EXHIBIT 8.2
LAW OFFICES
SILVER, XXXXXXXX & XXXX, L.L.P.
A LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
0000 XXXXXXXXX XXXXXX, X.X.
XXXXXXXXXX, X.X. 00000
PHONE: (000) 000-0000
FAX: (000) 000-0000
XXX.XXXXXX.XXX
WRITER S DIRECT DIAL NUMBER
(000) 000-0000
September 27, 2006
Board of Directors
FirstBank NW Corp.
0000 00xx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Re: Agreement and Plan of Merger dated as of June 4, 2006, by and between
Sterling Financial Corporation and FirstBank NW Corp.
Ladies and Gentlemen:
We have acted as counsel to FirstBank NW Corp., ("FirstBank"), a
Washington corporation, in connection with its proposed merger (the "Merger")
with and into Sterling Financial Corporation ("Sterling"), a Washington
corporation. Upon consummation of the Merger, Sterling shall be the surviving
corporation. The Merger will be consummated pursuant to the Agreement and Plan
of Merger, dated as of June 4, 2006, between Sterling and FirstBank (the "Merger
Agreement"). For purposes of this opinion, capitalized terms used and not
otherwise defined herein shall have the meaning ascribed thereto in the Merger
Agreement. At your request, this opinion is being delivered in connection with
Sterling's registration statement on Form S-4 including the proxy statement of
FirstBank contained therein relating to the proposed Merger (the "Registration
Statement") to which this opinion appears as an exhibit.
You have requested that we render the opinion set forth below. In
rendering such opinion, we have assumed with your consent that (i) the Merger
will be effected in accordance with the Merger Agreement; (ii) the Merger will
qualify as a statutory merger under the applicable laws of the state of
Washington; (iii) the statements concerning the Merger set forth in the Merger
Agreement and the Registration Statement are true, complete and correct as of
the date hereof and at the Effective Time; (iv) the representations made by
Sterling and FirstBank in the Merger Agreement and in their respective letters
delivered to us for purposes of this opinion (the "Representation Letters") are
true, complete and correct as of the date hereof and at the Effective Time; and
(v) any representations made in the Merger Agreement or in the Representation
Letters "to the best knowledge of" or similarly qualified are true, correct and
complete without such qualification. We have also assumed that the parties have
complied with
Board of Directors
September 27, 2006
Page 2
and, if applicable, will continue to comply with, the covenants contained in the
Merger Agreement.
Our opinion is based solely upon applicable law and the factual
information contained in the above-mentioned documents. In rendering our
opinion, we have assumed the accuracy of all information contained in each of
such documents. We also have assumed the authenticity of all original documents,
the conformity of all copies to the original documents, and the genuineness of
all signatures. We have not attempted to verify independently the accuracy of
any information in any such document, and we have assumed that such documents
accurately and completely set forth all material facts relevant to this opinion.
All of our assumptions were made with your consent. If any fact or assumption
described herein is incorrect, any or all of the federal income tax consequences
described herein may be inapplicable.
OPINIONS
Subject to the foregoing and the limitations expressed elsewhere herein,
we are of the opinion that for federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
section 368(a) of the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"). Each of FirstBank and Sterling shall be party to the
reorganization within the meaning of Code section 368(b).
2. No gain or loss will be recognized by FirstBank or Sterling as a result
of the Merger.
3. Each shareholder of FirstBank who exchanges, in the Merger, shares of
FirstBank Common Stock for the Merger Consideration (i.e. shares of Sterling
Common Stock and cash):
(a) will not recognize any loss (determined separately as to each
block of FirstBank Common Stock exchanged), except with regard to cash
received in lieu of a fractional share, as described in paragraph 4 below
(Code section 356(c));
(b) will realize gain (determined as to each block of FirstBank
Common Stock exchanged) if (i) the sum of the amount of cash and the fair
market value of the shares of Sterling Common Stock received (including
any fractional share of Sterling Common Stock deemed to be received, as
described in paragraph 4 below) exceeds (ii) the adjusted tax basis of the
FirstBank Common Stock surrendered in exchange therefor, and will
recognize such gain, if any, up to but not in excess of the amount of cash
received (excluding cash received in lieu of a fractional share) (Code
sections 1001 and 356(a));
(c) will have an aggregate basis for the shares of Sterling Common
Stock received (including any fractional share of Sterling Common Stock
deemed to be received, as described in paragraph 4 below) equal to the
basis of the shares of FirstBank
Board of Directors
September 27, 2006
Page 3
Common Stock surrendered, increased by the amount of gain, if any,
recognized by such holder and decreased by the amount of any cash received
(excluding cash received in lieu of a fractional share) (Code section
358(a)); and
(d) will have a holding period for the shares of Sterling Common
Stock received (including any fractional share of Sterling Common Stock
deemed to be received, as described in paragraph 4 below) which includes
the period during which the shares of FirstBank Common Stock surrendered
were held, provided that the shares of FirstBank Common Stock surrendered
were capital assets in the hands of such holder (Code section 1223(1)).
No opinion is expressed as to whether the recognized gain described in
subparagraph (b) of this paragraph 3 will be capital gain or will be treated as
the receipt of a taxable dividend. Provided that the receipt of the cash by the
FirstBank shareholder does not have the effect of the distribution of a
dividend, such gain will be capital gain to an individual shareholder if the
shares of FirstBank Common Stock exchanged were capital assets in the hands of
the holder, and long-term or short-term depending on the holder's holding period
for each block of FirstBank Common Stock surrendered (Code section 1222).
Generally, an individual shareholder's capital gain will be long-term if the
holder has held the shares of FirstBank Common Stock for more than one year.
However, if the cash payment has the effect of the distribution of a dividend,
such gain generally will be taxable as dividend income (Code section 356(a)).
Any long-term capital gain or dividend income recognized in the Merger by an
individual FirstBank shareholder generally will be subject to a maximum federal
income tax rate of 15%.
Under Code section 356, the determination of whether a cash payment has
the effect of the distribution of a dividend will be made generally in
accordance with the principles of Code section 302, taking into account the
stock ownership attribution rules of Code section 318. Because this
determination generally will depend on the facts and circumstances of each
FirstBank shareholder, we express no opinion as to whether the cash payments
discussed in this paragraph 3 will be treated as having the effect of the
distribution of a dividend.
A cash payment will be considered not to have the effect of the
distribution of a dividend under section 302 if the cash payment (i) results in
a "substantially disproportionate" reduction in such shareholder's actual and
constructive stock interest, or (ii) is not "essentially equivalent to a
dividend" (Code sections 302(b)(1) and (2)). These two tests will be applied as
if all FirstBank Common Stock exchanged for cash in the Merger had instead been
exchanged in the Merger solely for shares of Sterling Common Stock, and such
shares of Sterling Common Stock were then redeemed by Sterling in return for the
cash payments. Accordingly, the determination of whether a cash payment to a
FirstBank shareholder satisfies either of the foregoing tests will be made by
comparing (i) such shareholder's actual and constructive stock interest in
Sterling before the deemed Sterling redemption (determined as if such
shareholder had received solely Sterling Common Stock in the Merger), with (ii)
such shareholder's actual and constructive stock interest in Sterling after the
deemed Sterling redemption. Commissioner x. Xxxxx, 000 X.X. 000 (1989).
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September 27, 2006
Page 4
A cash payment will result in a "substantially disproportionate" reduction
in a shareholder's stock interest if (i) the percentage of outstanding Sterling
Common Stock actually and constructively owned by such shareholder after the
deemed Sterling redemption is less than four-fifths (80%) of the percentage of
outstanding Sterling Common Stock actually and constructively owned by such
shareholder immediately prior to the deemed Sterling redemption (determined as
if such shareholder had received solely Sterling Common Stock in the Merger),
(ii) the percentage of outstanding voting shares of Sterling actually and
constructively owned by such shareholder after the deemed Sterling redemption is
less than four-fifths (80%) of the percentage of outstanding Sterling voting
shares actually and constructively owned by such shareholder immediately prior
to the deemed Sterling redemption (determined as if such shareholder had
received solely Sterling Common Stock in the Merger), and (iii) such shareholder
actually and constructively owns less than fifty percent (50%) of the total
combined voting power of all classes of stock entitled to vote after the deemed
Sterling redemption (Code section 302(b)(2)). The cash payment will not be
"essentially equivalent to a dividend" if the deemed Sterling redemption results
in a "meaningful reduction" (as the quoted term has been interpreted by judicial
authorities and by rulings of the Service) of the shareholder's actual and
constructive ownership interest (Code section 302(b)(1); United States x. Xxxxx,
000 X.X. 000 (1970); see, e.g., Rev. Rul. 76-385, 1976-2 C.B. 92; Rev. Rul.
76-364, 1976-2 C.B. 91).
The determination of ownership for purposes of each of the foregoing tests
will be made by taking into account both shares of Sterling Common Stock
actually owned by such shareholder and shares of Sterling Common Stock
constructively owned by such shareholder pursuant to Code section 318 (Code
section 356(a)). Under Code section 318, a shareholder will be deemed to own
stock that is owned or deemed to be owned by certain members of his or her
family (spouse, children, grandchildren and parents) and other related parties
including, for example, certain entities in which such shareholder has a direct
or indirect interest (including partnerships, estates, trusts and corporations),
as well as shares of stock that such shareholder (or a related person) has the
right to acquire upon exercise of an option or conversion right.
4. Each shareholder of FirstBank who receives cash in lieu of a fractional
share of Sterling Common Stock will be treated as if the fractional share had
been received in the Merger and then redeemed by Sterling. Provided that the
shares of FirstBank Common Stock surrendered were capital assets in the hands of
such holder, the receipt of such cash will cause the individual recipient to
recognize capital gain or loss, equal to the difference between the amount of
cash received and the portion of such holder's adjusted tax basis in the shares
of Sterling Common Stock allocable to the fractional share interest, and such
gain or loss will be long-term or short-term depending on the holder's holding
period for the fractional share interest (Code sections 1001 and 1222; Rev. Rul.
66-365, 1966-2 C.B. 116; Rev. Proc. 77-41, 1977-2 C.B. 574).
* * * * * * * * * * * *
We express no opinion with regard to (1) the federal income tax
consequences of the Merger not addressed expressly by this opinion, including
without limitation, (i) the tax consequences, if any, to those shareholders of
FirstBank who acquired shares of FirstBank
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September 27, 2006
Page 5
Common Stock pursuant to the exercise of employee stock options or otherwise as
compensation, and (ii) the tax consequences to special classes of shareholders,
if any, including without limitation, foreign persons, financial institutions,
insurance companies, tax-exempt entities, retirement plans, dealers or brokers
in securities, and persons that hold FirstBank Common Stock as part of a
straddle, a hedge against currency risk, a constructive sale or conversion
transaction; and (2) federal, state, local, or foreign taxes (or any other
federal, state, local, or foreign laws) not specifically referred to and
discussed herein. Further, our opinion is based upon the Code, Treasury
Regulations proposed or promulgated thereunder, and administrative
interpretations and judicial precedents relating thereto, all of which are
subject to change at any time, possibly with retroactive effect, and we assume
no obligation to advise you of any subsequent change thereto. If there is any
change in the applicable law or regulations, or if there is any new
administrative or judicial interpretation of the applicable law or regulations,
any or all of the federal income tax consequences herein may become
inapplicable.
The foregoing opinion reflects our legal judgment solely on the issue
presented and discussed herein. This opinion has no official status or binding
effect of any kind. Accordingly, we cannot assure you that the Service or any
court of competent jurisdiction will agree with this opinion.
We do hereby confirm to you that the description of the federal income tax
consequences of the Merger in the Registration Statement under the heading "The
Merger - Material United States Federal Income Tax Consideration of the Merger"
is consistent with this opinion. We do hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the references to our
firm name therein.
Very truly yours,
SILVER, XXXXXXXX & XXXX, L.L.P.
