<PAGE>
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: [_]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
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.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
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.
</TABLE>
- --------
* 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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
<PAGE>
[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.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
------- ----------- --------
<C> <S> <C>
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.
</TABLE>
- --------
* Previously filed
** Filed herewith
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<TABLE>
<C> <C> <S>
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
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S>
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
-
</TABLE>
2
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
