EXHIBIT 8.2
(312) 902-5277
[FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LETTERHEAD]
July 29, 1996
Commercial Intertech Corp.
1775 Logan Avenue
Youngstown, Ohio 44501
Gentlemen:
We have acted as special counsel to Commercial Intertech Corp., an Ohio
corporation ("Commercial Intertech"), in connection with the distribution (the
"Spin-off") by Commercial Intertech to its stockholders (the "Stockholders") of
all the outstanding stock of CUNO Incorporated, a Delaware corporation ("CUNO"),
pursuant to, and in accordance with, a Distribution and Interim Services
Agreement by and between Commercial Intertech and CUNO, substantially in the
form of the draft thereof dated July 26, 1996 (the "Agreement").
You have requested our opinion as to whether the Spin-off should qualify as
a tax-free distribution under Section 355 of the Internal Revenue Code of 1986,
as presently in force (the "Code"), and as to certain attendant consequences
(specified below) as a result of such qualification. We have not been requested
to render, and are not rendering, any opinion regarding (i) the tax consequences
of the Spin-off under any other federal tax laws, under the tax laws of the
several states of the United States or the political subdivisions thereof, or
under the tax laws of any foreign country or (ii) any tax consequences of any
transaction other than the Spin-off. In particular, this opinion does not
address the tax consequences of any of the
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July 29, 1996
Page 2
transactions undertaken or to be undertaken in contemplation of the Spin-off,
including any intercompany sales, contributions, dividends or transfers of
assets.
All capitalized terms used, but not defined herein, have the same meaning
assigned to them in the Agreement.
In reaching our opinion, we have reviewed and are relying upon (without
independent investigation) the completeness and accuracy at all times, of the
facts, representations and warranties contained in the following documents
(including all amendments, schedules and exhibits thereto): (i) the Agreement,
(ii) the Information Statement on Form 10 of CUNO, dated July 29, 1996, (iii)
the Commercial Intertech and CUNO Officers' Certificate, dated July 29, 1996
(the "Officers' Certificate"), (iv) the Schedule 14D-9, dated July 12, 1996, of
Commercial Intertech, (v) the Rule 13d-1 Transaction Statement, dated July 12,
1996, of Commercial Intertech, (vi) the letter to Commercial Intertech from
Goldman Sachs & Co., dated July 29, 1996, (vii) the letter to Commercial
Intertech from William M. Mercer Incorporated, dated July 29, 1996 and (viii)
the pro forma separate company Form 1120s of Commercial Intertech and CUNO with
respect to the taxable years ended October 31, 1991, 1992, 1993, 1994 and 1995
prepared in connection with the filing of the consolidated federal income tax
return for Commercial Intertech for such years. In addition, we have relied upon
information contained in both oral or written communications obtained in our
consultations with officers, employees and representatives of Commercial
Intertech and CUNO. However, we have represented Commercial Intertech only in
connection with this transaction and there may exist facts or other information
that could have a bearing on the opinion contained herein and of which we are
not aware and, accordingly, the opinion contained herein is based solely on such
knowledge of Commercial Intertech as we have acquired in the course of our
representation.
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July 29, 1996
Page 3
Opinion
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In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without independent investigation)
that:
(i) Original documents (including signatures) are authentic;
documents submitted to us as copies conform to the original
documents, and there has been (or will be by the Effective Time
of the Spin-off) due execution and delivery of all documents
where due execution and delivery are prerequisites to the
effectiveness thereof;
(ii) Any representation or statement referred to above made "to the
best knowledge of" or otherwise similarly qualified is correct
without such qualification;
(iii) The Spin-off is being consummated, in whole or in substantial
part, for the corporate business purposes set forth in the
Officers' Certificate, including:
(a) to provide an equity interest in CUNO to its current and
future key employees by establishing an employee stock
compensation program that will directly relate to the
performance of such employees;
(b) to allow CUNO to facilitate subsequent acquisitions of
other corporations in the filtration industry using CUNO
stock as consideration;
(c) to enhance the abilities of the management of Commercial
Intertech and CUNO to focus more closely on the objectives
of their respective businesses;
(d) to increase CUNO's access to the capital markets;
(e) to allow investors to better evaluate the merits of both
Commercial Intertech and CUNO so that each will achieve
separate market recognition commensurate with each
company's performance; and
(f) to ensure that the benefits of appropriate market
recognition of the value of CUNO accrue to the
shareholders, employees and other constituents of
Commercial Intertech rather than to United Dominion
Industries Limited.
(iv) Neither Commercial Intertech nor CUNO (nor any member of the
Commercial Intertech affiliated group) will recognize gain under
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July 29, 1996
Page 4
regulations promulgated under Code (S) 1502 as a result of the
Spin-off; and
(v) The Spin-off will be consummated pursuant to the Agreement.
(vi) There will be no significant or material changes to any of the
documents upon which we have relied in rendering this opinion.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications (especially as discussed
below in the section "Potential Change of Control") set forth herein, we are of
the opinion, for federal income tax purposes, that the Spin-off should qualify
as a tax-free distribution under Section 355 of the Code and, assuming such
qualification, for federal income tax purposes:
1. Commercial Intertech will not recognize gain or loss upon the
distribution of the CUNO stock to the Stockholders.
2. CUNO will not recognize gain or loss as a result of the Spin-off.
3. The Stockholders will not recognize gain or loss (nor will they
include any amount in income) upon receipt of CUNO stock.
4. The basis of the stock of Commercial Intertech and CUNO in the hands
of the Stockholders after the Spin-off will be the same as the
aggregate basis of the Commercial Intertech stock held immediately
before the Spin-off. Such basis will be allocated between the
Commercial Intertech and CUNO stock in proportion to the fair market
value of each.
5. The holding period of the CUNO stock received in the Spin-off will
include the holding period of the Commercial Intertech stock with
respect to which the Distribution will be made, provided that such
stock is held as a capital asset on the date of the Spin-off.
Potential Change of Control
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On June 27, 1996, United Dominion Industries Limited ("UDI") offered to
purchase all of the outstanding Commercial Intertech stock. The Board of
Directors of Commercial Intertech
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July 29, 1996
Page 5
rejected this offer. On July 12, 1996, UDI announced a tender offer to acquire
for cash all of the outstanding Commercial Intertech common stock. Commercial
Intertech is vigorously resisting the tender offer and has urged the
Stockholders not to tender their shares to UDI.
The requirements of Section 355 contemplate that the spin-off transaction
not be used principally as a "device" for the distribution of the earnings or
profits of either Commercial Intertech or CUNO. Whether a transaction is used
principally as a device will be determined from all the facts and circumstances,
including the presence of device factors specified in Treasury Regulations
promulgated under Code Section 355. Pursuant to these regulations, sales of
stock after a spin-off transaction are evidence of device, particularly where a
large percentage of the stock is sold and such sales occur shortly after the
spin-off transaction. Moreover, the regulations indicate that a sale or exchange
of the stock of either the distributing company or the spun-off company pursuant
to an arrangement negotiated before the distribution is substantial evidence of
device, and a subsequent sale or exchange not pursuant to an arrangement
negotiated before the distribution is evidence of device. The regulations also
indicate that substantial evidence of device exists where an enforceable right
to sell exists prior to the distribution, which (subject to the satisfaction of
certain conditions) will be the case if UDI's tender offer is not withdrawn
prior to the Spin-off.
The requirements of Section 355 also contemplate that the Stockholders will
retain a significant continuing equity interest in both Commercial Intertech and
CUNO following the Spin-off. There is, however, no specific legislative,
regulatory, judicial authority or Internal Revenue Service formal pronouncement
addressing how this continuity requirement would apply to a post
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July 29, 1996
Page 6
Spin-off acquisition of Commercial Intertech or CUNO in a hostile takeover
announced prior to the Spin-off. Analogous authority, however, suggests that the
continuity requirement may not be satisfied in this circumstance.
Our opinion is based specifically on the assumption that neither UDI nor
any other party acquires (in a transaction other than a tax-free reorganization
in which either no gain or loss is recognized or only an insubstantial amount of
gain is recognized) all or a significant portion of the outstanding stock of
either Commercial Intertech or CUNO in a transaction that could reasonably be
anticipated to occur as of the date of the Spin-off. We express no view as to
the reasonableness of that assumption. If that assumption proves to be incorrect
(i) we may no longer hold the opinion expressed in this letter and (ii) our
opinion may no longer be relied upon.
If the Spin-off does not qualify under Section 355 of the Code, then
Commercial Intertech will be treated as if it sold the stock of CUNO in a
taxable transaction for its fair market value and Commercial Intertech will
incur a tax liability based on the difference between its tax basis in CUNO and
CUNO's fair market value. In addition, all of the Stockholders will be treated
as if they received a taxable dividend in the amount of the fair market value of
the CUNO stock received (to the extent Commercial Intertech has accumulated or
current earnings and profits).
QUALIFICATIONS
Our opinion is based solely upon the documents we have examined, the
representations in the Officers' Certificate, and the additional information we
have obtained. Our opinion
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Page 7
assumes that each of the statements contained in such documents, each of the
representations contained in the Officer's Certificate and any of such
additional information will be true and complete at all times from the date
hereof through and including the Distribution Date. Accordingly, our opinion
cannot be relied upon if this assumption proves to be incorrect, or if such
statements, representations, or additional information is, or later becomes,
inaccurate or incomplete. Similarly, our opinion cannot be relied upon if,
subsequent to the date of this letter, any of the terms of relevant agreements
are modified, or the parties to the agreements take action inconsistent with the
terms of such agreements.
Our opinion represents our best legal judgment on the matters set forth
above based upon our review of existing authorities and the facts and
assumptions set forth above. The opinion is based upon existing statutory,
regulatory, administrative, and judicial authority, any of which may be changed
at any time with retroactive effect. In particular, legislation proposed by the
Administration would render the Spin-off taxable to Commercial Intertech if
within two years following the Spin-off there is a more than 50 percent change
in control transaction involving either Commercial Intertech or CUNO which is
related to the Spin-off. The explanation to the proposed legislation indicates
that hostile acquisitions commenced before the Spin-off occurs may be treated as
related. The Administration proposed that this legislation apply to all
transactions occurring after March 19, 1996, although Congressional leaders have
indicated that it would not be effective until after appropriate Congressional
action.
We assume no obligation to modify or supplement this opinion if any
applicable laws change after the date hereof or if we become aware of any facts
that might change the opinions expressed herein after the date hereof. Our
opinion does not bind the Internal Revenue Service, any other entity, or any
court. Accordingly, the Internal Revenue Service or a court considering the
issue addressed in our opinion could reach a conclusion contrary to our opinion.
Our opinion is limited to the federal income tax issues specifically
addressed in the opinion. We have not been asked to address, and have not
addressed, any other tax consequences of the transactions described above.
This opinion is being delivered in connection with the decision of
Commercial Intertech's Board of Directors to effect the Spin-off. This opinion
may not be relied upon or utilized for any other
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July 29, 1996
Page 8
purpose, or by any other person or entity, and may not be made available to any
other person or entity, without our prior written consent. We do, however,
consent to the filing of this opinion as an exhibit to the Registration
Statement on Form 10. We further consent to the use of our name in the
Registration Statement wherever it appears.
Very truly yours,
Fried, Frank, Harris, Shriver & Jacobson