OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
"FLEET LOAN AGREEMENT"), AMONG FAO, INC., FAO SCHWARZ, INC., ZB COMPANY, INC.,
THE RIGHT START, INC., TARGOFF-RS, LLC, FLEET RETAIL FINANCE INC., BACK BAY
CAPITAL FUNDING LLC AND THE OTHER LENDING INSTITUTIONS PARTY FROM TIME TO TIME
PARTY THERETO AND FLEET RETAIL FINANCE INC. AS AGENT FOR THE LENDERSAND TO
INDEBTEDNESS REFINANCING THE INDEBTEDNESS UNDER THE FLEET LOAN AGREEMENT (THE
"FLEET INDEBTEDNESS") AS CONTEMPLATED BY THE SUBORDINATION AGREEMENT, AND TO ANY
OTHER SECURED INDEBTEDNESS OF GUARANTOR FOR BORROWED MONEY PERMITTED BY THE
FLEET LOAN AGREEMENT, AND EACH HOLDER OF THE SUBORDINATED NOTE, BY ACCEPTANCE
THEREOF, HAS AGREED TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION
AGREEMENT.
IN THE EVENT THAT ANY PROVISIONS OF THIS GUARANTY ARE DEEMED TO
CONFLICT WITH THE SUBORDINATION AGREEMENT, THE PROVISIONS OF THE SUBORDINATION
AGREEMENT SHALL GOVERN.
3.
GUARANTY OF GUARANTIED OBLIGATIONS.
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY GUARANTIES AND PROMISES TO PAY
ON DEMAND THE GUARANTIED OBLIGATIONS AND EACH AND EVERY ONE OF THEM, INCLUDING
ALL AMENDMENTS, MODIFICATIONS, SUPPLEMENTS, RENEWALS OR EXTENSIONS OF ANY OF
THEM, WHETHER SUCH AMENDMENTS, MODIFICATIONS, SUPPLEMENTS, RENEWALS OR
EXTENSIONS ARE EVIDENCED BY NEW OR ADDITIONAL INSTRUMENTS, DOCUMENTS OR
AGREEMENTS OR CHANGE THE RATE OF INTEREST ON ANY GUARANTIED OBLIGATION OR THE
SECURITY THEREFOR, OR OTHERWISE.
4.
NATURE OF GUARANTY.
THIS GUARANTY IS
IRREVOCABLE AND CONTINUING IN NATURE AND RELATES TO ANY GUARANTIED OBLIGATIONS
NOW EXISTING OR HEREAFTER ARISING.
THIS GUARANTY IS A GUARANTY OF PROMPT AND
PUNCTUAL PAYMENT AND IS NOT MERELY A GUARANTY OF COLLECTION.
5.
RELATIONSHIP TO OTHER AGREEMENTS.
NOTHING HEREIN SHALL IN ANY WAY MODIFY OR LIMIT THE EFFECT OF TERMS OR
CONDITIONS SET FORTH IN ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED BY
GUARANTOR IN CONNECTION WITH THE GUARANTIED OBLIGATIONS, BUT EACH AND EVERY TERM
AND CONDITION HEREOF SHALL BE IN ADDITION THERETO.
ALL PROVISIONS CONTAINED IN
THE SUBORDINATED NOTE ARE FULLY APPLICABLE TO THIS GUARANTY AND ARE INCORPORATED
HEREIN BY THIS REFERENCE.
6.
WAIVERS AND CONSENTS.
GUARANTOR
ACKNOWLEDGES THAT THE OBLIGATIONS UNDERTAKEN HEREIN INVOLVE THE GUARANTY OF
OBLIGATIONS OF PERSONS OTHER THAN GUARANTOR AND, IN FULL RECOGNITION OF THAT
FACT, CONSENTS AND AGREES THAT SUBORDINATED NOTE HOLDER, TOGETHER WITH ISSUER,
MAY, AT ANY TIME AND FROM TIME TO TIME, WITHOUT NOTICE OR DEMAND, AND WITHOUT
AFFECTING THE ENFORCEABILITY OR CONTINUING EFFECTIVENESS HEREOF (A) SUPPLEMENT,
MODIFY, AMEND, EXTEND, RENEW, ACCELERATE OR OTHERWISE CHANGE THE TIME FOR
PAYMENT OR THE TERMS OF THE GUARANTIED OBLIGATIONS OR ANY PART THEREOF,
INCLUDING ANY INCREASE OR DECREASE OF THE RATE OF INTEREST THEREON; (B)
SUPPLEMENT, MODIFY, AMEND OR WAIVE, OR ENTER INTO OR GIVE ANY AGREEMENT,
APPROVAL OR CONSENT WITH RESPECT TO, THE GUARANTIED OBLIGATIONS OR ANY PART
THEREOF, OR ANY OF THE SUBORDINATED NOTE TO WHICH GUARANTOR IS NOT A PARTY OR
ANY ADDITIONAL SECURITY OR GUARANTIES, OR ANY CONDITION, COVENANT, DEFAULT,
REMEDY, RIGHT, REPRESENTATION OR TERM THEREOF OR THEREUNDER; (C) ACCEPT NEW OR
ADDITIONAL INSTRUMENTS, DOCUMENTS OR AGREEMENTS IN EXCHANGE FOR OR RELATIVE TO
ANY OF THE SUBORDINATED NOTE OR