1
EXHIBIT 8.1
[TO BE TYPED ON XXXXXXX, XXXXXX LETTERHEAD]
___________, 1997
Alabama National BanCorporation
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chairman and Chief Executive Officer
Re: Agreement and Plan of Merger dated as of July 24,
1997 (the "Merger Agreement") between First American
Bancorp ("FAB"); and Alabama National BanCorporation
("ANB"); which provides for the merger of FAB with
and into ANB
Gentlemen:
This letter is in response to your request that we provide you with
our opinion with respect to certain of the federal income tax consequences of
consummation of the transactions set forth in the Merger Agreement. In
rendering this opinion, we have relied upon the facts presented to us in (i)
the Merger Agreement and (ii) the Joint Proxy Statement and Prospectus filed
with the Securities and Exchange Commission as part of ANB's Registration
Statement on Form S-4, including the exhibits thereto along with the amendments
thereto. Additionally, we have relied upon the representations of management
of FAB and management of ANB set forth in certificates of officers of those
entities, copies of which are attached hereto as Exhibits A and B,
respectively. In the aggregate, the facts relied upon are as set forth in the
section of this letter denominated "FACTS."
In our examination of such documents, we have assumed, with your
consent, that all documents submitted to us as photocopies reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, and that all
statements set forth in such documents are accurate.
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We have assumed that the stockholders of both ANB and FAB approve the
Merger Agreement in accordance with law of Delaware and Alabama, their
respective state of incorporation. We have assumed that the transactions
contemplated by the Merger Agreement, will qualify as statutory mergers under
Delaware and Alabama law.
FACTS
ANB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with its principal executive
office located in Birmingham, Alabama. It presently has 10,000,000 authorized
shares of common capital stock, $1.00 par value per share ("ANB Common Stock"),
of which 6,525,418 shares were issued and outstanding as of June 30, 1997.
Additionally, ANB has 100,000 authorized shares of preferred stock, $1.00 par
value per share, none of which were issued and outstanding as of June 30, 1997.
Since June 30, 1997, there has been no change in the issued and outstanding ANB
Common Stock (except (i) as will be effected by the transactions described
herein, and (ii) for insignificant changes occurring in the ordinary course of
business), and none of the preferred shares have been issued.
FAB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Alabama with its principal executive
offices located in Decatur, Alabama. As of June 30, 1997, FAB had 10,000,000
authorized shares of common capital stock, each of which had a par value of
$.01 per share (the "FAB Common Stock"), of which 2,878,683.785 were issued and
outstanding as of June 30, 1997. Additionally, FAB has 400,000 authorized
shares of preferred stock, $.01 par value per share, none of which were issued
and outstanding as of June 30, 1997.
FAB owns all the stock of First American Bank, an Alabama state
banking corporation ("First American Bank").
Numerous factors were considered by the Boards of Directors of FAB and
ANB in approving and recommending to their respective shareholders the terms of
the merger of FAB into ANB (the "Merger"). These included an analysis of the
financial structure; results of operations; prospects of ANB, the bank
subsidiaries of ANB, FAB and First American Bank; the composition of the
businesses of the two organizations; the overall compatibility of the
management of the organizations; the outlook for both organizations in the
banking and financial services industry; and the opinion of an investment
banker as to the fairness of the terms of the Merger from a financial point of
view.
ANB's board of directors considered the information presented to the
directors by the management of ANB concerning (i) the business, operations,
earnings, asset quality, and
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financial condition of FAB, including the composition of the earning asset
portfolio of FAB, (ii) the financial terms of the Merger, including the
relationship of the value of the consideration issuable in the Merger to the
market value, tangible book value, and earnings per share of FAB, (iii) the
non-financial terms of the Merger, including the treatment of the Merger as a
tax-free exchange of FAB Common Stock for ANB Common Stock for federal income
tax purposes, (iv) the likelihood of the Merger being approved by the
applicable regulatory authorities without undue conditions or delay, (v) the
opportunity for reducing the non-interest expense of the operations of FAB and
the ability of the operations of FAB after the Merger to contribute to the
earnings of ANB, (vi) the attractiveness of the FAB franchise, the market
potential of FAB and each of the markets in which it operates, and the
combinability of the franchise of FAB in north Alabama with the operation of
ANB in its market, and (vii) the compatibility of the community bank
orientation of the operations of FAB to that of ANB.
FAB's board of directors considered whether the Merger would enhance
shareholder value while protecting the need of its current customer and
determine during the course of negotiations that the merger would satisfy both
of those criteria.
With respect to enhancement of shareholder value the board of
directors of FAB consider (i) the consideration to be received by the FAB
shareholders, (ii) the marketability and liquidity of ANB Common Stock, (iii)
ANB's market position and reputation, and (iv) the dividend history of ANB.
Considering the relative book value of ANB Common Stock as compared to FAB
Common Stock, based in part on evaluation received from Xxxx Xxxxxxxxxx & Co.
Investment Bankers, the board of directors of FAB determined that the exchange
ratio represented in the Merger Agreement would be fair to the stockholders of
FAB. The board of directors of FAB determined that the ownership of ANB Common
Stock would present an immediate enhancement to shareholder value in that ANB
Common Stock is actively traded on the NASDAQ National Market, thereby
presenting shareholders with a significantly enhanced marketability and
liquidity when compared to the FAB Common Stock. The board of directors of FAB
also believe that ownership of ANB Common Stock presented an opportunity for
continuing enhancement of shareholder value, considering ANB's size, position
in its relevant market, the reputation of its management and its historical
performance. ANB also had a history of paying dividends to its shareholders,
as opposed to FAB which had not historically paid cash dividends to its
shareholders.
Having determined that the Merger would be in the best interest of the
FAB shareholders, the board of directors of FAB evaluated the impact of the
Merger on the current customers of First American Bank considering (i) ANB's
ability to provide additional financial services to First American Bank's
customers, (ii) the size of ANB's network of bank branches that could provide
added convenience to First American Bank's existing customers, and (iii) ANB's
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commitment to continue to service Xxxxxx, Limestone and Madison Counties. The
board of FAB determined that ANB would provide a number of additional financial
services, such as trust services and security brokerage services, that would
benefit the First American Bank's current customers in Xxxxxx, Limestone and
Madison Counties. In addition, ANB's commitment to maintain the current
management of First American Bank and the appointment by ANB of three of FAB's
current board of directors to its board of directors indicated that ANB would
maintain and preserve the relationship which FAB had developed historically and
would continue to serve the needs of Xxxxxx, Limestone and Madison Counties in
the future.
Prior to the Merger, no FAB Common Stock will be held by FAB or any
subsidiary thereof or by ANB, any subsidiary thereof or any director or
executive officer thereof, other than in a fiduciary capacity and, in the case
of FAB, as treasury stock. Upon consummation of the Merger, each share of FAB
Common Stock issued and outstanding immediately prior to the Merger (excluding
shares held by Stockholders who perfect their dissenter's rights) shall cease
to be outstanding and shall be converted into .7199 newly issued shares of ANB
Common Stock. The ANB Common Stock to be issued in the Merger will have been
registered with the Securities and Exchange Commission under the Securities Act
of 1933. The ratio for the exchange of shares of FAB Common Stock for ANB
Common Stock was negotiated through arm's-length bargaining. Accordingly, the
fair market value of the ANB Common Stock and cash consideration, in the case
of fractional shares, will be approximately equal to the fair market value of
the FAB Common Stock surrendered in exchange therefor.
Each share of ANB Common Stock issued and outstanding immediately
prior to the effective time of the Merger shall remain issued and outstanding
from and after the effective time.
As contemplated in the Agreement, FAB will be merged into and become a
part of ANB, which will be the surviving corporation. FAB's separate corporate
existence will cease to exist upon consummation of the Merger. The Merger will
be effected pursuant to the laws of the States of Alabama and Delaware. ANB,
as the successor corporation, will acquire all of the assets of FAB (both net
and gross) and assume all of FAB's liabilities. Both the fair market value and
adjusted basis of the assets of FAB to be transferred to ANB will equal or
exceed the sum of liabilities to be assumed by ANB, plus the amount of
liabilities, if any, to which the transferred assets are subject. The
liabilities of FAB to be assumed by ANB and the liabilities to which
transferred assets of FAB are subject were incurred by FAB in the ordinary
course of its business. FAB does not have any indebtedness of ANB or any
subsidiary or affiliate of ANB that was issued, acquired or will be settled at
a discount, or that was issued or acquired in connection with this transaction.
Nor does ANB have any indebtedness of FAB or any
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subsidiary or affiliate of FAB that was issued, acquired or will be settled at
a discount, or that was issued or acquired in connection with this transaction.
ANB has no plan or intention to sell or otherwise dispose of any of
the assets of FAB acquired in the transaction, except for dispositions made, or
to be made, in the ordinary course of business. Following the Merger, ANB will
continue the historic business of FAB and use a significant portion of FAB's
assets in such business, including the operation of the banking business of FAB
conducted through First American Bank. ANB has no plan or intention to
liquidate First American Bank, to merge First American Bank into another
corporation, or to cause First American Bank to sell or otherwise dispose of
any of the assets of First American Bank, except for dispositions made in the
ordinary course of business.
No fractional shares will be issued in connection with the Merger. In
the event that a fractional share is computed, the shareholder will receive
cash in lieu thereof. The cash payment in lieu of fractional shares is solely
for the purpose of avoiding the expense and inconvenience to ANB of issuing
fractional shares and does not represent separately bargained-for
consideration. No one holder of FAB Common Stock will receive cash greater
than the average sales price of one full share of ANB Common Stock reported on
the NASDAQ National Market during the ten trading days ending on the tenth
business day prior to the effective date of the Merger, and in the aggregate
the maximum amount of cash consideration that will be paid in the transaction
to the holders of FAB Common Stock in lieu of fractional shares will not exceed
the product of (i) the number of holders of FAB Common Stock on the effective
date of the Merger, times (ii) the value of one full share of ANB Common Stock
calculated as set forth above. The total cash consideration that will be paid
in the Merger instead of issuing fractional shares is not expected to exceed
one percent of the total consideration to be received. Any holder of FAB
Common Stock who perfects his statutory dissenter's rights shall be entitled to
receive the value of such shares in cash, as determined pursuant to the Alabama
Business Corporation Act. In the event that Shareholders owing in excess of 5%
of the outstanding shares of FAB Common Stock property assert their dissenter's
rights, ANB's Board of Directors may terminate the Merger.
All ANB Common Stock to be received by FAB shareholders will be freely
transferable, except for ANB Common Stock received by persons deemed to be
"affiliates" of FAB who, under Rule 145 pursuant to the Securities Act of 1933,
will be restricted as to future sales. As of the effective date of the Merger,
each such affiliate will have entered into an agreement restricting resale of
the ANB Common Stock.
To the best knowledge of management of FAB, there is no plan or
intention by any holder of 1% or more of the outstanding shares of FAB Common
Stock to (i) sell, exchange,
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or otherwise dispose of any of the ANB Common Stock received in the transaction
(ii) reduce the risk associated with the ownership of ANB Common Stock by
entering into a transaction such as a short sale of ANB Common Stock (including
transactions commonly referred to as "short-against-the-box"), the granting of
a "deep-in-the-money" call option, or other arrangement, or (iii) enter into,
or consent to, any contract or other arrangement with respect to the sale,
exchange or other disposition of ANB Common Stock to be received in the Merger
(collectively a "Disposition Transaction"). To the best knowledge of
management of FAB, there is no plan or intention on the part of the remaining
holders of FAB Common Stock to engage in a Disposition Transaction of a number
of shares of ANB Common Stock received in the Merger that would reduce the
holders' of FAB Common Stock holdings of ANB Common Stock received in the
Merger to less than 50% of the value of all FAB Common Stock as of the
effective date of the Merger. ANB has no plan or intention to reacquire any
ANB Common Stock issued in the transaction.
Three of the 12 present directors of FAB will be elected to the Board
of Directors of ANB effective on the date of consummation of the Merger and
thereafter will receive an annual fee as a director of ANB. The fee to be paid
such individuals, as directors, is not allocable to any of the FAB Common
Stock. Xxx X. Xxxxx will be elected to serve as Vice-Chairman of ANB as a
result of the Merger. Additionally, Xx. Xxxxx will continue to serve as
Chairman of First American Bank. Any consideration to be paid by ANB to Xx.
Xxxxx for his employment services is not allocable to any of their FAB Common
Stock. Finally, no shareholder-employee of FAB will receive any consideration
for the FAB Common Stock owned by such shareholder-employee in the form of
compensation for services rendered or to be rendered, and all compensation to
such shareholder-employees for services rendered or to be rendered will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
ANB and FAB will each bear and pay costs and expenses incurred by it,
or on its behalf, in connection with the Merger, including filing, registration
and application fees, printing and mailing fees and expenses and fees and
expenses of their respective accountants and counsel. Any costs and expenses
incurred by a holder of FAB Common Stock will be for his own account and will
not be paid by ANB or FAB.
Neither ANB nor FAB are under the jurisdiction of a court in a Title
11 or similar case.
As of December 31, 1996, the total assets of FAB, exclusive of cash,
cash items (including receivables) and Government securities, were $__________.
Of this amount, the total value of the assets held for investment constitutes
$__________, of which $__________ consisted of stock and securities. As of the
date hereof, there has been no substantial change
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in FAB's total assets, that portion of FAB's total assets held for investment
or that portion represented by stock and securities.
As of December 31, 1996, the total assets of ANB, exclusive of cash,
cash items (including receivables) and Government securities, were
$____________. Of this amount, the total value of the assets held for
investment constitutes $___________ of which $_____________ consisted of stock
and securities. As of the date hereof, there has been no substantial change in
ANB's total assets, that portion of ANB's total assets held for investment or
that portion represented by stock and securities.
LEGAL ANALYSIS
Section 354(a)(1) of the Internal Revenue Code of 1986 (the "Code")(1)
provides that gain or loss will not be recognized to a transferor stockholder
if stock or securities in a corporation that is a "party to a reorganization"
are, pursuant to a "plan of reorganization," exchanged solely for stock or
securities in another corporation that is also a "party to the reorganization."
The exchange to which section 354(a)(1) applies must be pursuant to a "plan of
reorganization" and the stock and securities surrendered and received must be
the stock and securities of corporations each of which is a "party to a
reorganization" as those terms are defined in section 368. Treas. Reg. Section
1.354-1(a). Section 354(a)(2)(A) provides that the non-recognition rule of
section 354(a)(1) will not apply if either (i) the principal amount of the
securities received by the transferor exceeds the principal amount of the
securities surrendered by the transferor, or (ii) securities are received by
the transferor but no securities are surrendered by the transferor.
Section 356(a)(1) provides that if the non-recognition rule of section
354(a)(1) would apply to an exchange except that money or "other property" is
received by the transferor in addition to stock or securities in a corporation
that is a "party to a reorganization," then gain will be recognized by the
transferor to the extent of the money and fair market value of the "other
property" received. If such an exchange has the effect of the distribution of
a dividend, then each transferor that receives money or "other property" will
have the gain to be recognized treated as a dividend to the extent of such
transferor's ratable share of the earnings and profits of the corporation in
which the transferor held stock. Code, Section 356(a)(2). Whether a
distribution has the effect of a dividend will be determined based upon
principles developed under sections 356(a)(2) and 302 for determining dividend
equivalency. Rev. Rul. 74-515, 1974-2 C.B. 118. In applying those principles
in the context of section 356, one compares the interest
--------------------
(1) Statutory references are to the Code.
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the shareholder actually received in the acquiring corporation in the
reorganization with the interest the shareholder would have received in the
acquiring corporation if solely stock had been received. Commissioner x.
Xxxxx, 489 U.S. 726 (1989); Rev. Rul. 93-61, 1993-2 C.B. 118.
The phrase "other property" does not include "securities" if such
securities would be permitted to be received without the recognition of gain
under the provisions of section 354. Code, Section 356(d)(2)(A). Further, if
securities of a corporation that is "a party to a reorganization" are
surrendered and securities of a corporation that is "a party to a
reorganization" are received which exceed the principal amount of the
securities surrendered, the term "other property" includes only the fair market
value of the excess principal amount. Code, Section 356(d)(2)(B).
In a "reorganization" where cash is paid by the acquiring corporation
that is not separately bargained for but is in lieu of fractional share
interests to which shareholders are entitled, such cash payment will be treated
under section 302(a) as a redemption of the fractional share interest which
will be treated as a distribution in exchange, provided that the redemption is
not essentially equivalent to a dividend. Rev. Rul. 66-365, 1966-2 C.B. 116
amplified Rev. Rul. 81-18, 1981-1 C.B. 122; Rev. Rul. 69-34, 1969-1 C.B. 105.
See also, PLR 9703019. The Internal Revenue Service (the "Service") will
normally rule that a cash distribution in lieu of fractional share interests
arising in a "reorganization" will be in part or full payment in exchange for
the stock redeemed if the cash distribution is undertaken solely for the
purpose of saving the corporation the expense and inconvenience of issuing and
transferring fractional shares and is not separately bargained-for
consideration. Rev. Proc. 77-41, 1977-2 C.B. 574. See e.g. PLR 9701020.
The term "reorganization" is defined in Section 368(a) and includes
under Section 368(a)(1)(A) a statutory merger or what is commonly referred to
as an "A reorganization." See also, Treas. Reg. Section 1.368-2(b)(1).
In the present matter, FAB will merge into ANB in a statutory merger
under the laws of the States of Alabama and Delaware. Holders of FAB Common
Stock will exchange their shares for ANB Common Stock. Only in the instance
where a fractional share is computed will the holder of a FAB Common Stock
receive cash in lieu of a fractional share of ANB Common Stock. The
distribution of cash, as opposed to the distribution of a fractional share of
ANB Common Stock, is solely for the purpose of saving ANB the expense and
inconvenience of issuing and transferring fractional shares of ANB Common Stock
and is not separately bargained-for consideration.
In the case of an exchange to which section 354 applies, the basis of
the stock or securities received by the transferor, without the recognition of
gain or loss, shall be the same
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as that of the stock or securities exchanged, decreased by (i) the fair market
value of any "other property" and money received by the transferor and (ii) the
amount of loss recognized by the taxpayer on the exchange, and increased by (x)
the amount treated as a dividend and (y) the amount of gain recognized on the
exchange, exclusive of the portion treated as a dividend. Code, Section
358(a)(1).
The holding period of stock of a corporation "a party to a
reorganization" received by a transferor includes the period of time that the
transferor held the stock of the other corporation "a party to the
reorganization" if such stock constitutes a capital asset in the hands of the
transferor. Code, Section 1223(1). Additionally, for this rule to apply the
stock received must have the same basis, in whole or in part, as the stock
exchanged. Generally, a capital asset will include all property held by a
taxpayer exclusive of (i) stock in trade of a taxpayer or (ii) other property
of a kind which would be properly includible in inventory. Code, Section
1221(1).
In the present matter, a holder of FAB Common Stock will have a basis
in the ANB Common Stock received equal to such holder's basis in the FAB Common
Stock surrendered, decreased by the amount of any cash received in lieu of a
fractional share of ANB Common Stock and increased by the amount of gain
recognized as a result of receiving cash in lieu of a fractional share. Such
holder of FAB Common Stock will include in the holding period of ANB Common
Stock the holding period of such holder of FAB Common Stock unless the FAB
Common Stock was not considered as a capital asset in the hands of such holder.
With respect to the tax treatment of a corporation that is "a party to
a reorganization" which issues stock to a transferor of stock or securities in
another corporation that is a "party to a reorganization," the basis of the
property acquired shall be the same as the basis in the property surrendered
increased by the amount of gain recognized by the transferor on such transfer.
Code, Section 362(b).
The term "party to a reorganization" is defined in sections 368(a) and
368(b). The term "plan of reorganization" is defined in the regulations
promulgated under the authority of section 368.
Two additional requirements for a "reorganization" are a "continuity
of business enterprise" and a "continuity of interest" therein on the part of
those persons who, directly or indirectly, were the owners of the enterprise
prior to the reorganization. Treas. Reg. Section 1.368-1(b).
The "continuity of business enterprise" requirement is satisfied if
the acquiring corporation either (i) continues the acquired corporation's
historic business, or (ii) uses a
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significant portion of the acquired corporation's historic business assets in a
business. Treas. Reg. Section 1.368-1(d)(2). With respect to continuing the
historic business of the acquired corporation, the fact that the acquiring
corporation is in the same line of business as the acquired corporation tends
to establish the requisite business continuity. The acquired corporation's
historic business is generally the business it has most recently conducted. If
the acquired corporation has more than one line of business, continuity of
business enterprise requires that only a significant line of business be
conducted. Treas. Reg. Section 1.368-1(d)(3). With respect to the alternative
of historic business assets continuity, it generally will be satisfied if the
acquiring corporation utilizes a significant portion of the acquired
corporation's historic business assets in a business. An acquired
corporation's historic business assets are those assets used in its historic
business. Whether a "significant" portion of the historic assets are used in a
business is based upon the relative importance of the assets to the operation
of the business. Treas. Reg. Section 1.368-1(d)(4).
The "continuity of interest" requirement is satisfied if there exists
among the holders of the stock and securities of either (i) the acquired
corporation or (ii) acquiring corporation, the requisite continuity of interest
in the acquiring corporation. Treas. Reg. Section 1.368-1(b). For ruling
purposes, the Service has stated that the continuity of interest requirement
will be satisfied if one or more shareholders of the acquired corporation
acquire stock of the acquiring corporation, or a corporation controlling the
acquiring corporation, that is equal in value to at least 50% of the value of
all the outstanding stock of the acquired corporation on the date of the
reorganization. Rev. Proc. 77-37, 1977-2 C.B. 568. See, X.X. Xxxxxxx Corp. v.
Commissioner 104 TC 100 (1995) (discussion of judicial authority for less than
50%).
In the present matter, ANB both will continue FAB's historic business
and use a significant portion of FAB's historic business assets in such
business. Additionally, former holders of FAB Common Stock will acquire in the
aggregate ANB Common Stock equal in value to at least 50% of the value of all
of the outstanding FAB Common Stock on the date of the reorganization, and
there is no known intent to dispose of a sufficient number of ANB Common Stock
to reduce the value of the ANB Common Stock received and retained to less than
50% of the value of the FAB Common Stock immediately before the Merger.
Additionally, for a transaction to qualify as a reorganization by
virtue of a statutory merger, there must be a business purpose for the
transaction. Treas. Reg. Sections 1.368-1(b); 1.368-2(b)(2). Whether a
transaction has a business purpose is eventually a factual question with no
mathematical safe-harbor available.
In the present matter, ANB should be able by virtue of its size to
realize certain economies of scale and be more competitive with regional and
national providers of financial
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services. Additionally, holders of FAB Common Stock will receive in exchange
for such shares a security registered under the Securities Act of 1933 issued
by a company that reports under the Securities Exchange Act of 1934. Based
upon similar facts, the Service has ruled in the past that a reorganization has
occurred.
Assuming that a "reorganization" occurs, a "party to a reorganization"
includes both corporations in a transaction qualifying as a reorganization when
one corporation acquires properties of another corporation and, in the case of
a corporation controlling the acquiring corporation, such corporation where its
stock is used in the acquisition. Treas. Reg. Section 1.368-2(f). A "plan of
reorganization" is a consummated transaction specifically defined as a
reorganization and is not itself a broadening of the term "reorganization."
Treas. Reg. Section 1.368-2(g).
Although not directly applicable to the present matter, the Service
has held that the "solely for voting stock" requirement of Sections
368(a)(1)(B) and 368(a)(1)(C) will not be violated if the acquiring corporation
pays expenses of the acquired corporation that are solely and directly related
to the reorganization, but will be violated if the acquiring corporation pays
the individual expenses of the stockholders of the acquired corporation. Rev.
Rul. 73-54, 1973-1 C.B. 187; PLR 9701020. Even in statutory mergers, for
ruling purposes, the Service required a representation that each party to the
merger and the stockholders of the acquired corporation will pay their
respective expenses, if any, incurred in connection with the transaction. Rev.
Proc. 86-42, 1986-2 C.B. 722. The Service has stopped ruling on these types of
transactions. Rev. Proc. 97-3, 1997-I.R.B. 84 (Section 3.01(24)).
Even though a transaction would otherwise meet all of the requirements
for a "reorganization" as described before, a transaction will not be
considered a "reorganization" if two or more parties to the transaction are
"investment companies," at least as with respect to such "investment company."
Code, Section 368(a)(2)(F)(i). For this purpose, the term "investment company"
means a "regulated investment company," a "real estate investment trust," or a
corporation 50% or more of the value of whose total assets are stock and
securities and 80% or more of the value of whose total assets are assets held
for investment. In making this calculation, stock and securities in any
subsidiary are disregarded and the parent corporation is deemed to own its
ratable share of the subsidiary assets, considering for this purpose a
corporation as being a subsidiary if another corporation owns 50% or more of
the combined voting power of all classes of stock entitled to vote, or 50% or
more of the total value of shares of all classes of stock outstanding. Code,
Section 368(a)(2)(F)(iii). Additionally, in determining total assets, there is
excluded cash and cash items (including receivables), government securities and
in certain instances other assets acquired. Code, Section 368(a)(2)(F)(iv).
Assets are held for investment if (i) they are held primarily for gain from
appreciation in value, production of
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passive income or both and (ii) are not held primarily for sale to customers.
Prop. Treas. Reg. Section 1.368-4(d)(1). Passive income includes interest
income if such interest constitutes passive income for purposes of S
corporation taxation. Prop. Treas. Reg. Section 1.368-4(d)(2). Interest
income directly derived in the ordinary course of a trade or business of
lending or financing does not constitute passive income. Treas. Reg. Section
1.1362-2(c)(5)(iii)(B). Among the requirements to constitute a "regulated
investment company," is that the company files with its return for the taxable
year an election to be a "regulated investment company" or has made such
election for a previous taxable year. Code, Section 851(d)(1). A similar
requirement is provided to constitute a "real estate investment trust." Code,
Section 856(c)(1).
In the present matter, neither ANB, nor FAB has made an election to be
taxed as a regulated investment company or a real estate investment trust.
Accordingly, such entities can constitute an "investment company" only if 50%
or more of the value of their respective assets are stocks and securities and
80% or more of the value of the total assets are held for investment. In
making these calculations, cash, cash items (including receivables) and
Government securities are excluded and stock and securities in a 50%-owned
subsidiary are disregarded with the parent being deemed to own its ratable
share of such subsidiaries' assets. Otherwise, a "security" includes
obligations of state and local governments, commodity futures contracts, shares
of regulated investment companies, real estate investment trusts and other
investments constituting a security within the meaning of the Investment
Company Act of 1940. In the present matter, neither ANB nor FAB meet the
definition of an "investment company."
With respect to FAB Shareholders who elect to exercise their right to
dissent to the Merger, xxxx received with respect to a dissenter's FAB Common
Stock will be treated as received by the FAB Shareholder in redemption of their
FAB Common Stock, subject to the provisions and limitations of Section 302 of
the Code.
OPINION
Based upon the facts set forth herein and assuming that the Merger
will take place as described in the Agreement and that the representations made
by ANB and FAB are true and correct at the time of consummation of the Merger,
it is our opinion that:
(i) the Merger will constitute a reorganization within
the meaning of Section 368 of the Code;
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Alabama National BanCorporation
___________, 1997
Page 13
(ii) no gain or loss will be recognized by a holder of FAB
Common Stock upon conversion in the Merger of FAB Common Stock into
ANB Common Stock;
(iii) the basis of ANB Common Stock to be received in the
Merger by a holder of FAB Common Stock will be the same as such
holder's basis in the FAB Common Stock exchanged therefor;
(iv) the holding period of ANB Common Stock to be received
in the Merger by a holder of FAB Common Stock will include the period
during which such holder held the FAB Common Stock exchanged therefor,
provided that such FAB Common Stock was held as a capital asset
immediately prior to the consummation of the Merger;
(v) the receipt of cash in exchange for a fractional
share interest in a share of ANB Common Stock will be treated as
received in exchange for such fractional share interest;
(vi) ANB and FAB will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(vii) no gain or loss will be recognized by ANB or FAB in
connection with the reorganization; and
(viii) the receipt of cash by a FAB Shareholder, who
exercises his or her rights to dissent, will be treated as received in
exchange for such FAB Common Stock.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time
with retroactive effect. In addition, our opinions are based solely on the
documents that we have examined, the additional information that we have
obtained, and the statements set out therein, which we have assumed and you
have confirmed to be true on the date hereof and will be true on the date on
which the proposed transaction is consummated. Our opinions cannot be relied
upon if any of the facts contained in such documents or if such additional
information is, or later becomes, inaccurate, or if any of the statements set
out herein is, or later becomes, inaccurate. Finally, our opinions are limited
to the tax matters specifically covered thereby, and we have not been asked to
address, nor have we addressed, any other tax consequences of the proposed
transaction.
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Alabama National BanCorporation
___________, 1997
Page 14
We consent to the use of this opinion as an exhibit to the
Registration Statement (Registration No. ___________) filed by ANB relating to
the proposed Merger and to the reference to us under the headings "RISK FACTORS
- Tax Considerations," "THE MERGER - Certain Federal Income Tax Consequences"
and "LEGAL MATTERS" in the Joint Proxy Statement and Prospectus included in the
Registration Statement. This opinion is being provided solely for the use of
ANB. No other person or party shall be entitled to rely on this opinion.
Very truly yours,
15
EXHIBIT A
STATEMENT OF FACTS AND REPRESENTATIONS
This Statement of Facts and Representations is made on behalf of First
American Bancorp ("FAB") to Xxxxxxx, Xxxxxx & Xxxx, P.C., and is intended to be
relied upon in the issuance of an opinion as to certain federal tax
consequences arising from consummation of the transactions described in the
Agreement and Plan of Merger dated July 24, 1997, by and between FAB and
Alabama National BanCorporation ("ANB"). Capitalized terms shall have the
meaning assigned to them in the opinion of Xxxxxxx, Xxxxxx & Xxxx, P.C. dated
_____________, 1997, to ANB.
1. Both the fair market value and adjusted basis of assets of FAB
to be transferred to ANB will equal or exceed the sum of liabilities to be
assumed by ANB, plus the amount of liabilities, if any, to which the
transferred assets are subject.
2. The ratio for the exchange of shares of FAB Common Stock for
ANB Common Stock was negotiated through arm's-length bargaining. The fair
market value of the ANB Common Stock and cash consideration, in the case of
fractional shares, will be approximately equal to the fair market value of the
FAB Common Stock surrendered in exchange therefor.
3. The liabilities of FAB to be assumed by ANB and the
liabilities to which transferred assets of FAB are subject were incurred by FAB
in the ordinary course of its business.
4. To the best knowledge of management of FAB, there is no plan
or intention by any holder of 1% or more of the outstanding shares of FAB
Common Stock to (i) sell, exchange, or otherwise dispose of any of the ANB
Common Stock received in the transaction, (ii) reduce the risk associated with
the ownership of ANB Common Stock by entering into a transaction such as a
short sale of ANB Common Stock (including transactions commonly referred to as
a "short-against-the-box"), the granting of "deep-in-the-money" call options,
or other arrangement, or (iii) enter into, or consent to, any contract or other
arrangement with respect to the sale, exchange or other disposition of ANB
Common Stock to be received (collectively a "Disposition Transaction"). To the
best knowledge of management of FAB, there is no plan or intention on the part
of the remaining holders of FAB Common Stock to engage in a Disposition
Transaction of a number of shares of ANB Common Stock received in the Merger
that would reduce the holders of FAB Common Stock holdings of ANB Common Stock
received in the Merger to less than 50% of the value of all FAB Common Stock as
of the effective date of the Merger.
5. FAB does not have any indebtedness of ANB or any subsidiary of
ANB that was issued, acquired or will be settled at a discount, or that was
issued or acquired in connection with this transaction.
A-1
16
6. Any cost or expense incurred by a holder of FAB Common Stock
will be for his own account and will not be paid by FAB.
7. The payment of cash in lieu of fractional shares of ANB Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
ANB of issuing fractional shares and does not represent separately bargained
for consideration. The total cash consideration that will be paid in the
transaction to the holders of FAB Common Stock instead of issuing fractional
shares of ANB Common Stock will not exceed one percent (1%) of the total
consideration that will be issued in the transaction to the holders of FAB in
exchange for their shares of FAB Common Stock. The fractional share interests
of each FAB Common Stock will be aggregated, and no holder of FAB Common Stock
will receive cash in an amount greater than the value of one full share of ANB
Common Stock based upon the average sales price of one full share of ANB Common
Stock reported on the NASDAQ National Market during the ten trading days ending
on the tenth business day prior to the effective date of the Merger.
8. The fee to be paid to those individuals who are members of the
Board of Directors of FAB who become directors of ANB, is not allocable to any
of the FAB Common Stock. Any consideration to be paid by ANB to Xxx X. Xxxxx
pursuant to employment arrangements is not allocable to any of the FAB Common
Stock. No shareholder-employee of FAB will receive any consideration for the
FAB Common Stock owned by such shareholder-employee in the form of compensation
for services rendered or to be rendered and all compensation to such
shareholder-employee for services rendered or to be rendered will be
commensurate with amounts paid to third parties bargaining at arm's-length for
similar services.
9. FAB is not under the jurisdiction of a court in a Title 11 or
similar case.
10. As of December 31, 1996, the total assets of FAB, exclusive of
cash, cash items (including receivables) and Government securities was
$______________. Of this amount, the total value of the assets held for
investments constitutes $___________, of which $____________ consists of stock
and securities.
11. As of the date hereof, there has been no substantial change
from December 31, 1996 in FAB's total assets or that portion of FAB's total
assets represented by investment securities.
12. Except as will be effected by the Merger, there has been no
change in the issued and outstanding FAB Common Stock since December 31, 1996.
13. XXX has not elected to be taxed as a regulated investment
company or a real estate investment trust.
FIRST AMERICAN BANCORP
By:_____________________________________
Its:__________________________________
A-2
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EXHIBIT B
STATEMENT OF FACTS AND REPRESENTATIONS
This Statement of Facts and Representations is made on behalf of
Alabama National BanCorporation ("ANB"), to Xxxxxxx, Xxxxxx & Xxxx, P.C., and
is intended to be relied upon in the issuance of an opinion as to certain
federal tax consequences arising from consummation of the transactions
described in the Agreement and Plan of Merger dated July 24, 1997, by and
between First American Bancorp ("FAB") and ANB. Capitalized terms shall have
the meaning assigned to them in the opinion of Xxxxxxx, Xxxxxx & Xxxx, P.C.
dated _________, 1997, to ANB.
1. The ratio for the exchange of shares of FAB Common Stock for
ANB Common Stock was negotiated through arm's-length bargaining. The fair
market value of the ANB Common Stock and cash consideration in the case of
fractional shares will be approximately equal to the fair market value of the
FAB Common Stock surrendered in exchange therefor.
2. Each share of ANB common stock (excluding shares held by
stockholders who perfect their dissenter's right of appraisal as provided in
the Merger Agreement) issued and outstanding immediately prior to the effective
time of the Merger shall remain issued and outstanding from and after the
effective time.
3. ANB does not have any indebtedness of FAB or any subsidiary of
FAB that was issued, acquired or will be settled at a discount, or that was
issued or acquired in connection with this transaction.
4. ANB has no plan or intention to sell or otherwise dispose of
any of the assets of FAB acquired in the transaction, except for dispositions
made, or to be made, in the ordinary course of business or for transfers to
another corporation controlled by ANB. Following the Merger, ANB will continue
the historic business of FAB and use a significant portion of FAB's assets in
such business, including the operation of the banking business of FAB conducted
through First Bank.
5. ANB has no plan or intention to reacquire any ANB Common Stock
issued in this transaction.
6. None of ANB, its subsidiaries (other than in a fiduciary
capacity), directors and executive officers owned on December 31, 1996 any FAB
Common Stock.
7. The payment of cash in lieu of fractional shares of ANB Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
ANB of issuing fractional shares and does not represent separately bargained
for consideration. The total cash consideration that will be paid in the
transaction to the holders of FAB Common Stock instead of issuing fractional
shares of ANB Common Stock will not exceed one percent (1%) of the total
consideration that
B-1
18
will be issued in the transaction to the holders of FAB in exchange for their
shares of FAB Common Stock. The fractional share interests of each FAB Common
Stock will be aggregated, and no holder of FAB Common Stock will receive cash
in an amount greater than the book value of one full share of ANB Common Stock
determined as of the month-end immediately preceding the effective date of the
Merger.
8. As of December 31, 1996, the total assets of ANB, exclusive of
cash, cash items (including receivables) and Government securities were
$_____________. Of this amount, the total value of the assets held for
investment constitutes $_____________, of which $_______________ consists of
stock and securities. As of the date hereof, there has been no substantial
change in ANB's total assets, the portion of ANB's total assets held for
investment, or that portion represented by stock and securities.
9. ANB is not under the jurisdiction of a court in a Title 11 or
similar case.
10. ANB has no plan or intention to liquidate First American Bank,
to merge First American Bank into another corporation, or to cause First
American Bank to sell or otherwise dispose of any of the assets of First
American Bank, except for dispositions made in the ordinary course of business.
11. ANB has not elected to be taxed as a regulated investment
company or a real estate investment trust.
ALABAMA NATIONAL
BANCORPORATION
By:____________________________________
Its:_________________________________
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