EXHIBIT 8.1
FORM OF TAX OPINION OF SMITH GAMBRELL & RUSSELL
, 2000
Career Education Corporation
2895 Greenspoint Parkway, Suite 600
Hoffman Estates, Illinois 60195
EduTrek International, Inc.
6600 Peachtree-Dunwoody Road
Embassy Row 500
Atlanta, Georgia 30328
Re: Agreement and Plan of Merger under which EI Acquisition, Inc. a wholly-
owned subsidiary of Career Education Corporation, will merge with and
into EduTrek International, Inc.
Ladies/Gentlemen:
We have acted as counsel to EduTrek International, Inc. ("EduTrek") in
connection with the proposed merger (the "Merger") of EI Acquisition, Inc.
("Interim") with and into EduTrek International, Inc. ("EduTrek"), which will
become a wholly-owned subsidiary of Career Education Corporation ("CEC"),
pursuant to the terms of and as described in that certain Agreement and Plan of
Merger (the "Merger Agreement") dated as of October 24, 2000, by and among CEC,
Interim and EduTrek described in the CEC Registration Statement on Form S-4, to
be filed with the Securities and Exchange Commission on or about
(the "Registration Statement"). At your request, in
connection with the filing by CEC of the Registration Statement and the Proxy
Statement-Prospectus of EduTrek and CEC (the "Proxy Statement-Prospectus")
included as part of the Registration Statement, we are rendering our opinion
concerning certain federal income tax consequences of the Merger. Unless
otherwise indicated, all capitalized terms used in this opinion have the same
meaning as used in the Merger Agreement.
For purposes of rendering our opinion herein, we have conducted an
examination of the Internal Revenue Code of 1986, as amended (the "Code"), and
such other applicable laws, regulations, rulings, decisions, documents and
records as we have deemed necessary. With respect to factual matters, we have
relied upon the Merger Agreement, including, without limitation, the
representations of the parties set forth therein, and upon certain statements
and representations made to us in certificates by officers of CEC and EduTrek,
in each case without independent verification thereof. With the consent of CEC
and EduTrek, we have relied on the accuracy and completeness of the statements
and representations contained in such certificates and have assumed that such
certificates will be complete and accurate as of the Effective Time. We have
assumed that any representation or statement qualified by "the best of
knowledge" of the party making such representation or statement, or by any
similar qualification, is correct without such qualification. As to all matters
in which a person or entity making a representation referred to above has
represented that such person or entity either is not a party to, or does not
have, or is not aware of, any plan or intention, understanding or agreement, we
have assumed that there is in fact no such plan, intention, understanding or
agreement. We have also relied on the accuracy and completeness of the Proxy
Statement-Prospectus.
For purposes of this opinion, we have assumed that at least eighty percent
of the outstanding shares of EduTrek Common Stock will be exchanged for CEC
Common Stock in the Merger, the shares of EduTrek Common Stock constitute
capital assets in the hands of each holder thereof, the Merger will be
consummated according to the Merger Agreement, and the Merger will qualify as a
statutory merger under applicable state law.
Based on the foregoing, and subject to the qualifications set forth below,
we are of the opinion that under the Code:
(1) The merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and EduTrek and CEC will each be a party to
such reorganization within the meaning of Section 368(b) of the Internal
Revenue Code.
(2) An EduTrek shareholder will not recognize gain or loss as a result
of the merger except as follows:
. An EduTrek shareholder will recognize gain on the exchange equal to
the lesser of (a) the cash portion of the Merger Consideration or (b)
the gain which would have been recognized if the exchange were fully
taxable.
. An EduTrek shareholder who receives cash in lieu of a fractional
share of CEC 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.
(3) Unless the exchange is deemed to have the effect of the distribution
of a dividend, any gain recognized by an EduTrek shareholder as a result of
the merger will be capital gain if the shareholder's EduTrek common stock
is held as a capital asset at the effective time of the merger and will be
long-term capital gain if the shareholder's EduTrek common stock has been
held for more than one year at the effective time of the merger.
(4) The tax basis of the shares of CEC common stock received in exchange
for shares of EduTrek common stock in the merger will be the same as the
tax basis of the shares of EduTrek common stock exchanged therefor (reduced
by the tax basis allocable to any fractional shares for which cash is
received), increased by any gain recognized on the exchange (including any
gain treated as a dividend but other than gain attributable to fractional
shares), and reduced by the amount of any cash received in the exchange
(other than with respect to fractional shares).
(5) The holding period for shares of CEC common stock received in
exchange for shares of EduTrek common stock pursuant to the merger will
include the holding period of the shares of EduTrek common stock exchanged
therefor.
The opinions expressed herein are based upon our interpretation of existing
legal authorities, and no assurance can be given that such interpretations
would be followed if the exchange of shares contemplated by the Merger became
the subject of administrative or judicial proceedings. Statements of opinion
herein are opinions only and should not be interpreted as guarantees of the
current status of the law, nor should they be accepted as a guarantee that a
court of law or administrative agency will concur in such statement.
No opinion is expressed with respect to any of the following:
(i) The appropriate method to determine the fair market value of any
stock or other consideration received in any sale or exchange;
(ii) The state, local or foreign tax consequences of any aspect of the
Merger; or
(iii) The federal income tax consequences of any aspect of the Merger to
holders of EduTrek Common Stock who are subject to special tax treatment
for federal income tax purposes, including insurance companies, financial
institutions or trusts, dealers in securities or foreign currency, traders
that mark to market, tax-exempt organizations, shareholders who hold their
shares as part of a hedge, appreciated financial position, straddle or
conversion transaction, shareholders who acquired the EduTrek common stock
through the exercise of options or otherwise as compensation or through a
tax-qualified retirement plan and foreign corporations, foreign
partnerships or other foreign entities and individuals who are not citizens
or residents of the United States, or to holders of warrants or options to
purchase EduTrek Common Stock, if any, which are exchanged for or converted
into options or warrants to acquire CEC Common Stock.
We expressly consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to this opinion in the Proxy Statement-Prospectus. In giving this
opinion, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
Smith, Gambrell & Russell, LLP