EXHIBIT 8.2
September 3, 1999
Capital Re Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This opinion is being delivered to you in accordance with Section
7.3(e) of the Agreement and Plan of Merger (the "Agreement"), dated as of June
10, 1999, by and among Ace Limited ("Ace"), a Cayman Islands corporation, CapRe
Acquisition Corp. ("MergerSub"), a Delaware corporation and wholly-owned
subsidiary of Ace, and Capital Re Corporation ("Capital Re"), a Delaware
corporation. Pursuant to the Agreement, MergerSub will be merged with and into
Capital Re (the "Merger").
In connection with the preparation of this opinion, we have examined
and with your consent relied upon (without any independent investigation or
review thereof) the following documents (including all exhibits and schedules
thereto): (1) the Agreement; (2) the Registration Statement on Form S-4 as filed
with the Securities and Exchange Commission (the "Registration Statement"),
including the Proxy Statement/Prospectus of Ace and Capital Re; (3)
representations and certifications made to us by Ace (attached hereto as Exhibit
A); (4) representations and certifications made to us by Capital Re (attached
hereto as Exhibit B); (5) such other instruments and documents related to the
formation, organization and operation of Ace, MergerSub and Capital Re or to the
consummation of the Merger and the transactions contemplated thereby as we have
deemed necessary or appropriate. In addition, we have reviewed the form of
opinion of counsel, to be received by Xxx from Xxxxx, Xxxxx & Xxxxx, counsel
to Ace with respect to the tax consequences of the proposed transaction (the
"Xxxxx, Xxxxx & Xxxxx Opinion")./1/
The Proposed Transaction
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Based solely upon our review of the documents set forth above, and
upon such information as Ace, MergerSub and Capital Re have provided to us
(which we have not attempted to verify in any respect), and in reliance upon
such documents and information, we understand that the proposed transaction and
the relevant facts with
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/1/ All capitalized terms used herein and not otherwise defined shall have
the same meaning as they have in the Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
respect thereto are as follows:
Xxx is the owner of all of the outstanding stock of MergerSub, a
Delaware corporation. Ace is a publicly owned holding company that, through its
Bermuda-based operating subsidiaries, provides a broad range of insurance and
reinsurance products to a diverse group of international clients. MergerSub was
organized solely for the purpose of accomplishing the merger described below.
Capital Re is a holding company that through its subsidiaries provides
value-added reinsurance products for several specialty insurance markets.
Because Capital Re and Ace believe that their businesses will be
complementary, it is proposed that pursuant to the Agreement and the laws of the
State of Delaware, Merger Sub merge with and into Capital Re. MergerSub's
separate corporate existence will cease and Capital Re will be the surviving
corporation (the "Surviving Corporation"). As the Surviving Corporation, Capital
Re will succeed to all of the assets and liabilities of MergerSub under Delaware
corporate law.
By virtue of the Merger, each share of Capital Re Common Stock issued
and outstanding immediately prior to the Effective Time (other than any shares
of Capital Re Common Stock owned by Capital Re, Ace or any direct or indirect
Subsidiary of Ace or Capital Re, which will be canceled, unless such shares are
owned on behalf of third parties) will be converted into and become exchangeable
for the right to receive .60 of an ordinary share, par value $.041666667 per
share, of Ace ("Ace Shares"); provided however that if the Average Closing Price
for the twenty consecutive trading days ending three trading days prior to the
Effective Time is equal to or greater than $36.67 per Ace Share, the Exchange
Ratio will be equal to 22 (twenty-two) divided by the Average Closing Price.
Cash will be paid in lieu of the issuance of any fractional Ace Shares. Except
with respect to payments of cash to Capital Re shareholders in lieu of
fractional shares of ACE Stock, no consideration will be paid or received
(directly or indirectly, actually or constructively) for Capital Re Common Stock
other than ACE Stock.
In addition, at the Effective Time, each share of common stock of
MergerSub issued and outstanding immediately prior to the Effective Time will be
converted into one validly issued, fully-paid and nonassessable share of common
stock, $0.01 par value, of Capital Re.
Assumptions and Representations
-------------------------------
In connection with rendering this opinion, we have assumed or obtained
representations (and, with your consent, are relying thereon, without any
independent investigation or review thereof, although we are not aware of any
material facts or circumstances contrary to or inconsistent therewith) that:
1. All information contained in each of the documents we have
examined and relied upon in connection with the preparation of this opinion is
accurate and completely describes all material facts relevant to our opinion,
all copies are accurate and all signatures are genuine. We have also assumed
that there has been (or will be by
the Effective Time of the Merger) due execution and delivery of all documents
where due execution and delivery are prerequisites to the effectiveness thereof.
2. The Merger will be consummated in accordance with applicable state
law and will qualify as a statutory merger under applicable state law.
3. All representations made in the exhibits hereto are true, correct,
and complete in all material respects. Any representation or statement made "to
the best of knowledge" or similarly qualified is correct without such
qualification.
4. The Merger will be consummated in accordance with the Agreement
and as described in the Proxy Statement/Prospectus (including satisfaction of
all covenants and conditions to the obligations of the parties without amendment
or waiver thereof); each of Ace, Merger Sub and Capital Re will comply with all
reporting obligations with respect to the Merger required under the Code and the
Treasury Regulations thereunder; and the Agreement and all other documents and
instruments referred to therein or in the Proxy Statement/Prospectus are valid
and binding in accordance with their terms.
Opinion - Federal Income Tax Consequences
-----------------------------------------
Based upon and subject to the assumptions and qualifications set forth
herein, it is our opinion, as of the date hereof, that for Federal income tax
purposes:
(a) the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code and
(b) each of Capital Re, Ace and MergerSub will be a party to that
reorganization with in the meaning of Section 368(b) of the Code.
These opinions will not be applicable in determining the federal
income tax consequences of the Merger to any Capital Re shareholder who is a
U.S. person and a "five percent transferee shareholder" within the meaning of
Treasury Regulations Section 1.367(a)-3(c)(5)(ii), unless such "five percent
transferee shareholder" enters into a "gain recognition agreement" as described
in Treasury Regulations Section 1.367(a)-8.
In addition to the assumptions set forth above, these opinions are
subject to the exceptions, limitations and qualifications set forth below:
1. These opinions represent and are based upon our best judgment
regarding the application of relevant current provisions of the Code and
interpretations of
the foregoing as expressed in existing court decisions, administrative
determinations (including the practices and procedures of the Internal Revenue
Service (the "IRS") in issuing private letter rulings, which are not binding on
the IRS except with respect to the taxpayer that receives such a ruling) and
published rulings and procedures all as of the date hereof. An opinion of
counsel merely represents counsel's best judgment with respect to the probable
outcome on the merits and is not binding on the Internal Revenue Service or the
courts. There can be no assurance that positions contrary to our opinions will
not be taken by the IRS, or that a court considering the issues would not hold
contrary to such opinions. Xxx has not requested a ruling from the IRS (and no
ruling will be sought) as to any of the federal income tax consequences
addressed in these opinions. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, would not adversely affect the accuracy of the opinions
expressed herein. Nevertheless, we undertake no responsibility to advise you of
any new developments in the law or in the application or interpretation of the
federal income tax laws.
2. This letter addresses only the specific tax opinions set forth
above. This letter does not address any other federal, state, local or foreign
tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger).
3. We express no opinion regarding, among other things, the tax
consequences of the Merger (including the opinions set forth above) as applied
to specific stockholders of Capital Re that may be relevant to particular
classes of Capital Re shareholders, such as dealers in securities, corporate
shareholders subject to the alternative minimum tax, foreign persons, and
holders of shares acquired upon exercise of stock options or in other
compensatory transactions. Furthermore, we express no opinion regarding the tax
consequences of the receipt of Ace Shares by Capital Re shareholders pursuant to
the exercise of employee stock options.
4. Our opinions set forth herein are based upon the description of
the contemplated transactions as set forth above in the section captioned "The
Proposed Transaction," the Agreement and the Proxy Statement/Prospectus. If the
actual facts relating to any aspect of the transactions differ from this
description in any material respect, our opinions may become inapplicable. No
opinion is expressed as to any transaction other than those set forth in the
section captioned "The Proposed Transaction," the Agreement and the Proxy
Statement/Prospectus or to any transaction whatsoever, including the Merger, if
all the transactions described in the section captioned "The Proposed
Transaction," the Agreement and the Proxy Statement/Prospectus are not
consummated in accordance with the terms of the section captioned "The Proposed
Transaction," the Agreement and the Proxy Statement/Prospectus 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 these opinions is incorrect, our opinions might be adversely affected
and may not be relied
upon.
This opinion is provided to Capital Re Corporation only, and without
our prior consent, may not be relied upon, used, circulated, quoted or otherwise
referred to in any manner by any person, firm, governmental authority or entity
whatsoever other than reliance thereon by the holders of Capital Re Common
Stock. Notwithstanding the prior sentence, we hereby consent to the use of the
opinion letter as an exhibit to the Registration Statement and to the use of our
name in the Registration Statement. In giving the consent, we do not thereby
admit that we are an "expert" within the meaning of the Securities Act of 1933,
as amended.
Sincerely yours,
/s/ Xxxxx & Xxxxxxx L.L.P.
XXXXX & XXXXXXX L.L.P.
