SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 24, 1995
PETRIE STORES CORPORATION
(Exact Name of Registrant as Specified in Charter)
New York 1-6166 36-213-7966
(State or Other Jurisdiction of (Commission) (I.R.S. Employer
Incorporation) File Number) Identification No.)
70 Enterprise Avenue, Secaucus, New Jersey 07094
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 866-3600
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On January 24, 1995, Petrie Stores Corporation,
a New York corporation ("Petrie") exchanged (the
"Exchange") with Toys "R" Us, Inc., a Delaware
corporation ("Toys 'R' Us"), 39,853,403 shares of Toys
"R" Us common stock, par value $.10 per share ("Toys
Common Stock"), held by Petrie, plus $165 million in
cash, for 42,076,420 shares of Toys Common Stock. The
consummation of the Exchange was pursuant to the terms of
an Acquisition Agreement, dated as of April 20, 1994 (the
"Acquisition Agreement"), as amended as of May 10, 1994,
between Petrie and Toys "R" Us, which provided that on
the closing date of the Exchange, Petrie transfer all of
the shares of Toys Common Stock held by it and an amount
of cash not in excess of $250,000,000 for a number of
shares of Toys Common Stock equal to (a) the number of
shares of Toys Common Stock held by Petrie, less
3,326,699 shares, plus (b) such amount of cash divided by
the market value of a share of Toys Common Stock on the
ten trading days next preceding the second trading day
prior to the closing date of the Exchange.
All of the shares of Toys Common Stock
transferred by Petrie had been purchased with funds from
the general working capital of Petrie. The cash
transferred by Petrie was obtained from the net proceeds
of the sale, on December 9, 1994, of Petrie's and its
subsidiaries' retail store operations to PS Stores
Acquisition Corp., a Delaware corporation ("PS Stores").
Simultaneously with the consummation of the
Exchange, Petrie delivered 3,493,450 shares of the Toys
Common Stock that it received in the Exchange into an
escrow account (the "Escrow Account") pursuant to the
terms of 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
(x) under (i) the Acquisition Agreement, (ii) the Seller
Indemnification Agreement, dated as of December 9, 1994,
among Petrie, Toys "R" Us, 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 (y) otherwise.
In addition, Petrie delivered 2,724,406 shares
of Toys Common Stock into a collateral account (the
"Collateral Account") pursuant to the terms of 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.
The shares of Toys Common Stock presently held
by Petrie will 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.
Prior to distributing the shares to Petrie's
shareholders, 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 Toys
"R" Us, 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 Toys "R" Us is in place, it will retain
either $177,500,000 in cash or shares of Toys Common
Stock 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 arrangement being finalized.
The foregoing is qualified in its entirety by
reference to the full text of the Acquisition Agreement,
the Escrow Agreement, the Amended and Restated Cash
Collateral Agreement and the Side Letter Agreement. The
Acquisition Agreement was previously filed as an exhibit
to Petrie's Current Report on Form 8-K, filed with the
Securities and Exchange Commission on April 22, 1994, and
is incorporated herein by reference. A copy of the
Escrow Agreement is filed as Exhibit 10.1 to this Report
and is incorporated herein by reference. A copy of the
Amended and Restated Cash Collateral Agreement is filed
as Exhibit 10.2 to this Report and is incorporated herein
by reference. A copy of the Side Letter Agreement is
filed as Exhibit 10.3 to this Report and is incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(c) Exhibits.
Exhibit No. Description
10.1 Escrow Agreement, dated as of January 24,
1995, between Petrie and Custodial Trust
Company, as Escrow Agent
10.2 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
10.3 Side Letter Agreement, dated as of January
24, 1995, between Petrie and Toys "R" Us
Signatures
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: February 1, 1995
PETRIE STORES CORPORATION
By: /s/ Hilda Kirschbaum Gerstein
Name: Hilda Kirschbaum Gerstein
Title: President and Chief
Executive Officer
Exhibit Index
Exhibit Description
10.1 Escrow Agreement, dated as of
January 24, 1995, between Petrie
and Custodial Trust Company, as
Escrow Agent
10.2 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
10.3 Side Letter Agreement, dated as
of January 24, 1995, between
Petrie and Toys "R" Us
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
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
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.
