EXHIBIT 8.1
November 25, 1998
Lycos, Inc.
000-0 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Ladies and Gentlemen:
This opinion is being delivered to you in accordance with Section 6.7 of
the Agreement and Plan of Merger and Reorganization dated as of November 25,
1998 (the "Merger Agreement") by and among Lycos, Inc., a Delaware corporation
("Parent"), BF Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent ("Sub"), Wired Ventures, Inc., a Delaware corporation (the
"Company") and H.W. Xxxxx Xx., Xxxxx Xxxxxxxx and Xxxx X. Xxxxx, as stockholder
representatives. Pursuant to the terms of the Merger Agreement, Sub will merge
with and into the Company (the "Merger"), and the Company will become a wholly-
owned subsidiary of Parent.
Except as otherwise provided, capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
We have acted as counsel to Parent in connection with the Merger. As such,
and for the purpose of rendering this opinion, we have examined and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations,
and warranties contained in the following documents (including all exhibits and
schedules attached thereto):
(a) the Merger Agreement;
(b) those certain tax representation letters dated November 24, 1998 and
November 18, 1998, delivered to us by Parent and Sub, and the Company,
respectively, containing certain representations of Parent, Sub, and
the Company (the "Tax Representation Letters");
(c) Form S-4 registration statement filed in connection with the Merger
(the "Registration Statement"); and
Lycos, INc.
November 25, 1998
Page 2
(d) such other instruments and documents related to the formation,
organization, and operation of Parent, Sub, and the Company and
related to the consummation of the Merger and the other transactions
contemplated by the Merger Agreement as we have deemed necessary or
appropriate.
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that:
1. Original documents submitted to us (including signatures thereto) are
authentic, documents submitted to us as copies conform to the original
documents, and all such documents have been (or will be by the Effective Time)
duly and validly executed and delivered where due execution and delivery are a
prerequisite to the effectiveness thereof;
2. All statements, covenants, representations, and warranties made or
agreed to by Parent, Sub, and the Company, their managements, employees,
officers, directors, and stockholders in connection with the Merger, including,
but not limited to, those set forth in the Merger Agreement (including the
exhibits thereto) and the Tax Representation Letters are true and accurate at
all relevant times;
3. All covenants contained in the Merger Agreement (including exhibits
thereto) and the Tax Representation Letters are performed without waiver or
breach of any material provision thereof;
4. The Merger will be reported by Xxxxxx and the Company on their
respective federal income tax returns in a manner consistent with the opinion
set forth below;
5. Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification;
6. The opinion, dated November 25, 1998, from Xxxxxx Godward LLP with
respect to the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code has been delivered and has not been
withdrawn.
Based on our examination of the foregoing items and subject to the
limitations, qualifications, assumptions, and caveats set forth herein, we are
of the opinion that, for federal income tax purposes, the Merger will be a
reorganization within the meaning of Section 368(a) of the Code.
In addition to your request for our opinion on this specific matter of
federal income tax law, you have asked us to review the discussion of federal
income tax consequences contained in the Registration Statement. We have
reviewed the discussion entitled "Material Federal
Lycos, INc.
November 25, 1998
Page 3
Income Tax Consequences" contained in the Registration Statement, and are of the
opinion that the discussion fairly presents the material federal income tax
consequences to Parent, the Company and the Company's shareholders as a result
of the Merger.
We consent to the reference to our firm under the captions "Material
Federal Income Tax Consequences" and "Legal Matters" in the Registration
Statement and to the filing of this opinion as an exhibit to the Registration
Statement.
This opinion does not address the various state, local, or foreign tax
consequences that may result from the Merger or the other transactions
contemplated by the Merger Agreement. In addition, no opinion is expressed as to
any federal income tax consequence of the Merger or the other transactions
contemplated by the Merger Agreement, except as specifically set forth herein,
and this opinion may not be relied upon except with respect to the consequences
specifically discussed herein. No opinion is expressed as to the federal income
tax treatment that may be relevant to any particular investor in light of
personal circumstances or to certain types of investors subject to special
treatment under the federal income tax laws (for example, life insurance
companies, dealers in securities, taxpayers subject to the alternative minimum
tax, banks, tax exempt organizations, non-United States persons, and
stockholders who acquired their shares of Company capital stock pursuant to the
exercise of options or otherwise as compensation or who hold their Company
capital stock as part of a straddle or risk reduction transaction).
No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement, or as to the Merger if all of the
transactions described in the Merger Agreement are not consummated in accordance
with the terms of the Merger Agreement and without waiver or breach of any
material provision thereof. To the extent that any of the statements,
covenants, representations, warranties, and assumptions material to our opinion
and upon which we have relied are not accurate and complete in all material
respects at all relevant times, our opinion would be adversely affected and
should not be relied upon.
This opinion represents only our best judgment as to the federal income tax
consequences of the Merger and is not binding on the Internal Revenue Service or
any court of law, tribunal, administrative agency, or other governmental body.
The conclusions are based on the Code, judicial decisions, administrative
regulations, and published rulings existing on the date hereof. No assurance
can be given that future legislative, judicial, or administrative changes or
interpretations, on either a prospective or retroactive basis, would not
adversely affect the accuracy of the conclusions stated herein. Nevertheless,
by rendering this opinion, we undertake no responsibility to advise you of any
new developments in the application or interpretation of the federal income tax
laws.
This opinion is being delivered by us in our capacity as counsel to the
Parent, for the
Lycos, INc.
November 25, 1998
Page 4
purpose of satisfying the conditions set forth in Section 6.7(c) of the Merger
Agreement and for the purpose of being included as an exhibit to the
Registration Statement. It is intended for the benefit of Parent, and may not be
relied upon or utilized for any other purpose or by any other person and may not
be made available to any other person without our prior written consent.
Very truly yours,
XXXXXXXX, XXXXXXX & XXXXXXX,
A Professional Corporation
THE COMPANY
TAX REPRESENTATION LETTER
November ____, 1998
Xxxxxx Godward LLP Xxxxxxxx, Xxxxxxx & Xxxxxxx
One Maritime Plaza, 20th Floor 000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000 Xxxxxx, XX 00000
Re: Merger pursuant to the Agreement and Plan of Merger and Reorganization
(the "Merger Agreement"), dated as of October 5, 1998, among Lycos, Inc.,
a Delaware corporation ("Acquiror"), BF Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"),
Wired Ventures, Inc., a Delaware corporation (the "Company"), and
X. Xxxxxxx Xxxxx, Xx., Xxxxx Xxxxxxxx and Xxxx X. Xxxxx, as Stockholder
Representatives, and the related certificate of merger or agreement of
merger between the Company and Merger Sub (the "Certificate of Merger").
Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Merger Agreement or the Certificate of Merger. The Merger Agreement
and the Certificate of Merger, including exhibits and schedules attached
thereto, are collectively referred to as the "Agreements."
After consulting with its counsel and auditors regarding the meaning of and
factual support for the following representations, the undersigned hereby
certifies and represents that the following facts are now true and will continue
to be true as of the Effective Time of the Merger and thereafter where relevant:
1. Pursuant to the Merger, Merger Sub will merge with and into the Company, and
the Company will acquire all of the assets and liabilities of Merger Sub.
Specifically, the assets transferred to the Company pursuant to the Merger will
represent at least ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market value of the gross
assets held by Merger Sub immediately prior to the Merger. In addition, at least
ninety percent (90%) of the fair market value of the net assets and at least
seventy percent (70%) of the fair market value of the gross assets held by the
Company immediately prior to the Merger will continue to be held by the Company
immediately after the Merger. For the purpose of determining the percentage of
the Company's and Merger Sub's net and gross assets held by the Company
immediately following the Merger, the following assets will be treated as
property held by Merger Sub or the Company, as the case may be, immediately
prior but not subsequent to the Merger: (i) assets disposed of by the Company or
Merger Sub (other than assets transferred from Merger Sub to the Company in the
Merger) prior to or subsequent to the Merger and in contemplation thereof
(including without limitation any asset disposed of by the Company, other than
in the ordinary course of business, pursuant to a plan or intent existing during
the period ending on the Effective Time of the Merger and beginning with the
commencement of negotiations (whether formal or informal) with Acquiror
regarding the Merger (the "Pre-Merger Period")); (ii) assets used by the Company
or Merger Sub to pay expenses or liabilities incurred in connection with the
Merger; and (iii) assets used to make distribution, redemption or other payments
in respect of stock of the Company or rights to acquire such stock (including
payments treated as such for tax purposes) that are made in contemplation of the
Merger or that are related thereto;
2. Other than in the ordinary course of business or pursuant to its obligations
under the Agreements, the Company has made no transfer of any of its assets
(including any distribution of assets with respect to, or in redemption of,
stock) in contemplation of the Merger or during the Pre-Merger Period;
3. The Company's principal reasons for participating in the Merger are bona fide
business purposes unrelated to taxes;
4. On the Effective Time of the Merger, the Company will have no outstanding
equity interests other than those disclosed in Section_2.3 of the Merger
Agreement. At the time of the Merger, except as specified in the Merger
Agreement, the Company will have no outstanding warrants, options, or
convertible securities or any other type of right outstanding pursuant to which
any person could acquire shares of the Company stock or any other equity
interest in the Company, other than those disclosed in Section_2.3 of the
Merger Agreement or the Company Disclosure Schedule with respect thereto;
5. In the Merger, shares of stock of the Company representing "Control" of the
Company will be exchanged solely for shares of voting stock of Acquiror. At the
Effective Time of the Merger, there will exist no rights to acquire the Company
stock or to vote (or restrict or otherwise control the vote of) shares of stock
of the Company which, if exercised, would affect Acquiror's acquisition and
retention of Control of the Company. For purposes of this paragraph, shares of
the stock of Company exchanged in the Merger for cash and other property
(including, without limitation, the Cash Amount, cash paid in lieu of fractional
shares of Acquiror Common Stock and cash paid to stockholders of the Company in
connection with the exercise of appraisal rights) will be treated as shares of
stock of the Company outstanding on the date of the Merger but not exchanged for
shares of voting stock of Acquiror. As used in this letter, oControlo shall
consist of direct ownership of shares of stock possessing at least eighty
percent (80%) of the total combined voting power of shares of all classes of
stock entitled to vote and at least eighty percent (80%) of the total number of
shares of all other classes of stock of the corporation. For purposes of
determining Control, a person shall not be considered to own shares of voting
stock if rights to vote such shares (or to restrict or otherwise control the
voting of such shares) are held by a third party (including a voting trust)
other than an agent of such person;
6. The total fair market value of all consideration other than shares of
Acquiror Common Stock received by stockholders of the Company in the Merger
(including, without limitation, the Cash Portion, the Tax Refund Amount, the
Advance Escrow Amount (collectively, the "Cash Amount"), cash paid in lieu of
fractional shares of Acquiror Common Stock and cash paid to stockholders
perfecting appraisal rights) will be less than twenty percent (20%) of the total
fair market value of all consideration paid in the Merger for shares of stock of
the Company less the value of the Escrow Shares;
7. The Company has no plan or intention to issue additional shares of stock
after the Merger, or take any other action, that would result in Acquiror losing
Control of the Company;
8. Except for transfers described in both Section 368(a)(2)(C) of the Code and
Treasury Regulation Section 1.368-2(j)(4) and except as otherwise provided in
the Agreements, the Company has no plan or intention to sell or otherwise
dispose of any of its assets or of any of the assets acquired from Merger Sub in
the Merger except for dispositions made in the ordinary course of business or to
pay expenses incurred by the Company pursuant to the Merger;
9. The Company intends to continue its historic business or use a significant
portion of its historic business assets in a business following the Merger;
10. The liabilities of the Company have been incurred by the Company in the
ordinary course of its business;
11. The fair market value of the Company's assets will, on the Effective Time of
the Merger, exceed the aggregate liabilities of the Company plus the amount of
liabilities, if any, to which such assets are subject;
12. The Company is not and will not be on the Effective Time of the Merger an
"investment company" within the meaning of Section 368(a)(2)(F)(iii) and (iv) of
the Code;
13. The Company is not and will not be on the Effective Time of the Merger under
the jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code;
14. The Company has made no extraordinary distributions within the meaning of
Temporary Federal Treasury Regulation Section 1.368-1T(e) with respect to its
stock, prior to and in connection with the Merger;
15. The Company has not redeemed and no related person with respect to the
Company, as such term is defined by Treasury Regulation Section 1.368-1(e)(3),
(without regard to Section 1.368-1(e)(3)(i)(a)), has purchased any Company stock
prior to and in connection with the Merger;
16. Except with respect to (i) the Cash Amount, (ii) payments of cash to
stockholders of the Company in lieu of fractional shares of Acquiror Common
Stock and (iii) payments of cash to stockholders perfecting appraisal rights,
one hundred percent (100%) of the shares of stock of the Company outstanding
immediately prior to the Merger will be exchanged solely for shares of Acquiror
Common Stock. Thus, except as set forth in the preceding sentence, the Company
intends that no consideration be paid or received (directly or indirectly,
actually or constructively) for shares of stock of the Company other than shares
of Acquiror Common Stock;
17. The combined fair market value of (i) the shares of Acquiror Common Stock
and (ii) the Cash Amount received by each stockholder of the Company will be
approximately equal to the fair market value of the shares of stock of the
Company surrendered in exchange therefor and the aggregate consideration
received by stockholders of the Company in exchange for their shares of stock of
the Company will be approximately equal to the fair market value of all of the
outstanding shares of stock of the Company immediately prior to the Merger;
18. Except as provided in Section 12.4 of the Merger Agreement, each of
Acquiror, Merger Sub and the Company and each stockholder of the Company will
pay separately his, her or its own expenses relating to the Merger;
19. There is no intercorporate indebtedness existing between Acquiror and the
Company or between Merger Sub and the Company that was issued, acquired, or will
be settled at a discount as a result of the Merger; Acquiror will assume no
liabilities of the Company or any stockholder of the Company in connection with
the Merger;
20. The terms of the Merger Agreement and the other agreements relating thereto
are the product of arm's length negotiations;
21. None of the compensation received by any stockholder-employees of the
Company will be separate consideration for, or allocable to, any of their shares
of stock of the Company; none of the shares of Acquiror Common Stock received by
any stockholder-employees of the Company will be separate consideration for, or
allocable to, any employment agreement or any covenants not to compete; and the
compensation paid to any stockholder-employees of the Company will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services;
22. The payment of cash in lieu of fractional shares of Acquiror Common Stock is
solely for the purpose of avoiding the expense and inconvenience to Acquiror of
issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the transaction
to the Company stockholders instead of issuing fractional shares of Acquiror
Common Stock will not exceed one percent (1%) of the total consideration that
will be issued in the transaction to the Company stockholders in exchange for
their shares of Company stock. The fractional share interests of each Company
stockholder will be aggregated, and no Company stockholder will receive cash in
an amount equal to or greater than the value of one full share of Acquiror
Common Stock;
23. With respect to each instance, if any, in which shares of stock of the
Company have been purchased by a stockholder of Acquiror (a "Stockholder")
during the Pre-Merger period (a "Stock Purchase"): (i) to the best knowledge of
the Company, (A) the Stock Purchase was made by such Stockholder on its own
behalf, rather than as a representative, or for the benefit, of Acquiror, (B)
the Stock Purchase was entered into solely to satisfy the separate interests of
such Stockholder and the seller, and (C) the purchase price paid by such
Stockholder pursuant to the Stock Purchase was the product of arm's length
negotiations; and (ii) the Stock Purchase was not a formal or informal condition
to consummation of the Merger;
24. The Merger will be reported by Company on its federal tax return as a
reorganization within the meaning of Section_368(a) of the Code;
25. The transactions contemplated in the Merger will occur pursuant to a plan of
reorganization agreed upon before the transaction in which the rights of the
parties are defined and will take place as described in the Agreements. In
addition, all transfers contemplated as part of the Merger will occur on
approximately the same date;
26.The Agreements and the documents executed in connection therewith represent
the entire understanding of Company, Acquiror, and Xxxxxx Sub with respect to
the Merger;
27. All the Acquiror common stock to be received by Company stockholders
pursuant to the Merger, including contingent shares, will be received within
five (5) years from the date of the Merger;
28. The escrow shares will appear as issued and outstanding on the balance sheet
of Acquiror and such stock will be legally outstanding under applicable state
law;
29. All cash dividends paid on the escrow shares will be distributed currently
to the exchanging Company stockholders;
30. All voting rights of the escrow shares will be exercisable by or on behalf
of the exchanging Company stockholders or their authorized agent;
31. No escrow shares will be subject to restrictions requiring their return to
Acquiror because of death, failure to continue employment, or similar
restrictions;
32. All the escrow shares will be released from the arrangement within 5 years
from the date of consummation of the transaction (except where there is a bona
fide dispute as to whom the stock should be released);
33. At least fifty percent (50%) of the number of shares of Acquiror common
stock issued initially to the exchanging Company stockholders is not subject to
the Escrow arrangement;
34. The return, if any, of the escrow shares will not be triggered by an event
the occurrence or nonoccurrence of which is within the control of the exchanging
Company stockholders;
35. The return, if any, of the escrow shares will not be triggered by the
payment of additional tax or reduction in tax paid as a result of an IRS audit
of the exchanging Company stockholders, Company, Acquiror or Merger Sub either
(a)_with respect to the Merger, or (b)_when the Merger in which the escrow
shares will be issued involves persons related within the meaning of
Section_267(c)(4); and
36. The Company is authorized to make all of the representations set forth
herein.
The undersigned recognizes that (i) your opinions will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinions will be subject to certain limitations
and qualifications including that they may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
Notwithstanding anything herein to the contrary, the undersigned makes no
representations regarding any actions or conduct of the Company pursuant to
Acquiror's exercise of control over the Company after the Merger.
The undersigned recognizes that your opinions will not address any tax
consequence of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
Wired Ventures, Inc.
a Delaware corporation
By:
Title
ACQUIROR AND MERGER SUB
TAX REPRESENTATION LETTER
November __, 1998
Xxxxxx Godward LLP Xxxxxxxx, Xxxxxxx & Xxxxxxx
One Maritime Plaza, 20/th/ Floor 000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000 Xxxxxx, XX 00000
Re: Merger pursuant to the Agreement and Plan of Merger and Reorganization (the
"Merger Agreement"), dated as of October 5, 1998, among Lycos, Inc., a
Delaware corporation ("Acquiror"), BF Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"), Wired
Ventures, Inc., a Delaware corporation (the "Company"), and X. Xxxxxxx
Xxxxx, Xx., Xxxxx Xxxxxxxx and Xxxx X. Xxxxx, as Stockholder
Representatives, and the related certificate of merger or agreement of
merger between the Company and Merger Sub (the "Certificate of Merger").
Gentlemen:
This letter is supplied to you in connection with your rendering of
opinions regarding certain federal income tax consequences of the Merger.
Unless otherwise indicated, capitalized terms not defined herein have the
meanings set forth in the Merger Agreement or the Certificate of Merger. The
Merger Agreement and the Certificate of Merger, including exhibits and schedules
attached thereto, are collectively referred to as the "Agreements."
After consulting with their counsel and auditors regarding the meaning of
and factual support for the following representations, the undersigned hereby
certify and represent that the following facts are now true and will continue to
be true as of the Effective Time of the Merger and thereafter where relevant:
1. Pursuant to the Merger, Merger Sub will merge with and into the Company,
and the Company will acquire all of the assets and liabilities of Merger
Sub. Specifically, the assets transferred to the Company pursuant to the
Merger will represent at least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the fair
market value of the gross assets held by Merger Sub immediately prior to
the Merger. In addition, at least ninety percent (90%) of the fair
market value of the net assets and at least seventy percent (70%) of the
fair market value of the gross assets held by the Company immediately
prior to the Merger will continue to be held by the Company immediately
after the Merger. For the purpose of determining the percentage of the
Company's and Merger Sub's net and gross
assets held by the Company immediately following the Merger, the
following assets will be treated as property held by Merger Sub or the
Company, as the case may be, immediately prior but not subsequent to the
Merger: (i) assets disposed of by the Company or Merger Sub (other than
assets transferred from Merger Sub to the Company in the Merger) prior
to or subsequent to the Merger and in contemplation thereof (including
without limitation any asset disposed of by the Company, other than in
the ordinary course of business, pursuant to a plan or intent existing
during the period ending at the Effective Time of the Merger and
beginning with the commencement of negotiations (whether formal or
informal) with Acquiror regarding the Merger (the "Pre-Merger Period"));
(ii) assets used by the Company or Merger Sub to pay expenses or
liabilities incurred in connection with the Merger; and (iii) assets
used to make distribution, redemption or other payments in respect of
stock of the Company or rights to acquire such stock (including payments
treated as such for tax purposes) that are made in contemplation of the
Merger or that are related thereto;
2. Acquiror's principal reasons for participating in the Merger are bona
fide business purposes not related to taxes;
3. Prior to the Merger, Acquiror will be in "Control" of Merger Sub. As
used in this letter, "Control" shall consist of direct ownership of
shares of stock possessing at least eighty percent (80%) of the total
combined voting power of all classes of stock entitled to vote and at
least eighty percent (80%) of the total number of shares of all other
classes of stock of the corporation. For purposes of determining
Control, a person shall not be considered to own shares of voting stock
if rights to vote such shares (or to restrict or otherwise control the
voting of such shares) are held by a third party (including a voting
trust) other than an agent of such person;
4. In the Merger, shares of stock of the Company representing Control of
the Company will be exchanged solely for shares of Acquiror Common
Stock. For purposes of this paragraph, shares of stock of the Company
exchanged in the Merger for cash and other property (including, without
limitation, the Cash Portion, the Tax Refund Amount, the Advance Escrow
Amount (collectively, the "Cash Amount"), cash paid in lieu of
fractional shares of Acquiror Common Stock and cash paid to stockholders
of the Company in connection with the exercise of appraisal rights) will
be treated as shares of stock of the Company outstanding on the date of
the Merger but not exchanged for shares of Acquiror Common Stock;
5. Acquiror has no plan or intention to cause the Company to issue
additional shares of stock after the Merger, or take any other action,
that would result in Acquiror losing Control of the Company;
6. Other than with respect to shares acquired from terminated employees of
the Company in the ordinary course of business, Acquiror has no plan or
intention to reacquire any of its stock issued pursuant to the Merger;
7. Except for transfers described in both Section 368(a)(2)(C) of the Code
and Treasury Regulation Section 1.368-2(j)(4) and as otherwise provided
in the Agreements, Acquiror has no plan or intention to: (a)_liquidate
the Company; (b)_merge the Company with or into another corporation
including Acquiror or its affiliates; (c)_sell, distribute or otherwise
dispose of the stock of the Company or cause the Company to sell or
otherwise dispose of the stock of the Company; or (d)_cause the Company
to sell or otherwise dispose of any of its assets or of any assets
acquired from Merger Sub, except for dispositions made in the ordinary
course of business or payment of expenses incurred by the Company
pursuant to the Merger;
8. In the Merger, Merger Sub will have no liabilities assumed by the
Company and will not transfer to the Company any assets subject to
liabilities, except to the extent incurred in connection with the
transactions contemplated by the Agreements;
9. Acquiror intends that, following the Merger, the Company will continue
its historic business or use a significant portion of its historic
business assets in a business;
10. During the past five (5) years, none of the outstanding shares of
capital stock of the Company, including the right to acquire or vote
any such shares have, directly or indirectly, been owned by Acquiror or
affiliates of Acquiror;
11. Acquiror is not an investment company within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Code;
12. No stockholder of the Company is acting as agent for Acquiror in
connection with the Merger or the approval thereof; Acquiror will not
reimburse any stockholder of the Company for any stock of the Company
such stockholder may have purchased or for other obligations such
stockholder may have incurred;
13. Except for repurchases or redemptions of Acquiror Common Stock that are
consistent with past practices and pursuant to pre-existing purchase
programs that were not created or modified in connection with the
Merger, neither Merger Sub nor Acquiror nor any "related person" of
Merger Sub or Acquiror (as such term is defined by Treasury Regulation
Section 1.368-1(e)(3)) will repurchase or redeem any of the Acquiror
Common Stock to be issued to the stockholders of the Company in
connection with the Merger;
14. Except with respect to (i) payments of the Cash Amount, (ii) payments
of cash to stockholders of the Company in lieu of fractional shares of
Acquiror Common Stock
and (iii) payments of cash to stockholders perfecting appraisal rights,
one hundred percent (100%) of the stock of the Company outstanding
immediately prior to the Merger will be exchanged solely for Acquiror
Common Stock. Thus, except as set forth in the preceding sentence,
Merger Sub and Acquiror intend that no consideration be paid or
received (directly or indirectly, actually or constructively) for stock
of the Company other than Acquiror Common Stock;
15. The total fair market value of all consideration other than Acquiror
Common Stock received by stockholders of the Company in the Merger
(including, without limitation, the Cash Amount, cash paid to
stockholders of the Company in lieu of fractional shares and cash paid
to stockholders perfecting appraisal rights) will be less than twenty
percent (20%) of the total fair market value of all consideration paid
in the Merger for shares of stock of the Company less the value of the
Escrow Shares;
16. The combined fair market value of (i) the Acquiror Common Stock and
(ii) the Cash Amount received by each stockholder of the Company will
be approximately equal to the fair market value of the stock of the
Company surrendered in exchange therefor, and the aggregate
consideration received by stockholders of the Company in exchange for
their stock of the Company will be approximately equal to the fair
market value of all of the outstanding shares of stock of the Company
immediately prior to the Merger;
17. Except as provided in Section 12.4 of the Merger Agreement, each of
Acquiror, Merger Sub and the Company and each stockholder of the
Company will pay separately his, her or its own expenses relating to
the Merger;
18. There is no intercorporate indebtedness existing between Acquiror and
the Company or between Merger Sub and the Company that was issued,
acquired or will be settled at a discount as a result of the Merger,
and Acquiror will assume no liabilities of the Company or any
stockholder of the Company in connection with the Merger;
19. The terms of the Merger Agreement and the agreements related thereto
are the product of arm's length negotiations;
20. None of the compensation received by any stockholder-employee of the
Company will be separate consideration for, or allocable to, any of
their shares of stock of the Company; none of the shares of Acquiror
Common Stock received by any stockholder-employee of the Company will
be separate consideration for, or allocable to, any employment
agreement or any covenants not to compete; and the compensation paid to
any stockholder-employee of the Company will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services;
21. The payment of cash in lieu of fractional shares of Acquiror Common
Stock is solely for the purpose of avoiding the expense and
inconvenience to Acquiror of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the Company
stockholders instead of issuing fractional shares of Acquiror Common
Stock will not exceed one percent (1%) of the total consideration that
will be issued in the transaction to the Company stockholders in
exchange for their shares of Company stock. The fractional share
interests of each Company stockholder will be aggregated, and no
Company stockholder will receive cash in an amount equal to or greater
than the value of one full share of Acquiror Common Stock;
22. Pursuant to the terms of the Merger Agreement, less than fifty percent
(50%) of the shares of Acquiror Common Stock to be issued in the Merger
will be delivered to the Escrow Fund for the purpose of providing a
fund for the payment of Losses, if any, suffered by Acquiror. These
shares of Acquiror Common Stock will be held and distributed in
accordance with the terms of the Merger Agreement and Escrow Agreement.
The Acquiror Common Stock held in Escrow Fund will appear as issued and
outstanding on Acquiror's balance sheet and will be legally outstanding
under applicable state law. All cash dividends paid on such Acquiror
Common Stock will be distributed currently to the stockholders of the
Company, and the stockholders of the Company will have full voting
rights with respect to the Acquiror Common Stock delivered into the
Escrow Fund. No shares of Acquiror Common Stock delivered to the Escrow
Fund are subject to restrictions requiring their return to Acquiror
because of death, failure to continue employment or similar
restrictions. Except as provided in Section 11.2(b) of the Merger
Agreement, all of the Acquiror Common Stock delivered into the Escrow
Fund will be released from the Escrow Fund within five (5) years;
23. With respect to each instance, if any, in which shares of stock of the
Company have been purchased by a stockholder of Acquiror (a
"Stockholder") during the Pre-Merger Period (a "Stock Purchase"): (i)
the Stock Purchase was made by such Stockholder on its own behalf and
not as a representative, or for the benefit, of Acquiror; (ii) the
purchase price paid by such Stockholder pursuant to the Stock Purchase
was the product of arm's length negotiations, was funded by such
Stockholder's own assets, was not advanced, and will not be reimbursed,
either directly or indirectly, by Acquiror; (iii) at no time was such
Stockholder or any other party required or obligated to surrender to
Acquiror the Company stock acquired in the Stock Purchase, and neither
such Stockholder nor any other party will be required to surrender to
Acquiror the Acquiror Common Stock for which such shares of stock of
the Company will be exchanged in the Merger; and (iv) the Stock
Purchase was not a formal or informal condition to consummation of the
Merger and was entered into solely to satisfy the separate interests of
such Stockholder and the seller;
24. Merger Sub was formed solely for the purposes of effecting the Merger
and has conducted no business or other activities except in connection
with the Merger;
25. At the Effective Time, the fair market value of the assets of Company
will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which the assets are subject;
26. All amounts payable to stockholders of Company who exercise appraisal
rights in the Merger will be paid (and Acquiror will cause all such
amounts paid after the Effective Time to be paid) by Company;
27. The Merger will be reported by Acquiror on its federal income tax
return as a reorganization within the meaning of Section_368(a) of the
Code;
28. The transactions contemplated in the Merger will occur pursuant to a
plan of reorganization agreed upon before the transaction in which the
rights of the parties are defined and will take place as described in
the Agreements. In addition, all transfers contemplated as part of the
Merger will occur on approximately the same date;
29. The Agreements and the documents executed in connection therewith
represent the entire understanding of Acquiror, Merger Sub, and Company
with respect to the Merger;
30. The return, if any, of the escrow shares will not be triggered by an
event the occurrence or nonoccurrence of which is within the control of
the exchanging Company stockholders;
31. The return, if any, of the escrow shares will not be triggered by the
payment of additional tax or reduction in tax paid as a result of an
IRS audit of the exchanging Company stockholders, Company, Acquiror or
Merger Sub either (a)_with respect to the Merger, or (b)_when the
Merger in which the escrow shares will be issued involves persons
related within the meaning of Section_267(c)(4); and
32. Acquiror and Merger Sub are authorized to make all of the
representations set forth herein.
The undersigned recognize that (i) your opinions will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinions will be subject to certain limitations
and qualifications including that they may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
The undersigned recognize that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
Lycos, Inc.,
a Delaware corporation
By:________________________
Title:
BF Acquisition Corp.,
a Delaware corporation
By:________________________
Title:
