**Exhibit 10.1**

 

**FIRST AMENDMENT TO LOAN AND SECURITYAGREEMENT**

 

**THIS FIRST AMENDMENTTO 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 Delawarecorporation, 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”); **FLEETRETAIL FINANCE INC.**, as Administrative Agent, Collateral Agent andSyndication Agent for the Lenders (in each such capacity, with its successorsand assigns, the “Agent”); and **CONGRESSFINANCIAL CORPORATION (CENTRAL)**and **WELLS FARGO RETAIL FINANCE II, LLC**, as Co-DocumentationAgents.

 

**RECITALS**

 

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

 

B.                                     TheBorrowers have requested that they be permitted to provide another AvailabilityLetter of Credit in the aggregate maximum drawing amount of $6,000,000.

 

C.                                     TheBorrowers have also informed the Lenders and the Agent that the Kayne ExistingIndebtedness Holders are Richard Kayne and Fortune Twenty-Fifth, Inc. and thatthere will be additions to the Kayne Credit Support Indebtedness Holders basedupon the requested additional Availability Letter of Credit.

 

D.                                    TheLenders signing below are willing to consent to the Borrowers’ request on theterms and conditions hereinafter set forth.

 

E.                                      TheBorrowers have informed the Agent that they failed as required by Section 10.1of the Loan Agreement to maintain at least $5,000,000 in Excess Availability onAugust 25 through the date hereof and have requested that the Lenders agree towaive such default.  The Lenders arewilling to provide the requested waiver but only upon the terms and conditionshereinafter set forth.

 

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

 

**I.****                                         AMENDMENTSTO LOAN AGREEMENT.**

 

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

 

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“$5,000,000AVAILABILITY LETTER OF CREDIT.  A letteror letters of credit in Agent’s possession in form and substance satisfactoryto 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 November30, 2003, with the Old Kayne Credit Support Indebtedness Holders as the obligorsthereunder, 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 anyDefault within fourteen (14) days prior to or on such expiry date, or (z) atany time within fourteen (14) days prior to or on such expiry date, if an Eventof Default would exist if the $5,000,000 Availability Letter of Credit were toexpire on such day.  For purposes ofdetermining whether an Event of Default would exist under Section 10.1 of thisAgreement within fourteen (14) days prior to or on such expiry date, thecalculation of Excess Availability shall exclude the $6,000,000 AvailabilityLetter of Credit from the Borrowing Base and from the Tranche B Borrowing Base(notwithstanding the definitions of “Borrowing Base” and “Tranche B BorrowingBase”).

 

“$6,000,000AVAILABILITY LETTER OF CREDIT.  A letteror letters of credit in Agent’s possession in form and substance satisfactoryto the Agent in its sole discretion in the aggregate maximum drawing amount (inincrements of $1,000,000) of $6,000,000, naming the Agent as beneficiary andwith an expiry date of January 9, 2004 (or through an extended expiry date, atthe discretion of the New Kayne Credit Support Indebtedness Holders with the Agent’sprior 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 forno less than 90 days; as so extended, the “$6,000,000 L/C Expiry Date”), withthe 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 ofDefault (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 theBorrowers’ failure to comply with the minimum Excess Availability covenant setforth in Section 10.1 of this Agreement during such ten-day period), (y) thefull amount thereof upon the occurrence of any Default within ten (10) daysprior 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 roundedupward to the nearest $1,000,000 sufficient to assure that the Borrower is incompliance with Section 10.1 based upon the information available to the Agentat the time of such draw request.  TheAgent’s rights to draw amounts under the $6,000,000 Availability Letter ofCredit shall not be limited by any increase in Excess Availability followingthe submission of a draw request under the $6,000,000 Availability Letter ofCredit.

 

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

 

“BORROWINGBASE.  The aggregate of the following:

 

(a)                                  Theface amount of Eligible Credit Card Receivables MULTIPLIED BY the Credit CardAdvance Rate,

 

PLUS

 

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

 

PLUS

 

(c)                                  Ifthe $5,000,000 Availability Letter of Credit exists and is in full force andeffect, 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)                                 Ifthe $6,000,000 Availability Letter of Credit exists and is in full force andeffect, until ten (10) days prior to the $6,000,000 L/C Expiry Date, onehundred percent (100%) of the undrawn amount of the $6,000,000 AvailabilityLetter of Credit.

 

“KAYNE CREDITSUPPORT ADDITIONAL LIEN.  A Lien on theexisting and future personal property assets of the Borrowers in favor of theNew Kayne Credit Support Indebtedness Holders to secure the New Kayne CreditSupport Indebtedness, pursuant to a security agreement in form and substancesatisfactory to the Agent, subordinate to the Lien (whether now existing orhereafter acquired) of the Agent on all such assets.

 

“KAYNE CREDITSUPPORT INDEBTEDNESS.  Indebtedness tothe extent permitted hereunder hereafter incurred and owing by the Borrowers toall or any combination of the Kayne Credit Support Indebtedness Holders in theaggregate principal amount of up to and including the aggregate face amount ofthe 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 theNew Kayne Availability Notes with respect to a draw made under the AvailabilityLetters of Credit.

 

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“KAYNE CREDITSUPPORT INDEBTEDNESS HOLDERS.  All orany combination of the Old Kayne Credit Support Indebtedness Holders and theNew Kayne Credit Support Indebtedness Holders.

 

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

 

“KAYNEEXISTING INDEBTEDNESS HOLDERS.  RichardKayne and Fortune Twenty-Fifth, Inc., and their respective assigns; PROVIDEDsuch assigns have assumed pursuant to an agreement in form and substancereasonably satisfactory to the Agent the intercreditor and subordinationagreement in favor of the Agent with respect to the Kayne Existing Indebtednessand the Kayne Existing Lien.

 

“KAYNEEXISTING LIEN.  A Lien on Equipmentowned by FAO, Schwarz or ZB and existing on the Closing Date in favor of theKayne Existing Indebtedness Holders to secure the Kayne Existing Indebtednessand, 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.

 

“MINIMUMEXCESS AVAILABILITY AMOUNT.  (a)$5,000,000 until ten (10) days prior to the $6,000,000 L/C Expiry Date (asdefined 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 timesthereafter; provided, however, the Minimum Excess Availability Amount shall bereduced from $10,000,000 to $5,000,000 if either (i) the entire $6,000,000Availability Letter of Credit is drawn and $6,000,000 is applied to reduce theRevolving Loans (or to cash collateralize the Obligations), but such reductionshall remain for only so long as no payments are made with respect to any ofthe New Kayne Credit Support Indebtedness or (ii) the Borrowers have receivednet proceeds of not less than $6,000,000 from new subordinated debt and orequity financing on terms and conditions acceptable to the SuperMajorityRevolving Credit Lenders and the Tranche B Lender in their sole discretion.

 

“NEW KAYNEAVAILABILITY NOTES.  Promissory notesissued after the Closing Date by FAO, Schwarz and ZB in favor of the Old KayneCredit Support Indebtedness Holders in respect of the Old Kayne Credit SupportIndebtedness and by the Borrowers in favor of the New Kayne Credit SupportIndebtedness 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 tothe Agent.

 

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“NEW KAYNECREDIT SUPPORT INDEBTEDNESS. Indebtedness to the extent permitted hereunder hereafter incurred andowing by the Borrowers to all or any combination of the New Kayne CreditSupport Indebtedness Holders in the aggregate principal amount of up to andincluding $6,000,0000 in respect of the $6,000,000 Availability Letter ofCredit, whether contingent as to a draw (or draws, if more than one letter ofcredit) not yet made thereunder or evidenced by the New Kayne Availability Noteswith respect to a draw made under the $6,000,000 Availability Letter of Credit.

 

“NEW KAYNECREDIT 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 Lesand Sheri Biller Revocable Trust, Charles Norris, Marc I. Stern, as trustee forthe Beatrice B. Trust and James J. Land (or Richard Atlas, as trustee of theAtlas Family Trust, or such other Persons as reasonably acceptable to by theAgent), and their respective assigns; PROVIDED Mr. Atlas in such capacity andsuch other Persons and assigns have assumed pursuant to an agreement in formand substance reasonably satisfactory to the Agent the intercreditor andsubordination agreement in favor of Agent with respect to the New Kayne CreditSupport Indebtedness.

 

“OLD KAYNECREDIT SUPPORT INDEBTEDNESS. Indebtedness to the extent permitted hereunder hereafter incurred andowing by the Borrowers to all or any combination of the Old Kayne CreditSupport Indebtedness Holders in the aggregate principal amount of up to andincluding $5,000,000 in respect of the $5,000,000 Availability Letter of Creditwhether 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 withrespect to a draw made under the $5,000,000 Availability Letter of Credit.

 

“OLD KAYNECREDIT SUPPORT INDEBTEDNESS HOLDERS. Fred Kayne, Kayne Anderson Capital Advisors, L.P., Richard Kayne, HancockPark Capital II, L.P., Woodacres LLC, Les Biller and Charles Norris, and theirrespective assigns; PROVIDED such assigns have assumed pursuant to an agreementin form and substance reasonably satisfactory to the Agent the intercreditorand subordination agreement in favor of Agent with respect to the Old KayneCredit Support Indebtedness and the Kayne Existing Lien.

 

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

 

“TRANCHE BBORROWING BASE.  The aggregate of thefollowing:

 

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(a)                                  Theface amount of Eligible Credit Card Receivables MULTIPLIED BY the Credit CardAdvance Rate,

 

PLUS

 

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

 

PLUS

 

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

 

PLUS

 

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

 

B.                                     PermittedLiens.  Section 9.2.1 is herebyamended by (1) deleting the period at the end of subparagraph (xvii) thereofand substituting “; and” therefor; and (2) adding the following newsubparagraph (xviii) immediately thereafter:

 

“(xviii)             ALien on the existing and hereafter acquired personal property assets of theBorrowers (other than existing Equipment (as of the Closing Date) covered bySection 9.2.1(viii)) in favor of the New Kayne Credit Support IndebtednessHolders to secure the New Kayne Credit Support Indebtedness, subordinated tothe Lien (whether now existing or hereafter arising) of the Agent on behalf ofthe Agent and the Lenders in such assets, pursuant to an intercreditor andsubordination agreement acceptable in form and substance to the Agent and theTranche B Lender.”

 

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

 

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

 

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Letter ofCredit has expired, (ii) no Default or Event of Default exists or couldreasonably be expected to result from such payment, and (iii) after givingeffect to such payment, the Borrowers shall have no less than $10,000,000 inExcess Availability.”

 

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

 

“10.1 MINIMUMEXCESS AVAILABILITY.  The Borrower shallmaintain at all times Excess Availability of not less than the Minimum ExcessAvailability Amount.”

 

E.                                      Applicationof draws under Availability Letters of Credit.  The Agent agrees that so long as the $5,000,000 AvailabilityLetter of Credit and the $6,000,000 Availability Letter of Credit both remainoutstanding and undrawn, the Agent will draw on the $5,000,000 AvailabilityLetter of Credit first.  Proceeds ofdraws under the Availability Letters of Credit shall be applied by the Agent topay down Revolving Loans under the Agreement; unless an Event of Default thenexists in which case such proceeds may be applied in accordance with Section2.15 of the Credit Agreement.

 

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

 

A.                                   Theexecution and delivery of this Amendment has been duly authorized by allrequisite corporate action on the part of the Borrowers.

 

B.                                     Asof the date hereof and after giving effect to this Amendment, therepresentations and warranties of the Borrowers contained in the LoanAgreement, as amended hereby, and the other Loan Documents are true and correctin all material respects on and as of the date of this Amendment as though madeat and as of such date.  Since April 23,2003, after giving effect to this Amendment, no event or circumstance hasoccurred or existed which could reasonably be expected to have Material AdverseEffect.  As of the date hereof and aftergiving effect to this Amendment, no Default or Event of Default has occurredand is continuing.

 

C.                                     TheBorrowers are not required to obtain any consent, approval or authorizationfrom, or to file any declaration or statement with, any governmentalinstrumentality or other agency or any other Person in connection with, or as acondition to, the execution, delivery or performance of this Amendment by suchparty.

 

D.                                    ThisAmendment 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 rightsand remedies of creditors generally or the application of principles of equity,whether in any action at law or proceeding in equity.

 

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E.                                      Eachof the Borrowers warrants and represents that, as of the date hereof, it has nodefenses, setoffs, claims, counterclaims or causes of action of any kind ornature 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 bythe Borrowers shall remain in full force and effect and, by the execution ofthis Amendment by the Borrowers, such Loan Documents are hereby ratified andaffirmed.

 

**III.****                                 WAIVEROF EXISTING EVENT OF DEFAULT/CONSENT.**

 

A.                                   TheBorrowers 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 theLoan Agreement for the period from August 25, 2003 through the date of thisAmendment (the “Existing Event of Default”).  The Agent and the Lenders hereby waive such Existing Event ofDefault.  Such waiver relates solely tothe Existing Event of Default and shall in no way be deemed or construed as awaiver by the Agent and the Lenders of any other Default or Event of Defaultunder the Loan Agreement or any other Loan Document, including withoutlimitation any additional breach of Section 10.1 occurring subsequent to thedate of this Amendment.  The Lendersexpressly reserve the full extent of their rights under the Loan Agreement, theother Loan Documents and applicable law in respect of any other Default orEvent of Default.

 

B.                                     Notwithstandingthe fact that such payments constitute Restricted Payments under the LoanAgreement, the Agent and the Lenders hereby consent to the Borrowers paying anissuance fee of (i) $100,000 to the Old Kayne Credit Support IndebtednessHolders with respect to the issuance of the $5,000,000 Availability Letter ofCredit and (ii) $200,000 to the New Kayne Credit Support Indebtedness Holderswith respect to the issuance of the $6,000,000 Availability Letter of Credit.

 

**IV.****                                CONDITIONS.**   The willingness of the Agent and theLenders to amend the Loan Agreement is subject to the satisfaction of thefollowing conditions precedent:

 

A.                                   TheBorrowers shall have executed and delivered to the Agent (or shall have causedto be executed and delivered to the Agent by the appropriate persons) thefollowing:

 

1.                                       Onor before the date hereof:

 

(a)                                  ThisAmendment;

 

(b)                                 AnIntercreditor and Subordination Agreement dated as of the date hereof among theAgent, the Borrowers and the New Kayne Credit Support Indebtedness Holders inform and substance satisfactory to the Agent (the “New Kayne IntercreditorAgreement”); and

 

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

 

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

 

2.                                       Suchother supporting documents and certificates as the Agent, any Lender or theircounsel may reasonably request within the time period(s) reasonably designatedby the Agent, such Lender or their counsel.

 

B.                                     Alllegal matters incident to the transactions hereby contemplated shall bereasonably satisfactory to the Agent’s counsel and to the Lenders’ counsel.

 

**V.****                                    MISCELLANEOUS.**

 

A.                                   Asprovided in the Loan Agreement, the Borrowers agree to reimburse the Agent upondemand for all fees and disbursements of counsel to the Agent incurred inconnection with the preparation of this Amendment.

 

B.                                     (i)  In consideration of the agreements of Agentand Lenders contained herein and for other good and valuable consideration, thereceipt and sufficiency of which is hereby acknowledged, each of the Borrowerson behalf of itself and its successors, assigns, and other legalrepresentatives hereby absolutely, unconditionally and irrevocably release,remise and forever discharge Agent, each Lender and their respective successorsand assigns, and their affiliates, subsidiaries, predecessors, directors,officers, attorneys, employees, agents and other representatives (Agent, eachLender and all such other Persons being hereinafter referred to collectively asthe “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 andany and all other claims, counterclaims, defenses, rights of set-off, demandsand 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 respectiveadministrators, successors, assigns, and other legal representatives, may nowor hereafter own, hold, have or claim to have against the Releasees or any ofthem for, upon, or by reason of any circumstance, action, cause or thingwhatsoever which arises at any time on or prior to the day and date of thisAmendment for or on account of, or in relation to, or in any way in connectionwith any of the Loan Agreement, the other Loan Documents or this Amendment ortransactions thereunder or hereunder related thereto or hereto.

 

(ii)                                  Eachof the Borrowers understands, acknowledges and agrees that the release setforth above may be pleaded as a full and complete defense and may be used as abasis for an

 

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

 

(iii)                               Eachof the Borrowers agrees that no fact, event, circumstance, evidence ortransaction which could now be asserted or which may hereafter be discoveredshall affect in any manner the final, absolute and unconditional nature of therelease set forth above.

 

C.                                     Eachof the Borrowers on behalf of itself and its successors, assigns, and otherlegal 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 onthe basis of  any Claim released,remised and discharged pursuant to the foregoing Paragraph B.

 

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

 

E.                                      ThisAmendment may be executed by the parties hereto in several counterparts hereofand by the different parties hereto on separate counterparts hereof, all ofwhich counterparts shall together constitute one and the same agreement.  Delivery of an executed signature page ofthis Amendment by facsimile transmission shall be effective as an in-handdelivery of an original executed counterpart hereof.

 

*[The next pages arethe signature pages.]*

 

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IN WITNESSWHEREOF, the parties hereto, intending to be legally bound hereby, have causedthis First Amendment to Loan and Security Agreement to be executed by theirrespective officers thereunto duly authorized as of the date first writtenabove.

 
|   | **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 |   |
|        |                           |  |  |  |  |  |

 

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IN WITNESS WHEREOF,intending to be legally bound hereby, the undersigned Lender has caused thisFirst Amendment to Loan and Security Agreement by and among FAO, INC., FAOSCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THELENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its dulyauthorized 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 |   |
|        |                                                                                                                  |  |  |  |  |  |

 

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IN WITNESS WHEREOF,intending to be legally bound hereby, the undersigned Lender has caused thisFirst Amendment to Loan and Security Agreement by and among FAO, INC., FAOSCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THELENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its dulyauthorized 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 |   |
|        |                                                                                           |  |  |  |  |

 

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IN WITNESS WHEREOF,intending to be legally bound hereby, the undersigned Lender has caused thisFirst Amendment to Loan and Security Agreement by and among FAO, INC., FAOSCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THELENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its dulyauthorized 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 |   |
|        |                                                                                     |  |  |  |  |  |

 

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IN WITNESS WHEREOF,intending to be legally bound hereby, the undersigned Lender has caused thisFirst Amendment to Loan and Security Agreement by and among FAO, INC., FAOSCHWARZ, INC., ZB COMPANY, INC., THE RIGHT START, INC., TARGOFF-RS, LLC, THELENDERS PARTY HERETO and FLEET RETAIL FINANCE INC., as Agent, to be executed by its dulyauthorized 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 |   |
|        |                                   |  |  |  |  |  |

 

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