EXHIBIT 99.3
FIRST AMENDMENT
TO
SECURITIES PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT (this "First
Amendment") is entered into and effective as of April 21, 2003 by and among, on
the one hand, FAO, Inc., a Delaware corporation ("Company"), and certain
purchasers (the "Purchasers") under that certain Securities Purchase Agreement
dated as of April 3, 2003 (the "Purchase Agreement").
RECITALS
Company and Purchasers have entered into the Purchase Agreement pursuant
to which Purchasers have agreed to purchase and Company has agreed to sell its
Series I Convertible Preferred Stock (the "Preferred Stock"). Certain Purchasers
have requested and Company has agreed to make certain amendments to the Purchase
Agreement. Certain new persons (the "New Purchasers") wish to purchase the
Preferred Stock that certain existing Purchasers have a right to purchase.
Section 8.3 of the Purchase Agreement permits amendment with the written
consent of the Company and any Purchaser who would be materially adversely
affected by the amendment.
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 ascribed to such terms in the Purchase
Agreement.
2. Amendments to the Purchase Agreement.
(a) Section 4.1 of the Purchase Agreement is hereby amended by
adding to the end of the definition of "Initial Equity
Capitalization" the following: ", as set forth in Schedule 2.3
attached hereto."
(b) Section 7.2 of the Purchase Agreement is hereby amended
and restated in its entirety as follows:
"Section 7.2 Commitment Provisions. The Purchasers, pro rata in
proportion to each Purchaser's Commitment, shall cause the issuance
of the LC so requested by the Company provided that:
(a) The aggregate stated amount of the LC shall not
exceed $5 million:
(b) The expiry of the LC shall not be later than
November 30, 2003;
(c) The issuance date shall not be earlier than June 1,
2003; and
(d) The Company shall execute such documentation to
apply for and support the issuance of the LC as may be
required by the issuer of the LC, which may be one of the
Company's senior lenders (the "LC Issuer)."
(c) Section 7.4(b) of the Purchase Agreement is hereby amended
by adding to the end of such subsection the following: "; provided
that the issuance of such warrants will not result in the
cancellation of the LC Notes."
(d) Schedule I of the Purchase Agreement is hereby amended and
restated in its entirety as follows:
"SCHEDULE I
AMOUNT OF
PURCHASERS SHARES
PURCHASED PRICE
Saks Incorporated 5,000 $5,000,000
Xxxx Xxxxx 4,000 $4,000,000
Xxxxx Xxxxxxxx Capital Advisors, L.P. 5,000 $5,000,000
Xxxxxxx Xxxxx 4,900 $4,900,000
Xxxxxxx Park Capital II, L.P. 5,000 $5,000,000
Woodacres LLC 3,100 $3,100,000
Xxx Xxxxxx, as trustee 2,000 $2,000,000
Xxxxxxx Xxxxxx 1,000 $1,000,000"
(e) Schedule 2.3 of the Purchase Agreement is hereby amended
and restated in its entirety as follows:
"Schedule 2.3
Capitalization
The equity capitalization of FAO will be as follows on the Closing Date (without
giving effect to the 1:15 reverse stock split):
SECURITY COMMON EQUIVALENTS
Series I Convertible Preferred Stock* 305,000,000
Series J Convertible Preferred Stock** 65,704,954
Warrants*** 1,650,000
Common Stock**** 39,835,968
Total: 412,190,924
* Assumes 30,000 shares of Series I Convertible Preferred Stock are issued under
the Agreement at a conversion rate of $.10 per share. Also includes 500 shares
of Series I Convertible Preferred Stock issued to KBB Retail Assets Corp. in
compromise of its claims in the Bankruptcy Case Proceedings.
** Series J Convertible Preferred Stock ranks pari passu with the Series I and
is issued in compromise of claims by Xxxxx Xxxxxxxx affiliates and Xxxx Xxxxx in
connection with the Bankruptcy Case Proceedings. Assumes that Xxxxx Xxxxxxxx
affiliates and Xxxx Xxxxx convert the $4 million in aggregate principal amount
of convertible Equipment Notes they receive in compromise of their claims in the
Bankruptcy Case Proceedings.
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*** Includes Common Stock issuable upon exercise of warrants held by Xxxxx
Xxxxxxxx Affiliates and Xxxx Xxxxx.
**** Includes Common Stock to be received by unsecured creditors in compromise
of their claims in the Bankruptcy Case Proceedings, and existing Common Stock.
Until the Closing Date, FAO will not issue additional equity not shown in this
Schedule except pursuant to the Agreement."
3. Choice of Law. The validity of this First 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.
4. Counterparts; Telefacsimile Execution. This First 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
First Amendment by telefacsimile shall be as effective as delivery of a manually
executed counterpart of this First Amendment. Any party delivering an executed
counterpart of this First Amendment by telefacsimile also shall deliver a
manually executed counterpart of this First Amendment but the failure to deliver
a manually executed counterpart shall not affect the validity, enforceability,
and binding effect of this First Amendment.
5. Effect on Purchase Agreement. The Purchase 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 First 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 Purchase Agreement, as in effect
prior to the date hereof.
6. Effect of Signatures of New Purchasers. Upon execution of this
Amendment, the New Purchasers will become entitled to all the rights granted to
Purchasers under the Purchase Agreement and become obligated under the Purchase
Agreement as fully as if they had signed the Purchase Agreement originally,
Xxxxx Xxxxxxxx Capital Advisors, L.P., as Agent, Xxxxxxx Xxxxx and Xxxx Xxxxx
will have their purchase rights reduced as indicated and PCG Tagi, LLC (Series
H) shall no longer have any rights or obligations under the Purchase Agreement
or any related agreement.
7. Miscellaneous.
(a) Upon and after the effectiveness of this First Amendment,
each reference in the Purchase Agreement to "this Agreement",
"hereunder", "herein", "hereof" or words of like import referring to
the Purchase Agreement, and each reference in the related documents
to "the Purchase Agreement", "thereunder", "therein", "thereof" or
words of like import referring to the Purchase Agreement, shall mean
and be a reference to the Purchase Agreement as modified and amended
hereby.
(b) The Purchase Agreement and all related 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 Company.
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Securities Purchase Agreement to be executed as of the date first above written.
FAO, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxxx
Executive Vice President
EXITING PURCHASER: NEW PURCHASERS:
PCG TAGI, LLC (SERIES H) WOODACRES LLC
By /s/ Xxxx X. Xxxxxx By /s/ Xxxxx Xxxxxxxxxx
----------------------------------------- ------------------------------
Title: Vice President, Finance and Secretary Title: General Counsel of Manager
------------------------------------- --------------------------
/s/ Xxxxxxx Xxxxxx
---------------------------------
XXXXXXX XXXXXX
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NEW PURCHASER:
/s/ Xxx Xxxxxx
-----------------------------------------
XXX XXXXXX, as Trustee
Amended and Restated Les and Xxxxx Xxxxxx
Revocable Trust U/A Dated June 5, 2002
REMAINING PURCHASERS:
XXXXX XXXXXXXX CAPITAL ADVISORS, L.P.,
as Agent
By /s/Xxxxx Xxxxxxxxxx
--------------------------------------
Title: General Counsel
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/s/ Xxxx Xxxxx
-----------------------------------------
XXXX XXXXX
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