-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uuk7m8C7fG2/8p9verTt4TvHSkMDmS5fmiX8t0TLPjVQF4uOWXP7PjdbUML4YE80 UMHvRWYVNFVQNoT9BgF28A== 0001125282-03-002372.txt : 20030324 0001125282-03-002372.hdr.sgml : 20030324 20030324121629 ACCESSION NUMBER: 0001125282-03-002372 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20030324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYS R US INC CENTRAL INDEX KEY: 0001005414 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOBBY, TOY & GAME SHOPS [5945] IRS NUMBER: 223260693 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-103983 FILM NUMBER: 03613408 BUSINESS ADDRESS: STREET 1: C/O TOYS R US NATIONAL OFFICES STREET 2: 461 FROM ROAD CITY: PARAMUS STATE: NJ ZIP: 07652 BUSINESS PHONE: 2012627800 MAIL ADDRESS: STREET 1: C/O TOYS R US NATIONAL OFFICES STREET 2: 225 SUMMIT AVENUE CITY: MONTVALE STATE: NJ ZIP: 07645 S-3 1 b323792_s3.txt FORM S-3 As filed with the Securities and Exchange Commission on March 24, 2003 Registration No. 333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------- TOYS "R" US, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 22-3260693 (State or Other Jurisdiction (I.R.S. Employer Identification Number) of Incorporation or Organization) 461 From Road Paramus, New Jersey 07652 (201) 262-7800 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ----------------------- Louis Lipschitz Executive Vice President--Chief Financial Officer Toys "R" Us, Inc. 461 From Road Paramus, New Jersey 07652 (201) 262-7800 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ----------------------- Copies to: Glenn M. Reiter, Esq. Robert Evans III, Esq. Simpson Thacher & Bartlett Shearman & Sterling 425 Lexington Avenue 599 Lexington Avenue New York, New York 10017-3954 New York, New York 10022-6069 - ------------------------------------------------------------------------------- Approximate date of commencement of proposed sale to public: From time to time after this Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /x/ If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
================================================================================================================== Title of Each Class of Proposed Maximum Proposed Maximum Amount of Securities to be Amount to be Aggregate Price Per Aggregate Offering Registration Registered Registered (1) Unit (2) Price (3) Fee - ------------------------------------------------------------------------------------------------------------------ Debt Securities........... $800,000,000 $800,000,000 $64,720 ==================================================================================================================
(1) This Registration Statement is being filed to register an indeterminate principal amount or number of debt securities of the Registrant as may from time to time be issued at indeterminate prices (in U.S. dollars or the equivalent thereof in any other currency or currency unit). (2) The Proposed Maximum Aggregate Price Per Unit will be determined from time to time by the Registrant in connection with the issuance by the Registrant of the securities registered hereunder. (3) The Proposed Maximum Aggregate Offering Price has been estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended, and reflects the maximum offering price of securities issued, rather than the principal amount of securities that may be issued at a discount and shall not exceed $800,000,000 or the equivalent thereof, based on the exchange rate on the applicable offering date, in one or more currencies or currency units identified by the Registrant at the time of offering. ----------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. =============================================================================== THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED MARCH 24, 2003 PROSPECTUS TOYS "R" US, INC. $800,000,000 DEBT SECURITIES ----------------------- We may offer and sell the debt securities from time to time in one or more offerings. This prospectus provides you with a general description of the debt securities that we may offer. Each time that we sell debt securities we will provide a prospectus supplement to this prospectus that contains specific information about the offering and the terms of the debt securities. The prospectus supplement may also add, update or change information contained in this prospectus. You should carefully read this prospectus and any prospectus supplement before you invest in any of our debt securities. We may offer and sell senior unsecured debt securities under this prospectus. We have not yet determined whether any of the debt securities will be listed on any exchange or over-the-counter market. If we decide to seek the listing of the debt securities, the prospectus supplement relating to such debt securities will disclose the exchange or market on which the debt securities will be listed. ----------------------- Investment in the debt securities involves risks. See "Risk Factors" beginning on page 5. Neither the Securities and Exchange Commission nor any state or other securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ----------------------- The debt securities will be sold directly by us, through agents, dealers or underwriters designated from time to time, or through a combination of such methods. If our agents or any dealers or underwriters are involved in the sale of the debt securities, the names of such agents, dealers or underwriters and any applicable commissions or discounts will be set forth in the applicable prospectus supplement. This prospectus may not be used to consummate sales of debt securities unless accompanied by an applicable prospectus supplement. ----------------------- The date of this prospectus is , 2003. TABLE OF CONTENTS Page About This Prospectus......................................................2 Where You Can Find More Information........................................3 Incorporation of Certain Documents by Reference............................3 Toys "R" Us, Inc...........................................................4 Risk Factors...............................................................5 Forward-Looking Statements.................................................7 Use of Proceeds............................................................7 Ratio of Earnings to Fixed Charges.........................................8 Description of Debt Securities.............................................9 United States Federal Income Tax Consequences.............................22 Plan of Distribution......................................................30 Legal Matters.............................................................32 Experts...................................................................32 ABOUT THIS PROSPECTUS This prospectus is part of a "shelf" registration statement that we filed with the Securities and Exchange Commission, or SEC. By using a shelf registration statement, we may sell up to $800,000,000 aggregate offering price of any combination of the debt securities described in this prospectus from time to time and in one or more offerings. This prospectus only provides you with a general description of the debt securities that we may offer. Each time we sell debt securities, we will provide a supplement to this prospectus that contains specific information about the terms of the debt securities. The prospectus supplement may also add, update or change information contained in this prospectus. Before purchasing any debt securities, you should carefully read both this prospectus and any prospectus supplement, together with the additional information described under the heading "Where You Can Find More Information" and "Incorporation of Certain Documents by Reference". You should rely only on the information contained or incorporated by reference in this prospectus and in any prospectus supplement. We have not authorized anyone else to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer of these debt securities in any state or jurisdiction where the offer or sale is not permitted. You should not assume that the information appearing in this prospectus or any prospectus supplement or in any document incorporated by reference is accurate as of any date other than the respective dates thereof. Our business, financial condition, results of operations and prospects may have changed since those dates. As used in this prospectus, "Toys `R' Us," "company," "we," "us" and "our" generally means Toys "R" Us, Inc., together with its consolidated subsidiaries, unless the context otherwise requires or otherwise expressly stated. However, in the "Description of Debt Securities" section in this prospectus, whenever we refer to "Toys `R' Us," "company," "us", "we" or "our," we generally will be referring to Toys "R" Us, Inc. and not any of its subsidiaries. When we refer to "you" or "yours," we mean the holders of the applicable series of debt securities. Our fiscal year ends on the Saturday nearest to January 31 of each calendar year. References to the 2000, 2001 and 2002 fiscal years are to the 53 weeks ended February 3, 2001, the 52 weeks ended February 2, 2002 and the 52 weeks ended February 1, 2003, respectively. References to our last three fiscal years are to our 2000, 2001 and 2002 fiscal years. Toys "R" Us, Kids "R" Us, Babies "R" Us, Imaginarium and certain other brand names used in this prospectus are our registered trademarks. We are not incorporating by reference in this prospectus any material from our web sites. The references to our web sites are inactive textual references to the uniform resource locators (URLs) and are for your reference only. 2 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the SEC. You can inspect and copy these reports, proxy statements and other information at the public reference facilities of the SEC, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You can also obtain copies of these materials from the public reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may call the SEC at 1-800-SEC-0330 for further information on its public reference room. The SEC also maintains a web site that contains reports, proxy statements and other information regarding registrants, including us, that file electronically with the SEC (http://www.sec.gov). You can also inspect reports and other information that we file at the office of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. This prospectus is part of a registration statement on Form S-3 that we filed with the SEC covering sales of the debt securities. For further information concerning us and the debt securities, you should refer to the registration statement, including its exhibits. The indenture and forms of the other documents establishing the terms of the offered debt securities are filed as exhibits to the registration statement or will be filed as exhibits to a document incorporated by reference in the registration statement of which this prospectus forms a part. This prospectus summarizes material provisions of the debt securities and the indenture. Because this prospectus may not contain all the information that you may find important, you should review the full text of these documents. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" the information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the following documents previously filed by us with the SEC and any future filings made by us with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus and prior to termination of the offering of the securities that we have registered under the registration statement of which this prospectus forms a part. These documents contain important information about us. o Annual Report on Form 10-K for the fiscal year ended February 2, 2002; o Quarterly Report on Form 10-Q for the quarter ended May 4, 2002; o Quarterly Report on Form 10-Q and Form 10-Q/A for the quarter ended August 3, 2002; o Quarterly Report on Form 10-Q and Form 10-Q/A for the quarter ended November 2, 2002; o Current Report on Form 8-K filed with the SEC on May 13, 2002; o Current Report on Form 8-K filed with the SEC on May 20, 2002; and o Current Report on Form 8-K filed with the SEC on January 21, 2003. Any statement contained in a document incorporated by reference, or deemed to be incorporated by reference, in this prospectus shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is incorporated by reference in this prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. 3 You may request a copy of these reports and other filings, other than exhibits unless those exhibits are specifically incorporated by reference into those filings, at no cost by writing to Ursula Moran, Vice President-Investor Relations, Toys "R" Us, Inc., 461 From Road, Paramus, New Jersey 07652, or telephoning us at (201) 262-7800. TOYS "R" US, INC. We are one of the world's leading retailers of toys, children's apparel and baby products, based upon our consolidated net sales in fiscal 2002. As of February 1, 2003, we operated 1,595 retail stores worldwide. These stores consist of 1,051 U.S. locations comprised of 681 toy stores under the name "Toys "R" Us," 183 infant-toddler stores under the name "Babies "R" Us," 146 children's clothing stores under the name "Kids "R" Us," 37 educational specialty stores under the name "Imaginarium" and 4 "Geoffrey" stores which include products from Toys "R" Us, Babies "R" Us and Kids "R" Us. Internationally, as of February 1, 2003, we operated 544 stores, including licensed and franchised stores. We also sell merchandise through Internet sites at www.toysrus.com, www.babiesrus.com, www.imaginarium.com and www.giftsrus.com. We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 461 From Road, Paramus, New Jersey 07652, and our telephone number is (201) 262-7800. 4 RISK FACTORS An investment in our debt securities involves risks. You should carefully consider the risks and uncertainties described below and the other information contained or incorporated by reference in this prospectus before you decide whether to invest in our debt securities. If any of the following risks actually occurs, our business, financial condition, results of operations and liquidity could be materially adversely affected. This may affect our ability to pay interest on such debt securities or repay the principal when due, and you may lose part or all of your investment. Our industry is highly competitive, and competitive conditions may adversely affect our revenues and overall profitability. Our industry is highly competitive, and our results of operations are sensitive to, and may be adversely affected by, competitive pricing, promotional pressures, additional store openings and other factors. We compete with discount and mass merchandisers, such as Wal-Mart, Kmart and Target, national and regional chains and local retailers in the market areas served by our company. Discount and mass merchandisers use aggressive pricing policies and, during the holiday season, enlarged toy selling areas to build traffic for other store departments. Competition is principally based on price, store location, advertising and promotion, product selection, quality and service. In addition, competition in the retail apparel business consists of discount and mass merchandisers, national and regional chains, and local retailers as well as Internet and catalog businesses. Kids "R" Us is vulnerable to demand and pricing shifts for apparel and to less than optimal selection as a result of these factors. Some of our competitors may have greater financial resources, lower merchandise acquisition costs and lower operating expenses than our company. If we fail to compete successfully, we could face lower net sales and be required to offer greater discounts to our customers, which could result in decreased profitability. Our business is highly seasonal, and our financial performance depends upon the results of the fourth quarter of each fiscal year. Our business is highly seasonal, with net sales and earnings generally highest in the fourth quarter. During the last three fiscal years, more than 40% of our net sales and the substantial portion of our operating earnings have been generated in the fourth quarter. Our results of operations depend significantly upon the holiday selling season in the fourth quarter. If we achieve less than satisfactory net sales during the key fourth quarter, we may not be able to compensate sufficiently for lower net sales during the first three quarters of the fiscal year. We may not retain or attract customers if we fail to implement successfully our strategy. We continue to implement a series of customer-oriented strategic initiatives to differentiate and strengthen our core merchandise content and service levels. We also are continuing with initiatives to reduce and optimize our operating expense structure. The success of these initiatives will depend on various factors, including the appeal of renovated store formats and new products to customers, competitive conditions and economic conditions. If we are unsuccessful at implementing some or all of our strategic initiatives, we may be unable to retain or attract customers, which could result in lower net sales and a failure to realize the benefit of the sizeable expenditures incurred for these strategic initiatives. Our net sales may be adversely affected if we fail to respond to changes in consumer preferences in a timely manner. Our financial performance depends on our ability to identify, originate and define product trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner. Our toy and other products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. We cannot assure you that we will be able to continue to meet changing consumer demands in the future. If we misjudge the market for our products, we may be faced with significant excess inventories for some products and missed opportunities for other products. In addition, because we place orders for products well in advance of purchases by our customers, we could experience excess inventory if our customers purchase fewer products than anticipated. Our net sales may be affected by changes in consumer spending patterns. Sales of toys and other products may depend upon discretionary consumer spending, which may be affected by general economic conditions, consumer confidence and other factors beyond our control. A decline in consumer spending could, among other things, negatively affect our net sales and could also result in excess inventories, which could, in turn, lead to increased inventory financing expenses. As a result, changes in consumer spending patterns could adversely affect our profitability. 5 Our operations depend on the availability of adequate financing. We have significant liquidity and capital requirements, and we depend on our ability to generate cash flow from operations, borrow funds and issue securities in the capital markets. Although we currently retain lower-tier investment grade ratings from each of the rating agencies, future rating agency actions could affect our ability to obtain financing on satisfactory terms. We currently have adequate sources of liquidity and capital resources; however, any inability on our part to have access in the future to financing when needed would have a negative effect on our results of operations and financial condition. We depend on key vendors to supply the merchandise that we sell to our customers. We have over 2,000 vendor relationships through which we procure the merchandise that we offer to customers. For fiscal 2002, our top 20 vendors based on our purchase volume represented approximately 45% of the total merchandise we purchased on an annual basis. If our relationships with major vendors deteriorate or we become unable to negotiate reasonable terms to acquire merchandise from any of these vendors and then fail to obtain similar products from alternative sources, our net sales and profitability would be negatively affected. International events could delay or prevent the delivery of products to our stores. A significant portion of the toys and other products sold by us is manufactured outside the United States, particularly in Asia. As a result, any event causing a disruption of imports, including the imposition of import restrictions or trade restrictions in the form of tariffs or otherwise, acts of war or international or domestic terrorism, could increase the cost and reduce the supply of products available to us, which could, in turn, negatively affect our net sales and profitability. Economic, political and other risks associated with our international operations could adversely affect our business. We have operations in 29 countries outside the United States, including, among others, the United Kingdom, Canada, Germany and France. We intend to pursue opportunities that may arise in these and other countries. Net sales in foreign countries (excluding sales by licensees and franchisees) represented approximately 19% of our net sales in fiscal 2002. We are subject to the risks inherent in conducting business across national boundaries, many of which are outside our control. These risks include the following: o economic downturns; o currency exchange rate and interest rate fluctuations; o changes in governmental policy, including, among others, those relating to taxation; o international military, political and diplomatic incidents; o government instability; o nationalization of foreign assets; and o tariffs and governmental trade policies. We cannot assure you that one or more of these factors will not negatively affect our international operations and, as a result, harm our business and financial performance. As of the date of this prospectus, we are unable to predict the effect of the current war in Iraq on consumer spending patterns or on our net sales and profitability. 6 Our business operations could be disrupted if our existing and new management information systems fail to perform adequately. We depend upon our management information systems in the conduct of our operations. We are in the process of upgrading our inventory management, distribution and supply chain management systems and our point of sale systems, as well as other essential information technology. We have spent in excess of $100 million on systems in each of the last three fiscal years. Implementation of major new systems and enhancements to existing systems could cause disruptions in our operations. If our major management information systems fail to perform as anticipated, we could experience difficulties in replenishing inventories or in delivering toys and other products to store locations in response to customer demands. Any of these or other systems-related problems could, in turn, adversely affect our net sales and profitability. FORWARD-LOOKING STATEMENTS This prospectus, any prospectus supplement and the documents incorporated herein by reference contain certain statements that are, or may be considered to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. We generally identify these statements by words or phrases such as "anticipate," "estimate," "plan," "expect," "believe," "intend," "foresee," "will," "may" and similar words or phrases. These statements discuss, among other things, our strategy, store openings and renovations, future performance and anticipated cost savings, results of our restructuring, anticipated international development and other goals and targets. All of these forward-looking statements are subject to risks, uncertainties and assumptions. Consequently, actual events and results may vary significantly from those included in or contemplated or implied by our forward-looking statements. The forward-looking statements included in this prospectus, any prospectus supplement or the relevant incorporated document are made only as of the date of this prospectus, the relevant prospectus supplement or the relevant incorporated document, as the case may be, and, except as required by law, we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances, new information or otherwise. Factors that could cause our actual results to differ materially include the factors that we describe in this prospectus, including under "Risk Factors," the relevant prospectus supplement and in the documents we incorporate by reference. USE OF PROCEEDS Unless otherwise specified in the applicable prospectus supplement, we will use the net proceeds from the sale of the debt securities for repayment of debt and our general corporate purposes. General corporate purposes may include, in addition to the repayment of debt, working capital needs, capital expenditures, possible acquisitions and any other purposes that may be identified in any prospectus supplement. The net proceeds may be invested temporarily in investment grade securities or applied to repay short-term or revolving debt until they are used for their stated purpose. 7 RATIO OF EARNINGS TO FIXED CHARGES The following table presents our consolidated ratio of earnings to fixed charges for the periods indicated.
Fiscal Year Nine Months Fiscal Year Ended Ended Ended ---------------------------------------------------------------------- February 1, November 2, February 2, February 3, January 29, January 30, January 31, 2003 (1) 2002 2002 2001 2000 1999 1998 ----------- ----------- ----------- ---------- ---------- ---------- ----------- Ratio of Earnings to Fixed Charges............... 2.26 --(2) 1.14 3.00 2.66 --(2) 4.19
(1) Preliminary, subject to audit of financial statements for the fiscal year ended February 1, 2003. (2) Earnings were insufficient to cover fixed charges for the nine months ended November 2, 2002 by $97 million and for the fiscal year ended January 30, 1999 by $103 million; therefore, the ratio is less than one-to-one and is not shown. For purposes of calculating the ratio of earnings to fixed charges, earnings were calculated by adding (a) earnings from continuing operations before minority interest and income taxes; (b) interest expense, including the portion of rents representative of an interest factor; (c) amortization of debt issue costs; and (d) the amount of our undistributed (income) losses of less than 50% owned companies. Fixed charges consist of interest expense, amortization of debt issue costs, and the portion of rents representative of an interest factor. 8 DESCRIPTION OF DEBT SECURITIES The following description discusses the general terms and provisions of the debt securities that we may offer and sell with this prospectus. The particular terms of the debt securities offered will be set forth in a prospectus supplement relating to those debt securities. The debt securities offered by this prospectus will be our senior unsecured obligations. The debt securities will be issued under the debt indenture, dated as of May 28, 2002, between us and The Bank of New York, as trustee. The debt securities will be governed by the indenture. The indenture gives us broad authority to set the particular terms of each series of debt securities, including the right to modify certain of the terms contained in the indenture. The particular terms of a series of debt securities and the extent, if any, to which the particular terms of the issue modify the terms of the indenture will be described in the prospectus supplement relating to the debt securities. The terms of the debt securities will include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. The indenture contains the full legal text of the matters described in this section. Because this section is a summary, it does not describe every provision of the debt securities or the indenture. This summary is subject to and qualified in its entirety by reference to all the provisions of the indenture, including definitions of terms used in the indenture. The indenture has been filed as an exhibit to the registration statement of which this prospectus forms a part. You should read the indenture, including the defined terms, and the particular terms of the debt securities for provisions that may be important to you. Whenever we refer to defined terms or particular sections of the indenture in this prospectus or any prospectus supplement, those defined terms or sections are incorporated by reference herein or therein as applicable. You should read the prospectus supplement relating to a series of debt securities for more information about the terms of a particular series of debt securities, including variations from the terms described in this prospectus. This summary is subject to and qualified by reference to the description of the particular terms of the debt securities in the applicable prospectus supplement. The trustee for the debt securities will be The Bank of New York, unless otherwise provided in the applicable prospectus supplement. Capitalized terms used below are defined under "Covenants--Defined Terms". General The indenture provides that our debt securities may be issued without limit as to aggregate principal amount, in one or more series, and in any currency or currency units, in each case as established from time to time in or under authority granted by one or more resolutions of our board of directors and set forth in an officers' certificate or as established in one or more supplemental indentures. All debt securities of one series need not be issued at the same time, and, unless otherwise provided, any series may be reopened, without the consent of the holders of the debt securities of that series, for issuances of additional debt securities of that series. Each time that we issue a new series of debt securities or reopen any existing series, the prospectus supplement relating to those debt securities will specify the particular amount, price and other terms of those debt securities, including the following: o the title of the debt securities; o any limit on the total principal amount of the debt securities; o the date or dates on which the principal of the debt securities will be payable or their manner of determination; o the interest rate or rates of the debt securities (which may be fixed or variable); the date or dates from which interest will accrue on the debt securities; and the interest payment dates and the regular record dates for the debt securities; or, in each case, their manner of determination; o if other than the principal corporate office of the trustee, the place or places where the principal of and premium, if any, and interest on the debt securities will be paid; 9 o the period or periods within which (or their manner of determination), the price or prices at which (or their manner of determination), the currency or currency unit, if other than U.S. dollars, in which and the terms on which any of the debt securities may be redeemed, in whole or in part at our option; o the obligation, if any, we have to redeem, repay or purchase debt securities under any sinking fund, mandatory redemption or analogous provision or at the option of the holder; and the period or periods within which (or their manner of determination), the price or prices at which (or their manner of determination), the currency or currency unit, if other than U.S. dollars, in which and the terms and conditions on which the debt securities will be so redeemed, repaid or purchased in whole or in part; o the denomination in which the debt securities will be issued, if other than denominations of $1,000 and any whole multiple thereof, or, in the case of bearer securities, $5,000; o the portion of the principal amount of the debt securities that is payable on the declaration of acceleration of the maturity, if other than their principal amount (these debt securities could include original issue discount, or OID, debt securities or indexed debt securities, which are each described below); o the obligation, if any, we have to pay additional amounts under any debt securities held by a person who is not a U.S. person for tax payments, assessments or other governmental charges and whether we have the option to redeem the debt securities which are affected by the additional amounts instead of paying the additional amounts; o the form in which we will issue the debt securities, whether registered, bearer or both, and any restrictions on the exchange of one form of debt securities for another and on the offer, sale and delivery of the debt securities in either form; o whether the debt securities will be issuable as global securities; o whether the amounts of payments of principal of, premium, if any, and interest, if any, on the debt securities are to be determined with reference to an index, formula or other method, and if so, the manner in which such amounts will be determined; o if the debt securities are issuable in definitive form upon the satisfaction of certain conditions, the form and terms of such conditions; o the trustee, if other than The Bank of New York, and any paying agents, transfer agents, registrars, depositories, currency determination agents or similar agents with respect to the debt securities; o any additions or deletions to the terms of the debt securities with respect to the events of default or covenants governing the debt securities; o the currency or currency units in which payment of the principal of and premium and interest on any debt securities will be made, if other than U.S. dollars, and our or the holders' right, if any, to elect payment in a currency or currency unit other than that in which the debt securities are payable; and, if applicable, the method of establishing an exchange rate; o whether and to what extent the debt securities are subject to defeasance on terms different from those described under "Defeasance of the Indenture"; and o any other terms of the debt securities that are not inconsistent with the indenture. We may issue indexed debt securities. Payments of principal of, and premium and interest on, indexed debt securities are determined with reference to the rate of exchange between the currency or currency unit in which the debt security is denominated and any other currency or currency unit specified by us, to the relationship between two or more currencies or currency units or by other similar methods or formulas specified in the prospectus supplement. The indenture permits us to issue debt securities which are subordinated to present and future senior indebtedness and debt securities. We do not intend to issue subordinated debt securities under this prospectus. 10 The terms on which a series of debt securities may be convertible into or exchangeable for other securities of Toys "R" Us or another party will be set forth in the prospectus supplement relating to that series. The terms will include provisions as to whether conversion or exchange is mandatory, at the option of the holder or at our option. The terms may include provisions under which the number of other securities to be received by the holders of a series of debt securities may be adjusted. We may also issue debt securities as original issue discount (OID) debt securities. OID debt securities bear no interest or bear interest at below-market rates and are sold at a discount below their stated principal amount. Upon acceleration of maturity, the holder of an OID debt security will be entitled to a specified amount that is less than the principal amount. If we issue OID debt securities, the prospectus supplement will contain the issue price, the rate at which interest will accrete, and the date from which such interest will accrete on the OID debt securities. The above list is not intended to be an exclusive list of the terms that may be applicable to any series of debt securities, and we are not limited in any respect in our ability to issue debt securities with terms different from or in addition to those described above or elsewhere in this prospectus, provided that the terms are not inconsistent with the indenture. The debt securities are obligations exclusively of Toys "R" Us and not of its subsidiaries. We are a holding company and conduct all of our operations through subsidiaries. Our right to participate as an equity holder in any distribution of assets of any subsidiary (and thus the ability of holders of the debt securities to benefit as creditors of our company from such distribution) is junior to creditors of that subsidiary, including trade creditors, debt holders, secured creditors, taxing authorities and any guarantee holders. As a result, claims of holders of the debt securities will generally have a junior position to claims of creditors of our subsidiaries, except to the extent that we may be recognized as a creditor of those subsidiaries. Because we are a holding company, the debt securities will be effectively subordinated to the existing and future liabilities of our subsidiaries. We conduct substantially all of our operations through our subsidiaries, so that our ability to meet our obligations under the debt securities will be dependent on the earnings and cash flows of those subsidiaries and the ability of those subsidiaries to pay dividends or to advance or repay funds to us. In the event of our liquidation or reorganization, holders of debt securities will generally have a junior position to claims of creditors of our subsidiaries. As of February 1, 2003, Toys "R" Us had approximately $2,341 million of outstanding indebtedness. At the same date, our subsidiaries had approximately $177 million of outstanding indebtedness and had also guaranteed approximately $342 million of outstanding indebtedness of Toys "R" Us. Because the debt securities will not be secured, they will also be effectively subordinated to our existing and future secured debt to the extent of the value of the assets securing that indebtedness. As of February 1, 2003, we had no secured senior debt outstanding, other than mortgages and capital leases. Our subsidiaries are separate and distinct legal entities. Our subsidiaries have no obligation to pay any amounts due on the debt securities or to provide us with funds for our payment obligations, whether by dividend, distribution, loans or other payments. In addition, any payment of dividends, distributions, loans or advances by our subsidiaries to us could be subject to contractual restrictions. Payments to us by our subsidiaries will also be contingent upon our subsidiaries' earnings and business considerations. The indenture does not contain restrictions on the amount of additional debt that we or our subsidiaries may incur in the future. In addition, the indenture does not contain covenants that prevent us from selling, transferring or otherwise disposing of any shares of, or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of, voting stock of any of our subsidiaries, nor does it prohibit any subsidiary from issuing any shares of, securities convertible into, or options, warrants or rights to subscribe for or purchase shares of, voting stock of such subsidiary. Status of Debt Securities The debt securities will be our senior unsecured obligations and will rank equal in right of payment with all of our existing and future unsecured and unsubordinated debt. The debt securities will be effectively subordinated in right of payment to our existing and future senior secured indebtedness to the extent of the value of the assets securing that indebtedness. Form Unless otherwise indicated in the prospectus supplement, the debt securities will be issued in fully registered form, without coupons. 11 Payment Unless otherwise indicated in the applicable prospectus supplement, we will pay principal of and premium, if any, and interest on registered debt securities at the office of the trustee or at any other office or agency maintained by us for such purpose. We will pay installments of interest on any registered debt security to the person in whose name the registered debt security is registered at the close of business on the regular record date for these payments. We will pay principal and premium, if any, on debt securities only against surrender of these debt securities. If we issue debt securities in bearer form, the prospectus supplement will describe where and how payment will be made. Covenants The indenture includes each of the material covenants discussed below. Limitation on Liens The indenture provides that we will not, and will not permit any of our Domestic Subsidiaries, directly or indirectly, to issue, assume or guarantee any debt for borrowed money if that debt is secured by any Lien upon any Principal Property of ours or of a Domestic Subsidiary or upon any shares of stock or debt of any Domestic Subsidiary, whether owned at May 28, 2002 (the date of the indenture) or thereafter acquired, without effectively securing the debt securities equally and ratably with that debt. The foregoing restriction does not apply to: (1) Liens on any property acquired, constructed or improved by us or any Domestic Subsidiary after May 28, 2002, which are created or assumed contemporaneously with or within three years (four years in the case of Liens on warehouses and distribution centers) after its acquisition, or completion of construction or improvement, or within six months thereafter pursuant to a firm commitment for financing arrangements entered into within that three-year period (or in the case of warehouses and distribution centers, four-year period) to secure or provide for the payment of the purchase price or cost thereof; or in addition to Liens contemplated by clauses (2) and (3) below, Liens existing on any property at the time of acquisition thereof; (2) Liens existing on any property, shares of stock or debt at the time of acquisition thereof from a Person merged or consolidated with or into us or a Domestic Subsidiary; (3) Liens on property of any Person existing at the time it becomes a Domestic Subsidiary; (4) Liens to secure debt of a Domestic Subsidiary owed to us or debt of us or one of our Domestic Subsidiaries owed to another Domestic Subsidiary; (5) Liens in favor of governmental bodies to secure partial progress, advance or other payments pursuant to any contract or statute or to secure debt incurred to finance all or any part of the purchase price or cost of constructing or improving the property subject to the Liens; (6) any Lien existing on May 28, 2002; or (7) Liens for the sole purpose of extending, renewing or replacing debt secured by any Lien referred to in the foregoing clauses (1) to (6), inclusive; provided, however, that the principal amount of debt secured by that Lien shall not exceed the principal amount of debt so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to the property that secured the Lien so extended, renewed or replaced (plus improvements on such property). The limitation on liens shall not apply to the issuance, assumption or guarantee by us or any Domestic Subsidiary of debt secured by a Lien which would otherwise be subject to the foregoing restrictions up to an aggregate amount which, together with all other debt of ours and our Domestic Subsidiaries secured by Liens (not including Liens permitted under the foregoing exceptions) that would otherwise be subject to the foregoing restrictions and the Value of Sale and Leaseback Transactions existing at that time (other than Sale and Leaseback Transactions that, if such Sale and Leaseback Transaction had been a Lien, would have been permitted under clause (1) above and other than Sale and Leaseback Transactions as to which application of amounts have been made in accordance with clause (3) under "--Limitation on Sale and Leaseback Transactions"), does not at the time exceed the greater of 10% of Consolidated Net Tangible Assets or 15% of Consolidated Capitalization. 12 The indenture does not limit the ability of our Subsidiaries that are not Domestic Subsidiaries to issue, assume or guarantee any secured debt. Limitation on Sale and Leaseback Transactions The indenture provides that we will not, and will not permit any of our Domestic Subsidiaries to, enter into any Sale and Leaseback Transaction unless the net proceeds of the Sale and Leaseback Transaction are at least equal to the sum of all costs incurred by us or any Domestic Subsidiary in connection with the acquisition of, and construction of any improvements on, the Principal Property to be leased and: (1) we or the Domestic Subsidiary would be entitled to incur debt secured by a Lien on the Principal Property to be leased without equally and ratably securing the debt securities, pursuant to clause (1) under "--Limitation on Liens;" or (2) we or the Domestic Subsidiary would be entitled to incur debt secured by a Lien on the Principal Property to be leased without equally and ratably securing the debt securities, pursuant to the second to last sentence under "--Limitation on Liens;" or (3) we or the Domestic Subsidiary shall, within 120 days of the effective date of any such arrangement (or, in the case of (ii) below, within six months thereafter pursuant to a firm purchase commitment entered into within such 120 day period) apply an amount equal to the proceeds from such Sale and Leaseback Transaction relating to such Principal Property: (i) to the payment or other retirement of debt incurred or assumed by us or any Subsidiary that ranks senior to or equal with the debt securities (other than debt owned by us or any Subsidiary); or (ii) to the purchase of other Principal Property. The indenture does not limit the ability of our Subsidiaries that are not Domestic Subsidiaries to enter into Sale and Leaseback Transactions. Merger, Consolidation or Sale or Conveyance of Assets The indenture provides that we may not consolidate or merge with or into any other Person or convey or transfer our properties and assets substantially as an entirety to any Person, unless: (1) the successor Person (if not Toys "R" Us) shall be a corporation, partnership, limited liability company or trust organized and existing under the laws of the United States, any State thereof or the District of Columbia, and shall expressly assume, by a supplemental indenture reasonably satisfactory to the trustee, the due and punctual payment of the principal of, premium, if any, and interest on the debt securities and the performance of every covenant in the indenture on our part; (2) immediately after giving effect to such transaction, no event of default, and no event which, after notice or lapse of time or both, would become an event of default, shall have occurred and be continuing; and (3) we shall have delivered to the trustee an officers' certificate and an opinion of counsel, each stating that the consolidation, merger, conveyance or transfer and the supplemental indenture comply with clauses (1) and (2) above and all other conditions precedent specified in the indenture relating to the transaction have been complied with. In the case of any consolidation, merger, conveyance or transfer, the successor Person will succeed to and be substituted for Toys "R" Us as obligor on the debt securities, with the same effect as if it had been named in the indenture as Toys "R" Us, and we will be relieved of all obligations under the debt securities and the indenture. The covenant described above includes a phrase relating to the sale, assignment, conveyance, transfer or other disposition of "assets substantially as an entirety". Like the phrase "all or substantially all" of a company's assets, there is no precise, established definition of the phrase "assets substantially as an entirety" under applicable law. In interpreting this phrase, courts, among other things, make a subjective determination as to the portion of assets conveyed, considering many factors, including the value of assets conveyed, the proportion of a company's income derived from the assets conveyed and the significance of those assets to the ongoing business of the company. To the extent the meaning of such phrase is uncertain, uncertainty will exist as to whether or not the covenant described above may apply. 13 Defined Terms "Consolidated Capitalization" means the total of all the assets appearing on the consolidated balance sheet of Toys "R" Us and its Subsidiaries, less the following: (A) current liabilities; and (B) deferred income taxes. "Consolidated Net Tangible Assets" means the total of all the assets appearing on the consolidated balance sheet of Toys "R" Us and its Subsidiaries, less the following: (A) current liabilities; (B) intangible assets, including without limitation, such items as goodwill, trademarks, trade names, patents and unamortized debt discount and expense carried as an asset on said balance sheet; and (C) appropriate adjustments on account of minority interests of other Persons holding stock in any of our Subsidiaries. "Domestic Subsidiary" means a Subsidiary formed under the laws of, or conducting its principal operations within, the United States or any State or territory thereof. "Lien" means any mortgage, pledge, lien, encumbrance, charge or security interest of any kind, excluding, pledges or deposits under worker's compensation, unemployment insurance or similar statutes, mechanics', workmen's or other similar liens arising in the ordinary course of business or deposits or pledges to obtain the release of any such liens, certain liens for taxes, assessments or governmental charges or levies, landlord's liens on property held under lease, easements and other liens or encumbrances similar to the foregoing. "Person" means an individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal Property" means any real property or any permanent improvement thereon owned by us or any Domestic Subsidiary including, without limitation, any store, warehouse, manufacturing facility or plant. "Sale and Leaseback Transaction" means any arrangement with any Person providing for the leasing to us or any Domestic Subsidiary of any Principal Property (except for temporary leases for a term, including any renewal thereof, of not more than 36 months and except for leases between us and a Subsidiary or between Subsidiaries), which Principal Property has been or is to be sold or transferred by us or such Domestic Subsidiary to such Person. "Subsidiary" means with respect to any Person, any corporation, association or other business entity of which more than 50% of the outstanding voting stock is owned, directly or indirectly, by such Person or one or more Subsidiaries of such Person (or a combination thereof). Unless otherwise specified, "Subsidiary" means a direct or indirect Subsidiary of ours. "Value" means, with respect to a Sale and Leaseback Transaction, as of any particular time, the amount equal to the greater of (1) the net proceeds from the sale or transfer of the property leased pursuant to such Sale and Leaseback Transaction and (2) the sum of all costs of us or any Domestic Subsidiary incurred in connection with the acquisition of such property and the construction of any improvements thereon, as determined in good faith by us or such Domestic Subsidiary at the time of entering into such Sale and Leaseback Transaction, in either case multiplied by a fraction, the numerator of which shall be equal to the number of full years of the term of the lease that is part of such Sale and Leaseback Transaction remaining at the time of determination and the denominator of which shall be equal to the number of full years of such term, without regard to any renewal or extension options contained in the lease. Other Covenants The applicable prospectus supplement will describe any other material covenants in respect of a series of debt securities. Other than our covenants included in the indenture as described above or as described in the applicable prospectus supplement, the debt securities will not have the benefit of any covenants that limit or restrict our business or operations or the incurrence of additional indebtedness by us, and there are no covenants or other provisions in the indenture providing for a put or increased interest or otherwise that would afford holders of debt securities additional protection in the event of a recapitalization transaction, a change of control transaction or a highly leveraged transaction. 14 Registration of Transfer and Exchange All debt securities issued upon any registration of transfer or exchange of debt securities will be valid obligations of ours, evidencing the same debt and entitled to the same rights under the indenture as the debt securities surrendered in the registration of transfer or exchange. We will not apply any service charge for the registration of transfer or exchange, but we may in some cases require payment of a sum to cover any tax or other governmental charges. Subject to the limitations applicable to global securities, holders of registered debt securities may present their securities for registration of transfer at the office of one or more security registrars designated and maintained by us. At your option, you may exchange your registered debt securities of any series, except a global security, for an equal principal amount of other registered debt securities of the same series having authorized denominations upon surrender to our designated agent. We will not be required to register the transfer of or exchange (1) any debt securities during a period of 15 days before any mailing of a notice of redemption of any securities selected for redemption or (2) any debt securities selected for redemption, in whole or in part, except the unredeemed portion of any debt securities being redeemed in part or the exchange of any bearer securities so selected for redemption for registered securities of the same series and like tenor. No global security may be exchanged for registered debt securities in the name of any person other than the depositary for that global security or any nominee of the depositary for that global security except in the limited circumstances described below or in the prospectus supplement relating to those debt securities. We may at any time, at our option, exchange debt securities issued as one or more global securities for an equal principal amount of debt securities of the same series in definitive registered form. In this case we will deliver to the holders new debt securities in definitive registered form in the same aggregate principal amount as the global securities being exchanged. Global Debt Securities Most offered debt securities will be book-entry (global) debt securities. Upon issuance, all book-entry debt securities will be represented by one or more fully registered global debt securities, without coupons. Unless otherwise stated in the applicable prospectus supplement, each global debt security will be deposited with, or on behalf of, The Depository Trust Company, or "DTC," a securities depository, and will be registered in the name of DTC or a nominee of DTC. DTC will thus be the only registered holder of these debt securities. Purchasers of debt securities may only hold interests in the global debt securities through DTC if they are participants in the DTC system. Purchasers may also hold interests through a securities intermediary -- banks, brokerage houses and other institutions that maintain securities accounts for customers that have an account with DTC or its nominee. DTC will maintain accounts showing the debt security holdings of its participants, and these participants will in turn maintain accounts showing the debt security holdings of their customers. Some of these customers may themselves be securities intermediaries holding debt securities for their customers. Ownership of beneficial interests in book-entry debt securities will be shown only on, and the transfer of those ownership interests will be effected only through, records maintained by DTC or its nominee with respect to participants' interests or by the participant with respect to interests of persons held by the participants on their behalf. The debt securities of each beneficial owner of a book-entry debt security will be evidenced solely by entries on the books of the beneficial owner's securities intermediary. The actual purchaser of the debt securities will generally not be entitled to have the debt securities represented by the global debt securities registered in its name and will not be considered the owner under the indenture. Accordingly, each beneficial owner must rely on the procedures of DTC or if such person is not a participant, on the procedures of the participant through which such person owns its interest to exercise any rights of a holder under the indenture. In most cases, a beneficial owner will also not be able to obtain a paper certificate evidencing the holder's ownership of debt securities. The book-entry system for holding debt securities eliminates the need for physical movement of certificates and is the system through which most publicly traded securities are held in the United States. However, the laws of some jurisdictions require some purchasers of debt securities to take physical delivery of their debt securities in definitive form. These laws may impair the ability to own, pledge or transfer book-entry debt securities. 15 A beneficial owner of book-entry debt securities represented by a global debt security may exchange the debt securities for definitive (paper) debt securities only if: o DTC is unwilling or unable to continue as depositary for such global debt security or is no longer eligible to act as depositary and we do not appoint a qualified replacement for DTC within 90 days after we receive notice or become aware of this ineligibility; o we in our sole discretion decide to allow some or all book-entry debt securities to be exchangeable for definitive debt securities in registered form; or o an event of default has occurred and is continuing with respect to the debt securities of a particular series. Unless we indicate otherwise, any global debt security that is exchangeable will be exchangeable in whole for definitive debt securities in registered form, with the same terms and of an equal aggregate principal amount. Definitive debt securities will be registered in the name or names of the person or persons specified by DTC in a written instruction to the registrar of the debt securities. DTC may base its written instruction upon directions that it receives from its participants. In this prospectus, for book-entry debt securities, references to actions taken by debt security holders will mean actions taken by DTC upon instructions from its participants, and references to payments and notices of redemption to debt security holders will mean payments and notices of redemption to DTC as the registered holder of the debt securities for distribution to participants in accordance with DTC's procedures. All payments on the book-entry debt securities will be made to DTC or its nominee as their holder. DTC is a limited purpose trust company organized under the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered under section 17A of the Securities Exchange Act of 1934. The rules applicable to DTC and its participants are on file with the SEC. None of the trustee, any paying agent, any security registrar or us will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interest in the book-entry debt securities or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. Defeasance of the Indenture Unless otherwise specified in the prospectus supplement, we can terminate all of our obligations under the indenture with respect to the debt securities of any series, other than the obligation to pay interest on, premium, if any, and the principal of the debt securities of such series and certain other obligations, known as "covenant defeasance", at any time by: o depositing money or U.S. government obligations with the trustee in an amount sufficient to pay the principal of and interest on the debt securities of such series to their maturity; and o complying with certain other conditions, including delivery to the trustee of an opinion of counsel to the effect that holders of debt securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of our covenant defeasance. In addition, unless otherwise specified in the prospectus supplement, we can terminate all of our obligations under the indenture with respect to the debt securities of any series, including the obligation to pay interest on, premium, if any, and the principal of the debt securities of such series, known as "legal defeasance", at any time by: o depositing money or U.S. government obligations with the trustee in an amount sufficient to pay the principal of and interest on the debt securities of such series to their maturity, and o complying with certain other conditions, including delivery to the trustee of an opinion of counsel stating that there has been a change in the federal tax law since the date of the indenture to the effect that holders of debt securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of our legal defeasance or the delivery to the trustee of a ruling or other formal statement or action by the Internal Revenue Service to the same effect. 16 Payments of Unclaimed Moneys Moneys deposited with the trustee or any paying agent for the payment of principal of or premium and interest on any debt security that remains unclaimed for two years will be repaid to us at our request, unless the law requires otherwise. If you want to claim any unclaimed moneys, you must look to us and not to the trustee or paying agent. Events of Default, Notices, and Waiver Events of Default An "event of default" regarding any series of debt securities is any one of the following events: o default for 30 days in the payment of interest on the debt securities of that series; o default in payment when due of principal of, or premium, if any, on debt securities of that series or default in the deposit of any sinking fund payment when and as due by the terms of the debt securities of that series; o our failure to comply with any covenant or agreement in the indenture or debt security of that series for a period of 90 days after notice is provided to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the then outstanding debt securities of that series; o certain events of bankruptcy, insolvency and reorganization with respect to us; and o any other event of default of that series that is specified in the prospectus supplement. A default regarding a single series of debt securities will not necessarily constitute a default regarding any other series. Certain of our indebtedness may provide for events of default which differ from the events of default for the debt securities. In addition, the indenture permits series of debt securities to be issued that include additional or different events of default as compared with the events of default listed above. If an event of default for any series of debt securities occurs and is continuing (other than an event of default involving the bankruptcy, insolvency or reorganization of us), either the trustee or the holders of 25% in principal amount of the outstanding debt securities of that series may declare the principal (or, in the case of (a) OID debt securities, such lesser amount as provided in those OID debt securities or (b) indexed debt securities, the amount determined by the terms of those indexed debt securities), of all the debt securities of that series, together with any accrued interest on the debt securities, to be immediately due and payable by notice in writing to us. If it is the holders of debt securities who give notice of that declaration of acceleration to us, then they must also give notice to the trustee. If an event of default occurs which involves the bankruptcy, insolvency or reorganization of us, as set forth above, then all unpaid principal amounts (or, if the debt securities are (a) OID debt securities, such lesser amount as provided in those OID debt securities or (b) indexed debt securities, the amount determined by the terms of those indexed debt securities) and accrued interest on all debt securities of each series will immediately become due and payable, without any action by the trustee or any holder of debt securities. In the event that we become subject to a bankruptcy proceeding, liquidation or reorganization, the claim of a holder of an OID debt security will be limited by the bankruptcy court to the accreted value, rather than the face amount, of the OID debt security. In order for holders of debt securities to initiate proceedings for a remedy under the indenture, holders of 25% in principal amount of those debt securities must: o first give notice to the trustee as provided above; o request that the relevant trustee initiate a proceeding in its own name; and o offer that trustee indemnity reasonably satisfactory to it against costs and liabilities. 17 If the trustee still refuses for 60 days to initiate the proceeding, and no inconsistent direction has been given to the trustee by holders of a majority of the debt securities of the same series, the holders may initiate a proceeding. The holders of a majority in principal amount of the outstanding debt securities of a series may rescind a declaration of acceleration with respect to the debt securities of that series if all events of default, besides the failure to pay principal or interest due solely because of the declaration of acceleration, have been cured or waived. A judgment for money damages by courts in the United States, including a money judgment based on an obligation expressed in a foreign currency, will ordinarily be rendered only in U.S. dollars. A New York statute provides that a court shall render a judgment or decree in the foreign currency of the underlying obligation and that the judgment or decree shall be converted into U.S. dollars at the exchange rate prevailing on the date of entry of the judgment or decree. We are required under the indenture to file an officers' certificate with the trustee every year as to our compliance with all conditions and covenants in the indenture. Notices The trustee is required to give notice to holders of a series of debt securities of a default, which remains uncured, has not been waived and that is known to the trustee, within 90 days after the default has occurred. If a default occurs in the performance of any covenant in the debt securities or the indenture, other than a default in the payment of principal of and premium or interest on any of the debt securities, the trustee shall not give notice to the holders of debt securities until 90 days after the occurrence of the default. The trustee may withhold notice of a default if the trustee determines in good faith that doing so is in the interest of the holders, but may not withhold the notice in the case of a default in the payment of principal of and premium or interest on any of the debt securities or the deposit of any sinking fund payment. Waiver The holders of a majority in principal amount of the outstanding debt securities of a series may waive any past default or event of default except a default in the payment of principal of or premium or interest on the debt securities of that series or a default relating to a provision that cannot be amended without the consent of each affected holder. Rights and Duties of the Trustee The holders of a majority in principal amount of outstanding debt securities of any series may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or other power conferred on the trustee. The trustee may decline to follow that direction if it would involve the trustee in personal liability or would be illegal. During an event of default, the trustee is required to exercise the standard of care and skill that a prudent person would exercise under the circumstances in the conduct of his own affairs. The trustee is not obligated to exercise any of its rights or powers under the indenture at the request or direction of any of the holders of debt securities unless those holders have offered to the trustee security or indemnity reasonably satisfactory to it. The trustee is entitled, in the absence of bad faith on its part, to rely on an officers' certificate before taking action under the indenture. Supplemental Indentures Supplemental Indentures Not Requiring Consent of Holders Without the consent of any holders of debt securities, we and the trustee may supplement the indenture, among other things, to: o reflect that another Person has succeeded us and assumed our covenants and obligations under the debt securities and the indenture; o cure any ambiguity, inconsistency or defect in the indenture or in the debt securities, or make any other provisions or changes with respect to matters or questions arising under the indenture; o issue and establish the form and terms of any series of debt securities as provided in the indenture; 18 o provide for any guarantee of the debt securities of any series, secure any debt securities of any series or confirm and evidence the release, termination or discharge of any such guarantee or lien securing any debt securities of any series when such release, termination or discharge is permitted by the indenture; o add to our covenants further covenants or surrender any right or power conferred upon us by the indenture for the benefit of the holders of debt securities and, if the covenants or the surrender of such right or power are for the benefit of less than all series of debt securities, stating which series are entitled to benefit; o add any additional event of default and, if the new event of default applies to fewer than all series of debt securities, stating to which series it applies; o change the trustee for a series of debt securities or provide for an additional trustee; o provide additional provisions for bearer debt securities; o change or eliminate any provision of the indenture, so long as no outstanding debt securities exist which are entitled to the benefit of that provision; o supplement any provisions of the indenture to the extent necessary to permit or facilitate the defeasance and discharge of any series of debt securities, provided that any such action will not adversely affect the interests of the holders of debt securities of that series or any other series of debt securities issued under the indenture in any material respect; o modify or supplement any provisions of the indenture necessary to permit the reopening of any series of debt securities; o modify the indenture in order to achieve or continue its qualification under the Trust Indenture Act of 1939 or as may be necessary or desirable in accordance with amendments to that Act; o add to the conditions, limitations and restrictions on the authorized amount, form, terms or purposes of issue, authentication and delivery of debt securities; or o for any other reason specified in the applicable prospectus supplement. Supplemental Indentures Requiring Consent of Holders We and the trustee, with the consent of the holders of at least a majority in principal amount of each series of the debt securities that would be affected by a modification of the indenture, may supplement the indenture or modify in any way the terms of that indenture or the rights of the holders of the debt securities. However, without the consent of each holder of all of the debt securities affected by that modification, we and the trustee may not: o reduce the principal of or premium, if any, on or change the stated maturity of any debt security; o reduce the rate of or change the time for payment of interest on any debt security or, in the case of OID debt securities, reduce the rate of accretion of the OID; o change any of our obligations to pay additional amounts, if any, under the indenture (except as contemplated by clause (1) under "--Merger, Consolidation or Sale or Conveyance of Assets" and permitted by the first bullet point under "--Supplemental Indentures Not Requiring Consent of Holders"); o reduce or alter the method of computation of any amount payable upon redemption, repayment or purchase of any debt security by us, or the time when the redemption, repayment or purchase may be made; o make the principal or interest on any debt security payable in a currency other than the currency stated in the debt security or change the place of payment; 19 o reduce the amount of principal due on an OID debt security upon acceleration of maturity or provable in bankruptcy or reduce the amount payable under the terms of an indexed debt security upon acceleration of maturity or provable in bankruptcy; o impair any right of repayment or purchase at the option of any holder of debt securities; o adversely affect the conversion rights of any holder of debt securities; o impair the right of any holder of debt securities to sue for payment of the principal, premium, if any, or interest on a debt security that would be due and payable at the stated maturity thereof or upon redemption; o reduce the percentage in principal amount of the outstanding debt securities of any series required to supplement the indenture or to waive any of its provisions; or o modify the foregoing except to increase any such percentage or provide that other provisions of the indenture cannot be modified or waived without the consent of the holder of each debt security affected thereby. A supplemental indenture which modifies or eliminates a provision intended to benefit the holders of one series of debt securities will not affect the rights under the indenture of holders of other series of debt securities. Waiver of Covenants We may omit to comply with some of our covenants and conditions set forth in the indenture if the holders of at least a majority in aggregate principal amount of the outstanding securities of each series affected by such omission waive that compliance. Redemption The specific terms, if any, of any redemption of a series of debt securities will be contained in the prospectus supplement for that series. Generally, we must send notice of redemption to the holders at least 30 days but not more than 60 days prior to the redemption date. The notice will specify: o the redemption date; o the redemption price; o the place or places of payment; o the CUSIP or other identifying number of the debt securities being redeemed, if any; o whether the redemption is pursuant to a sinking fund; o that on the redemption date, interest, or, in the case of OID debt securities, original issue discount and interest, if any, will cease to accrue; and o if bearer debt securities are being redeemed, that those bearer debt securities must be accompanied by all coupons maturing after the redemption date or the amount of the missing coupons will be deducted from the redemption price, or indemnity must be furnished, and whether those bearer debt securities may be exchanged for registered debt securities not being redeemed. On or before any redemption date, we will deposit an amount of money with the trustee or with a paying agent sufficient to pay the redemption price. If less than all the debt securities are being redeemed, the trustee shall select the debt securities to be redeemed using a method it considers fair. From and after the redemption date, unless we default in the payment of the redemption price, the debt securities will cease to bear interest and, in the case of bearer securities, the coupons for such interest will be void. 20 Concerning the Trustee We may from time to time maintain lines of credit and have other customary banking relationships with the trustee and its affiliates. We also have agreed, pursuant to the indenture, to indemnify the trustee for certain losses, liabilities and expenses. Governing Law The indenture and the debt securities will be governed by, and construed in accordance with, the laws of the State of New York. 21 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following summary describes the material U.S. federal income tax consequences of the purchase, ownership and disposition of debt securities as of the date of this prospectus. Except where noted, this summary deals only with debt securities purchased on original issue at their issue price and held as capital assets by United States holders, and does not deal with special situations. For example, this summary does not address: o tax consequences to holders who may be subject to special tax treatment, such as dealers in securities or currencies, financial institutions, real estate investment trusts, regulated investment companies, tax-exempt entities, insurance companies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, investors in pass-through entities or persons liable for alternative minimum tax; o tax consequences to persons holding debt securities as part of a hedging, integrated, conversion or constructive sale transaction or a straddle; o tax consequences to U.S. holders (as defined below) of debt securities whose "functional currency" is not the U.S. dollar; o alternative minimum tax consequences, if any; or o any state, local or foreign tax consequences. The discussion below is based upon the provisions of the Internal Revenue Code of 1986 (the Code), and regulations, rulings and judicial decisions as of the date of this prospectus. Those authorities may be changed, possibly with retroactive effect, which could result in U.S. federal income tax consequences that are different from those discussed below. The discussion set forth below also assumes that all debt securities issued under this prospectus constitute debt for U.S. federal income tax purposes. If any debt security does not constitute debt for U.S. federal income tax purposes, the tax consequences of the ownership of that debt security could differ materially from the tax consequences described herein. We will summarize any special U.S. federal income tax considerations relevant to a particular issue of debt securities in the applicable prospectus supplement. For the purposes of this summary, a "United States holder" means a beneficial owner of the debt securities offered in this prospectus that is: o a citizen or resident of the United States; o a corporation or partnership created or organized in or under the laws of the United States or any political subdivision of the United States; o an estate the income of which is subject to U.S. federal income taxation regardless of its source; or o a trust if (x) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (y) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. A "non-United States holder" means a beneficial owner of the debt securities that is not a United States holder. If a partnership holds the debt securities offered in this prospectus, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the offered debt securities, you should consult your tax advisors. If you are considering the purchase of debt securities, you should consult your own tax advisors concerning the U.S. federal income tax consequences to you and any consequences arising under the laws of any other taxing jurisdiction. 22 Consequences to United States Holders The following is a summary of certain U.S. federal income tax consequences that will apply to you if you are a United States holder of debt securities. Payments of Interest Except as set forth below, stated interest on a debt security will generally be taxable to you as ordinary income from domestic sources at the time it is paid or accrued in accordance with your method of accounting for tax purposes. Original Issue Discount If you own debt securities issued with original issue discount (OID), you will be subject to special tax accounting rules, as described in greater detail below. In that case, you should be aware that you generally must include OID in gross income in advance of the receipt of cash attributable to that income. However, you generally will not be required to include separately in income cash payments received on the debt securities, even if denominated as interest, to the extent those payments do not constitute qualified stated interest, as defined below. Notice will be given in the applicable prospectus supplement when we determine that a particular debt security will be an original issue discount debt security. Additional rules applicable to OID debt securities that are denominated in or determined by reference to a currency other than the U.S. dollar are described below under "--Foreign Currency Debt Securities". A debt security with an issue price that is less than the "stated redemption price at maturity" (the sum of all payments to be made on the debt security other than "qualified stated interest") generally will be issued with OID if that difference is at least 0.25% of the stated redemption price at maturity multiplied by the number of complete years to maturity. The "issue price" of each debt security in a particular offering will be the first price at which a substantial amount of that particular offering is sold to the public. The term "qualified stated interest" means stated interest that is unconditionally payable in cash or in property, other than debt instruments of the issuer, provided the interest to be paid meets all of the following conditions: o it is payable at least once per year; o it is payable over the entire term of the debt security; and o it is payable at a single fixed rate or, subject to certain conditions, based on one or more interest indices. We will give you notice in the applicable prospectus supplement when we determine that a particular debt security will bear interest that is not qualified stated interest. If you own a debt security issued with "de minimis" OID, which is an amount of discount that is less than 0.25% of the stated redemption price at maturity multiplied by the number of complete years to maturity, the debt security will not be considered to be issued with OID, and you generally must include the de minimis OID in income at the time stated principal payments on the debt securities are made in proportion to the amount of such payments. Any amount of de minimis OID that you have included in income will be treated as capital gain. Certain of the debt securities may contain provisions permitting them to be redeemed prior to their stated maturity at our option and/or at your option. OID debt securities containing those features may be subject to rules that differ from the general rules discussed herein. If you are considering the purchase of OID debt securities with those features, you should carefully examine the applicable prospectus supplement and should consult your own tax advisors with respect to those features since the tax consequences to you with respect to OID will depend, in part, on the particular terms and features of the debt securities. If you own OID debt securities with a maturity upon issuance of more than one year you generally must include OID in income in advance of the receipt of some or all of the related cash payments using the "constant yield method" described in the following paragraph. This method takes into account the compounding of interest. The accruals of OID on an OID debt security will generally be less in the early years and more in the later years. 23 The amount of OID that you must include in income if you are the initial United States holder of an OID debt security is the sum of the "daily portions" of OID with respect to the debt security for each day during the taxable year or portion of the taxable year in which you held that debt security (accrued OID). The daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the OID allocable to that accrual period. The "accrual period" for an OID debt security may be of any length and may vary in length over the term of the debt security, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on the first day or the final day of an accrual period. The amount of OID allocable to any accrual period is an amount equal to the excess, if any, of: o the debt security's adjusted issue price at the beginning of the accrual period multiplied by its yield to maturity, determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period, over o the aggregate of all qualified stated interest allocable to the accrual period. OID allocable to a final accrual period is the difference between the amount payable at maturity, other than a payment of qualified stated interest, and the adjusted issue price at the beginning of the final accrual period. The "adjusted issue price" of a debt security at the beginning of any accrual period is equal to its issue price increased by the accrued OID for each prior accrual period, determined without regard to the amortization of any acquisition or bond premium, as described below, and reduced by any payments made on the debt security (other than qualified stated interest) on or before the first day of the accrual period. Under these rules, you will have to include in income increasingly greater amounts of OID in successive accrual periods. We are required to provide information returns stating the amount of OID accrued on debt securities held of record by persons other than corporations and other exempt holders. Floating rate debt securities are subject to special OID rules. In the case of an OID debt security that is a floating rate debt security, both the "yield to maturity" and "qualified stated interest" will be determined solely for purposes of calculating the accrual of OID as though the debt security will bear interest in all periods at a fixed rate generally equal to the rate that would be applicable to interest payments on the debt security on its date of issue or, in the case of certain floating rate debt securities, the rate that reflects the yield to maturity that is reasonably expected for the debt security. Additional rules may apply if: o the interest on a floating rate debt security is based on more than one interest index; or o the principal amount of the debt security is indexed in any manner. You may elect to treat all interest on any debt security as OID and calculate the amount includible in gross income under the constant yield method described above. For purposes of this election, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. You should consult with your own tax advisors about this election. Short-Term Debt Securities In the case of debt securities having a term of one year or less, all payments, including all stated interest, will be included in the stated redemption price at maturity and will not be qualified stated interest. As a result, you will generally be taxed on the discount instead of stated interest. The discount will be equal to the excess of the stated redemption price at maturity over the issue price of a short-term debt security, unless you elect to compute this discount using tax basis instead of issue price. In general, individual and certain other cash method United States holders of short-term debt securities are not required to include accrued discount in their income currently unless they elect to do so, but may be required to include stated interest in income as the interest is received. United States holders that report income for U.S. federal income tax purposes on the accrual method and certain other United States holders are required to accrue discount on short-term debt securities (as ordinary income) on a straight-line basis, unless an election is made to accrue the discount according to a constant yield method based on daily compounding. If you are not required, and do not elect, to include discount in income currently, any gain you realize on the sale, exchange or retirement of a short-term debt security will generally be ordinary income to you to the extent of the discount accrued by you through the date of sale, exchange or retirement. In addition, if you do not elect to currently include accrued discount in income you may be required to defer deductions for a portion of your interest expense with respect to any indebtedness attributable to the short-term debt securities. 24 Market Discount If you purchase a debt security, other than an OID debt security, for an amount that is less than its stated redemption price at maturity, or, in the case of an OID debt security, its adjusted issue price, the amount of the difference will be treated as "market discount" for U.S. federal income tax purposes, unless that difference is less than a specified de minimis amount. Under the market discount rules, you will be required to treat any payment, other than qualified stated interest, on, or any gain on the sale, exchange, retirement or other disposition of, a debt security as ordinary income to the extent of the market discount that you have not previously included in income and are treated as having accrued on the debt security at the time of its payment or disposition. In addition, you may be required to defer, until the maturity of the debt security or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness attributable to the debt security. Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the debt security, unless you elect to accrue on a constant yield method. You may elect to include market discount in income currently as it accrues, on either a ratable or constant yield method, in which case the rule described above regarding deferral of interest deductions will not apply. Acquisition Premium, Amortizable Bond Premium If you purchase an OID debt security for an amount that is greater than its adjusted issue price but equal to or less than the sum of all amounts payable on the debt security after the purchase date other than payments of qualified stated interest, you will be considered to have purchased that debt security at an "acquisition premium". Under the acquisition premium rules, the amount of OID that you must include in gross income with respect to the debt security for any taxable year will be reduced by the portion of the acquisition premium properly allocable to that year. If you purchase a debt security (including an OID debt security) for an amount in excess of the sum of all amounts payable on the debt security after the purchase date other than qualified stated interest, you will be considered to have purchased the debt security at a "premium" and, if it is an OID debt security, you will not be required to include any OID in income. You generally may elect to amortize the premium over the remaining term of the debt security on a constant yield method as an offset to interest when includible in income under your regular accounting method. Special rules limit the amortization of premium in the case of convertible debt securities. If you do not elect to amortize bond premium, that premium will decrease the gain or increase the loss you would otherwise recognize on disposition of the debt security. Sale, Exchange and Retirement of Debt Securities Your adjusted tax basis in a debt security will, in general, be your cost for that debt security, increased by OID, market discount or any discount with respect to a short-term debt security that you previously included in income, and reduced by any amortized premium and any cash payments on the debt security other than qualified stated interest. Upon the sale, exchange, retirement or other disposition of a debt security, you will recognize gain or loss equal to the difference between the amount you realize upon the sale, exchange, retirement or other disposition (less an amount equal to any accrued and unpaid interest, which will be treated as a payment of interest for federal income tax purposes) and the adjusted tax basis of the debt security. Except as described above with respect to certain short-term debt securities or with respect to market discount, or as described below with respect to foreign currency debt securities, that gain or loss will be capital gain or loss. Capital gains of individuals derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Foreign Currency Debt Securities Payments of Interest If you receive interest payments made in a foreign currency and you use the cash basis method of accounting, you will be required to include in income the U.S. dollar value of the amount received, determined by translating the foreign currency received at the "spot rate" for such foreign currency on the date such payment is received regardless of whether the payment is in fact converted into U.S. dollars. You will not recognize exchange gain or loss with respect to the receipt of such payment. 25 If you use the accrual method of accounting, you may determine the amount of income recognized with respect to such interest in accordance with either of two methods. Under the first method, you will be required to include in income for each taxable year the U.S. dollar value of the interest that has accrued during such year, determined by translating such interest at the average rate of exchange for the period or periods during which such interest accrued. Under the second method, you may elect to translate interest income at the spot rate on: o the last day of the accrual period; o the last day of the taxable year if the accrual period straddles your taxable year; or o the date the interest payment is received if such date is within five days of the end of the accrual period. This election must be applied consistently to all debt instruments from year to year and may not be revoked without the consent of the Internal Revenue Service (the IRS). Upon receipt of an interest payment on such debt security (including, upon the sale of such debt security, the receipt of proceeds which include amounts attributable to accrued interest previously included in income), you will recognize ordinary income or loss in an amount equal to the difference between the U.S. dollar value of such payment (determined by translating the foreign currency received at the spot rate for such foreign currency on the date such payment is received) and the U.S. dollar value of the interest income you previously included in income with respect to such payment. Original Issue Discount OID on a debt security that is also a foreign currency debt security will be determined for any accrual period in the applicable foreign currency and then translated into U.S. dollars, in the same manner as interest income accrued by a holder on the accrual basis, as described above. You will recognize exchange gain or loss when OID is paid (including, upon the sale of such debt security, the receipt of proceeds which include amounts attributable to OID previously included in income) to the extent of the difference between the U.S. dollar value of such payment (determined by translating the foreign currency received at the spot rate for such foreign currency on the date such payment is received) and the U.S. dollar value of the accrued OID (determined in the same manner as for accrued interest). For these purposes, all receipts on a debt security will be viewed: o first, as the receipt of any stated interest payment called for under the terms of the debt security; o second, as the receipt of previously accrued OID (to the extent thereof), with payments considered made for the earliest accrual periods first; and o third, as the receipt of principal. Market Discount and Bond Premium The amount of market discount on foreign currency debt securities includible in income will generally be determined by translating the market discount determined in the foreign currency into U.S. dollars at the spot rate on the date the foreign currency debt security is retired or otherwise disposed of. If you have elected to accrue market discount currently, then the amount which accrues is determined in the foreign currency and then translated into U.S. dollars on the basis of the average exchange rate in effect during such accrual period. You will recognize exchange gain or loss with respect to market discount which is accrued currently using the approach applicable to the accrual of interest income as described above. Bond premium on a foreign currency debt security will be computed in the applicable foreign currency. If you have elected to amortize the premium, the amortizable bond premium will reduce interest income in the applicable foreign currency. At the time bond premium is amortized, exchange gain or loss, which is generally ordinary gain or loss, will be realized based on the difference between spot rates at such time and the time of acquisition of the foreign currency debt security. If you elect not to amortize bond premium, you must translate the bond premium computed in the foreign currency into U.S. dollars at the spot rate on the maturity date and such bond premium will constitute a capital loss which may be offset or eliminated by exchange gain. 26 Sale, Exchange or Retirement Upon the sale, exchange, retirement or other taxable disposition of a foreign currency debt security, you will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange, retirement or other disposition (less an amount equal to any accrued and unpaid interest, which will be treated as a payment of interest for federal income tax purposes) and your adjusted tax basis in the foreign currency debt security. Subject to the foreign currency rules discussed below, such gain or loss will be capital gain or loss. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. If your foreign currency debt security is sold, exchanged or retired for an amount denominated in foreign currency, then your amount realized generally will be based on the spot rate of the foreign currency on the date of sale, exchange or retirement. If the foreign currency debt securities are traded on an established securities market and held by a cash method taxpayer, foreign currency paid or received is translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale. An accrual method taxpayer may elect the same treatment with respect to the purchase and sale of foreign currency debt securities traded on an established securities market, provided that the election is applied consistently. Your tax basis in a foreign currency debt security generally will be your cost therefor. If you purchased a foreign currency debt security with foreign currency, your cost will be the U.S. dollar value of the foreign currency amount paid for such foreign currency debt security determined at the time of such purchase. If you purchased a foreign currency debt security with previously owned foreign currency, you will recognize ordinary exchange gain or loss at the time of purchase attributable to the difference at the time of purchase, if any, between your tax basis in such foreign currency and the fair market value of the foreign currency debt security in U.S. dollars on the date of purchase. If the foreign currency debt securities are traded on an established securities market and held by a cash method taxpayer, foreign currency paid or received is translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale. An accrual method taxpayer may elect the same treatment with respect to the purchase and sale of foreign currency debt securities traded on an established securities market. Upon the sale, exchange or retirement of a foreign currency debt security, you will recognize exchange gain or loss with respect to the principal amount of such foreign currency debt security. For these purposes, the principal amount of the foreign currency debt security is your purchase price for the foreign currency debt security calculated in the foreign currency on the date of purchase, and the amount of exchange gain or loss recognized is equal to the difference between (i) the U.S. dollar value of the principal amount determined on the date of the sale, exchange, retirement or other disposition of the foreign currency debt security and (ii) the U.S. dollar value of the principal amount determined on the date you purchased the foreign currency debt security. Such gain or loss will be treated as ordinary income or loss and generally will be U.S. source gain or loss. The realization of such gain or loss will be limited to the amount of overall gain or loss realized on the disposition of a foreign currency debt security. Exchange Gain or Loss with Respect to Foreign Currency Your tax basis in the foreign currency received as interest on a foreign currency debt security will be the U.S. dollar value thereof at the spot rate in effect on the date the foreign currency is received. Your tax basis in foreign currency received on the sale, exchange or retirement of a foreign currency debt security will be equal to the U.S. dollar value of the foreign currency, determined at the time of the sale, exchange or retirement, or, if the foreign currency debt securities are traded on an established securities market, the spot rate of exchange on the settlement date, in the case of a cash basis United States holder or an electing accrual basis United States holder as described above. Any gain or loss recognized by you on a sale, exchange or other disposition of the foreign currency will be ordinary income or loss and generally will be U.S. source gain or loss. Dual Currency Debt Securities If so specified in an applicable prospectus supplement relating to a foreign currency debt security, we may have the option to make all payments of principal and interest scheduled after the exercise of such option in a currency other than the specified currency. The U.S. federal income tax treatment of dual currency debt securities is uncertain. U.S. Treasury regulations currently in effect do not address the tax treatment of dual currency debt securities. 27 An IRS announcement states that the IRS is considering issuing proposed regulations that would: o apply the principles contained in regulations governing contingent debt instruments to dual currency debt securities in the "predominant currency" of the dual currency debt securities; and o apply the rules discussed above with respect to foreign currency debt securities with OID for the translation of interest and principal into U.S. dollars. The IRS states that these concepts are still under consideration. Persons considering the purchase of dual currency debt securities should carefully examine the applicable prospectus supplement and should consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership and disposition of such debt securities. If we exercise such an option, you may be considered to have exchanged your debt security denominated in the specified currency for a debt security denominated in the optional payment currency. If the exercise is treated as a deemed exchange, you will recognize gain or loss, if any, equal to the difference between your basis in the debt security denominated in the specified currency and the value of the debt security denominated in the optional payment currency. If the exercise of the option is not treated as a deemed exchange, you will not recognize gain or loss and your basis in the debt security will be unchanged. Consequences to Non-United States Holders Under present U.S. federal income and estate tax law, and subject to the discussion below concerning backup withholding: (a) no withholding of U.S. federal income tax will be required with respect to the payment by us or any of our paying agents of principal or interest (which for purposes of this discussion includes OID) on a debt security owned by you under the "portfolio interest rule," provided that: o interest paid on the debt security is not effectively connected with your conduct of a trade or business in the United States; o you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of section 871(h)(3) of the Code and the regulations thereunder; o you are not a controlled foreign corporation that is related to us through stock ownership; o you are not a bank whose receipt of interest on a debt security is described in section 881(c)(3)(A) of the Code; o the beneficial owner satisfies the statement requirement (described generally below) set forth in section 871(h) and section 881(c) of the Code and the regulations thereunder; and o such interest is not considered contingent interest under Section 871(h)(4)(A) of the Code and the regulations thereunder; (b) no withholding of U.S. federal income tax generally will be required with respect to any gain realized by you upon the sale, exchange, retirement or other disposition of a debt security; and (c) a debt security beneficially owned by an individual who at the time of death is a non-United States holder will not be subject to U.S. federal estate tax as a result of such individual's death, provided that any payment to you on the debt securities, including original issue discount, would be eligible for exemption from the 30% federal withholding tax under the rules described in paragraph (a) above without regard to the statement requirement described in the fifth bullet point under paragraph (a) above. 28 To satisfy the requirement referred to in the fifth bullet point under paragraph (a) above, you, or a financial institution holding the debt security on your behalf, must provide, in accordance with specified procedures, a paying agent of ours with a statement to the effect that the you are not a U.S. person. Currently, these requirements will be met if: o you provide your name and address, and certifies, under penalties of perjury, that you are not a U.S. person (which certification may be made on an IRS Form W-8BEN); or o a financial institution holding the debt security on your behalf certifies, under penalties of perjury, that such statement has been received by it and furnishes a paying agent with a copy thereof. The statement requirement referred to in the fifth bullet point under paragraph (a) above may also be satisfied with other documentary evidence with respect to an offshore account or through certain foreign intermediaries. If you cannot satisfy the requirements of the "portfolio interest" exception described in (a) above, payments of premium, if any, and interest (including OID) made to you will be subject to a 30% withholding tax unless you provide us or our paying agent, as the case may be, with a properly executed: o IRS Form W-8BEN claiming an exemption from or reduction in withholding under the benefit of an applicable income tax treaty; or o IRS Form W-8ECI stating that interest paid on the debt security is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States. Alternative documentation may be applicable in certain situations. If you are engaged in a trade or business in the United States and premium, if any, or interest (including OID) on the debt security is effectively connected with the conduct of such trade or business, you, although exempt from the withholding tax discussed above (provided the certification requirements described above are satisfied), will be subject to U.S. federal income tax on such premium, interest and OID on a net income basis in the same manner as if you were a United States holder. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or lesser rate under an applicable income tax treaty) of such amount, subject to adjustments. Any gain realized upon the sale, exchange, retirement or other disposition of a debt security generally will not be subject to U.S. federal income tax unless: o such gain is effectively connected with your trade or business in the United States, if any; or o if you are an individual, you are present in the United States for 183 days or more in the taxable year of such sale, exchange, retirement or other disposition, and certain other conditions are met. Special rules may apply to certain non-United States holders, such as "controlled foreign corporations," "passive foreign investment companies," "foreign personal holding companies" and certain expatriates, that are subject to special treatment under the Code. Such entities should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. Information Reporting and Backup Withholding United States Holders In general, information reporting requirements will apply to payments of principal, interest, OID and premium, paid on debt securities and to the proceeds of sale of a debt security made to you (unless you are an exempt recipient such as a corporation). A backup withholding tax will apply to such payments if you fail to provide a taxpayer identification number or certification of exempt status, or fail to report in full dividend and interest income. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS. Non-United States Holders Information reporting will generally apply to payments of interest on the debt securities to you and the amount of tax, if any, withheld with respect to such payments. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty. 29 In general, no backup withholding will be required regarding payments that we make to you provided that we do not have actual knowledge or reason to know that you are a United States person and we have received from you the certification described above under "--Consequences to Non-United States Holders" (such as an IRS Form W-8BEN). In addition, no information reporting or backup withholding will be required regarding the proceeds of the sale of a debt security made within the United States or conducted through certain United States-related financial intermediaries, if: o the payor receives the certification described above and does not have actual knowledge or reason to know that you are a United States person; or o you otherwise establish an exemption. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS. PLAN OF DISTRIBUTION We may sell the debt securities described in this prospectus from time to time in one or more transactions as follows: o through underwriters or dealers; o through agents; o directly to purchasers; or o through a combination of the foregoing methods of sale. The prospectus supplement for each offering of debt securities will describe, among other things, the following: o the name or names of any underwriters, dealers or agents; o the purchase price and the proceeds to us from that sale; o any underwriting discounts, commissions or agents' fees and other items constituting underwriters' or agents' compensation; o any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers; and o any securities exchanges on which the debt securities may be listed. Underwriters Unless otherwise set forth in the prospectus supplement, the obligations of the underwriters to purchase debt securities will be subject to conditions. The underwriters will be obligated to purchase all the debt securities if any are purchased. The applicable prospectus supplement will name any underwriter involved in a sale of debt securities. The debt securities will be acquired by the underwriters for their own account and may be resold by them from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Underwriters may be deemed to have received compensation from us in the form of underwriting discounts or commissions and may also receive commissions from the purchasers of debt securities for whom they may act as agent. Underwriters may also sell debt securities to or through dealers. These dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. 30 We may authorize underwriters to solicit offers by certain types of institutions to purchase debt securities from it at the public offering price stated in the prospectus supplement required by delayed delivery contracts providing for payment and delivery on a specified date in the future. If we sell debt securities under these delayed delivery contracts, the prospectus supplement will state that as well as the conditions to which these delayed delivery contracts will be subject and the commissions payable for that solicitation. The applicable prospectus supplement will set forth whether or not underwriters may over-allot or effect transactions that stabilize, maintain or otherwise affect the market price of the debt securities at levels above those that might otherwise prevail in the open market, including, for example, by entering stabilizing bids, effecting syndicate covering transactions or imposing penalty bids. Agents We may also sell debt securities through agents designated by us from time to time. We will name any agents involved in the offer or sale of the debt securities and will list commissions payable by us to these agents in the prospectus supplement. These agents will be acting on a best efforts basis to solicit purchases for the period of their appointment, unless we state otherwise in the prospectus supplement. Direct Sales We may sell debt securities directly to purchasers. In this case, we may not engage underwriters or agents in the offer and sale of debt securities. Remarketing Transactions We may also sell debt securities that we have purchased, redeemed or repaid or which are being remarketed on behalf of holders through one or more remarketing firms acting as principals for their own accounts or as our agents. The applicable prospectus supplement will identify any remarketing firms and describe the terms of our agreement with them and their compensation. Remarketing firms may be deemed to be underwriters of the debt securities under the Securities Act of 1933. Indemnification We may indemnify underwriters, dealers or agents who participate in the distribution of debt securities against certain liabilities, including liabilities under the Securities Act of 1933, and agree to contribute to payments which these underwriters, dealers or agents may be required to make. Relationships with Agents, Underwriters, Dealers and Remarketing Firms Agents, underwriters, dealers and remarketing firms, and their affiliates, may engage in transactions with, or perform services for, us in the ordinary course of business. This includes commercial banking and investment banking transactions. Trading Market for Debt Securities Unless otherwise indicated in the prospectus supplement, we will not list the debt securities on any securities exchange. Typically, the debt securities will be new issues of securities with no established trading market. Any underwriters that purchase debt securities from us may make a market in these debt securities. The underwriters will not be obligated, however, to make a market in the debt securities and may discontinue market-making at any time without notice to holders of those securities. We cannot assure you that there will be liquidity in the trading market for any debt securities. 31 LEGAL MATTERS The validity of the debt securities will be passed upon for us by Simpson Thacher & Bartlett, New York, New York, our counsel. The validity of the debt securities will be passed upon for any agents or underwriters by Shearman & Sterling, New York, New York. EXPERTS Our financial statements as of February 2, 2002 and February 3, 2001 and for each of the fiscal years in the three-year period ended February 2, 2002 incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended February 2, 2002, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report incorporated by reference therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 32 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The expenses in connection with the issuance and distribution of the securities being registered, other than the underwriting discounts and commissions, are as follows: Securities and Exchange Commission registration fee ........... $ 64,720 Legal fees and expenses ....................................... $100,000 Accounting fees and expenses .................................. $ 60,000 Rating agency fees ............................................ $300,000 Blue sky fees and expenses .................................... $ 10,000 Trustee fees and expenses ..................................... $ 35,000 Printing and delivery expenses ................................ $100,000 Miscellaneous expenses ........................................ $ 30,280 -------- Total* .................................................. $700,000 - -------------- * All of the above expenses are estimated except for the SEC registration fee. Item 15. Indemnification of Directors and Officers. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify any present or former director, officer, employee or agent made a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he was a director, officer, employee or agent of the corporation or was serving at the request of the corporation, against liabilities, costs and expenses actually and reasonably incurred by him in his capacity as a director or officer or arising out of such action, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action, had no reasonable cause to believe his conduct was unlawful. No indemnification may be provided where the director, officer, employee or agent has been adjudged by a court, after exhaustion of all appeals, to be liable to the corporation, unless a court determines that the person is entitled to such indemnity. Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to eliminate or limit its directors' personal liability for monetary damages to the corporation or its stockholders for breaches of their fiduciary duty as directors except for (1) a breach of the duty of loyalty, (2) failure to act in good faith, (3) intentional misconduct or knowing violation of law, (4) willful or negligent violations of certain provisions of the Delaware General Corporation Law (Sections 174, 160 and 173) imposing certain requirements with respect to stock purchases, redemptions and dividends or (5) any transaction from which the director derived an improper personal benefit. The above provisions of the Delaware General Corporation Law are non-exclusive. Our Restated Certificate of Incorporation contains a provision eliminating the personal liability for monetary damages of our directors to the full extent permitted under the Delaware General Corporation Law. The Delaware General Corporation Law contains provisions setting forth conditions under which a corporation may indemnify its directors and officers. Our Restated Certificate of Incorporation provides that a director or officer who is a party to any action, suit or proceeding shall be entitled to be indemnified by us to the extent permitted by the Delaware General Corporation Law against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred by such director or officer in connection with such action, suit or proceeding. We have entered into indemnification agreements with certain of our executive officers and intend to enter into indemnification agreements with our directors and other executive officers in the future. Pursuant to these indemnification agreements, we have agreed, or will agree, to indemnify these persons against certain liabilities. We maintain a standard form of officers' and directors' liability insurance policy, which provides coverage to our officers and directors for certain liabilities. II-1 Any underwriting agreement or agency agreement with respect to an offering of securities registered hereunder will provide for indemnification of the Registrant and its officers and directors by the underwriters or agents, as the case may be, against certain liabilities, including liabilities under the Securities Act of 1933 (Act). Item 16. Exhibits. 1.1 Form of Underwriting Agreement. 4.1 Indenture, dated as of May 28, 2002, between the Registrant and The Bank of New York, as trustee, with respect to the debt securities (filed as Exhibit 4.14 to the Post-Effective Amendment to the Registrant's Registration Statement on Form S-3, No. 333-84254 filed on May 28, 2002 and incorporated herein by reference). 4.2 Form of Fixed Rate Note. 4.3* Form of Floating Rate Note. 5.1 Opinion and consent of Simpson Thacher & Bartlett. 12.1 Computation in support of ratio of earnings to fixed charges. 23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1). 23.2 Consent of Ernst & Young LLP. 24.1 Powers of attorney (included on signature pages to Part II of this Registration Statement). 25.1 Form T-1 statement of eligibility and qualification of The Bank of New York under the indenture with respect to the debt securities (filed as Exhibit 25.1 to Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3, No. 333-84254 filed on May 13, 2002 and incorporated herein by reference). - ------------------- * To be filed as an exhibit to a Current Report on Form 8-K or other report, which will be deemed to be incorporated by reference herein. II-2 Item 17. Undertakings. (a)The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the Registration Statement is on Form S-3, Form S-8, or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 15 of this registration statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Toys "R" Us, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Paramus, State of New Jersey, on this 24th day of March, 2003. TOYS "R" US, INC. By: /s/ John H. Eyler, Jr. ------------------------------- John H. Eyler, Jr. Chairman, Chief Executive Officer and President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John H. Eyler, Jr., Louis Lipschitz, and Christopher K. Kay, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement (and any additional Registration Statement related thereto permitted by Rule 462(b) promulgated under the Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform such and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated. Date: ----- /s/ John H. Eyler, Jr. March 24, 2003 - -------------------------- John H. Eyler, Jr. Chairman, Chief Executive Officer and President (Principal Executive Officer) /s/ Louis Lipschitz March 24, 2003 - -------------------------- Louis Lipschitz Executive Vice President--Chief Financial Officer (Principal Financial Officer) /s/ Dorvin D. Lively March 24, 2003 - -------------------------- Dorvin D. Lively Senior Vice President and Corporate Controller (Principal Accounting Officer) /s/ Charles Lazarus March 24, 2003 - -------------------------- Charles Lazarus Director, Chairman Emeritus II-4 /s/ RoAnn Costin March 24, 2003 - -------------------------- RoAnn Costin Director /s/ Roger Farah March 24, 2003 - -------------------------- Roger Farah Director /s/ Peter A. Georgescu March 24, 2003 - -------------------------- Peter A. Georgescu Director /s/ Michael Goldstein March 24, 2003 - -------------------------- Michael Goldstein Director /s/ Calvin Hill March 24, 2003 - -------------------------- Calvin Hill Director /s/ Nancy Karch March 24, 2003 - -------------------------- Nancy Karch Director /s/ Norman S. Matthews March 24, 2003 - -------------------------- Norman S. Matthews Director /s/ Arthur B. Newman March 24, 2003 - -------------------------- Arthur B. Newman Director II-5 EXHIBIT INDEX 1.1 Form of Underwriting Agreement. 4.1 Indenture, dated as of May 28, 2002, between the Registrant and The Bank of New York, as trustee, with respect to the debt securities (filed as Exhibit 4.14 to the Post-Effective Amendment to the Registrant's Registration Statement on Form S-3, No. 333-84254 filed on May 28, 2002 and incorporated herein by reference). 4.2 Form of Fixed Rate Note. 4.3* Form of Floating Rate Note. 5.1 Opinion and consent of Simpson Thacher & Bartlett. 12.1 Computation in support of ratio of earnings to fixed charges. 23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1). 23.2 Consent of Ernst & Young LLP. 24.1 Powers of attorney (included on signature pages to Part II of this Registration Statement). 25.1 Form T-1 statement of eligibility and qualification of The Bank of New York under the indenture with respect to the debt securities (filed as Exhibit 25.1 to Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3, No. 333-84254 filed on May 13, 2002 and incorporated herein by reference). - ------------------- * To be filed as an exhibit to a Current Report on Form 8-K or other report, which will be deemed to be incorporated by reference herein. EX-1.1 3 b323792_ex1-1.txt UNDERWRITING AGREEMENT EXHIBIT 1.1 TOYS "R" US, INC. DEBT SECURITIES FORM OF UNDERWRITING AGREEMENT _____, 2003 [________] [________] As Representatives of the Several Underwriters [________] Dear Sirs: 1. Introductory. Toys "R" Us Inc., a Delaware corporation (the "Company"), proposes to issue and sell up to $800,000,000 aggregate initial public offering price of its debt securities (the "Securities"), from time to time, in or pursuant to one or more offerings on terms to be determined at the time of sale. The Securities will be issued in one or more series as senior unsecured indebtedness under an Indenture (the "Indenture") dated as of May 28, 2002 between the Company and The Bank of New York, as Trustee (the "Trustee"). Each series of Securities may vary, as applicable, as to title, aggregate principal amount, ranking, interest rate or formula and timing of payments thereof, stated maturity date, redemption and/or repayment provisions, sinking fund requirements, conversion provisions and any other terms and conditions established by or pursuant to the Indenture. Whenever the Company determines to make an offering of Securities through [_________] (together, the "Representatives"), or through an underwriting syndicate managed by the Representatives, the Company will enter into an agreement (each, a "Terms Agreement") providing for the sale of such Securities to, and the purchase and offering thereof by, the Representatives and such other underwriters, if any, selected by the Representatives (the "Underwriters," which term shall include the Representatives, whether acting as the only Underwriters or as members of an underwriting syndicate, as well as any Underwriter substituted pursuant to Section 8 hereof). The Terms Agreement relating to the offering of Securities shall specify the aggregate principal amount of Securities to be initially issued (the "Underwritten Securities"), the name of each Underwriter participating in such offering (subject to substitution as provided in Section 8 hereof) and the name of any Underwriter other than the Representatives acting as co-manager in connection with such offering, the number or aggregate principal amount, as the case may be, of Underwritten Securities which each such Underwriter severally agrees to purchase, whether such offering is on a fixed or variable price basis and, if on a fixed price basis, the initial offering price, the price at which the Underwritten Securities are to be purchased by the Underwriters, the form, time, date and place of delivery and payment of the Underwritten Securities and any other material variable terms of the Underwritten Securities. The Terms Agreement, which may be in the form of Exhibit A hereto or in such other form as may be agreed between the Company and the Underwriters, may take the form of an exchange of any standard form of written telecommunication between the Company and the Representatives, acting for themselves and, if applicable, as representatives of any other Underwriters. Each offering of Underwritten Securities through the Representatives as the only Underwriters or through an underwriting syndicate managed by the Representatives will be governed by this Underwriting Agreement, as supplemented by the applicable Terms Agreement. 1 2. Representations and Warranties of the Company. The Company represents and warrants to the Representatives, as of the date hereof, and to each Underwriter named in the applicable Terms Agreement, as of the date thereof and as of each Closing Date (as defined below) that: (a) A registration statement on Form S-3 (No. 333-[______]) relating to the Securities, including a form of prospectus, has been filed with the Securities and Exchange Commission ("Commission") for the registration of the Securities under the Securities Act of 1933, as amended ("Securities Act"), and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the Securities Act (the "Securities Act Regulations"). The registration statement has been declared effective by the Commission and the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the Company has filed such post-effective amendments thereto as may be required prior to the execution of the applicable Terms Agreement and each such post-effective amendment has been declared effective by the Commission. The registration statement (as so amended, if applicable), including the information, if any, deemed to be a part thereof pursuant to Rule 430A(b) of the Securities Act Regulations (the "Rule 430A Information") or Rule 434(d) of the Securities Act Regulations (the "Rule 434 Information"), is referred to herein as the "Registration Statement"; and the final prospectus and the final prospectus supplement relating to the offering of the Underwritten Securities, in the form first furnished to the Underwriters by the Company for use in connection with the offering of the Underwritten Securities, are collectively referred to herein as the "Prospectus"; provided, however, that all references to the "Registration Statement" and the "Prospectus" shall also be deemed to include all documents incorporated therein by reference pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the execution of the applicable Terms Agreement; provided, further, that if the Company files a registration statement with the Commission pursuant to Rule 462(b) of the Securities Act Regulations (the "Rule 462(b) Registration Statement"), then, after such filing, all references to "Registration Statement" shall also be deemed to include the Rule 462(b) Registration Statement. A "preliminary prospectus" shall be deemed to refer to any prospectus used before the Registration Statement became effective and any prospectus that omitted, as applicable, the Rule 430A Information, the Rule 434 Information or other information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) of the Securities Act Regulations and was used after such effectiveness and prior to the execution and delivery of the applicable Terms Agreement. 2 For purposes of this Underwriting Agreement, all references to the Registration Statement, Prospectus or preliminary prospectus or to any amendment or supplement to any of the foregoing shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Underwriting Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" (or other similar expressions) in the Registration Statement, Prospectus or preliminary prospectus shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, Prospectus or preliminary prospectus, as the case may be, prior to the execution of the applicable Terms Agreement; and all references in this Underwriting Agreement to amendments or supplements to the Registration Statement, Prospectus or preliminary prospectus shall be deemed to mean and include the filing of any document under the Exchange Act which is incorporated by reference in the Registration Statement, Prospectus or preliminary prospectus, as the case may be, after the execution of the applicable Terms Agreement. (b) The Company meets the requirements for use of Form S-3 under the Securities Act. No stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. The Registration Statement, as of its effective date, conformed in all material respects to the requirements of the Securities Act and the Securities Act Regulations and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus, as of the time of filing pursuant to Rule 424(b), will conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and the Prospectus, as of its issue date and as of the Closing Date, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Registration Statement or the Prospectus based upon written information furnished to the Company by any Underwriter through the Representatives specifically for use therein. 3 (c) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied or will comply, as the case may be, as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder (the "Exchange Act Regulations"). (d) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Prospectus and to enter into and perform its obligations under, or as contemplated under, this Agreement and the applicable Terms Agreement; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be in good standing or to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, properties, results of operations or financial condition of the Company and its subsidiaries taken as a whole ("Material Adverse Effect"). (e) Each of Toys "R" Us-Delaware, Inc. and Toys "R" Us Holdings, plc (United Kingdom) (which are the only subsidiaries of the Company that constitute "significant subsidiaries" as such term is defined in Rule 1-02 of Regulation S-X) ("Significant Subsidiary")) has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and each Significant Subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be in good standing or to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect; all of the issued and outstanding capital stock of each Significant Subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each Significant Subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and security interests, except as would not, individually or in the aggregate, have a Material Adverse Effect. 4 (f) If the Prospectus contains a "Capitalization" section, the Company has the authorized, issued and outstanding capitalization as set forth under such section as of the dates set forth therein. (g) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering. (h) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation by the Company of the transactions contemplated by this Agreement in connection with the issuance and sale of the Securities by the Company, except such as have been obtained or made under the Securities Act, the Exchange Act, the Trust Indenture Act and such as may be required under state or foreign securities or Blue Sky laws or where the failure to obtain such consent, approval, authorization or filing would not, individually or in the aggregate, have a Material Adverse Effect. (i) The execution, delivery and performance of this Agreement and the applicable Terms Agreement and the Indenture and the issuance and sale of the Securities will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (a) any statute, any rule, regulation or order of any governmental authority, agency or body or any court (domestic or foreign) having jurisdiction over the Company or any of its Significant Subsidiaries or any of their properties, or (b) any agreement or instrument to which the Company or any such Significant Subsidiary is a party or by which the Company or any such Significant Subsidiary is bound or to which any of the properties of the Company or any such Significant Subsidiary is subject, or (c) the Restated Certificate of Incorporation or Restated By-laws of the Company, except, in the case of clauses (a) and (b) only, for such breaches, violations or defaults that would not, individually or in the aggregate, have a Material Adverse Effect. (j) This Agreement has been, and the applicable Terms Agreement as of the date thereof will have been, duly authorized, executed and delivered by the Company. 5 (k) Except as disclosed in the Prospectus, the Company and its Significant Subsidiaries have good and marketable title to all real properties and all personal property owned by them, respectively, in each case free from liens, encumbrances and defects that would materially and adversely affect the value thereof or materially and adversely interfere with the use made or to be made thereof by them, except as would not, individually or in the aggregate, have a Material Adverse Effect; and except as disclosed in the Prospectus, the Company and its Significant Subsidiaries hold any leased real property or buildings under valid and enforceable leases with no material exceptions that would materially interfere with the use made or to be made thereof by them, except as would not, individually or in the aggregate, have a Material Adverse Effect. (l) The Company and its Significant Subsidiaries possess or have obtained all licenses, certificates, authorizations or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such license, certificate, authorization or permit that would, individually or in the aggregate, have a Material Adverse Effect. (m) No labor dispute with the employees of the Company or any of its Significant Subsidiaries exists or, to the knowledge of the Company, is threatened that would, individually or in the aggregate, have a Material Adverse Effect. (n) The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that would, individually or in the aggregate, have a Material Adverse Effect. (o) Except as disclosed in the Prospectus, there are no legal or government actions, suits or proceedings pending against or affecting the Company or any of its Significant Subsidiaries or any of their respective properties that would, individually or in the aggregate, have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement; and to the Company's knowledge, no such actions, suits or proceedings are threatened or, contemplated by governmental authorities or threatened by others. (p) Ernst & Young LLP, who have certified the audited financial statements of the Company and its subsidiaries incorporated by reference in the Registration Statement and the Prospectus are independent public accountants as required by the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations. 6 (q) The financial statements, together with the related notes and schedules, incorporated by reference in the Registration Statement and the Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates shown and their consolidated results of operations and changes in consolidated cash flows, for the periods shown, and, except as otherwise disclosed in the Prospectus, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis. (r) Except as disclosed in the Prospectus, since the date as of which information is given therein, there has been no material adverse change, nor any development or event involving a prospective material adverse change in the business, properties, results of operations or financial condition of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (s) The Company is not and, after giving effect to the offering and sale of the Underwritten Securities and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as defined in, and subject to regulation under, the Investment Company Act of 1940. (t) The Company and its Significant Subsidiaries have filed all federal, state, local and foreign tax returns that have been required to be filed or has duly requested extensions thereof, except to the extent that any failure to file or request for extension would not, individually or in the aggregate, have a Material Adverse Effect. The Company and its Significant Subsidiaries have paid all taxes shown as due on such filed tax returns (including any related assessments), except to the extent that any such taxes or assessments are being contested in good faith and by appropriate proceedings, or to the extent that any failure to pay would not, individually or in the aggregate, have a Material Adverse Effect. (u) The Underwritten Securities have been, or as of the date of the applicable Terms Agreement will have been, duly authorized by the Company, and, when the Underwritten Securities are duly executed and delivered by the Company against payment therefor as set forth herein and upon due authentication thereof by the Trustee, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or law) and (iii) an implied covenant of good faith and faith dealing. The Underwritten Securities will conform, when issued, in all material respects to the description thereof contained in the Prospectus. 7 (v) The Indenture has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or law) and (iii) an implied covenant of good faith and fair dealing. The Indenture conforms in all material respects to the description thereof contained in the Prospectus. 3. Purchase, Sale and Delivery of Underwritten Securities. The several commitments of the Underwriters to purchase the Underwritten Securities pursuant to the applicable Terms Agreement shall be deemed to have been made on the basis of the representations, warranties and agreements herein contained and shall be subject to the terms and conditions herein set forth. The Company will deliver the Underwritten Securities to the Representatives for the accounts of the Underwriters, against payment of the purchase price in federal (same day) funds by wire transfer to an account at a bank reasonably acceptable to the Representatives drawn to the order of the Company at the office of Shearman & Sterling, 599 Lexington Avenue, New York, N.Y. 10022 or at such other place as shall be agreed upon by the Company and the Representatives, at 9:00 A.M., New York City time on the third (fourth, if the pricing occurs after 4:30 P.M. (New York City time) on any given day) business day after the date of the applicable Terms Agreement (unless postponed in accordance with the provisions of Section 8 hereof), or at such other time not later than seven full business days thereafter as the Representatives and the Company determine, such time being herein referred to as the "Closing Date." For purposes of Rule 15c6-1 under the Exchange Act, the Closing Date shall be the settlement date for payment of funds and delivery of securities for all the Underwritten Securities sold pursuant to an offering. The certificates for the Underwritten Securities so to be delivered will be in definitive form, in such denominations and registered in such names as the Representatives shall request and will be made available for checking and packaging at the above office of Shearman & Sterling not later than 2:00 P.M. (New York City time) on the business day prior to the Closing Date. It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Underwritten Securities which it has severally agreed to purchase. The Representatives, each individually and not as representatives of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Underwritten Securities to be purchased by any Underwriter whose funds have not been received by the Closing Date, but such payment shall not relieve such Underwriter from its obligations hereunder. 8 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Underwritten Securities for sale to the public as set forth in the Prospectus. 5. Certain Agreements of the Company. The Company agrees with the Representatives and with each Underwriter participating in the offering of Underwritten Securities that: (a) The Company will prepare (in a form reasonably approved by the Representatives) and file the Prospectus with the Commission pursuant to and in accordance with the applicable subparagraph of Rule 424(b) under the Securities Act not later than the second business day following the execution and delivery of the Terms Agreement applicable to the Underwritten Securities or, if applicable, such earlier time as may be required by such rule). The Company will advise the Representatives promptly of any such filing pursuant to Rule 424(b). (b) The Company will advise the Representatives promptly of any proposal to amend or supplement the Registration Statement or the Prospectus and will provide the Representatives with copies thereof and will not effect any such amendment or supplement (other than filings pursuant to the Exchange Act) to which the Representatives reasonably object after reasonable opportunity for review of such amendment or supplement. To the extent the distribution of Underwritten Securities has not been completed, the Company will be required to provide the Representatives with reports that it is required to file with the Commission under the Exchange Act. The Company will also advise the Representatives promptly of the effectiveness of any post-effective amendment to the Registration Statement or the filing of any amendment or supplement to the Prospectus and of the institution by the Commission of any stop order proceedings in respect of the Registration Statement and will use its reasonable best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (c) If, at any time when a Prospectus is required to be delivered under the Securities Act in connection with sales by any Underwriter, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time when a Prospectus is required to be delivered under the Securities Act in connection with sales by any Underwriter to amend the Prospectus to comply with the Securities Act, the Company will promptly notify the Representatives of such event, and will promptly prepare and file with the Commission, at its own expense (or, if such time is in excess of nine months from the date of the applicable Terms Agreement, at the expense of the Underwriters), an amendment or supplement that will correct such statement or omission or an amendment which will effect such compliance. Neither the Representatives' consent to, nor the Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. 9 (d) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its securityholders an earnings statement covering a period of at least 12 months beginning after the effective date of the Registration Statement which will satisfy the provisions of Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 under the Securities Act). For the purpose of the preceding sentence, "Availability Date" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "Availability Date" means the 90th day after the end of such fourth fiscal quarter. (e) The Company will, as promptly as reasonably practicable after the date of the Terms Agreement applicable to the Underwritten Securities, furnish to each Underwriter copies of the Registration Statement (one of which will include all exhibits), each related preliminary prospectus, and, so long as a prospectus relating to the Underwritten Securities is required to be delivered under the Securities Act in connection with sales by any Underwriter, the Prospectus and all amendments and supplements to such documents, in each case in such quantities as such Underwriter reasonably requests. The Company will, subject to the terms hereof, pay the expenses of printing and distributing to the Underwriters all such documents. (f) The Company will use its reasonable best efforts to arrange for the qualification of the Underwritten Securities for sale under the laws of such jurisdictions as the Representatives reasonably designate and will continue such qualifications in effect so long as required for the distribution of the Securities; provided, however, that the Company and its subsidiaries shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction. (g) The Company will pay all expenses incident to the performance of its obligations under this Agreement and the applicable Terms Agreement, including (i) the fees and expenses of the Trustee (including the reasonable fees and disbursements of its counsel); (ii) any filing fees and other expenses (including reasonable fees and disbursements of counsel to the Underwriters) incurred in connection with qualification of the Underwritten Securities for sale under the laws of such jurisdictions as the Representatives reasonably designate and the printing of memoranda relating thereto; (iii) the printing and delivery to the Underwriters of copies of each preliminary prospectus and the Prospectus and any amendments or supplements thereto, subject to the terms hereof; (iv) the fees and disbursements of the Company's counsel, accountants and other advisors or agents; (v) any filing fee incident to any review by the National Association of Securities Dealers, Inc. of the Underwritten Securities; (vi) any travel expenses of the Company's officers and employees and any other expenses of the Company in connection with attending or hosting "roadshow" meetings with prospective purchasers of the Underwritten Securities; and (vii) expenses incurred in distributing preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) to the Underwriters, subject to the terms hereof. Except to the extent, if any, set forth in Section 9, the Company shall not be responsible to pay any expenses of the Underwriters incident to the performance of their obligations under this Agreement and the applicable Terms Agreement, including, without limitation, the fees and disbursements of counsel to the Underwriters and the travel expenses of representatives of the Underwriters in connection with any such "roadshow" meetings. 10 (h) Between the date of the applicable Terms Agreement and the Closing Date or any other date specified in such Terms Agreement, the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to the Securities specified in such Terms Agreement, or publicly disclose its intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of the Representatives, if and as specified in the applicable Terms Agreement. (i) The Company will use its reasonable best efforts to arrange for the Underwritten Securities, when issued, to be authorized for listing on The New York Stock Exchange if and as specified in the applicable Terms Agreement. 6. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Underwritten Securities pursuant to the applicable Terms Agreement will be subject to the accuracy of the representations and warranties on the part of the Company herein, as of the date of such Terms Agreement and as of the Closing Date, to the accuracy of the statements of Company officers made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) The Representatives shall have received a letter at the time of execution of the applicable Terms Agreement of Ernst & Young LLP confirming that they are independent public accountants within the meaning of the Securities Act and the Securities Act Regulations thereunder and stating substantially to the effect that: (i) in their opinion the financial statements and schedules examined by them and included or incorporated by reference in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations; 11 (ii) on the basis of a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of the applicable Terms Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets or net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or (B) for the period from the date of the latest income statement included in the Prospectus to the date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year in consolidated net sales or net operating income or consolidated net income, except in all cases set forth in clauses (A) and (B) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (iii) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Registration Statement (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. 12 (b) The Representatives shall have received a letter, dated such Closing Date, of Ernst & Young LLP which meets the requirements of Section 6(a), except that the specified date referred to in such subsection will be a date not more than three days prior to such Closing Date for the purposes of this subsection. (c) The Registration Statement shall have become effective under the Securities Act and the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement; and prior to such Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company or the Representatives, shall be contemplated by the Commission. (d) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the business, properties, results of operations or financial condition of the Company and its subsidiaries taken as a whole, which, in the judgment of a majority in interest of the Underwriters including the Representatives, is material and adverse and makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Underwritten Securities; (ii) any material and adverse change in U.S. or international financial, political or economic conditions as would, in the judgment of a majority in interest of the Underwriters including the Representatives, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Underwritten Securities, whether in the primary market or in respect of dealings in the secondary market; (iii) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such Exchange, or any suspension of trading of any securities of the Company on such Exchange or in the over-the-counter market; (iv) any banking moratorium declared by U.S. federal or New York authorities; (v) any material and adverse disruption of settlements of securities or clearance services in the United States or (vi) any attack on, outbreak or escalation of hostilities or material act of terrorism involving, the United States, any declaration of war by Congress or any other national or international calamity or emergency if, in the judgment of a majority in interest of the Underwriters including the Representatives, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Underwritten Securities. 13 (e) The Representatives shall have received an opinion, dated such Closing Date, of Simpson Thacher & Bartlett, counsel for the Company, substantially as set forth in Exhibit B hereto. (f) The Representatives shall have received an opinion, dated such Closing Date, of Christopher K. Kay, Esq., Executive Vice President--Operations and General Counsel of the Company, substantially to the effect that: (i) to such counsel's knowledge, the Company is duly qualified to do business as a foreign corporation in good standing in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect; (ii) all outstanding shares of the Common Stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable; (iii) to such counsel's knowledge, there are no contracts or agreements between the Company and any person granting such person the right (other than rights which have been waived or satisfied) to require the Company to include any securities of the Company owned or to be owned by such person in the securities registered pursuant to the Registration Statement; and (iv) to the knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or its or their property of a character required to be disclosed in the Registration Statement or the Prospectus which is not adequately described as required. Such opinion shall be limited in all respects to matters governed by the Delaware General Corporation Law and the federal laws of the United States of America. Such counsel may rely as to certain matters of fact, to the extent he deems proper, on certificates of officers of the Company and public officials. (g) The Representatives shall have received from Shearman & Sterling, counsel for the Underwriters, such opinion or opinions dated such Closing Date, with respect to the issuance and sale of the Underwritten Securities delivered on such Closing Date, the Registration Statement, the Prospectus, the Indenture, the Securities and other related matters as the Underwriters may reasonably request, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. 14 (h) The Representatives shall have received a certificate, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects; (ii) the Company has complied in all material respects, with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; (iii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission; (iv) the Rule 462(b) Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) under the Securities Act was filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 111(a) or (b) under the Securities Act, prior to the time the Prospectus was printed and distributed to any Underwriter; and (v) since the date as of which information is given in the Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the business, properties, results of operations or financial condition of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Prospectus or as described in such certificate. (i) Prior to or on the Closing Date, the Underwritten Securities shall have been approved for listing, subject to official notice of issuance and evidence of satisfactory distribution, on the New York Stock Exchange, and satisfactory evidence of such actions shall have been provided to the Underwriters, if and as specified in the applicable Terms Agreement. (j) At the Closing Date, the Underwritten Securities shall have the ratings accorded by any "nationally recognized statistical rating organization" (as defined by the Commission for purposes of Rule 436(g)(2) of the Securities Act Regulations) if and as specified in the applicable Terms Agreement, and the Company shall have delivered to the Representatives evidence reasonably satisfactory to the Representatives, confirming that the Underwritten Securities have such ratings. Since the time of execution of such Terms Agreement, there shall not have occurred a downgrading in, or withdrawal of, the rating assigned to the Underwritten Securities, if any, or any of the Company's other debt securities by any such rating organization. The Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as the Representatives reasonably request. The Representatives may in their sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder. 15 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Underwriter, its partners, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will, subject to Section 7(c), reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred (it being understood, however, that the Company shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Underwriters, directors, partners, officers and controlling persons, which firm shall be designated in writing by the Representatives); provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein; provided further, that with respect to any untrue statement or alleged untrue statement or omission or alleged omission of material fact made in any preliminary prospectus, the indemnity agreement contained in this Section 7(a) shall not inure to the benefit of any Underwriter (or its partners, directors, officers or controlling persons) from whom the person asserting any such loss, claim, damage or liability purchased the securities concerned, to the extent that any such loss, claim, damage or liability of such Underwriter (or its partners, directors, officers or controlling persons) occurs under the circumstance the untrue or alleged untrue statement or omission or alleged omission of a material fact contained in the preliminary prospectus was corrected in the Prospectus and there was not sent or given to such person, at or prior to the written confirmation of the sale of such securities to such person, a copy of the Prospectus. (b) Each Underwriter will severally and not jointly indemnify and hold harmless the Company, its directors and officers and each person, if any who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred. 16 (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under Section 7(a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under Section 7(a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party. No indemnifying party shall be liable for any settlement of any such action effected without the indemnifying party's written consent (which consent shall not be unreasonably withheld), unless, (i) such settlement is entered into more than 30 days after receipt by the indemnifying party of written notice of the proposed settlement, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 20 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. 17 (d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in Section 7(a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 7(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section 7(d). Notwithstanding the provisions of this Section 7(d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this Section 7(d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) The obligations of the Company under this Section 7 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Securities Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director or officer of the Company and to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act. 18 8. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Underwritten Securities hereunder on any Closing Date and the aggregate principal amount of Underwritten Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total principal amount of Underwritten Securities that the Underwriters are obligated to purchase on such Closing Date, the Representatives may make arrangements satisfactory to the Company for the purchase of such Underwritten Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Underwritten Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate principal amount of Underwritten Securities with respect to which such default or defaults occur exceeds 10% of the total number of Underwritten Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to the Representatives and the Company for the purchase of such Underwritten Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company, except as provided in Section 9. As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. In the event of any such default which does not result in a termination of the applicable Terms Agreement, either the Representatives or the Company shall have the right to postpone the Closing Date for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Underwritten Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Underwritten Securities by the Underwriters is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Underwriters pursuant to Section 7 shall remain in effect, and if any Underwritten Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Underwritten Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (ii), (iii), (iv), (v) or (vi) of Section 6(d), the Company will reimburse the Underwriters for all out-of-pocket expenses (including reasonable fees and disbursements of counsel to the Underwriters) reasonably incurred by them in connection with the offering of the Underwritten Securities. 19 10. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representatives c/o [________]; or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 461 From Road, Paramus, New Jersey 07652, Attention: General Counsel; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter. The Representatives shall promptly furnish the address of any Underwriter upon the request of the Company. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder. 12. Representation of Underwriters. The Representatives will act for the several Underwriters in connection with offerings of Underwritten Securities, and any action under this Agreement taken by the Representatives will be binding upon all the Underwriters. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. The Company hereby submits to the non-exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. 20 If the foregoing is in accordance with the Representatives' understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the several Underwriters in accordance with its terms. Very truly yours, TOYS "R" US, INC. By: ------------------------------------ Name: Title: 21 The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written [_________________] By: ________________________ Name: Title: [_________________] By: ________________________ Name: Title: Acting on behalf of themselves and as the Representatives of the several Underwriters. EXHIBIT A Toys "R" Us, Inc. Debt Securities FORM OF TERMS AGREEMENT ________, 200_ To: Toys "R" Us, Inc. 461 From Road Paramus, New Jersey 07652 Ladies and Gentlemen: We understand that Toys "R" Us, Inc., a Delaware corporation (the "Company"), proposes to issue and sell $__________ aggregate principal amount of its senior debt securities (the "Underwritten Securities"). Subject to the terms and conditions set forth or incorporated by reference herein, we [the underwriters named below (the "Underwriters")] offer to purchase [, severally and not jointly,] the [principal amount of] Underwritten Securities [opposite their names set forth below] at the purchase price set forth below. [Principal Amount] Underwriter of Underwritten Securities - ------------------------------------------------------------------------------- Total __________ ---------- [$] ========== The Underwritten Securities shall have the following terms: Title: Ranking: Aggregate principal amount: Form and Denominations: Currency of payment: Interest rate or formula: Interest payment dates: Regular record dates: Stated maturity date: Redemption provisions: Sinking fund requirements: Conversion provisions: Listing requirements (if any): Ratings: Clear-market provision: Type of offering: [Fixed] [Variable] price offering Initial public offering price per Security (if fixed price offering): ____ % of the principal amount, plus accrued interest [and amortized original issue discount], if any, from __________. Purchase price per Security payable by Underwriters: _____ % of principal amount, plus accrued interest [and amortized original issue discount], if any, from __________. Closing Date and location: Other terms and conditions: Please accept this offer no later than ______ P.M. (New York City time) on _____________ by signing a counterpart of this Terms Agreement in the space set forth below and returning the signed counterpart to us. Very truly yours, [_________________] By: ____________________ Name: Title: [_________________] By: ____________________ Name: Title: [Acting on behalf of themselves and the other named Underwriters.] Accepted: TOYS "R" US, INC. By: --------------------------------- Name: Title: EXHIBIT B [Form of Opinion of Simpson Thacher & Bartlett to be delivered pursuant to Section 6(e)] 1. The Company has been duly incorporated and is validly existing and in good standing as a corporation under the laws of the State of Delaware. 2. The Indenture has been duly authorized, executed and delivered by the Company and qualified under the Trust Indenture Act and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. 3. The Underwritten Securities have been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Trustee and upon payment and delivery in accordance with the Underwriting Agreement, will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture. 4. The statements in the Prospectus under the caption "Description of Debt Securities," insofar as they purport to constitute summaries of certain terms of documents referred to therein, constitute accurate summaries of the terms of such documents in all material respects. 5. The statements set forth in the Prospectus under the caption "United States Federal Income Tax Consequences," insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters described therein in all material respects. 6. The issue and sale of the Underwritten Securities by the Company and the compliance by the Company with all of the provisions of the Underwriting Agreement will not breach or result in a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument filed or incorporated by reference as an exhibit to the Registration Statement, nor will such action violate the Restated Certificate of Incorporation or Amended and Restated By-laws, as amended, of the Company or any U.S. Federal or New York state statute or the Delaware General Corporation Law or any rule or regulation that has been issued pursuant to any U.S. Federal or New York state statute or the Delaware General Corporation Law or any order known to us issued pursuant to any U.S. Federal or New York state statute or the Delaware General Corporation Law by any court or governmental agency or body or court having jurisdiction over the Company, any of the Company's Significant Subsidiaries or any of their properties. 7. No consent, approval, authorization, order, registration or qualification of or with any U.S. Federal or New York governmental agency or body or any Delaware governmental agency or body acting pursuant to the Delaware General Corporation Law or, to our knowledge, any U.S. Federal or New York court or any Delaware court acting pursuant to the Delaware General Corporation Law is required for the issue and sale of the Underwritten Securities by the Company and the compliance by the Company with the provisions of the Underwriting Agreement, except for the registration of the Underwritten Securities under the Securities Act and the Exchange Act, the qualification of the Indenture under the Trust Indenture Act and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Underwritten Securities by the Underwriters. 8. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 9. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of and subject to regulation under the Investment Company Act of 1940, as amended. The opinions referred to in subparagraphs (2) and (3) above may be subject (i) to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing. The opinion letter shall also contain a statement substantially to the following effect: (i) such counsel is of the opinion that the Registration Statement, as of its effective date, and the Prospectus, as of its date, complied as to form in all material respects with the requirements of the Securities Act, the Trust Indenture Act and the applicable rules and regulations of the Commission thereunder and that the documents filed under the Exchange Act and incorporated by reference, or deemed to be incorporated by reference, therein, if any (the "Exchange Act Documents"), complied as to form when filed in all material respects with the requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder (except that in each case such counsel need not express any opinion with respect to the financial statements or other financial data contained or incorporated by reference in the Registration Statement, the Prospectus or the Exchange Act Documents, and (ii) such counsel has no reason to believe that the Registration Statement, as of its effective date (including the Exchange Act Documents on file with the Commission on such effective date) or as of the date of filing of the Annual Report on Form 10-K of the Company for the most recent fiscal year, as the case may be, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading or that the Prospectus (including the Exchange Act Documents) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that in each case such counsel need not express any belief with respect to the financial statements or other financial data contained or incorporated by reference in the Registration Statement, the Prospectus or the Exchange Act Documents). EX-4.2 4 b323792_ex4-2.txt FORM OF FIXED RATE NOTE Exhibit 4.2 FORM OF FIXED RATE NOTE (FACE OF NOTE) [For inclusion in Global Securities only -- THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE NAME OF CEDE & CO., AS NOMINEE OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY"). THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY SUCH DEPOSITARY TO A NOMINEE OF SUCH DEPOSITARY OR BY A NOMINEE OF SUCH DEPOSITARY TO SUCH DEPOSITARY OR ANOTHER NOMINEE OF SUCH DEPOSITARY OR BY SUCH DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY, UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE CERTIFICATED FORM. Unless this Note is presented by an authorized representative of the Depositary to the Company or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co., or such other name as requested by an authorized representative of The Depository Trust Company, and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] CUSIP No.________________ R-____ $------------------------ TOYS "R" US, INC. _____% NOTE DUE _____ TOYS "R" US, INC., a Delaware corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to [CEDE & CO.], or registered assigns, the principal sum of _________________ Dollars ($___________) [as increased or decreased as provided for in Schedule A hereto] on ________, 20__ (such date is hereinafter referred to as the "Maturity"), and to pay interest on said principal sum from __________, 20__ or from the next recent date to which interest has been paid or duly provided for, ______ in arrears on __________ _________ of each year (each such date, an "Interest Payment Date"), commencing on _____________, 20__, at the rate of ____% per annum through and including the day immediately preceding the next Interest Payment Date until the principal hereof shall have been paid or duly made available for payment [and, to the extent permitted by law, to pay interest on any overdue principal and premium, if any, and on any overdue installment of interest at the same rate per annum as set forth above]. 2 The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year consisting of twelve 30-day months and, except as provided in the Indenture (as defined below), the amount of interest payable for any period shorter than a full quarterly period for which interest is computed will be computed on the basis of the actual number of days elapsed in such 90-day period. In the event that any Interest Payment Date is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), in each case with the same force and effect as if made on such Interest Payment Date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Note (or one or more predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment which shall be the ______ or ______, as the case may be, calendar day prior to the relevant Interest Payment Date. [For inclusion in Global Securities only - Except as otherwise provided in the Indenture, this Note will be issued in global form only registered in the name of The Depository Trust Company (the "Depositary") or its nominee. This Note will not be issued in definitive form, except as otherwise provided in the Indenture, and ownership of this Note shall be maintained in book-entry form by the Depositary for the accounts of participating organizations of the Depositary.] The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made, at the option of the Company, by check mailed to the registered Holder at such address as shall appear in the records of the Trustee or by wire transfer to an account appropriately designated by the Holder entitled thereto. This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee in accordance with the Indenture referred to in Section 1 on the reverse hereof. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. 3 IN WITNESS WHEREOF, the Company has caused this Note to be executed. Dated: ________, 20__ TOYS "R" US, INC., as Issuer By: ___________________________ Name: Title: Attest: By: _________________________ Name: Title: 4 CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein described in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By ____________________________ Authorized Signatory Dated: ________, 20__ 5 (REVERSE OF NOTE) 1. Indenture. This Note is one of a duly authorized series of Securities of the Company designated as the ___% Notes due 20__ of the Company (herein sometimes referred to as the "Notes"), issued pursuant to an Indenture dated as of May 28, 2002 (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee", which term includes any successor trustee under the Indenture), as amended and supplemented, to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Notes. The Notes are one of an indefinite number of series of debt securities of the Company (herein collectively called the "Securities") issued or to be issued in one or more series under the Indenture. The Notes are limited initially (except as provided in the Indenture) in aggregate principal amount to $_______. The terms, conditions and provisions of the Notes are those stated in the Indenture, those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, and those set forth in this Note. To the extent that the terms, conditions and other provisions of this Note modify, supplement or are inconsistent with those of the Indenture, then the terms, conditions and other provisions of this Note shall govern. All terms used in this Note that are defined in the Indenture shall have the meanings assigned to them in the Indenture. The Company may, without the consent of the holders, issue and sell additional Securities ranking equally with the Notes and otherwise identical in all respects (except for their date of issue, issue price and the date from which interest payments thereon shall accrue) so that such additional Securities shall be consolidated and form a single series with the Notes. 2. Ranking. The Notes shall constitute the senior, unsubordinated and unsecured debt obligations of the Company and shall rank equally in right of payment with all other existing and future senior, unsubordinated and unsecured obligations of the Company. 3. Form; Transfer. Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any Paying Agent and the Registrar may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any Paying Agent nor any Registrar shall be affected by any notice to the contrary. 6 4. Sinking Fund. [The Notes are [not] entitled to the benefit of any sinking fund.] [Insert brief description of any sinking fund] 5. [Redemption. [Describe any applicable redemption provisions, such as:] The Company may at its option redeem this Note (i) in whole or from time to time in part, or (ii) in whole but not in part, (a) on or after _______, or (b) on _______ or _______, at a price equal to _____% of the principal amount hereof, together with accrued interest to the Redemption Date. The Company may exercise such option by giving, or causing to be given, notice of such redemption not less than 30 days nor more than 60 days' notice to the Holders of the Notes.] 6. Default and Remedies. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall become, due and payable (or, in certain circumstances shall become due and payable without any such declaration), in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Holders of specified percentages in aggregate principal amount of the outstanding Securities of each series at the time outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 7. Covenants. The Notes are subject to the covenants set forth in the Indenture. The Indenture imposes certain limitations on the ability of the Company to, among other things, merge or consolidate with any other Person or sell, assign, convey or transfer or otherwise dispose of assets substantially as an entirety to another Person, and requires that the Company comply with certain further covenants. All such covenants and limitations are subject to a number of important qualifications and exceptions. 8. Amendment; Supplements. Without the consent of any Holders of the Notes, the Company and the Trustee may enter into one or more supplemental indentures supplementing the Indenture, pursuant to Section 901 of the Indenture to, among other things, add to the covenants of the Company for the benefits of the Holders of the Notes, to add any additional Events of Default with respect to the Notes, cure any ambiguity or defect, to correct or supplement any provision of the Indenture which may be inconsistent with any other provision therein or herein, or to make any other provisions or changes with respect to matters or questions arising under the Indenture or this Note or make such other changes as are specified and permitted under Section 901 of the Indenture. With respect to provisions of the Notes and the Indenture other than those specified in the preceding sentence pursuant to Section 901 of the Indenture, the Company and the Trustee may enter into one or more supplemental indentures supplementing the Indenture, pursuant to Section 902 of the Indenture, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the Holders of the Notes, but only with the consent of the Holders of more than 50% in aggregate principal amount of the Outstanding Securities, provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security, among other things, (1) change the Maturity of the principal of or interest on the Notes, or reduce the principal amount thereof or the rate of interest thereon, if any, reduce the amount payable in accordance with the terms of the Notes upon a declaration of acceleration of Maturity thereof, (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of the Indenture or certain defaults hereunder and their consequences, or (3) modify other provisions as set forth in the Indenture. 7 Upon the execution of any supplemental indenture under the Indenture, the Indenture shall be modified in accordance therewith and such supplemental indenture shall form a part of the Indenture for all purposes and every Holder of Notes theretofore or thereafter authenticated and delivered thereunder shall be bound thereby. 9. Defeasance. Sections 401, 402, 403 and 404 of the Indenture, which relate to defeasance of Securities, shall apply to the Notes. 10. Obligation Absolute and Unconditional. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed. 11. No Recourse. No recourse shall be had for the payment of the principal of (and premium, if any), or the interest, if any, on this Note, or for any claim based thereon, or upon any obligation, covenant or agreement of the Indenture, against any incorporator, stockholder, officer, employee or director, as such, past, present or future, of the Company or of any predecessor or successor Person, either directly or indirectly through the Company or any predecessor or successor Person, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment of penalty or otherwise; it being expressly agreed and understood that the Indenture and this Note are solely corporate obligations, and that no personal liability whatever shall attach to, or is incurred by, any incorporator, stockholder, officer, employee or director, past, present or future, of the Company or of any predecessor or successor Person, either directly or indirectly through the Company or any predecessor or successor Person, because of the incurring of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants or agreements contained in the Indenture and this Note, or to be implied herefrom or therefrom; and that all such personal liability is hereby expressly released and waived as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of this Note. 8 12. Separability. In case any one or more of the provisions contained in the Indenture or in the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, then, to the extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provisions of the Indenture or of the Notes, but the Indenture and the Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. 13. Governing Law. THE NOTES AND THE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 14. Copies of Indenture. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Toys "R" Us, Inc. 461 From Road Paramus, New Jersey 07652 15. Notices. If the Company is required to give notice to the Holders of the Notes pursuant to the terms of the Indenture, then it shall do so as set forth in Section 106 of the Indenture. 9 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Note to: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her. Date: ____________________ Signature: -------------------------------- Signature Guarantee: ___________ (Sign exactly as your name appears on the other side of this Note) 10 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian ------------------------------------ (cust) (minor) Under Uniform Gifts to Minors Act ------------------------------------ (State) TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common Additional abbreviations may also be used though not in the above list. Schedule A (TO BE ATTACHED TO GLOBAL SECURITIES) SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
Stated Amount of the Amount of Decrease Amount of Increase in Global Security in Stated Amount of Stated Amount of the Following Such Signature of Date the Global Security Global Security Decrease or Increase Authorizing Signatory - -------------------------------------------------------------------------------------------------------------------
EX-5.1 5 b323792_ex5-1.txt OPINION AND CONSENT OF THACHER AND BARLETT Exhibit 5.1 [Letterhead of Simpson Thacher & Bartlett] March 24, 2003 Toys "R" Us, Inc. 461 From Road Paramus, NJ 07652 Ladies and Gentlemen: We have acted as counsel to Toys "R" Us, Inc., a Delaware corporation (the "Company"), in connection with the Registration Statement on Form S-3 (the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, relating to the issuance by the Company of $800,000,000 aggregate principal amount of debt securities (the "Securities"). The Securities will be issued under an indenture (the "Indenture") dated as of May 28, 2002, between the Company and The Bank of New York, as Trustee. We have examined the Registration Statement and the Indenture, a form of which has been filed with the Commission as an exhibit to the Registration Statement. We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other and further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the Company. In rendering the opinion set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents. We also have assumed that the Indenture is the valid and legally binding obligation of the Trustee. Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that, assuming (a) the taking of all necessary corporate action to approve the issuance and terms of the Securities, the terms of the offering thereof and related matters by the Board of Directors of the Company, a duly constituted and acting committee of such Board or duly authorized officers of the Company (such Board of Directors, committee or authorized officers being hereinafter referred to as the "Board") and (b) the due execution, authentication, issuance and delivery of the Securities, upon payment of the consideration therefor provided for in the applicable definitive purchase, underwriting or similar agreement approved by the Board and otherwise in accordance with the provisions of the Indenture and such agreement, the Securities will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms. Our opinion set forth above is subject to the effects of (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing. We are members of the Bar of the State of New York, and we do not express any opinion herein concerning any law other than the law of the State of New York, the Federal law of the United States and the Delaware General Corporation Law (including the statutory provisions, all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the foregoing). We hereby consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. Very truly yours, /s/ Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT EX-12.1 6 b323792_ex12-1.txt COMPUTATION OF RATIOS Exhibit 12.1 Toys "R" Us, Inc. Computation of Historical Ratios of Earnings to Fixed Charges (a) (In Thousands, Except Ratio Data)
Nine Months Fiscal Year Ended Ended ---------------------------------------------------------------------------------- November 2, February 1, February 2, February 3, January 29, January 30, January 31, 2002 2003 (b) 2002 2001 2000 1999 1998 -------------------------------------------------------------------------------------------------- Consolidated pretax income (loss) from continuing operations $ (78,115) $ 360,824 $ 90,886 $ 636,856 $ 439,350 $ (106,159) $ 771,851 Share of pretax income of less than 50%-owned companies (5,181) (29,597) (28,813) (30,925) -- -- -- Minority interest in Toysrus - Japan (pre initial public offering) -- -- -- 1,316 9,584 5,804 5,927 Minority interest in Toysrus.com (12,178) (14,049) (22,278) (53,337) -- -- -- Interest 87,264 113,873 120,955 130,037 93,304 103,921 89,576 Interest capitalized during period (1,168) (1,428) (4,225) (2,789) (1,745) (2,160) (4,330) Amortization of debt issuance expense 5,414 6,762 4,757 3,091 5,280 5,387 2,542 Interest portion of rental expense 94,790 129,935 127,238 141,863 170,625 162,825 150,638 -------------------------------------------------------------------------------------------------- Adjusted income from continuing operations $ 90,826 $ 566,320 $ 288,520 $ 826,112 $ 716,398 $ 169,618 $ 1,016,204 ================================================================================================== Fixed Charges: Interest $ 87,264 $ 113,873 $ 120,955 $ 130,037 $ 93,304 $ 103,921 $ 89,576 Amortization of debt issuance expense 5,414 6,762 4,757 3,091 5,280 5,387 2,542 Interest portion of rental expense 94,790 129,935 127,238 141,863 170,625 162,825 150,638 -------------------------------------------------------------------------------------------------- Total Fixed Charges $ 187,468 $ 250,570 $ 252,950 $ 274,991 $ 269,209 $ 272,133 $ 242,756 ================================================================================================== Ratio of Earnings to Fixed Charges -- (c) 2.26 1.14 3.00 2.66 -- (c) 4.19 ==================================================================================================
(a) For purpose of calculating the ratio of earnings to fixed charges, earnings were calculated by adding (i) earnings from continuing operations before minority interest and income taxes, (ii) interest expense, including the portion of rents representative of an interest factor, (iii) amortization of debt issue costs, and (iv) the amount of the company's undistributed (income) losses of less than 50%-owned companies. Fixed charges consist of interest expense, amortization of debt issue costs, and the portion of rents representative of an interest factor. (b) Preliminary, subject to audit of financial statements for the fiscal year ended February 1, 2003. (c) Earnings were insufficient to cover fixed charges for the nine months ended November 2, 2002 by $97 million and for the fiscal year ended January 30, 1999 by $103 million. Therefore the ratio is less than 1 to 1 and is not shown. EX-23.2 7 b323792_ex23-2.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and the related Prospectus of Toys "R" Us, Inc. for the registration of $800 million of Debt Securities and to the incorporation by reference therein of our report dated March 14, 2002, with respect to the consolidated financial statements of Toys "R" Us, Inc. and subsidiaries incorporated by reference in its Annual Report (Form 10-K) for the year ended February 2, 2002, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP New York, New York March 21, 2003 -----END PRIVACY-ENHANCED MESSAGE-----