EXHIBIT 8.1
, 1997
-------------------
U.S. Transportation Systems, Inc.
00 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Precept Investors, Inc.
0000 Xxxxxxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Gentlemen:
Pursuant to an agreement dated as of November 16, 1997, by and between
Precept Acquisition Company, LLC, a Texas limited liability company ("Precept
Acquisition") and U.S. Transportation Systems, Inc. ("USTS") (the
"Agreement"), USTS will transfer substantially all of its assets and
liabilities to Precept Acquisition in exchange for the common stock of
Precept Investors, Inc., a Texas corporation and the sole owner of Precept
Acquisition ("Precept Investors") (the "Precept Common Stock") (the
"Reorganization"). Precept Acquisition and Precept Investors are together
referred to herein as "Precept." Except as otherwise provided, capitalized
terms referred to herein have the meanings set forth in the Agreement. All
section references, unless otherwise indicated, are to the Internal Revenue
Code of 1986, as amended (the "Code").
We have acted as legal counsel to USTS in connection with the
Reorganization, and you have requested our opinion regarding certain federal
income tax consequences of the Reorganization to USTS and USTS's shareholders
who receive Precept Common Stock pursuant to the Plan of Liquidation and
Dissolution. 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:
U.S. Transportation Systems, Inc.
Precept Investors, Inc.
Page 2
, 1997
-------------------
A. The Agreement;
B. The Joint Proxy and Registration Statement on Form S-4, including
the Joint Proxy Statement/Prospectus included therein (the "Registration
Statement"); and
C. Such other instruments and documents related to the formation,
organization and operation of Precept and USTS or to the consummation of the
Reorganization and the transactions contemplated thereby as we have deemed
necessary or appropriate.
In preparing our opinion we have reviewed such federal income tax authority
as we deemed relevant under the circumstances.
Further, for purposes of this opinion, we have assumed, with your
permission and without independent investigation, the following:
1. Original documents (including signatures) are authentic,
documents submitted to us as copies conform to the original documents, and there
has been (or will be by the Closing Date) due execution and delivery of all
documents where due execution and delivery are prerequisites to effectiveness
thereof.
2. The "FACTS" section contained herein is true, correct, and
complete in all material respects.
3. The fair market value of the Precept Common Stock received by the
USTS shareholders will be approximately equal to the fair market value of the
USTS Common Stock surrendered in exchange therefor.
4. Precept 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 USTS immediately prior to the Reorganization. For purposes
hereof, amounts paid by USTS to dissenters, amounts used by USTS to pay its
reorganization expenses, amounts paid by USTS to shareholders who receive cash
or other property, and all redemptions and distributions (except for regular
normal dividends) made by USTS immediately preceding the transfer will be
included as assets of USTS immediately prior to the Reorganization.
5. To the best knowledge of the management of USTS, there is no
present plan or intention on the part of the USTS shareholders to sell,
exchange, or otherwise dispose of, in the foreseeable future, a number of shares
of Precept Common Stock
U.S. Transportation Systems, Inc.
Precept Investors, Inc.
Page 3
, 1997
-------------------
received in the Reorganization that would reduce the USTS shareholders'
ownership of Precept Common Stock to a number of shares having a value, as of
the date of the Reorganization, of less than 50 percent of the value of the
formerly outstanding stock of USTS as of the same date. For purposes of this
representation, shares of USTS Common Stock exchanged for cash or other
property, surrendered by dissenters or exchanged for cash in lieu of
fractional shares of Precept Common Stock will be treated as outstanding USTS
Common Stock as of the date of the Reorganization. Moreover, shares of USTS
Common Stock and shares of Precept Common Stock held by USTS shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the
transaction will be taken into account in making this representation.
6. Precept has no plan or intention to sell or otherwise dispose
of any significant portion of the assets of USTS acquired in the transaction,
except for dispositions made in the ordinary course of business or transfers
described in section 368(a)(2)(C) of the Code.
7. USTS will distribute the stock, securities and other property
it receives in the transaction, and its other properties, in pursuance of the
plan of reorganization.
8. The liabilities of USTS assumed by Precept and the liabilities
to which the transferred assets of USTS are subject were not determined and
fixed in the reorganization, but were incurred by USTS in the ordinary course
of its business.
9. Following the Reorganization, Precept will continue the
historic business of USTS or use a significant portion of USTS's historic
business assets in a business.
10. Precept, USTS and the shareholders of USTS will pay their
respective expenses, if any, incurred in connection with the transaction.
11. There is no intercorporate indebtedness existing between USTS
and Precept that was issued, acquired, or will be settled at a discount.
12. Neither USTS nor Precept is an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.
13. USTS is not 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.
U.S. Transportation Systems, Inc.
Precept Investors, Inc.
Page 4
, 1997
-------------------
14. Precept does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any stock of USTS.
15. The fair market value of the assets of USTS transferred to
Precept will equal or exceed the sum of any liabilities assumed by Precept,
plus the amount of liabilities, if any, to which the transferred assets are
subject.
16. The payment of cash in lieu of fractional shares of Precept
Common Stock is solely for the purpose of avoiding the expense and
inconvenience to Precept 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 USTS shareholders instead of issuing
fractional shares of Precept Common Stock will not exceed one percent of the
total consideration that will be issued in the transaction to the USTS
shareholders in exchange for their shares of USTS's Common Stock. The
fractional share interests of each USTS shareholder will be aggregated, and
no USTS shareholder will receive cash in an amount equal to or greater than
the value of one full share of Precept Common Stock.
17. None of the compensation received by any shareholder-employee
of USTS pursuant to any employment, consulting or similar arrangement entered
into in connection with the Reorganization (including the employment
agreement of Xxxxxxx Xxxxxxxxx) will be separate consideration for, or
allocable to, any of the shares of such shareholder-employee's USTS Common
Stock exchanged in the Reorganization. None of the shares of Precept Common
Stock received by any shareholder-employee in the Reorganization will be
separate consideration for, or allocable to any such employment, consulting
or similar arrangement (including the employment agreement of Xxxxxxx
Xxxxxxxxx) for services rendered or to be rendered. The compensation payable
to any shareholder-employee under any employment, consulting or similar
arrangement (including the employment agreement of Xxxxxxx Xxxxxxxxx) will be
for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services.
18. Precept Acquisition will elect under Treas. Reg. Section
301.7701-3(a) to be disregarded as an entity separate from its owner, Precept
Investors, or will be treated as such under the default rule of Treas. Reg.
Section 301.7701-3(b).
U.S. Transportation Systems, Inc.
Precept Investors, Inc.
Page 5
, 1997
-------------------
19. Precept has no plan or intention to reacquire any of the Precept
Common Stock issued in the Reorganization.
FACTS
The Reorganization will be accomplished through the sale of substantially
all the assets of USTS to Precept and the assumption of certain of USTS's
liabilities by Precept. Certain assets, defined in the Agreement as
"Excluded Assets," will be excluded from the sale. In the sale, USTS will
receive 9.5 million shares of Precept Common Stock, plus one additional share
of Precept Common Stock for each share of USTS Common Stock issued between
the date of the Agreement and the date of the closing of the sale, and
Precept will assume certain USTS liabilities.
After the closing of the sale, USTS will make a partial distribution to
its shareholders of Precept Common Stock received in the sale. The final
steps of the Reorganization will require that USTS dispose of its remaining
assets, satisfy or make provision for its remaining liabilities and unmatured
claims, dissolve USTS and transfer the remaining Precept Common Stock to a
liquidating trust (the "Liquidating Trust") within one year of the Closing
Date. A final distribution of Precept Common Stock, if any, from the
Liquidating Trust will take place approximately four years from the Closing
Date.
OPINIONS
Based on the foregoing and subject to the assumptions, exceptions,
limitations and qualifications set forth herein, and on the Code, the
regulations promulgated thereunder, and judicial and administrative
interpretations thereof, all as in effect as of today's date, it is our
opinion that for federal income tax purposes the Reorganization will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of
the Code and accordingly:
A. USTS and Precept will each be considered a party to a reorganization
within the meaning of Section 368(b) of the Code;
B. No gain or loss will be recognized by USTS or Precept as a result of
the Reorganization;
C. No gain or loss will be recognized to the USTS shareholders upon
receipt of Precept Common Stock in liquidation of their USTS Common Stock
pursuant to the Reorganization unless and
U.S. Transportation Systems, Inc.
Precept Investors, Inc.
Page 6
, 1997
-------------------
to the extent that a USTS shareholder receives or is deemed to receive
property other than Precept Common Stock, recognizing that the receipt of a
beneficial interest in the Liquidating Trust will be deemed to be the receipt
of property other than Precept Common Stock to the extent that cash or other
property is contributed to the Liquidating Trust;
D. To the extent that they hold their USTS Common Stock as capital
assets, the USTS shareholders receiving Precept Common Stock pursuant to the
Reorganization will include their holding period for the USTS Common Stock in
computing their holding periods for such Precept Common Stock;
E. The holding period of the assets acquired by Precept will include
the period for which such assets were held by USTS;
F. The aggregate tax basis of the Precept Common Stock received by the
USTS shareholders in the Reorganization, including Precept Common Stock that
is deemed to be received by USTS shareholders as a result of receiving a
beneficial interest in the Liquidating Trust, will be the same as the
aggregate tax basis such shareholders had in their USTS Common Stock prior to
the Reorganization, increased by the amount of gain recognized on the
exchange, and decreased by the amount of any property other than Precept
Common Stock received in the Reorganization, or deemed received as a result
of the receipt of a beneficial interest in the Liquidating Trust (the
aggregate tax basis of the USTS Common Stock surrendered in the exchange will
be allocated between the Precept Common Stock actually received and the
USTS's shareholder's pro rata share of the Precept Common Stock held in the
Liquidating Trust; and
G. The tax basis of the USTS assets received by Precept will be the
same as the basis such assets had in the hands of USTS immediately prior to
the Reorganization.
In addition to the assumptions set forth above, this opinion is subject
to the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service
or the courts, and there is no assurance that the Internal Revenue Service
will not assert a contrary position. Furthermore, no assurance can be given
U.S. Transportation Systems, Inc.
Precept Investors, Inc.
Page 7
, 1997
-------------------
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, will not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2. No opinion is expressed as to any transaction other than the
Reorganization as described in the Agreement or to any transaction whatsoever,
including the Reorganization, if all the transactions described in the Agreement
or otherwise contemplated, including, without limitation, the establishment of
the Liquidating Trust for the sole purpose of liquidating the assets transferred
to it with no objective to continue or engage in the conduct of a trade or
business, are not consummated in accordance with the terms of such Agreement and
without waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
3. This opinion has been delivered to you for the purpose of complying
with Securities and Exchange Commission requirements relating to the offering of
the Precept Common Stock. We consent to the use of this opinion as an exhibit
to the Registration Statement to register the Precept Common Stock issued in
connection with the Reorganization, and further consent to the use of our name
wherever appearing in the Registration Statement, including the Prospectus
constituting a part thereof, and any amendment thereto. In giving such opinion,
we do not thereby admit that we are acting within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules or regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
Xxxxxxxx, Xxxxx & Xxxx, P.C.
