EXHIBIT 8
PERKINS COIE
A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
1201 THIRD AVENUE 40TH FLOOR - SEATTLE, WASHINGTON 98101-3099
TELEPHONE: (206) 583-8888 - FACSIMILE: (206) 583-8500
June 21, 1996
Sierra On-Line, Inc.
Suite 300
3380-146th Place S.E.
Bellevue, WA 98007
Re: Merger of Larry Acquisition Corp, a Delaware corporation
("Acquisition") and a wholly owned subsidiary of CUC
International, Inc., a Delaware corporation ("Parent") Into
Sierra On-Line, Inc., a Delaware corporation (the "Company")
Ladies and Gentlemen:
We have been asked, as counsel to the Company, to render this opinion
regarding the material U.S. federal income tax consequences of the merger (the
"Merger") of Acquisition into the Company pursuant to that certain Agreement
and Plan of Merger, dated as of February 19, 1996 (the "Agreement").
Capitalized terms not otherwise defined herein shall have the same meanings
given to them in the Agreement or if not defined therein as described in the
Registration Statement on Form S-4 of Parent (the "Registration Statement")
filed with respect to the Merger and the Proxy Statement/Prospectus contained
therein (the "Proxy/Prospectus"). This opinion letter is rendered pursuant
to Section 5.2(d) of the Agreement.
In connection with our opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Agreement, the Proxy/Prospectus, and such other documents as we have deemed
necessary or appropriate as a basis for the conclusions set forth below. We
have relied, as to matters of fact, solely upon those statements and
representations by officers and representatives of the Company contained in
that certain Sierra On-Line, Inc. Certificate dated the date hereof and attached
hereto as Exhibit B, upon statements and representations by officers and
representatives of Parent contained in that certain CUC International, Inc.
Certificate dated the date hereof and attached hereto as Exhibit C
(collectively, the "Tax Certificates"), upon statements and representations by
certain significant shareholders of the Company attached hereto as Exhibit A
(the "Shareholders' Certificates"), and upon the assumptions contained herein.
Without the Tax Certificates and the Shareholders' Certificates, we would not
render this opinion.
Sierra On-Line, Inc.
June 14, 1996
Page 2
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), Treasury Regulations promulgated thereunder and the pertinent
judicial authorities and interpretative rulings of the Internal Revenue
Service (the "IRS").
Assumptions
In rendering the opinions set forth below we have assumed that (1) the
representations contained in the Tax Certificates and the Shareholders'
Certificates are true as of the date hereof and as of the Effective Time
of the Merger (it being understood that our opinion is conditioned on the
written confirmation of the continuing accuracy of those representations
at the Effective Time), (2) the historic shareholders of the Company have
not disposed of shares of Company Common Stock in contemplation of the
Merger and do not have any plan or intention, existing as of the Effective
Time, to dispose of a number shares of Parent Common Stock received in the
Merger such that the holdings of Parent Common Stock by all historic
shareholders of the Company would be reduced to less than fifty percent
of the total value, measured at the Effective Time, of the Merger
Consideration, (3) the Merger will be consummated in accordance with the
Agreement, (4) all signatures on all documents we examined are genuine, all
documents submitted to us as originals are authentic and all documents
submitted to us as certified or photostatic copies are in conformity to
the original documents, and (5) the Merger qualifies as a merger under the
General Corporation Law of the State of Delaware.
Opinion
Based on the assumptions set forth above and upon our examination of the
Agreement, the Proxy/Prospectus and the relevant legal authorities, it is
our opinion that:
(A) The Merger of Acquisition into the Company will be a reorganization
described in Section 368(a) of the Code. Code Section 368(a)(1)(A) and
(a)(2)(E). Parent, Acquisition and the Company will each be "a party to such
reorganization" described in Section 368(b) of the Code.
(B) No gain or loss will be recognized by the Company, Acquisition or
Parent as a result of the Merger. Code Sections 361, 357(a).
Sierra On-Line, Inc.
June 14, 1996
Page 3
(C) No gain or loss will be recognized by the shareholders of the
Company on the exchange of their Company Common Stock solely for Parent
Common Stock. Code Sec. 354(a)(1).
(D) The payment of cash to a holder of Company Common Stock in lieu
of a fractional share interest in Parent Common Stock will be treated as if
the fractional share had been distributed as part of the exchange and then
redeemed by Parent. Clark v. Commissioner, 489 U.S. 726 (1989). The cash
payment will result in a capital gain or loss if it is substantially
disproportionate or not essentially equivalent to a dividend under Section
302(b) of the Code.
(E) The section of the Proxy Prospectus entitled "Certain Federal
Income Tax Consequences" accurately reflects our opinion as to the matters
discussed therein.
Our opinion is limited to the specific matters described in paragraphs
(A) through (E) above. We give no opinion with respect to other tax
matters, whether federal, state or local, that may relate to the Merger.
Although we believe that the opinion covers the material federal income tax
consequences of the Merger, it may not address issues that are material to
an individual shareholder based on his or her particular tax situation. No
ruling will be requested from the IRS regarding the Merger. Our opinion is
not binding on the IRS and does not constitute a guarantee that the IRS
will not challenge the tax treatment of the Merger.
We caution that our opinion is based on the federal income tax laws as
they exist on the date hereof. It is possible that subsequent changes in
the tax law could be enacted and applied retroactively to the Merger and
that such changes could result in a materially different result than the
result described in the opinions above.
This opinion is furnished to you solely in connection with the Merger
and is intended for your use and the use of your shareholders and may not
be provided to or relied upon by others without our express written
consent.
Very truly yours,
/s/ Perkins Coie
----------------
PERKINS COIE
EXHIBIT A
June 14, 1996
TO: Ken and Roberta Williams
RE: Agreement and Plan of Merger dated as of February 19, 1996 by and
among CUC International, Inc. ("Parent"), Larry Acquisition Corp.
("Acquisition"), a wholly-owned subsidiary of Parent, and Sierra On-
Line, Inc. (the "Company")
Dear Mr. and Mrs. Williams:
As counsel to the Company, we have been requested to provide our tax
opinion concerning the proposed Merger of Acquisition into the Company
under the Internal Revenue Code of 1986, as amended. As part of the basis
for our opinions, we are asking for representations from certain
shareholders of the Company that they have no present intent to sell any
Parent shares received in the Merger. The representations will not
preclude a holder from deciding after the Merger to sell his or her Parent
shares.
Your representation will be effective by signing and dating the
representation set out below, and returning this letter in the self-
addressed, stamped envelope. We will rely on your representations in
rendering our tax opinions. We would appreciate receiving your
representation as soon as possible and in any event no later than the day
before the scheduled closing of the Merger. If you have any questions,
please call Richard K. Thumann, General Counsel and Vice President of the
Company.
Very truly yours,
/s/ Perkins Coie
Perkins Coie
REPRESENTATION: The undersigned represents that as of the date below
and continuing through the Effective Time of the Merger, the undersigned
has no present plan or intention to sell, exchange or otherwise dispose of
any shares of Parent Common Stock to be received in the Merger, except that
the undersigned may have a plan to sell, exchange or otherwise dispose of
up to 10% of the shares of Parent Common Stock received by the undersigned
in the Merger in exchange for shares of the Company Common Stock that were
outstanding on the date of the above Agreement.
Date: June 14, 1996 By /s/ Kenneth Williams
------------------ -- ------------------------------
By /s/ Roberta Williams
-- ------------------------------
EXHIBIT B
SIERRA ON-LINE, INC.
CERTIFICATE
Sierra On-Line, Inc. (the "Company"), a Delaware corporation,
recognizes that this Certificate will be relied upon by Perkins Coie in
delivering its opinions regarding the tax consequences of the proposed
merger (the "Merger") of Larry Acquisition Corp. ("Acquisition"), a
Delaware corporation and a wholly owned subsidiary of CUC International,
Inc., a Delaware corporation ("Parent") with and into the Company pursuant
to that certain Agreement and Plan of Merger by and among the Company,
Acquisition and Parent, dated as of February 19, 1996 (the "Agreement").
Capitalized terms not otherwise defined herein shall have the same meaning
as stated in the Agreement or, if not defined therein, in the Proxy
Statement/Prospectus contained in the Registration Statement on Form S-4
filed by Parent with the Securities and Exchange Commission in connection
with the Merger. The Company hereby certifies that to the best knowledge
and belief of the management of the Company, after due inquiry and
investigation, the facts and assumptions relating to the Merger, insofar as
they relate to the Company, that are described in the opinion letter from
Perkins Coie to the Company dated the date hereof, 1996 (a copy of which
you acknowledge has been provided to you) and the following statements are
true, correct and complete in all material respects as of the date of this
letter:
(a) The exchange ratio in the Merger and the formula set forth in the
Agreement pursuant to which shares of Company Common Stock will be exhanged
for Parent Common Stock, are the result of arm's length bargaining.
Accordingly, the fair market value of Parent Common Stock to be issued to
the Company shareholders in the Merger will be, at the Effective Time of
the Merger, approximately equal to the fair market value of the shares of
Company Common Stock surrendered in exchange therefor.
(b) In the Merger, shareholders of the Company owning 100% of the
shares (other than fractional shares) of Company Common Stock outstanding
at the Effective Time of the Merger, which is the only class of stock of
the Company, will exchange their shares of Company Common Stock solely for
Parent Common Stock.
(c) Cash payments to Company shareholders in lieu of issuing
fractional shares of Parent Common Stock in the Merger are being undertaken
solely for the purpose of saving Parent the expense and inconvenience of
issuing and transferring fractional shares of Parent Common Stock, and are
not separately bargained for consideration.
(d) The Company has no plan or intention to issue additional shares
of stock that would result in Parent losing control (within the meaning of
Section 368(c) of the Code) of the Company.
(e) The Company will continue its historic business or use a
significant portion of its historic business assets in a business after the
Merger. The Company has no plan or intention to liquidate or to sell or
otherwise dispose of any of its assets, except for transfers of assets to a
corporation controlled, within the meaning of Section 368(c) of the Code,
by the Company that are described in Treasury Regulation Section
1.368-2(j)(4), transfers in the ordinary course of business or payment of
expenses incurred pursuant to the Merger (including payments with respect
to fractional shares).
(f) Compensation currently being paid under contract to shareholder-
employees of the Company approximately equals the value of the services
currently being performed by such individuals and was established pursuant
to arm's length negotiations. Compensation to be paid to shareholder-
employees of the Company who, after the Merger, continue employment with
the Company, and/or accept employment with Parent will not exceed the value
of the services to be performed by such individuals and has been established
independently of negotiations on the consideration for the shares of Company
Common Stock to be transferred to Parent in the Merger. Consequently, no
portion of any such compensation to be paid to such individuals is in exchange
for the shares of Company Common Stock owned by such individuals prior to the
Merger and none of the shares of Parent Common Stock to be received by such
individuals pursuant to the Merger is intended to be separate consideration
for or allocable to any services to be performed by, or any employment
agreement entered into with, such individuals.
(g) There is no plan or intention by the Company shareholders who own
five percent or more of the Company stock as of the date of the Merger and
the management of the Company knows of no plan or intention on the part of
the remaining Company shareholders to sell or otherwise dispose of any of
the shares of Parent Common Stock to be received by them in the Merger
which would reduce their holding of Parent Common Stock to a number of
shares having, in the aggregate, a value as of the Effective Time of the
Merger of less than 50% of the total value of the Company Common Stock
outstanding immediately prior to the Effective Time of the Merger. For
purposes of this representation, fractional shares of Company Common Stock
surrendered for cash and shares of Company Common Stock sold, redeemed or
otherwise disposed of prior or subsequent to and as part of the Merger will
be considered as outstanding immediately prior to the Effective Time of the
Merger. The
-2-
Company has no plan or intention to acquire or redeem by purchase or
otherwise any shares of Company Common Stock prior to the Effective Time of
the Merger.
(h) The Company at the Effective Time of the Merger will possess, and
will have the plan and intention to retain, after the Merger, assets
representing at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets of each of the
Company and Acquisition respectively held by them immediately prior to the
Merger. For this purpose, assets held by the Company prior to the Merger
will include all amounts used by the Company to pay its reorganization
expenses or to pay Company shareholders in lieu of fractional shares. In
this connection, the Company has not and prior to the Effective Time of the
Merger will not engage in any redemptions or pay any dividends or make any
other distributions with respect to any shares of its outstanding stock
(except for regular, normal dividends).
(i) The Company has no outstanding warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire stock in the Company that, if exercised or converted, would affect
Parent's acquisition or retention of control of the Company (within the
meaning of Section 368(c) of the Code).
(j) Parent and the Company will each pay their respective expenses
incurred in connection with the Merger and any other transactions
contemplated by the Agreement.
(k) There is no intercorporate debt between the Company on the one
hand and Acquisition or Parent on the other.
(l) The Company is participating in the Merger for good and valid
business reasons and not for tax purposes.
(m) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(n) On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
(o) The Company 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.
-3-
(p) The Agreement represents the full and complete agreement among
Parent, Acquisition and the Company regarding the Merger, and there are no
other written or oral agreements regarding the Merger.
(q) The factual statements of or about the Company in the Form S-4 for
the Merger are accurate.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed this 14th day of June ,1996.
----- -----------
SIERRA ON-LINE, INC.
By /s/ Michael A. Brochu
-------------------------
Name: Michael A. Brochu
Title: President
-------------------------
-4-
EXHIBIT C
CUC INTERNATIONAL, INC.
CERTIFICATE
CUC INTERNATIONAL, INC. ("Parent"), a Delaware corporation,
recognizes that this Certificate will be relied upon by Perkins Coie in
delivering its opinions regarding the tax consequences of the proposed
merger (the "Merger") of Larry Acquisition Corp. ("Acquisition"), a
Delaware corporation and a wholly owned subsidiary of Parent, with and into
Sierra On-Line, Inc. (the "Company"), a Delaware corporation, pursuant to
that certain Agreement and Plan of Merger by and among the Company,
Acquisition and Parent, dated as of February 19, 1996 (the "Agreement").
Capitalized terms not otherwise defined herein shall have the same meaning
as stated in the Agreement or, if not defined therein, in the Proxy
Statement/Prospectus contained in the Registration Statement on Form S-4
filed by Parent with the Securities and Exchange Commission in connection
with the Merger. Parent hereby certifies that to the best knowledge and
belief of Parent, after due inquiry and investigation, the facts and
assumptions relating to the Merger, insofar as they relate to Parent and
Acquisition, that are described in the opinion letter from Perkins Coie to
the Company dated the date hereof (a copy of which you acknowledge has been
provided to you) and the following statements are true, correct and
complete in all material respects as of the date of this letter:
(a) The exchange ratio in the Merger and the formula set forth in the
Agreement pursuant to which shares of Parent Common Stock will be exchanged
for Company Common Stock, are the result of arm's-length bargaining.
Accordingly, the fair market value of Parent Common Stock to be issued to
Company shareholders in the Merger will be, at the Effective Time of the
Merger, approximately equal to the fair market value of the shares of
Company Common Stock surrendered in exchange therefor.
(b) The Parent Common Stock to be issued to Company shareholders in
the Merger and pursuant to the Agreement will be voting stock.
(c) In the Merger, shares of Company Common Stock possessing control
(within the meaning of Section 368(c) of the Code) of the Company will be
exchanged solely for Parent Common Stock.
(d) Cash payments to the Company shareholders in lieu of issuing
fractional shares of Parent Common Stock in the Merger are being undertaken
solely for the purpose of saving Parent the expense and inconvenience of
issuing and transferring fractional shares of Parent Common Stock, and are
not separately bargained for consideration.
(e) Parent has no plan or intention to cause the Company to issue
additional shares of stock that would result in Parent losing control
(within the meaning of Section 368(c) of the Code) of the Company.
(f) Parent has no plan or intention to liquidate the Company or merge
the Company with any corporation (including Parent) and intends to cause
the Company to continue the Company's historic business or to use a
significant portion of its historic business assets in a business after the
Merger. Parent has no plan or intention to sell or otherwise dispose of any
of its shares of Company Common Stock or to cause the Company to sell or
otherwise dispose of any of its assets, except for transfers of assets to a
corporation controlled, within the meaning of Section 368(c) of the Code, by
the Company that are described in Treasury Regulation Section 1.368-2(j)(4),
transfers in the ordinary course of business or payment of expenses incurred
pursuant to the Merger (including payments with respect to fractional shares).
(g) Parent has no plan or intention to make any distributions in
respect of shares of Parent Common Stock following the Merger, other than
regular cash dividiends declared and paid in the ordinary course of
business.
(h) Compensation to be paid to shareholder-employees of the Company
who, after the Merger, continue employment with the Company, and/or accept
employment with Parent, will not exceed the value of the services to be
performed by such individuals and has been established independently of
negotiations on the consideration for the shares of Company Common
Stock to be transferred to Parent in the Merger. Consequently, no portion
of any such compensation to be paid to such individuals is in exchange for
the shares of Company Common Stock owned by such individuals prior to the
Merger and none of the shares of Parent Common Stock to be received by such
individuals pursuant to the Merger is intended to be separate consideration
for or allocable to any services to be performed by, or any employment
agreement entered into with, such individuals.
(i) Parent has no plan or intention to cause the Company, after the
Merger, to dispose of assets which would result in the Company failing to
retain assets representing at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets of
each of the Company and Acquisition respectively held by them prior to the
Merger. For this purpose, assets held by the Company prior to the Merger
will include all amounts used by the Company to pay its reorganization
expenses or to pay the Company shareholders in lieu of fractional shares.
For purposes of this representation, assets transferred from Parent to
Acquisition are not included as assets of Acquisition immediately before
the Merger where such assets are used (i) to pay creditors of the Company
or (ii) to enable Acquisition to satisfy state minimum capitalization
requirements (where the money is returned to Parent as part of the
transaction).
(j) Parent, Acquisition, and the Company will each pay their
respective expenses incurred in connection with the Merger and any other
transactions contemplated by the Agreement.
(k) There is no intercorporate debt between the Company on the one
hand and Acquisition or Parent on the other.
-2-
(l) Acquisition has been formed solely in order to consummate the
transactions contemplated by the Agreement and at no time will Acquisition
conduct any business activities or other operations of any kind other than those
necessary to consummate such transactions. Acquisition has no liabilities to be
assumed by the Company and will not transfer to the Company any assets subject
to liabilities in the Merger.
(m) Neither Parent nor Acquisition nor any other direct or indirect
subsidiary of Parent owns beneficially or has owned during the past five years
any stock or securities of the Company.
(n) Parent is participating in the Merger for good and valid business
reasons and not for tax purposes.
(o) Parent has no plan or intention to redeem or otherwise reacquire any
of the Parent Stock issued in the Merger.
(p) Neither Parent nor Acquisition is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(q) Immediately before the Merger, Parent will be in control of
Acquisition.
(r) The Merger Agreement represents the full and complete agreement among
Parent, Acquisition, and the Company regarding the Merger, and there are no
other written or oral agreements regarding the Merger.
(s) The factual statements of or about Parent or Acquisition contained in
the Form S-4 for the Merger are accurate.
IN WITNESS WHEREOF, Parent has caused this Certificate to be duly executed
this 14th day of June, 1996.
---- ----
CUC International, Inc.
By /s/ Cosmo Corigliano
-----------------------------
Name: Cosmo Corigliano
Title: Chief Financial Officer
-3-