EXHIBIT 8.1
[LETTERHEAD OF SHERMAN & HOWARD L.L.C.]
DRAFT
_________________, 2000
Columbus Energy Corp.
1660 Lincoln Street, Suite 2400
Denver, CO 80264
Key Production Company, Inc.
707 Seventeenth Street, Suite 3300
Denver, CO 80202
Re: Merger Pursuant to Agreement and Plan of Merger
Among Company, Merger Sub and Key
Ladies and Gentlemen:
We have acted as counsel to Columbus Energy Corp., a Colorado
corporation ("Company") in connection with the proposed merger (the "Merger") of
Company with and into Key Acquisition Two, Inc., a Colorado corporation ("Merger
Sub"), with and into the Company pursuant to the terms of the Agreement and Plan
of Merger ("Merger Agreement") dated August 28, 2000, by and among Company,
Merger Sub and Key Production Company, Inc. a Delaware corporation ("Key"). Key
owns all of the outstanding stock of Merger Sub. This opinion is being delivered
to you pursuant to Section 7.02(e) of the Merger Agreement. Except as otherwise
provided, capitalized terms not defined herein have the meanings set forth in
the Merger Agreement and the exhibits thereto or in the letters delivered to
Sherman & Howard L.L.C., by Key and Company containing certain representations
of Key and Company relevant to the opinion (the "Representation Letters"). All
section references, unless otherwise indicated, are to the United States
Internal Revenue Code of 1986, as amended (the "Code").
You have requested our opinion regarding certain federal income tax
consequences of the Merger. In our capacity as counsel to the Company in the
Merger, and for purposes of rendering this opinion, we have examined and relied
upon the Merger Agreement and the exhibits thereto, the Representation Letters,
and such other documents as we considered relevant for purposes of this opinion.
In our examination, we have assumed the authenticity of all documents submitted
to us as originals, the accuracy of all documents submitted to us as copies and
the authenticity of the originals of such copies, the genuineness of signatures,
and the legal capacity of signatories.
We have assumed that all parties to the Merger Agreement and to any
other documents examined by us have acted, and will act, in accordance with the
terms of such Merger Agreement and documents and that the Merger will be
consummated at the Closing Date pursuant to the terms and conditions set forth
in the Merger Agreement without the waiver or modification of any such terms and
conditions. Furthermore, we have assumed that all representations contained in
the Merger Agreement, as well as those representations contained in the
Representation Letters, are, and at the Effective Date will be, true and
complete in all material respects, and that any representation made in any of
the documents referred to herein "to the best of the knowledge and belief" (or
similar qualification) of any person or party is correct without such
qualification. We have also assumed that as to all matters for which a
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person or entity has represented that such person or entity does not have, or is
not aware of, any plan, intention, understanding, or agreement, there is no such
plan, intention, understanding, or agreement. We have not attempted to verify
independently such representations, but in the course of our representation,
nothing has come to our attention that would cause us to question the accuracy
of such representations.
In rendering our opinion, we have considered the applicable provisions
of the Code, Treasury Regulations promulgated or proposed thereunder (the
"Regulations"), current published administrative positions of the Internal
Revenue Service ("Rulings"), and existing judicial authorities. New developments
in the Regulations, Rulings, judicial authorities or legislative changes
occurring after the Closing Date may have an adverse impact upon the opinions
expressed herein.
Our opinion represents our best judgment of how a court would decide if
presented with the issues addressed herein, but is not binding upon either the
Internal Revenue Service ("IRS") or any court. Thus, no assurances can be given
that a position taken in reliance on our opinion will not be challenged by the
IRS or rejected by a court.
This opinion addresses only the specific United States federal income
tax consequences of the Merger set forth below, and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use,
excise or other tax consequences that may result from the Merger or any other
transaction (including any transaction undertaken in connection with the
Merger). We express no opinion regarding the tax consequences of the Merger to
shareholders of Company that are subject to special tax rules, such as dealers
in securities, banks, insurance companies, tax-exempt organizations and
non-United States persons.
On the basis of, and subject to the foregoing, and in reliance upon the
representations and assumptions described above, we are of the opinion that:
1. The Merger will constitute a reorganization within the meaning
of Section 368(a)(1) of the Code, and Key, Merger Sub, and Company will be
parties to such reorganization within the meaning of Section 368(b) of the Code;
2. Neither Key, Merger Sub, nor Columbus will recognize any gain
or loss for United States federal income tax purposes as a result of the Merger;
and
3. The Material United States Federal Income Tax Consequences
section of the Proxy Statement (which constitutes the prospectus included in the
Registration Statement) describes the material United States federal income tax
consequences to Company shareholders from the Merger.
No opinion is expressed as to any other consequences 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. We
expressly consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference of Sherman & Howard L.L.C. under the
heading "Material United States
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Federal Income Tax Consequences" and "Legal Matters" of the Proxy Statement. In
giving such consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder.
Very truly yours,
SHERMAN & HOWARD L.L.C.
