EXHIBIT 8.1
December 9, 1999
Sandpiper Networks, Inc.
000 Xxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Attention: Xx. Xxx X. Xxxxxxx
Re: Agreement and Plan of Reorganization Dated as of October 24, 1999
By and Among Digital Island, Inc., Beach Acquisition Corp., and
Sandpiper Networks, Inc.
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Dear Sir:
We have acted as counsel for Sandpiper Networks, Inc., a California
corporation ("Sandpiper"), in connection with the merger (the "Merger") of Beach
Acquisition Corp., a California corporation ("Merger Sub") and wholly-owned
subsidiary of Digital Island, Inc., a Delaware corporation ("Island"), with and
into Sandpiper pursuant to an agreement and plan of reorganization, dated as of
October 24, 1999 by and among Sandpiper, Merger Sub and Island (the "Merger
Agreement").
In that connection, you have requested our opinion regarding certain U.S.
Federal income tax consequences of the Merger. In providing our opinion, we
have examined the Merger Agreement, the registration statement on Form S-4 (the
"Registration Statement"), which includes the Joint Proxy Statement and
Prospectus of Sandpiper and Island (the "Proxy Statement/Prospectus"), filed
with the Securities and Exchange Commission (the "SEC") on December 9, 1999,
and such other documents and corporate records as we have deemed necessary or
appropriate for purposes of our opinion. In our examination, we have assumed
the genuineness of all signatures, the legal capacity of all natural persons,
the authority of all persons signing documents, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such copies. In addition, we have assumed
that (i) the Merger will be consummated in accordance with the provisions of the
Merger Agreement and the Registration Statement, (ii) the statements concerning
the Merger set forth in the Merger Agreement and the Registration Statement are
true, complete and correct, (iii) the representations
Sandpiper Networks, Inc.
December 9, 1999
Page 2
made by Sandpiper and Island, in their respective letters delivered to us for
purposes of this opinion (the "Representation Letters") are true, complete and
correct and will remain true, complete and correct at all times up to and
including the Effective Time (as defined in the Merger Agreement), and (iv) any
representations made in the Representation Letters "to the best knowledge of" or
similarly qualified are correct without such qualification. We have made no
independent investigation with regard to such statements or representations. We
assume that no actions will be taken that are inconsistent with such statements
and representations. If any of the above described assumptions are untrue for
any reason or if the Merger is consummated in a manner that is different from
the manner in which it is described in the Merger Agreement or the Proxy
Statement/Prospectus, our opinions as expressed below may be adversely affected
and may not be relied upon.
Based upon the foregoing, for U.S. Federal income tax purposes, we are of
opinion that (i) the Merger will constitute a reorganization within the meaning
of Section 368 (a) of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) Sandpiper, Merger Sub and Island will each be a party to such
reorganization within the meaning of Section 368 (b) of the Code; (iii) except
as provided below, holders of Sandpiper stock (a) will not recognize gain or
loss for federal income tax purposes as a result of the exchange of their shares
of Sandpiper stock for Island common stock in the Merger, except with respect to
cash received instead of a fractional share of Island common stock, as discussed
below, and (b) will have a tax basis in the Island stock received in the Merger
equal to the tax basis of the Sandpiper stock surrendered in the Merger less any
tax basis of the Sandpiper stock surrendered that is allocable to a fractional
share of Island common stock for which cash is received; (iv) a Sandpiper
shareholder's holding period with respect to the Island common stock received in
the Merger will include the holding period of the Sandpiper stock surrendered in
the Merger therefor, assuming the shareholder holds the shares of Sandpiper
stock as a capital asset on the date of the exchange; and (v) to the extent that
a holder of shares of Sandpiper stock receives cash instead of a fractional
share of Island common stock, the holder will recognize gain or loss for federal
income tax purposes, measured by the difference between the amount of cash
received and the portion of the tax basis of the holder's shares of Sandpiper
stock allocable to such fractional share of Island common stock. Assuming the
shareholder holds the shares of Sandpiper stock as a capital asset on the date
of the exchange, the gain or loss will be a capital gain or loss and will be a
long-term capital gain or loss if the share of Sandpiper stock exchanged for the
fractional share of Island common stock was held for more than one year at the
Effective Time.
Our opinion does not address all aspects of United States federal income
taxation that may be relevant to a Sandpiper shareholder in light of the
shareholder's particular circumstances or to those Sandpiper shareholders
subject to special rules, such as shareholders who are not citizens or residents
of the United States or organized under the laws of the United States,
Sandpiper Networks, Inc.
December 9, 1999
Page 3
financial institutions, tax-exempt organizations, insurance companies, brokers
or dealers in securities, traders in securities electing xxxx to market,
shareholders who acquired their Sandpiper stock pursuant to the exercise of
options or similar derivative securities or otherwise as compensation or
shareholders who hold their Sandpiper stock pursuant to a tax-qualified
retirement plan or as part of a straddle, hedge or conversion transaction.
Our opinion is limited to the federal income tax matters addressed, and no
opinion is rendered with respect to any other issue, including any other tax
aspects of the Merger. In particular, we express no opinion with respect to the
tax consequences of any Island common stock received other than in exchange for
Sandpiper stock or with respect to any state, local or foreign tax consequences
of the Merger. In addition, our conclusions are based on federal income tax law
currently in effect, which is subject to change on a prospective or retroactive
basis. If any assumption or representation described above or contained in the
Merger Agreement or the Representations Letters is not true, correct and
complete, or in the event of a change in law adversely affecting the conclusions
reached in this letter, our opinion will be void and of no force or effect. You
should be aware that although this letter represents our opinion concerning the
matter specifically discussed, it is not binding on the courts or on any
administrative agency, including the Internal Revenue Service, and a court or
agency may hold or act to the contrary. We undertake no obligation to update
this letter or our opinion at any time. Our opinion is provided to you as a
legal opinion only, and not as a guaranty or warranty, and is limited to the
specific transactions, documents and matter described above. No opinion may be
implied or inferred beyond that which is expressly stated in this letter.
This opinion is furnished solely for the benefit of Sandpiper in connection
with the Merger Agreement and may not be filed with or furnished to any
individual, entity, association, agency or other person and may not be quoted or
referred to, orally or in writing, in whole or in part, without our prior
written consent.
We hereby consent to the use of our name in the Registration Statement and
in the Joint Proxy Statement/Prospectus filed as a part thereof and to the
filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Xxxxxxx & XxXxxxxx
Xxxxxxx & XxXxxxxx
