Exhibit 10.70

 

SECURITIES PLEDGE AGREEMENT

 

This Securities Pledge Agreement (this “Pledge Agreement”), dated as of April
23, 2003, is by and among FAO, Inc. (“FAO”), a Delaware corporation, FAO
Schwarz, Inc. (“Schwarz”), a Delaware corporation, ZB Company, Inc. (“ZB”), a
Delaware corporation, The Right Start, Inc. (“Right Start”), a Delaware
corporation, and Targoff-RS, LLC (“Targoff”), a New York limited liability
company (FAO, Schwarz, ZB, Right Start, and Targoff being referred to
collectively herein as the “Pledgors” and each, individually, as a “Pledgor”),
and Fleet Retail Finance Inc., in its capacity as administrative and collateral
agent (in such capacity, together with its successors and assigns, the “Agent”),
for the benefit of the various financial institutions who are from time to time
are Lenders under the Credit Agreement described below (each, a “Beneficiary”
and, collectively, the “Beneficiaries”).

 

Preliminary Statement

 

A.            The Pledgors, the Agent, and the Lenders from time to time parties
thereto have entered into a Loan and Security Agreement dated as of April 23,
2003 (as amended, supplemented or otherwise modified from time to time, the
“Credit Agreement”), pursuant to which Lenders have agreed to make loans and
grant other financial accommodations to the Pledgors subject to the terms and
conditions set forth in the Credit Agreement.  Capitalized terms used but not
defined herein have the respective meanings assigned to them in the Credit
Agreement.

 

B.            FAO owns 100% of the issued and outstanding capital stock of
Schwarz, ZB, Right Start and 100% of the membership interest in Targoff. 
Schwarz, ZB, Right Start, and Targoff do not have any Subsidiaries as of the
date of this Agreement.

 

C.            One of the conditions precedent to the Lenders’ obligations under
the Credit Agreement is that the Pledgors shall execute and deliver this Pledge
Agreement to secure the payment and performance of the Obligations (as defined
in the Credit Agreement).

 

NOW, THEREFORE, in order to induce the Lenders to enter into the Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the Pledgors and Agent hereby
agree as follows:

 

1.             Definitions.  All capitalized terms used but not elsewhere
defined in this Pledge Agreement shall have the respective meanings ascribed to
such terms in the Credit Agreement. The following terms shall have the following
meanings in this Pledge Agreement:

 

“Collateral” means, with respect to each Pledgor, all right, title and interest
of such Pledgor in, under and to all Securities of each Pledged Company, whether
now or hereafter owned, acquired or held by a Pledgor or in which a Pledgor may
now have or hereafter acquire an interest, including without limitation all
shares of the capital stock of, and membership interests in, each Pledged
Company and all rights to purchase capital stock of, and membership interests
in, each Pledged Company, registered in the name of

 

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

 

such Pledgor, as shown on Exhibit A hereto, and all dividends, distributions and
other amounts or additional securities of each Pledged Company or any successor
in interest to each Pledged Company and other property to which such Pledgor or
any successor in interest to Pledgor (with or without additional consideration)
is or becomes entitled by virtue of the ownership by such Person of any of the
Securities or as the result of any corporate reorganization, merger,
consolidation, stock split, stock dividend, distribution, conversion, preemptive
right or otherwise, and the proceeds thereof.

 

“Pledged Company” means, with respect to each Pledgor, each Subsidiary from time
to time of such Pledgor.

 

“Secured Obligations” means (a) the Obligations (as defined in the Credit
Agreement) and (b) all of the Pledgors’ obligations under this Pledge Agreement.

 

“Securities” means the capital stock and membership interests from time to time
of a Pledged Company and any warrants, options or other rights to purchase the
capital stock of, or membership interest in, such Pledged Company, however
evidenced or arising, and all certificates and other instruments evidencing such
capital stock, warrants, options and other rights to purchase capital stock and
membership interests, with duly executed powers or other instruments of transfer
separate from certificates, in form and substance satisfactory to Agent and duly
endorsed in blank.

 

2.             Pledge of Collateral.

 

2.1          Pledge.  In order to secure the Secured Obligations, each Pledgor
hereby pledges, grants a security interest in, assigns, transfers, delivers,
sets over and confirms to Agent for the ratable benefit of the Agent and the
Lenders all Collateral now owned or hereafter acquired by such Pledgor.

 

2.2          Delivery.  Each Pledgor is depositing with the Agent simultaneously
herewith, all certificates, warrants, options, voting or other rights to acquire
a certificate of each Pledged Company, as described on Exhibit A attached
hereto.  In the event that any of a Pledgor’s ownership interest or other rights
in a Pledged Company may not have been evidenced by a certificate prior to the
date hereof, such Pledgor has caused such Pledged Company to certificate such
interests and rights prior to the date hereof, and such certificates are
included on Exhibit A attached hereto.

 

3.             Representations, Warranties and Covenants.  Each Pledgor hereby
represents, warrants and covenants to Agent that:

 

(i)                                     the Collateral listed on Exhibit A with
respect to Pledgor constitutes all of the Securities of all of Pledgor’s
Subsidiaries on the date hereof, and all of such Securities are certificated;

 

(ii)                                  unless otherwise noted on Exhibit A with
respect to any Subsidiary of Pledgor, such Collateral represents 100% of the
issued and outstanding capital stock (or

 

2

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

 

similar interest) and warrants, options and other rights to purchase capital
stock (or similar interest) of such Subsidiary of Pledgor;

 

(iii)                               Pledgor is the sole legal and beneficial
owner of the Collateral pledged by Pledgor to Agent pursuant to this Pledge
Agreement;

 

(iv)                              such Collateral is validly issued, fully paid
and non-assessable and is registered in the name of Pledgor,

 

(v)                                 the pledge of such Collateral pursuant to
the terms of this Pledge Agreement creates a valid, and, upon the delivery of
certificates representing the certificated Securities to Agent, or upon
registration of Agent’s lien on uncertificated Securities, if any, on the books
and records of the Pledged Company, perfected first Lien on such Collateral in
favor of Agent, provided that Agent maintains “control” (as defined in the
Uniform Commercial Code as in effect in The State of New York) of such
Collateral;

 

(vi)                              none of such Collateral is subject to any lien
of any kind whatsoever, except for the first lien on such Collateral granted to
Agent hereby and Permitted Liens;

 

(vii)                           no authorization, approval or other action by,
or notice to or filing with, any governmental body is required for the pledge by
Pledgor of such Collateral pursuant to the terms of this Pledge Agreement; and

 

(viii)                        until all of the Secured Obligations (other than
contingent indemnification Secured Obligations to the extent no claim giving
rise thereto has been asserted) have been paid and performed in full, Pledgor:
(A) will not create or permit to exist any lien upon or with respect to such
Collateral, except for the first lien thereon granted to Agent by this Pledge
Agreement and Permitted Liens, and (B) will not sell, transfer, convey, assign,
or otherwise divest Pledgor’s interest in such Collateral, or any part thereof,
to any other Person.

 

Each Pledgor further represents and warrants to Agent that the state and county
where Pledgor’s chief executive office is located are as set forth on Exhibit B
hereto.

 

4.             Additional Securities; Stock Splits; Stock Dividends.

 

4.1          Additional Securities.  Each Pledgor agrees that in the event that
Pledgor now is, or hereafter becomes, entitled (with or without additional
consideration) to other or additional Securities as the result of any
acquisition, reorganization, merger, consolidation, stock split, stock dividend,
conversion, exercise of warrant or preemptive right or otherwise of any Pledged
Company, Pledgor shall:

 

4.1.1       Delivery.  Cause the issuer of such other or additional Securities
(a) to certificate such Securities and to deliver to Agent all such certificates
and other documents, if any, evidencing the ownership by Pledgor of such
additional capital stock

 

3

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

 

or membership interests and hereby authorizes and empowers Agent to demand the
same from such issuer, and agrees if such certificates and other documents are
delivered to Pledgor, to take possession thereof in trust for Agent or (b) in
the case of uncertificated Securities that the Agent consents to in writing,
cause the lien on such Securities created hereby in favor of the Agent to be
registered in the books and records of the issuer and hereby authorizes and
empowers Agent to demand the same from such issuer; and

 

4.1.2       UCC Financing Statements and Assignments Separate from Certificate. 
Deliver to Agent (i) such UCC financing statements and other documents executed
by Pledgor as Agent reasonably may request to perfect Agent’s security interest
in such other or additional Securities and (ii) a stock power (or similar power)
separate from certificate with respect to such other or additional Securities,
executed in blank by Pledgor; and

 

4.1.3       Additional Documents.  Deliver to Agent such other certificates,
documents and other instruments as Agent may reasonably request in connection
with the pledge of such other or additional Securities by Pledgor.

 

4.2          Additional Collateral.  Each Pledgor agrees that such other or
additional Securities of Pledged Companies shall constitute a portion of the
Collateral and be subject to this Pledge Agreement in the same manner and to the
same extent as the Securities pledged hereby to Agent on the date hereof.

 

5.             Voting Power; Distributions.  Unless and until the Agent shall
have given written notice to the Borrowers’ Representative in accordance with
Section 6.1 hereof, each Pledgor shall be entitled to exercise all voting powers
in all matters pertaining to its Collateral or otherwise, for any purpose not
inconsistent with, or in violation of, this Pledge Agreement or any other Loan
Documents.  Unless and until Agent shall have given written notice to the
Borrowers’ Representative in accordance with Section 6.1 hereof, the Pledgors
shall be entitled to receive dividends in accordance with present practice,
provided, however upon such notice, and unless and until all of the Secured
Obligations (other than contingent indemnification Secured Obligations to the
extent no claim giving rise thereto has been asserted) have been performed and
paid in full, Pledgors shall not be entitled to receive any dividends or
distributions with respect to any portion of the Collateral.  If any such
dividends or distributions are received by any Pledgor in violation of the terms
of this Section 5, such distributions shall be (i) held in trust by such Pledgor
on behalf of Agent, (ii) turned over to Agent by Pledgor immediately upon
receipt thereof and (iii) deemed to constitute a portion of the Collateral
pledged by Pledgor to Agent hereunder.

 

6.             Remedies.

 

6.1          Demand and Remedies.  At any time after the occurrence and during
the continuance of a Default or Event of Default, Agent may, at its option,
evidenced by written notice to Borrowers’ Representative at the address set
forth in Section 9.6 hereof, and without limitation of any of Agent’s other
rights and remedies, exercise any or all of the following remedies:

 

4

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

 

6.1.1                     Registration.  Cause all or any part of the Collateral
to be registered in its name or in the name of its nominee;

 

6.1.2                   Voting_Power. Exercise all voting powers pertaining to
all or any part of the Collateral and otherwise act with respect thereto as
though Agent were the owner thereof;

 

6.1.3                   Distributions.  Receive all dividends and distributions
of any kind whatsoever on all or any part of the Collateral;

 

6.1.4                   Collection; Conversion.  Exercise any and all rights of
collection, conversion or exchange, and any and all other rights, privileges,
options or powers of Pledgor pertaining or relating to all or any part of the
Collateral;

 

6.1.5                   Sale of Collateral.  Subject to any applicable state or
federal securities laws, sell, assign and deliver the whole, or from time to
time, all or any part of the Collateral at any broker’s board or at any private
sale or at public auction, with or without demand for performance or
advertisement of the time or place of sale or adjournment thereof or otherwise,
and free from any right of redemption (all of which hereby expressly are waived
by each Pledgor) for cash, for credit or for other property, for immediate or
future delivery, and for such price and on such terms and in such manner as is
commercially reasonable.

 

6.1.6                     Other Remedies.  Exercise any other remedy
specifically granted under this Pledge Agreement or now or hereafter existing in
equity, or at law, by virtue of statute or otherwise; and

 

6.1.7                   Power of Attorney.  With respect to the actions
described in each of Section 6.1.2 and Section 6.1.4 above, each Pledgor hereby
irrevocably constitutes and appoints Agent its proxy and attorney-in-fact with
full power of substitution and acknowledges that the constitution and
appointment of such proxy and attorney-in-fact are coupled with an interest and
are irrevocable until all Secured Obligations (other than contingent
indemnification Secured Obligations to the extent no claim giving rise thereto
has been asserted) are paid and performed in full.

 

6.2          Agreement to Sell Collateral.  For the purposes of this Section 6,
an agreement to sell all or any part of the Collateral shall be treated as a
sale thereof and Agent shall be free to carry out such sale pursuant to such
agreement, and no Pledgor shall be entitled to the return of any of the same
subject thereto, notwithstanding the fact that after Agent shall have entered
into such an agreement, all defaults hereunder, under the Credit Agreement or
under any Loan Document may have been remedied or all Secured Obligations may
have been paid and/or performed in full.

 

5

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

 

6.3          Agent May Bid.  At any sale made pursuant to Section 6.1 above,
Agent and/or any Beneficiary may bid for and purchase, free from any right of
equity or redemption on the part of any Pledgor (the same hereby being waived
and released by each Pledgor), any part or all of the Collateral that is offered
for sale, and Agent and/or any Beneficiary, upon compliance with the terms of
sale, may hold, retain and dispose of such Collateral without further
accountability therefor.

 

6.4          Proceeds of Sale.  The proceeds of any sale of the whole or any
part of the Collateral and any other monies at the time held by Agent under the
provisions of this Pledge Agreement shall be applied in accordance with the
terms of the Credit Agreement.

 

6.5          No Duty of Agent.  Neither the Agent nor any Beneficiary shall have
any duty to exercise any of the rights, privileges, options or powers or to sell
or otherwise realize upon any of the Collateral, as hereinbefore authorized, and
neither Agent nor any Beneficiary shall be responsible for any failure to do so
or delay in so doing.

 

6.6          Effect of Sale.  Any sale of all or any portion of the Collateral
pursuant to Section 6.2 above shall operate to divest all right, title and
interest of the Pledgor of such Collateral which is the subject of any such
sale.

 

6.7          Securities Laws.  Each Pledgor acknowledges that Agent may be
unable to effect a public sale of all or a part of the Collateral by reason of
prohibitions contained in any applicable state or federal securities law, or
that it may be able to do so only after delay which might adversely affect the
value that might be realized upon the sale of the Collateral.  Accordingly, each
Pledgor agrees that Agent, without the necessity of attempting to cause any
registration of the Collateral to be effected under any applicable state or
federal securities law, may sell the Collateral or any part thereof in one or
more private sales to a restricted group of purchasers who may be required to
agree, among other things, that they are acquiring the Collateral for their own
account, for investment purposes only, and not with a view toward the
distribution or resale thereof.  Each Pledgor agrees that any such private sale
may be at prices or on terms less favorable to the owner of the Collateral sold
than would be the case if such Collateral was sold at public sale, and that any
such private sale shall not be deemed not to have been made in a commercially
reasonable manner solely by virtue of such sale having been a private sale.

 

6.8          Assistance to Realization.  Each Pledgor, at its sole cost and
expense, shall use reasonable efforts to assist Agent and/or any Beneficiary in
obtaining any required approval for any action or transaction required
hereunder, including, but not limited to (i) preparing, signing and filing with
any governmental body the assignor’s or transferor’s portion of any application
or applications for consent necessary or appropriate under applicable law or the
rules and regulations of any governmental body to any sale, assignment or
transfer to Agent or any other Person of any or all Collateral hereunder or any
licenses, franchises, permits and authorizations of Pledgor and (ii) executing
all applications and other documents and taking all other actions reasonably
requested by Agent to enable Agent, its designee or any receiver, trustee or
similar official purchaser to obtain from any Person any required authority
necessary to operate the

 

6

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

 

business of Pledgor provided, nothing herein shall require Pledgor to take any
such action that would violate applicable law.  To the extent permitted by law,
each Pledgor hereby irrevocably appoints Agent its attorney-in-fact with full
power of substitution to execute such applications and documents and take such
actions on behalf of Pledgor.  Each Pledgor acknowledges that the appointment of
Agent as such attorney-in-fact is coupled with an interest and is irrevocable.

 

6.9          Transfer of Control to Other Persons.  Each Pledgor acknowledges
and agrees that a transfer of control of the Collateral may be made to a
receiver, trustee or similar official or to any purchaser of all or any part of
the other Collateral hereunder, pursuant to any court order, public or private
sale, judicial sale, foreclosure or the exercise of any other remedies available
to Agent and/or any Beneficiary hereunder or under applicable law.

 

6.10        Notice of Sale.  Agent shall give not less than 10 Business Days’
prior written notice to Borrowers’ Representative of Collateral subject to any
sale pursuant to this Section 6.  Each Pledgor hereby agrees that such notice is
commercially reasonable.

 

7.             Agent’s Obligations, Custodial Agreement, Performance Rights,
Pledge Does Not Make Agent a Shareholder.  Neither Agent nor any Beneficiary
shall have any duty to protect, preserve or enforce rights against the
Collateral, it being understood that Agent and each Beneficiary shall (i) have
no responsibility for (A) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to the
Collateral, whether or not Agent has or is deemed to have knowledge of such
matters, (B) taking any necessary steps to preserve rights against any parties
with respect to the Collateral or (C) making any capital contributions or other
payments on behalf of any Pledgor and (ii) not be deemed to be a shareholder of
any Pledged Company unless Agent or any Beneficiary purchases or otherwise
retains the applicable portion of the Collateral in connection with a
foreclosure.  Neither Agent nor any Beneficiary shall have any liability or
responsibility for Collateral in its possession, in the absence of its gross
negligence or willful misconduct.

 

8.             Termination of Pledge Agreement.  Upon the payment and
performance in full of all Secured Obligations, Agent shall deliver to Pledgors
the Collateral in its possession and this Pledge Agreement thereupon shall
terminate.

 

9.             Miscellaneous.

 

9.1          Exercise of Rights.  Each Pledgor unconditionally agrees that upon
the occurrence and continuance of a Default or Event of Default, Agent may
exercise its rights and remedies against any one or several Pledgors hereunder
prior to, concurrently with, or subsequent to the exercise by Agent of its other
rights and remedies against such Pledgor or its rights and remedies against any
other Pledgor or obligor under any of the Loan Documents.  The obligations of
each Pledgor under this Pledge Agreement shall be absolute and unconditional and
shall remain in full force and effect without regard to, and shall not be
released or discharged or in any way affected by:

 

9.1.1       Amendments.  Any amendment or modification of or supplement to any
of the Loan Documents;

 

7

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

 

9.1.2       Exercise or Non-Exercise of Rights.  Any exercise or non-exercise of
any right or remedy under any of the Loan Documents, or the granting of any
postponements or extensions for time of payment or other indulgences to Pledgor
or any other Person, or the settlement or adjustment of any claim or the release
or discharge or substitution of any Person primarily or secondarily liable with
respect to any of the Loan Instruments;

 

9.1.3       Bankruptcy.  The institution of any bankruptcy, insolvency,
reorganization, debt arrangement, readjustment, composition, receivership or
liquidation proceedings by or against Pledgor, Borrower or any other Person; or

 

9.1.4       Other Defenses.  Any other circumstance which otherwise might
constitute a defense to, or a discharge of, Pledgor with respect to the Secured
Obligations, other than payment thereof.

 

9.2          Rights Cumulative.  Each and every right, remedy and power granted
to Agent hereunder shall be cumulative and in addition to any other right,
remedy or power specifically granted herein or now or hereafter existing in
equity, at law, by virtue of statute or otherwise and may be exercised by Agent,
from time to time, concurrently or independently and as often and in such order
as Agent may deem expedient.  Any failure or delay on the part of Agent in
exercising any such right, remedy or power, or abandonment or discontinuance of
steps to enforce the same, shall not operate as a waiver thereof or affect the
right of Agent thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not preclude any other or
further exercise thereof or the exercise of any other right, remedy or power,
and no such failure, delay, abandonment or single or partial exercise of rights
of Agent hereunder shall be deemed to establish a custom or course of dealing or
performance among the parties hereto.

 

9.3          Modification.  Any modification or waiver of any provision of this
Pledge Agreement, or any consent to any departure by any Pledgor therefrom,
shall not be effective in any event unless the same is in writing and signed by
Agent and then such modification, waiver or consent shall be effective only in
the specific instance, for the specific Pledgor and for the specific purpose
given.  Any notice to or demand on any Pledgor in any event not specifically
required of Agent hereunder shall not entitle such Pledgor or any other Pledgor
to any other or further notice or demand in the same, similar or other
circumstances unless specifically required hereunder.

 

9.4          Further Assurances.  Each Pledgor agrees that at any time, and from
time to time, after the execution and delivery of this Pledge Agreement,
Pledgor, upon the request of Agent and/or any Beneficiary, promptly will execute
and deliver such further documents and do such further acts and things as Agent
reasonably may request in order to effect fully the purposes of this Pledge
Agreement and to subject to the security interest created hereby any Collateral
intended by the provisions hereof to be covered hereby.  Each Pledgor and Agent
acknowledge their intent that, upon and after the occurrence of a Default or
Event of Default, Agent shall receive, to the fullest extent permitted by law
and governmental policy, all rights necessary or

 

8

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

 

desirable to obtain, use or sell the Collateral, and to exercise all remedies
available to Agent under the Loan Documents, the Uniform Commercial Code or
other applicable law.  Each Pledgor and Agent further acknowledge and agree
that, in the event of changes in law or governmental policy occurring subsequent
to the date hereof that affect in any manner Agent’s rights of access to, or use
or sale of, the Collateral, or the procedures necessary to enable Agent to
obtain such rights of access, use or sale, Agent and Pledgors shall amend this
Pledge Agreement and any other Loan Documents to which any Pledgor is a party,
in such manner as Agent reasonably shall request, in order to provide Agent such
rights to the greatest extent possible consistent with then applicable law and
governmental policy.

 

9.5          Preservation of Collateral.  Each Pledgor agrees that it will
warrant, preserve, maintain and defend, at the reasonable expense of Pledgor,
the right, title and interest of Agent in and to the Collateral of Pledgor and
all right, title and interest represented thereby against all claims, charges
and demands of all Persons whomsoever which are based on a breach of any Secured
Obligations; provided that no Pledgor shall have to take such actions in
violation of applicable law.

 

9.6          Notices.  All notices, requests, demands or other communications
hereunder shall be in writing and may be delivered in hand, mailed by United
States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows, and
in the case of any notices, requests or demands to any Pledgor shall be deemed
to be duly served on, given to or made if sent to the Borrowers’ Representative
as set forth below:

 

FAO, Inc.

2520 Renaissance Boulevard

King of Prussia, Pennsylvania 19406

Attn:  Legal

Fax No.  610-278-7805

 

or at such other address for notice as the Borrowers’ Representative shall last
have furnished in writing to the Agent;

 

and if to Agent, served on, given to or made if sent to:

 

Fleet Retail Finance Inc.

40 Broad Street

Boston, MA 02109

Attn:  James Dore, Managing Director

Fax No.  617-434-4312

 

or at such other address for notice as the Agent shall last have furnished in
writing to the Borrowers’ Representative.

 

9

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

 

9.7          GOVERNING LAW.  THIS PLEDGE AGREEMENT IS A CONTRACT UNDER THE LAWS
OF THE STATE OF NEW YORK, AND SHALL FOR THE PURPOSES OF THIS SECTION 9.7 BE
DEEMED TO BE PERFORMED AND MADE IN THE STATE OF NEW YORK, AND SHALL, PURSUANT TO
NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401 FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK.

 

9.8          Severability.  In the event that any provision of this Pledge
Agreement is deemed to be invalid by reason of the operation of any law or by
reason of the interpretation placed thereon by any court or any other
Governmental Body, this Pledge Agreement shall be construed as not containing
such provision and any and all other provisions hereof which otherwise are
lawful and valid shall remain in full force and effect.

 

9.9          Successors and Assigns.  This Pledge Agreement shall be binding
upon each Pledgor and its successors and permitted assigns, and shall inure to
the benefit of the Agent and its successors and permitted assigns, and for the
benefit of each of the Beneficiaries and their respective successors and
permitted assigns; provided, however, that no Pledgor shall be entitled to
assign or delegate any of its rights or obligations under this Pledge Agreement
without the prior written consent of the Agent, and any purported assignment in
the absence of such consent shall be void.

 

9.10        Counterparts.  This Pledge Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
when taken together shall be deemed to be one and the same instrument.

 

9.11        Notation on Books.  Concurrently with the execution and delivery
hereof, each Pledgor shall cause each Pledged Company to register in its books
the security interests in and the pledge of the Collateral effected hereby.

 

9.12        Joint and Several Agreement.  All obligations of the Pledgors
hereunder are the joint and several obligations and undertakings of each Person
signing this Pledge Agreement as a “Pledgor”.

 

9.13        Headings.  The headings of the sections of this Pledge Agreement
have been inserted for convenience of reference only and shall in no way affect
the construction or interpretation of this Pledge Agreement.

 

10.          Agent’s Right to Specific Performance.  Each Pledgor acknowledges
that Pledgor’s licenses, franchises, permits and authorizations are unique
assets, that there is no adequate remedy at law for failure by Pledgor to comply
with the provisions of Section 6 and that such failure would not be adequately
compensable in monetary damages; therefore, each Pledgor agrees that, in
addition to all other remedies available at law or in equity, Agent and each
Beneficiary shall be entitled to obtain decree(s) of specific performance
entitling it to temporary restraining order(s), preliminary injunction(s) or
permanent injunction(s) to specifically enforce and require specific performance
of the provisions of Section 6.  Each

 

10

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

 

Pledgor agrees that notice shall be adequate for the entry of a decree of
specific performance in respect of any such matter (i) in the case of a
temporary restraining order, upon 72 hours’ prior notice of the hearing hereof
and (ii) in the case of any other proceeding, upon five  (5) days’ prior notice
of the hearing thereof.  Each Pledgor hereby waives all requirements and demands
that Agent give any greater notice of such hearings and further waives all
requirements and demands that Agent post a bond on other surety arrangement in
connection with the issuance of such decree.

 

11.          JURISDICTION AND VENUE.  EACH PLEDGOR AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS PLEDGE AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE PLEDGORS BY MAIL AT THE ADDRESS
SPECIFIED IN SECTION 9.6.  THE PLEDGORS HEREBY WAIVE ANY OBJECTION THAT THEY MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT
SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

 

12.          WAIVER OF JURY TRIAL.  EACH PLEDGOR HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS PLEDGE AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS
AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE AGENT OR ANY LENDER
RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS
AND AGREES THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  Except as
prohibited by law, each Pledgor hereby waives any right it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages.  Each Pledgor (a) certifies that no representative,
agent or attorney of any Lender or the Agent has represented, expressly or
otherwise, that such Lender or Agent would not, in the event of litigation, seek
to enforce the foregoing waivers and (b) acknowledges that the Agent and the
Lenders have been induced to enter into this Pledge Agreement and the other Loan
Documents to which it is a party by, among other things, the waivers and
certifications contained herein.

 

13.          Expenses.  Each Pledgor agrees, jointly and severally, to pay on
demand any and all loss, costs, expenses, demands or liability, including,
without limitation, legal fees, properly incurred or paid by the Agent, and/or
any Beneficiary in connection with the preparation, negotiation, execution,
delivery, administration, and enforcement of any rights and remedies under this
Pledge Agreement, whether or not legal action is instituted.  The language
contained

 

11

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

 

in this Section 13 is not intended, and shall not be construed, to limit in any
way the obligations of any Pledgor under the Credit Agreement.

 

14.          Indemnification.  Each Pledgor agrees, as a separate and
independent primary obligation, to indemnify the Agent and each Beneficiary from
time to time on demand by the Agent (and by payment to the Agent) from and
against any loss, cost, expense, demands or liability of any kind incurred or
suffered by the Agent and/or any Beneficiary as a result of any Pledgor’s
failure to (a) perform the Obligations duly and punctually and/or (b) perform
its obligations under this Pledge Agreement and/or (c) make payment under this
Pledge Agreement in the relevant currency.

 

15.          Agent.  Each Pledgor acknowledges that the Agent may either appoint
a joint agent (with power to act severally as well as jointly) or delegate by
power of attorney or otherwise to any person or any of its rights, trusts,
powers, authorities or discretions vested in it in respect of this Pledge
Agreement for any purpose, including for the purpose of ensuring the efficacy
and enforceability of, and enforcement of, this Pledge Agreement.

 

12

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

 

IN WITNESS WHEREOF, each Pledgor and Agent have caused this Pledge Agreement to
be executed as of the date first above written.

 

 

FAO, INC.

 

 

 

 

By:

/s/ Jerry R. Welch

 

 

 

Name: Jerry R. Welch

 

 

Title: Chief Executive Officer and President

 

 

 

 

FAO SCHWARZ, INC.

 

 

 

 

By:

/s/ Jerry R. Welch

 

 

 

Name: Jerry R. Welch

 

 

Title: Chief Executive Officer and President

 

 

 

 

ZB COMPANY, INC.

 

 

 

 

By:

/s/ Jerry R. Welch

 

 

 

Name: Jerry R. Welch

 

 

Title: Chief Executive Officer and President

 

 

 

 

THE RIGHT START, INC.

 

 

 

 

By:

/s/ Jerry R. Welch

 

 

 

Name: Jerry R. Welch

 

 

Title: Chief Executive Officer and President

 

 

 

 

TARGOFF-RS, LLC

 

 

 

 

By: FAO, Inc., its sole member

 

 

 

By:

/s/ Jerry R. Welch

 

 

 

Name: Jerry R. Welch

 

 

Title: Chief Executive Officer and President

 

 

 

 

FLEET RETAIL FINANCE INC., as Agent

 

 

 

 

By:

/s/ Christine M. Scott

 

 

 

Name: Christine M. Scott

 

 

Title: Vice President

 

13

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

 

Exhibit A

 

Collateral

 

Pledgor

 

Subsidiary

 

Certificate
No.

 

Number of
Shares (or
Percentage
Interest)

 

FAO, Inc.

 

FAO Schwarz, Inc.

 

2

 

1000

 

 

 

 

 

 

 

 

 

FAO, Inc.

 

ZB Company, Inc.

 

2

 

1000

 

 

 

 

 

 

 

 

 

FAO, Inc.

 

The Right Start, Inc.

 

1

 

100

 

 

 

 

 

 

 

 

 

FAO, Inc.

 

Targoff-RS, LLC

 

1

 

100

%

 

14

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

 

Exhibit B

 

Chief Executive Offices

 

 

As to each Pledgor:

 

2520 Renaissance Boulevard

King of Prussia, Pennsylvania 19406

 

15

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