-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, o5XNTYGp6MzzjHZPkhnbQR9SAk0Zc6m6kXWoM5gf/sAcbV1JuaLz6LX2Virn8fVi YGHZXznRYnwOg+qZ4A9Nzg== 0000950172-95-000034.txt : 19950608 0000950172-95-000034.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950172-95-000034 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19950130 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TOYS R US INC CENTRAL INDEX KEY: 0000051734 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOBBY, TOY & GAME SHOPS [5945] IRS NUMBER: 135159250 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-06674 FILM NUMBER: 95503975 BUSINESS ADDRESS: STREET 1: 461 FROM RD CITY: PARAMUS STATE: NJ ZIP: 07652 BUSINESS PHONE: 2012627800 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE STORES INC DATE OF NAME CHANGE: 19780525 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE DEPARTMENT STORES INC DATE OF NAME CHANGE: 19700702 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PETRIE STORES CORP CENTRAL INDEX KEY: 0000077808 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 362137966 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 70 ENTERPRISE AVE CITY: SECAUCUS STATE: NJ ZIP: 07094 BUSINESS PHONE: 2018663600X1480 SC 13D/A 1 SCHEDULE 13D AMENDMENT NO. 19 SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 SCHEDULE 13DAmendment No. 19 Under the Securities Exchange Act of 1934 TOYS "R" US, INC. (Name of Issuer) Common Stock, par value $.10 per share (Title of Class and Securities) 892335-10-0 (CUSIP Number of Class of Securities) Hilda Kirschbaum Gerstein President and Chief Executive Officer Petrie Stores Corporation 70 Enterprise Avenue Secaucus, New Jersey 07094 201-866-3600 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copy to: Alan C. Myers, Esq. Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, New York 10022 (212) 735-3000 January 24, 1995 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box: ( ) Check the following box if a fee is being paid with this statement: ( ) SCHEDULE 13D 1 NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Petrie Stores Corporation 36-213-7966 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP. (a) ( ) (b) ( ) 3 SEC USE ONLY 4 SOURCE OF FUNDS* OO 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York 7 SOLE VOTING POWER 42,076,420 NUMBER OF SHARES 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY EACH 9 SOLE DISPOSITIVE POWER REPORTING 29,674,673 PERSON WITH 10 SHARED DISPOSITIVE POWER 12,401,747 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 42,076,420 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* ( ) 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 15.2% 14 TYPE OF REPORTING PERSON* CO This Amendment No. 19 amends and supplements the Statement on Schedule 13D, dated December 17, 1982, as heretofore amended (the "Statement"), filed with the Securities and Exchange Commission (the "Commission") by Petrie Stores Corporation, a New York corporation ("Petrie"), in connection with Petrie's ownership of shares of common stock, par value $.10 per share (the "Shares"), of Toys "R" Us, Inc., a Delaware corporation (the "Issuer"). Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in this Statement. Item 1. Security and Issuer. Item 1 is hereby amended as follows: The address of the principal executive offices of the Issuer is 461 From Road, Paramus, New Jersey 07652. Item 2. Identity and Background. Item 2 is hereby amended as follows: (a)-(c), (f) On December 9, 1994, Petrie consummated the sale of all of its and its subsidiaries' retail store operations to PS Stores Acquisition Corp., a Delaware corporation ("PS Stores"). Information as to each of the executive officers and directors of Petrie is set forth on Schedule I hereto. Each such person is a citizen of the United States. The Estate of Milton Petrie (the "Estate") beneficially owns 28,111,274 shares of the common stock, par value $1.00 per share, of Petrie, constituting approximately 54% of the outstanding shares of common stock of Petrie. (d) During the last five years, neither Petrie nor, to the best of Petrie's knowledge, any of the individuals named in Schedule I hereto, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) During the last five years, neither Petrie nor, to the best of Petrie's knowledge, any of the individuals named in Schedule I hereto, has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. Item 3 is hereby amended as follows: On January 24, 1995, Petrie transferred to the Issuer 39,853,403 Shares plus $165 million in cash in exchange for 42,076,420 Shares. All of the Shares transferred by Petrie were purchased with funds from the general working capital of Petrie. The cash transferred by Petrie was obtained from the proceeds of the sale of Petrie's and its subsidiaries' retail store operations. Item 4. Purpose of Transaction. Item 4 is hereby amended as follows: On January 24, 1995, Petrie exchanged with the Issuer 39,853,403 Shares plus $165,000,000 in cash for 42,076,420 Shares pursuant to the terms of an Acquisition Agreement, dated as of April 20, 1995 (the "Acquisition Agreement") and amended on May 10, 1994, by and between Petrie and the Issuer. The purpose of such exchange was to effect a tax-free reorganization under Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended, and pursuant to the terms of a private letter ruling issued by the Internal Revenue Service on November 15, 1994. The Shares presently held by Petrie will eventually be distributed to Petrie's shareholders, except for such Shares as are retained to provide for the payment of Petrie's present and future actual and contingent liabilities. Petrie presently anticipates that its board of directors will meet during the next sixty days to determine the size of an initial distribution of the Shares to its shareholders and to set a record date for such distribution. Except as set forth in this Item 4, neither Petrie nor, to the best of Petrie's knowledge, the Estate nor any of the individuals named in Schedule I hereto, has any plans or proposals which related to or which would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D. A copy of the Acquisition Agreement was previously filed as an exhibit to Amendment No. 17 to Petrie's Statement on Schedule 13D, filed with the Commission on April 22, 1994, and is incorporated herein by reference. Item 5. Interest in Securities of the Issuer. Item 5 is hereby amended as follows: (a)-(b) Petrie beneficially owns 42,076,420 Shares, constituting approximately 15.2% of the 277,554,230 Shares outstanding on November 21, 1994 (as reported in the Issuer's Quarterly Report on Form 10-Q filed with Commission on December 15, 1994). Except as disclosed in Item 6, Petrie has sole voting and dispositive power with respect to such Shares. To the best of Petrie's knowledge, neither the Estate nor any of the individuals named in Schedule I hereto beneficially owns any Shares. (c) Except as disclosed in Item 4, neither Petrie nor, to the best of Petrie's knowledge, the Estate nor any of the individuals named in Schedule I hereto, has effected any transaction in the Shares during the past 60 days. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Item 6 is hereby amended as follows: On January 24, 1995, Petrie delivered 3,493,450 Shares into an escrow account (the "Escrow Account") pursuant to an Escrow Agreement, dated as of January 24, 1995, between Petrie and Custodial Trust Company, as Escrow Agent (the "Escrow Agreement"). The Shares placed into the Escrow Account pursuant to the Escrow Agreement secure the payment of any of Petrie's liabilities arising under (i) the Acquisition Agreement, (ii) the Seller Indemnification Agreement, dated as of December 9, 1994, among Petrie, the Issuer, PS Stores, certain subsidiaries of PS Stores and Petrie Retail, Inc., a Delaware corporation, (iii) the Stock Purchase Agreement, dated as of August 23, 1994 and amended on November 3, 1994, by and between Petrie and WP Investors, Inc., a Delaware corporation (the "Stock Purchase Agreement"), and (iv) otherwise. On January 24, 1995, Petrie delivered 2,724,406 Shares into a collateral account (the "Collateral Account") pursuant to an Amended and Restated Cash Collateral and Pledge Agreement, dated as of December 9, 1994, as amended as of January 24, 1995, among Petrie, PS Stores, certain subsidiaries of PS Stores, and Custodial Trust Company, as Collateral Agent (the "Amended and Restated Cash Collateral Agreement"). The Shares placed into the Collateral Account pursuant to the Amended and Restated Cash Collateral Agreement secure the payment of any of Petrie's liabilities arising under (i) the Stock Purchase Agreement and (ii) the Cross-Indemnification and Procedure Agreement, dated as of December 9, 1994, between Petrie and PS Stores. Prior to distributing Shares to Petrie's shareholders, as discussed in Item 4, Petrie intends to enter into a hedge arrangement with a financial institution pursuant to which Petrie will put into place an arrangement which will hedge the value of the Shares in the Escrow Account and the Collateral Account. Petrie has agreed with the Issuer, pursuant to a letter agreement, dated as of January 24, 1995 (the "Side Letter Agreement"), that until such time as a hedge arrangement reasonably satisfactory to the Issuer is in place, it will retain either $177,500,000 in cash or Shares having a market value (as of January 20, 1995) of at least $355,000,000 (12,401,747 Shares). As indicated above, Petrie does not presently anticipate that there will be any distribution of Shares to its shareholders prior to the hedge arrangements being finalized. Each of the Amended and Restated Cash Collateral Agreement, the Escrow Agreement and the Side Letter Agreement, restricts, among other things, Petrie's ability to dispose of the Shares subject thereto. A copy of the Escrow Agreement is filed as Exhibit D to this Statement and is incorporated herein by reference. A copy of the Amended and Restated Cash Collateral Agreement is filed as Exhibit E to this Statement and is incorporated herein by reference. A copy of the Side Letter Agreement is filed as Exhibit F to this Statement and is incorporated herein by reference. Item 7. Material to be Filed as Exhibits. The following documents are attached hereto as Exhibits: Exhibit D Escrow Agreement, dated as of January 24, 1995, between Petrie and Custodial Trust Company, as Escrow Agent. Exhibit E Amended and Restated Cash Collateral and Pledge Agreement, dated as of December 9, 1994, as amended as of January 24, 1995, among Petrie, PS Stores, certain subsidiaries of PS Stores, and Custodial Trust Company, as Collateral Agent. Exhibit F Side Letter Agreement, dated as of January 24, 1995, between Petrie and the Issuer. SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PETRIE STORES CORPORATION The name, business address, present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which such employment is conducted, of each of the directors and executive officers of Petrie is set forth below. If no business address is given, the director's or officer's address is Petrie Stores Corporation, 70 Enterprise Avenue, Secaucus, New Jersey 07094. Unless otherwise indicated, each occupation set forth opposite an executive officer's name refers to employment with Petrie. Directors of Petrie are indicated with an asterisk. Present Principal Occupation or Employment and Name and Principal Business of Corporation Business Address in Which Employment is Conducted Joseph H. Flom* Partner, Skadden, Arps, Slate, Skadden, Arps, Slate, Meagher & Flom (law firm and Meagher & Flom counsel to Petrie) 919 Third Avenue New York, NY 10022 Hilda Kirschbaum Gerstein* President and Chief Executive Officer of Petrie Alan C. Greenberg* Chairman of the Board of The Bear The Bear Stearns Companies Stearns Companies, Inc. (investment Inc. bank and financial advisors to 245 Park Avenue Petrie) New York, NY 10067 Carroll Petrie* Private Investor Jean Roberts* Retired Dorothy Fink Stern* Retired Laurence A. Tisch* Chairman of the Board, Co-Chief CBS Inc. Executive Officer and a Director of 51 West 52nd Street Loews Corp. (diversified holding 35th Floor company); Chairman of the Board, New York, NY 10019 President and Chief Executive Officer of CBS Inc. (television network and broadcaster); Chief Executive Officer of CNA Financial Corp (an insurance and financial services company) Raymond S. Troubh* Financial Consultant 10 Rockefeller Plaza New York, NY 10020 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 30, 1995 PETRIE STORES CORPORATION By: /s/Hilda Kirschbaum Gerstein Name: Hilda Kirschbaum Gerstein Title: President and Chief Executive Officer EXHIBIT INDEX Exhibit D Escrow Agreement, dated as of January 24, 1995, between Petrie and Custodial Trust Company, as Escrow Agent. Exhibit E Amended and Restated Cash Collateral and Pledge Agreement, dated as of December 9, 1994, as amended as of January 24, 1995, among Petrie, PS Stores, certain subsidiaries of PS Stores, and Custodial Trust Company, as Collateral Agent. Exhibit F Side Letter Agreement, dated as of January 24, 1995, between Petrie and the Issuer. EX-99 2 EXHIBIT D ESCROW AGREEMENT This ESCROW AGREEMENT is made and entered into as of January 24, 1995, between Petrie Stores Corporation, a New York corporation ("Petrie"), and Custodial Trust Company, an affiliate of Bear, Stearns & Co. Inc., as Escrow Agent (the "Escrow Agent"). WHEREAS, Petrie and Toys "R" Us, Inc., a Delaware corporation ("Toys"), are parties to an Acquisition Agreement, dated April 20, 1994, as amended on May 10, 1994 (the "Acquisition Agreement"), pursuant to which Petrie has exchanged with Toys 39,853,403 shares of Toys common stock, par value $.10 per share ("Toys Common Stock"), and cash (in the amount of $165 million), for an aggregate of 42,076,420 shares of Toys Common Stock; WHEREAS, the Exchange, in conjunction with the complete liquidation of Petrie, is intended to qualify as a tax-free reorganization under Sections 368(a)(1)(C) and (a)(2)(G) of the Internal Revenue Code of 1986, as amended; WHEREAS, Petrie's Board of Directors anticipates that Petrie may not be able to fully wind up all of its affairs prior to the date by which Petrie must dissolve, and therefore have made specific arrangements for such contingency in the Plan of Liquidation and Dissolution (the "Plan"); WHEREAS, on November 1, 1994, Petrie's Board of Directors voted to submit to its shareholders, among other things, (i) the disposition of Petrie's retail store operations (the "Disposition"), (ii) the Exchange, and (iii) the establishment of a liquidating trust (the "Trust") pursuant to an agreement and declaration of trust, by and between Petrie and certain trustees (the "Liquidating Trust Agreement") and the complete liquidation and dissolution of Petrie (the "Liquidation," and together with the Exchange and Disposition, the "Transaction"), and on December 6, 1994, its shareholders approved the Disposition, and on January 24, 1995, its shareholders approved the Exchange and the Liquidation, authorizing the complete liquidation and dissolution of Petrie pursuant to the Plan; and WHEREAS, the Plan, among other things, (i) provides that following the consummation of the Exchange, Petrie will distribute pro rata to its shareholders all of its assets consisting of Toys Common Stock and cash, if any, other than such assets retained by Petrie and set aside in escrow (the "Retained Assets") to provide for the payment of all liabilities of Petrie, (ii) provides for the establishment of the Trust pursuant to the terms and conditions thereof and the establishment of one or more escrow accounts one of which is pursuant to the terms and conditions of this Escrow Agreement, and (iii) authorizes and directs Petrie to transfer physical possession of the Retained Assets to one or more escrow agents subject to the terms provided herein and therein. NOW, THEREFORE, in consideration of the premises, Petrie hereby transfers physical possession of the Retained Assets for the uses and purposes stated herein, subject to the terms and provisions set out below, and the Escrow Agent hereby accepts such Retained Assets, subject to the following terms and provisions: 1. Certain Definitions. For purposes of this Escrow Agreement, unless the context indicates otherwise, Petrie and the shareholders of Petrie ("Petrie Shareholders"), upon the establishment of the Trust, shall mean, respectively, in the case of (i) Petrie, the trustees (the "Trustees") of the Trust, and (ii) Petrie Shareholders, the beneficiaries of the Trust (the "Beneficiaries"). 2. Appointment and Agreement of Escrow Agent. Petrie hereby appoints the Escrow Agent, as escrow agent, and the Escrow Agent agrees to perform the duties of Escrow Agent under this Agreement. 3. Establishment of Escrow. 3.1 Delivery of Property and Receipt. Simultaneously with the execution of this Escrow Agreement, Petrie is delivering to the Escrow Agent the Retained Assets consisting of $0 in cash (the "Escrowed Cash") and 3,493,450 shares of Toys Common Stock ("Escrowed Stock," and together with the Escrowed Cash and any additional income attributable to any property held pursuant to this Escrow Agreement, the "Escrowed Property"). The Escrow Agent hereby acknowledges receipt of the Escrowed Property and agrees to hold and disburse the Escrowed Property in accordance with the terms and conditions of this Escrow Agreement for the uses and purposes stated herein. 3.2 Investment and Income. Pending the disbursement of the Escrowed Property pursuant to this Escrow Agreement, The Escrow Agent shall invest the Escrowed Cash as directed by Petrie in (i) direct obligations of the United States of America or obligations of any agency or instrumentality thereof which mature not later than one year from the date of the acquisition thereof; (ii) money market deposit accounts, checking accounts, savings accounts, or certificates of deposit, or other time deposit accounts which mature not later than one year from the date of acquisition thereof which are issued by a commercial bank or savings institution organized under the laws of the United States of America or any state thereof; or (iii) any other instruments which may be permissible under Revenue Procedure 82-58, as the same may be amended, supplemented or modified. All dividends, interest and other amounts received with respect to Escrowed Property shall be treated for Federal, state and local tax purposes as received by Petrie or, upon the establishment of the Trust, by the Trustees, for the benefit of the Beneficiaries. 4. Voting Rights of Escrowed Toys Common Stock. All voting rights on Toys Common Stock are exercisable by Petrie, or upon the establishment of the Trust, by the Trustees or their authorized agent on behalf of the Beneficiaries. 5. Obligations Secured. This Escrow Agreement has been executed and the deposit of the Escrowed Property hereunder has been made for the purpose of winding up Petrie's affairs, including but not limited to its payment of any unsatisfied debts, claims, liabilities, commitments, suits and other obligations, whether contingent or fixed or whether arising under the Acquisition Agreement, the Seller Indemnification Agreement, dated as of December 9, 1994, among Toys, Petrie and the other parties thereto (the "Seller Indemnification Agreement"), the Stock Purchase Agreement, dated as of August 23, 1994, as amended, by and between Petrie and PS Acquisition Corp. (the "Stock Purchase Agreement"), or otherwise (each, a "Liability"). 6. Procedures for Disbursement of Escrowed Fund. The Escrow Agent shall hold and distribute the Escrowed Property as follows: 6.1 Disbursement of Escrowed Property. Whenever there shall be delivered to the Escrow Agent a certificate signed by Petrie to the Escrow Agent (i) that a Liability is due and payable or (ii) that Petrie believes that the amount of Escrowed Property is sufficient to cover all outstanding Liabilities, then the Escrow Agent shall deliver to Petrie such amount of Escrowed Property equal in value to the amount requested in (i) above, and/or such amount over and above the amount that Petrie believes is sufficient as stated in (ii) above. The Escrow Agent shall deliver to Petrie, by wire transfer upon request or by check, such portion in cash to the extent of cash in the Escrowed Property and, to the extent the amount of cash in Escrowed Property is not sufficient to satisfy the claim, the balance in Escrowed Stock held in Escrowed Property; provided, however, that the Escrow Agent shall not make any distribution to Petrie pursuant to (ii) above unless (x) it shall have notified Toys of its intent to make such a distribution and (y) Toys has failed to give notice of its objection to such distribution, pursuant to and upon the terms set forth in Section 9.3(b), within 20 days of its receipt of such notice. The Escrow Agent, at the direction of Petrie, shall deliver to Petrie the Escrowed Stock, or a portion thereof, if simultaneously therewith, Petrie delivers to the Escrow Agent, cash or cash equivalents in an amount equal to the value of the exchanged Escrowed Stock. The value of the exchanged Escrowed Stock shall be calculated using the closing price of Toys Common Stock, as reported by the New York Stock Exchange, one business day prior to the delivery to Petrie of the exchanged Escrowed Stock. If Escrowed Stock is thus required to be delivered, the Escrow Agent shall cause certificates of shares of the Escrowed Stock having a value in the amount of such balance, and duly executed stock powers with respect to such certificates, with signatures guaranteed by a bank or trust company or by a member firm of the New York Stock Exchange, to be delivered to Petrie. Notwithstanding the above, all Escrowed Property shall be delivered to the Trustees, subject to the terms of the Trust, upon the termination of this Escrow Agreement pursuant to Section 7 hereof. 6.2 Interim Distributions. Notwithstanding anything in this Escrow Agreement to the contrary, all dividends paid on the Escrowed Stock and any income attributable to the Escrowed Property will be distributed to Petrie for the benefit of its shareholders. 7. Termination of Escrow. This Escrow Agreement shall terminate (the "Termination Date") upon the earliest of (i) five years from the date hereof; (ii) the reasonable determination by the Trustees that all of the Liabilities have been satisfied or paid; provided, however, that the Trustees shall notify Toys of such determination and this Escrow Agreement shall not terminate if within 20 days of delivery of such notice, Toys notifies the Trustees of its objection to such termination, pursuant to and upon the terms set forth in Section 9.3(b), and (iii) the disbursement of all of the Escrowed Property in accordance with Section 6.1. On the business day following the Termination Date, the Escrow Agent shall deliver the Escrowed Property, if any, to Petrie. With respect to subparagraph (ii) above, this Escrow Agreement shall be terminated only upon the receipt by the Escrow Agent of a written notice of termination executed by the Trustees directing the distribution of all Escrowed Property then held by the Escrow Agent under and pursuant to this Escrow Agreement, which notice shall certify that Toys has not objected thereto as provided by this Section 7. 8. The Escrow Agent. 8.1 Indemnification of Escrow Agent. Petrie hereby agrees to indemnify and hold the Escrow Agent and Toys and their respective directors, officers, agents and employees harmless from and against any and all liabilities, claims, losses, costs, charges, damages, and attorneys' fees which the Escrow Agent or Toys in good faith may incur or suffer in connection with or arising out of this Escrow Agreement. 8.2 Duties of Escrow Agent and Toys. The Escrow Agent and Toys shall have no duties other than those expressly imposed on them herein. The Escrow Agent shall not be liable for any act or omission except for its own negligence or willful misconduct. In no event shall the Escrow Agent be liable for any action taken or omitted to be taken in accordance with the instructions of Petrie pursuant to this Agreement. Toys shall not be liable for any act or omission except for its own willful misconduct, knowingly and intentionally committed in bad faith. 8.3 Fees of Escrow Agent. The fees and charges of the Escrow Agent with respect to this Escrow Agreement shall be paid by Petrie in accordance with the Escrow Agent's customary fees as charged from time to time. Petrie agrees that the Escrow Agent may deduct any unpaid fees from Escrowed Property prior to the Escrow Agent's distributing any assets in connection with the termination of this Escrow Agreement. 8.4 Escrow Agent to Follow Instructions of Petrie. Any provision herein contained to the contrary notwithstanding, the Escrow Agent shall at any time and from time to time take such action hereunder with respect to the Escrowed Property as shall be agreed to in writing by Petrie provided that the Escrow Agent shall first be indemnified to its satisfaction, by Petrie, with respect to any of its costs, expenses (including reasonable attorney fees) or liabilities which might be incurred; provided, however, that distributions of Escrowed Property shall be made only in accordance with Sections 6 and 7 hereof. 8.5 Resignation of Escrow Agent. The Escrow Agent may resign at any time by providing Petrie with thirty days' written notice of its intention to do so. Upon receiving such notice, Petrie shall endeavor to appoint a successor Escrow Agent. If Petrie is unable to appoint a successor Escrow Agent within thirty days of receipt by Petrie of the Escrow Agent's notice of its intention to resign, the Escrow Agent may petition a court of competent jurisdiction to appoint a successor. The Escrow Agent's resignation shall be effective upon delivery of the remaining Escrowed Property to the successor Escrow Agent and the successor assuming the obligations, rights and duties of the Escrow Agent hereunder. 9. Provisions. 9.1 Notices. A copy of all notices and communications delivered by the Escrow Agent pursuant to this Agreement shall be sent to Toys and PS Acquisition Corp. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or sent by cable, telegram, telecopier or telex to the parties hereto and to Toys at the following addresses or at such other addresses as shall be specified by the parties or by Toys by like notice: (a) If to Petrie: Petrie Stores Corporation 70 Enterprise Avenue Secaucus, New Jersey 07094 Attention: Peter Left, Chief Operating Officer Facsimile: (201) 866-2355 or following the establishment of the Trust, to the Trustees at such address as Petrie shall provide: If to the Trustees: ___________________________ ___________________________ ___________________________ with a copy to: Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, New York 10022 Attention: Alan C. Myers, Esq. Facsimile: (212) 735-2000 (b) If to Toys: Toys "R" Us, Inc. 395 W. Passaic Street Rochelle Park, New Jersey 07662 Attention: Louis Lipschitz Chief Financial Officer Facsimile: (201) 845-0973 with a copy to: Schulte Roth & Zabel 900 Third Avenue New York, New York 10022 Attention: Andre Weiss, Esq. Facsimile: (212) 593-5955 (c) If to the Escrow Agent: Custodial Trust Company 101 Carnegie Center Princeton, New Jersey 08540 Attention: Vice President Trust Operations Kevin Darmody Facsimile: (609) 951-2317 with a copy to: Custodial Trust Company 245 Park Avenue New York, New York 10167 Attention: Kathleen Ludman Facsimile: (212) 272-3099 (d) If to PS Acquisition Corp. c/o E.M. Warburg, Pincus & Co. 466 Lexington Avenue New York, New York 10017 Attention: Errol M. Cook Facsimile: (212) 878-9351 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Stephanie J. Seligman Facsimile: (212) 403-2000 Notwithstanding the foregoing, the Escrow Agent agrees that in respect of any action, suit or proceeding it might initiate against Petrie, or the Petrie shareholders by serving process on the Secretary of State of the State of New York to furnish a duplicate copy of all such papers so served to Petrie, up until the time it dissolves, and thereafter to the Trustees by a nationally-recognized overnight courier at the address of each such party set forth above. 9.2 Benefit and Assignment. The rights and obligations of each party under this Escrow Agreement may not be assigned without the prior written consent of all other parties except that Petrie in connection with its dissolution may assign this Escrow Agreement to the Trustees on behalf of the Beneficiaries. This Escrow Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns (and, in the case of Petrie, the Beneficiaries and the Trustees). Nothing in this Escrow Agreement, expressed or implied, is intended to or shall (i) confer on any person other than the parties hereto, or their respective successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Escrow Agreement other than in respect to the rights conferred on Toys or PS Acquisition Corp. pursuant to Sections 6, 7, 8 and 9.3 hereof, or (ii) constitute the parties hereto as partners or participants in a joint venture. The Escrow Agent shall not be obligated to recognize any such succession or assignment, until satisfactory written evidence thereof shall have been received by it. 9.3 Third Party Beneficiary. (a) Petrie and the Escrow Agent each acknowledge that each of Toys and PS Acquisition Corp. is a third party beneficiary of this Escrow Agreement. (b) Toys' objection to any distribution hereunder or the termination of this Agreement must state, in effect, that it reasonably believes that the contemplated distribution or termination could result in the remaining Escrowed Property being insufficient to pay for any of Petrie's obligations under the Seller Indemnification Agreement. (c) If the Escrow Agent intends to make a distribution notwithstanding Toys' objection thereto, it will give Toys at least 20 days prior written notice of its belief that the Toys notice fails to meet the standard set forth in Section 9.3(b) and of its intention to proceed with the distribution. 9.4. Specific Performance. The Escrow Agent acknowledges that failure on his part to comply with the terms of Sections 6.1 and 7 hereof shall cause Toys immediate and irreparable harm that cannot be adequately compensated by the remedies at law, and that in the event of such breach or violation, or threatened breach or violation, Toys may have such sections of this Agreement specifically enforced by preliminary and permanent injunctive relief without having to prove the inadequacy of the available remedies at law or any actual damages. Any remedy sought or obtained by Toys shall not be considered either exclusive or a waiver of the rights of Toys or any other person to assert any other remedies it has in law or equity. In any proceeding upon a motion for any such injunctive relief, the Escrow Agent's ability to answer in damages shall not be a bar, or be interposed as a defense, to the granting of such injunctive relief against the Escrow Agent. Any rights under this Section may be enforced in any appropriate court in the State of New York. 9.5. Entire Agreement; Amendment. This Escrow Agreement, the Acquisition Agreement, the Stock Purchase Agreement and the Liquidating Trust Agreement contain all the terms agreed upon by the parties with respect to the subject matter hereof. This Escrow Agreement may be amended only by a written instrument signed by Toys and the party against which enforcement of any waiver, change, modification, extension or discharge is sought. 9.6 Headings. The headings of the sections and subsections of this Escrow Agreement are for ease of reference only and shall not be deemed to evidence or affect the meaning or construction of any of the provisions hereof. 9.7 Governing Law and Submission to Jurisdiction. This Escrow Agreement shall be construed, as to both validity and performance, enforced in accordance with and interpreted and governed by the laws of the State of New York, without regard to any of the conflicts of laws provisions thereof. Petrie and the Trustees agree that any claim, suit, action or other proceeding for indemnity or otherwise provided for in this Escrow Agreement, brought by Petrie, the Petrie shareholders, the Trustees or the Beneficiaries, the Trustees or the Beneficiaries shall be brought only in a court sitting in New York, New York. 9.8 Counterparts. This Escrow Agreement may be executed in multiple counterparts, all of which taken together shall constitute one instrument. IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be duly executed by their respective duly authorized officers, all as of the day and year first above written. PETRIE STORES CORPORATION ON BEHALF OF ITSELF AND THE PETRIE SHAREHOLDERS By:/s/Hilda Kirschbaum Gerstein Name: Hilda Kirschbaum Gerstein Title: President and Chief Executive Officer CUSTODIAL TRUST COMPANY By:/s/Ronald D. Watson Name: Ronald D. Watson Title: President EX-99 3 EXHIBIT E AMENDED AND RESTATED CASH COLLATERAL AND PLEDGE AGREEMENT, dated as of December 9, 1994, as amended as of January 24, 1995, among Petrie Stores Corporation, a New York corporation (the "Seller"), PS Stores Acquisition Corp., a Delaware corporation ("PS Stores"), on behalf of itself and each other Buyer Indemnified Party (as such term is defined below) (collectively, the "Buyer") and Custodial Trust Company, (as successor collateral agent to Bear, Stearns & Co. Inc.), as collateral agent (the "Collateral Agent") for the Buyer. (Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Stock Purchase Agreement referred to below.) W I T N E S S E T H WHEREAS, WP Investors, Inc., a Delaware corporation ("WP Investors"), and the Seller are parties to a Stock Purchase Agreement, dated as of August 23, 1994, as amended as of November 3, 1994 (as it may be further modified, amended or supplemented from time to time, the "Stock Purchase Agreement"); WHEREAS, pursuant to the Stock Purchase Agreement, PS Stores (as assignee of WP Investors) simultaneously with the initial execution and delivery hereof acquired all of the issued and outstanding shares of capital stock of Petrie Retail, Inc., a Delaware corporation and a wholly owned subsidiary of Seller ("Retail Co."); WHEREAS, pursuant to the Stock Purchase Agreement, the Seller has agreed, among other things, to indemnify the Buyer with respect to the Excluded Liabilities (as defined below) and to provide collateral to secure certain of such indemnification obligations; WHEREAS, in order to more fully set forth their obligations with respect to such indemnity arrangements, among other things, Seller and Buyer simultaneously with the initial execution and delivery of this Agreement executed and delivered a Cross-Indemnification and Procedure Agreement, dated as of December 9, 1994 (the "Indemnity Agreement"); WHEREAS, it was a condition to the Buyer's obligation to consummate the Closing under the Stock Purchase Agreement that the Buyer be satisfied with the collateral arrangements with respect to such indemnity obligations; WHEREAS, simultaneously with the initial execution and delivery hereof, Buyer hereby appointed the Collateral Agent as its Agent and the Collateral Agent herein agreed that the Collateral Agent shall hold and administer the Account Collateral (as defined below) for the Buyer; WHEREAS, as of January 24, 1995, the parties hereto have agreed that Custodial Trust Company will serve as the successor collateral agent hereunder and Custodial Trust Company agrees to accept such appointment; WHEREAS, at the time of the initial execution and delivery of this Agreement, Seller granted the Collateral Agent a first priority perfected security interest in the Account Collateral and Seller and PS Stores agreed that subject to the satisfaction of certain conditions this Agreement would be supplemented to provide, among other things, for the inclusion of shares of common stock, par value $.10 per share ("Toys Common Stock"), of Toys "R" Us, Inc., a Delaware corporation ("Toys"), as Cash Collateral Permitted Investments (which constitute part of the Account Collateral); and WHEREAS, as a result of the satisfaction of such conditions, the parties hereto desire to amend and restate this Agreement as set forth herein; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the parties hereto hereby agree as follows: SECTION 1. Defined Terms. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires: "Account Collateral" shall have the meaning assigned to it in Section 4. "Additional Shares" shall have the meaning assigned to it in Section 6. "Business Day" shall mean a day that is not a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. Unless specifically stated as a Business Day, all days referred to herein shall mean calendar days. "Buyer Indemnified Party" shall have the meaning set forth in the Indemnity Agreement. "Cash Collateral Effective Date" shall mean December 9, 1994, which is the date as of which this Cash Collateral Agreement was initially dated. "Cash Collateral Permitted Investments" shall mean (i) any Cash Equivalents and (ii) until, but not following, the occurrence of a Non-Withdrawal Sale Event any shares of Toys Common Stock that constitute Account Collateral hereunder if and only if such shares of Toys Common Stock are Pledged Shares. "Cash Equivalents" shall mean: (a) any security, maturing not more than three (3) months after the date of acquisition, issued by the United States of America, or an instrumentality or agency thereof and guaranteed fully as to principal, premium, if any, and interest by the United States of America; (b) any certificate of deposit, time deposit, Eurodollar time deposit, or bankers' acceptance maturing not more than three (3) months after the date of acquisition, issued by any commercial banking institution that is a member of the Federal Reserve System and that has combined capital and surplus and undivided profits of not less than $250,000,000, whose debt has a rating, at the time at which any investment therein is made or on the date of such acquisition by the Collateral Agent, as the case may be, of "P-1" (or higher) by Moody's Investors Service, Inc. or any successor rating agency, or "A-1" (or higher) by Standard & Poor's Corporation or any successor rating agency (a "Qualified Bank"); and (c) commercial paper, maturing not more than three (3) months after the date of acquisition, issued by any Qualified Bank. "Deficiency Sale Event Threshold" at any time shall mean 110% of the Threshold Amount (as such term is defined in the Indemnity Agreement) applicable at the time of determination. "Event of Withdrawal" shall mean any delivery by or on behalf of PS Stores to the Collateral Agent of a certificate signed by its chief executive officer, president, any vice president or chief financial officer stating that Buyer is entitled to immediate payment for all or a specified portion of the Obligations (a "Withdrawal Notice"). "Investments" shall have the meaning assigned to it in Section 7. "Market Value of the Account Collateral" as of any date shall mean the sum of (x) the fair market value (as determined by the Collateral Agent) of any Cash Equivalents included in the Account Collateral as of the Trading Day immediately prior to the date of determination and (y) the product of the Closing Price of one share of Toys Common Stock as of the Trading Day immediately prior to the date of determination and the number of shares of Toys Common Stock then included in the Account Collateral. The term "Closing Price" of the Toys Common Stock on any day shall mean the last reported sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way of the Toys Common Stock in each case on the New York Stock Exchange, or, if the Toys Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange or quotation system on which the Toys Common Stock is listed or admitted to trading or quoted, or, if not listed or admitted to trading or quoted on any national securities exchange or quotation system, the average of the closing bid and asked prices of the Toys Common Stock in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similarly generally accepted reporting service, or, if not so available in such manner, as furnished by any New York Stock Exchange member firm mutually selected from time to time by the Board of Directors of the PS Stores and the Seller for that purpose, or, if not so available in such manner, as determined by the Board of Directors of PS Stores and Seller in good faith. The term "Trading Day" shall mean a day on which securities are traded or quoted on the national securities exchange or quotation system or in the over-the-counter market used to determine the Closing Price. "Non-Withdrawal Sale Event" shall mean any Sale Event that is not a Withdrawal Sale Event. "Obligations" shall mean all Excluded Liabilities (including the costs of defense thereof and reasonable attorneys' fees and expenses) arising pursuant to Section 5.14 and/or Section 6.1(b)(y)(ii)(B) of the Stock Purchase Agreement as further governed by the Indemnity Agreement. "Pledged Collateral" shall mean any Account Collateral included in clause (v) or (vi) of the definition of Account Collateral. "Pledged Shares" shall mean as of January 24, 1995, 2,724,406 shares of Toys Common Stock deposited with or acquired by the Collateral Agent pursuant to Section 3 hereof and shall thereafter include any additional shares of Toys Common Stock that may hereafter constitute Pledged Shares as contemplated by Section 6 hereof. "Sale Event" shall mean the occurrence of any of the following events: (x) the agreements contemplated by Exhibit A to the Indemnity Agreement shall not be in full force and effect in a manner reasonably acceptable to the Buyer (the "Hedge Agreements") on April 30, 1995, (y) Buyer shall be entitled to deliver a Withdrawal Notice, or (z) unless the Hedge Agreements are in full force and effect in a manner reasonably acceptable to Buyer, (i) the Market Value of the Account Collateral in which Buyer has a first priority perfected lien shall be less than the then applicable Deficiency Sale Event Threshold, or (ii) shares of Toys Common Stock shall cease to be listed and admitted for trading on the New York Stock Exchange. "Withdrawal Sale Event" shall mean any Sale Event arising solely pursuant to clause (y) of the definition of Sale Event. SECTION 2. Cash Collateral Account. Bear, Stearns & Co. Inc., as the initial Collateral Agent has established at its office in New York City, under the sole dominion and control of the Collateral Agent and in the name of the Collateral Agent, as collateral agent hereunder, a certain collateral account: Bear, Stearns & Co. Inc. as Collateral Agent for PS Stores Acquisition Corp. (#049-407-02-12) (the "Initial Account") and effective as of its appointment as Collateral Agent hereunder Custodial Trust Company, as successor collateral agent has established at its office in Princeton, New Jersey, under the sole dominion and control of the Collateral Agent and in the name of the Collateral Agent, as collateral agent hereunder, a certain collateral account: Custodial Trust Company, as Collateral Agent for PS Stores Acquisition Corp. (#112- 10638-16)(the "Successor Account"). Simultaneously with the effectiveness of its retirement as Collateral Agent hereunder, Bear, Stearns & Co. Inc. is transferring all right, title and interest in the Account Collateral in the Initial Account to the Successor Account. For purposes of this Agreement, the term "Cash Collateral Account" shall mean the Initial Account prior to and until the effectiveness of the appointment of Custodial Trust Company as Collateral Agent hereunder and the Successor Account as of and following the effectiveness of the appointment. The parties hereto acknowledge and agree that (i) the Cash Collateral Account is not intended to constitute a "deposit account" (as such term is defined in SECTION 9-105(1)(e) of the Uniform Commercial Code as in effect in the State of New York, (ii) the Collateral Agent does not intend and has not been instructed to establish a "deposit account" and (iii) no interest or other earnings shall be payable by the Collateral Agent (other than in its capacity as Collateral Agent hereunder) in respect of any Account Collateral held in the Collateral Account. SECTION 3. Appointment of Agent; Deposit of Cash. Buyer hereby appoints the Collateral Agent as Collateral Agent hereunder and the Collateral Agent hereby accepts such appointment and agrees and acknowledges that it holds the security interest in the Account Collateral for the benefit of Buyer. Buyer and the Collateral Agent confirm that such appointment shall include Account Collateral comprised of Pledged Collateral. On the Cash Collateral Effective Date, the Seller wired, or caused to be wired, into the Cash Collateral Account an amount in cash or immediately available funds equal to $67,500,000. On January 24, 1995, immediately following its appointment as successor Collateral Agent, Custodial Trust Company as the Collateral Agent pursuant to instructions from Buyer will utilize all of the $67,986,073 of the Account Collateral to acquire 2,286,687 shares of Toys Common Stock and the Seller will deposit 437,719 additional shares of Toys Common Stock as additional Account Collateral, all as contemplated by the Indemnity Agreement and all in accordance with Section 6 hereof. SECTION 4. Pledge and Assignment. The Seller hereby pledges and assigns to the Collateral Agent, for the benefit of the Buyer, and hereby grants to the Collateral Agent, for the benefit of the Buyer, a continuing lien and security interest in, the following collateral (the "Account Collateral"): (i) the Cash Collateral Account and all certificates and instruments, if any, from time to time credited to or representing or evidencing the Cash Collateral Account and all funds therein; (ii) all Investments from time to time and all certificates and instruments, if any, from time to time credited to or representing or evidencing the Investments; (iii) all notes, certificates of deposit, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Collateral Agent for or on behalf of the Seller in substitution for or in addition to any or all of the then existing Account Collateral; (iv) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral; (v) the Pledged Shares and the certificates representing the Pledged Shares and any interest of the Seller in the entries on the books of any financial intermediary pertaining to the Pledged Shares, and all dividends, cash, options, warrants, rights, instruments and securities, property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; (vi) all additional shares of Toys Common Stock from time to time delivered by the Seller to the Collateral Agent for the benefit of the Buyer in accordance with Section 6 hereof (which shares shall thereafter be deemed to be part of the Pledged Shares), and the certificates representing such additional shares and any interest of the Seller in the entries on the books of any financial intermediary pertaining to such additional shares, and all dividends, cash, options, warrants, rights, instruments and securities, property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares; and (vii) to the extent not covered by clauses (i) through (vi) above, all proceeds of any or all of the foregoing Account Collateral. SECTION 5. Security for Obligations. This Agreement secures the payment and performance of all Obligations. SECTION 6. Delivery of Collateral. All certificates or instruments, if any, representing or evidencing the Account Collateral shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and in substance reasonably satisfactory to the Collateral Agent. Seller agrees that the security interest of the Collateral Agent in all the Account Collateral will be reflected on all books and records necessary to perfect such interest, and the Collateral Agent shall have the right to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Account Collateral. In addition, the Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Account Collateral for certificates or instruments of smaller or larger denominations. Subject to compliance with the provisions of this Agreement, including this Section 6, prior to the delivery of a Sale Notice (as defined below) by PS Stores following the occurrence of a Non-Withdrawal Sale Event, if Seller delivers to the Collateral Agent an officer's certificate signed by its President or any of its Vice Presidents stating that the representations and warranties in Section 9 hereof are true and correct in all material respects, the Seller may from time to time deposit, as additional Pledged Shares, shares of Toys Common Stock registered in the name of the Collateral Agent, as collateral agent for the Buyer pursuant to this Agreement (the "Additional Shares"). SECTION 7. Investing of Amounts in the Cash Collateral Accounts. (a) The Collateral Agent will from time to time (i) invest amounts on deposit in the Cash Collateral Account in Cash Equivalents, and (ii) to the extent practicable, invest interest paid on the Account Collateral, and reinvest other proceeds of any Account Collateral which may mature or be sold, in Cash Equivalents, in the case of each of clause (i) and (ii), as the Seller, or, to the extent provided in the following sentence, the Collateral Agent, may select (collectively, the Cash Equivalents referred to in clauses (i) and (ii), the "Investments"). In the event the Seller fails to instruct the Collateral Agent to invest any such amounts in excess of $500,000 before 11:00 a.m. (New York time) on the Business Day following any date on which Seller deposits cash or Cash Equivalents into the Cash Collateral Account, or on the Business Day on which any amounts otherwise become available for investment as a result of interest payments or the receipt of proceeds of Account Collateral which has matured or was sold, the Collateral Agent may, at its sole discretion, invest such excess amounts in such Cash Equivalents as it may select. Interest and proceeds which are not invested or reinvested in Cash Equivalents as provided above shall remain in the Cash Collateral Account as cash, except as specifically provided in Section 8. (b) In the event that at any time or from time to time PS Stores has delivered written notice to the Collateral Agent that a Sale Event has occurred (a "Sale Notice"), PS Stores shall have the right in its discretion to cause the Collateral Agent to dispose (i) in the event of a Non-Withdrawal Sale Event, of some or all of the Pledged Collateral, and (ii) in the event of a Withdrawal Sale Event, of up to the amount of Pledged Collateral necessary to satisfy the amount specified in the Withdrawal Notice, in each case, in one or more transactions effected on the New York Stock Exchange at any time or from time to time thereafter or in the case of transactions not effected on the New York Stock Exchange, in any manner that is commercially reasonable. Subject to the foregoing, the Collateral Agent will as promptly as possible take such action as may be requested by PS Stores to dispose of such number of shares of Toys Common Stock and any other property constituting the Pledged Collateral in such manner as PS Stores shall so determine and the Collateral Agent shall deposit immediately the proceeds thereof in the Cash Collateral Account and invest such proceeds in Cash Equivalents. Thereafter, such proceeds shall be invested in Cash Equivalents in accordance with Section 7(a). Without limiting anything else in this Agreement, (x) any failure of PS Stores to exercise its right to cause such sale in whole or in part following the occurrence of a Sale Event shall not constitute a waiver of its right to do so following any other Sale Event and (y) PS Stores shall not be obligated to direct the Collateral Agent to dispose of some or all of the Pledged Collateral after a Sale Event and Seller shall not be released from any of its obligations to Buyer as a result of any failure of PS Stores to so direct the Collateral Agent. The Seller hereby waives any claims against Buyer and the Collateral Agent arising by reason of the fact that the price at which any Account Collateral may have been sold in any transaction effected on the New York Stock Exchange was less than the price that might have been obtained at any other sale, or that in any transactions effected on the New York Stock Exchange the price obtained by selling the Account Collateral all at once or in large blocks at the same time or over a short period of time was less than might have been obtained had the Account Collateral been sold over time in smaller blocks, or that in any transactions effected on the New York Stock Exchange the price obtained by selling Account Collateral in small blocks over time was less than the price that might have been obtained by selling the Account Collateral all at once in large blocks at the same time or over a short period of time. In the event that at any time any portion of the Account Collateral is not comprised solely of Cash Collateral Permitted Investments, the Collateral Agent will as promptly as possible take such action as may be requested by PS Stores to dispose of any such securities, assets or property that do not constitute Cash Collateral Permitted Investments and to deposit immediately the proceeds thereof in the Cash Collateral Account as Cash Equivalents. Thereafter, such proceeds shall be invested in Cash Equivalents in accordance with Section 7(a). SECTION 8. Release of Amounts. Funds on deposit in the Cash Collateral Account shall be disbursed to the Seller only upon delivery to the Collateral Agent of a certificate executed by the Buyer's chief executive officer, president, any vice president or chief financial officer specifying (i) the amount of funds to be disbursed, and (ii) the account or accounts to which the funds are to be disbursed; provided, however, that to the extent that on the last Business Day of any calendar quarter the excess of the amount of the Account Collateral comprised of Cash Equivalents over the amount of any expenses of the Collateral Agent payable hereunder shall exceed $67,500,000, the Collateral Agent shall pay the amount of any such excess to the Seller to the extent it can do so without selling or disposing of any Account Collateral prior to the maturity thereof. SECTION 9. Representations and Warranties. The Seller represents and warrants that it is the legal and beneficial owner of the Account Collateral free and clear of any lien, security interest, or other charge or Encumbrance (as defined in the Stock Purchase Agreement), except for the security interests created by this Agreement. The Seller further represents and warrants that (i) the Seller is, and at the time of delivery of the Pledged Collateral to the Collateral Agent pursuant to this Agreement will be, the legal and beneficial owner of the Pledged Collateral free and clear of any Encumbrance except for the lien and security interest created by this Agreement; (ii) all Pledged Shares (including any Additional Shares) at any time constituting Pledged Collateral shall have been acquired by the Seller in a registered public offering pursuant to a registration statement that was declared effective under the Securities Act of 1933, as amended; and (iii) the pledge of the Account Collateral pursuant to this Agreement creates, and in the case of any Additional Shares, will create, a valid and perfected first priority security interest in the Account Collateral securing the payment of the Obligations. SECTION 10. Further Assurances. At any time and from time to time, at the expense of the Seller, the Seller will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Buyer may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Account Collateral. SECTION 11. Transfers and Other Liens. The Seller will not (i) sell or otherwise dispose of any of the Account Collateral, or (ii) create or permit to exist any lien, security interest, or other charge or Encumbrance upon or with respect to any of the Account Collateral, except for the security interests under this Agreement. SECTION 12. Collateral Agent Appointed Attorney-in-Fact. The Seller hereby appoints the Collateral Agent its attorney-in-fact, with full authority in the place and stead of the Seller and in the name of the Seller or otherwise, from time to time in the Collateral Agent's reasonable discretion to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to sell any Account Collateral following the occurrence of a Sale Event and to receive, endorse and collect all instruments made payable to the Seller representing any interest payment, dividend, or other distribution in respect of the Account Collateral or any part thereof and to give full discharge for the same. The Collateral Agent agrees promptly to notify the Seller after any such action or execution of instruments, provided that the failure to give such notice shall not affect the validity of such action or execution of instruments. SECTION 13. Collateral Agent May Perform. If Seller fails to perform any agreement contained herein after notice to the Seller to the extent practicable, the Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Seller under Section 16. SECTION 14. Reasonable Care. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Account Collateral in its possession if the Account Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, and shall be without liability for any loss, damage, cost, expense (including reasonable attorneys' fees and disbursements), liabilities or claims which does not arise from its willful misfeasance or negligence, it being understood that the Collateral Agent shall not have any responsibility or liability for any loss resulting from Cash Collateral Permitted Investments made pursuant to Section 7, or for disposing of the Pledged Collateral pursuant to Section 7(b), it being understood that neither the Collateral Agent nor Buyer shall have responsibility for (i) taking any necessary steps to preserve rights against any person or entity with respect to any Pledged Collateral, or (ii) any losses which may occur in connection with the disposition of the Pledged Collateral after a Sale Event or the determination not to dispose of all or any part of the Pledged Collateral after a Sale Event. Prior to the occurrence of a Non- Withdrawal Sale Event, the Collateral Agent shall give the Seller notice with respect to calls, conversions, exchange, maturities, tenders or other matters relative to the Pledged Collateral and the Collateral Agent shall at Seller's expense follow Seller's instructions with respect to any such matters, except to the extent any such instructions would either create any Encumbrance on any Account Collateral, impair or interfere with the security interests created hereunder, cause any Account Collateral to be invested in any assets, securities or property other than Cash Collateral Permitted Investments or otherwise result in a violation of any provision hereof. In no event shall the Collateral Agent be liable for any action taken or omitted to be taken in accordance with the instructions of Buyer pursuant to this Agreement. SECTION 15. Remedies upon an Event of Withdrawal. If at any time or from time to time any Event of Withdrawal shall have occurred: (i) The Collateral Agent shall, without any prior notice to the Seller and at any time or from time to time, pay and deliver the Account Collateral or any part thereof specified by Buyer in the Withdrawal Notice to Buyer for application against all or any part of the Obligations. The Collateral Agent shall notify Seller of such withdrawal or delivery immediately following any such payment or delivery. (ii) The Collateral Agent shall, at Buyer's direction, from time to time, also exercise in respect of the Account Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at the applicable times, all as directed by Buyer. At Buyer's direction, the Collateral Agent may, without notice except as specified below, sell the Account Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or brokers' board, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and, in the case of transactions effected on the New York Stock Exchange, irrespective of the impact any such disposition may have on the market price of the Account Collateral, and otherwise upon such other terms as the Collateral Agent may deem commercially reasonable. The Seller agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Seller of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Account Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Collateral Agent or any of its affiliates may be the purchaser of any or all of the Account Collateral at any public sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Seller, and the Seller hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. (iii) Any cash held by the Collateral Agent as Account Collateral and all cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Account Collateral may, in the discretion of the Buyer, then or at any time thereafter be applied in whole or in part against all or any part of the Obligations specified in the Withdrawal Notice. SECTION 16. Expenses. The Seller will pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel, which the Collateral Agent may incur in connection with (i) the purchase or sale of Cash Collateral Permitted Investments, (ii) the administration of this Agreement, (iii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Account Collateral, (iv) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (v) the failure by the Seller to perform or observe any of the provisions hereof. Any amounts payable to the Collateral Agent pursuant to this Section 16 will be payable on demand and the Collateral Agent shall make such demand on or prior to the last Business Day of each calendar quarter for any such amounts incurred by the Collateral Agent prior to such date and not yet reimbursed. SECTION 17. Amendments, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by Seller herefrom shall in any event be effective unless the same shall be in writing and signed by the Buyer and the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 18. Nonexclusive Remedy. The remedies herein provided are to the fullest extent permitted by law cumulative and are not exclusive of any remedies provided by law. Without limiting the foregoing, nothing in this Agreement shall be deemed to limit the liability of the Seller under the Stock Purchase Agreement. The Seller agrees and acknowledges that Buyer may proceed directly against the Seller if any of the rights or remedies contemplated hereunder is not available to Buyer for any reason or is insufficient to fully discharge the Buyer's obligations under the Stock Purchase Agreement. SECTION 19. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing and transmitted by telex or telecopy, if to: the Collateral Agent: Custodial Trust Company 101 Carnegie Center Princeton, New Jersey 08540 Attention: Kevin Darmody Facsimile: (609) 951-2327 Telephone: (609) 951-2320 the Seller: Petrie Stores Corporation c/o Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, New York 10022 Attention: Alan C. Myers, Esq. Facsimile: (212) 735-2000 the Buyer: PS Stores Acquisition Corp. 70 Enterprise Avenue Secaucus, New Jersey 07094 Attention: Chief Operating Officer Facsimile: (201) 866-2355 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019-6150 Attention: Stephanie Seligman, Esq. Facsimile: (212) 403-2000 or such other addresses and numbers of which the parties may advise each other in writing. SECTION 20. Continuing Security Interest. This Agreement shall create a continuing security interest in the Account Collateral and shall (i) remain in full force and effect until payment in full of the Obligations, (ii) be binding upon the Seller, its successors and assigns, and (iii) inure to the benefit of the Collateral Agent and its successors, transferees and assigns. All rights of the Collateral Agent and security interests hereunder, and all obligations of the Seller hereunder, shall be absolute and unconditional irrespective of: (i) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Stock Purchase Agreement, the Indemnity Agreement or any other agreement or instrument relating thereto; or (ii) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Seller. All dividends, distributions, principal or interest payments received by the Seller contrary to the provisions of this Agreement above shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of the Seller and shall be forthwith paid over to the Collateral Agent as Account Collateral in the same form as so received (with any necessary endorsement). SECTION 21. Governing Law; Terms. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except to the extent that perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Account Collateral are governed by the laws of a jurisdiction other than the State of New York. Unless otherwise defined herein or in the Credit Agreement, terms defined in Article 9 of the Uniform Commercial Code in the State of New York are used herein as therein defined. SECTION 22. Indemnification of Collateral Agent. The Buyer agrees to indemnify and hold Collateral Agent free and harmless against any claim, cause of action, liability, expense, including reasonable attorneys' fees, loss, damage or cost incurred or arising as the result of or in connection with (i) the fact that securities in the Collateral Account are registered in the name of the Collateral Agent or (ii) compliance by the Collateral Agent with any instruction issued by the Buyer relating to the Collateral Account. The Collateral Agent shall not be required to act or to refrain from acting without first having received the direction of the Buyer. SECTION 23. Resignation of Collateral Agent. The Collateral Agent may, upon thirty (30) days' notice to Buyer, fully and completely discharge its obligations pursuant to this agreement by delivering all of the Account Collateral then in its possession to a successor collateral agent designated by Buyer. Buyer agrees to arrange for appointment of a successor collateral agent to whom the Account Collateral shall be transferred within said 30-day period. Upon the acceptance of any appointment as a Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. Without limiting the foregoing, the parties hereby agree that effective simultaneously with the transfer of the Account Collateral from the Initial Account to the Successor Account, Custodial Trust Company is hereby appointed as the successor Collateral Agent to Bear, Stearns & Co. Inc. and (in each case, effective as of such time) Custodial Trust Company hereby accepts such appointment and Bear, Stearns & Co. Inc. hereby retires as Collateral Agent. Custodial Trust Company shall immediately upon such effectiveness succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. SECTION 24. Counterparts. This Agreement may be executed in one or more counterparts which collectively shall constitute a single agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their officer thereunto duly authorized as of the date first above written. PETRIE STORES CORPORATION By:/s/Hilda Kirschbaum Gerstein Name: Hilda Kirschbaum Gerstein Title: President and Chief Executive Officer CUSTODIAL TRUST COMPANY, AS SUCCESSOR TO BEAR, STEARNS & CO. INC., as Collateral Agent By:/s/Ronald D. Watson Name: Ronald D. Watson Title: President PS STORES ACQUISITION CORP. By:/s/Verna Gibson Name: Verna Gibson Title: Chairman and Chief Executive Officer Accepted and Agreed: BEAR, STEARNS & CO. INC., as predecessor Collateral Agent By:/s/Michael Minikes Name: Michael Minikes Title: Senior Managing Director of the Treasury EX-99 4 EXHIBIT F January 24, 1995 Petrie Stores Corporation 70 Enterprise Avenue Secaucus, New Jersey 07094 Dear Sirs: Reference is made to the Acquisition Agreement, dated as of April 20, 1994, between Toys "R" Us, Inc., a Delaware corporation (the "Buyer"), and Petrie Stores Corporation, a New York corporation (the "Seller"), as amended May 10, 1994 (the "Acquisition Agreement"). Capitalized terms used but not defined herein shall have the meanings specified in the Acquisition Agreement. Upon the consummation on the date hereof of the Closing under the Acquisition Agreement, the Seller is entering into an Escrow Agreement, dated as of the date hereof, between the Seller and Custodial Trust Company, as escrow agent (the "Escrow Agreement"). In connection therewith, the parties hereby agree as follows: 1. The Seller will establish the trust referred to in Section 8.2 of the Acquisition Agreement no later than January 24, 1996 pursuant to a liquidating trust agreement in the form of Exhibit A hereto (the "Trust Agreement"). The provisions of this Agreement shall apply to any cash or assets made subject to the Trust Agreement. 2. At the consummation of the Exchange, the Seller shall retain in one or more identifiable accounts, at its discretion any of the following individually or in combination, as a reserve (the "Reserve") against the liabilities, contingencies and expenses set forth on Schedule A hereto (the "Liabilities"): (i) cash in an amount at least equal to $177,500,000 (the "Reserved Amount"); or (ii) shares of Buyer Common Stock having an aggregate Market Value Per Share (as of January 20, 1995) of at least twice the Reserved Amount. 3. At any time after the date hereof, the Seller upon at least 20 days' prior written notice to the Buyer, unless the Buyer shall have previously objected thereto, may change the components of the Reserve in any combination of clauses (i) and (ii) of paragraph 2 or by, individually or in the aggregate, placing into the Reserve a put, call or other hedging arrangement (the "Hedge") reasonably satisfactory to the Buyer with respect to shares of Buyer Common Stock, it being understood that (x) in considering whether the Hedge is satisfactory, the Buyer shall be entitled to take into account all facts reasonably considered by it to be relevant, including, without limitation, the credit rating of any counterparty, the then remaining Liabilities and any other liabilities of the Seller, the terms of the Hedge and the amount of any liability (whether or not contingent) or potential exposure arising or reasonably expected to arise against any party from the Hedge and (y) the Seller acknowledges that any such Hedge will be satisfactory to the Buyer only if the Buyer is reasonably satisfied that such Hedge will not adversely affect the Buyer's ability to rely on the private letter ruling issued by the Internal Revenue Service to the Seller and the Buyer on November 15, 1994; provided, that any notice with respect to a Hedge (a) shall specify the number of shares of Buyer Common Stock proposed to be made subject to the Hedge and the portion of the Reserved Amount proposed to be covered by the Hedge, (b) shall identify the proposed counterparty to the Hedge and the credit rating of such counterparty, (c) shall specify the number of shares of Buyer Common Stock proposed to be removed from the Reserve or distributed to shareholders of the Seller after and as a consequence of putting the Hedge in place (the "Hedge Related Distribution") and (d) shall be accompanied by final drafts of all documents to be executed or delivered in connection therewith so as to afford to the Buyer a reasonable opportunity to review and comment thereon. At any time that a Hedge complying with this paragraph 3 shall be in effect with respect to any portion of the Reserved Amount, the provisions of paragraph 2(ii) above shall not apply to such portion of the Reserved Amount. 4. For purposes of this Agreement, the Reserve shall include the cash or assets (i) constituting the "Escrowed Property" under the Escrow Agreement, (ii) contained in the "Cash Collateral Account" maintained under the Cash Collateral Agreement, dated as of December 9, 1994, among the Seller, PS Stores Acquisition Corp. and Bear, Stearns & Co. Inc., as collateral agent, as amended as of the date hereof (the "Cash Collateral Agreement") and (iii) otherwise contained in one or more identifiable accounts pursuant to paragraph 2 (any of the accounts referred to in (i), (ii) or (iii) being a "Designated Account"). 5. If the Seller shall desire to make any Restricted Seller Distribution (as defined below), other than to make a payment in respect of any Liabilities and other than to make the Hedge Related Distribution, the Seller shall give notice thereof to the Buyer in the same manner as the notices contemplated by Sections 6.1, 7 and 9.3 of the Escrow Agreement and Sections 5.5, 5.6 and 14.4 of the Trust Agreement and any Seller Distribution shall be subject to the provisions thereof with respect to distributions. "Restricted Seller Distribution" means any distribution or other expenditure of funds or transfer of assets by the Seller that would result in the Seller being in violation of this Agreement, including without limitation, any distribution from a Designated Account other than to another Designated Account. 6. The notice and reporting obligations due to the Buyer under the Escrow Agreement shall be incorporated herein and made a part hereof. Sincerely yours, TOYS "R" US, INC. By: /s/Louis Lipschitz Name: Louis Lipschitz Title: Senior Vice President of Finance and Chief Financial Officer ACCEPTED AND AGREED: PETRIE STORES CORPORATION By: /s/Hilda Kirschbaum Gerstein Name: Hilda Kirschbaum Gerstein Title: President and Chief Executive Officer SCHEDULE A 1. Liabilities in connection with or related to any leases or lease guarantees to which Petrie is a party, including, but not limited to, any payments made pursuant to such leases or lease guarantees, any termination or modification of any leases or lease guarantees, and any expenses incurred in connection with seeking such termination or modification. 2. Liabilities in connection with Petrie's participation in the UAW District 65 Security Plan Pension Fund. 3. Liabilities in connection with any assessment made by or settlement negotiated with the Internal Revenue Service relating to the disposition by Petrie of certain shares of Toys "R" Us Common Stock in connection with the exchange or redemption of certain debentures. 4. Liabilities in connection with the ongoing operations of Petrie and the Liquidating Trust, including, but not limited to, legal fees, audit and accounting fees, SEC filing fees, proxy solicitation expenses, printing expenses, stock exchange or over- the-counter application and/or listing fees, insurance, salaries and benefits, rent, taxes and directors' and trustees' fees. 5. Liabilities in connection with the payment of any professional fees which relate to any of the transactions contemplated by the Acquisition Agreement. -----END PRIVACY-ENHANCED MESSAGE-----