (ii) 1,500,000 shares
of Common Stock (subject to certain adjustments). Each of Messrs. Rada,
Constantine, Cabon and Perri were issued five Rights Certificates which are
exercisable during the following periods: (1) the first is exercisable from
December 31, 2002 to March 31, 2003; (2) the second is exercisable from December
31, 2003 to March 31, 2004; (3) the third is exercisable from December 31, 2004
to March 31, 2005; (4) the fourth is exercisable from December 31, 2005 to March
31, 2006; and (5) the fifth is exercisable from December 31, 2006 to March 31,
2007. No additional consideration beyond the initial warrant exercise price is
required as a result of any exercise of any of the Rights Certificates. The
terms and conditions are set forth in greater detail in the Rights Certificates.

Item 5.  Interest of Named Experts and Counsel.

         None.

Item 6.  Indemnification of Directors and Officers.

         Subsection (a) of Section 145 of the General Corporation Law of
Delaware (the "DGCL") empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.

         Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.

         Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) or in the defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith; that indemnification or
advancement of expenses provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of a
director, officer, employee or agent of the

                                      II-2

<PAGE>

corporation against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.

         Reference is also made to Section 102(b)(7) of the DGCL, which enables
a corporation in its certificate of incorporation to eliminate or limit the
personal liability of a director for monetary damages for violations of a
director's fiduciary duty, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (providing for
liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from which the director
derived an improper personal benefit.

         The Registrant's certificate of incorporation contains certain
provisions that eliminate a director's liability for monetary damages for a
breach of fiduciary duty, except in certain circumstances involving certain
wrongful acts. These acts include, but are not limited to, the breach of a
director's duty of loyalty or acts or omissions that involve intentional
misconduct or a knowing violation of law.

         The certificate of incorporation also contains provisions indemnifying
the directors and officers of the Registrant to the fullest extent permitted by
the Delaware General Corporation Law. The Registrant's by-laws require that the
Registrant advance the expenses of an indemnified person defending a legal
proceeding after it receives an undertaking from the person to repay such
advance if a court ultimately determines that he or she is not entitled to
indemnification. The Registrant's by-laws also require the Registrant to pay any
expenses of an indemnified person in connection with such person enforcing their
indemnification rights. The Registrant may also maintain a directors and
officers liability insurance policy that provides for indemnification of its
directors and officers against certain liabilities incurred in their capacities
as such.

Item 7.  Exemption from Registration Claimed.

         The shares of Common Stock to be offered and sold under the reoffer
prospectus were initially issued by the Registrant in a transaction deemed
exempt from registration under the Securities Act in reliance on the exemption
from the registration requirements of the Securities Act contained in Section
4(2) thereof covering transactions by an issuer not involving any public
offering.

Item 8.  Exhibits.

Exhibit
 Number                                Description
 ------                                -----------
   3.1     Amended and Restated Certificate of Incorporation of the Registrant
           (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K
           filed April 23, 2002, and incorporated herein by reference).

   3.2     Amended and Restated By-Laws of the Registrant (filed as Exhibit 3.2
           to the Registrant's Current Report on Form 8-K filed April 23, 2002,
           and incorporated herein by reference).

   4.1     Form of New Management Warrant, dated April 9, 2002 (filed as Exhibit
           4.2 to the Registrant's Current Report on Form 8-K filed April 23,
           2002, and incorporated herein by reference).

                                      II-3

<PAGE>

 4.2     Schedule of New Management Warrants (filed as Exhibit 4.3 to the
         Registrant's Current Report on Form 8-K filed April 23, 2002, and
         incorporated herein by reference).

 5.1*    Opinion of Sonnenschein Nath & Rosenthal

 23.1*   Consent of Sonnenschein Nath & Rosenthal (included in opinion filed as
         Exhibit 5.1)

 23.2*   Consent of KPMG LLP, Independent Auditors

 24.1*   Power of Attorney (see signature page)

* Filed herewith.

Item 9.  Undertakings.

A.   The undersigned Registrant hereby undertakes:

     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

         (i)   To include any prospectus required by Section 10(a)(3) of the
Securities Act;

         (ii)  To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and

         (iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement (or the most
recent post-effective amendment thereof);

Provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.

     (2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

     (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or

                                      II-4

<PAGE>

otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Naperville, State of Illinois, on the 19 day of
August, 2002.

                                         Factory Card & Party Outlet Corp.



                                         By:   /s/ James D. Constantine
                                            ------------------------------------
                                             James D. Constantine
                                             Executive Vice President,
                                             Chief Financial and Administrative
                                             Officer

                                      II-5

<PAGE>

                                POWER OF ATTORNEY

         Each person whose individual signature appears below hereby authorizes
James D. Constantine, as attorney-in-fact with full power of substitution, to
execute in the name and on behalf of each person, individually and in each
capacity stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments.

         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 19 day of August, 2002.

            SIGNATURE                                 TITLE
            ---------                                 -----

    /s/ Gary W. Rada
---------------------------------
         Gary W. Rada                      Director, President and Chief
                                           Operating Officer


    /s/ James D. Constantine
---------------------------------          Director, Executive Vice President
         James D. Constantine              and Chief Financial and
                                           Administrative Officer


    /s/ John G. Brim
---------------------------------
         John G. Brim                      Director


    /s/ Ben Evans
---------------------------------
         Ben Evans                         Director


    /s/ R.E. George
---------------------------------
         R.E. George                       Director and Chairman of the Board


    /s/ Peter Michael Holmes
---------------------------------
         Peter Michael Holmes              Director


     /s/ Martin G. Mand
---------------------------------
         Martin G. Mand                    Director


    /s/ Patrick O'Brien
---------------------------------
         Patrick O'Brien                   Director


    /s/ Robert S. Sandler
---------------------------------
         Robert S. Sandler                 Director

                                      II-6

<PAGE>

                                INDEX TO EXHIBITS

Exhibit
Number                             Description
------                             -----------

 3.1        Amended and Restated Certificate of Incorporation of the Registrant
            (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K
            filed April 23, 2002, and incorporated herein by reference).

 3.2        Amended and Restated By-Laws of the Registrant (filed as Exhibit 3.2
            to the Registrant's Current Report on Form 8-K filed April 23, 2002,
            and incorporated herein by reference).

 4.1        Form of New Management Warrant, dated April 9, 2002 (filed as
            Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed
            April 23, 2002, and incorporated herein by reference).

 4.2        Schedule of New Management Warrants (filed as Exhibit 4.3 to the
            Registrant's Current Report on Form 8-K filed April 23, 2002, and
            incorporated herein by reference).

 5.1*       Opinion of Sonnenschein Nath & Rosenthal

 23.1*      Consent of Sonnenschein Nath & Rosenthal (included in opinion filed
            as Exhibit 5.1)

 23.2*      Consent of KPMG LLP, Independent Auditors

 24.1*      Power of Attorney (see signature page)

* Filed herewith.

                                      II-7
[{"type": "S-8", "sequence": "1", "filename": "ds8.txt", "description": "FORM S-8", "secsgml_size_bytes": 76493}]
{"company-data": {"conformed-name": "FACTORY CARD OUTLET CORP", "cik": "0001024441", "assigned-sic": "5940", "irs-number": "363652087", "state-of-incorporation": "DE", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-98549", "film-number": "02745975"}, "business-address": {"street1": "2727 DIEHL RD", "city": "NAPERVILLE", "state": "IL", "zip": "60563", "phone": "6305792000"}, "mail-address": {"street1": "745 BIRGINAL DRIVE", "city": "BENSENVILLE", "state": "IL", "zip": "60106"}}
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                ________________

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                ________________

                        Factory Card & Party Outlet Corp.
             (Exact name of Registrant as specified in its charter)

               DELAWARE                                  36-3652087
  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                    Identification No.)

                                 2727 Diehl Road
                         Naperville, Illinois 60563-2371
          (Address of principal executive offices, including zip code)

   Employment Agreements, Restricted Stock Agreements and Warrant Agreements,
                           dated as of April 8, 2002,
                    of the selling stockholders named herein
                            (Full title of the plan)

                              James D. Constantine
                          Executive Vice President and
                   Chief Financial and Administrative Officer
                        Factory Card & Party Outlet Corp.
                                 2727 Diehl Road
                         Naperville, Illinois 60563-2371
                                 (603) 579-2000
 (Name, address and telephone number, including area code, of agent for service)

                                With Copies To:
                            Neal I. Aizenstein, Esq.
                          Sonnenschein Nath & Rosenthal
                      8000 Sears Tower, 233 S. Wacker Drive
                             Chicago, Illinois 60606
                                 (312) 876-8000
CALCULATION OF REGISTRATION FEE

-----------------------------------------------------------------------------------------------------------------

                                                               Proposed          Proposed
                                        Amount to be           Maximum            Maximum           Amount of
         Title of Securities             Registered         Offering Price       Aggregate        Registration
          to be Registered                  (1)              Per Share(2)      Offering Price          Fee
-----------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value       77,700/1/            $10.50           $815,850           $75.06
     per share
-----------------------------------------------------------------------------------------------------------------
(1)  Pursuant to Rule 416 under the Securities Act of 1933, as amended, this
     Registration Statement also covers such indeterminate number of additional
     shares as may be issued under the agreements listed above as the result of
     any future stock split, stock dividends, merger, reorganization and any
     other dilutive events set forth in such agreements.

(2)  Estimated pursuant to Rule 457(c) and (h) under the Securities Act of 1933,
     as amended, solely for purposes of determining the registration fee and is
     based on the average of the high and low prices of the Common Stock as
     reported by the Nasdaq over the counter bulletin board on August 19, 2002.
     [The date needs to be within 5 business days prior to the filing date.]

___________________

/1/ See the table in the Selling Stockholders section for calculation of the
77,700 shares. Only the shares from the restricted stock grants and exercise of
management warrants for persons with Employment Agreements were included in
order to qualify within the meaning of employee benefit plans (i.e. agreements
awarding stock as compensation for services) although if restricted stock grants
to people other than the ones with the employment agreements were granted
pursuant to restricted stock agreements that recite that they were awarded for
services to the Company, we may be able to deem such agreements to also be
"employee benefit plans" and also include their shares.
PART I

              INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

This registration statement was prepared in accordance with Form S-8 and Part I
of Form S-3, and is registering 77,700 shares of common stock in the aggregate
which have been issued pursuant to (a) Employment Agreements dated as of April
8, 2002 of Gary W. Rada, James D. Constantine, Timothy F. Gower, William A.
Beyerl, Robert Krentzman, Joseph M. Cabon and Michael Perri, (b) Restricted
Stock Agreements dated as of April 8, 2002 attached as exhibits to the
Employment Agreements of Gary W. Rada, James D. Constantine, Timothy F. Gower,
William A. Beyerl, Robert Krentzman and Michael Perri and (c) Warrant Agreements
dated as of April 8, 2002 attached as exhibits to the Employment Agreements of
Gary W. Rada, James D. Constantine, Joseph M. Cabon and Michael Perri (the
"Warrant Agreements," together with the Employment Agreements and the Restricted
Agreements referred to as the "Agreements"). In accordance with the Note to Part
I of Form S-8, the information specified by Part I of Form S-8 has been omitted
from this registration statement. Pursuant to General Instruction C to Form S-8,
this prospectus may be used for reofferings and resales of shares of our common
stock acquired by employees, former employees and some transferees of these
employees.
REOFFER PROSPECTUS

                        FACTORY CARD & PARTY OUTLET CORP.

                          77,700 SHARES OF COMMON STOCK

                         Issued or Issuable Pursuant to

Employment Agreements, Restricted Stock Agreements and Warrant Agreements, each
                         dated as of April 8, 2002, of

Gary W. Rada, James D. Constantine, Timothy F. Gower, William A. Beyerl, Robert
                  Krentzman, Joseph M. Cabon and Michael Perri

         This prospectus relates to the reoffer and resale of shares of our
common stock acquired pursuant to the Agreements which may be sold from time to
time by certain stockholders of Factory Card & Party Outlet Corp. (the
"Company") described under the caption "Selling Stockholders" in this
prospectus. The selling stockholders are current or former employees, officers
and directors of the Company who acquired the shares of common stock as
compensation for services performed, and to be performed, for the Company.

         The prices at which these selling stockholders may sell their shares
will be determined by the prevailing market price for our common stock or in
negotiated transactions. We will not receive proceeds from any of these sales.
We are paying the expenses incurred in registering the shares, but all selling
and other expenses incurred by each of the Selling Stockholders will be borne by
that Selling Stockholder.

         The shares of Common Stock offered pursuant to this prospectus are
"restricted securities" under the Securities Act of 1933, as amended (the
"Securities Act") before their sale under this prospectus. This prospectus has
been prepared for the purpose of registering the shares under the Securities Act
to allow for future sales by the Selling Stockholders, on a continuous or
delayed basis, to the public without restriction, subject to certain vesting
restrictions with respect to shares issued as restricted stock. See Selling
Stockholders and Item 4 of Part II of the registration statement. Each Selling
Stockholder may be deemed to be an "underwriter" within the meaning of the
Securities Act. Any commissions received by a broker or dealer in connection
with resales of the shares may be deemed to be underwriting commissions or
discounts under the Securities Act.

         Our common stock is currently quoted on the Nasdaq over the counter
bulletin board under the symbol "FCPO." On August 16, 2002, the closing price of
a share of our common stock on the Nasdaq over the counter bulletin board was
$9.25.

         You should consider carefully the risk factors beginning on page 3 of
this prospectus before purchasing any of the common stock offered.

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                 The date of this prospectus is August 19, 2002.
TABLE OF CONTENTS
Page
                                                                                             ----
Where You Can Find More Information .......................................................     1

Incorporation of Documents by Reference ...................................................     1

The Company ...............................................................................     2

Risk Factors ..............................................................................     2

Special Note Regarding Forward-Looking Statements .........................................     8

Use of Proceeds ...........................................................................     9

Selling Stockholders ......................................................................     9

Plan of Distribution ......................................................................    10

Legal Matters .............................................................................    11

Experts ...................................................................................    11

Disclosure of Commission Position on Indemnification for Securities Act Liabilities .......    12
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
any information different from that contained in this prospectus. Neither the
delivery of this prospectus nor the sale of common stock means that the
information contained in this prospectus is correct after the date of this
prospectus. The selling stockholders are offering to sell and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. This prospectus is not an offer to sell or a solicitation of an offer
to buy shares of our common stock in any circumstances under which the offer or
solicitation is unlawful.

         In this prospectus, the "Company," "we," "us" and "our" refer to
Factory Card & Party Outlet Corp. and our predecessors and subsidiaries, unless
the context specifically indicates otherwise.
WHERE YOU CAN FIND MORE INFORMATION

         We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). These reports, proxy statements and other
information can be inspected and copied at the Public Reference Room of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago,
IL 60661-2511 and 233 Broadway, New York, NY 10279, at prescribed rates. The
Commission maintains a website that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission. The address of this website is
"http://www.sec.gov." In addition, you may obtain information from the Public
Reference Room by calling the Commission at 1-800-Commission-0330.

         We intend to furnish our stockholders with annual reports containing
additional financial statements and a report thereon by independent certified
public accountants.

         We have filed with the Commission a registration statement on Form S-8
with respect to the securities offered by this prospectus. This prospectus,
which constitutes part of the registration statement, does not contain all of
the information set forth in the registration statement and the attached
exhibits and schedules. You may refer to the registration statement, its
exhibits and schedules for further information with respect to the Company and
the securities offered by this prospectus. You may obtain copies of the
registration statement, its exhibits and schedule in the locations described
above.

                     INCORPORATION OF DOCUMENTS BY REFERENCE

         The Commission allows us to "incorporate by reference" into this
prospectus the information contained in the documents we file with them, which
means that we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be
part of this prospectus, and later information that we file with the Commission
will update and supersede this information. We are incorporating by reference
the following documents: (i) our Annual Report on Form 10-K for the fiscal year
ended February 2, 2002 filed with the Commission on April 9, 2002; (ii) our
Quarterly Report on Form 10-Q for the fiscal quarter ended May 4, 2002, filed
with the Commission on June 18, 2002; (iii) our Current Reports on Form 8-K
filed with the Commission on April 23, 2002 and June 13, 2002; and (iv) the
description of our common stock contained in our Registration Statement on Form
8-A filed with the Commission on June 13, 2002.

         In addition, all documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.

         A copy of any document incorporated by reference in this registration
statement of which this prospectus forms a part but which is not delivered with
this prospectus will be provided by us without charge to any person to whom this
prospectus has been delivered upon the oral or written request of that person.
Requests should be directed to the attention of James D. Constantine, Executive
Vice President and Chief

                                        1
Financial and Administrative Officer, Factory Card & Party Outlet Corp., 2727
Diehl Road, Naperville, Illinois 60563-2371. Our telephone number at that
location is (630) 579-2000.

                                   THE COMPANY

         We are a chain of company-owned stores offering an extensive selection
of greeting cards, giftwrap, balloons, everyday and seasonal party supplies and
other special occasion merchandise at everyday value prices. As of June 8, 2002,
we operated 172 stores in 20 states. Based on the published number of stores of
our competitors as compiled by us from various business publications and other
publicly available information, we believe we are one of the largest chains of
company-owned stores in the greeting card, party supply and special occasion
industry. Our stores provide customers with a value-oriented, "one-stop"
shopping destination for greeting card, party supply and special occasion
merchandise for all major holidays and celebratory events, including birthdays,
graduations, weddings, baby showers and other family, religious and special
occasions. Our stores average approximately 12,000 square feet, with
approximately 80% of the space devoted to selling space, and are designed to
provide ease of shopping within an attractive, spacious and festive environment.

         Our principal executive offices are located at 2727 Diehl Road,
Naperville, Illinois 60563-2371. Our telephone number at that location is (630)
579-2000.

                                  RISK FACTORS

         The shares of our common stock being offered for resale by the selling
stockholders involve risk. You should carefully consider the risks described
below and the other information in this prospectus before deciding to invest in
the shares of common stock offered pursuant to this prospectus.

We recently emerged from a Chapter 11 plan of reorganization, have a history of
net losses and may not be profitable.

         On March 23, 1999, we filed voluntary petitions for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. The Bankruptcy Court confirmed an
amended joint plan of reorganization on February 5, 2002, as modified on March
20, 2002, and we emerged from our bankruptcy proceedings effective April 9,
2002. We incurred net losses of approximately $5.5 million, $8.7 million and
$28.9 million during the three fiscal years ended February 2, 2002, February 3,
2001 and January 29, 2000, respectively. Our equity ownership, board of
directors and a portion of our senior management was replaced in connection with
our reorganization. While our current senior management has concentrated on
refining our business strategy, there can be no assurance that we will attain
profitability or achieve growth in our operating performance. If our financial
performance does not exceed our historical results, the price of our common
stock could decline and your investment could be materially adversely affected.

Intense competition in our industry could prevent us from increasing or
sustaining our revenues and prevent us from achieving or sustaining
profitability.

         The greeting card, party supply and special occasion retailing business
is highly competitive. Increased competition by existing or future competitors
may reduce our sales and cause us to incur a loss. As a result of competition
from other specialty party supplies and paper goods retailers, we may need to
incur additional marketing and promotional expenses to achieve sales growth in
our existing stores. Our stores compete with a variety of smaller and larger
retailers, including:

                                       2
.   specialty party supplies and paper goods retailers, including other
         party superstores;
     .   card shops and designated departments in mass merchandisers;
     .   warehouse/merchandise clubs and discount general merchandise chains;
     .   toy stores;
     .   drug stores;
     .   supermarkets;
     .   department stores of local, regional and national chains; and
     .   Internet retailers.

     Many of our competitors have substantially greater financial and personnel
resources than we do. Some of our competitors have been, or may be, funded by
certain members of the vendor community. In addition, a trend toward discounting
the cost of party supplies and greeting cards is developing and we may encounter
additional competition from new entrants in the future in our existing markets.
Our competitors may be able to respond more quickly or adjust prices more
effectively to take advantage of new opportunities or customer requirements.
Increased competition could result in pricing pressures, reduced sales, reduced
margins or failure to achieve or maintain widespread market acceptance, any of
which could prevent us from increasing or sustaining our revenues and achieving
or sustaining profitability.

Customers' requirements are likely to evolve, and we will not retain customers
or attract new customers if we do not anticipate and meet specific customer
requirements and changes in merchandising trends.

     Our core operations rely on a stable customer base. Failure to maintain
existing customers and obtain new customers will adversely affect our market
position.

     Our success depends, in part, on our ability to anticipate and respond to
changing merchandise trends and consumer demands in a timely manner.
Accordingly, any delay or failure by us in identifying and responding to
emerging trends could adversely affect consumer acceptance of the merchandise in
our stores. If we are required to sell a significant amount of unsold inventory
at below average mark-ups over our cost or below cost, such action could have an
adverse effect on our financial condition and results of operations.

     Our success depends in part on our ability to anticipate and respond in a
timely manner to changing merchandise trends and consumer demands. We make
merchandising decisions well in advance of the seasons during which we will sell
the merchandise. As a result, if we fail to identify and respond quickly to
emerging trends, consumer acceptance of the merchandise in our stores could
diminish and we may experience a reduction in revenues. Significantly greater or
less-than-projected product demand could lead to one or more of the following:

     .  lost sales due to insufficient inventory;
     .  higher carrying costs associated with slower turning inventory; and
     .  reduced or eliminated margins due to mark downs on excess inventory.

     If consumer demand for single-use, disposable party goods were to diminish,
the party supplies and paper goods industry and our revenues would be negatively
affected. For example, if cost increases in raw materials such as paper,
plastic, cardboard or petroleum were to cause our prices to increase
significantly, consumers might decide to forgo the convenience associated with
single-use, disposable products. Similarly, changes in consumer preferences away
from disposable products and in favor of reusable products for environmental or
other reasons could reduce the demand for our products.

                                       3
Our business depends on continued good relations with our suppliers.

         Our failure to maintain good relationships with our principal suppliers
or the loss of our principal suppliers would hurt our business. We purchase our
inventory from more than 300 vendors world-wide, with the largest supplier
representing approximately 11% and the ten largest suppliers representing
approximately 41% of our aggregate purchases in fiscal year 2001. Many of our
principal suppliers currently provide us with incentives like volume purchasing
allowances and trade discounts. If our suppliers were to reduce or discontinue
these incentives, prices from our suppliers would increase and our profitability
would be reduced. As is customary in our industry, we generally do not have
long-term contracts with any suppliers and any supplier could discontinue
selling to us at any time; however, pursuant to our bankruptcy plan of
reorganization, we have entered into agreements with certain of our trade
vendors to provide us with competitive trade terms, including, extended credit
limits, extended payment terms and seasonal advances. While we are not aware of
any reasons to question the operational or financial ability of such vendors
either to ship or provide such terms, the inability of any of such vendors to do
so could adversely affect our competitive financial performance.

We may need to raise additional capital to fund our operations and support our
long-term growth strategy.

         Our ability to make scheduled payments of principal of, or to pay the
interest on, or to refinance, indebtedness or to fund planned capital
expenditures, will depend upon our future performance, which, in turn, is
subject to general economic, financial, competitive and other factors that are
beyond our control. Based upon our current level of operations and anticipated
growth, we believe that future cash flow from operations, together with
available borrowings under our new financing facility, will be adequate to meet
our anticipated requirements for capital expenditures, working capital, interest
payments and scheduled principal payments. There can be no assurance that our
business will continue to generate sufficient cash flow from operations in the
future to service our debt and make necessary capital expenditures after
satisfying certain liabilities arising in the ordinary course of business. If
unable to do so, we may be required to refinance all or a portion of our
existing debt, sell assets or obtain additional financing. There can be no
assurance that any refinancing would be available or available on favorable
terms or that any sales of assets or additional financing could be obtained or
obtained on favorable terms. Financial difficulties of our competitors and our
recent losses may affect our ability to obtain financing. If adequate funds are
not available or are not available on acceptable terms, we may be unable to
develop or enhance our products and services, implement our long-term growth
strategy, take advantage of future opportunities or respond in a timely manner
to competitive pressures.

We are substantially leveraged and our new financing facility contains covenants
that could adversely affect our business.

         Our indebtedness restricts our ability to obtain additional financing
in the future and, because we may be more leveraged than some of our
competitors, may place us at a competitive disadvantage. Also, the new financing
facility that we entered into as part of our emergence from bankruptcy contains
covenants that impose operating and financial restrictions on us. These
covenants could adversely affect our ability to finance future operations,
potential acquisitions or capital needs or to engage in other business
activities that may be in our interest.

The seasonal nature of our business could adversely impact our operations.

         Our business is highly seasonal, with operating results varying from
quarter to quarter. We have historically experienced higher sales during the
second and fourth quarters primarily due to increased demand by customers for
our products attributable to special occasions and holiday seasons during these

                                       4
periods. Lower sales than expected by us during this period, a lack of
availability of product, or a general economic downturn in sales could have a
material adverse effect on our business, financial condition and results of
operations for the full year. In addition, the timing of new store openings,
related pre-opening expenses and the amount of revenue contributed by new and
existing stores may cause our quarterly results of operations to fluctuate. Any
or all of these factors could also cause the price of our common stock to
decline.

Disruptions in supply of our inventory caused by labor issues involving
longshoremen at ports on the West Coast could adversely impact our operations.

         The deadline to agree on a new three-year contact between port operator
Pacific Maritime Association and the International Longshore and Warehouse Union
passed in early July 2002 without resolution. Any strike or work slowdown
involving longshoremen at the ports on the West Coast could affect our ability
to stock our stores and therefore adversely impact our operations.

We may not be able to profitably grow our business.

         In order to profitably grow our business, we need to increase sales in
our existing markets and open stores in new markets. Opening additional stores
in existing markets could reduce sales from our stores located in or near those
markets and stores opened in new markets may not be profitable. In addition, the
opening of additional stores could put additional strain on our existing store
base to leverage the new stores' fixed cost structure.

Higher administrative expenses could adversely affect our business and
operations.

         Higher selling, general and administrative expenses occasioned by the
potential need for additional advertising, marketing, administrative or
management information systems expenditures could negatively impact our business
and operations.

We may not be able to effectively execute our long-term growth strategy.

         Our long-term growth strategy requires effective planning and
management. Once a new geographic market is identified, we must obtain suitable
store sites on acceptable terms. Also, the competitive and merchandising
challenges we face in new geographic markets may be different from the
challenges we face in our existing geographic markets. We may have to adapt to
regional tastes and customs and compete against established and familiar local
businesses with innovative or unique techniques for marketing party supplies and
paper goods. Entering new markets may also place significant demands on our
management, financial controls, operations and information systems. This may
cause us to incur higher costs relating to marketing and operations. Expansion
will require an increase in our personnel, particularly store managers and sales
associates, to operate our new stores.

Adverse publicity could adversely affect our business.

         We generally operate in medium sized towns and suburban neighborhoods.
Adverse publicity or news coverage relating to us could negatively impact our
efforts to establish and promote name recognition and a positive image.

                                       5
If we do not comply with the numerous laws and regulations that govern our
business, our business could be harmed.

         Each of our stores must comply with regulations adopted by Federal
agencies and with licensing and other regulations enforced by state and local
health, sanitation, safety, fire and other departments. More stringent and
varied requirements of local governmental bodies with respect to zoning, land
use and environmental factors, and difficulties or failures in obtaining the
required licenses or approvals, can delay and sometimes prevent, the opening of
a new store. In addition, we must comply with the Fair Labor Standards Act and
various state laws governing various matters such as minimum wage, overtime and
other working conditions. We also must comply with the provisions of the
Americans with Disabilities Act of 1990, as amended, which requires generally
that employers provide reasonable accommodation for employees with disabilities
and that stores be accessible to customers with disabilities. We believe that
the procedures currently in effect at our stores are in general compliance with
such laws and regulations. However, future violations of such laws, the
enactment of stricter laws or regulations or the implementation of more
aggressive enforcement policies could adversely affect our operations or
financial condition.

If our future results do not meet or exceed the projections and assumptions we
made for "Fresh Start Accounting" reporting purposes, we may have to write down
the values of some of our assets.

         On April 9, 2002, as a result of our emergence from bankruptcy, we
adopted "fresh start accounting" principles, which require us to restate all
assets and liabilities to their fair values and certain valuation studies. We
estimated that the value of our business for purposes of our plan of
reorganization was approximately $42.5 million based upon certain projections
and assumptions as well as our best estimates of expected future market
conditions. If our actual performance differs from our projections, the value of
your investment could decline.

If we are unable to hire additional qualified personnel or retain existing
personnel, we may not be able to operate our business successfully.

         Our success depends upon the efforts of our senior management and other
key personnel. The loss of the services of any member of our management team or
a key employee, or a failure to timely retain a replacement officer could have a
material adverse effect on us. Our future success will also depend in part on
attracting and retaining quality employees. Many of our employees are in entry
level or part-time positions with historically high rates of turnover. Our
ability to meet our labor needs while controlling costs is subject to external
factors, such as unemployment levels, minimum wage legislation and changing
demographics. There can be no assurance that we will be successful in retaining
our existing key personnel or in attracting and retaining additional employees
we may require. Any difficulties in obtaining, retaining and training qualified
personnel could have a material adverse effect on us.

Interruption or obsolescence of our management information systems could have a
negative effect on our competitive ability and our business generally.

         We believe that our management information systems are an important
factor in supporting our business and enhancing our competitive position in the
industry. Over the past three years, we have invested significant resources in
systems and infrastructure to support our business and make it more efficient.
We use a management information and control system, which is based on the JDA
Merchandise Management System software package ("JDA") and supports the complete
range of retail cycle functions in the areas of finance, merchandising and
distribution. All stores are linked to our headquarters through personal
computers, which interface with an IBM AS/400 and provide auto-replenishment of
inventory and the ability to enter payroll information and send and receive
electronic mail. These personal computers are also tied into our point-of-sale
system ("POS system"). The POS system provides sales information to our stores
and

                                       6
central office and is used to enhance merchandise planning and buying programs.
Any obsolescence or continuing interruption in the functioning of these systems
could have a negative effect on our ability to compete effectively in the
industry and on our business.

Certain provisions of our charter may prevent or delay a change of control of
the Company.

         Our certificate of incorporation provides for a classified Board of
Directors. Any effort to obtain control of our Board of Directors by causing the
election of a majority of the board of directors may require more time than
would be required without a staggered election structure. Our certificate of
incorporation also imposes restrictions on the direct or indirect
transferability of the Common Stock for a period of two (2) years following
April 9, 2002, subject to certain exceptions, such that no person or certain
groups of persons (x) may acquire or accumulate five percent (5%) or more (as
determined under tax law principles governing the application of Section 382 of
the Internal Revenue Code of 1986, as amended) of the Common Stock or (y) who,
upon implementation of the Plan, owns 5% or more of the Common Stock, may
acquire additional Common Stock. These provisions would have the effect of
preventing a change of control for the duration of such restrictions.

Certain provisions of our bankruptcy plan of reorganization may have significant
dilutive effects on holders of common stock generally.

         In connection with our bankruptcy plan of reorganization, we issued
trade conversion notes in an aggregate amount equal to $3.13 million to certain
of our trade creditors which will be payable on the fourth anniversary of April
9, 2002. The trade conversion notes are convertible at the option of the holders
into an aggregate of up to 29.35% of our common stock outstanding (including for
such calculation only common stock, warrants and options issued pursuant to our
bankruptcy plan and assuming the conversion of all such trade conversion notes)
at any time between April 9, 2005 and April 9, 2006, subject to adjustments to
reflect any prepayments made by us. Although we currently intend to and
anticipate paying such notes, failure to meet our projected financial
performance could prevent us from making such payments in which event,
then-existing holders of Common Stock may be significantly diluted by a
conversion of the trade conversion notes.

         Pursuant to our bankruptcy plan, we also issued warrants to members of
our management exercisable for common stock. The holders of such warrants will
be entitled to receive additional shares of Common Stock on an annual basis,
upon the issuance of common stock upon the exercise of certain warrants issued
pursuant to the bankruptcy plan, the conversion of the trade conversion notes or
options issued under our 2002 Stock Option Plan for a four year period beginning
April 9, 2002. For a general description of the calculation of the number of
additional shares which may be issued to such warrant holders, see Item 4 of
Part II of the registration statement. Your holdings of Common Stock may be
further diluted in the event these warrant holders are issued additional shares
of Common Stock.

         Pursuant to our bankruptcy plan of reorganization, we also issued four
series of warrants to holders of our old pre-bankruptcy common stock to purchase
up to approximately 10% (subject to certain dilution events) of the common stock
issued under the bankruptcy plan (assuming exercise of all such warrants). These
four series of warrants will be exercisable for terms ranging from four to eight
years. We currently have stock option plans pursuant to which we may issue
options to our employees and directors exercisable for up to approximately
317,000 shares of our common stock. As of June 8, 2002, there were 1,512,459
shares of common stock issued and outstanding. The issuance of shares of common
stock pursuant to the exercise of the four series of warrants and the stock
options, conversion of the trade conversion notes and the antidilution rights
protection of the warrants issued to management could significantly dilute the
holders generally of common stock currently issued and outstanding.

                                        7
Our stock price may be volatile, and you may not be able to resell your shares
at or above the price you paid, or at all.

         Since the effective date of our bankruptcy restructuring, our common
stock has had limited trading activity on the Nasdaq over the counter bulletin
board. We cannot predict the extent to which investor interest in our stock will
lead to the development of a more active trading market, how liquid that market
might become or whether it will be sustained. The trading price of our common
stock could be subject to wide fluctuations due to the factors discussed in this
risk factors section and elsewhere in this prospectus. In addition, the stock
markets in general have experienced extreme price and volume fluctuations. These
broad market and industry factors may decrease the market price of our common
stock, regardless of our actual operating performance.

We do not anticipate paying dividends.

         We have not paid dividends on our common stock and we do not anticipate
paying dividends in the foreseeable future. We intend to retain future earnings,
if any, to finance the expansion of our operations and for general corporate
purposes, including future acquisitions. In addition, our financing facility
prohibits us from paying dividends on our capital stock.

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This prospectus and the documents to which we refer you and incorporate
herein by reference contain forward-looking statements regarding our business
and prospects, such as projections of future performance, statements of
management's plans and objectives, forecasts of market trends, and other matters
that are forward-looking statements within the meaning of Sections 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of 1934. In
addition, from time to time, we or our representatives may make forward-looking
statements orally or in writing. We base these forward-looking statements on our
expectations and projections about future events, which we derive from the
information currently available to us.

         Statements containing the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimates," "projects,"
"believes," "expects," "anticipates," "intends," "target," "goal," "plans,"
"objective," "should" or similar expressions identify forward-looking
statements, which may appear in this prospectus and in documents, reports,
filings with the Commission, news releases, written or oral presentations made
by our officers or other representatives to analysts, stockholders, investors,
news organizations and others, and discussions with our management and other
company representatives. For these statements, we claim the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.

         Our future results, including results related to forward-looking
statements, involve a number of risks and uncertainties. No assurance can be
given that the results reflected in any forward-looking statements will be
achieved. Any forward-looking statements made by us or on our behalf speak only
as of the date on which this statement is made. Our forward-looking statements
are based upon assumptions that are sometimes based upon estimates, data,
communications and other information from suppliers, government agencies and
other sources that may be subject to revision. We do not undertake any
obligation to update or keep current either any forward-looking statement to
reflect events or circumstances arising after the date of such statement, or the
important factors that could cause our future results to differ materially from
historical results or trends, results anticipated or planned by us, or which are
reflected from time to time in any forward-looking statement which may be made
by us or on our behalf.

                                        8
In addition to other matters identified or described by us from time to
time in filings with the Commission, there are several important factors that
could cause our future results to differ materially from historical results or
trends, results anticipated or planned by us, or results that are reflected from
time to time in any forward-looking statement that may be made by us or on our
behalf. Some of these important factors we listed under the heading "Risk
Factors".

                                 USE OF PROCEEDS

         We will not receive any proceeds from the sale of shares that may be
sold pursuant to this prospectus for the respective accounts of the selling
stockholders. All of such proceeds will be received by the selling stockholders.
For more information about our selling stockholders, see "Selling Stockholders"
and "Plan of Distribution."

                              SELLING STOCKHOLDERS

         The 77,700 shares of our common stock to which this prospectus relates
are being registered for reoffers and resales by our present employees, officers
and directors named below, who acquired the shares of Common Stock pursuant to
our "employee benefit plan" as that term is defined in Rule 405 of Regulation C
under the Securities Act. The selling stockholders may resell all, a portion or
none of such shares of Common Stock from time to time.

         The table below sets forth with respect to the selling stockholders,
based upon information available to us as of August 8, 2002, the number of
shares of our common stock owned (including, where applicable, the common stock
covered by this prospectus, common stock not covered by this prospectus and
options to purchase common stock), the number of shares of Common Stock
registered by this prospectus and the number and percentage of outstanding
shares of common stock that will be owned after the sale of the registered
common stock assuming the sale of all of the registered common stock. The
inclusion in the table of the individuals named therein shall not be deemed to
be an admission that any such individuals are "affiliates" of the Company.
---------------------------------------------------------------------------------------------------------------------------
Name of Selling    Title                                  Number of        Number of       Number of        Percent of
Stockholder                                               Shares           Shares That     Shares to Be     Common Stock
                                                          Beneficially     May Be Offered  Beneficially     Owned if All
                                                          Owned (1) (2)    Hereby (2)      Owned if All     Shares
                                                                                           Shares Offered   Offered
                                                                                           Hereby Are Sold  Hereby Are
                                                                                                            Sold (3)
---------------------------------------------------------------------------------------------------------------------------
Gary W. Rada       President, Chief Operating Officer     45,000           20,000 (4)      25,000           1.7%
                   and Director
---------------------------------------------------------------------------------------------------------------------------
James D.           Executive Vice President, Chief        46,000           26,000 (4)      20,000           1.3%
Constantine        Financial and Administrative Officer
                   and Secretary
---------------------------------------------------------------------------------------------------------------------------
Timothy F. Gower   Senior Vice President of Stores        29,000           14,000          15,000           1.0%
---------------------------------------------------------------------------------------------------------------------------
Robert Krentzman   Vice President of Information          12,000            6,000           6,000           *
                   Technologies
---------------------------------------------------------------------------------------------------------------------------
Joseph M. Cabon    Former Vice President of Distribution     200              200 (4)           0           *
---------------------------------------------------------------------------------------------------------------------------
William A. Beyerl  Vice President of Human Resources      12,000            6,000           6,000           *
---------------------------------------------------------------------------------------------------------------------------
Michael Perri      Vice President of Merchandising        10,500            5,500 (4)       5,000           *
---------------------------------------------------------------------------------------------------------------------------
*Less than 1%

                                        9
(1)  As of August 16, 2002, the number of shares owned by the listed individuals
includes options to purchase shares of Common Stock under our employee benefit
plans, whether or not exercisable as of, or within sixty days of, the date of
this prospectus as well as the shares of common stock offered pursuant to this
prospectus. Such options become exercisable in four equal annual installments
beginning on the first anniversary of April 23, 2002.

(2)  The number of shares owned by the listed individuals other than Joseph M
Cabon includes restricted stock which is scheduled to vest ratably over a four
year period commencing on April 9, 2002, subject to acceleration or forfeiture
under certain circumstances.

(3)  Percentage is based on 1,512,448 shares of Common Stock outstanding as of
August 16, 2002 and is calculated in accordance with Rule 13d-3(d) under the
Exchange Act.

(4)  The shares of common stock offered pursuant to this prospectus for the
listed individual also include such indeterminate number of additional shares as
may be issued as the result of certain dilutive events as set forth in certain
Rights Certificates issued in connection with the Warrant Agreement relating to
certain of the listed shares.

                              PLAN OF DISTRIBUTION

     We are registering the resale of 77,700 shares of our common stock on
behalf of certain selling stockholders. We issued all of the shares in
connection with the Agreements. We will not receive any proceeds from this
offering.

     The selling stockholders or their pledgees, donees, transferees, assigns or
other successors-in-interest selling shares received from a named selling
stockholder as a gift, partnership distribution or other non-sale-related
transfer after the date of this prospectus may sell any or all of their shares
from time to time on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. All of such persons are "selling
stockholders" as that term is used in this prospectus. These sales may be at
fixed or negotiated prices. The selling stockholders may effect such
transactions by selling the shares in one or more, or a combination, of the
following:

     .  a block trade in which the broker-dealer so engaged will attempt to sell
  the shares as agent but may position and resell a portion of the block as
  principal to facilitate the transaction;
     .  purchases by a broker-dealer as principal and resale by such
  broker-dealer for its account pursuant to this prospectus;
     .  an exchange distribution in accordance with the rules of the applicable
  exchange;
     .  ordinary brokerage transactions and transactions in which the broker
  solicits purchasers;
     .  privately negotiated transactions;
     .  broker-dealers may agree with the selling stockholder to sell a
  specified number of the shares at a stipulated price per share; and
     .  any other method permitted under applicable law.

     In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus.

     To the extent required, this prospectus may be amended or supplemented from
time to time in the manner discussed below to describe a specific plan of
distribution. In effecting sales, broker-dealers engaged by the selling
stockholders may arrange for other broker-dealers to participate in the resales.
The selling

                                       10
stockholders may also enter into the hedging transactions similar to the
following with broker-dealers in connection with distributions of the shares:

        .  short sales against the box in the course of hedging the positions
    they assume with selling stockholders;
        .  sell shares short and redeliver the shares to close out such short
    positions;
        .  options, puts, calls or other transactions with broker-dealers which
    require the delivery to the broker-dealer of the shares, and the
    broker-dealer then reselling or otherwise transferring such shares pursuant
    to this prospectus;
        .  loan or pledge the shares to a broker-dealer; and
        .  the broker-dealer may sell the shares so loaned, or upon a default
    the broker-dealer may sell the pledged shares pursuant to this prospectus.

        Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the sale.
Broker-dealers or agents and any other participating broker-dealers or the
selling stockholders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company is
not aware of any of the selling stockholders having entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities. There is no underwriter or coordinating broker
acting in connection with the proposed sale of shares by selling stockholders.

         The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.

         Because selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling stockholders
will be subject to the prospectus delivery requirements of the Securities Act.
We will make copies of this prospectus available to the selling stockholders and
have informed them of the need for delivery of copies of this prospectus to
purchasers at or prior to the time of any sale of the shares.

         We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares.

                                  LEGAL MATTERS

         The validity of the shares of Common Stock which are offered under the
Registration Statement of which this prospectus forms a part will be passed upon
by Sonnenschein, Nath & Rosenthal, Chicago, Illinois.

                                     EXPERTS

         The consolidated financial statements and schedule of the Company as of
February 2, 2002 and February 1, 2001 and for the fiscal years ended February 2,
2002, February 1, 2001 and January 29, 2000, have been incorporated by reference
herein and in the registration statement in reliance upon the reports of KPMG
LLP, independent accountants, incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing.

                                       11
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
                         FOR SECURITIES ACT LIABILITIES

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.

                                       12
PART II
                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.

         The following documents filed by Factory Card & Party Outlet Corp., a
Delaware corporation (the "Registrant") with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference in this
Registration Statement on Form S-8 (the "Registration Statement"):

         (a) The Registrant's Annual Report on Form 10-K under the Exchange Act,
for the fiscal year ended February 2, 2002, filed with the Commission on April
9, 2002;

         (b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 4, 2002, filed with the Commission on June 18, 2002;

         (c) The Registrant's Current Reports on Form 8-K filed with the
Commission on April 23, 2002 and June 13, 2002; and

         (d) The description of the Common Stock, par value $0.01 per share,
contained in the Registrant's Registration Statement on Form 8-A filed with the
Commission on June 13, 2002 pursuant to the Securities Act, including any
amendments or reports for the purpose of updating such description.

         All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, after the date hereof and prior to the
filing of a post-effective amendment which indicates that the securities offered
hereby have been sold or which deregisters the securities covered hereby then
remaining unsold shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.

Item 4.  Description of Securities.

         See the Registrant's Registration Statement on Form 8-A filed with the
Commission on June 13, 2002 pursuant to the Securities Act for a description of
the Common Stock, par value $0.01 per share.

         Of the 77,700 shares of common stock registered pursuant to this
registration statement, 65,000 of such shares were granted as restricted stock
to the selling stockholders (other than Joseph M. Cabon) pursuant to Employment
Agreements and Restricted Stock Agreements which restricted shares are scheduled
to vest ratably over a four year period commencing on April 9, 2002 subject to
acceleration under certain circumstances set forth in such Agreements (including
in the event of certain changes in control of the Company or a termination of
the applicable selling stockholder's employment without "cause" or for "good
reason"). Such restricted shares are also subject to forfeiture to the extent
they have not vested in the event of a termination of the applicable selling
stockholder's employment for "cause" subject to the terms and conditions of the
applicable Agreements.

         Of the 77,700 shares of common stock registered pursuant to this
registration statement, 12,700 of such shares were granted pursuant to the
exercise of Warrant Agreements of Gary W. Rada, James D. Constantine, Joseph M.
Cabon and Michael Perri. Rights Certificates (which are non-transferable) were
issued to Messrs. Rada, Constantine, Cabon and Perri in connection with the
exercise of the Warrant Agreements which provide for the issuance of additional
shares of common stock in the event certain dilutive events should occur during
the four year period beginning April 9, 2002 through April 8, 2006. The Rights
Certificates are exercisable to the extent the Company has made issuances
(collectively, the "Additional Shares") of (a) Common Stock upon the exercise of
certain warrants or the conversion of certain trade

                                      II-1
conversion notes or (b) options under the Company's 2002 Stock Option Plan. The
Rights Certificates are exercisable for the number of shares of Common Stock of
the Company derived by: (x) multiplying the number of shares of Common Stock
issued to the applicable warrant holder upon exercise of his Warrant Agreement
by (y) a number equal to the (i) the number of Additional Shares issued during
the applicable period of the applicable year, divided by (ii) 1,500,000 shares
of Common Stock (subject to certain adjustments). Each of Messrs. Rada,
Constantine, Cabon and Perri were issued five Rights Certificates which are
exercisable during the following periods: (1) the first is exercisable from
December 31, 2002 to March 31, 2003; (2) the second is exercisable from December
31, 2003 to March 31, 2004; (3) the third is exercisable from December 31, 2004
to March 31, 2005; (4) the fourth is exercisable from December 31, 2005 to March
31, 2006; and (5) the fifth is exercisable from December 31, 2006 to March 31,
2007. No additional consideration beyond the initial warrant exercise price is
required as a result of any exercise of any of the Rights Certificates. The
terms and conditions are set forth in greater detail in the Rights Certificates.

Item 5.  Interest of Named Experts and Counsel.

         None.

Item 6.  Indemnification of Directors and Officers.

         Subsection (a) of Section 145 of the General Corporation Law of
Delaware (the "DGCL") empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.

         Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.

         Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) or in the defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith; that indemnification or
advancement of expenses provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of a
director, officer, employee or agent of the

                                      II-2
corporation against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.

         Reference is also made to Section 102(b)(7) of the DGCL, which enables
a corporation in its certificate of incorporation to eliminate or limit the
personal liability of a director for monetary damages for violations of a
director's fiduciary duty, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (providing for
liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from which the director
derived an improper personal benefit.

         The Registrant's certificate of incorporation contains certain
provisions that eliminate a director's liability for monetary damages for a
breach of fiduciary duty, except in certain circumstances involving certain
wrongful acts. These acts include, but are not limited to, the breach of a
director's duty of loyalty or acts or omissions that involve intentional
misconduct or a knowing violation of law.

         The certificate of incorporation also contains provisions indemnifying
the directors and officers of the Registrant to the fullest extent permitted by
the Delaware General Corporation Law. The Registrant's by-laws require that the
Registrant advance the expenses of an indemnified person defending a legal
proceeding after it receives an undertaking from the person to repay such
advance if a court ultimately determines that he or she is not entitled to
indemnification. The Registrant's by-laws also require the Registrant to pay any
expenses of an indemnified person in connection with such person enforcing their
indemnification rights. The Registrant may also maintain a directors and
officers liability insurance policy that provides for indemnification of its
directors and officers against certain liabilities incurred in their capacities
as such.

Item 7.  Exemption from Registration Claimed.

         The shares of Common Stock to be offered and sold under the reoffer
prospectus were initially issued by the Registrant in a transaction deemed
exempt from registration under the Securities Act in reliance on the exemption
from the registration requirements of the Securities Act contained in Section
4(2) thereof covering transactions by an issuer not involving any public
offering.

Item 8.  Exhibits.

Exhibit
 Number                                Description
 ------                                -----------
   3.1     Amended and Restated Certificate of Incorporation of the Registrant
           (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K
           filed April 23, 2002, and incorporated herein by reference).

   3.2     Amended and Restated By-Laws of the Registrant (filed as Exhibit 3.2
           to the Registrant's Current Report on Form 8-K filed April 23, 2002,
           and incorporated herein by reference).

   4.1     Form of New Management Warrant, dated April 9, 2002 (filed as Exhibit
           4.2 to the Registrant's Current Report on Form 8-K filed April 23,
           2002, and incorporated herein by reference).

                                      II-3
4.2     Schedule of New Management Warrants (filed as Exhibit 4.3 to the
         Registrant's Current Report on Form 8-K filed April 23, 2002, and
         incorporated herein by reference).

 5.1*    Opinion of Sonnenschein Nath & Rosenthal

 23.1*   Consent of Sonnenschein Nath & Rosenthal (included in opinion filed as
         Exhibit 5.1)

 23.2*   Consent of KPMG LLP, Independent Auditors

 24.1*   Power of Attorney (see signature page)

* Filed herewith.

Item 9.  Undertakings.

A.   The undersigned Registrant hereby undertakes:

     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

         (i)   To include any prospectus required by Section 10(a)(3) of the
Securities Act;

         (ii)  To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and

         (iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement (or the most
recent post-effective amendment thereof);

Provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.

     (2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

     (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or

                                      II-4
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Naperville, State of Illinois, on the 19 day of
August, 2002.

                                         Factory Card & Party Outlet Corp.

                                         By:   /s/ James D. Constantine
                                            ------------------------------------
                                             James D. Constantine
                                             Executive Vice President,
                                             Chief Financial and Administrative
                                             Officer

                                      II-5
POWER OF ATTORNEY

         Each person whose individual signature appears below hereby authorizes
James D. Constantine, as attorney-in-fact with full power of substitution, to
execute in the name and on behalf of each person, individually and in each
capacity stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments.

         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 19 day of August, 2002.

            SIGNATURE                                 TITLE
            ---------                                 -----

    /s/ Gary W. Rada
---------------------------------
         Gary W. Rada                      Director, President and Chief
                                           Operating Officer

    /s/ James D. Constantine
---------------------------------          Director, Executive Vice President
         James D. Constantine              and Chief Financial and
                                           Administrative Officer

    /s/ John G. Brim
---------------------------------
         John G. Brim                      Director

    /s/ Ben Evans
---------------------------------
         Ben Evans                         Director

    /s/ R.E. George
---------------------------------
         R.E. George                       Director and Chairman of the Board

    /s/ Peter Michael Holmes
---------------------------------
         Peter Michael Holmes              Director

     /s/ Martin G. Mand
---------------------------------
         Martin G. Mand                    Director

    /s/ Patrick O'Brien
---------------------------------
         Patrick O'Brien                   Director

    /s/ Robert S. Sandler
---------------------------------
         Robert S. Sandler                 Director

                                      II-6
INDEX TO EXHIBITS

Exhibit
Number                             Description
------                             -----------

 3.1        Amended and Restated Certificate of Incorporation of the Registrant
            (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K
            filed April 23, 2002, and incorporated herein by reference).

 3.2        Amended and Restated By-Laws of the Registrant (filed as Exhibit 3.2
            to the Registrant's Current Report on Form 8-K filed April 23, 2002,
            and incorporated herein by reference).

 4.1        Form of New Management Warrant, dated April 9, 2002 (filed as
            Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed
            April 23, 2002, and incorporated herein by reference).

 4.2        Schedule of New Management Warrants (filed as Exhibit 4.3 to the
            Registrant's Current Report on Form 8-K filed April 23, 2002, and
            incorporated herein by reference).

 5.1*       Opinion of Sonnenschein Nath & Rosenthal

 23.1*      Consent of Sonnenschein Nath & Rosenthal (included in opinion filed
            as Exhibit 5.1)

 23.2*      Consent of KPMG LLP, Independent Auditors

 24.1*      Power of Attorney (see signature page)

* Filed herewith.

                                      II-7