EXHIBIT 8.2
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REF./FILE NO.
October 3, 2000
Professional Bancorp, Inc.
000 Xxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx,
Chief Operating Officer
Re: Agreement and Plan of Merger by and between Professional
Bancorp, Inc., and First Community Bancorp
Gentlemen:
We have acted as special tax counsel to Professional Bancorp, Inc., a
Pennsylvania corporation ("Company"), in connection with the closing of the
Merger contemplated by the Agreement and Plan of Merger dated August 7, 2000
(the "Merger Agreement") by and between Company and First Community Bancorp, a
California corporation ("FCB"), which provides, among other things, for the
Merger of Company into FCB. This opinion is furnished to you pursuant to Section
7.02(c) of the Merger Agreement. Capitalized terms not specifically defined in
this opinion shall have the meanings assigned to them in the Merger Agreement.
I. BASES OF OPINIONS
In rendering our opinions, we have examined and relied upon the following:
A. The facts and the representations of Company and FCB contained in the
Merger Agreement;
B. The facts and the representations contained in the Registration
Statement on Form S-4, the Prospectus and the Proxy Statement of Company, as
filed with the Securities and Exchange Commission by FCB pursuant to Section
6.03 of the Merger Agreement (collectively, the "Registration Statement");
C. The following documents:
1. The Merger Agreement;
2. The Registration Statement;
D. The Internal Revenue Code of 1986 (the "Code"), the regulations issued
thereunder, Revenue Rulings and Revenue Procedures issued by the Internal
Revenue Service (the "Service") and applicable case law;
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E. The representations of shareholders of Company who own five percent
(5%) or more of the stock in Company, which are set forth in representation
letters dated on or about the date of this opinion; and
F. The representations of Company, which are set forth in a
representation letter dated the same date of this opinion.
In our examination, we have assumed the authenticity of original documents,
the accuracy of copies and the genuineness of signatures. We also have assumed
(to the extent we have no contrary knowledge) the accuracy of the factual
matters contained in the documents we have examined. In addition, we have
assumed that the Merger will be consummated in the manner contemplated by the
Registration Statement and in accordance with the provisions of the Merger
Agreement. Finally, we have assumed that Company is not under the jurisdiction
of any court in connection with a case under title 11 of the United States Code
or a receivership, foreclosure or similar proceeding.
We have also assumed the following:
(a) There are no other documents, understandings or agreements between
Company and FCB, including modifications of the Merger Agreement, which would
have an adverse effect on the opinions rendered herein;
(b) Each of Company and FCB is duly organized, validly existing
corporation in good standing in its respective state of incorporation;
(c) The Merger Agreement and the transactions contemplated thereby
have been duly authorized by all necessary corporate actions of Company and FCB,
and the Merger Agreement has been duly executed and delivered by Company and
FCB; and
(d) The Merger Agreement constitutes valid, binding and enforceable
obligations of Company and FCB enforceable against each of them in accordance
with its terms.
II. OPINIONS
Subject to the qualifications set forth in this opinion letter, it is our
opinion that, for Federal income tax purposes:
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1. The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code.
2. Each of FCB and Company will be a party to the
reorganization within the meaning of Section 368 of the
Code.
3. No gain or loss will be recognized by a shareholder of
Company if such shareholder receives solely FCB Common Stock
in exchange for Company Common Stock pursuant to Section 354
of the Code.
4. Any shareholder who receives part cash and part FCB Common
Stock in exchange for Company Common Stock will recognize
gain, but not loss, in the amount equal to the lesser of:
(1) the excess, if any, of:
(a) the sum of the fair market value as of the
Effective Date of the Merger of FCB Common Stock
and the cash received, over
(b) the shareholder's basis in the shares of Company
Common Stock surrendered in the Merger; and
(2) the amount of the cash received.
Any such gain will generally be capital gain, subject to
Section 302 of the Code, and will be long-term capital gain,
if as of the Effective Date of the Merger, the holding
period for the shareholder's Company Common Stock is greater
than one year and the shares of Company Common Stock
exchanged were held as capital assets at the Effective Time
of the Merger.
5. Any shareholder who receives solely cash in exchange for
Company Common Stock surrendered in the Merger will
recognize gain or loss equal to the difference between the
amount of cash received and the shareholder's basis in the
Company Common Stock surrendered. This gain or loss will
generally be capital gain or loss and will be long-term
capital gain or loss, if as of the Effective Date of the
Merger, the holding period for such Company Common Stock is
greater than one year and the
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shares of Company Common Stock exchanged were held as
capital assets at the Effective Time of the Merger.
6. The basis of FCB Common Stock received in the Merger by a
holder of Company Common Stock will in the aggregate be the
same as the basis of the Company Common Stock exchanged
therefor pursuant to Section 358 of the Code, decreased by
the amount of cash received and increased by the amount of
gain recognized (less any basis attributable to fractional
shares of Company Common Stock for which cash is received).
7. Under Section 1223 of the Code, the holding period of FCB
Common Stock received in the Merger by a holder of Company
Common Stock will include the holding period of the Company
Common Stock exchanged therefor, provided that the shares of
Company Common Stock so exchanged were held as capital
assets at the Effective Time of the Merger.
8. Gain or loss realized by a shareholder of Company Common
Stock who receives cash in the Merger in exchange for
fractional share interests, if any, will be recognized in an
amount equal to the difference between the cash received and
the basis of such shareholder in each fractional share of
FCB Common Stock constructively received in the Merger
pursuant to Section 1001 of the Code.
III. LIMITATIONS
Our opinions are limited to the matters expressly set forth herein, which
we believe to be the material Federal income tax consequences of the Merger.
Subject to the foregoing, no opinion, favorable or unfavorable, is expressed
(nor should such an opinion be implied or inferred) with respect to any other
tax consequences or other treatment of the transactions described in or
contemplated by the Merger Agreement or the Registration Statement. Moreover,
the scope of this opinion is limited to the Federal income tax consequences of
the Merger contemplated by the Merger Agreement as set forth above and does not
include or encompass state or local tax consequences, and no inferences should
otherwise be made.
In order for the Merger to qualify as a tax-free reorganization, the
Company shareholders must have a continuity of proprietary interest. The
Service's advanced ruling
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guidelines provide that the continuity of proprietary interest requirement in
Treasury Regulation Section 1.368-1(b) will be satisfied if the shareholders
of the acquired company receive stock of the acquiror equal in value, as of
the effective date of the reorganization, to 50% of the value of all the
formerly outstanding stock of the acquired company. Revenue Procedure 77-37,
1977-2 C.B. 568. The parties to the Merger Agreement intend that 50% of the
value of the consideration paid to Company shareholders will consist of FCB
Common Stock. Accordingly, pursuant to the applicable authority, the
continuity of proprietary interest requirement would be satisfied.
However, because the price of the FCB Common Stock fluctuates on a daily
basis, and because the Determination Date is five business days prior to the
Effective Date, it is possible that the Company shareholders will receive
consideration in the form of FCB Common Stock in an amount such that less than
50% of the consideration paid to the Company shareholders by FCB is comprised of
FCB Common Stock.
Applicable case authority provides that Company shareholders must acquire a
"definite and substantial interest" in FCB, and FCB Common Stock must be a
"material part of the consideration transferred" for there to be tax free
reorganization. SEE E.G., HELVERING V. MINNESOTA TEA CO., 296 U.S. 394 (1935).
There is some authority supporting the position that the receipt by the
shareholders of the Company of FCB Common Stock that has a value less than fifty
percent of the total value received by the shareholders of Company will satisfy
the requirement that there be continuity of proprietary interest before and
after the reorganization. XXXX. X. XXXXXX CO. X. XXXXXXXXX, 296 U.S. 374 (1935),
HELVERING X. XXXXX, 296 U.S. 387 (1935), XXXXXX V. COMMISSIONER, 84 F.2d 415
(6th Cir 1936).
There is no authority relating to whether continuity of proprietary
interest is satisfied when a transaction which initially contemplates that 50%
of the value of the consideration received by shareholders of the acquired
company will be stock of the acquiror, but due to market fluctuations the
transaction actually results in shareholders of the acquired company receiving
less than 50% of the value of the consideration in stock of the acquiror.
Nonetheless, the Merger Agreement clearly reflects an intent to satisfy the
continuity of proprietary interest requirement. We believe that, irrespective of
unforeseen market fluctuations, a court would determine that the continuity of
proprietary interest requirement is satisfied in this case.
Our opinions are based on our understanding of the current applicable
Federal law, and the facts as they currently exist. There can be no assurance
that a court or the Service, when faced with the same facts, would reach the
same conclusions as we have or that the law will not be changed after the date
of this letter. Future legislative, judicial or
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administrative interpretations of or changes to the law could be applied
retroactively and may invalidate these opinions. The information and opinions
given in this opinion letter are effective as of the date of this letter, and we
have assumed no obligation to update or supplement these opinions.
This opinion is being delivered to you pursuant to Section 7.02(c) of the
Merger Agreement in connection with filing of the Registration Statement with
the SEC and is not to be used, circulated, quoted or otherwise referred to for
any other purpose without our express written permission. We consent to the
filing of this opinion as an exhibit to the Registration Statement and to the
references to our firm name therein. In giving this consent, we do not admit
that we are within the category of persons whose consent is required under
section 7 of the Securities Act of 1933, as amended, or the rules or regulations
of the SEC promulgated thereunder. This opinion is stated as of the date hereof,
and we assume no responsibility to advise you or any other person or entity of
changes in law or circumstances which may affect our opinions expressed herein.
Very truly yours,
XXXXXX, XXXXXXX, XXXXXX & XXXXXXX LLP
