-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gjyqOnTSSm8C+HPxbFrPAhk+ziF/Z7oBZbKJJtTreYg8ffsk5VAAO3dLpET7hk1H 16N7JoFoMcPKp317jJIlFA== 0000950109-94-002146.txt : 19941121 0000950109-94-002146.hdr.sgml : 19941118 ACCESSION NUMBER: 0000950109-94-002146 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19941117 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYS R US INC CENTRAL INDEX KEY: 0000051734 STANDARD INDUSTRIAL CLASSIFICATION: 5945 IRS NUMBER: 135159250 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-56303 FILM NUMBER: 94560852 BUSINESS ADDRESS: STREET 1: 461 FROM RD CITY: PARAMUS STATE: NJ ZIP: 07652 BUSINESS PHONE: 2012627800 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE STORES INC DATE OF NAME CHANGE: 19780525 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE DEPARTMENT STORES INC DATE OF NAME CHANGE: 19700702 POS AM 1 POS AM AMENDMENT #1 S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1994 REGISTRATION NO. 33-56303 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- TOYS "R" US, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 5945 13-5159250 (STATE OR OTHER (PRIMARY STANDARD (I.R.S. JURISDICTION OF INDUSTRIAL EMPLOYERIDENTIFICATION INCORPORATION OR CLASSIFICATION CODE NO.) ORGANIZATION) NUMBER) 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 SENIOR VICE PRESIDENT-FINANCE AND 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 OF ALL COMMUNICATIONS TO: ANDRE WEISS, ESQ. ALAN C. MYERS, ESQ. SCHULTE ROTH & ZABEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM 900 THIRD AVENUE 919 THIRD AVENUE NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022 (212) 758-0404 (212) 735-3000 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement and upon consummation of the Transaction as described herein. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with the General Instruction G, check the following box: [_] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PETRIE STORES CORPORATION 70 ENTERPRISE AVENUE SECAUCUS, NEW JERSEY 07094 ---------------- SUPPLEMENT TO THE PROXY STATEMENT DATED NOVEMBER 3, 1994 ---------------- 43,700,000 SHARES TOYS "R" US, INC. COMMON STOCK SUPPLEMENT TO THE PROSPECTUS DATED NOVEMBER 3, 1994 ---------------- The following information amends, supplements and, to the extent inconsistent, supersedes the corresponding information in the Proxy Statement/Prospectus dated November 3, 1994 (the "Proxy Statement/Prospectus") previously sent to Petrie shareholders in connection with the Annual Meeting of Petrie shareholders, to be held at the offices of Skadden, Arps, Slate, Meagher & Flom, 33rd Floor, 919 Third Avenue, New York, New York, on Tuesday, December 6, 1994, at 9:00 a.m., local time, and any adjournment or postponement thereof. This Supplement should be read in conjunction with the Proxy Statement/Prospectus. Capitalized terms used but not defined in this Supplement shall have the meanings ascribed to them in the Proxy Statement/Prospectus. The approximate date on which this Supplement and the accompanying form of proxy card will first be sent to Petrie shareholders is November 17, 1994. The date of this Supplement is November 17, 1994. PROXIES A blue proxy card has been enclosed with this Supplement and contains the same proposals as the white proxy card previously sent to Petrie shareholders with the Proxy Statement/Prospectus, except that on the blue proxy card Petrie shareholders are being asked to ratify the selection of Ernst & Young LLP as Petrie's independent auditors for the fiscal year ending January 28, 1995. See "Ratification of Selection of Petrie's Independent Auditors." Petrie shareholders should complete and return the blue proxy card accompanying this Supplement even if they have previously completed and returned the white proxy card. White proxy cards previously solicited by Petrie in connection with the Annual Meeting will remain valid unless revoked. The completion and return of a blue proxy card will constitute a revocation of a previously completed and returned white proxy card. Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with the Secretary of Petrie at or before the taking of the vote at the Annual Meeting, a written notice of revocation bearing a later date than the proxy, (ii) duly executing a later dated proxy relating to the same shares and delivering it to the Secretary of Petrie before the taking of the vote at the Annual Meeting or (iii) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy). Any written notice of revocation or subsequent proxy should be sent so as to be delivered to Petrie Stores Corporation, 70 Enterprise Avenue, Secaucus, New Jersey 07094, Attention: Secretary, or hand-delivered to the Secretary of Petrie, at or before the taking of the vote at the Annual Meeting. DEATH OF MILTON PETRIE On November 6, 1994, Milton Petrie, the founder and Chairman of the Board of Petrie since Petrie's organization in 1932, died. At the time of his death, Mr. Petrie was the record and beneficial owner of 28,111,274 shares of Petrie Common Stock (approximately 60% of the outstanding Petrie Common Stock) which have devolved to the Estate of Milton Petrie (the "Petrie Estate"). Pursuant to Milton Petrie's last will and testament, eight executors have been appointed: Joseph H. Flom, Hilda Kirschbaum Gerstein, Jerome A. Manning, Bernard Petrie, Carroll Petrie, Dorothy Fink Stern, Laurence A. Tisch and David Zack. Each of the executors disclaims beneficial ownership of the Petrie Common Stock held by the Petrie Estate. The executors of the Petrie Estate share equally the power to dispose of, and vote, Petrie Common Stock held by the Petrie Estate. In connection with the execution and delivery of the Toys Acquisition Agreement, Mr. Petrie, by act of his attorneys-in-fact, entered into the Toys Voting Agreement, and agreed to vote, or execute a consent with respect to such shares, in favor of each part of the Transaction and granted Toys "R" Us an irrevocable proxy to exercise all voting, consent and other rights to approve each part of the Transaction. In connection with the execution and delivery of the Retail Operations Stock Purchase Agreement, Mr. Petrie, by act of his attorneys-in-fact, also entered into the WP Investors Voting Agreement, and agreed to vote, or exercise a consent with respect to, his shares in favor of the Retail Operations Stock Purchase Agreement. Both the Toys Voting Agreement and the WP Voting Agreement provide that the irrevocable proxies granted thereby shall survive the death of Milton Petrie, and accordingly are in full force and effect. CERTAIN FEDERAL INCOME TAX CONSEQUENCES On November 15, 1994, Petrie and Toys "R" Us received the IRS Ruling. The IRS Ruling is in all material respects in the form described in the Proxy Statement/Prospectus, and allows Petrie to consummate the Exchange without recognizing any gain on the disposition of the Toys Shares. It also allows Petrie to distribute to Petrie shareholders the shares of Toys Common Stock received in the Exchange without Petrie shareholders recognizing income as a result of such distribution. In addition, Petrie shareholders will not recognize any income with respect to any shares of Toys Common Stock placed into the Liquidating Trust. The IRS Ruling is conditioned on the Liquidating Trust being classified as a liquidating trust for federal income tax purposes. Skadden, Arps, Slate, Meagher & Flom, counsel to Petrie, has rendered an opinion that, as long as the Liquidating Trust is formed and operated in accordance with the Liquidating Trust Agreement and as described in the Proxy Statement/Prospectus, it will be so classified. A copy of the IRS Ruling and of the opinion of Skadden, Arps, Slate, Meagher & Flom have each been filed as an exhibit to the Registration Statement of which the Proxy Statement/Prospectus forms a part. For information as to how to obtain a copy of the IRS Ruling and/or the opinion of Skadden, Arps, Slate, Meagher & Flom, see "AVAILABLE INFORMATION" in the Proxy Statement/Prospectus. CONVERTIBLE DEBENTURES On November 10, 1994, Petrie called for redemption on December 12, 1994 all of its Convertible Debentures at a redemption price of $1,008 per $1,000 principal amount of the Convertible Debentures, together with accrued and unpaid interest thereon of $39.333 per $1,000 principal amount of Convertible Debentures, from June 15, 1994 to, but not including, December 12, 1994. The holders of the Convertible Debentures have the right to convert the Convertible Debentures into approximately 45.1977 shares of Petrie Common Stock for each $1,000 principal amount of Convertible Debentures and such right expires at 3:00 p.m. New York time on December 12, 1994. If all of the outstanding Convertible Debentures were redeemed on December 12, 1994, the aggregate amount necessary for redemption would be $129,414,786.55 (including $123,566,000 for principal, $988,528 for premium and $4,860,258.55 for accrued interest from June 15, 1994 to, but not including, December 12, 1994). If all of the outstanding Convertible Debentures were converted into Petrie Common Stock, approximately 5,584,903 additional shares of Petrie Common Stock would be issued upon such conversion. 2 THE TOYS ACQUISITION AGREEMENT On November 15, 1994, Petrie waived its right to terminate the Toys Acquisition Agreement in accordance with the provision thereof which provides that Petrie may terminate the Toys Acquisition Agreement if it reasonably determines that its and its subsidiaries' contingent liabilities have not been reduced below $200 million. As of November 15, 1994, Petrie believes that its and its subsidiaries' contingent liabilities have been reduced to approximately $225 million. NOMINEES FOR ELECTION AS DIRECTORS Upon the consummation of the Retail Operations Stock Purchase, it is presently anticipated that Jay Galin, Allan Laufgraben, Peter A. Left and Daniel G. Maresca will resign from the Petrie Board of Directors. RATIFICATION OF SELECTION OF PETRIE'S INDEPENDENT AUDITORS David Zack, a retired partner in David Berdon & Co. ("David Berdon"), Petrie's independent auditors, has been appointed an executor of the Petrie Estate. As a result, David Berdon may no longer be deemed independent and, on November 14, 1994, the Audit Committee and Petrie's Board of Directors approved the appointment of Ernst & Young LLP as Petrie's independent auditors for the fiscal year ending January 28, 1995, to replace David Berdon. David Berdon's reports on Petrie's financial statements for the two most recent fiscal years did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During Petrie's two most recent fiscal years and the six months ended July 30, 1994, Petrie did not have any disagreements with David Berdon on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of David Berdon, would have caused David Berdon to make reference thereto in connection with its reports. During the two most recent fiscal years and the six months ended July 30, 1994, Petrie has not consulted with Ernst & Young LLP regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on Petrie's financial statements or with respect to any matter that was either the subject of a disagreement or a reportable event. Neither has Ernst & Young LLP provided Petrie with either a written report or oral advice that Ernst & Young LLP concluded was an important factor considered by Petrie in reaching a decision as to an accounting, auditing or financial reporting issue. At the Annual Meeting, Petrie's shareholders will be asked to ratify the selection of Ernst & Young LLP as Petrie's independent auditors for the fiscal year ending January 28, 1995. Ernst & Young LLP has advised WP Investors in connection with the Retail Operations Stock Purchase and serves as Toys "R" Us' independent auditors. THE PETRIE BOARD OF DIRECTORS RECOMMENDS THAT PETRIE SHAREHOLDERS VOTE FOR RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS PETRIE'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 28, 1995. GENERAL Requests for additional copies of this Supplement and the Proxy Statement/Prospectus should be directed to Petrie's Transfer Agent, American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, telephone: (718) 921-8200. 3 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits 2.1* Stock Purchase Agreement by and between WP Investors, Inc. and Petrie Stores Corporation, dated as of August 23, 1994, as amended on November 3, 1994 (reference to Annex A to the Proxy Statement/Prospectus). 2.2* Acquisition Agreement by and between Registrant and Petrie Stores Corporation, dated as of April 20, 1994, as amended on May 10, 1994 (reference to Annex B to the Proxy Statement/Prospectus). 2.3* Form of Plan of Liquidation and Dissolution of Petrie Stores Cor- poration (reference to Annex C to the Proxy Statement/Prospectus). 2.4* Form of Liquidating Trust Agreement (reference to Annex D to the Proxy Statement/Prospectus). 2.5* Form of Escrow Agreement (reference to Annex E to the Proxy Statement/Prospectus). 4.1 Form of Indenture, dated as of January 1, 1987 between Registrant and United Jersey Bank as trustee, pursuant to which securities in one or more series in an unlimited amount may be issued by the Registrant (incorporated herein by reference to Exhibit 4(a) to Registrant's Registration Statement No. 33-11461). 4.2 Form of Registrant's 8 1/4 percent Sinking Fund Debentures due 2017 (incorporated herein by reference to Exhibit 4(b) to Regis- tration Statement No. 33-11461). 4.3 Form of Indenture between the Registrant and United Jersey Bank, as Trustee, pursuant to which one or more series of debt securi- ties up to $300,000,000 in principal amount may be issued by the Registrant (incorporated herein by reference to Exhibit 4 to Reg- istrant's Registration Statement No. 33-42237). 4.4 Form of Registrant's 8 3/4 percent Debentures due 2021 (incorpo- rated herein by reference to Exhibit 4 to Registrant's Report on Form 8-K dated August 29, 1991). 4.5 Substantially all other long-term debt of the Registrant (which other debt does not exceed on an aggregate basis 10 percent of the total assets of the Registrant and its subsidiaries on a consoli- dated basis) is evidenced by, among other things, (a) industrial revenue bonds issued by industrial development authorities and guaranteed by the Registrant, (b) mortgages held by third parties on real estate owned by the Registrant, (c) stepped coupon guaran- teed bonds held by a third party and guaranteed by the Registrant and (d) an agreement under which the Registrant guaranteed certain yen-denominated loans made by a third party to a subsidiary of the Registrant. The Registrant will file with the Commission copies of the constituent documents relating to such debt upon request of the Commission. 5.1* Opinion of Schulte Roth & Zabel. 5.2** Opinion of Skadden, Arps, Slate, Meagher & Flom. 23.1* Consent of Schulte Roth & Zabel (included in Exhibit 5.1). 23.2* Consent of Ernst & Young LLP. 23.3* Consent of Deloitte & Touche LLP. 23.4* Consent of David Berdon & Co. 23.5* Consent of Bear, Stearns & Co. Inc.
II-1 23.6** Consent of Skadden, Arps, Slate, Meagher & Flom (included in Ex- hibit 5.2). 24.1* Power of Attorney (reference to signature pages of this Registra- tion Statement). 99.1** Form of Proxy to be used in soliciting holders of Petrie Common Stock (reference to Annex A to the Supplement to the Proxy Statement/Prospectus). 99.2* Opinion of Bear, Stearns & Co. Inc. (reference to Annex F to the Proxy Statement/Prospectus). 99.3** Private Letter Ruling of the Internal Revenue Service.
- -------- * Previously filed ** Filed herewith (b) Financial Statement Schedules Financial Statement Schedules have been omitted because they are not applicable or not required or because the information is included elsewhere in the financial statements or the notes thereto. II-2 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THERETO DULY AUTHORIZED, IN THE CITY OF PARAMUS, STATE OF NEW JERSEY ON NOVEMBER 17, 1994. Toys "R" Us, Inc. (Registrant) /s/ Louis Lipschitz By: _________________________________ LOUIS LIPSCHITZ SENIOR VICE PRESIDENT--FINANCE AND CHIEF FINANCIAL OFFICER PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST- EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED. SIGNATURES TITLE DATE ---------- ----- ---- * Chairman of the November 17, 1994 - ------------------------------------- Board CHARLES LAZARUS * Vice Chairman and November 17, 1994 - ------------------------------------- Chief Executive MICHAEL GOLDSTEIN Officer (Principal Executive Officer) * President and Chief November 17, 1994 - ------------------------------------- Operating Officer ROBERT C. NAKASONE /s/ Louis Lipschitz Senior Vice November 17, 1994 - ------------------------------------- President--Finance LOUIS LIPSCHITZ and Chief Financial Officer (Principal Financial and Accounting Officer) * Director November 17, 1994 - ------------------------------------- ROBERT A. BERNHARD II-3 SIGNATURES TITLE DATE ---------- ----- ---- * Director November 17, 1994 - ------------------------------------- MILTON S. GOULD * Director November 17, 1994 - ------------------------------------- SHIRLEY STRUM KENNY * Director November 17, 1994 - ------------------------------------- REUBEN MARK * Director November 17, 1994 - ------------------------------------- HOWARD W. MOORE * Director November 17, 1994 - ------------------------------------- NORMAN M. SCHNEIDER * Director November 17, 1994 - ------------------------------------- HAROLD M. WIT /s/ Louis Lipschitz *By:_________________________________ LOUIS LIPSCHITZ ATTORNEY-IN-FACT Date: November 17, 1994 II-4 Annex A Petrie Stores Corporation 70 Enterprise Avenue Secaucus, New Jersey 07094 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PROXY FOR THE 1994 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 6, 1994 The undersigned shareholder of Petrie Stores Corporation ("Petrie") hereby appoints Joseph H. Flom, Alan C. Greenberg and Raymond S. Troubh and each of them, the lawful attorneys and proxies of the undersigned, each with several powers of substitution, to vote all the shares of Common Stock of Petrie Stores Corporation held of record by the undersigned on October 31, 1994 at the Annual Meeting of Shareholders to be held at the offices of Skadden, Arps, Slate, Meagher & Flom, 33rd Floor, 919 Third Avenue, New York, New York, on Tuesday, December 6, 1994, at 9:00 a.m., local time, and at any and all adjournments or postponements thereof (the "Annual Meeting"), with all the powers the undersigned would possess if personally present, upon all matters set forth in the Proxy Statement/Prospectus, dated November 3, 1994, and the Supplement thereto, dated November 17, 1994. Shares represented by all properly executed proxies will be voted in accordance with instructions appearing on the proxy and in the discretion of the proxy holders as to any other matter that may properly come before the Annual Meeting of Shareholders. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR the nominees set forth in ITEM 1, FOR ITEM 2, FOR ITEM 3, FOR ITEM 4, FOR ITEM 5 AND AT THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF SHAREHOLDERS. (TO BE SIGNED ON REVERSE SIDE) [X] Please mark your votes as in this example. FOR all nominees WITHHOLD AUTHORITY listed to right to vote for all (except as marked to nominees the contrary below) listed to right 1. ELECTION OF [_] [_] DIRECTORS Nominees: Joseph H. Flom Jay Galin Hilda Kirschbaum Gerstein Alan C. Greenberg Allan Laufgraben Peter A. Left Daniel G. Maresca Carroll Petrie Jean Roberts Dorothy Fink Stern Laurence A. Tisch Raymond S. Troubh INSTRUCTION: To withhold authority to vote for any individual nominee(s), strike a line through such nominee's name.) - -------------------------------------------------------------------------------- FOR AGAINST ABSTAIN 2. Approval of the disposition of Petrie's retail operations. [_] [_] [_] 3. Approval of the exchange with Toys "R" Us, Inc. ("Toys "R" Us") of all of the shares of Toys "R" Us common stock, par value $.10 per share ("Toys Common Stock"), held by certain subsidiaries of Petrie (currently, approximately 39.9 million shares) and cash (presently estimated to be $180 million) [_] [_] [_] for a number of shares of Toys Common Stock equal to (a) the number of shares of Toys Common Stock held by Petrie, less approximately 3.3 million shares of Toys Common Stock, plus (b) such amount cash divided by the market value of a share of Toys Common Stock. 4. Approval of the establishment of a liquidating trust and the complete [_] [_] [_] liquidation and dissolution of Petrie. 5. Approval and ratification of the appoint- ment of Ernst & Young LLP as the independent auditors of Petrie for the [_] [_] [_] fiscal year ending January 28, 1995. PLEASE DATE, SIGN, AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE. DATE - -------------------------------- --------------------- Signature DATE - -------------------------------- --------------------- Signature if held jointly IMPORTANT: Please sign as name(s) appear on this proxy, and date this proxy. If a joint account, each joint owner must sign. If signing for a corporation or partnership or as agent, attorney or fiduciary, indicate the capacity in which you are signing. EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE NO. ------- ----------- -------- 2.1* Stock Purchase Agreement by and between WP Investors, Inc. and Petrie Stores Corporation, dated as of August 23, 1994, as amended on November 3, 1994 (reference to Annex A to the Proxy Statement/Prospectus). 2.2* Acquisition Agreement by and between Registrant and Petrie Stores Corporation, dated as of April 20, 1994, as amended on May 10, 1994 (reference to Annex B to the Proxy Statement/Prospectus). 2.3* Form of Plan of Liquidation and Dissolution of Petrie Stores Corporation (reference to Annex C to the Proxy Statement/Prospectus). 2.4* Form of Liquidating Trust Agreement (reference to Annex D to the Proxy Statement/Prospectus). 2.5* Form of Escrow Agreement (reference to Annex E to the Proxy Statement/Prospectus). 4.1 Form of Indenture, dated as of January 1, 1987 between Reg- istrant and United Jersey Bank as trustee, pursuant to which securities in one or more series in an unlimited amount may be issued by the Registrant (incorporated herein by reference to Exhibit 4(a) to Registrant's Registration Statement No. 33-11461). 4.2 Form of Registrant's 8 1/4 percent Sinking Fund Debentures due 2017 (incorporated herein by reference to Exhibit 4(b) to Registration Statement No. 33-11461). 4.3 Form of Indenture between the Registrant and United Jersey Bank, as Trustee, pursuant to which one or more series of debt securities up to $300,000,000 in principal amount may be issued by the Registrant (incorporated herein by refer- ence to Exhibit 4 to Registrant's Registration Statement No. 33-42237). 4.4 Form of Registrant's 8 3/4 percent Debentures due 2021 (in- corporated herein by reference to Exhibit 4 to Registrant's Report on Form 8-K dated August 29, 1991). 4.5 Substantially all other long-term debt of the Registrant (which other debt does not exceed on an aggregate basis 10 percent of the total assets of the Registrant and its sub- sidiaries on a consolidated basis) is evidenced by, among other things, (a) industrial revenue bonds issued by indus- trial development authorities and guaranteed by the Regis- trant, (b) mortgages held by third parties on real estate owned by the Registrant, (c) stepped coupon guaranteed bonds held by a third party and guaranteed by the Regis- trant and (d) an agreement under which the Registrant guar- anteed certain yen-denominated loans made by a third party to a subsidiary of the Registrant. The Registrant will file with the Commission copies of the constituent documents re- lating to such debt upon request of the Commission. 5.1* Opinion of Schulte Roth & Zabel. 5.2** Opinion of Skadden, Arps, Slate, Meagher & Flom. 23.1* Consent of Schulte Roth & Zabel (included in Exhibit 5.1). 23.2* Consent of Ernst & Young LLP. 23.3* Consent of Deloitte & Touche LLP. 23.4* Consent of David Berdon & Co. 23.5* Consent of Bear, Stearns & Co. Inc. 23.6** Consent of Skadden, Arps, Slate, Meagher & Flom (included in Exhibit 5.2). 24.1* Power of Attorney (reference to signature pages of this Registration Statement). 99.1** Form of Proxy to be used in soliciting holders of Petrie Common Stock (reference to Annex A to the Supplement to the Proxy Statement/Prospectus). 99.2* Opinion of Bear, Stearns & Co. Inc. (reference to Annex F to the Proxy Statement/Prospectus). 99.3** Private Letter Ruling of the Internal Revenue Service.
- -------- * Previously filed ** Filed herewith EX-5.2 2 SKADDEN ARPS LETTER EXHIBIT 5.2 SKADDEN, ARPS, SLATE, MEAGHER & FLOM 919 THIRD AVENUE NEW YORK, NY 10022 November 16, 1994 Petrie Stores Corporation 70 Enterprise Avenue Secaucus, New Jersey 07094 Re: Acquisition by Toys "R" Us, Inc. ("Toys") of Substantially all of the Assets of Petrie Stores Corporation ("Petrie") Dear Sirs: We have acted as counsel to Petrie in connection with transactions to be consummated pursuant to the acquisition agreement between Petrie and Toys dated April 20, 1994 (the "Agreement") and described in the Joint Proxy and Registration Statement of Petrie and Toys filed with the Securities and Exchange Commission on November 3, 1994, as amended or supplemented, as the case may be (the "Proxy"). In connection therewith you have asked our opinion whether for federal income tax purposes, (a) the Liquidating Trust, as described and defined in the Proxy, qualifies as a liquidating trust under Treasury Regulation Section 301.7701-4(d), and (b) the beneficiaries of the Liquidating Trust will be treated as the owners of their representative shares of the Liquidating Trust pursuant to Sections 671 through 679 of the Internal Revenue Code of 1986, as amended (the "Code")./1/ The Liquidating Trust will be established under the law of the State of New York pursuant to an agreement (the "Liquidating Trust Agreement") substantially in the form incorporated as an exhibit to the Proxy. In connection with the transactions described in the Proxy, we have assisted in the preparation of the Agreement, the Liquidating Trust Agreement and related escrow agreements and the Proxy. In connection with this opinion, we have also examined originals or copies, certified or otherwise identified to our satisfaction, of such other documents as we have deemed necessary or appropriate for the purposes of the opinion set forth below. In our examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such copies. We have not made an independent investigation of the facts set forth in any of the Agreement, the Liquidating Trust Agreement or related escrow agreements, the Proxy or such other documents that we have examined in preparing the Agreement, the Liquidating Trust Agreement and related escrow agreements and the Proxy. We have consequently assumed that the information presented in such documents or otherwise furnished to us accurately and completely describes all material facts relevant to the transactions and in particular the formation and operation of the Liquidating Trust. No facts have come to our attention, however, that would prompt us to question the accuracy or completeness of such facts or documents. The opinion set forth below is also based on the correctness of the following assumptions: (i) the absence of any change in the applicable laws of the State of New York, the Code, the Treasury Regulations and the interpretations of the Code and Treasury Regulations by the courts and the Internal Revenue Service with respect to the issues addressed herein and (ii) the Liquidating Trust will be formed and operated in accordance with the Liquidating Trust Agreement and as described in the Proxy. It should be noted that such laws, Code, - -------- /1/ All Section references are to the Code and all Treasury Regulation Section references are to the treasury regulations promulgated thereunder. Treasury Regulations and interpretations are subject to change at any time and, in some circumstances, such change may have retroactive effect. A material change in any of the foregoing bases for our opinion which occurs after the date hereof could affect our conclusions herein. Based upon the foregoing assumptions, it is our opinion that, under present law, (a) the Liquidating Trust will qualify as a liquidating trust under Treasury Regulation Section 301.7701-4(d), and (b) the beneficiaries of the Liquidating Trust will be treated as the owners of their representative shares of the Liquidating Trust pursuant to Sections 671 through 679 of the Code. Except as expressly set forth above, we express no other opinion with respect to the tax consequences to any party under federal, state, local, or foreign law of the transactions described in the Proxy or any related transactions. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement on Form S-4 of which the Proxy forms a part and to the use of our firm's name in the Proxy under the caption "Certain Federal Income Tax Consequences". In giving such consent, we do not hereby admit that we come into the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder. Very truly yours, /s/ Skadden, Arps, Slate, Meagher & Flom EX-99.3 3 IRS DOCUMENT EXHIBIT 99.3 INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY Washington, DC 20224 Index Number: 0332.02-00; 0368.03-00; 0483.00-00 Person to Contact: Barnet Phillips, IV Steven M. Flanagan Skadden, Arps, Slate, Meagher & Flom Telephone Number: 919 Third Avenue (202) 622-7790 New York, New York 10022 Refer Reply to: CC:DOM:CORP:3 TR-31-01201-94 Date: Nov. 15, 1994 Target = Petrie Stores Corporation EIN: 36-2137966 Acquiring = Toys "R" Us, Inc. EIN: 13-5159250 Buyer = WP Investors, Inc. EIN: 13-3781428 X = The Miller-Wohl Company, Inc. EIN: 13-1047880 S1 = Mall 242 Corporation EIN: 36-2477283 S2 = 6322 Halsted Corporation EIN: 36-2136666 S3 = Beloit Plaza Apparel Corp. EIN: 36-2554490 S4 = Carlsbad Apparel Corp. EIN: 36-2657396 S5 = Cherry Hill Marianne Corp. EIN: 36-2472338 S6 = Crossroads Apparel Corp. EIN: 36-2567389 S7 = Dartmouth Plaza Apparel Corp. EIN: 36-2651691 S8 = Glen Burnie Apparel Corp. EIN: 36-2651701 S9 = Marianne Ladies Apparel Corp. EIN: 36-2651778 S10 = Marianne Newark Corporation EIN: 36-2536161 S11 = Marianne Wilmington Corp. EIN: 36-2711965 S12 = Mari-Ann St. Clair Corp. EIN: 36-2135184 S13 = McKinley Apparel, Inc. EIN: 36-2511248
S14 = Myrtle Beach Apparel Corp. EIN: 22-2102298 S15 = M.J. Petrie, Inc. EIN: 36-2135773 S16 = M.J. Petrie Highland Park Corp. EIN: 36-2136667 S17 = M.J. Todd, Inc. EIN: 36-2139863 S18 = Petrie's Valley Fair Corporation EIN: 36-2657474 S19 = Red Robin 1900 West 25th St. Corp. EIN: 36-2201808 S20 = Staten Island Apparel Corporation EIN: 36-2727309 S21 = Stuarts Apparel, Inc. EIN: 36-2554157 S22 = Stuarts Clarksville Apparel Corp. EIN: 36-2664562 S23 = Stuarts Clearview Apparel Corp. EIN: 36-2665178 S24 = Stuarts High Fashion, Inc. EIN: 36-2130774 S25 = Stuarts Wichita Apparel Corp. EIN: 22-2053997 S26 = Trumbull Marianne Corp. EIN: 36-2536159 SS1 = Bashford Apparel Corp. EIN: 36-2718943 A = The Estate of Milton Petrie - B = Milton Petrie - State A = New York State B = Delaware Business A = the retail women's clothing business Business B = the retail toy business Business C = the retail children's clothing business Date x = January 10, 1994 - Date y = April 19, 1994 - a = 60 - b = 14 - c = 85 - d = 15 - e = 2 - f = 1 billion - g = 115 million -
2 Dear Mr. Phillips: This letter responds to your request dated May 6, 1994, for rulings on the federal income tax consequences of a proposed transaction. You submitted additional information in letters dated June 20, September 9, October 14, October 21, October 31, November 9, November 10, and November 14, 1994. The information submitted for consideration is summarized below. Target is a publicly held State A corporation, and the common parent of a consolidated group. Target engages in Business A directly, and indirectly through wholly owned subsidiaries. Target's only authorized and outstanding class of stock is common stock. A owns approximately a percent of the outstanding Target common stock. No other shareholder of Target owns more than 5 percent of Target's stock. X and S1 through S26 are domestic wholly owned subsidiaries of Target. SS1 is a domestic wholly owned subsidiary of S1. X, SS1, and each of S1 through S26 (except for S2 and S12) are engaged in Business A. Acquiring, a publicly held State B Corporation, is also the common parent of a consolidated group. Acquiring is engaged in both Business B and Business C. SS1 and S2 through S26 each own shares of Acquiring voting common stock, which is Acquiring's only authorized and outstanding class of stock. Combined, these corporations own approximately b percent of Acquiring's stock. No other shareholder of Acquiring owns more than 5 percent of Acquiring's stock. The Acquiring stock held by SS1 and S2 through S26 represents approximately c percent of the total net value of the Target group. The Business A assets of the Target group represent approximately d percent of the Target group's total net value. The Business A assets directly held by Target represent only approximately e percent of the fair market value of the Business A assets held by the Target group. Target has a general business practice of making substantially all payments on behalf of its subsidiaries for inventory purchases, as well as for other expenses, such as payroll, taxes, and general administration. In consideration of these purchases and services, Target generally charges its subsidiaries the cost of the purchased inventory and both an overhead and a service fee. As Target's domestic subsidiaries sell inventory, the cash is transferred to Target. All of the service charges and payments made by Target on behalf of its subsidiaries and all distributions made by the subsidiaries to Target are recorded on the books of Target as intercompany debits and credits (the "Intercompany Accounts"). To the extent that these debits and credits offset, the amounts are treated as satisfied. Any outstanding Intercompany Accounts are carried forward. Acquiring publicly announced on Date x that its Board of Directors authorized the repurchase of up to $f of its stock through open market purchases (the "Buy Back"). Pursuant to the Buy Back, (a) any redemptions will be undertaken for a corporate business purpose, (b) the stock to be purchased will be widely held, (c) the stock purchases will be made in the open market, and to the best of Acquiring's knowledge, will not be made from (i) directors or officers of Acquiring, or (ii) any shareholder owning one percent or more of the outstanding stock of Acquiring, and (d) there is no plan or intention that the aggregate amount of Acquiring stock purchased in the Buy Back will equal or exceed 20 percent of the outstanding stock of Acquiring. Purchases pursuant to the Buy Back are expected to extend over a period of several years. For what have been represented as valid business purposes, the taxpayers propose the following transactions: (i) SS1 will adopt a plan of liquidation pursuant to which it will merge with and into S1 under applicable state law. All of the stock of SS1 will be redeemed and cancelled and SS1 will be dissolved. (ii) Target will transfer the Business A assets and liabilities it holds directly and the stock of all of its subsidiaries (other than the stock of X and S1 through S26) to X. (iii) Each of S1 through S26 will enter into an instrument of assignment with X, whereby each of S1 through S26 will transfer to X (a) all of its Business A assets and liabilities (other than certain 3 liabilities described in step (iv)), and (b) the stock of any controlled subsidiaries. X will have the right under each of the instruments to direct S1 through S26 to transfer their Business A assets and liabilities to any subsidiary controlled by X. At the time of the transfers to X as described in steps (ii) and (iii), Target, pursuant to a definitive stock purchase agreement (the "Stock Purchase Agreement"), will be under a binding legal obligation to sell all of the Stock of X to Buyer (an unrelated domestic corporation) and its designee. (iv) Each of S1 through S26 will adopt a plan of liquidation pursuant to which each of S1 through S26 will merge with and into Target under applicable state law. All of the stock of each of S1 through S26 will be redeemed and cancelled and each of S1 through S26 will be dissolved. In the event that a specific landlord of any of S1 through S26 does not give consent to the direct assignment of a leasehold to X in the transaction described in step (iii), such leasehold will be transferred to Target. Target will distribute any such leaseholds to the Trust described in step (vii), which will enter into short-term licensing agreements with X or one or more of its subsidiaries for a term of no longer than the underlying lease (without the exercise of any option for renewal). (v) Pursuant to the Stock Purchase Agreement, Target will sell the stock of X to Buyer and its designee for cash. (vi) Pursuant to a plan of reorganization entered into between Target and Acquiring, Target will transfer all of its assets (including Acquiring voting common stock), except for any cash retained in the Escrow and leaseholds of nonconsenting landlords distributed to the Trust, to Acquiring in exchange for newly issued Acquiring voting common stock. The amount of Acquiring common stock Target will be entitled to receive in exchange for its assets will be equal to the value of the assets transferred by Target, as determined by reference to the average trading price per share of Acquiring common stock (a) in the case of the Acquiring stock transferred by Target, over the 10 trading days prior to Date y, - minus $g, and (b) in the case of cash transferred by Target, over the 10 - trading days prior to the second trading day prior to the closing of the proposed transaction. This step is hereinafter referred to as the "Transfer." (vii) Prior to the liquidation of Target described in step (viii), both an escrow (the "Escrow") and a liquidating trust (the "Trust") will be established to secure certain of Target's remaining contingent liabilities. Target will transfer shares of Acquiring stock received in the Transfer and any remaining cash to the Escrow which will then be placed in the Trust. The escrowed property will be released and distributed to the Trust to the extent it is not needed to secure contingent liabilities of Target. The Escrow will terminate within 5 years from the date of the final liquidating distribution by Target. If Target still has contingent liabilities at the time of the Escrow's termination, the remaining escrowed property will be distributed to the Trust. Target will also transfer shares of Acquiring stock received in the Transfer to an additional escrow (the "Second Escrow," which together with the Escrow are hereinafter referred to as the "Escrows") to adequately provide for the payment of certain other contingent liabilities of Target, including contingent pension obligations of Business A. The Second Escrow will also be placed in the Trust. It is expected that the Second Escrow will have a duration of no longer than 6 years beginning with the first full plan year ("Plan Year") following the date of the final liquidating distribution by Target. Upon its termination, the remaining escrowed property held by the Second Escrow will be distributed to the Trust. If Target still has contingent liabilities at the time of the termination of the Escrows, the Trust may continue in existence until such liabilities are satisfied or extinguished. The assets of the Trust will be distributed pro rata to the Target shareholders (the beneficiaries of the Trust). (viii) Target will liquidate and distribute pro rata to its shareholders all the Acquiring stock received in the Transfer (other than any Acquiring stock transferred to the Escrows) in complete liquidation. The taxpayers have made the following representations with respect to the proposed transaction described in step (i): 4 (a) S1, on the date of adoption of the plan of liquidation, and at all times until the final liquidating distribution is completed, will be the owner of 100 percent of the single outstanding class of stock of SS1. (b) No shares of stock of SS1 have been redeemed during the 3 years preceding the adoption of the plan of complete liquidation of SS1. (c) All distributions from SS1 to S1 pursuant to the plan of complete liquidation will be made within a single taxable year of SS1. (d) As soon as the first liquidating distribution has been made, SS1 will cease to be a going concern and its activities will be limited to winding up its affairs, paying its debts, and distributing its remaining assets to its shareholder. (e) SS1 will not retain any assets following the final liquidating distribution. (f) SS1 will not have acquired assets in a nontaxable transaction at any time, except for acquisitions occurring more than 3 years prior to the date of adoption of the plan of liquidation. (g) No assets of SS1 have been, or will be, disposed of by either SS1 or S1 except (i) for dispositions in the ordinary course of business, (ii) dispositions occurring more than 3 years prior to adoption of the plan of liquidation, and (iii) dispositions pursuant to the transactions described in steps (iii) and (iv). (h) Taking into account the Stock Purchase Agreement, the liquidation of SS1 will not have been preceded or followed by the reincorporation in, or transfer or sale to, a recipient corporation ("Recipient") of any of the businesses or assets of SS1, if persons holding directly or indirectly, more than 20 percent in value of the stock of SS1 also hold, directly or indirectly, more than 20 percent in value of the stock in Recipient. For purposes of this representation, ownership will be determined by the application of the constructive ownership rules of (S) 318(a) of the Internal Revenue Code as modified by (S) 304(c)(3). (i) Prior to the adoption of the plan of liquidation, no assets of SS1 will have been distributed in kind, transferred, or sold to S1, except for (i) transactions occurring in the normal course of business, and (ii) transactions occurring more than 3 years prior to the adoption of the liquidation plan. (j) SS1 will report all earned income represented by assets that will be distributed to its shareholder such as receivables being reported on a cash basis, unfinished construction contracts, commissions due, etc. (k) The fair market value of the assets of SS1 will exceed its liabilities (including, for purposes of this calculation, the Intercompany Accounts) both on the date of the adoption of the plan of complete liquidation and immediately prior to the time the first liquidating distribution is made. (l) There is no intercorporate debt existing between SS1 and S1, and none has been cancelled, forgiven, or discounted, except for transactions that occurred more than 3 years prior to the date of adoption of the liquidation plan. (m) S1 is not an organization that is exempt from federal income tax under (S) 501 or any other provision of the Code. (n) All other transactions undertaken contemporaneously with, in anticipation of, in conjunction with, or in any way related to, the proposed liquidation of SS1 have been fully disclosed. The taxpayers have made the following representations with respect to the proposed transaction described in step (iv): (o) Target, on the date of adoption of each plan of liquidation, and at all times until each final liquidating distribution is completed, will be the owner of 100 percent of the single outstanding class of stock of each of S1 through S26. (p) No shares of stock of any of S1 through S26 have been redeemed during the 3 years preceding the adoption of the plan of complete liquidation of such subsidiary. 5 (q) All distributions from each of S1 through S26 to Target pursuant to the plan of complete liquidation will be made within a single taxable year of such subsidiary. (r) As soon as the first liquidating distribution has been made, each of S1 through S26 will cease to be a going concern and its activities will be limited to winding up its affairs, paying its debts, and distributing its remaining assets to its shareholder. (s) None of S1 through S26 will retain any assets following its final liquidating distribution. (t) None of S1 through S26 will have acquired assets in a nontaxable transaction at any time, except for (i) acquisitions occurring more than 3 years prior to the date of adoption of its plan of liquidation, and (ii) assets acquired by S1 pursuant to the transaction described in step (i). (u) No assets of any of S1 through S26 have been, or will be, disposed of either by such subsidiary or by Target except (i) for dispositions in the ordinary course of business, (ii) dispositions occurring more than 3 years prior to adoption of the plan of liquidation, and (iii) dispositions pursuant to the transactions described in steps (iii) and (vi). (v) Taking into account the Stock Purchase Agreement, the liquidation of S1 through S26 will not be preceded or followed by the reincorporation in, or transfer or sale to, a recipient corporation ("Recipient") of any of the businesses or assets of any of such subsidiaries, if persons holding, directly or indirectly, more than 20 percent in value of the stock of such subsidiary also hold, directly or indirectly, more than 20 percent in value of the stock in Recipient. For purposes of this representation, ownership will be determined by the application of the constructive ownership rules of (S) 318(a) as modified by (S) 304(c)(3). (w) Prior to the adoption of its plan of liquidation, no assets of any of S1 through S26 will have been distributed in kind, transferred, or sold to Target, except for (i) transactions occurring in the normal course of business, and (ii) transactions occurring more than 3 years prior to the adoption of the liquidation plan. (x) Each of S1 through S26 will report all earned income represented by assets that will be distributed to its shareholder such as receivables being reported on a cash basis, unfinished construction contracts, commissions due, etc. (y) The fair market value of the assets of each of S1 through S26 will exceed its liabilities (including, for purposes of this calculation, the Intercompany Accounts) both on the date of the adoption of the plan of complete liquidation and immediately prior to the time the first liquidating distribution is made. (z) Except as otherwise described with respect to the Intercompany Accounts, there is no intercorporate debt existing between any of S1 through S26 and Target. No such Intercompany Accounts have been cancelled, forgiven, or discounted, except for transactions that occurred more than 3 years prior to the date of adoption of the liquidation plan. The Intercompany Accounts will be eliminated in the proposed transaction. (aa) Target is not an organization that is exempt from federal income tax under (S) 501 or any other provision of the Code. (bb) All other transactions undertaken contemporaneously with, in anticipation of, in conjunction with, or in any way related to, the proposed liquidations of S1 through S26 have been fully disclosed. The taxpayers have made the following representations with respect to the transactions described in steps (vi), (vii), and (viii): (cc) The fair market value of the Acquiring stock received by each Target shareholder will be approximately equal to the fair market value of the Target stock surrendered in the exchange. (dd) There is no plan or intention by A, and to the best of the knowledge of management of Target, there is no plan or intention on the part of the remaining shareholders of Target, to sell, exchange, or otherwise dispose of a number of shares of Acquiring stock received in the transaction that would reduce 6 the Target shareholders' ownership of Acquiring stock to a number of shares having a value, as of the date of the Transfer, of less than 50 percent of the value of all the formerly outstanding Target stock as of the same date. For purposes of this representation, distributions by A to the - beneficiaries of B pursuant to the terms of B's will shall not be - - considered dispositions of Acquiring stock. Further, shares of Target stock exchanged for cash or other property, surrendered by dissenters, or exchanged for cash in lieu of fractional shares of Acquiring stock will be treated as outstanding Target stock on the date of the transaction. Moreover, shares of Target stock and shares of Acquiring stock held by Target shareholders and otherwise sold, redeemed, or disposed of prior or subsequent to the Transfer will be considered in making this representation. (ee) Acquiring will acquire at least 90 percent of the fair market value of the net assets and at least 70 percent of the fair market value of the gross assets held by Target immediately prior to the transaction. For purposes of this representation, amounts paid by Target to dissenters, amounts used by Target to pay its reorganization expenses, amounts paid by Target to shareholders who receive cash or other property, amounts paid by Target to satisfy certain liabilities pursuant to the Stock Purchase Agreement, all redemptions and distributions (except for regular, normal dividends) made by Target immediately preceding the Transfer, and any cash or leaseholds of nonconsenting landlords distributed to the Trust will be included as assets of Target held immediately prior to the transaction. (ff) Acquiring has no plan or intention to reacquire any of its stock transferred in the Transfer other than open market transactions as provided in the Buy Back. (gg) Acquiring has no plan or intention to sell or otherwise dispose of any of the assets of Target acquired in the Transfer, except for dispositions made in the ordinary course of business. Shares of Acquiring stock acquired in the Transfer will be cancelled. (hh) Subject to the Escrows and the Trust, Target will distribute the Acquiring stock received in the Transfer and its other properties, in pursuance of the plan of reorganization. (ii) No liabilities of Target will be assumed by Acquiring, and no property of Target will be acquired by Acquiring subject to any liability. (jj) Following the Transfer, Acquiring will continue the historic business of Target or use a significant portion of Target's business assets in a business. (kk) Acquiring, Target and the shareholders of Target will pay their respective expenses, if any, incurred in connection with the proposed transaction. (ll) There is no intercorporate indebtedness existing between Acquiring and Target that was issued, acquired or will be settled at a discount. (mm) No two parties to the transaction are investment companies as defined in (S) 368(a)(2)(F)(iii) and (iv). (nn) Acquiring does not own, directly or indirectly, nor has it owned during the past five years, directly or indirectly, any stock of Target. (oo) Target is not under the jurisdiction of a court in a title 11 or similar case within the meaning of (S) 368(a)(3)(A). (pp) To the extent that a portion of the Acquiring stock will be placed in the Escrow, (1) there is a valid business reason for establishing the Escrow; (2) the Acquiring stock subject to the Escrow will appear as issued and outstanding on the balance sheet of Acquiring and such stock is legally outstanding under applicable state law; (3) all dividends paid on such stock will be distributed currently to the Trust; (4) all voting rights of such stock are exercisable by or on behalf of the Trust beneficiaries (i.e., the Target shareholders) or their authorized agent, the trustees of ---- the Trust; (5) no shares of such stock are subject to restrictions requiring their return to Acquiring because of death, failure to continue employment, or similar restrictions; (6) all such stock will be released from the Escrow within 5 years from the date of the final liquidating distribution by Target which will be within twelve months from the 7 date of the Transfer (except where there is a bona fide dispute as to whom the shares of stock should be released); (7) at least 50 percent of the number of shares of Acquiring stock issued initially to Target in the Transfer and to be distributed to the Target shareholders in the liquidation of Target will not be subject to the Escrow or the Second Escrow; (8) the return to Acquiring of any Acquiring stock subject to the Escrow will not be triggered by an event the occurrence or nonoccurrence of which is within the control of the Target shareholders or the trustees of the Trust; (9) the return to Acquiring of any Acquiring stock subject to the Escrow will not be triggered by the payment of additional tax or reduction in tax paid as a result of a Service audit of Target or its shareholders either (a) with respect to the reorganization transaction in which such stock will be issued, or (b) when the reorganization in which such stock will be issued involved persons related within the meaning of (S) 267(c)(4); and (10) the mechanism for the calculation of the number of shares of Acquiring stock to be returned, if any, is objective and reasonably ascertainable. (qq) To the extent that a portion of the Acquiring stock will be placed in the Second Escrow, (1) there is a valid business reason for establishing the Second Escrow; (2) the Acquiring stock subject to the Second Escrow will appear as issued and outstanding on the balance sheet of Acquiring and such stock is legally outstanding under applicable state law; (3) all dividends paid on such stock will be distributed currently to the Trust; (4) all voting rights of such stock are exercisable by or on behalf of the Trust beneficiaries (i.e., the Target shareholders) or their authorized agent, the trustees of the Trust; (5) no shares of such stock are subject to restrictions requiring their return to Acquiring because of death, failure to continue employment, or similar restrictions; (6) all such stock will be released from the Second Escrow within 6 Plan Years from the date of the final liquidating distribution by Target which will be within twelve months from the date of the Transfer (except where there is a bona fide dispute as to whom the shares of stock should be released); (7) at least 50 percent of the number of shares of Acquiring stock issued initially to Target in the Transfer and to be distributed to the Target shareholders in the liquidation of Target will not be subject to the Escrow or the Second Escrow; (8) the return to Acquiring of any Acquiring stock subject to the Second Escrow will not be triggered by an event the occurrence or nonoccurrence of which is within the control of the Target shareholders or the trustees of the Trust; (9) the return to Acquiring of any Acquiring stock subject to the Second Escrow will not be triggered by the payment of additional tax or reduction in tax paid as a result of a Service audit of Target or its shareholders either (a) with respect to the reorganization transaction in which such stock will be issued, or (b) when the reorganization transaction in which such stock will be issued involved persons related within the meaning of (S) 267(c)(4); and (10) the mechanism for the calculation of the number of shares of Acquiring stock to be returned, if any, is objective and reasonably ascertainable. (rr) The Trust will qualify as a liquidating trust within the meaning of (S) 301.7701-4(d) of the Income Tax Regulations. (ss) The beneficiaries of the Trust will be the owners of their representative share of the Trust pursuant to (S)(S) 671 through 679. Based solely on the information submitted and on the representations set forth above, we rule as follows with respect to the transaction described in step (i): (1) S1 will recognize no gain or loss on the receipt of property distributed by SS1 in complete liquidation. Section 332(a). (2) S1's basis in the property received from SS1 will be the same as it was in the hands of SS1 immediately prior to the liquidation of SS1. Section 334(b). (3) SS1 will recognize no gain or loss on the distribution to S1 of property in complete liquidation. Section 337(a). Based solely on the information submitted, we rule as follows with respect to the transactions described in steps (ii) and (iii): 8 (4) Target will recognize gain, if any, on the transfer of its directly held Business A assets and the stock of its subsidiaries to X. Any gain will be deferred by Target. Section 1.1502-13(c)(1). (5) Each of S1 through S26 will recognize gain, if any, on the transfer of such subsidiary's Business A assets and the stock of any controlled subsidiaries to X or any subsidiary controlled by X. Any gain will be deferred by each of S1 through S26. Section 1.1502-13(c)(1). (6) Any gain deferred under rulings (4) and (5) will be taken into account immediately preceding the time that X ceases to be a member of the Target group. Section 1.1502-13(f)(1)(iii). Based solely on the information submitted and on the representations set forth above, we rule as follows with respect to the transaction described in step (iv): (7) Target will recognize no gain or loss on the receipt of property distributed by each of S1 through S26 in complete liquidation. Section 332(a). (8) Target's basis in the property received from each of S1 through S26 will be the same as it was in the hands of each of S1 through S26 immediately prior to their liquidation. Section 334(b). (9) Each of S1 through S26 will recognize no gain or loss on their distribution to Target of property in complete liquidation. Section 337(a). (10) Each of S1 through S26 will recognize no gain or loss on their distribution to Target of property in satisfaction of any Intercompany Accounts. Section 337(b)(1). Based solely on the information submitted and on the representations set forth above, and provided that the Trust qualifies as a liquidating trust within the meaning of (S) 301.7701-4(d), we rule as follows with respect to the transactions described in steps (vi), (vii), and (viii): (11) The acquisition by Acquiring of substantially all of Target's assets in exchange solely for Acquiring voting common stock, followed by the distribution of the Acquiring stock, cash, and other property to the shareholders of Target (including any Acquiring stock, cash, and other property placed in the Trust or subject to the Escrows) in exchange for all of their Target Stock in complete liquidation of Target, will be a reorganization within the meaning of (S) 368(a)(1)(C). See (S) 1.368- 1(d)(2); Rev. Rul. 85-197, 1985-2 C.B. 120; Rev. Rul. 85-198, 1985-2 C.B. 121; Commissioner v. Gilmore's Estate, 130 F.2d 791 (3d Cir. 1942), aff'g 44 B.T.A. 881 (1941), acq., 1946-2 C.B. 2; Commissioner v. Webster's Estate, 131 F.2d 426 (5th Cir. 1942), aff'g 44 B.T.A. 881 (1941), acq., 1946-2 C.B. 5. See also Rev. Rul. 88-48, 1988-1 C.B. 117. For purposes of this ruling, "substantially all" means at least 90 percent of the fair market value of the net assets and at least 70 percent of the fair market value of the gross assets of Target. Acquiring and Target will each be "a party to the reorganization" within the meaning of (S) 368(b). (12) Target will recognize no gain or loss on the transfer of substantially all its assets to Acquiring in exchange for Acquiring voting common stock. Section 361(a). (13) Target will recognize no gain or loss on its distribution of the Acquiring stock received in the Transfer to Target shareholders pursuant to the plan of reorganization. Section 361(c)(1). Target will recognize gain on the distribution of appreciated property, if any, to its shareholders as if such property was sold at its fair market value. Section 361(c)(2). (14) Acquiring will recognize no gain or loss, or other income, on the receipt of substantially all the assets of Target solely in exchange for Acquiring voting common stock. Section 1032(a). (15) Acquiring will succeed to and take into account, on the date of the proposed transfer (as defined in (S) 1.381(b)-1(b)), the applicable items of Target described in (S) 381(c), subject to the conditions and limitations specified in (S)(S) 381, 382, 383, 384, and the regulations thereunder. (16) Acquiring will succeed to and take into account the earnings and profits, or deficit in earnings and profits, of Target as of the date of the transfer. Section 381(c)(2) of the Code and (S) 1.381(c)(2)-1 of the Regulations. Any deficit in earnings and profits of Target will be used solely to offset earnings and profits accumulated after the date of the transfer. 9 (17) Target shareholders will recognize no gain or loss on the exchange of their Target stock solely for Acquiring voting stock. Section 354(a). (18) The gain, if any, realized by a Target shareholder on receipt of Acquiring stock and cash or other property in exchange for Target stock will be recognized, but in an amount not in excess of the amount of cash and the fair market value of other property received. Section 356(a)(1). If the exchange has the effect of the distribution of a dividend, then the amount of the gain recognized that is not in excess of the shareholder's ratable share of undistributed earnings and profits will be treated as a dividend. Section 356(a)(2). Target shareholders will not recognize any loss in the exchange. Section 356(c). (19) A Target shareholder's basis in the Acquiring stock received in the transaction will be the same as the basis of the Target stock such shareholder surrendered in exchange therefor, decreased by the amount of any cash or the fair market value of any other property received by the shareholder and increased by any gain recognized by the shareholder in the exchange. Section 358(a). (20) A Target shareholder's holding period in the Acquiring stock received in the transaction will, in each instance, include the period during which the stock of Target surrendered in exchange therefor was held, provided that the Target stock is held as a capital asset in the hands of the Target shareholder on the date of the exchange. Section 1223(1). (21) Section 483 does not apply to the payment in the form of Acquiring common stock which is placed in the Escrows as security for the payment of the contingent liabilities of Target since the payment will be made as of the date of the exchange of the Acquiring stock for substantially all of the assets of Target. For purposes of this ruling, it is assumed that the taxpayers' treatment of the Intercompany Accounts as described in this letter is proper. No opinion was requested and no opinion is expressed as to whether such treatment is proper for federal income tax purposes. We express no opinion about the tax treatment of the transaction under other provisions of the Code and regulations or about the tax treatment of any conditions existing at the time of, or effects resulting from, the transaction that are not specificially covered by the above rulings. Specifically, no opinion was requested and no opinion is expressed as to whether the Trust qualifies as a liquidating trust within the meaning of (S) 301.7701-4(d). This ruling is directed only to the taxpayers who requested it. Section 6110(j)(3) provides that it may not be used or cited as precedent. A copy of this letter should be attached to the federal income tax returns of the taxpayers involved for the taxable year in which the transaction covered by this ruling letter is consummated. Sincerely yours, Assistant Chief Counsel (Corporate) /s/ Ken Cohen By___________________________________ Ken Cohen Senior Technician Reviewer, Branch 3 10 -----END PRIVACY-ENHANCED MESSAGE-----