Exhibit 10.5

SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of August 15, 2002, is made by each of F.A.O., Inc. ("FAO"), a California corporation, FAO Schwarz, Inc.
("Schwarz"), a Delaware corporation and ZB Company, Inc., a Delaware corporation ("ZB", and, together with FAO and Schwarz, "Grantors"), in favor of Kayne Anderson Capital Advisors, L.P., as
agent ("KACA") and Fortune Twenty-Fifth, Inc. (together with KACA, the "Secured Parties"), holders of certain notes of even date herewith in the aggregate principal amount of up to $10,500,000
(the "Equipment Notes"), issued by Grantors to Secured Parties, with reference to the following facts:

RECITALS

A.    The
Secured Parties agreed to provide a $10,500,000 letter of credit for the benefit of the Grantors expiring November 8, 2002 (the "Letter of Credit").

B.    The
Grantors issued the Equipment Notes to the Secured Parties as security against draws made on the Letter of Credit. To the extent a draw is made on the Letter of
Credit, the Equipment Notes will thereafter represent a like aggregate principal amount of indebtedness of the Grantors.

C.    The
security interests created under this Security Agreement are senior to all other security interests in the Collateral described herein.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, each of the Grantors hereby represents, warrants,
covenants, agrees, assigns and grants as follows:

1.Definitions.Terms defined in the Equipment Notes and not otherwise defined in this Agreement shall have the
meanings defined for those terms in the Equipment Notes. Terms defined in the New York Uniform Commercial Code and not otherwise defined in this Agreement or in the Equipment Notes shall have the
meanings defined for those terms in the New York Uniform Commercial Code. As used in this Agreement, the following terms shall have the meanings respectively set forth after each:

"Agreement" means this security agreement, and any extensions, modifications, renewals, restatements, supplements or amendments hereof.

"Collateral" means all of Grantors's now owned or hereafter acquired right, title and interest in and to each of the following:



"Equipment" means all of Grantors' now owned or hereafter acquired right, title, and interest with respect to "equipment", as such term is
defined from time to time in the Uniform Commercial Code as in effect in the State of New York, fixtures and vehicles (including motor vehicles) including all

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attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing.

"Secured Obligations" means any and all present and future obligations of Grantors arising under or relating to the Equipment Notes or any
one or more of them, whether due or to become due, matured or unmatured, or liquidated or unliquidated, including interest that accrues after the commencement of any bankruptcy or insolvency
proceeding by or against Grantors.

2.Further Assurances.At any time and from time to time at the request of the Secured Parties, Grantors shall
execute and deliver to the Secured Parties all such financing statements and other instruments and documents in form and substance satisfactory to the Secured Parties as shall be necessary or
desirable to fully perfect, when filed and/or recorded, the Secured Parties' security interests granted pursuant toSection 3of this Agreement.
At any time and from time to time, the Secured Parties shall be entitled to file and/or record any or all such financing statements, instruments and documents held by them, and any or all such further
financing statements, documents and instruments, and to take all such other actions, as the Secured Parties may deem appropriate to perfect and to maintain perfected the security interests granted in Section 3of this Agreement. Before and after the occurrence of any Event of Default, at the Secured Parties' request, Grantors shall execute all
such further financing statements, instruments and documents, and shall do all such further acts and things, as may be deemed necessary or desirable by the Secured Parties to create and perfect, and
to continue and preserve, an indefeasible security interest in the Collateral in favor of the Secured Parties, or the priority thereof, including causing any such financing statements to be filed
and/or recorded in the applicable jurisdiction.

3.Security Agreement.For valuable consideration, Grantors assign and pledge to the Secured Parties, and grants
to the Secured Parties a security interest in, all currently existing and hereafter acquired Collateral (except to the extent such a lien is prohibited by agreements of the Grantors existing on the
date hereof), as security for the timely payment of all of the Secured Obligations. This Agreement is a continuing and irrevocable agreement and all the rights, powers, privileges and remedies
hereunder shall apply to any and all Secured Obligations, including those Secured Obligations arising under successive transactions which shall either continue the Secured Obligations, increase or
decrease them, or from time to time create new Secured Obligations after all or any prior Secured Obligations have been satisfied, and notwithstanding the bankruptcy of Grantors.

4.Events of Default.There shall be an Event of Default hereunder upon the occurrence and during the
continuance of an Event of Default under the Equipment Notes.

5.Rights Upon Event of Default.Upon the occurrence and during the continuance of an Event of Default, the
Secured Parties shall have, in any jurisdiction where enforcement hereof is sought, in addition to all other rights and remedies that the Secured Parties may have under applicable law or in equity or
under this Agreement all rights and remedies of a secured party under the Uniform Commercial Code as enacted in any jurisdiction.

6.Voting Rights; Dividends; Etc.With respect to any Collateral consisting of securities, partnership
interests, joint venture interests, investments or the like in the possession of the Secured Parties (referred to collectively and individually in thisSection 6and inSection 7as the "Investment Collateral"), so long as no Event of Default occurs and remains continuing:



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7.Rights During Event of Default.With respect to any Investment Collateral in the possession of the Secured
Parties, so long as an Event of Default has occurred and is continuing:



8.Costs and Expenses.Grantors agree to pay to the Secured Parties all costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by the Secured Parties in the enforcement or attempted enforcement of this Agreement, whether or not an action is filed in connection
therewith, and in connection with any waiver or amendment of any term or provision hereof. All advances, charges, costs and expenses, including reasonable attorneys' fees and disbursements, incurred
or paid by the Secured Parties in exercising any right, privilege, power or remedy conferred by this Agreement, or in the enforcement or attempted enforcement thereof, shall be secured hereby and
shall become a part of the Secured Obligations and shall be paid to the Secured Parties by Grantors, immediately upon demand, together with interest thereon from the date of demand at the rate of 8%
per annum.

9.Continuing Effect.This Agreement shall remain in full force and effect and continue to be effective should
any petition be filed by or against Grantors for liquidation or reorganization, should Grantors become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Grantors' assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by the Secured Parties, whether as a "voidable preference,"
"fraudulent conveyance" or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

10.Release of Grantors.This Agreement shall be terminated and all Secured Obligations of Grantors hereunder
shall be released when all Secured Obligations have been paid in full or upon such release of Grantors' Secured Obligations hereunder. Upon such termination Secured Parties shall return any pledged
Collateral to Grantors, or to the person or persons legally entitled thereto, and shall endorse, execute, deliver, record and file all instruments and documents, and do all other acts and things
reasonably required for the return of the Collateral to Grantors, or to the person or persons legally entitled thereto, and to evidence or document the release of the Secured Parties' interests
arising under this Agreement, all as reasonably requested by, and at the sole expense of, Grantors.

11.GOVERNING LAW.THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

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IN
WITNESS WHEREOF, Each of the Grantors has executed this Agreement by its duly authorized officer as of the date first written above.

| |  | "Grantors"                              
| |  | ----------------------------------------
| |  | F.A.O., INC.,a California corporation   
| |  | By:                                     
| |  | FAO SCHWARZ, INC.,a Delaware corporation
| |  | By:                                     
| |  | ZB COMPANY, INC.,a Delaware corporation 
| |  | By:                                     

ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:

|"Secured Parties"                    
|-------------------------------------
|KAYNE ANDERSON CAPITAL ADVISORS, L.P.
|BY                                   
|Title:                               
|FORTUNE TWENTY-FIFTH, INC.           
|By                                   
|Title:                               

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