Document:

Exhibit
10.70

 

SECURITIES PLEDGE AGREEMENT

 

This Securities Pledge
Agreement (this “Pledge Agreement”), dated as of April 23, 2003, is by and
among FAO, Inc. (“FAO”), a Delaware corporation, FAO Schwarz,
Inc. (“Schwarz”),
a Delaware corporation, ZB Company, Inc. (“ZB”), a Delaware corporation, The Right
Start, Inc. (“Right Start”), a Delaware corporation, and Targoff-RS, LLC (“Targoff”),
a New York limited liability company (FAO, Schwarz, ZB, Right Start, and
Targoff being referred to collectively herein as the “Pledgors” and each,
individually, as a “Pledgor”), and Fleet Retail Finance Inc.,  in
its capacity as administrative and collateral agent (in such capacity, together
with its successors and assigns, the “Agent”), for the benefit of the various
financial institutions who are from time to time are Lenders under the Credit
Agreement described below (each, a “Beneficiary” and, collectively, the “Beneficiaries”).

 

Preliminary Statement

 

A.            The Pledgors, the Agent, and the
Lenders from time to time parties thereto have entered into a Loan and Security
Agreement dated as of April 23, 2003 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), pursuant to which
Lenders have agreed to make loans and grant other financial accommodations to
the Pledgors subject to the terms and conditions set forth in the Credit
Agreement.  Capitalized terms used but
not defined herein have the respective meanings assigned to them in the Credit
Agreement.

 

B.            FAO owns 100% of the issued and outstanding
capital stock of Schwarz, ZB, Right Start and 100% of the membership interest
in Targoff.  Schwarz, ZB, Right Start,
and Targoff do not have any Subsidiaries as of the date of this Agreement.

 

C.            One of the conditions precedent to
the Lenders’ obligations under the Credit Agreement is that the Pledgors shall
execute and deliver this Pledge Agreement to secure the payment and performance
of the Obligations (as defined in the Credit Agreement).

 

NOW, THEREFORE, in
order to induce the Lenders to enter into the Credit Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which hereby
are acknowledged, the Pledgors and Agent hereby agree as follows:

 

1.             Definitions.  All capitalized terms used
but not elsewhere defined in this Pledge Agreement shall have the respective
meanings ascribed to such terms in the Credit Agreement. The following terms
shall have the following meanings in this Pledge Agreement:

 

“Collateral”
means, with respect to each Pledgor, all right, title and interest of such
Pledgor in, under and to all Securities of each Pledged Company, whether now or
hereafter owned, acquired or held by a Pledgor or in which a Pledgor may now
have or hereafter acquire an interest, including without limitation all shares of
the capital stock of, and membership interests in, each Pledged Company and all
rights to purchase capital stock of, and membership interests in, each Pledged
Company, registered in the name of

 

 

such Pledgor, as shown on
Exhibit A hereto, and all dividends, distributions and other amounts or
additional securities of each Pledged Company or any successor in interest to
each Pledged Company and other property to which such Pledgor or any successor
in interest to Pledgor (with or without additional consideration) is or becomes
entitled by virtue of the ownership by such Person of any of the Securities or
as the result of any corporate reorganization, merger, consolidation, stock
split, stock dividend, distribution, conversion, preemptive right or otherwise,
and the proceeds thereof.

 

“Pledged
Company” means, with respect to each Pledgor, each Subsidiary from
time to time of such Pledgor.

 

“Secured
Obligations” means (a) the Obligations (as defined in the Credit
Agreement) and (b) all of the Pledgors’ obligations under this Pledge
Agreement.

 

“Securities”
means the capital stock and membership interests from time to time of a Pledged
Company and any warrants, options or other rights to purchase the capital stock
of, or membership interest in, such Pledged Company, however evidenced or
arising, and all certificates and other instruments evidencing such capital
stock, warrants, options and other rights to purchase capital stock and
membership interests, with duly executed powers or other instruments of transfer
separate from certificates, in form and substance satisfactory to Agent and
duly endorsed in blank.

 

2.             Pledge
of Collateral.

 

2.1          Pledge.  In order to secure the Secured Obligations,
each Pledgor hereby pledges, grants a security interest in, assigns, transfers,
delivers, sets over and confirms to Agent for the ratable benefit of the Agent
and the Lenders all Collateral now owned or hereafter acquired by such Pledgor.

 

2.2          Delivery.  Each Pledgor is depositing with the Agent
simultaneously herewith, all certificates, warrants, options, voting or other
rights to acquire a certificate of each Pledged Company, as described on Exhibit A
attached hereto.  In the event that any
of a Pledgor’s ownership interest or other rights in a Pledged Company may not
have been evidenced by a certificate prior to the date hereof, such Pledgor has
caused such Pledged Company to certificate such interests and rights prior to
the date hereof, and such certificates are included on Exhibit A
attached hereto.

 

3.             Representations,
Warranties and Covenants.  Each Pledgor hereby represents, warrants and covenants to Agent
that:

 

(i)                                     the
Collateral listed on Exhibit A with respect to Pledgor constitutes all
of the Securities of all of Pledgor’s Subsidiaries on the date hereof, and all of
such Securities are certificated;

 

(ii)                                  unless
otherwise noted on Exhibit A with respect to any Subsidiary of Pledgor,
such Collateral represents 100% of the issued and outstanding capital stock (or

 

2

 

similar interest) and
warrants, options and other rights to purchase capital stock (or similar
interest) of such Subsidiary of Pledgor;

 

(iii)                               Pledgor
is the sole legal and beneficial owner of the Collateral pledged by Pledgor to
Agent pursuant to this Pledge Agreement;

 

(iv)                              such
Collateral is validly issued, fully paid and non-assessable and is registered
in the name of Pledgor,

 

(v)                                 the
pledge of such Collateral pursuant to the terms of this Pledge Agreement
creates a valid, and, upon the delivery of certificates representing the
certificated Securities to Agent, or upon registration of Agent’s lien on
uncertificated Securities, if any, on the books and records of the Pledged
Company, perfected first Lien on such Collateral in favor of Agent, provided
that Agent maintains “control” (as defined in the Uniform Commercial Code
as in effect in The State of New York) of such Collateral;

 

(vi)                              none
of such Collateral is subject to any lien of any kind whatsoever, except for
the first lien on such Collateral granted to Agent hereby and Permitted Liens;

 

(vii)                           no
authorization, approval or other action by, or notice to or filing with, any
governmental body is required for the pledge by Pledgor of such Collateral
pursuant to the terms of this Pledge Agreement; and

 

(viii)                        until all
of the Secured Obligations (other than contingent indemnification Secured
Obligations to the extent no claim giving rise thereto has been asserted) have
been paid and performed in full, Pledgor: (A) will not create or permit to
exist any lien upon or with respect to such Collateral, except for the first
lien thereon granted to Agent by this Pledge Agreement and Permitted Liens, and
(B) will not sell, transfer, convey, assign, or otherwise divest Pledgor’s
interest in such Collateral, or any part thereof, to any other Person.

 

Each Pledgor further
represents and warrants to Agent that the state and county where Pledgor’s
chief executive office is located are as set forth on Exhibit B  hereto.

 

4.             Additional
Securities; Stock Splits; Stock Dividends.

 

4.1          Additional
Securities.  Each
Pledgor agrees that in the event that Pledgor now is, or hereafter becomes,
entitled (with or without additional consideration) to other or additional
Securities as the result of any acquisition, reorganization, merger,
consolidation, stock split, stock dividend, conversion, exercise of warrant or
preemptive right or otherwise of any Pledged Company, Pledgor shall:

 

4.1.1       Delivery.  Cause the issuer of such other or additional Securities (a) to
certificate such Securities and to deliver to Agent all such certificates and
other documents, if any, evidencing the ownership by Pledgor of such additional
capital stock

 

3

 

or membership interests
and hereby authorizes and empowers Agent to demand the same from such issuer,
and agrees if such certificates and other documents are delivered to Pledgor,
to take possession thereof in trust for Agent or (b) in the case of
uncertificated Securities that the Agent consents to in writing, cause the lien
on such Securities created hereby in favor of the Agent to be registered in the
books and records of the issuer and hereby authorizes and empowers Agent to
demand the same from such issuer; and

 

4.1.2       UCC
Financing Statements and Assignments Separate from Certificate.  Deliver to Agent (i) such
UCC financing statements and other documents executed by Pledgor as Agent
reasonably may request to perfect Agent’s security interest in such other or
additional Securities and (ii) a stock power (or similar power) separate from
certificate with respect to such other or additional Securities, executed in
blank by Pledgor; and

 

4.1.3       Additional
Documents.  Deliver
to Agent such other certificates, documents and other instruments as Agent may
reasonably request in connection with the pledge of such other or additional
Securities by Pledgor.

 

4.2          Additional
Collateral.  Each
Pledgor agrees that such other or additional Securities of Pledged Companies
shall constitute a portion of the Collateral and be subject to this Pledge
Agreement in the same manner and to the same extent as the Securities pledged
hereby to Agent on the date hereof.

 

5.             Voting
Power; Distributions.  Unless
and until the Agent shall have given written notice to the Borrowers’ Representative
in accordance with Section 6.1 hereof, each Pledgor shall be entitled to
exercise all voting powers in all matters pertaining to its Collateral or
otherwise, for any purpose not inconsistent with, or in violation of, this
Pledge Agreement or any other Loan Documents. 
Unless and until Agent shall have given written notice to the Borrowers’
Representative in accordance with Section 6.1 hereof, the Pledgors shall
be entitled to receive dividends in accordance with present practice, provided,
however upon such notice, and unless and until all of the Secured
Obligations (other than contingent indemnification Secured Obligations to the
extent no claim giving rise thereto has been asserted) have been performed and
paid in full, Pledgors shall not be entitled to receive any dividends or
distributions with respect to any portion of the Collateral.  If any such dividends or distributions are
received by any Pledgor in violation of the terms of this Section 5,
such distributions shall be (i) held in trust by such Pledgor on behalf of
Agent, (ii) turned over to Agent by Pledgor immediately upon receipt
thereof and (iii) deemed to constitute a portion of the Collateral pledged by
Pledgor to Agent hereunder.

 

6.             Remedies.

 

6.1          Demand
and Remedies.  At
any time after the occurrence and during the continuance of a Default or Event
of Default, Agent may, at its option, evidenced by written notice to Borrowers’
Representative at the address set forth in Section 9.6 hereof, and
without limitation of any of Agent’s other rights and remedies, exercise any or
all of the following remedies:

 

4

 

6.1.1                     Registration.  Cause all or any part of the Collateral to
be registered in its name or in the name of its nominee;

 

6.1.2                   Voting_Power.
Exercise all voting powers pertaining to all or any part of the Collateral and
otherwise act with respect thereto as though Agent were the owner thereof;

 

6.1.3                   Distributions.  Receive all dividends and distributions of
any kind whatsoever on all or any part of the Collateral;

 

6.1.4                   Collection;
Conversion.  Exercise any and
all rights of collection, conversion or exchange, and any and all other rights,
privileges, options or powers of Pledgor pertaining or relating to all or any
part of the Collateral;

 

6.1.5                   Sale
of Collateral.  Subject to any
applicable state or federal securities laws, sell, assign and deliver the
whole, or from time to time, all or any part of the Collateral at any broker’s
board or at any private sale or at public auction, with or without demand for
performance or advertisement of the time or place of sale or adjournment
thereof or otherwise, and free from any right of redemption (all of which
hereby expressly are waived by each Pledgor) for cash, for credit or for other
property, for immediate or future delivery, and for such price and on such
terms and in such manner as is commercially reasonable.

 

6.1.6                     Other
Remedies.  Exercise any other
remedy specifically granted under this Pledge Agreement or now or hereafter
existing in equity, or at law, by virtue of statute or otherwise; and

 

6.1.7                   Power
of Attorney.  With respect to
the actions described in each of Section 6.1.2 and Section 6.1.4
above, each Pledgor hereby irrevocably constitutes and appoints Agent its proxy
and attorney-in-fact with full power of substitution and acknowledges that the
constitution and appointment of such proxy and attorney-in-fact are coupled
with an interest and are irrevocable until all Secured Obligations (other than
contingent indemnification Secured Obligations to the extent no claim giving
rise thereto has been asserted) are paid and performed in full.

 

6.2          Agreement
to Sell Collateral. 
For the purposes of this Section 6, an agreement to sell all or
any part of the Collateral shall be treated as a sale thereof and Agent shall
be free to carry out such sale pursuant to such agreement, and no Pledgor shall
be entitled to the return of any of the same subject thereto, notwithstanding
the fact that after Agent shall have entered into such an agreement, all
defaults hereunder, under the Credit Agreement or under any Loan Document may
have been remedied or all Secured Obligations may have been paid and/or
performed in full.

 

5

 

6.3          Agent
May Bid.  At any
sale made pursuant to Section 6.1 above, Agent and/or any Beneficiary
may bid for and purchase, free from any right of equity or redemption on the
part of any Pledgor (the same hereby being waived and released by each
Pledgor), any part or all of the Collateral that is offered for sale, and Agent
and/or any Beneficiary, upon compliance with the terms of sale, may hold,
retain and dispose of such Collateral without further accountability therefor.

 

6.4          Proceeds
of Sale.  The
proceeds of any sale of the whole or any part of the Collateral and any other
monies at the time held by Agent under the provisions of this Pledge Agreement
shall be applied in accordance with the terms of the Credit Agreement.

 

6.5          No
Duty of Agent.  Neither
the Agent nor any Beneficiary shall have any duty to exercise any of the
rights, privileges, options or powers or to sell or otherwise realize upon any
of the Collateral, as hereinbefore authorized, and neither Agent nor any
Beneficiary shall be responsible for any failure to do so or delay in so doing.

 

6.6          Effect
of Sale.  Any sale
of all or any portion of the Collateral pursuant to Section 6.2 above
shall operate to divest all right, title and interest of the Pledgor of such
Collateral which is the subject of any such sale.

 

6.7          Securities
Laws.  Each
Pledgor acknowledges that Agent may be unable to effect a public sale of all or
a part of the Collateral by reason of prohibitions contained in any applicable
state or federal securities law, or that it may be able to do so only after
delay which might adversely affect the value that might be realized upon the
sale of the Collateral.  Accordingly,
each Pledgor agrees that Agent, without the necessity of attempting to cause
any registration of the Collateral to be effected under any applicable state or
federal securities law, may sell the Collateral or any part thereof in one or
more private sales to a restricted group of purchasers who may be required to
agree, among other things, that they are acquiring the Collateral for their own
account, for investment purposes only, and not with a view toward the
distribution or resale thereof.  Each
Pledgor agrees that any such private sale may be at prices or on terms less
favorable to the owner of the Collateral sold than would be the case if such
Collateral was sold at public sale, and that any such private sale shall not be
deemed not to have been made in a commercially reasonable manner solely by
virtue of such sale having been a private sale.

 

6.8          Assistance
to Realization. 
Each  Pledgor, at its sole cost and expense, shall use reasonable
efforts to assist Agent and/or any Beneficiary in obtaining any required
approval for any action or transaction required hereunder, including, but not
limited to (i) preparing, signing and filing with any governmental body the
assignor’s or transferor’s portion of any application or applications for
consent necessary or appropriate under applicable law or the rules and
regulations of any governmental body to any sale, assignment or transfer to
Agent or any other Person of any or all Collateral hereunder or any licenses,
franchises, permits and authorizations of Pledgor and (ii) executing all
applications and other documents and taking all other actions reasonably
requested by Agent to enable Agent, its designee or any receiver, trustee or
similar official purchaser to obtain from any Person any required authority
necessary to operate the

 

6

 

business of Pledgor provided, nothing herein shall require Pledgor to
take any such action that would violate applicable law.  To the extent permitted by law, each Pledgor
hereby irrevocably appoints Agent its attorney-in-fact with full power of
substitution to execute such applications and documents and take such actions
on behalf of Pledgor.  Each Pledgor
acknowledges that the appointment of Agent as such attorney-in-fact is coupled
with an interest and is irrevocable.

 

6.9          Transfer
of Control to Other Persons.  Each
Pledgor acknowledges and agrees that a transfer of control of the Collateral
may be made to a receiver, trustee or similar official or to any purchaser of
all or any part of the other Collateral hereunder, pursuant to any court order,
public or private sale, judicial sale, foreclosure or the exercise of any other
remedies available to Agent and/or any Beneficiary hereunder or under
applicable law.

 

6.10        Notice
of Sale.  Agent
shall give not less than 10 Business Days’ prior written notice to Borrowers’
Representative of Collateral subject to any sale pursuant to this Section 6.  Each Pledgor hereby agrees that such notice
is commercially reasonable.

 

7.             Agent’s Obligations, Custodial
Agreement,  Performance Rights, Pledge Does Not Make Agent a
Shareholder.  Neither
Agent nor any Beneficiary shall have any duty to protect, preserve or enforce
rights against the Collateral, it being understood that Agent and each
Beneficiary shall (i) have no responsibility for (A) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to the Collateral, whether or not Agent has or is deemed
to have knowledge of such matters, (B) taking any necessary steps to preserve
rights against any parties with respect to the Collateral or (C) making any
capital contributions or other payments on behalf of any Pledgor and (ii) not
be deemed to be a shareholder of any Pledged Company unless Agent or any
Beneficiary purchases or otherwise retains the applicable portion of the
Collateral in connection with a foreclosure. 
Neither Agent nor any Beneficiary shall have any liability or
responsibility for Collateral in its possession, in the absence of its gross
negligence or willful misconduct.

 

8.             Termination
of Pledge Agreement.  Upon
the payment and performance in full of all Secured Obligations, Agent shall
deliver to Pledgors the Collateral in its possession and this Pledge Agreement
thereupon shall terminate.

 

9.             Miscellaneous.

 

9.1          Exercise
of Rights.  Each
Pledgor unconditionally agrees that upon the occurrence and continuance of a Default
or Event of Default, Agent may exercise its rights and remedies against any one
or several Pledgors hereunder prior to, concurrently with, or subsequent to the
exercise by Agent of its other rights and remedies against such Pledgor or its
rights and remedies against any other Pledgor or obligor under any of the Loan
Documents.  The obligations of each
Pledgor under this Pledge Agreement shall be absolute and unconditional and
shall remain in full force and effect without regard to, and shall not be released
or discharged or in any way affected by:

 

9.1.1       Amendments.  Any amendment or
modification of or supplement to any of the Loan Documents;

 

7

 

9.1.2       Exercise
or Non-Exercise of Rights.  Any
exercise or non-exercise of any right or remedy under any of the Loan
Documents, or the granting of any postponements or extensions for time of
payment or other indulgences to Pledgor or any other Person, or the settlement
or adjustment of any claim or the release or discharge or substitution of any
Person primarily or secondarily liable with respect to any of the Loan
Instruments;

 

9.1.3       Bankruptcy.  The institution of any
bankruptcy, insolvency, reorganization, debt arrangement, readjustment,
composition, receivership or liquidation proceedings by or against Pledgor,
Borrower or any other Person; or

 

9.1.4       Other
Defenses.  Any
other circumstance which otherwise might constitute a defense to, or a
discharge of, Pledgor with respect to the Secured Obligations, other than
payment thereof.

 

9.2          Rights
Cumulative.  Each
and every right, remedy and power granted to Agent hereunder shall be
cumulative and in addition to any other right, remedy or power specifically
granted herein or now or hereafter existing in equity, at law, by virtue of
statute or otherwise and may be exercised by Agent, from time to time,
concurrently or independently and as often and in such order as Agent may deem
expedient.  Any failure or delay on the
part of Agent in exercising any such right, remedy or power, or abandonment or
discontinuance of steps to enforce the same, shall not operate as a waiver
thereof or affect the right of Agent thereafter to exercise the same, and any
single or partial exercise of any such right, remedy or power shall not preclude
any other or further exercise thereof or the exercise of any other right,
remedy or power, and no such failure, delay, abandonment or single or partial
exercise of rights of Agent hereunder shall be deemed to establish a custom or
course of dealing or performance among the parties hereto.

 

9.3          Modification.  Any modification or waiver
of any provision of this Pledge Agreement, or any consent to any departure by
any Pledgor therefrom, shall not be effective in any event unless the same is
in writing and signed by Agent and then such modification, waiver or consent
shall be effective only in the specific instance, for the specific Pledgor and
for the specific purpose given.  Any
notice to or demand on any Pledgor in any event not specifically required of
Agent hereunder shall not entitle such Pledgor or any other Pledgor to any
other or further notice or demand in the same, similar or other circumstances
unless specifically required hereunder.

 

9.4          Further
Assurances.  Each
Pledgor agrees that at any time, and from time to time, after the execution and
delivery of this Pledge Agreement, Pledgor, upon the request of Agent and/or
any Beneficiary, promptly will execute and deliver such further documents and
do such further acts and things as Agent reasonably may request in order to
effect fully the purposes of this Pledge Agreement and to subject to the
security interest created hereby any Collateral intended by the provisions
hereof to be covered hereby.  Each
Pledgor and Agent acknowledge their intent that, upon and after the occurrence
of a Default or Event of Default, Agent shall receive, to the fullest extent
permitted by law and governmental policy, all rights necessary or

 

8

 

desirable to obtain, use or sell the Collateral, and to exercise all
remedies available to Agent under the Loan Documents, the Uniform Commercial
Code or other applicable law.  Each
Pledgor and Agent further acknowledge and agree that, in the event of changes
in law or governmental policy occurring subsequent to the date hereof that
affect in any manner Agent’s rights of access to, or use or sale of, the
Collateral, or the procedures necessary to enable Agent to obtain such rights
of access, use or sale, Agent and Pledgors shall amend this Pledge Agreement
and any other Loan Documents to which any Pledgor is a party, in such manner as
Agent reasonably shall request, in order to provide Agent such rights to the
greatest extent possible consistent with then applicable law and governmental
policy.

 

9.5          Preservation
of Collateral. 
Each Pledgor agrees that it will warrant, preserve, maintain and defend,
at the reasonable expense of Pledgor, the right, title and interest of Agent in
and to the Collateral of Pledgor and all right, title and interest represented
thereby against all claims, charges and demands of all Persons whomsoever which
are based on a breach of any Secured Obligations; provided that no
Pledgor shall have to take such actions in violation of applicable law.

 

9.6          Notices.  All notices, requests, demands or other
communications hereunder shall be in writing and may be delivered in hand,
mailed by United States registered or certified first class mail, postage
prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile
or telex and confirmed by delivery via courier or postal service, addressed as
follows, and in the case of any notices, requests or demands to any Pledgor
shall be deemed to be duly served on, given to or made if sent to the
Borrowers’ Representative as set forth below:

 

FAO, Inc.

2520 Renaissance
Boulevard

King of Prussia,
Pennsylvania 19406

Attn:  Legal

Fax No.  610-278-7805

 

or at such other address
for notice as the Borrowers’ Representative shall last have furnished in
writing to the Agent;

 

and if to Agent, served
on, given to or made if sent to:

 

Fleet Retail Finance Inc.

40 Broad Street

Boston, MA 02109

Attn:  James Dore, Managing Director

Fax No.  617-434-4312

 

or at such other address
for notice as the Agent shall last have furnished in writing to the Borrowers’
Representative.

 

9

 

9.7          GOVERNING
LAW.  THIS PLEDGE
AGREEMENT IS A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK, AND SHALL FOR
THE PURPOSES OF THIS SECTION 9.7 BE DEEMED TO BE PERFORMED AND MADE IN THE
STATE OF NEW YORK, AND SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1401 FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF SAID STATE OF NEW YORK.

 

9.8          Severability.  In the event that any provision of this
Pledge Agreement is deemed to be invalid by reason of the operation of any law
or by reason of the interpretation placed thereon by any court or any other
Governmental Body, this Pledge Agreement shall be construed as not containing
such provision and any and all other provisions hereof which otherwise are
lawful and valid shall remain in full force and effect.

 

9.9          Successors
and Assigns.  This
Pledge Agreement shall be binding upon each Pledgor and its successors and
permitted assigns, and shall inure to the benefit of the Agent and its
successors and permitted assigns, and for the benefit of each of the
Beneficiaries and their respective successors and permitted assigns; provided,
however, that no Pledgor shall be entitled to assign or delegate any of its
rights or obligations under this Pledge Agreement without the prior written
consent of the Agent, and any purported assignment in the absence of such
consent shall be void.

 

9.10        Counterparts.  This Pledge Agreement may
be executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which when taken together shall be deemed to be one and
the same instrument.

 

9.11        Notation
on Books. 
Concurrently with the execution and delivery hereof, each Pledgor shall
cause each Pledged Company to register in its books the security interests in
and the pledge of the Collateral effected hereby.

 

9.12        Joint
and Several Agreement. 
All obligations of the Pledgors hereunder are the joint and several
obligations and undertakings of each Person signing this Pledge Agreement as a
“Pledgor”.

 

9.13        Headings.  The headings of the sections of this Pledge
Agreement have been inserted for convenience of reference only and shall in no
way affect the construction or interpretation of this Pledge Agreement.

 

10.          Agent’s
Right to Specific Performance.  Each Pledgor acknowledges that Pledgor’s licenses, franchises,
permits and authorizations are unique assets, that there is no adequate remedy
at law for failure by Pledgor to comply with the provisions of Section 6
and that such failure would not be adequately compensable in monetary damages;
therefore, each Pledgor agrees that, in addition to all other remedies
available at law or in equity, Agent and each Beneficiary shall be entitled to
obtain decree(s) of specific performance entitling it to temporary restraining
order(s), preliminary injunction(s) or permanent injunction(s) to specifically
enforce and require specific performance of the provisions of Section 6.  Each

 

10

 

Pledgor agrees that notice shall be adequate for the entry of a decree
of specific performance in respect of any such matter (i) in the case of a
temporary restraining order, upon 72 hours’ prior notice of the hearing hereof
and (ii) in the case of any other proceeding, upon five  (5) days’ prior notice of the hearing
thereof.  Each Pledgor hereby waives all
requirements and demands that Agent give any greater notice of such hearings
and further waives all requirements and demands that Agent post a bond on other
surety arrangement in connection with the issuance of such decree.

 

11.          JURISDICTION
AND VENUE.  EACH PLEDGOR
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS PLEDGE AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION
OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
PLEDGORS BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 9.6.  THE PLEDGORS HEREBY WAIVE ANY OBJECTION THAT
THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT
OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

 

12.          WAIVER
OF JURY TRIAL.  EACH PLEDGOR HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING
OUT OF ANY DISPUTE IN CONNECTION WITH THIS PLEDGE AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY,
INCLUDING ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF
THE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOANS OR
ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT IT WILL NOT SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. 
Except as prohibited by law, each Pledgor hereby waives any right it may
have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages.  Each Pledgor (a) certifies that no
representative, agent or attorney of any Lender or the Agent has represented,
expressly or otherwise, that such Lender or Agent would not, in the event of
litigation, seek to enforce the foregoing waivers and (b) acknowledges
that the Agent and the Lenders have been induced to enter into this Pledge
Agreement and the other Loan Documents to which it is a party by, among other
things, the waivers and certifications contained herein.

 

13.          Expenses.  Each Pledgor agrees, jointly and severally, to pay on demand any
and all loss, costs, expenses, demands or liability, including, without
limitation, legal fees, properly incurred or paid by the Agent, and/or any
Beneficiary in connection with the preparation, negotiation, execution,
delivery, administration, and enforcement of any rights and remedies under this
Pledge Agreement, whether or not legal action is instituted.  The language contained

 

11

 

in this Section 13 is not intended, and shall not be construed, to
limit in any way the obligations of any Pledgor under the Credit Agreement.

 

14.          Indemnification.  Each Pledgor agrees, as a separate and
independent primary obligation, to indemnify the Agent and each Beneficiary
from time to time on demand by the Agent (and by payment to the Agent) from and
against any loss, cost, expense, demands or liability of any kind incurred or
suffered by the Agent and/or any Beneficiary as a result of any Pledgor’s
failure to (a) perform the Obligations duly and punctually and/or (b) perform
its obligations under this Pledge Agreement and/or (c) make payment under this
Pledge Agreement in the relevant currency.

 

15.          Agent.  Each Pledgor acknowledges that the Agent may
either appoint a joint agent (with power to act severally as well as jointly)
or delegate by power of attorney or otherwise to any person or any of its
rights, trusts, powers, authorities or discretions vested in it in respect of
this Pledge Agreement for any purpose, including for the purpose of ensuring
the efficacy and enforceability of, and enforcement of, this Pledge Agreement.

 

12

 

IN WITNESS WHEREOF, each Pledgor and Agent
have caused this Pledge Agreement to be executed as of the date first above
written.

 

	
   

  	
  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: FAO, Inc., its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Name: Jerry R. Welch

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  FLEET RETAIL FINANCE INC., as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Christine M. Scott

  	
   

  
	
   

  	
   

  	
  Name: Christine M.
  Scott

  
	
   

  	
   

  	
  Title: Vice President

  

 

13

 

Exhibit A

 

Collateral

 

	
  Pledgor

  	
   

  	
  Subsidiary

  	
   

  	
  Certificate
  

  No.

  	
   

  	
  Number of 

  Shares (or

  Percentage 

  Interest)

  	
   

  
	
  FAO, Inc.

  	
   

  	
  FAO Schwarz, Inc.

  	
   

  	
  2

  	
   

  	
  1000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FAO, Inc.

  	
   

  	
  ZB Company, Inc.

  	
   

  	
  2

  	
   

  	
  1000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FAO, Inc.

  	
   

  	
  The Right Start, Inc.

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FAO, Inc.

  	
   

  	
  Targoff-RS, LLC

  	
   

  	
  1

  	
   

  	
  100

  	
  %

  

 

14

 

Exhibit B

 

Chief Executive Offices

 

 

As to each Pledgor:

 

2520 Renaissance
Boulevard

King of Prussia,
Pennsylvania 19406

 

15Exhibit 10.71

 

TRADEMARK SECURITY AGREEMENT

 

This Trademark
Security Agreement (this “Agreement”) is made as of April 23, 2003 by
and among FAO, Inc. (“FAO”), a Delaware corporation, FAO Schwarz,
Inc. (“Schwarz”),
a Delaware corporation, ZB Company, Inc. (“ZB”), a Delaware corporation, The Right
Start, Inc. (“Right Start”), a Delaware corporation, and Targoff-RS, LLC (“Targoff”),
a New York limited liability company (FAO, Schwarz, ZB, Right Start, and
Targoff being referred to collectively herein as the “Borrowers” and each,
individually, as a “Borrower”), and Fleet Retail Finance Inc.,  in
its capacity as administrative and collateral agent (in such capacity, together
with its successors and assigns, the “Agent”), for the benefit of the various
financial institutions who are from time to time Lenders under the Credit
Agreement described below (collectively, the Agent and the Lenders are referred
to as the “Secured Parties”).

 

1.             Recitals.

 

A.            The Borrowers and the Secured
Parties are entering into a Loan and Security Agreement of even date herewith
(as the same may be amended, restated, renewed, replaced, supplemented or
otherwise modified from time to time, the “Credit Agreement”), pursuant to which the
Lenders have agreed to lend and to make certain loans and other financial
accommodations available to the Borrowers, upon and subject to the terms and
conditions thereof.

 

B.            Pursuant to Section 6 of the Credit
Agreement, (as amended, restated, supplemented or otherwise in effect from time
to time, the “Security Provisions”), the Borrowers have granted a continuing
security interest in and to certain of its assets to Agent for the benefit of
the Secured Parties.

 

C.            The Secured
Parties have required, as a condition, among others, to the making of any loans
or other extensions of credit under the Credit Agreement, that the Borrowers
execute and deliver this Agreement to Agent for the benefit of the Secured
Parties;

 

D.            The Borrowers have agreed to enter
into this Agreement in furtherance of the rights granted to the Secured Parties
under the Credit Agreement.

 

NOW, THEREFORE,
in consideration of the premises and of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.             Defined Terms.

 

(a)           Unless otherwise defined herein, each
capitalized term used herein that is defined in the Credit Agreement shall have
the meaning specified for such term in the Credit Agreement.

 

(b)           The words “hereof,” “herein” and
“hereunder” and words of like import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of this
Agreement, and section references are to this Agreement unless otherwise
specified.

 

 

(c)           All terms defined in this Agreement
in the singular shall have comparable meanings when used in the plural, and vice
versa, unless otherwise specified.

 

2.             Incorporation of Recitals and
Security Provisions.  The Recitals set forth above are incorporated into this Agreement
by this reference thereto and are made a part hereof. The Security Provisions
and the terms and provisions thereof and the terms and provisions of the Credit
Agreement referenced in the Security Provisions are hereby incorporated herein
in their entirety by this reference thereto.

 

3.             Representations and Warranties.  The Borrowers jointly and severally
represent and warrant to the Secured Parties that:

 

(a)           Each Borrower owns, or is licensed to
use, all trademarks, trade names and service marks material to its business,
and the use thereof by the Borrowers does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect.

 

(b)           As of the Closing Date, (i) the
Trademarks (as defined below) listed on Schedule A hereto include
all trademarks, registered trademarks, service marks and registered service
marks owned by any Borrower, and all trademark applications and service mark
applications made by any Borrower, and all trade names used by any Borrower;
and (ii) the Licenses listed on Schedule B include all of the trademark
license agreements and service mark license agreements under which any Borrower
is the licensee or licensor; and (iii) there are no Liens on any Trademark or
License other than the Liens granted to the Secured Parties hereunder and
Permitted Liens.

 

(c)           Each Borrower has full power and
authority to grant to Agent for the benefit of the Secured Parties the security
interest in the Trademarks (as defined below) and Licenses (as defined below)
with respect to which it is listed as Trademark Owner or Trademark Licensee on Schedule
A and Schedule B hereto, and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person other than any consent or approval which has
been obtained.

 

(d)           The filing of the short form of this
Agreement, attached hereto as Exhibit 1, (the “Security Agreement
(Trademark)”) with the United States Patent and Trademark Office and with the
governmental or other U.S. or foreign offices listed on Schedule C
hereto, constitutes all the actions that are necessary to publish notice of and
protect the validity of and establish legal, valid and perfected security
interest in favor of the Agent (for the benefit of the Secured Parties) in
respect of the Trademarks and Licenses in which a security interest may be
perfected by filing, recording or registration, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction.

 

(e)           The security
interest granted hereunder constitutes a legal and valid security interest in
all the Trademarks and Licenses and, subject to the filings, recordings and
registrations described in the foregoing paragraph (d), a perfected security
interest therein.  Such security
interest is and shall be prior to any other Lien on any of the Trademarks and
Licenses other than Permitted Liens.

 

2

 

4.          Security
Interest in Trademarks.  To
secure the prompt and complete payment, performance and observance when due
(whether at stated maturity, by acceleration or otherwise) of all Obligations
(as such term is defined in the Credit Agreement), and to induce Agent and each
of the Lenders to enter into the Credit Agreement and to make the Loans and
other extensions of credit provided for therein in accordance with the
respective terms thereof, each Borrower hereby grants to Agent for the benefit
of the Secured Parties a security interest in, as and by way of a first
mortgage and security interest having priority over all other security
interests, except Permitted Liens, with power of sale to the extent permitted
by applicable law, all of such Borrower’s now owned or existing and hereafter
acquired or arising:

 

(a)           trademarks, registered trademarks,
trademark applications, service marks, registered service marks and service
mark applications, including, without limitation, the trademarks, registered
trademarks, trademark applications, service marks, registered service marks and
service mark applications listed on Schedule A attached hereto and made
a part hereof, and (i) all renewals thereof, (ii) all income, royalties,
damages and payments now and hereafter due and/or payable under and with
respect thereto, including, without limitation, payments under all licenses
entered into in connection therewith and damages and payments for past or
future infringements or dilutions thereof, (iii) the right to sue for past,
present and future infringements and dilutions thereof, (iv) the goodwill
of Borrower’s business symbolized by the foregoing and connected therewith, and
(v) all of Borrower’s rights corresponding thereto throughout the world (all of
the foregoing trademarks, registered trademarks and trademark applications, and
service marks, registered service marks and service mark applications, together
with the items described in clauses (i)-(v) in this Section 4(a), are
sometimes hereinafter individually and/or collectively referred to as the “Trademarks”);

 

(b)           rights under or interests in any
trademark license agreements or service mark license agreements with any other
party, whether Borrower is a licensee or licensor under any such license
agreement, including, without limitation, those trademark license agreements
and service mark license agreements listed on Schedule B attached hereto
and made a part hereof, together with any goodwill connected with and
symbolized by any such trademark license agreements or service mark license
agreements, and the right to prepare for sale and sell any and all Inventory
now or hereafter owned by Borrower and now or hereafter covered by such
licenses (all of the foregoing are hereinafter referred to collectively as the “Licenses”);
and

 

(c)           all proceeds of all the foregoing.

 

5.          Restrictions
on Future Agreements.  No
Borrower will, without Agent’s prior written consent, enter into any agreement,
including, without limitation, any license agreement, which is inconsistent
with this Agreement, except for those license agreements that a Borrower enters
into for the purpose of protecting or maintaining the validity or enforcement
of the rights granted to Agent under this Agreement provided, if no Event of
Default has occurred and is then continuing a Borrower may license Trademarks
in the ordinary course of business for commercial use, subject to the Agent’s
rights therein and each Borrower further agrees that it will not take any
action, and will use its reasonable business efforts not to permit any action
to be taken by others, including, without limitation, licensees, or fail to
take any action, which could

 

3

 

reasonably be expected to
affect in any material respect the validity or enforcement of the rights
granted to Agent under this Agreement.

 

6.             New Trademarks and Licenses.  If, prior to the termination of this
Agreement, any Borrower shall (i) obtain rights to any new trademarks,
registered trademarks, trademark applications, service marks, registered
service marks or service mark applications, (ii) become entitled to the benefit
of any trademarks, registered trademarks, trademark applications, trademark
licenses, trademark license renewals, service marks, registered service marks,
service mark applications, service mark licenses or service mark license
renewals whether as licensee or licensor, or (iii) enter into any new trademark
license agreement or service mark license agreement, the provisions of Section
4 above shall automatically apply thereto. 
Upon the occurrence of any of the events described in clauses (i), (ii)
and (iii) of the preceding sentence, Borrowers’ Representative shall promptly
execute and deliver to the Secured Parties for recording with the U.S. Patent
and Trademark Office and such other appropriate governmental offices in the
U.S. or abroad, a new Security Agreement (Trademarks) substantially in the form
of Exhibit 1 listing such additional registered trademarks and trademark
applications. Each Borrower hereby undertakes, to modify and update (i) Schedule
A to include any future trademarks, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications and (ii) Schedule B to include any future trademark
license agreements and service mark license agreements, which are Trademarks or
Licenses under Section 4 above or under this Section 6.  Each Borrower hereby authorizes Agent to
modify this Agreement, by amending Schedule A or Schedule B
thereto, as the case may be, such future trademarks, registered trademarks,
trademark applications, service marks, registered service marks and service
mark applications, and trademark license agreements and service mark license
agreements that are the Trademarks or the Licenses under paragraph 4 above or
under this paragraph 6.

 

7.             Royalties.  Each Borrower hereby agrees that the use by
Agent of the Trademarks and Licenses as authorized hereunder in connection with
Agent’s exercise of its rights and remedies under Section 15 or pursuant
to the Credit Agreement shall be coextensive with Borrower’s rights thereunder
and with respect thereto and without any liability for royalties or other related
charges from Agent or any Lender to Borrower to the extent permitted by the
terms of any applicable license agreement.

 

8.             Right to Inspect; Further
Assignments and Security Interests.  Agent may at all reasonable times and on
reasonable advance written notice (and at any time without notice when an Event
of Default exists) have access to, examine, audit, make copies (at Borrowers’
expense) and extracts from and inspect Borrowers’ premises and examine
Borrowers’ books, records and operations relating to the Trademarks and
Licenses; provided, that in conducting such inspections and
examinations, Agent shall use reasonable efforts not to disturb unnecessarily
the conduct of Borrowers’ ordinary business operations.  From and after the occurrence and during the
continuance of an Event of Default, the Borrowers agree that Agent, or a
conservator appointed by Agent, shall have the right to establish such
reasonable additional product quality controls as Agent or such conservator, in
its sole and absolute judgment, may deem necessary to assure maintenance of the
quality of products sold by Borrowers under the Trademarks and the Licenses or
in connection with which such Trademarks and Licenses are used.  The Borrowers agree (i) to give reasonable
written notice to Agent with respect to any sale or assignment of its
respective interests in, or grant of any license under, the Trademarks or the

 

4

 

Licenses, (ii) to maintain the
quality of such products as of the date hereof, and (iii) to give reasonable
written notice to Agent with respect to any material change of the quality of
such products.

 

9.             Nature and Continuation of
Agent’s Security Interest; Termination of Agent’s Security Interest.  This Agreement is made for collateral
security purposes only.  This Agreement
shall create a continuing security interest in the Trademarks and Licenses and
shall terminate only when all Obligations (other than contingent
indemnification Obligations to the extent no claim giving rise thereto has been
asserted) have been indefeasibly paid and satisfied in full in cash and the
Credit Agreement and all of the other Loan Documents have terminated pursuant
to the respective terms and provisions thereof.  When this Agreement has terminated, Agent shall, upon the request
of Borrowers’ Representative, promptly execute and deliver to Borrowers’
Representative, at Borrowers’ expense, all termination statements and other
instruments as may be necessary or proper to terminate Agent’s security
interest in the Trademarks and the Licenses, subject to any disposition thereof
which may have been made by Agent pursuant to this Agreement or the Credit
Agreement.

 

10.          Duties of Borrowers.  Each Borrower shall have the duty, to the
extent desirable in the normal conduct of such Borrower’s business, to: (i)
prosecute diligently any trademark application or service mark application that
is part of the Trademarks pending as of the date hereof or hereafter until the
termination of this Agreement, and (ii) make application for trademarks or
service marks that, in the case of either clause (i) or (ii) above, in such
Borrower’s sole discretion, are necessary in the operation of such Borrower’s
business.  Each Borrower further agrees
(i) not to abandon any Trademark or License, and (ii) to use its reasonable
business efforts to maintain in full force and effect the Trademarks and the
Licenses, in the case of either clause (i) of (ii) above, that are or shall be,
in such Borrower’s sole discretion, necessary or economically desirable in the
operation of such Borrower’s business. 
Any expenses incurred in connection with the foregoing shall be borne by
the Borrowers.  Neither Agent nor any
Lender shall have any duty with respect to the Trademarks and Licenses.  Without limiting the generality of the
foregoing, neither Agent nor any Lender shall be under any obligation to take
any steps necessary to preserve rights in the Trademarks or Licenses against
any other parties, but may do so at its option from and after the occurrence
and during the continuance of an Event of Default, and all expenses incurred in
connection therewith shall be for the sole account of the Borrowers and shall
be added to the Obligations secured hereby.

 

11.          Agent’s Right to Sue.  From and after the occurrence and during the
continuance of an Event of Default, Agent shall have the right, but shall not
be obligated, to bring suit in its own name to enforce the Trademarks and the
Licenses and, if Agent shall commence any such suit, Borrowers shall, at the
request of Agent, do any and all lawful acts and execute any and all proper
documents reasonably required by Agent in aid of such enforcement.  Borrowers shall, upon demand, promptly
reimburse Agent and each of the Lenders for all reasonable costs and expenses
incurred by Agent in the exercise of its rights under this Section 11
(including, without limitation, reasonable fees and expenses of attorneys and
paralegals for Agent).

 

12.          Waivers.  Failure by Agent or any of the Lenders at
any time or times hereafter to require strict performance by each Borrower of
any provision of this Agreement shall not waive, affect or diminish any right
of Agent or any of the Lenders thereafter to demand strict compliance and
performance therewith nor shall any course of dealing between one or more

 

5

 

Borrowers and Agent or any of
the Lenders have such effect.  No single
or partial exercise of any right hereunder shall preclude any other or further
exercise thereof or the exercise of any other right.  None of the undertakings, agreements, warranties, covenants and
representations of any Borrower contained in this Agreement shall be deemed to
have been suspended or waived by Agent or any of the Lenders unless such suspension
or waiver is in writing signed by an officer of Agent or any of the Lenders and
directed to Borrowers’ Representative specifying such suspension or waiver.

 

13.          Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but the provisions of this Agreement are severable, and
if any clause or provision shall be held invalid and unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part hereof, in such jurisdiction, and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.

 

14.          Modification.  This Agreement cannot be altered, amended or
modified in any way, except by a writing signed by the parties hereto.

 

15.          Cumulative Remedies; Power of
Attorney. 
Each Borrower hereby irrevocably designates, constitutes and appoints
Agent (and all Persons designated by Agent in its reasonable discretion) as
Borrower’s true and lawful attorney-in-fact, with full power of substitution,
and authorizes Agent and any of Agent’s designees, in Borrower’s or Agent’s
name, upon the occurrence and during the continuance of an Event of Default and
the giving by Agent of notice to Borrowers’ Representative of Agent’s intention
to enforce its rights and claims against Borrower, to take any action and
execute any instrument which Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
(i) endorse Borrower’s name on all applications, documents, papers and
instruments necessary or desirable for Agent in the use of the Trademarks or
the Licenses, (ii) assign, pledge, convey or otherwise transfer title in or
dispose of the Trademarks or the Licenses to anyone on commercially reasonable
terms, (iii) grant or issue any exclusive or nonexclusive license under the
Trademarks or, to the extent permitted, under the Licenses, to anyone on
commercially reasonable terms, and (iv) take any other actions with respect to
the Trademarks or the Licenses as Agent deems in its and the Lenders’ best
interests.  Each Borrower hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof.  This power of attorney is
coupled with an interest and shall be irrevocable until all of the Obligations
(other than contingent indemnification Obligations to the extent no claim
giving rise thereto has been asserted) shall have been indefeasibly paid and
satisfied in full in cash and the Credit Agreement and each of the other Loan
Documents shall have terminated pursuant to the respective terms and provisions
thereof.  Each Borrower acknowledges and
agrees that this Agreement is not intended to limit or restrict in any way the
rights and remedies of Agent or any of the Lenders under the Credit Agreement,
but rather is intended to facilitate the exercise of such rights and remedies.

 

Agent shall have, in addition to all other rights and remedies given it
by the terms of this Agreement and any of the other Loan Documents, all rights
and remedies allowed by law and the rights and remedies of a secured party
under the Uniform Commercial Code as enacted in any jurisdiction from time to
time in which the Trademarks or the Licenses may be located or deemed
located.  Upon the occurrence of an
Event of Default and the election by Agent to

 

6

 

exercise any of its remedies
under Section 9-610 or Section 9-620 of the Uniform Commercial Code with
respect to the Trademarks and Licenses, each Borrower agrees to assign, convey
and otherwise transfer title in and to the Trademarks and the Licenses to Agent
or any transferee of Agent (for the benefit of the Secured Parties) and to
execute and deliver to Agent or any such transferee (for the benefit of the
Secured Parties) all such agreements, documents and instruments as may be
necessary, in Agent’s reasonable discretion, to effect such assignment,
conveyance and transfer.  All of Agent’s
rights and remedies with respect to the Trademarks and the Licenses, whether
established hereby, by the Credit Agreement, by any other agreements or by law,
shall be cumulative and may be exercised separately or concurrently.  Notwithstanding anything set forth herein to
the contrary, it is hereby expressly agreed that upon the occurrence and during
the continuance of an Event of Default, Agent may exercise any of the rights
and remedies provided in this Agreement, the Credit Agreement and any of the
other Loan Documents.  Each Borrower
agrees that any notification of intended disposition of any of the Trademarks
and Licenses required by law shall be deemed reasonably and properly given if
given to Borrowers’ Representative at least ten (10) Business Days before such
disposition; provided, that Agent may give any shorter notice that
is commercially reasonable under the circumstances.

 

16.          Further Assurances.  Upon the written
request of the Agent, and at the sole expense of the Borrowers, each Borrower
will promptly execute and deliver such further instruments and documents and
take such further actions as the Agent may reasonably request in order to
obtain the full benefits of this Agreement and of the rights and powers herein
granted, including without limitation, filing of any financing statements under
the Uniform Commercial Code; execution and filing of collateral assignments of
general intangibles (including without limitation, the execution and filing of
separate memoranda relating thereto for filing with any governmental office in
the United States or abroad, including, without limitation those listed on Schedule
C hereto).

 

17.          Successors and Assigns.  This Agreement and all obligations of the
Borrowers hereunder shall be binding upon the respective successors and assigns
of Borrowers and shall, together with the rights and remedies of Agent and each
of the Lenders hereunder, inure to the benefit of Agent and the Lenders and
their respective successors and assigns.

 

18.          Notices.  Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, consent,
approval, declaration or other communications shall or may be given to or
served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given (and
deemed to have been given) in the manner and to the respective addresses set
forth in Section 16.6 of the Credit Agreement.  Failure or delay in delivering copies of any such notice, demand,
request, consent, approval, declaration or other communication to any Persons
designated in the Credit Agreement to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.

 

19.          GOVERNING LAW.  THIS AGREEMENT IS A CONTRACT UNDER THE LAWS OF THE
STATE OF NEW YORK, AND SHALL FOR THE PURPOSES OF THIS SECTION 19 BE DEEMED TO
BE PERFORMED AND MADE IN THE STATE

 

7

 

OF NEW YORK, AND
SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401 FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE
OF NEW YORK.

 

20.          JURISDICTION AND VENUE.  EACH BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS
IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS BY MAIL AT THE ADDRESS SPECIFIED
IN SECTION 18.  THE BORROWERS HEREBY
WAIVE ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT
COURT.

 

21.          WAIVER OF JURY TRIAL.  EACH BORROWER HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS
OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS
OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS OR ACTIONS OF THE AGENT OR ANY LENDER RELATING TO THE
ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES
THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  Except as prohibited by law, each Borrower
hereby waives any right it may have to claim or recover in any litigation
referred to in the preceding sentence any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.  Each Borrower (a) certifies
that no representative, agent or attorney of any Lender or the Agent has
represented, expressly or otherwise, that such Lender or Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and
(b) acknowledges that the Agent and the Lenders have been induced to enter
into this Agreement and the other Loan Documents to which it is a party by,
among other things, the waivers and certifications contained herein.

 

22.          Section Titles.  The section titles herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.

 

23.          Execution in Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.  Any such counterpart which may be delivered
by facsimile transmission shall be deemed the equivalent of an originally
signed counterpart and shall be fully admissible in any enforcement proceedings
regarding this Agreement.

 

8

 

24.          Merger.  This Agreement and the Loan Documents
represent the final agreement of Borrowers and the Secured Parties with respect
to the matters contained herein and may not be contradicted by evidence of
prior or contemporaneous agreements, or subsequent oral agreements, between any
Borrower and Agent or between any Borrower and any of the Lenders.

 

 

[Remainder of Page Intentionally
Left Blank -

Signature Page
Follows]

 

9

 

IN
WITNESS WHEREOF, each of the undersigned has caused
this Trademark Security Agreement to be signed by its duly authorized officer
under seal as of the day and year 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: FAO, Inc.,
  its sole member

  	
   

  
	
   

  	
  By:

  	
  /s/ Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Name: Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Title: Chief Executive Officer and President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address for Notices to any Borrower:

  	
   

  
	
   

  	
  FAO, Inc.

  	
   

  
	
   

  	
  2520 Renaissance Boulevard

  	
   

  
	
   

  	
  King of Prussia, Pennsylvania 19406

  	
   

  
	
   

  	
  Attn:  Raymond Springer, CFO

  	
   

  
	
   

  	
  Fax No.  610-278-7805

  	
   

  

 

10

 

	
   

  	
  FLEET RETAIL
  FINANCE INC., as Agent

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine M. Scott

  	
   

  
	
   

  	
   

  	
  Name: Christine M. Scott

  	
   

  
	
   

  	
   

  	
  Title: Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address for Notices:

  	
   

  
	
   

  	
  Fleet Retail Finance Inc.

  	
   

  
	
   

  	
  40 Broad Street

  	
   

  
	
   

  	
  Boston, MA 02109

  	
   

  
	
   

  	
  Attn:  James Dore, Managing
  Director

  	
   

  
	
   

  	
  Fax No.  617-434-4312

  	
   

  

 

11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]