EXHIBIT 8.2
[LETTERHEAD OF XXXXXX & BIRD APPEARS HERE]
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
000-000-0000
Fax: 000-000-0000
xxx.xxxxxx.xxx
June 10, 1998
XcelleNet, Inc.
0 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Re: Proposed Agreement and Plan of Reorganization Involving XcelleNet,
Inc., a Georgia Corporation, Sterling Commerce, Inc., a Delaware
Corporation, and Sterling Commerce (Southern), Inc., a Delaware
Corporation
Ladies and Gentlemen:
We have served as counsel to XcelleNet, Inc., a Georgia corporation
("Company") in connection with the proposed reorganization pursuant to the
Agreement and Plan of Merger, dated as of April 16, 1998, (the "Agreement"),
which provides for the merger of Company with and into Sterling Commerce
(Southern), Inc., a Delaware corporation ("Sub" or "Merger Sub") a wholly-owned
subsidiary of Sterling Commerce, Inc., a Delaware corporation ("Parent"). In
our capacity as counsel to Company, our opinion has been requested with respect
to certain of the federal income tax consequences of the Merger.
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code"), and Treasury Regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain assumptions as more fully described below. All terms used
herein without definition shall have the respective meanings specified in the
Agreement, and unless otherwise specified, all section references herein are to
the Code.
INFORMATION RELIED UPON
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In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) The Agreement;
0000 Xxxx Xxxxxxxx Xxxxxx 0000 Xxxxxxxx Xxxxxx, Xxxxx 000 000 Xxxxxxxxxxxx Xxxxxx, X.X.
P. O. Drawer 34009 P. O. Drawer 00000 Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000-0000 Xxxxxxx, XX 00000-0000 Xxxxxxxxxx, XX 00000-0000
000-000-0000 000-000-0000 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000 Fax: 000-000-0000
XcelleNet, Inc.
June 10, 1998
Page 2
(2) The Registration Statement on Form S-4 (the "Registration
Statement") filed by Parent with the Securities and Exchange Commission under
the Securities Act of 1933, filed on June 10, 1998, including the Proxy
Statement/Prospectus; and
(3) Such additional documents as we have considered relevant.
In our examination of the documents, we have assumed with your consent
that all documents submitted to us as photocopies faithfully reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, and that all
statements set forth in such documents are accurate.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with various
officers and representatives of Company and Parent and through certificates
provided by the management of Company and the management of Parent.
(1) On the terms and subject to the terms and conditions set forth in
the Agreement, Company shall be merged with and into Sub at the Effective Time.
At the Effective Time, the separate existence of Company shall cease and Sub
shall continue as the surviving corporation.
(2) Subject to the provisions of Article II of the Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part of
any holder of shares of Company's Common Stock, par value $0.01 per share
(individually a "Share" and collectively the "Shares"), or any other capital
stock of Company or any shares of capital stock of Merger Sub:
(a) Each Share of Common Stock, par value of $0.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
remain outstanding.
(b) Each Share issued and outstanding immediately prior to the
Effective Time that is owned by Company or any Subsidiary (as hereinafter
defined) of Company or by Parent, Merger Sub or any other Subsidiary of Parent
(other than Shares in trust accounts, managed accounts, custodial accounts and
the like that are beneficially owned by third parties) shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered or deliverable in exchange therefor.
(c) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be canceled in accordance with Section
2.1(b) of the
XcelleNet, Inc.
June 10, 1998
Page 3
Agreement and any Dissenting Shares (as hereinafter defined)) shall be converted
into the right to receive the Merger Consideration (as hereinafter defined) upon
surrender of the certificate formerly representing such Share in accordance with
the Agreement. For purposes hereof, Merger Consideration shall mean, (i) a cash
payment in an amount equal to $8.80 (the "Cash Payment") and (ii) 0.2885 (the
"Stock Factor") of a fully paid and nonassessable share of Parent's common
stock, $0.01 par value ("Parent Common Stock"), subject to adjustment as
described in Section 2.1(d) of the Agreement.
(3) Notwithstanding anything in the Agreement to the contrary, any
Shares issued and outstanding immediately prior to the Effective Time held by a
holder who has the right to demand, and who properly demands, payment for such
Shares ("Dissenting Shares") in accordance with applicable law shall not be
converted into a right to receive the Merger Consideration, unless such holder
fails to perfect or otherwise loses such holder's right to payment. If, after
the Effective Time, such holder fails to perfect or loses any such right, each
such Share of such holder shall be treated as a Share that had been converted as
of the Effective Time into the right to receive the Merger Consideration in
accordance with Section 2.1 of the Agreement.
With your consent, we have also assumed that the following statements
are true on the date hereof and will be true on the date on which the Merger is
consummated:
(1) The facts relating to the contemplated merger (the "Merger") of
the Company with and into Sub pursuant to the Merger Agreement, as described in
the Merger Agreement and the Registration Statement (collectively, the "Merger
Documents") are, insofar as such facts pertain to Parent, Sub, and the Company
true, correct and complete in all material respects.
(2) At the Effective Time of the Merger, the fair market value of the
Parent Common Stock and other consideration received by each Company shareholder
will be approximately equal to the fair market value of the Shares surrendered
in exchange therefor.
(3) Except for 100,000 shares acquired by Parent between November 14
and December 11, 1997 and completely disposed of to unrelated parties in open
market transactions by March 20, 1998, neither Parent, Sub, the Company nor any
other person related to the Company or Parent has acquired or will acquire, or
has owned in the past five years, any Shares of the Company ("Company Stock").
For purposes of this letter, a "Parent Related Party" is (i) a member of
Parent's affiliated group as defined in Section 1504 of the Code without regard
to Section 1504(b) of the Code (including but not limited to Sub), (ii) any
corporation in which at least fifty percent (50%) of the total combined voting
power of all classes of stock entitled to vote or at least fifty percent
XcelleNet, Inc.
June 10, 1998
Page 4
(50%) of the value of all classes of stock is owned directly or indirectly by
Parent, or (iii) any entity that is treated as a partnership for federal income
tax purposes and has as an owner (directly or indirectly, through one or more
other partnerships) Parent or a corporation described in (i) or (ii) of this
paragraph. An entity (other than Company or any Company Related Party) will be
treated as a Parent Related Party if the requisite relationship exists
immediately before or immediately after the acquisition. In addition, an entity
(other than Company or any Company Related Party) will be treated as a Parent
Related Party if the requisite relationship is created in connection with the
Merger. A "Company Related Party" means any corporation in which, immediately
before the acquisition, at least fifty percent (50%) of the total combined
voting power of all classes of stock entitled to vote or at least fifty percent
(50%) of the value of all classes of stock is owned, directly or indirectly, by
the Company, and any partnership that has as an owner (directly or indirectly,
through one or more other partnerships) Company or a corporation that is a
Company Related Party.
(4) Parent, Sub, and all Parent Related Parties will not acquire more
than 55% of the outstanding Company Stock for cash.
(5) Sub will acquire at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by the
Company immediately prior to the Merger. For purposes of this assumption, any
amounts paid by the Company to dissenters, amounts paid by the Company to
shareholders who receive cash or other property, Company assets used to pay its
reorganization expenses, and Company assets distributed in redemptions and other
distributions (except for regular, normal dividends) immediately preceding or in
connection with the Merger, will be included as assets of the Company held
immediately prior to the Merger and not acquired by Sub.
(6) No stock of Sub will be issued in the Merger.
(7) Prior to the Merger, Parent will be in control of Sub. Control
for all purposes of this letter means ownership of 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 number of each of the other classes of
stock.
(8) Following the Merger, Sub will not issue additional shares of its
stock that would result in Parent losing control of Sub.
(9) Cash payments to be made to shareholders of the Company in lieu of
fractional shares of Parent Common Stock that would otherwise be issued to such
shareholders in the Merger will be made for the purpose of saving Parent the
expense and inconvenience of issuing and transferring fractional shares of
Parent
XcelleNet, Inc.
June 10, 1998
Page 5
Stock, and do not represent separately bargained-for consideration. The total
cash consideration that will be paid in the Merger to Company shareholders in
lieu of fractional shares of Parent Common Stock will not exceed 1% of the total
consideration that will be issued in the merger to Company shareholders in
exchange for their Company Stock.
(10) Neither Parent nor Sub, nor any other Parent Related Party , has
a plan or intention to reacquire any of the Parent Common Stock issued in the
Merger.
(11) Parent has no plan or intention to liquidate Sub, to merge Sub
with and into any other corporation or otherwise dispose of the stock of Sub, or
to cause or permit Sub to sell or otherwise dispose of any of the assets held by
the Company at the time of the Merger, except for dispositions of such assets in
the ordinary course of business; provided, however, that Sub may transfer assets
of the Company to any corporation controlled by Sub, and/or to members of
Parent's "qualified group." For purposes of this representation and
representation 12, "qualified group" means one or more chains of corporations
connected through stock ownership with Parent where Parent controls at least one
of the corporations and control of each of the corporations is owned by one of
the other corporations. Parent's qualified group also includes a partnership
where one or more corporate members of Parent's qualified group own a
significant interest in the partnership or have actual or substantial management
functions as a partner in the partnership.
(12) Following the Merger, Sub, or an entity within Parent's
"qualified group" will continue the historic business of the Company or use a
significant portion of its historic business assets in a business.
(13) Parent, Sub, the Company, and the shareholders of the Company
will each pay their respective expenses, if any, incurred in connection with the
Merger.
(14) Neither Parent, Sub, nor the Company is an investment company as
defined in section 368(a)(2)(F)(iii) and (iv) of the Code. For purposes hereof,
an "investment company" shall mean a corporation that is a regulated investment
company, a real estate investment trust, or a corporation fifty percent (50%) or
more of the value of whose total assets are stock and securities and eighty
percent (80%) or more of the value of whose total assets are assets held for
investment. In making the fifty percent (50%) and eighty percent (80%)
determinations under the preceding sentence, stock and securities in any
subsidiary corporation shall be disregarded and the Parent corporation shall be
deemed to own its ratable share of the subsidiary's assets, and a corporation
shall be considered a subsidiary if the Parent owns fifty percent (50%) or more
of the combined voting power of all classes of stock entitled to vote or fifty
percent (50%) or more of the total value of shares of all classes of stock
outstanding.
XcelleNet, Inc.
June 10, 1998
Page 6
(15) None of the compensation received by any shareholder-employee of
the Company represents separate consideration for, or is allocable to, any of
their Company Stock. None of the Parent Common Stock that will be received by
Company shareholder-employees in the Merger represents separately bargained for
consideration which is allocable to any employment agreement or arrangement. The
compensation paid to any shareholder-employees will be for services actually
rendered or to be rendered and will be determined by bargaining at arm's-length.
(16) There is no intercorporate indebtedness existing between the
Parent or Sub and the Company that was issued or acquired, or will be settled,
at a discount.
(17) The fair market value of the assets of the Company transferred to
Sub will equal or exceed the sum of the liabilities assumed by Sub, plus the
amount of liabilities, if any, to which the transferred assets are subject.
(18) The liabilities of the Company assumed by Sub and the liabilities
to which the Company's assets are subject were incurred by the Company in the
ordinary course of its business.
(19) Except for options issued pursuant to the Stock Option Plans
which will be converted into options to acquire Parent Common Stock pursuant to
the Merger, immediately prior to the Merger, the Company will not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any person could acquire Company Stock.
(20) Neither Parent, Sub, nor the Company is under the jurisdiction
of a court in a case under Title 11 of the United States Code or a receivership,
foreclosure or similar proceeding in a federal or state court.
(21) For purposes hereof, any terms not otherwise defined shall have
their respective meanings as set forth in the Merger Agreement.
(22) The foregoing certifications are true as of the date hereof and
will be true as of the date of consummation of the Merger.
XcelleNet, Inc.
June 10, 1998
Page 7
OPINIONS
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Based on the foregoing assumptions, we are of the opinion that:
(1) Provided the Merger qualifies as a statutory merger under
applicable law, the Merger will be a tax-free reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code (the
"Code").
(2) Company and Parent will each be a party to a reorganization within
the meaning of Section 368(b) of the Code.
(3) The shareholders of Company will recognize no gain or loss upon
their exchange of shares of Company Stock for solely shares of Parent Common
Stock under Section 354 of the Code.
(4) No loss will be recognized by a Company stockholder upon the
exchange of such shareholder's XcelleNet Common Stock for shares of Parent
Common Stock and any consideration paid in cash. Gain, if any, will be
recognized by a Company shareholder in an amount equal to the excess of the fair
market value of Parent Common Stock received (including any fractional share
interest) plus any consideration paid in cash over such shareholder's tax basis
in the Company Stock exchanged therefor, but not in excess of the total cash
received.
(5) If an exchange has the effect of the distribution of a dividend
(determined with the application of certain constructive ownership rules), the
amount of gain recognized that is not in excess of a Company shareholder's
ratable share of undistributed earnings and profits will be treated as a
dividend taxable as ordinary income. The remainder, if any, of the gain
recognized will be capital gain, provided the Company Stock is held as a capital
asset in the hands of the exchanging shareholder on the Effective Date. Whether
an exchange has the effect of the distribution of a dividend will be determined
under the principles of Section 302 as though there were a redemption by Parent
of the portion of its stock the Company shareholders would have received if they
had received Parent Common Stock instead of the Cash Consideration received in
cash, if any. In general, under Section 302, dividend treatment will result
unless the redemption is (i) a complete termination of the shareholder's
interest, (ii) substantially disproportionate with respect to the shareholder,
or (iii) not essentially equivalent to a dividend. With respect to whether a
shareholder will have completely terminated his interest, as former Company
shareholders who do not exercise dissenters' rights will receive and hold shares
of Parent Common Stock, there will not be a complete termination of their
interest in Parent. As to the second test, a redemption will be substantially
disproportionate if the shareholder owns less than fifty percent (50%) of the
total combined voting power of all classes of stock entitled to vote and the
percentage of the voting stock owned by the shareholder after the redemption is
less than eighty percent (80%) of the percentage of the
XcelleNet, Inc.
June 10, 1998
Page 8
voting stock he owned before the redemption. Finally, even if the redemption is
not considered to be substantially disproportionate with respect to the
shareholder, the distribution may be considered to be not essentially equivalent
to a dividend. Whether a redemption is not essentially equivalent to a dividend
will depend upon the facts and circumstances. The Internal Revenue Service has
ruled, for example, that where there is a meaningful reduction in a
shareholder's interest in the redeeming corporation, the relative interest of
the shareholder is minimal and the shareholder exercises no control over the
affairs of the corporation, the redemption is not essentially equivalent to a
dividend. Rev. Rul. 76-385, 1976-2 C.C. 92.
(6) The payment of cash in lieu of fractional shares of Parent Common
Stock will be treated as if the fractional shares were issued as part of the
exchange and then redeemed by Parent. These cash payments will be treated as
having been received as distributions in full payment in exchange for the
fractional shares of Parent Common Stock redeemed as provided in Section 302(a).
Generally, any gain or loss recognized upon such exchange will be capital gain
or loss, provided the fractional share would constitute a capital asset in the
hands of the exchanging shareholder.
(7) Where solely cash is received by a Company shareholder in exchange
for his Company Stock pursuant to the exercise of dissenters' rights, such cash
will be treated as having been received in redemption of his Company Stock,
subject to the provisions and limitations of Section 302.
CONCLUSION
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The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein, which we have assumed are true on the date hereof and
will be true on the date on which the Merger is consummated. Our opinions
cannot be relied upon if any of the facts pertinent to the Federal income tax
treatment of the Merger stated in such documents or if such additional
information is, or later becomes, inaccurate, or if any of the statements set
out herein are, or later become, inaccurate. Finally, our opinions are limited
to the tax matters specifically covered thereby, and we have not been asked to
address, nor have we addressed, any other tax consequences of the Merger,
including for example, any issues related to intercompany transactions,
accounting methods, or changes in accounting methods resulting from the Merger.
XcelleNet, Inc.
June 10, 1998
Page 9
This opinion is being provided solely for the benefit Parent, Company,
and their shareholders. No other person or party shall be entitled to rely on
this opinion.
We hereby consent to the use of this opinion and to the references
made to the firm under the captions "Summary -- Certain Federal Income Tax
Consequences" and "The Merger -- Certain Federal Income Tax Consequences" in the
Proxy Statement/Prospectus constituting part of the Registration Statement.
Very truly yours,
XXXXXX & BIRD LLP
By: /s/ XXXXXXX X. XXXXXX
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[AD981200.029]
