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Exhibit 8.1
[COOLEY GODWARD LETTERHEAD]
July 12, 1996
WEBB B. MORROW III
Direct: (415) 843-5080
JTS Corporation Internet: morrowwb@cooley.com
166 Baypointe Parkway
San Jose, California 95134
Ladies and Gentlemen:
This opinion is being delivered to you in accordance with Section 6.1(f) of the
Amended and Restated Agreement and Plan of Reorganization dated April 8, 1996
(the "Reorganization Agreement") by and between JTS Corporation, a Delaware
corporation ("JTS") and Atari Corporation, a Nevada corporation (the "Company").
Atari will merge into JTS (the "Merger") pursuant to the Reorganization
Agreement and related Certificate of Merger to be filed by JTS and Atari with
the Secretaries of State of Delaware and Nevada on the Closing Date
(collectively, including the exhibits to each, the "Agreements").
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Reorganization Agreement or in certificates dated June
14, 1996 delivered to us by JTS and Atari containing certain representations of
JTS and Atari (the "Certificates of Representations"). All section references,
unless otherwise indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
We have acted as counsel to JTS in connection with the Merger. As such, and for
the purpose of rendering this opinion, we have examined originals, certified
copies or copies otherwise identified to our satisfaction as being true copies
of the original of the following documents (including all exhibits and schedules
attached thereto):
(a) the Agreements;
(b) the Certificates of Representations;
(c) Continuity of Interest Certificates executed and delivered by
certain shareholders of Atari (the "Continuity of Interest Certificates"); and
(d) such other instruments and documents related to the formation,
organization and operation of JTS and Atari and related to the consummation of
the Merger and the transactions contemplated thereby as we have deemed necessary
or appropriate.
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In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof):
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there is (or
will be prior to the Closing) due execution and delivery of all documents where
due execution and delivery are a prerequisite to the effectiveness thereof;
2. The truth and accuracy at all relevant times, of all
representations, warranties and statements made or agreed to by JTS and Atari,
their managements, employees, officers, directors and shareholders in connection
with the Merger, including but not limited to those set forth in the Agreements
(including the exhibits) and in the Certificates of Representations and in the
Continuity of Interest Certificates; and that all covenants contained in such
agreements are performed without waiver or breach of any material provision
thereof;
3. There is no plan or intention on the part of Atari's shareholders to
engage in a sale, exchange, transfer, distribution, pledge or other disposition
(including a distribution by a corporation to its shareholders) or any
transaction which would result in a reduction of risk of ownership, or a direct
or indirect disposition (a "Sale") of shares of JTS Common Stock to be received
in the Merger that would reduce Atari shareholders' ownership of JTS Common
Stock to a number of shares having an aggregate fair market value, as of the
Effective Time, of less than fifty percent (50%) of the aggregate fair market
value of all of the capital stock of Atari outstanding immediately prior to the
consummation of the Merger. Shares of Atari capital stock (a) with respect to
which dissenters' rights are exercised in the Merger (b) which are exchanged for
cash in lieu of fractional shares of JTS Common Stock or (c) which are sold,
redeemed or disposed of in a transaction that is in contemplation of or related
to the Merger, shall be considered shares of capital stock of Atari which are
exchanged in the Merger for shares of JTS Common Stock which are then disposed
of pursuant to a plan.
Based on our examination of the foregoing items and subject to the limitations,
qualifications, assumptions and caveats set forth herein, we are of the opinion
that for federal income tax purposes:
1. The merger of Atari into JTS will be a reorganization within the
meaning of Section 368(a)(1)(A) of the Code.
2. No gain or loss will be recognized by holders of Atari capital stock
solely upon their receipt of JTS capital stock solely in exchange for Atari
capital stock in the Merger (except to the extent of cash received in lieu of a
fractional share of JTS capital stock).
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3. The aggregate tax basis of the JTS capital stock received by Atari
stockholders in the Merger will be the same as the aggregate tax basis of Atari
capital stock surrendered in exchange therefor less the tax basis, if any,
allocated to fractional share interests.
4. The holding period of the JTS capital stock received in the Merger
will include the period for which the Atari capital stock surrendered in
exchange therefor was held, provided that the Atari capital stock is held as a
capital asset at the time of the Merger.
5. Cash payments received by holders of Atari capital stock in lieu of
a fractional share will be treated as if a fractional share of JTS capital stock
had been issued in the Merger and then redeemed by JTS. A stockholder of Atari
receiving such cash will generally recognize gain or loss upon such payment,
equal to the difference (if any) between such stockholder's basis in the
fractional share and the amount of cash received.
6. A shareholder who exercises appraisal or dissenters' rights with
respect to a share of JTS capital stock and who receives payment for such stock
in cash should generally recognize capital gain or loss (if such share was held
as a capital asset at the time of the Merger) measured by the difference between
the shareholder's basis in such share and the amount of cash received, provided
that such payment is neither essentially equivalent to a dividend nor has the
effect of a distribution of a dividend (a "Dividend Equivalent Transaction"). A
sale of capital stock of JTS pursuant to an exercise of appraisal or dissenters'
rights will generally not be a Dividend Equivalent Transaction if, as a result
of such exercise, the shareholder exercising dissenters' rights and all parties
related to such Shareholder own no shares of JTS Stock (either actually or
constructively with the meaning of Section 318 of the Code) after the Merger.
If, however, a stockholder's sale for cash of JTS capital stock pursuant to an
exercise of appraisal or dissenters' rights is a Dividend Equivalent
Transaction, then such shareholder will generally recognize income for federal
income tax purposes in an amount up to the entire amount of cash so received.
7. Neither JTS nor Atari will recognize material amounts of gain solely
as a result of the Merger.
In addition, we have reviewed the discussion contained in the Prospectus/Proxy
Statement included in the Registration Statement on the Form S-4 under "THE
MERGER - Certain Federal Income Tax Matters" (the "Tax Discussion") and we
believe that, subject to the qualifications and limitations contained in the Tax
Discussion, the matters stated in the Tax Discussion, to the extent they
represent matters of law or legal conclusions, are fairly presented.
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This opinion does not address the various state, local or foreign tax
consequences that may result from the Merger. In addition, no opinion is
expressed as to any federal income tax consequence of the Merger except as
specifically set forth herein and this opinion may not be relied upon except
with respect to the consequences specifically discussed herein.
No opinion is expressed as to any transaction other than the Merger as described
in the Agreements or to any other transaction whatsoever including the Merger if
all the transactions described in the Agreements are not consummated in
accordance with the terms of the Agreements and without waiver of any material
provision thereof. To the extent any of the representations, warranties,
statements and assumptions material to our opinion and upon which we have relied
are not complete, correct, true and accurate in all material respects at all
relevant times, our opinion would be adversely affected and should not be relied
upon.
This opinion only represents our best judgment as to the federal income tax
consequences of the Merger and is not binding on the Internal Revenue Service or
the courts. The conclusions are based on the Code, existing judicial decisions,
administration regulations and published rulings. No assurance can be given that
future legislative, judicial or administrative changes would not adversely
affect the accuracy of the conclusions stated herein. Nevertheless, by rendering
this opinion, we undertake no responsibility to advise you of any new
developments in the application or interpretation of the federal income tax
laws.
This opinion has been delivered to you solely for the purposes set forth in
Section 7.1(f) of the Reorganization Agreement and may not be relied upon or
utilized for any other purpose or by any other person or entity, and may not be
distributed or otherwise made available to any other person or entity without
our prior written consent, except for the filing of this opinion as an Exhibit
to the Form S-4 and the references to this firm in the Tax Discussion.
Sincerely,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
/s/ Webb B. Morrow
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Webb B. Morrow III
WBM/ekh