THIRD AMENDMENT  TO  AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Third Amendment") is entered into
and effective as of November 21, 2002 by and among, on the one hand, FAO, Inc., FAO Schwarz, Inc. and ZB Company, Inc., each a Delaware corporation (collectively,
"Borrowers"), and, on the other hand, the financial institutions from time to time party to the Loan Agreement referred to below (collectively, the
"Lenders" and each individually, a "Lender") and Wells Fargo Retail Finance, LLC, as agent for the
Lenders (in such capacity, "Agent").

RECITALS

Borrowers, Agent and Lenders have entered into the Amended and Restated Loan and Security Agreement dated as of April 30, 2002, as amended by the First
Amendment to Amended and Restated Loan and Security Agreement dated as of May 31, 2002 and the Second Amendment to Amended and Restated Loan and Security Agreement dated as of August 15,
2002 (as so amended, as amended hereby and as further amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement")
pursuant to which Lenders and Agent have agreed to make certain revolving credit advances and provide other financial accommodations to Borrowers. Borrowers have requested certain amendments to the
Loan Agreement. Agent and Lenders are willing to amend the Loan Agreement on the terms and conditions hereinafter set forth.

NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties signatory hereto agree as follows.

1.Definitions.Capitalized terms used but not otherwise defined herein shall have the respective meanings given
to such terms in the Loan Agreement.

2.Amendments to the Loan Agreement.





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Period:

Maximum Effective
Advance Rate:December 3December 9, 2002:

70
%December 10December 16, 2002:

62
%December 17December 23, 2002:

57
%December 24December 26, 2002:

45%
"


3.Conditions Precedent to Third Amendment.The satisfaction of each of the following, unless waived or deferred
by Agent in its sole discretion or, in the case of subsection (b) below, by the Required Lenders or all of the Lenders, as applicable, shall constitute conditions precedent to the effectiveness
of this Third Amendment and each and every provision hereof:

(a)
The representations and warranties in this Third Amendment, the Loan Agreement as amended by this Third Amendment, and the other Loan Documents shall be true and correct in all
respects on and
as of the date hereof, as though made on such date (except to the extent that such representations and warranties relate solely to an earlier date);

(b)
No Event of Default shall have occurred and be continuing on the date hereof nor shall result from the consummation of the transactions contemplated herein;

(c)
No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the transactions contemplated herein shall have been
issued and remain in force by any Governmental Authority against any Borrower or Agent;

(d)
Agent shall have received an Amendment and Ratification of the Kayne Intercreditor Agreement;

(e)
Agent shall have received a Third Amendment fee of $50,000 from Borrowers (to be shared pro rata with the Lenders signatory hereto); and

(f)
Agent shall have received payment in full of its out-of-pocket expenses (including reasonable attorneys' fees and expenses) incurred in connection with the
Loan Agreement and this Third Amendment.

4.Representations and Warranties.Each Borrower hereby represents and warrants to Agent that (a) the
execution, delivery, and performance of this Third Amendment and of the Loan Agreement are within such Borrower's corporate powers, have been duly authorized by all necessary corporate action, and are
not in contravention of any law, rule, or regulation, or any order, judgment, decree, writ, injunction, or award of any arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any of its properties may be bound or affected, (b) this Third Amendment and the Loan Agreement constitute such
Borrower's legal, valid, and binding obligation, enforceable against such Borrower in accordance with its terms, and (c) this Third Amendment has been duly executed and delivered by such
Borrower.

5.Choice of Law.The validity of this Third Amendment, its construction, interpretation and enforcement, and
the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the laws of the State of New York.

6.Counterparts; Telefacsimile Execution.This Third Amendment may be executed in any number of counterparts and
by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same
instrument. Delivery of an executed counterpart of a signature page to this Third Amendment by telefacsimile shall be as effective as delivery of a manually executed counterpart of this Third

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Amendment. Any party delivering an executed counterpart of this Third Amendment by telefacsimile also shall deliver a manually executed counterpart of this Third Amendment but the failure to deliver
a manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Third Amendment.

7.Effect on Loan Agreement.The Loan Agreement, as amended hereby, shall be and remain in full force and effect
in accordance with its respective terms and hereby is ratified and confirmed in all respects. The execution, delivery, and performance of this Third Amendment shall not operate as a waiver of or,
except as expressly set forth herein, as an amendment of, any right, power, or remedy of the Agent under the Loan Agreement, as in effect prior to the date hereof.

8.Further Assurances.Each Borrower shall execute and deliver all agreements, documents, and instruments, in
form and substance satisfactory to Agent, and take all actions as Agent may reasonably request from time to time, to perfect and maintain the perfection and priority of the security interest in the
Collateral held by Agent and to fully consummate the transactions contemplated under this Third Amendment and the Loan Agreement, as amended by this Third Amendment.

9.Miscellaneous.

(a)
Upon and after the effectiveness of this Third Amendment, each reference in the Loan Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like import referring
to the Loan Agreement, and each reference in the other Loan Documents to "the Loan Agreement", "thereunder", "therein", "thereof" or words of like import referring to the Loan Agreement, shall mean
and be a reference to the Loan Agreement as modified and amended hereby.

(b)
The Loan Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the
legal, valid, binding and enforceable obligations of Borrowers to Agent and Lenders.

(c)
For purposes of determining whether Borrowers may make the payment of $5,000,000 in respect of the Kayne Credit Support Indebtedness contemplated by the first proviso of
Section 7.11 of the Loan Agreement as amended hereby, Borrowers' projected failure to comply with Section 7.20 of the Loan
Agreement on the last day of December 2002 shall not be deemed a Default under the Loan Agreement prior to the last day of December 2002.

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IN
WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Amended and Restated Loan and Security Agreement to be executed as of the date first above written.

| |  | ZB COMPANY, INC.                                      
| |  | ------------------------------------------------------
| |  | By:                                                   
| |  | FAO, INC.                                             
| |  | By:                                                   
| |  | FAO SCHWARZ, INC.                                     
| |  | By:                                                   
| |  | LENDERS:                                              
| |  | WELLS FARGO RETAIL FINANCE, LLC,
as Agent and a Lender
| |  | By:                                                   
| |  | LASALLE BUSINESS CREDIT, INC.                         
| |  | By:                                                   
| |  | ORIX FINANCIAL SERVICES, INC.                         
| |  | By:                                                   

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SCHEDULE 7.1    Indebtedness

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SCHEDULE 7.3    Permitted Transactions

The
transactions set forth below are "Permitted Transactions". The Administrative Borrower shall provide Agent with at least fifteen days prior written notice of each such Permitted
Transaction and shall provide Agent and its counsel copies of all the documentation related to such Permitted Transaction, such documentation to be in form and substance reasonably satisfactory to
Agent. Before
consummating any Permitted Transaction, Borrowers shall deliver to Agent all documents requested by Agent to perfect and continue perfected Agent's Liens on the Collateral. If any Borrower creates a
Subsidiary, such Borrower shall pledge the capital stock of such Subsidiary to Agent and such Subsidiary shall become a Borrower hereunder.

1.    Parent
may create and merge into a wholly-owned Delaware subsidiary to be named FAO, Inc. (the "Successor Parent").

2.    The
Successor Parent may create a wholly-owned Delaware subsidiary to be named The Right Start, Inc. ("TRS"). The Successor Parent may sell, assign or otherwise
convey the assets related to The Right Start brand business to TRS upon TRS's becoming a Borrower hereunder.

3.    The
winding up of Targoff-RS, LLC after its assets have been transferred to Borrowers or Borrowers' directly or indirectly wholly-owned Subsidiary.

4.    Creation
of a Subsidiary that holds all of the group's internet assets.

5.    Creation
of a Subsidiary that provides executive employee services to the group.

6.    Transfers
of assets among Borrowers and their directly or indirectly wholly-owned Subsidiaries to facilitate any Permitted Transaction, any transaction that is approved
as part of the Business Plan and any immaterial transfer.

7.    Issuance
of the Kayne Credit Support Indebtedness and repayment of $5 million in aggregate principal amount thereof together with interest thereon to the extent
otherwise permitted pursuant to Section 7.11.

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SCHEDULE 7.4    Disposal of Assets

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