Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4 Crane Co. Form S-4 114 706K
2: EX-4.3 Certificate of Designation 7 26K
3: EX-5.1 Opinion of Milbank, Tweed, Hadley & McCloy 2 11K
4: EX-8.1 Form of Milbank, Tweed, Hadley & McCloy 11 39K
5: EX-23.2 Consent of Perkins Coie 1 6K
6: EX-23.3 Independent Auditors' Consent 1 6K
7: EX-23.4 Consent of Independent Accountants 1 6K
8: EX-23.5 Independent Auditors' Consent 1 6K
9: EX-99.1 Form of Interpoint Corporation Proxy 2 10K
10: EX-99.2 Form of Consulting Agreement 4 16K
EX-8.1 — Form of Milbank, Tweed, Hadley & McCloy
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Exhibit 8.1
[Form of Milbank, Tweed, Hadley & McCloy Opinion]
__________ __, 1996
Crane Co.
100 First Stamford Place
Stamford, Connecticut 06902
Federal Income Tax Consequences of the Proposed Spinoff and Merger
Dear Crane Co.:
You have requested our opinion concerning the material federal
income tax consequences of the spinoff by Interpoint Corporation ("Interpoint")
of all of the capital stock of its subsidiary Advanced Digital Information
Corporation ("ADIC") to its shareholders (the "Spinoff") followed by an exchange
by Interpoint shareholders of Interpoint common stock for shares of Crane Co.
voting common stock (the "Merger"), pursuant to (i) the Spinoff Agreements, (ii)
the Agreement and Plan of Merger, dated as of July 1, 1996 (the "Merger
Agreement"), by and among Crane Co., Interpoint and Crane Acquisition Corp., and
(iii) the Registration Statement on Form S-4, filed by Crane Co. with respect to
the Merger (the "Registration Statement"). Capitalized terms used in this
opinion and not otherwise defined have the meanings given to them in the
Registration Statement.
In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, covenants, and
representations contained in originals or copies, certified or otherwise
identified to our satisfaction, of the Merger Agreement, the Proxy
Statement/Prospectus filed as part of the Registration Statement (the "Proxy
Statement/ Prospectus"), and other documents we have deemed necessary and
appropriate. In addition, we
2
have relied upon representations made to us by Crane Co., Interpoint and ADIC
(the "Certificates"). Our opinion is conditioned on, among other things, the
accuracy of the facts, information, covenants and representations set forth in
the Certificates, and their being true at the Effective Time.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of those documents. We have also assumed the
transactions related to the Spinoff and the Merger or contemplated by the Merger
Agreement will be consummated in accordance with the Merger Agreement and as
described in the Proxy Statement/Prospectus.
The opinions set forth here are as of the date of this Letter
and are subject in each case to the truth and accuracy as of the Effective Date
of the representations stated here as being relied upon with respect to our
opinions as to the Spinoff and the Merger. In rendering our opinions, we have
considered the applicable provisions of the Internal Revenue Code of 1986 (the
"Code"), Treasury Regulations promulgated thereunder, pertinent judicial
authorities, Internal Revenue Service ("IRS") interpretive rulings, and other
authorities we considered relevant. We caution that statutes, regulations,
judicial decisions, and administrative interpretations are subject to change at
any time and, in some circumstances, with retroactive effect. A change in the
authorities upon which our opinion is based could affect our conclusions.
THE SPINOFF
Facts:
Interpoint will spinoff all its ADIC shares in a pro-rata
distribution to its shareholders.
In rendering our opinion, we have relied upon the following
representations of Interpoint officers:
- Interpoint owns all of the total combined voting power of ADIC
and all of the total number of shares of all other ADIC stock
classes immediately prior to the distribution.
3
- No intercorporate debt will exist between Interpoint and ADIC
at the time of, or subsequent to, the distribution of ADIC
stock except as may arise after the spinoff under the Tax
Allocation Agreement dated as of _________, 1996 between Crane
and ADIC.
- The total adjusted bases and the fair market value of the
assets transferred to ADIC by Interpoint each equals or
exceeds the sum of the liabilities assumed by ADIC plus any
liabilities to which the transferred assets are subject.
- The liabilities assumed in the transaction and the liabilities
to which the transferred assets are subject were incurred in
the ordinary course of business and are associated with the
assets being transferred.
- Interpoint neither accumulated its receivables nor made
extraordinary payment of its payables in anticipation of the
Spinoff.
- Interpoint will distribute all its ADIC stock and securities.
- No part of the consideration to be distributed by Interpoint
will be received by a shareholder as a creditor, employee, or
in any capacity other than that of a shareholder of the
corporation.
- Interpoint did not acquire control of ADIC within the
preceding five years in a transaction in which gain or loss
was recognized in whole or in part.
- Immediately following the distribution, Interpoint and ADIC
each will be engaged in a trade or business actively conducted
for at least five years prior to the distribution and not
acquired by Interpoint or ADIC during that period in a taxable
transaction.
- Following the transaction, Interpoint and ADIC will each
continue the active conduct of its business, independently and
with its separate employees.
- There is no plan or intention by any shareholder who owns 5
percent or more of the stock of Interpoint, and the Interpoint
management, to its best knowledge, is not aware of any plan or
intention on the part of any other Interpoint shareholder or
security holder to sell, exchange, transfer by gift, or
otherwise dispose of any stock in, or securities of, either
Interpoint (other than in the Merger) or ADIC after the
transaction.
- Other than the Merger, there is no plan or intention to
liquidate either Interpoint or ADIC, to merge either
corporation into any other corporation and, in no event, will
Crane Co. cause or permit Interpoint to be merged into Crane
Co. or a Crane Co. subsidiary within one year of the effective
date of the Merger, or to sell or otherwise dispose of the
assets of either corporation after the Spinoff, except in the
ordinary course of business.
4
- There is no plan or intention by either Interpoint or ADIC,
directly or through any subsidiary corporation, to purchase
any of its outstanding stock after the transaction, other than
stock purchases where: (i) there is a sufficient business
reason for the stock purchase; (ii) the stock to be purchased
is widely held; (iii) the stock purchases will be made in the
open market; and (iv) there is no plan or intention that the
aggregate amount of stock purchases will equal or exceed 20
percent of the outstanding stock of the corporation.
- The distribution of the ADIC stock is carried out for the
following corporate business purpose: to tailor Interpoint's
assets to facilitate the acquisition of Interpoint and its
business by Crane Co., a transaction that otherwise would not
occur. The distribution of the stock, or stock and securities,
of ADIC is motivated, in whole or substantial part, by this
corporate business purpose.
- Immediately before the distribution, items of income, gain,
loss, deduction, and credit will be taken into account as
required by the applicable intercompany transaction
regulations. Further, Interpoint's excess loss account, if
any, with respect to the ADIC stock will be included in income
immediately before the distribution.
- Payments made in connection with all continuing transactions,
if any, between Interpoint and ADIC, will be for fair market
value based on terms and conditions arrived at by parties
bargaining at arm's length.
- No two parties to the transaction are regulated investment
companies, real estate investment trusts, or a corporation
fifty percent of more of the value of whose total assets are
stock and securities, and eighty percent or more of the value
of whose total assets are assets held for investment. In
making the percentage determinations under the preceding
sentence, stock and securities in any subsidiary corporation
are disregarded and the parent corporation is deemed to own
its ratable share of the subsidiary's assets, and a
corporation is considered a subsidiary if the parent owns
fifty percent or more of the combined voting power of all
classes of stock entitled to vote or fifty percent or more of
the total value of shares of all classes of stock outstanding.
In rendering our opinion, we have relied upon the following
representations of Crane Co. officers:
- Crane Co. would not otherwise acquire Interpoint if Interpoint
owned ADIC.
- Crane Co. has no plan or intention to acquire ADIC stock or
securities.
5
Analysis:
Interpoint's pro-rata spinoff of its ADIC shares to its
shareholders will be tax-free because the following Code Section355 requirements
have been or will be satisfied:
- Interpoint will have "control" of ADIC immediately prior to
the distribution.(1) "Control" for this purpose requires
Interpoint to own at least 80 percent of the total combined
voting power of ADIC and at least 80 percent of the total
number of shares of all other ADIC stock classes.(2)
Interpoint owns all the ADIC stock.
- Immediately following the distribution, Interpoint and ADIC
each will be engaged in a trade or business actively conducted
for at least five years prior to the distribution and not
acquired by Interpoint or ADIC during that period in a taxable
transaction.(3)
- The spinoff transaction will not be used "principally as a
device" to distribute Interpoint's or ADIC's earnings and
profits.(4)
Interpoint has a good corporate business purpose for spinning off its ADIC
shares to its shareholders -- to tailor Interpoint's assets to facilitate the
subsequent tax-free acquisition of Interpoint by Crane Co.(5) A good corporate
business purpose is evidence the spinoff was not used principally as a device
for the distribution of earnings and profits.(6)
- Interpoint did not acquire control of ADIC within the
preceding five years in a transaction in which gain or loss
was recognized in whole or in part.(7)
- Interpoint will distribute all its ADIC stock and
securities.(8)
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1 Code Section355(a)(1)(A).
2 Code SectionSection355(a)(1)(D)(ii) & 368(c).
3 Code Section355(a)(1)(C), (b)(2)(B), & (b)(2)(C); Treas. Reg.
Section1.355-3(b).
4 Code Section355(a)(1)(B).
5 Rev. Proc. 96-30, Appendix A, Section2.07, 1996-19 I.R.B. 1 (June 10, 1996).
6 Treas. Reg. Section1.355-2(b)(4), (d)(3)(ii).
7 Code Section355(b)(2)(D).
8 Code Section355(a)(1)(D).
6
- Interpoint has a good corporate business purpose for spinning
off its ADIC shares to its shareholders -- to tailor
Interpoint's assets to facilitate a subsequent tax-free
acquisition of Interpoint by Crane that otherwise would not
occur.(9)
- Predistribution Interpoint shareholders will maintain their
continuity of interest in Interpoint and ADIC following the
distribution and the Merger.(10)
Crane Co.'s tax-free acquisition of Interpoint following Interpoint's pro-rata
spinoff of ADIC shares will not destroy the Code Section355 continuity of
interest by the former Interpoint shareholders.(11)
- Interpoint and ADIC will satisfy the continuity of business
enterprise requirement following the distribution.(12)
Based upon the foregoing, our opinion is:
1. Interpoint will spinoff all its ADIC shares in a tax-free,
pro-rata distribution to its shareholders. Code Section355.
2. No gain or loss will be recognized to Interpoint upon the
distribution of all its ADIC shares. Code Section355(c).
3. No gain or loss will be recognized to (and no amount will
be included in the income of) any of the Interpoint shareholders upon
their receipt of ADIC shares. Code Section355(a)(1).
4. The basis of the stock of ADIC and Interpoint in the hands
of the Interpoint shareholders after the distribution will, in each
instance, be the same as the shareholders' aggregate bases in their
Interpoint stock immediately prior to the distribution, allocated in
proportion to the fair market value of each in accordance with Treas.
Reg. Section1.358-1(a) & -2(a)(2). Code Section358(b)(2).
5. The holding period of the ADIC shares to be received by the
Interpoint shareholders will, in each instance, include the holding
period of the Interpoint stock with respect to which the distribution
will be made, provided the shares were held as a capital asset on the
date of the exchange. Code Section1223(1).
--------
9 Rev. Proc. 96-30, Appendix A,Section2.07, 1996-19 I.R.B. 1 (June 10, 1996).
10 Treas. Reg.Section1.355-2(c).
11 Rev. Rul. 70-434, 1970-2 C.B. 83 (continuity of interest requirement not
broken by (B) reorganization following spinoff).
12 Treas. Reg. Section1.355-1(b).
7
THE MERGER
Facts:
Following Interpoint's spinoff of its ADIC shares to its
shareholders, Crane Co.'s transitory subsidiary will merge into Interpoint.
Interpoint shareholders will receive solely Crane Co. voting common stock and,
after the Merger, Crane Co. will own 100 percent of Interpoint.
In rendering our opinion, we have relied upon the following
representations of Crane Co. and Interpoint officers:
- The fair market value of Crane Co. common stock and other
consideration received by each Interpoint shareholder will be
approximately equal to the fair market value of the Interpoint
common stock surrendered in the exchange.
- There is no plan or intention by any Interpoint common
shareholder who owns five percent or more of Interpoint common
stock, and to the best of the knowledge of the Interpoint
management, there is no plan or intention on the part of the
remaining Interpoint common shareholders collectively to sell,
exchange, or otherwise dispose of a number of shares of Crane
Co. stock received in the Merger that would reduce the
Interpoint shareholders' ownership of Crane Co. to a number of
shares having a value, as of the date of the Merger, of less
than 50 percent of the value of all of the formerly
outstanding Interpoint common stock as of the same date.
Shares of Interpoint common stock surrendered by dissenters or
exchanged for cash in lieu of fractional shares of Crane Co.
stock will be treated as outstanding Interpoint common stock
on the Merger date. Moreover, shares of Interpoint common
stock and shares of Crane Co. common stock held by Interpoint
shareholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the transaction will be considered as
having been disposed of in making this representation.13
- Prior to the Merger, Crane Co. will own all the outstanding
Acquisition Corp. stock.
- Interpoint has no plan or intention to issue additional shares
of its stock that would result in Crane Co. owning less than
80 percent of the total combined voting power and 80 percent
of the total number of shares of each other Interpoint stock
class.
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13 Rev. Rul. 66-224, 1966-2 C.B. 114 (50 percent equity continuity of interest,
by value, found adequate); Rev. Proc. 77-37, 1977-2 C.B. 568 (IRS considers
contemporaneous sales and redemptions if part of the plan in making the
continuity determination); Boris I. Bittker & James S. Eustice, Federal
Income Taxation of Corporations and Shareholders 12-28 (6th ed. 1994) (IRS
views a 50 percent continuity-of-equity interest by value as sufficient).
8
- Crane Co. has no plan or intention to reacquire any of its
stock issued in the Merger, although Crane may from time to
time, consistently with its prior practices, purchase some of
its stock from sellers in New York Stock Exchange transactions
or from employees to facilitate employee benefit plan
transactions (e.g., in connection with stock option exercises
or withholding on the vesting of restricted stock).
- Crane Co. has no plan or intention to liquidate Interpoint; to
merge Interpoint into another corporation and, in no event, to
cause or permit Interpoint to be merged into Crane Co. or a
Crane Co. subsidiary within one year of the effective date of
the Merger; to cause Interpoint to sell or otherwise dispose
of any of its assets, except for dispositions made in the
ordinary course of business; or to sell or otherwise dispose
of any of the Interpoint shares acquired in the transaction,
except possibly for transfers of stock to corporations
controlled by Crane.
- Acquisition Corp. will have no liabilities. Acquisition Corp.
will not transfer to Interpoint any assets subject to
liabilities, in the Merger.
- Following the Merger, Interpoint will continue its historic
business and use a significant portion of its historic
business assets.14
- Crane Co., Interpoint and the Interpoint shareholders will pay
their respective expenses, if any, incurred in connection with
the Merger.
- There is no intercorporate indebtedness existing between Crane
Co. and Interpoint or between Acquisition Corp. and Interpoint
that was issued, acquired, or will be settled at a discount.
- Crane Co. will acquire Interpoint stock solely in exchange for
Crane Co. voting common stock. For purposes of this
representation, Interpoint stock redeemed for cash or other
property furnished by Crane Co. will be considered as acquired
by Crane Co. Further, no liabilities of Interpoint or the
Interpoint shareholders will be assumed by Crane Co., nor will
any of the Interpoint stock be subject to any liabilities.
- Immediately prior to the Merger, Interpoint will make cash
payments to all stock option holders fully satisfying all
outstanding options in respect of Interpoint shares. No funds
will be supplied for that purpose, directly or indirectly, by
Crane Co., nor will Crane Co. directly or indirectly reimburse
Interpoint for any payments to stock option holders.
- At the time of the Merger, Interpoint will not have
outstanding any warrants, options, convertible securities, or
any other type of right pursuant to which any person could
acquire stock of Interpoint that, if exercised or converted,
would
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(14) Treas. Reg. Section1.368-1(d) (1980). See generally Bittker & Eustice,
supra note 13, at 12-204.
9
affect Crane Co.'s acquisition or retention of at least 80
percent of the total combined voting power and at least 80
percent of the total number of shares of each other Interpoint
stock class.
- Crane Co. does not own, nor has it owned during the past five
years, any shares of the Interpoint stock. [If its has, it
will have sold all the shares in arm's length sales prior to
the Merger.]
- No two parties to the Merger are regulated investment
companies, real estate investment trusts, or a corporations
fifty percent or more of the value of whose total assets are
stock and securities, and eighty percent or more of the value
of whose total assets are assets held for investment. In
making the percentage determinations under the preceding
sentence, stock and securities in any subsidiary corporation
are disregarded and the parent corporation is deemed to own
its ratable share of the subsidiary's assets, and a
corporation is considered a subsidiary if the parent owns
fifty percent or more of the combined voting power of all
classes of stock entitled to vote or fifty percent or more of
the total value of shares of all classes of stock outstanding.
- Interpoint will pay its dissenting shareholders the value of
their stock out of its own funds. No funds will be supplied
for that purpose, directly or indirectly, by Crane Co., nor
will Crane Co. directly or indirectly reimburse Interpoint for
any payments to dissenters.
- On the date of the Merger, the fair market value of the assets
of Interpoint will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which its assets are
subject.
- Interpoint is not 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.
- Crane Co.'s ownership of the two microelectronic corporations,
Interpoint and Crane Co.'s existing subsidiary, ELDEC, will
result in decreased aggregate research and development,
production and sales costs, thereby creating the opportunity
for more competitive pricing and greater profits.
- Crane Co. will be able to consolidate certain corporate and
administrative functions common to both Interpoint and ELDEC,
thereby reducing duplicative positions, reducing other
non-labor corporate and administrative expenses, and limiting
or avoiding duplicative expenditures for administrative and
customer service programs and information systems.
10
Analysis:
For the Merger to qualify as a tax-free reverse subsidiary (A)
merger under Code Section368(a)(2)(E), Interpoint, after the Merger, must hold
substantially all of its and the Crane Co. subsidiary's assets.(15) Interpoint's
spinoff of all its ADIC shares to its shareholders prior to the reorganization
causes Interpoint to fail the substantially all requirement of Code
Section368(a)(2)(E).(16)
Although the transaction will not qualify as a tax-free
reverse subsidiary merger, it will qualify as a tax-free forced (B)
reorganization under Code Section368(a)(1)(B).(17) The (B) reorganization
requirements will be satisfied because:
- Crane Co. will acquire Interpoint stock solely in exchange for
Crane Co. voting common stock; and
- Crane Co. will acquire, in the reorganization, at least 80
percent of the total combined voting power of Interpoint plus
at least 80 percent of the total number of shares of all other
Interpoint stock classes.(18)
Immediately prior to the Effective Time, Interpoint will make
cash payments to holders of certain stock options outstanding pursuant to the
Spinoff Agreements and the Company Option Plans in full satisfaction of all
stock options. All Interpoint Option Plans will be terminated and all
outstanding options in respect of Interpoint shares will be fully satisfied.
Based upon the foregoing, our opinion is:
1. The Merger will constitute a reorganization within the
meaning of Code Section368(a)(1)(B), and Crane Co., Interpoint, and
Acquisition Corp. will each be a party to the reorganization within the
meaning of Code Section368(b).
2. No gain or loss will be recognized by Interpoint, Crane
Co., or Acquisition Corp. upon the receipt by Crane Co. of Interpoint
stock solely in exchange for Crane Co. voting common stock. Rev. Rul.
57-278, 1957-1 C.B. 124.
--------
(15) Code Section368(a)(2)(E)(i); see Rev. Proc. 77-37, Section3.01, 1977-2
C.B. 568 (substantially all of corporation's assets means 90 percent of
corporation's net assets and 70 percent of corporation's gross assets).
(16) See Helvering v. Elkhorn Coal Co., 95 F.2d 732 (4th Cir. 1938).
(17) Rev. Rul. 67-448, 1967-2 C.B. 144; see Treas. Reg. Section1.368-2(j)(7),
examples (4) & (5).
(18) Code Section368(c); Bittker & Eustice, supra note 13, at 12-50.
11
3. The basis of the Interpoint stock received by Crane Co.
will be the same as the basis of the stock in the hands of the
Interpoint shareholders immediately prior to the exchange. Code
Section362(b).
4. The holding period of the Interpoint stock received by
Crane Co. will include the period during which the stock was held by
Interpoint shareholders. Code Section1223(2).
5. No gain or loss will be recognized by an Interpoint
shareholder who receives solely shares of Crane Co. common stock in
exchange for Interpoint common stock. Code Section354(a)(1). An
Interpoint shareholder who receives cash in lieu of fractional shares
of Crane Co. common stock will recognize gain or loss equal to the
difference between the cash received and the tax basis allocated to the
fractional share interest.(19) Any gain or loss recognized by a
shareholder will constitute capital gain or loss.
6. The basis of the Crane Co. voting common stock received by
the Interpoint shareholders will be the same as the basis of the
Interpoint stock surrendered in the exchange, reduced by the tax basis
allocable to any fractional share interest in Crane Co. common stock
with respect to which cash is being received. Code Section358(a)(1).
7. The holding period of the Crane Co. voting common stock
received by the Interpoint shareholders includes the holding period of
the Interpoint stock surrendered in the exchange, provided the shares
of Interpoint stock were held as a capital asset on the date of the
exchange. Code Section1223(1).
Except as expressly set forth above, we express no opinion to
any party as to the tax consequences, whether federal, state, local or foreign,
of the Merger or any transaction related to the Merger or contemplated by the
Merger Agreement or the Proxy Statement/Prospectus. We are furnishing this
opinion to you solely in connection with the Merger Agreement Section7.02(d),
which states Crane Co. and Acquisition Corp.'s obligation to effect the Merger
is conditioned on the delivery of this opinion. This opinion is solely for your
benefit and is not to be used, circulated, quoted or otherwise referred to for
any purpose without our express prior written permission.
Very truly yours,
[Milbank, Tweed, Hadley & McCloy]
RAJ/SF/SAR
Tax 31771_4
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(19) See Rev. Rul. 66-365, 1966-2 C.B. 116 (cash in lieu of fractional shares
treated as a distribution in full payment in exchange for the fractional
share interest under Code Section302(a)).
Dates Referenced Herein
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| Filed on: | | 9/10/96 | | | | | | | None on these Dates |
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| | 6/10/96 | | 5 | | 6 |
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