UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE TO

Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934
(Amendment No. 2)

RAG SHOPS, INC.

(Name of Subject Company (issuer))

CRAFTS RETAIL ACQUISITION CORP.
CRAFTS RETAIL HOLDING CORP.
SUN CRAFTS RETAIL, LLC
SUN CAPITAL PARTNERS III, LP
SUN CAPITAL PARTNERS III QP, LP
SUN CAPITAL ADVISORS III, LP
SUN CAPITAL PARTNERS III, LLC

(Names of Filing Persons (identifying status as offeror, issuer or other person))

Common Stock, par value $0.01 per Share

(Title of Class of Securities)

750624108

(CUSIP Number of Class of Securities)

Marc J. Leder
Rodger R. Krouse
Sun Capital Partners III, LP
Sun Capital Partners III QP, LP
5200 Town Center Circle, Suite 470
Boca Raton, Florida 33486
Telephone: (561) 394-0550
with a copy to:
Michael Weinsier
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
Telephone: (212) 837-6690

(Name, address, and telephone numbers of persons authorized
to receive notices and communications on behalf of filing persons)

Calculation of Filing Fee:

(1)

The transaction valuation is estimated solely for purposes of calculating the filing fee pursuant to Rule 0-11(d). The calculation assumes the purchase of all outstanding common shares of Rag Shops, Inc., par value $0.01 (the "Shares"), not beneficially owned by Crafts Retail Acquisition Corp. ("Crafts Acquisition") or its affiliates, at a purchase price of $4.30 Share, net to the seller in cash. As of September 22, 2004, there were 2,273,484 Shares on a fully diluted basis not beneficially owned by Crafts Acquisition.


(2)	Previously paid. See below.


	Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.


	Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:


	third party tender offer subject to Rule 14d-1.


	issuer tender offer subject to Rule 13e-4.


	going-private transaction subject to Rule 13e-3.


	amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:

This Amendment No. 2 to Tender Offer Statement and Rule 13e-3 Transaction Statement on Schedule TO amends and supplements the statement originally filed on September 22, 2004 and amended by Amendment No. 1 filed on October 7, 2004 by the filing persons. The Tender Offer Statement and Rule 13e-3 Transaction Statement filed under cover of Schedule TO relates to the offer by Crafts Retail Acquisition Corp., a Delaware corporation ("Crafts Acquisition"), to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of Rag Shops, Inc., a Delaware corporation (the "Company"), not owned by Crafts Acquisition, at a purchase price of $4.30 per Share net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 22, 2004, a copy of which was previously filed as Exhibit (a)(1)(i), as amended and supplemented by the Supplement to the Offer to Purchase dated October 7, 2004 , a copy of which was previously filed as Exhibit (a)(1)(viii)(such Exhibit (a)(1)(i), together with such Exhibit (a)(1)(viii), the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"), a copy of which was previously filed as Exhibit (a)(1)(ii).

Items 2 through 11 and Item 13.

The Offer expired at 11:59 pm, New York City time, on October 20, 2004 and was not extended. Based on information provided by The Colbent Corporation, the depositary for the Offer, a total of 1,910,524 Shares (including 10,613 Shares subject to guaranteed delivery), representing approximately 39.8% of the outstanding Shares, were validly tendered and not withdrawn pursuant to the Offer. Crafts Acquisition has accepted for payment all Shares validly tendered and not withdrawn prior to the expiration of the Offer.

Pursuant to the Stock Purchase Agreement, dated as of September 13, 2004 (the "Stock Purchase Agreement") by and among Crafts Acquisition, Crafts Retail Holding Corp. ("Crafts Holding"), certain stockholders of the Company and the Company, Crafts Acquisition previously acquired an aggregate of 2,671,199 Shares, or approximately 55.7% of the outstanding Shares, at $4.30 per Share. These Shares, together with the Shares accepted for payment pursuant to the Offer, comprise a total of 4,581,723 Shares, or approximately 95.5% of the outstanding Shares.

Pursuant to the Agreement and Plan of Merger, dated as of September 13, 2004 (the "Merger Agreement"), by and among Crafts Acquisition, Crafts Holding and the Company, Crafts Acquisition was merged with and into the Company through a short-form merger pursuant to Section 253 of the Delaware General Corporation Law, with the Company as the surviving corporation becoming a wholly owned subsidiary of Crafts Holding. No other stockholder meeting or vote was required under the Delaware General Corporation Law to effect the short-form merger. In the merger, each Share issued and outstanding that was not tendered was cancelled and automatically converted into the right to receive $4.30, without interest (other than Shares, if any, owned by Crafts Holding, Crafts Acquisition and the Company, which Shares were cancelled without consideration, and other than Shares owned by stockholders validly exercising appraisal rights under Delaware law, which Shares were cancelled and represent only the right to receive the fair value of such Shares under Delaware law).

Funding for the payment of the Shares purchased in the Offer and of the consideration in the merger consisted of a combination of equity contributions from Sun Capital Partners III, LP and Sun Capital Partners III QP, LP as well as a loan provided by Harris Trust and Savings Bank. The total payment of approximately $9.2 million consisted of (1) an aggregate of approximately $3 million dollars of equity contributions from Sun Capital Partners III, LP and Sun Capital Partners III QP, LP and (2) approximately $6.2 million in funds obtained by Crafts Retail Holding Corp. pursuant to the loan (the "Crafts Loan") provided by Harris Trust and Savings Bank and guaranteed by Sun Capital Partners III, LP and Sun Capital Partners III QP, LP. The Crafts Loan was made by way of an amendment to an earlier loan agreement increasing the aggregate principal amount available under the loan from $8 million to $15 million. Crafts Retail Holding Corp. contributed the proceeds of the Crafts Loan to Crafts Acquisition in order to fund the purchase of such Shares and merger consideration. The Crafts Loan is payable on demand and carries an interest rate of Harris Trust's prime rate plus 0.25%.

Following the merger, Rag Shops filed a Certification and Notice of Termination of Registration under Section 12(g) of the Securities Exchange Act of 1934, as amended, on Form 15 and was also voluntarily delisted from Nasdaq.

On October 21, 2004, Crafts Acquisition issued a press release announcing the results of the Offer and the completion of the merger. The full text of the press release is filed as Exhibit (a)(1)(ix) hereto and is incorporated by reference herein.


Item 12.				Exhibits
*(a)(1)(i)				Offer to Purchase dated September 22, 2004.
*(a)(1)(ii)				Letter of Transmittal.
*(a)(1)(iii)				Notice of Guaranteed Delivery.
*(a)(1)(iv)				Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*(a)(1)(v)				Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*(a)(1)(vi)				Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
*(a)(1)(vii)				Text of Press Release issued by the Company on September 13, 2004 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company filed with the Securities Exchange Commission on September 13, 2004)
**(a)(1)(viii)				Supplement to Offer to Purchase dated October 7, 2004.
(a)(1)(ix)				Press Release issued by Sun Capital Partners on October 21, 2004.
(b)(i)				Loan Authorization Agreement dated September 13, 2004 between Crafts Retail Holding Corp. and Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(ii)				Demand Note dated September 13, 2004 of Crafts Retail Holding Corp. in favor of Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(iii)				Guaranty dated September 13, 2004 of Sun Capital Partners III, LP in favor of Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(iv)				Guaranty dated September 13, 2004 of Sun Capital Partners III QP, LP in favor of Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(v)				First Amendment to Harris Loan Authorization Agreement dated October 21, 2004 between Crafts Retail Holding Corp. and Harris Trust and Savings Bank.
(b)(vi)				Demand Note dated October 21, 2004 of Crafts Retail Holding Corp. in favor of Harris Trust and Savings Bank.
(b)(vii)				First Amendment to Guaranty dated October 21, 2004 of Sun Capital Partners III, LP in favor of Harris Trust and Savings Bank.
(b)(viii)				First Amendment to Guaranty dated October 21, 2004 of Sun Capital Partners III QP, LP in favor of Harris Trust and Savings Bank.


Item 12.				Exhibits
(d)(i)				Agreement and Plan of Merger, dated as of September 13, 2004, by and among Crafts Retail Acquisition Corp., Crafts Retail Holding Corp. and the Company (incorporated by reference to Ex. 2.1 to the Current Report on Form 8-K/A of the Company filed with the Securities and Exchange Commission on September 22, 2004)
(d)(ii)				Stock Purchase Agreement dated September 13, 2004 by and among Crafts Retail Holding Corp., Crafts Retail Acquisition Corp. and certain stockholders of Rag Shops, Inc. (incorporated by reference to Exhibit 10.1 to Rag Shop's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2004).
(d)(iii)				Management Services Agreement dated September 13, 2004 between Rag Shops and Sun Capital Partners Management III, LLC (incorporated by reference to Exhibit 10.2 to Rag Shop's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2004).
(d)(iv)				Confidentiality Agreement, dated May 13, 2004, between Sun and SunTrust (incorporated by reference to Exhibit (e)(4) to Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).
(d)(v)				Letter of Intent, dated August 3, 2004, between Rag Shops and Sun (incorporated by reference to Exhibit (e)(5) to Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).
(d)(vi)				Extension of Letter of Intent, dated August 17, 2004, between Rag Shops and Sun (incorporated by reference to Exhibit (e)(6) to Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).
(g)				None.
(h)				None.


*	Previously filed under the same Exhibit number to the Schedule TO filed by the filing persons on September 22, 2004 and incorporated herein by reference.


**	Previously filed under the same Exhibit number to Amendment No. 1 to the Schedule TO filed by the filing persons on October 7, 2004 and incorporated herein by reference.

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


				CRAFTS RETAIL ACQUISITION CORP.
				By:				/s/ Marc J. Leder
								Name: Marc J. Leder Its: Vice President
				CRAFTS RETAIL HOLDING CORP.
				By:				/s/ Marc J. Leder
								Name: Marc J. Leder Its: Vice President
				SUN CRAFTS RETAIL, LLC
				By:				/s/ Marc J. Leder
								Name: Marc J. Leder Its: Co-CEO
				SUN CAPITAL PARTNERS III, LP
				By: Sun Capital Advisors III, LP Its: General Partner
				By: Sun Capital Partners III, LLC Its: General Partner
				By:				/s/ Marc J. Leder
								Name: Marc J. Leder Its: Co-CEO
				SUN CAPITAL PARTNERS III QP, LP
				By: Sun Capital Advisors III, LP Its: General Partner
				By: Sun Capital Partners III, LLC Its: General Partner
				By:				/s/ Marc J. Leder
								Name: Marc J. Leder Its: Co-CEO
				SUN CAPITAL ADVISORS III, LP
				By: Sun Capital Partners III, LLC Its: General Partner
				By:				/s/ Marc J. Leder
								Name: Marc J. Leder Its: Co-CEO
				SUN CAPITAL PARTNERS III, LLC
				By:				/s/ Marc J. Leder
								Name: Marc J. Leder Its: Co-CEO

EXHIBIT INDEX


EXHIBIT				DESCRIPTION
*(a)(1)(i)				Offer to Purchase dated September 22, 2004.
*(a)(1)(ii)				Letter of Transmittal.
*(a)(1)(iii)				Notice of Guaranteed Delivery.
*(a)(1)(iv)				Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*(a)(1)(v)				Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*(a)(1)(vi)				Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
*(a)(1)(vii)				Text of Press Release issued by the Company on September 13, 2004 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company filed with the Securities Exchange Commission on September 13, 2004)
**(a)(1)(viii)				Supplement to Offer to Purchase dated October 7, 2004.
(a)(1)(ix)				Press Release issued by Sun Capital Partners on October 21, 2004.
(b)(i)				Loan Authorization Agreement dated September 13, 2004 between Crafts Retail Holding Corp. and Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(ii)				Demand Note dated September 13, 2004 of Crafts Retail Holding Corp. in favor of Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(iii)				Guaranty dated September 13, 2004 of Sun Capital Partners III, LP in favor of Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(iv)				Guaranty dated September 13, 2004 of Sun Capital Partners III QP, LP in favor of Harris Trust and Savings Bank (incorporated by reference to the Schedule 13D of the filing persons filed with the Securities Exchange Commission on September 13, 2004).
(b)(v)				First Amendment to Harris Loan Authorization Agreement dated October 21, 2004 between Crafts Retail Holding Corp. and Harris Trust and Savings Bank.
(b)(vi)				Demand Note dated October 21, 2004 of Crafts Retail Holding Corp. in favor of Harris Trust and Savings Bank.
(b)(vii)				First Amendment to Guaranty dated October 21, 2004 of Sun Capital Partners III, LP in favor of Harris Trust and Savings Bank.
(b)(viii)				First Amendment to Guaranty dated October 21, 2004 of Sun Capital Partners III QP, LP in favor of Harris Trust and Savings Bank.
(c)(i)				Opinion of SunTrust addressed to the board of directors of the Company, dated September 13, 2004 (incorporated by reference to Exhibit (a)(6) and included as Annex A to Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).


EXHIBIT				DESCRIPTION
(c)(ii)				Fairness Presentation of SunTrust given to the board of directors of the Company on September 7, 2004 (incorporated by reference to Exhibit (a)(7) Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).
(d)(i)				Agreement and Plan of Merger, dated as of September 13, 2004, by and among Crafts Retail acquisition Corp., Crafts Retail Holding Corp. and the Company (incorporated by reference to Ex. 2.1 to the current Report on Form 8-K/A of the Company filed with the Securities Exchange Commission on September 22, 2004).
(d)(ii)				Stock Purchase Agreement dated September 13, 2004 by and among Crafts Retail Holding Corp., Crafts Retail Acquisition Corp. and certain stockholders of Rag Shops, Inc. (incorporated by reference to Exhibit 10.1 to Rag Shop's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2004).
(d)(iii)				Management Services Agreement dated September 13, 2004 between Rag Shops and Sun Capital Partners Management III, LLC (incorporated by reference to Exhibit 10.2 to Rag Shop's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2004).
(d)(iv)				Confidentiality Agreement, dated May 13, 2004, between Sun and SunTrust (incorporated by reference to Exhibit (e)(4) to Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).
(d)(v)				Letter of Intent, dated August 3, 2004, between Rag Shops and Sun (incorporated by reference to Exhibit (e)(5) to Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).
(d)(vi)				Extension of Letter of Intent, dated August 17, 2004, between Rag Shops and Sun (incorporated by reference to Exhibit (e)(6) to Rag Shop's Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on September 22, 2004).
*(f)				Section 262 of the Delaware General Corporation Law (included as Schedule C of the Offer to Purchase previously filed as Exhibit (a)(1)(i)).
(g)				None.
(h)				None.


*	Previously filed under the same Exhibit number to the Schedule TO filed by the filing persons on September 22, 2004 and incorporated herein by reference.


**	Previously filed under the same Exhibit number to Amendment No. 1 to the Schedule TO filed by the filing persons on October 7, 2004 and incorporated herein by reference.

EXHIBIT (a)(1)(ix) CONTACT: Steven B. Barnett Executive Vice President Rag Shops, Inc. (973) 423-1303 xt 115 FOR IMMEDIATE RELEASE - --------------------- SUN CAPITAL PARTNERS AFFILIATE COMPLETES ACQUISITION OF RAG SHOPS, INC. Boca Raton, FL - October 21, 2004 - Crafts Retail Acquisition Corp., an affiliate of Sun Capital Partners, Inc., announced that it has completed the acquisition of Rag Shops, Inc. (formerly NASDAQ:RAGS). "Rag Shops is one of the nation's leading craft and fabrics retailers, with a well recognized name, loyal customer and supplier base, diverse product offering and more than 1,300 dedicated, knowledgeable employees" stated Michael Fieldstone, a Vice President with Sun Capital. "With the addition of Sun Capital's operational experience, and the substantial financial resources of the equity investors, Rag Shops existing management team is well equipped to strengthen the Company's market position and to take advantage of new opportunities." Jeff Gerstel, President of Rag Shops added, "We are extremely excited to join with Sun Capital as we continue to focus on our vision for the future." ABOUT THE TRANSACTION Approximately 1,910,524 shares of Rag Shops' common stock, or approximately 39.8% of the outstanding shares of Rag Shops, were validly tendered in the tender offer, which expired Wednesday, October 20, 2004 at 11:59 pm (New York City time). The tendered shares, including approximately 10,613 shares subject to guaranteed delivery, were accepted for payment and will be purchased for $4.30 per share, net to the seller without interest in accordance with the terms of the offer. Payment for the shares purchased, as well as those shares tendered by notice of guaranteed delivery, will upon delivery of those shares and other required documentation, be made promptly by The Colbent Corporation, the depositary for the offer. Crafts Retail Acquisition Corp. previously owned approximately 55.7% of the outstanding shares of Rag Shops. These shares, together with the shares validly tendered and purchased in the offer, including shares subject to guaranteed delivery, comprise approximately 95.5% of the outstanding shares of Rag Shops. Because Crafts Retail Acquisition Corp. owned more than 90% of the outstanding shares of Rag Shops, it was permitted to and did effect a short-form merger under Delaware law. No additional stockholder action was required in connection with the "short-form" merger. 2 Each outstanding share of Rag Shops common stock not tendered (other than shares held by Crafts Retail Acquisition Corp., Crafts Retail Holding Corp. and Rag Shops and other than shares owned by stockholders validly exercising appraisal rights under Delaware law) has been converted into the right to receive $4.30 in cash, without interest. Crafts Retail Acquisition Corp. intends to promptly send holders of such shares information regarding payment of the merger consideration or the exercise of their appraisal rights. Rag Shops stockholders who hold their shares through a broker will be receiving such information from their broker. Funding for the payment of the shares purchased in the offer and of the consideration in the merger consisted of a combination of equity contributions from affiliates of Sun Capital as well as a loan provided by Harris Trust and Savings Bank. The total payment of approximately $9.2 million consisted of (1) an aggregate of approximately $3 million dollars of equity contributions from affiliates of Sun Capital and (2) approximately $6.2 million in funds obtained by Crafts Retail Holding Corp. pursuant to the loan provided by Harris Trust and Savings Bank and guaranteed by affiliates of Sun Capital. The loan was made by way of an amendment to an earlier loan agreement increasing the aggregate principal amount available under the loan from $8 million to $15 million. Crafts Retail Holding Corp. contributed the proceeds of the loan to Crafts Retail Acquisition Corp. in order to fund the purchase of the shares and the merger consideration. The loan is payable on demand and carries an interest rate of Harris Trust's prime rate plus 0.25%. ABOUT SUN CAPITAL PARTNERS Sun Capital Partners, Inc. is a leading private investment firm focused on leveraged buyouts and investments in market leading companies that can benefit from our in-house operating professionals and experience. Sun Capital affiliates invest in companies typically with the number one or two market position in their industry, long-term competitive advantages and significant barriers to entry. Sun Capital affiliates have invested in more than 70 companies since our inception in 1995 with combined sales in excess of $18.0 billion. Sun Capital has offices in Boca Raton, Florida, Los Angeles, New York and London, but has acquired and manages companies worldwide. Sun Capital has extensive retail investments including Sam Goody, SunCoast, Media Play, Anchor Blue, MOST, Wickes Furniture, Bruegger's Bagels, Nationwide Mattress and Furniture Warehouse, The Mattress Firm and Mervyn's. For more information about Sun Capital, please visit www.SunCapPart.com. - ------------------ ABOUT RAG SHOPS, INC. Rag Shops, Inc. is a specialty retailer of craft and fabric merchandise operating approximately 69 retail stores in New Jersey, Florida, Pennsylvania, New York and Connecticut. Rag Shops website can be found at www.ragshop.com. ----------------

EXHIBIT (b)(v) CRAFTS RETAIL HOLDING CORP. FIRST AMENDMENT TO HARRIS LOAN AUTHORIZATION AGREEMENT Harris Trust and Savings Bank Chicago, Illinois Ladies and Gentlemen: Reference is hereby made to that certain Harris Loan Authorization Agreement dated as of September 13, 2004 (the Harris Loan Authorization Agreement, as the same may be amended from time to time, being referred to herein as the "Loan Agreement"), between the undersigned, Crafts Retail Holding Corp., a Delaware corporation (the "Borrower"), and Harris Trust and Savings Bank (the "Bank"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Loan Agreement. The Borrower has requested that as of October 21, 2004, the Bank increase the amount of Maximum Credit available to the Borrower under the Loan Agreement and to make certain other amendments to the Loan Agreement, and the Bank is willing to do so under the terms and conditions set forth in this agreement (herein, the "Amendment"). SECTION 1. AMENDMENTS. Upon the satisfaction of all of the conditions set forth in Section 3 below, the following amendments to the Loan Agreement shall become immediately effective without further action: 1.1 The Loan Agreement shall be and hereby is amended by deleting the amount "$8,000,000" in each place it appears therein and substituting therefor the amount "$15,000,000". 1.2. The Loan Agreement shall be and hereby is amended by deleting the Note appearing as Exhibit A thereto, and by substituting in lieu thereof the "Demand Note" attached to this Amendment as "Exhibit A". SECTION 2. NEW NOTE. In replacement for that certain Note payable to the order of Harris Trust and Savings Bank dated as of September 13, 2004 in the principal amount of $8,000,000 (the "Previous Note"), the Borrower shall execute and deliver to the Bank a new demand note in the amount of $15,000,000 dated as of the date of its issuance and otherwise in the form of Exhibit A attached hereto (the "New Note") which shall substitute for the Bank's Previous Note and shall evidence the loans outstanding to the Bank. All references in the Loan Agreement to the Note shall be deemed references to the New Note. SECTION 3. CONDITIONS PRECEDENT. 3.1. The Borrower and the Bank shall have executed and delivered this Amendment. 3.2. The Borrower shall pay to the Bank an amendment fee in the amount of $17,500.00. 3.3. The Bank shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment to the extent the Bank or its counsel may reasonably request. 3.4. Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Bank and its counsel. 3.5. Sun Capital Partners III, LP and Sun Capital Partners III QP, LP shall each have executed and delivered to the Bank their consent to this Amendment in the form set forth below. SECTION 4. REPRESENTATIONS. In order to induce the Bank to execute and deliver this Amendment, the Borrower hereby represents to the Bank that as of the date hereof the representations and warranties set forth in the Loan Agreement are and shall be and remain true and correct and the Borrower is in compliance with the terms and conditions of the Loan Agreement. SECTION 5. MISCELLANEOUS. 5.1. Except as specifically amended herein, the Loan Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Loan Agreement, the Note, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Loan Agreement, any reference in any of such items to the Loan Agreement being sufficient to refer to the Loan Agreement as amended hereby. 5.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois. [SIGNATURE PAGE TO FOLLOW] -2- This First Amendment to Harris Loan Authorization Agreement is entered into as of this 21st day of October, 2004. CRAFTS RETAIL HOLDING CORP. By: /s/ Kevin Feinblum --------------------------------- Name: Kevin Feinblum -------------------------- Title: Vice President -------------------------- Accepted and agreed to. HARRIS TRUST AND SAVINGS BANK By: /s/ Kathleen J. Collins --------------------------------- Name Kathleen J. Collins -------------------------- Title Vice President -------------------------- -3- EXHIBIT A DEMAND NOTE $15,000,000 October 21, 2004 ON DEMAND, for value received, the undersigned, CRAFTS RETAIL HOLDING CORP., a Delaware corporation, promises to pay to the order of HARRIS TRUST AND SAVINGS BANK (the "Bank") at its offices at 111 West Monroe Street, Chicago, Illinois, the principal sum of Fifteen Million and No/100 Dollars ($15,000,000.00) or, if less, the amount outstanding under the Harris Loan Authorization Agreement referred to below together with interest payable at the times and at the rates and in the manner set forth in the Harris Loan Authorization Agreement referred to below. This Note evidences borrowings and other extensions of credit for the account of the undersigned under that certain Harris Loan Authorization Agreement dated as of September 13, 2004, between the undersigned and the Bank; and this Note and the holder hereof are entitled to all the benefits provided for under the Harris Loan Authorization Agreement, to which reference is hereby made for a statement thereof. The undersigned hereby waives presentment and notice of dishonor. The undersigned agrees to pay to the holder hereof all court costs and other reasonable expenses, legal or otherwise, incurred or paid by such holder in connection with the collection of this Note. It is agreed that this Note and the rights and remedies of the holder hereof shall be construed in accordance with and governed by the laws of the State of Illinois. This Note is issued in substitution and replacement for, and evidences indebtedness previously evidenced by, that certain Note of Crafts Retail Holding Corp. dated September 13, 2004, payable to the Bank in the principal amount of $8,000,000. CRAFTS RETAIL HOLDING, CORP. By: ------------------------------ Name: ----------------------- Title: ----------------------- GUARANTOR'S ACKNOWLEDGEMENT AND CONSENT The undersigned, Sun Capital Partners III, LP, heretofore executed and delivered to the Bank a Guaranty dated as of September 13, 2004 (as amended from time to time, the "Guaranty"). The undersigned hereby consents to the First Amendment to Harris Loan Authorization Agreement as set forth above and confirms that its Guaranty and all of the undersigned's obligations thereunder remain in full force and effect. The undersigned further agrees that the consent of the undersigned to any further amendments to the Harris Loan Authorization Agreement shall not be required as a result of this consent having been obtained, except to the extent, if any, required by the Guaranty referred to above. SUN CAPITAL PARTNERS III, LP By: Sun Capital Advisors III, LP Its: General Partner By: Sun Capital Partners III, LLC Its: General Partner By: -------------------------- Its: A Member GUARANTOR'S ACKNOWLEDGEMENT AND CONSENT The undersigned, Sun Capital Partners III QP, LP, heretofore executed and delivered to the Bank a Guaranty dated as of September 13, 2004 (as amended from time to time, the "Guaranty"). The undersigned hereby consents to the First Amendment to Harris Loan Authorization Agreement as set forth above and confirms that its Guaranty and all of the undersigned's obligations thereunder remain in full force and effect. The undersigned further agrees that the consent of the undersigned to any further amendments to the Harris Loan Authorization Agreement shall not be required as a result of this consent having been obtained, except to the extent, if any, required by the Guaranty referred to above. SUN CAPITAL PARTNERS III QP, LP By: Sun Capital Advisors III, LP Its: General Partner By: Sun Capital Partners III, LLC Its: General Partner By: -------------------------- Its: A Member

EXHIBIT (b)(vi) DEMAND NOTE $15,000,000 October 21, 2004 ON DEMAND, for value received, the undersigned, CRAFTS RETAIL HOLDING CORP., a Delaware corporation, promises to pay to the order of HARRIS TRUST AND SAVINGS BANK (the "Bank") at its offices at 111 West Monroe Street, Chicago, Illinois, the principal sum of Fifteen Million and No/100 Dollars ($15,000,000.00) or, if less, the amount outstanding under the Harris Loan Authorization Agreement referred to below together with interest payable at the times and at the rates and in the manner set forth in the Harris Loan Authorization Agreement referred to below. This Note evidences borrowings and other extensions of credit for the account of the undersigned under that certain Harris Loan Authorization Agreement dated as of September 13, 2004, between the undersigned and the Bank; and this Note and the holder hereof are entitled to all the benefits provided for under the Harris Loan Authorization Agreement, to which reference is hereby made for a statement thereof. The undersigned hereby waives presentment and notice of dishonor. The undersigned agrees to pay to the holder hereof all court costs and other reasonable expenses, legal or otherwise, incurred or paid by such holder in connection with the collection of this Note. It is agreed that this Note and the rights and remedies of the holder hereof shall be construed in accordance with and governed by the laws of the State of Illinois. This Note is issued in substitution and replacement for, and evidences indebtedness previously evidenced by, that certain Note of Crafts Retail Holding Corp. dated September 13, 2004, payable to the Bank in the principal amount of $8,000,000. CRAFTS RETAIL HOLDING, CORP. By: /s/ Kevin Feinblum ---------------------------------- Name: Kevin Feinblum --------------------------- Title: Vice President ---------------------------

EXHIBIT (b)(vii) SUN CAPITAL PARTNERS III, LP FIRST AMENDMENT TO GUARANTY Harris Trust and Savings Bank Chicago, Illinois Ladies and Gentlemen: Reference is hereby made to that certain Guaranty dated as of September 13, 2004 (the Guaranty, given in consideration of advances made or to be made, or credit given, or to be given, or other financial accommodation afforded or to be afforded to Crafts Retail Holding Corp., a Delaware corporation (the "Borrower"), as the same may be amended from time to time, being referred to herein as the "Guaranty", between the undersigned, Sun Capital Partners III, LP, a limited partnership (the "Guarantor"), and Harris Trust and Savings Bank (the "Bank")). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Guaranty. The Borrower has requested that as of October 21, 2004, the Bank increase the amount of Maximum Credit as set forth in that certain Harris Loan Authorization Agreement dated as of September 13, 2004 between the Borrower and the Bank, as amended from time to time (the "Loan Agreement") to $15,000,000; and The Borrower has requested that as of October 21, 2004, the Bank increase the liability limitation set forth in the Guaranty, and the Bank is willing to do so under the terms and conditions set forth in this agreement (herein, the "Amendment"). SECTION 1. AMENDMENTS. Subject to the satisfaction of all of the conditions precedent set forth in Section 2 below, the Guaranty shall be and hereby is amended as follows: 1.1 Clause (y) of the second sentence of the first paragraph of the Guaranty shall be amended and restated in its entirety to read as follows: "(y) Three Hundred Thousand and No/100 Dollars ($300,000.00) plus interest on all loans and/or advances hereunder and all expenses hereinbefore mentioned." SECTION 2. CONDITIONS PRECEDENT. 2.1. The Guarantor and the Bank shall have executed and delivered this Amendment. 2.2. The conditions precedent appearing in Section 3 of that certain First Amendment to Harris Loan Authorization Agreement between the Borrower and the Bank of even date herewith shall have been satisfied. 2.3. The Bank shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment to the extent the Bank or its counsel may reasonably request. 2.4. Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Bank and its counsel. SECTION 3. REPRESENTATIONS. In order to induce the Bank to execute and deliver this Amendment, the Guarantor hereby represents to the Bank that as of the date hereof the representations and warranties set forth in the Guaranty are and shall be and remain true and correct and the Guarantor is in compliance with the terms and conditions of the Guaranty. SECTION 4. MISCELLANEOUS. 4.1. Except as specifically amended herein, the Guaranty shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Guaranty, the Loan Agreement, the Note, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Guaranty, any reference in any of such items to the Guaranty being sufficient to refer to the Guaranty as amended hereby. 4.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois. [SIGNATURE PAGE TO FOLLOW] -2- This First Amendment to Guaranty is entered into as of this 21st day of October, 2004. SUN CAPITAL PARTNERS III, LP By: Sun Capital Advisors III, LP Its: General Partner By: Sun Capital Partners III, LLC Its: General Partner By Name /s/ Rodger Krouse --------------------------------- Title A Member Accepted and agreed to. HARRIS TRUST AND SAVINGS BANK By Name /s/ Kathleen J. Collins --------------------------------- Title Vice President --------------------------------- -3-

EXHIBIT (b)(viii) SUN CAPITAL PARTNERS III QP, LP FIRST AMENDMENT TO GUARANTY Harris Trust and Savings Bank Chicago, Illinois Ladies and Gentlemen: Reference is hereby made to that certain Guaranty dated as of September 13, 2004 (the Guaranty, given in consideration of advances made or to be made, or credit given, or to be given, or other financial accommodation afforded or to be afforded to Crafts Retail Holding Corp., a Delaware corporation (the "Borrower"), as the same may be amended from time to time, being referred to herein as the "Guaranty", between the undersigned, Sun Capital Partners III QP, LP, a limited partnership (the "Guarantor"), and Harris Trust and Savings Bank (the "Bank")). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Guaranty. The Borrower has requested that as of October 21, 2004, the Bank increase the amount of Maximum Credit as set forth in that certain Harris Loan Authorization Agreement dated as of September 13, 2004 between the Borrower and the Bank, as amended from time to time (the "Loan Agreement") to $15,000,000; and The Borrower has requested that as of October 21, 2004, the Bank increase the liability limitation set forth in the Guaranty, and the Bank is willing to do so under the terms and conditions set forth in this agreement (herein, the "Amendment"). SECTION 1. AMENDMENTS. Subject to the satisfaction of all of the conditions precedent set forth in Section 2 below, the Guaranty shall be and hereby is amended as follows: 1.1 Clause (y) of the second sentence of the first paragraph of the Guaranty shall be amended and restated in its entirety to read as follows: "(y) Fourteen Million Seven Hundred Thousand and No/100 Dollars ($14,700,000.00) plus interest on all loans and/or advances hereunder and all expenses hereinbefore mentioned." SECTION 2. CONDITIONS PRECEDENT. 2.1. The Guarantor and the Bank shall have executed and delivered this Amendment. 2.2. The conditions precedent appearing in Section 3 of that certain First Amendment to Harris Loan Authorization Agreement between the Borrower and the Bank of even date herewith shall have been satisfied. 2.3. The Bank shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment to the extent the Bank or its counsel may reasonably request. 2.4. Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Bank and its counsel. SECTION 3. REPRESENTATIONS. In order to induce the Bank to execute and deliver this Amendment, the Guarantor hereby represents to the Bank that as of the date hereof the representations and warranties set forth in the Guaranty are and shall be and remain true and correct and the Guarantor is in compliance with the terms and conditions of the Guaranty. SECTION 4. MISCELLANEOUS. 4.1. Except as specifically amended herein, the Guaranty shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Guaranty, the Loan Agreement, the Note, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Guaranty, any reference in any of such items to the Guaranty being sufficient to refer to the Guaranty as amended hereby. 4.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois. [SIGNATURE PAGE TO FOLLOW] -2- This First Amendment to Guaranty is entered into as of this 21st day of October, 2004. SUN CAPITAL PARTNERS III QP, LP By: Sun Capital Advisors III, LP Its: General Partner By: Sun Capital Partners III, LLC Its: General Partner By Name /s/ Rodger Krouse ---------------------------- Title A Member Accepted and agreed to. HARRIS TRUST AND SAVINGS BANK By Name /s/ Kathleen J. Collins ---------------------------- Title Vice President ---------------------------- -3-

Transaction valuation(1)

Amount of filing fee(2)

$9,775,981