EXHIBIT 99.4
xXxxx.xxx, Inc.
January 6, 1999
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
00 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Venture Law Group,
a Professional Corporation
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Re: Merger pursuant to the Agreement and Plan of Merger (the "Agreement")
dated as of October 22, 1999, among Xxxxxx.xxx Inc., a Delaware
corporation ("Parent"), Rocket Acquisition Corp., a Washington
corporation ("Merger Sub"), and xXxxx.xxx, Inc., a Washington
corporation ("Target")
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of
opinions pursuant to the Agreement regarding certain federal income tax
consequences of the Merger. Unless otherwise indicated, capitalized terms not
defined herein have the meanings set forth in the Agreement.
A. Representations
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 through the Effective Time of the Merger:
1. Pursuant to the Merger, Merger Sub will merge with and into Target,
and Target will acquire all of the assets and liabilities of Merger Sub. 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
Target immediately prior to the Merger, and at least ninety percent (90%) of the
fair market value of the net assets and seventy percent (70%) of the fair market
value of the gross assets held by Merger Sub immediately prior to the Merger
will be held by Target after the Merger. For the purpose of determining the
percentage of net and gross assets held by Target immediately following the
Merger, the following assets will be treated as property held by Target or
Merger Sub, as the case may be, immediately prior to the Merger but not by
Target subsequent to the Merger: (i) assets disposed of by Target or Merger Sub
(other than assets transferred by Merger Sub to Target in the Merger) prior to
or subsequent to the
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Merger and in contemplation thereof (including, without limitation, any asset
disposed of by Target or Merger Sub, other than in the ordinary course of
business, pursuant to a plan or intent existing during the period ending at the
Effective Time and beginning with the commencement of negotiations (whether
formal or informal) with Parent regarding the Merger (the "Pre-Merger Period")),
(ii) assets used by Target or Merger Sub to pay other expenses or liabilities
incurred in connection with the Merger, (iii) assets used by Target or Merger
Sub to make payments to dissenting Target shareholders and to Target
shareholders in lieu of fractional shares of Parent stock, and (iv) assets used
by Target or Merger Sub to make distribution, redemption or other payments in
respect of Target stock or rights to acquire such stock (including payments
treated as such for tax purposes) that are made in contemplation of the Merger
or related thereto;
2. Target 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 other than (i) in
the ordinary course of business and (ii) payments for expenses incurred in
connection with the Merger;
3. The Merger is being undertaken for business reasons and not for the
purpose of tax avoidance;
4. At the time of the Merger, except as specified or disclosed in the
Agreement or in a schedule or exhibit to the Agreement, Target will not have any
stock or any other equity interests outstanding and will not have any warrants,
options, convertible securities or any other type of right outstanding pursuant
to which any person could acquire any shares of Target stock or any other equity
interest in Target;
5. In the Merger, shares of Target stock representing "Control" of
Target will be exchanged solely for voting stock of Parent. For purposes of this
certificate, shares of Target stock exchanged in the Merger for cash and other
property (including, without limitation, cash paid to dissenting Target
shareholders and cash paid to Target shareholders in lieu of fractional shares
of Parent stock) will be treated as Target stock outstanding on the date of the
Merger but not exchanged for voting stock of Parent. As used herein, "Control"
of a corporation shall consist of ownership 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 voting stock if rights to vote
such stock (or to restrict or otherwise control the voting of such stock) are
held by a third party (including a voting trust) other than an agent of such
person;
6. At the time of the Merger, there will exist no rights to acquire
Target stock or to vote (or restrict or otherwise control the vote of) Target
stock which, if exercised, could affect Parent's acquisition and retention of
Control of Target;
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7. The liabilities of Target have been incurred by Target in the
ordinary course of its business;
8. Target does not and will not at the Effective Time have any
liability (i) to any Target shareholder incurred in exchange for cash or other
asset transferred to Target, or (ii) to Parent or Merger Sub;
9. No Target shareholder has guaranteed any Target indebtedness that
is currently outstanding or will be outstanding at the Effective Time of the
Merger;
10. The fair market value of Target's assets will, at the Effective
Time, exceed the aggregate liabilities of Target;
11. Other than shares of Target stock or options to acquire Target
stock issued as compensation to present or former service providers (including,
without limitation, employees and directors) of Target in the ordinary course of
business, no issuances of Target stock or rights to acquire Target stock have
occurred or will occur during the Pre-Merger Period other than pursuant to
options, warrants or agreements outstanding prior to the Pre-Merger Period or as
otherwise specifically identified in the Agreement;
12. Cash or other property paid to employees of Target during the Pre-
Merger Period has been or will be in the ordinary course of business or pursuant
to agreements entered into prior to the Pre-Merger Period;
13. Target is not and will not be at the Effective Time an "investment
company" within the meaning of Section 368(a)(2)(F)(iii) and (iv) of the
Internal Revenue Code of 1986, as amended (the "Code");
14. Target 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;
15. Target (i) has not redeemed and will not redeem any of its stock
prior to and in connection with the Merger, and (ii) has not made and will not
make any extraordinary distributions (within the meaning of Section 1.368-
1T(e)(1) of the Treasury Regulations) with respect to its stock prior to and in
connection with the Merger. For the purposes of this representation,
extraordinary distributions will not include periodic dividends that are
consistent with Target's historic dividend practices;
16. No person related to Target (within the meaning of Section 1.368-
1T(e)(2) of the Treasury Regulations) has acquired or will acquire any stock of
Target prior to and in connection with the Merger;
17. Except with respect to payments of cash to dissenting Target
shareholders and to Target shareholders in lieu of fractional shares of Parent
stock, one hundred percent
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(100%) of the Target stock outstanding immediately prior to the Merger will be
exchanged solely for Parent voting stock. Thus, except as set forth in the
preceding sentence, Target intends that no consideration be paid or received
(directly or indirectly, actually or constructively) for Target stock other than
Parent voting stock;
18. At the Effective Time, the fair market value of the Parent stock
received by each Target shareholder will be approximately equal to the fair
market value of the Target stock surrendered in exchange therefor, and the
aggregate consideration received by Target shareholders in exchange for their
Target stock will be approximately equal to the fair market value of all of the
outstanding shares of Target stock immediately prior to the Merger;
19. Except as otherwise specifically provided in the Agreement,
Parent, Merger Sub, Target and the shareholders of Target will each pay
separately its or their own expenses in connection with the Merger;
20. The terms of the Agreement and all other agreements entered into
in connection therewith are the product of arm's-length negotiations;
21. None of the payments received by any shareholder-employees of
Target that are designated as compensation are actually separate consideration
for, or allocable to, any of their shares of Target stock; none of the shares of
Parent stock received by any shareholder-employees of Target in exchange for
shares of Target stock are actually separate consideration for, or allocable to,
any employment agreement or any covenants not to compete; and the compensation
paid to any shareholder-employees of Target 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. No direct or indirect subsidiary of Target owns any shares of
Target stock;
23. Target will continue its historic business through the Effective
Time of the Merger;
24. There is no intercorporate indebtedness existing between Parent
and Target or between Merger Sub and Target;
25. The payment of cash in lieu of fractional shares of Parent stock
in connection with the consummation of the Merger is solely for the purpose of
avoiding the expense and inconvenience to Parent of issuing fractional shares
and does not represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to Target shareholders instead of
issuing fractional shares of Parent stock will not exceed one percent (1%) of
the total consideration that will be issued in the transaction to Target
shareholders in exchange for their stock. The fractional share interests of each
shareholder will be aggregated and no
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Target shareholder will receive cash in an amount equal to or greater than the
value of one full share of Parent stock;
26. Each of the representations made by Target in the Agreement and
any other documents associated therewith is true and accurate; and
27. The undersigned officer is authorized to make all of the
certifications and representations on behalf of Target set forth herein.
B. Reliance by You in Rendering Opinions;
Limitations on Your Opinions
1. The undersigned recognizes that (i) your opinions will be based on
the representations set forth herein and on the statements contained in the
Agreement and 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 are not accurate in all material respects.
2. Notwithstanding anything herein to the contrary, the undersigned
makes no representations regarding any actions or conduct of Target pursuant to
Parent's exercise of control over Target after the Merger.
3. The undersigned recognizes 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,
xXxxx.xxx, Inc., a Washington corporation
By ___________________________________
Its ___________________________________
