Exhibit 10.1


 


FIRST AMENDMENT TO LOAN AND SECURITY
AGREEMENT


 


THIS FIRST AMENDMENT
TO LOAN AND SECURITY AGREEMENT (this “Amendment”)
is executed as of August 27, 2003 by and among FAO, INC., a Delaware corporation, FAO SCHWARZ, INC., a Delaware corporation, ZB COMPANY, INC., a Delaware corporation, THE RIGHT START, INC., a Delaware
corporation, and TARGOFF-RS, LLC,
a New York limited liability company (collectively, the “Borrowers”);
the lenders from time to time parties thereto (collectively, the “Lenders”
and each individually, a “Lender”); FLEET
RETAIL FINANCE INC., as Administrative Agent, Collateral Agent and
Syndication Agent for the Lenders (in each such capacity, with its successors
and assigns, the “Agent”); and CONGRESS
FINANCIAL CORPORATION (CENTRAL) and WELLS FARGO RETAIL FINANCE II, LLC, as Co-Documentation
Agents.


 


RECITALS


 


A.                                   The
Borrowers, the Lenders and the Agent are parties to that certain Loan and
Security Agreement dated as of April 23, 2003 (as amended, extended,
supplemented or otherwise modified from time to time, the “Loan
Agreement”).  Capitalized terms used
herein without definition have the meanings assigned to them in the Loan
Agreement.


 


B.                                     The
Borrowers have requested that they be permitted to provide another Availability
Letter of Credit in the aggregate maximum drawing amount of $6,000,000.


 


C.                                     The
Borrowers have also informed the Lenders and the Agent that the Kayne Existing
Indebtedness Holders are Richard Kayne and Fortune Twenty-Fifth, Inc. and that
there will be additions to the Kayne Credit Support Indebtedness Holders based
upon the requested additional Availability Letter of Credit.


 


D.                                    The
Lenders signing below are willing to consent to the Borrowers’ request on the
terms and conditions hereinafter set forth.


 


E.                                      The
Borrowers have informed the Agent that they failed as required by Section 10.1
of the Loan Agreement to maintain at least $5,000,000 in Excess Availability on
August 25 through the date hereof and have requested that the Lenders agree to
waive such default.  The Lenders are
willing to provide the requested waiver but only upon the terms and conditions
hereinafter set forth.


 


NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:


 


I.                                         AMENDMENTS
TO LOAN AGREEMENT.


 


A.                                   Definitions.  The following definitions are amended to
read in their entirety as follows:


 

















 


“$5,000,000
AVAILABILITY LETTER OF CREDIT.  A letter
or letters of credit in Agent’s possession in form and substance satisfactory
to the Agent in its sole discretion in the aggregate maximum drawing amount of
$5,000,000, naming the Agent as beneficiary and with an expiry date of November
30, 2003, with the Old Kayne Credit Support Indebtedness Holders as the obligors
thereunder, under which the Agent may draw the amount thereof in one (1) draw
(x) upon the occurrence of any Event of Default, (y) upon the occurrence of any
Default within fourteen (14) days prior to or on such expiry date, or (z) at
any time within fourteen (14) days prior to or on such expiry date, if an Event
of Default would exist if the $5,000,000 Availability Letter of Credit were to
expire on such day.  For purposes of
determining whether an Event of Default would exist under Section 10.1 of this
Agreement within fourteen (14) days prior to or on such expiry date, the
calculation of Excess Availability shall exclude the $6,000,000 Availability
Letter of Credit from the Borrowing Base and from the Tranche B Borrowing Base
(notwithstanding the definitions of “Borrowing Base” and “Tranche B Borrowing
Base”).


 


“$6,000,000
AVAILABILITY LETTER OF CREDIT.  A letter
or letters of credit in Agent’s possession in form and substance satisfactory
to the Agent in its sole discretion in the aggregate maximum drawing amount (in
increments of $1,000,000) of $6,000,000, naming the Agent as beneficiary and
with an expiry date of January 9, 2004 (or through an extended expiry date, at
the discretion of the New Kayne Credit Support Indebtedness Holders with the Agent’s
prior written consent, provided each such extension is in place more than ten
(10) days prior to the then existing expiry date and each such extension is for
no less than 90 days; as so extended, the “$6,000,000 L/C Expiry Date”), with
the New Kayne Credit Support Indebtedness Holders as the obligors hereunder,
under which the Agent may draw in one or more draws (in increments of
$1,000,000) on such letter of credit and apply such amounts to the Obligations
(x) at any time, the full amount thereof upon the occurrence of any Event of
Default (other than an Event of Default arising at any time within ten (10)
days prior to or on the $6,000,000 L/C Expiry Date solely by reason of the
Borrowers’ failure to comply with the minimum Excess Availability covenant set
forth in Section 10.1 of this Agreement during such ten-day period), (y) the
full amount thereof upon the occurrence of any Default within ten (10) days
prior to or on the $6,000,000 L/C Expiry Date, or (z) on any day within ten
(10) days prior to or on the $6,000,000 L/C Expiry Date in amounts rounded
upward to the nearest $1,000,000 sufficient to assure that the Borrower is in
compliance with Section 10.1 based upon the information available to the Agent
at the time of such draw request.  The
Agent’s rights to draw amounts under the $6,000,000 Availability Letter of
Credit shall not be limited by any increase in Excess Availability following
the submission of a draw request under the $6,000,000 Availability Letter of
Credit.


 


2

















 


“AVAILABILITY
LETTERS OF CREDIT.  The $5,000,000
Availability Letter of Credit and the $6,000,000 Availability Letter of Credit,
individually and collectively.


 


“BORROWING
BASE.  The aggregate of the following:


 


(a)                                  The
face amount of Eligible Credit Card Receivables MULTIPLIED BY the Credit Card
Advance Rate,


 


PLUS


 


(b)                                 The
lesser of (i) the Cost of Eligible Inventory (net of Inventory Reserves)
MULTIPLIED BY the Inventory Advance Rate or (ii) the Appraised Inventory
Percentage MULTIPLIED BY the Appraised Inventory Liquidation Value,


 


PLUS


 


(c)                                  If
the $5,000,000 Availability Letter of Credit exists and is in full force and
effect, until fourteen (14) days prior to its expiry, one hundred percent
(100%) of the undrawn amount of the $5,000,000 Availability Letter of Credit,


 


PLUS


 


(d)                                 If
the $6,000,000 Availability Letter of Credit exists and is in full force and
effect, until ten (10) days prior to the $6,000,000 L/C Expiry Date, one
hundred percent (100%) of the undrawn amount of the $6,000,000 Availability
Letter of Credit.


 


“KAYNE CREDIT
SUPPORT ADDITIONAL LIEN.  A Lien on the
existing and future personal property assets of the Borrowers in favor of the
New Kayne Credit Support Indebtedness Holders to secure the New Kayne Credit
Support Indebtedness, pursuant to a security agreement in form and substance
satisfactory to the Agent, subordinate to the Lien (whether now existing or
hereafter acquired) of the Agent on all such assets.


 


“KAYNE CREDIT
SUPPORT INDEBTEDNESS.  Indebtedness to
the extent permitted hereunder hereafter incurred and owing by the Borrowers to
all or any combination of the Kayne Credit Support Indebtedness Holders in the
aggregate principal amount of up to and including the aggregate face amount of
the Availability Letters of Credit whether contingent as to a draw (or draws,
if more than one letter of credit) not yet made thereunder or evidenced by the
New Kayne Availability Notes with respect to a draw made under the Availability
Letters of Credit.


 


3

















 


“KAYNE CREDIT
SUPPORT INDEBTEDNESS HOLDERS.  All or
any combination of the Old Kayne Credit Support Indebtedness Holders and the
New Kayne Credit Support Indebtedness Holders.


 


“KAYNE
EXISTING INDEBTEDNESS.  Existing
Indebtedness held by the Kayne Existing Indebtedness Holders under the Plan of
Reorganization evidenced by the “New Kayne Anderson Equipment Notes” of FAO,
Schwarz and ZB under and as defined in the Plan of Reorganization in the
original principal amount of $3,686,126.


 


“KAYNE
EXISTING INDEBTEDNESS HOLDERS.  Richard
Kayne and Fortune Twenty-Fifth, Inc., and their respective assigns; PROVIDED
such assigns have assumed pursuant to an agreement in form and substance
reasonably satisfactory to the Agent the intercreditor and subordination
agreement in favor of the Agent with respect to the Kayne Existing Indebtedness
and the Kayne Existing Lien.


 


“KAYNE
EXISTING LIEN.  A Lien on Equipment
owned by FAO, Schwarz or ZB and existing on the Closing Date in favor of the
Kayne Existing Indebtedness Holders to secure the Kayne Existing Indebtedness
and, if incurred after the Closing Date and to the extent permitted hereunder,
the Kayne Credit Support Indebtedness and the Equipment Financing Indebtedness,
superior to the Lien of the Agent.


 


“MINIMUM
EXCESS AVAILABILITY AMOUNT.  (a)
$5,000,000 until ten (10) days prior to the $6,000,000 L/C Expiry Date (as
defined in definition of $6,000,000 Availability Letter of Credit) and (b)
$10,000,000 ten (10) days prior to the L/C Expiry Date and at all times
thereafter; provided, however, the Minimum Excess Availability Amount shall be
reduced from $10,000,000 to $5,000,000 if either (i) the entire $6,000,000
Availability Letter of Credit is drawn and $6,000,000 is applied to reduce the
Revolving Loans (or to cash collateralize the Obligations), but such reduction
shall remain for only so long as no payments are made with respect to any of
the New Kayne Credit Support Indebtedness or (ii) the Borrowers have received
net proceeds of not less than $6,000,000 from new subordinated debt and or
equity financing on terms and conditions acceptable to the SuperMajority
Revolving Credit Lenders and the Tranche B Lender in their sole discretion.


 


“NEW KAYNE
AVAILABILITY NOTES.  Promissory notes
issued after the Closing Date by FAO, Schwarz and ZB in favor of the Old Kayne
Credit Support Indebtedness Holders in respect of the Old Kayne Credit Support
Indebtedness and by the Borrowers in favor of the New Kayne Credit Support
Indebtedness Holders in respect of the New Kayne Credit Support Indebtedness,
in each case evidencing draws made under the Availability Letters of Credit,
each of which Notes shall be in form and substance reasonably satisfactory to
the Agent.


 


4

















 


“NEW KAYNE
CREDIT SUPPORT INDEBTEDNESS. 
Indebtedness to the extent permitted hereunder hereafter incurred and
owing by the Borrowers to all or any combination of the New Kayne Credit
Support Indebtedness Holders in the aggregate principal amount of up to and
including $6,000,0000 in respect of the $6,000,000 Availability Letter of
Credit, whether contingent as to a draw (or draws, if more than one letter of
credit) not yet made thereunder or evidenced by the New Kayne Availability Notes
with respect to a draw made under the $6,000,000 Availability Letter of Credit.


 


“NEW KAYNE
CREDIT SUPPORT INDEBTEDNESS HOLDERS. 
Fred Kayne, Kayne Anderson Capital Advisors, L.P., Richard Kayne,
Hancock Park Capital II, L.P., Woodacres LLC, Les Biller, as Trustee of the Les
and Sheri Biller Revocable Trust, Charles Norris, Marc I. Stern, as trustee for
the Beatrice B. Trust and James J. Land (or Richard Atlas, as trustee of the
Atlas Family Trust, or such other Persons as reasonably acceptable to by the
Agent), and their respective assigns; PROVIDED Mr. Atlas in such capacity and
such other Persons and assigns have assumed pursuant to an agreement in form
and substance reasonably satisfactory to the Agent the intercreditor and
subordination agreement in favor of Agent with respect to the New Kayne Credit
Support Indebtedness.


 


“OLD KAYNE
CREDIT SUPPORT INDEBTEDNESS. 
Indebtedness to the extent permitted hereunder hereafter incurred and
owing by the Borrowers to all or any combination of the Old Kayne Credit
Support Indebtedness Holders in the aggregate principal amount of up to and
including $5,000,000 in respect of the $5,000,000 Availability Letter of Credit
whether contingent as to a draw (or draws, if more than one letter of credit)
not yet made thereunder or evidenced by the New Kayne Availability Notes with
respect to a draw made under the $5,000,000 Availability Letter of Credit.


 


“OLD KAYNE
CREDIT SUPPORT INDEBTEDNESS HOLDERS. 
Fred Kayne, Kayne Anderson Capital Advisors, L.P., Richard Kayne, Hancock
Park Capital II, L.P., Woodacres LLC, Les Biller and Charles Norris, and their
respective assigns; PROVIDED such assigns have assumed pursuant to an agreement
in form and substance reasonably satisfactory to the Agent the intercreditor
and subordination agreement in favor of Agent with respect to the Old Kayne
Credit Support Indebtedness and the Kayne Existing Lien.


 


“SECURITIES
PURCHASE AGREEMENT.  That certain
Securities Purchase Agreement dated as of April 3, 2003 among FAO and Saks,
Fred Kayne, Kayne Anderson Capital Advisors, L.P., Richard Kayne, Hancock Park
Capital II, L.P. and PCG Tagi, LLC (Series H), as amended by the First
Amendment to Securities Purchase Agreement dated as of April 21, 2003 among
FAO, Saks and the Old Kayne Credit Support Indebtedness Holders.


 


“TRANCHE B
BORROWING BASE.  The aggregate of the
following:


 


5

















 


(a)                                  The
face amount of Eligible Credit Card Receivables MULTIPLIED BY the Credit Card
Advance Rate,


 


PLUS


 


(b)                                 The
lesser of (i) the Appraised Inventory Tranche B Percentage MULTIPLIED BY
the Appraised Inventory Liquidation Value, and (ii) the Tranche B
Inventory Advance Rate MULTIPLIED BY the Cost of Eligible Inventory (net of
Inventory Reserves),


 


PLUS


 


(c)                                  if
the $5,000,000 Availability Letter of Credit exists and is in full force and
effect, until fourteen (14) days prior to expiry of Availability Letter of
Credit, one hundred percent (100%) of the undrawn amount of the Availability
Letter of Credit,


 


PLUS


 


(d)                                 If
the $6,000,000 Availability Letter of Credit exists and is in full force and
effect, until ten (10) days prior to the $6,000,000 L/C Expiry Date, one
hundred percent (100%) of the undrawn amount of $6,000,000 Availability Letter
of Credit.”


 


B.                                     Permitted
Liens.  Section 9.2.1 is hereby
amended by (1) deleting the period at the end of subparagraph (xvii) thereof
and substituting “; and” therefor; and (2) adding the following new
subparagraph (xviii) immediately thereafter:


 


“(xviii)             A
Lien on the existing and hereafter acquired personal property assets of the
Borrowers (other than existing Equipment (as of the Closing Date) covered by
Section 9.2.1(viii)) in favor of the New Kayne Credit Support Indebtedness
Holders to secure the New Kayne Credit Support Indebtedness, subordinated to
the Lien (whether now existing or hereafter arising) of the Agent on behalf of
the Agent and the Lenders in such assets, pursuant to an intercreditor and
subordination agreement acceptable in form and substance to the Agent and the
Tranche B Lender.”


 


C.                                     Restricted
Payments.  Section 9.4(a) is hereby
amended by (1) deleting the period at the end of subparagraph (iii) thereof and
substituting “; and” therefor; and (2) adding the following new subparagraph
(iv) immediately thereafter:


 


“(iv)                        upon
five (5) Business Days’ prior written notice to the Agent of each such proposed
repayment of principal or interest under the New Kayne Availability Notes
issued in respect of the New Kayne Credit Support Indebtedness, repayment of
principal (in increments of no less than $1,000,000) and interest on such
prepaid principal; PROVIDED (i) the $6,000,000 Availability


 


6

















 


Letter of
Credit has expired, (ii) no Default or Event of Default exists or could
reasonably be expected to result from such payment, and (iii) after giving
effect to such payment, the Borrowers shall have no less than $10,000,000 in
Excess Availability.”


 


D.                                    Minimum
Excess Availability.  Section 10.1
is hereby amended to read in its entirety as follows:


 


“10.1 MINIMUM
EXCESS AVAILABILITY.  The Borrower shall
maintain at all times Excess Availability of not less than the Minimum Excess
Availability Amount.”


 


E.                                      Application
of draws under Availability Letters of Credit.  The Agent agrees that so long as the $5,000,000 Availability
Letter of Credit and the $6,000,000 Availability Letter of Credit both remain
outstanding and undrawn, the Agent will draw on the $5,000,000 Availability
Letter of Credit first.  Proceeds of
draws under the Availability Letters of Credit shall be applied by the Agent to
pay down Revolving Loans under the Agreement; unless an Event of Default then
exists in which case such proceeds may be applied in accordance with Section
2.15 of the Credit Agreement.


 


II.                                     REPRESENTATIONS,
WARRANTIES AND COVENANTS.  The Borrowers hereby represent and warrant
to, and covenant and agree with, the Agent and the Lenders that:


 


A.                                   The
execution and delivery of this Amendment has been duly authorized by all
requisite corporate action on the part of the Borrowers.


 


B.                                     As
of the date hereof and after giving effect to this Amendment, the
representations and warranties of the Borrowers contained in the Loan
Agreement, as amended hereby, and the other Loan Documents are true and correct
in all material respects on and as of the date of this Amendment as though made
at and as of such date.  Since April 23,
2003, after giving effect to this Amendment, no event or circumstance has
occurred or existed which could reasonably be expected to have Material Adverse
Effect.  As of the date hereof and after
giving effect to this Amendment, no Default or Event of Default has occurred
and is continuing.


 


C.                                     The
Borrowers are not required to obtain any consent, approval or authorization
from, or to file any declaration or statement with, any governmental
instrumentality or other agency or any other Person in connection with, or as a
condition to, the execution, delivery or performance of this Amendment by such
party.


 


D.                                    This
Amendment constitutes the legal, valid and binding obligation of the Borrowers,
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights
and remedies of creditors generally or the application of principles of equity,
whether in any action at law or proceeding in equity.


 


7

















 


E.                                      Each
of the Borrowers warrants and represents that, as of the date hereof, it has no
defenses, setoffs, claims, counterclaims or causes of action of any kind or
nature whatsoever with respect to the Loan Documents and this Amendment.


 


F.                                      All references to the Loan Agreement
(howsoever called) in any Loan Documents shall, from and after the date hereof,
refer to the Loan Agreement as amended by this Amendment.  All Loan Documents heretofore executed by
the Borrowers shall remain in full force and effect and, by the execution of
this Amendment by the Borrowers, such Loan Documents are hereby ratified and
affirmed.


 


III.                                 WAIVER
OF EXISTING EVENT OF DEFAULT/CONSENT.


 


A.                                   The
Borrowers have informed the Agent that they did not maintain at least
$5,000,000 in minimum Excess Availability as required by Section 10.1 of the
Loan Agreement for the period from August 25, 2003 through the date of this
Amendment (the “Existing Event of Default”).  The Agent and the Lenders hereby waive such Existing Event of
Default.  Such waiver relates solely to
the Existing Event of Default and shall in no way be deemed or construed as a
waiver by the Agent and the Lenders of any other Default or Event of Default
under the Loan Agreement or any other Loan Document, including without
limitation any additional breach of Section 10.1 occurring subsequent to the
date of this Amendment.  The Lenders
expressly reserve the full extent of their rights under the Loan Agreement, the
other Loan Documents and applicable law in respect of any other Default or
Event of Default.


 


B.                                     Notwithstanding
the fact that such payments constitute Restricted Payments under the Loan
Agreement, the Agent and the Lenders hereby consent to the Borrowers paying an
issuance fee of (i) $100,000 to the Old Kayne Credit Support Indebtedness
Holders with respect to the issuance of the $5,000,000 Availability Letter of
Credit and (ii) $200,000 to the New Kayne Credit Support Indebtedness Holders
with respect to the issuance of the $6,000,000 Availability Letter of Credit.


 


IV.                                CONDITIONS.   The willingness of the Agent and the
Lenders to amend the Loan Agreement is subject to the satisfaction of the
following conditions precedent:


 


A.                                   The
Borrowers shall have executed and delivered to the Agent (or shall have caused
to be executed and delivered to the Agent by the appropriate persons) the
following:


 


1.                                       On
or before the date hereof:


 


(a)                                  This
Amendment;


 


(b)                                 An
Intercreditor and Subordination Agreement dated as of the date hereof among the
Agent, the Borrowers and the New Kayne Credit Support Indebtedness Holders in
form and substance satisfactory to the Agent (the “New Kayne Intercreditor
Agreement”); and


 


8

















 


(c)                                  An
Amendment No. 1 dated as of the date hereof in connection with the foregoing
items from the parties to the Intercreditor and Subordination Agreement dated
as of April 23, 2003 in form and substance satisfactory to the Agent; and


 


(d)                                 True
and complete copies of (i) any required stockholders’ and/or directors’
consents and (ii) any resolutions required for the due authorization of the
execution, delivery and performance by the Borrowers of this Amendment,
certified by a duly authorized officer of the Borrowers.


 


2.                                       Such
other supporting documents and certificates as the Agent, any Lender or their
counsel may reasonably request within the time period(s) reasonably designated
by the Agent, such Lender or their counsel.


 


B.                                     All
legal matters incident to the transactions hereby contemplated shall be
reasonably satisfactory to the Agent’s counsel and to the Lenders’ counsel.


 


V.                                    MISCELLANEOUS.


 


A.                                   As
provided in the Loan Agreement, the Borrowers agree to reimburse the Agent upon
demand for all fees and disbursements of counsel to the Agent incurred in
connection with the preparation of this Amendment.


 


B.                                     (i)  In consideration of the agreements of Agent
and Lenders contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each of the Borrowers
on behalf of itself and its successors, assigns, and other legal
representatives hereby absolutely, unconditionally and irrevocably release,
remise and forever discharge Agent, each Lender and their respective successors
and assigns, and their affiliates, subsidiaries, predecessors, directors,
officers, attorneys, employees, agents and other representatives (Agent, each
Lender and all such other Persons being hereinafter referred to collectively as
the “Releasees”, and individually as a “Releasee”), of and from all demands,
actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, sums of money, accounts, bills, reckonings, damages and
any and all other claims, counterclaims, defenses, rights of set-off, demands
and liabilities whatsoever (individually, a “Claim”, and collectively,
“Claims”) of every name and nature, known or unknown, suspected or unsuspected,
both at law and in equity, which such Borrower, or any of its respective
administrators, successors, assigns, and other legal representatives, may now
or hereafter own, hold, have or claim to have against the Releasees or any of
them for, upon, or by reason of any circumstance, action, cause or thing
whatsoever which arises at any time on or prior to the day and date of this
Amendment for or on account of, or in relation to, or in any way in connection
with any of the Loan Agreement, the other Loan Documents or this Amendment or
transactions thereunder or hereunder related thereto or hereto.


 


(ii)                                  Each
of the Borrowers understands, acknowledges and agrees that the release set
forth above may be pleaded as a full and complete defense and may be used as a
basis for an


 


9

















 


injunction against any action,
suit or other proceeding which may be instituted, prosecuted or attempted in
breach of the provisions of such release.


 


(iii)                               Each
of the Borrowers agrees that no fact, event, circumstance, evidence or
transaction which could now be asserted or which may hereafter be discovered
shall affect in any manner the final, absolute and unconditional nature of the
release set forth above.


 


C.                                     Each
of the Borrowers on behalf of itself and its successors, assigns, and other
legal representatives, hereby absolutely, unconditionally and irrevocably,
covenants and agrees with and in favor of each Releasee that it will not sue
(at law, in equity, in any regulatory proceeding or otherwise) any Releasee on
the basis of  any Claim released,
remised and discharged pursuant to the foregoing Paragraph B.


 


D.                                    This
Amendment shall be governed by, and construed in accordance with, the law of
the State of New York.


 


E.                                      This
Amendment may be executed by the parties hereto in several counterparts hereof
and by the different parties hereto on separate counterparts hereof, all of
which counterparts shall together constitute one and the same agreement.  Delivery of an executed signature page of
this Amendment by facsimile transmission shall be effective as an in-hand
delivery of an original executed counterpart hereof.


 


[The next pages are
the signature pages.]


 


10

















 


IN WITNESS
WHEREOF, the parties hereto, intending to be legally bound hereby, have caused
this First Amendment to Loan and Security Agreement to be executed by their
respective officers thereunto duly authorized as of the date first written
above.


 


	
   

  	
  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:

  	
    /s/ Jerry R. Welch

  	
   

  
	
   

  	
    Name:

  	
  Jerry R.
  Welch

  	
   

  
	
   

  	
    Title:

  	
  Chief
  Executive Officer and President

  	
   

  
							



 


11

















 


IN WITNESS WHEREOF,
intending to be legally bound hereby, the undersigned Lender has caused this
First Amendment to Loan and Security Agreement by and among FAO, INC., FAO
SCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THE
LENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its duly
authorized officers as of the date first above written.


 


	
   

  	
  FLEET RETAIL FINANCE INC., as

  Administrative Agent, Collateral Agent and

  Syndication Agent and as a Lender

  
	
   

  
	
   

  
	
   

  	
  By:

  	
    /s/ Christine M. Scott

  	
   

  
	
   

  	
  Name:

  	
   Christine M. Scott

  	
   

  
	
   

  	
  Title:

  	
   Vice President

  	
   

  
							



 


12

















 


IN WITNESS WHEREOF,
intending to be legally bound hereby, the undersigned Lender has caused this
First Amendment to Loan and Security Agreement by and among FAO, INC., FAO
SCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THE
LENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its duly
authorized officers as of the date first above written.


 


	
   

  	
  CONGRESS FINANCIAL CORPORATION

  (CENTRAL), as Co-Documentation Agent and

  as a Lender

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Steven Linderman

  	
   

  
	
   

  	
  Name:

  	
   Steven Linderman

  	
   

  
	
   

  	
  Title:

  	
   Senior Vice President

  	
   

  
						



 


13

















 


IN WITNESS WHEREOF,
intending to be legally bound hereby, the undersigned Lender has caused this
First Amendment to Loan and Security Agreement by and among FAO, INC., FAO
SCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THE
LENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its duly
authorized officers as of the date first above written.


 


	
   

  	
  WELLS FARGO RETAIL FINANCE II,

  LLC, as Co-Documentation Agent and as a

  Lender

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ David Molinario

  	
   

  
	
   

  	
  Name:

  	
    David Molinario

  	
   

  
	
   

  	
  Title:

  	
    Vice President

  	
   

  
							



 


14

















 


IN WITNESS WHEREOF,
intending to be legally bound hereby, the undersigned Lender has caused this
First Amendment to Loan and Security Agreement by and among FAO, INC., FAO
SCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THE
LENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its duly
authorized officers as of the date first above written.


 


	
   

  	
  BACK BAY
  CAPITAL FUNDING LLC

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Kristan M. O’Connor

  	
   

  
	
   

  	
  Name:

  	
    Kristan M. O’Connor

  	
   

  
	
   

  	
  Title:

  	
    Director

  	
   

  
							



 


15