EXHIBIT 8.2
Xxxxx 0, 0000
Xxxxxxx Financial Services Corp.
000 Xxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Xx.,
President and Chief Executive Officer
Ladies and Gentlemen:
In connection with the Agreement and Plan of Merger, dated as of December
16, 1998, by and among Xxxxxxxxxx Corporation, a Vermont corporation
("Chittenden"), Chittenden Acquisition Subsidiary, Inc., a Delaware corporation
and wholly-owned subsidiary of Chittenden ("CASI"), and Vermont Financial
Services Corp., a Delaware corporation ("VFSC"), which agreement, and all other
agreements contemplated thereby, are collectively referred to herein as the
"Agreement," this opinion is furnished to you to be filed as Exhibit 8.2 to the
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") filed on the date
hereof with the Securities and Exchange Commission. Capitalized terms used
herein without definition have the meanings ascribed to them in the
Registration Statement or in the Agreement, as the context may require. "Code"
shall mean the Internal Revenue Code of 1986, as amended.
Facts. Pursuant to the Agreement, (i) CASI will merge (the "Merger") with
and into VFSC such that VFSC is the surviving corporation in the Merger and
continues its corporate existence under the laws of the State of Delaware as a
wholly-owned subsidiary of Chittenden, and (ii) VFSC (as the surviving
corporation in the Merger) will merge (the "Subsequent Merger," and together
with the Merger, the "Mergers") with and into Chittenden such that Chittenden
is the surviving corporation in the Subsequent Merger and continues its
corporate existence under the laws of the State of Vermont.
Assumptions. In rendering our opinions, we have with your permission assumed
the accuracy of the following assumptions as of the Effective Time, and we have
assumed that the Mergers will be consummated pursuant to the terms of and in
accordance with the Agreement. These assumptions are not based upon written
representations, but in rendering our closing opinion as required by Section
8.8 of the Agreement, we will require Chittenden and VFSC to execute written
representations confirming the accuracy of these assumptions as of the
Effective Time.
A. In accordance with Section 2.5 of the Agreement, the parties to the
Agreement intend that both the Merger and the Subsequent Merger be
consummated pursuant to one integrated plan. CASI is a newly formed
corporation, wholly owned by Chittenden, that was created for the specific
and sole purpose of consummating the Merger, it has not conducted any
business activities, it has no operating assets, and it has no liabilities.
Following the Merger and prior to the Subsequent Merger, in each case except
pursuant to the Subsequent Merger, Chittenden: (i) will not liquidate VFSC;
(ii) will not cause or permit the merger of VFSC with or into another
corporation; (iii) will not sell or otherwise dispose of any of the stock of
VFSC; (iv) will not cause or permit VFSC to issue additional shares of
stock; or (v) will not cause or permit VFSC to issue any warrants, options,
convertible securities, or any other type of right pursuant to which any
person could acquire stock in VFSC.
B. The fair market value of the Chittenden Common Stock and cash for fractional
shares received by each VFSC shareholder in the Merger will be approximately
equal to the fair market value of the VFSC Common Stock surrendered in
exchange therefor.
C. Neither Chittenden nor any person related to Chittenden has any plan or
intention to reacquire, either directly or indirectly through an affiliate
or agent, any of the Chittenden stock issued in the Merger, and Chittenden
has no plan or intention to make any extraordinary distribution with respect
to such stock. Shares of Chittenden stock acquired or redeemed prior or
subsequent to the Merger will be considered for purposes of this assumption.
D. Following the Merger and prior to the Subsequent Merger, Chittenden will not
cause or permit VFSC to sell or otherwise dispose of any of its assets,
except for dispositions made in the ordinary course of business. Chittenden
has no plan or intention to sell or otherwise dispose of any of the assets
of VFSC acquired in the Subsequent Merger, except: (i) for dispositions made
in the ordinary course of business; or (ii) upon advice of tax counsel that
the transfer is permitted by Section 368(a)(2)(C) of the Code and the
administrative authorities under Section 368 of the Code.
E. At the Effective Time, the liabilities of VFSC and the liabilities to which
its assets are subject will have been incurred by VFSC in the ordinary
course of its business. All liabilities of VFSC incurred following the
Merger and prior to the Subsequent Merger, including those to which VFSC's
assets are subject (if any), will be incurred by VFSC in the ordinary course
of its business.
F. Following the Merger and prior to the Subsequent Merger, VFSC will continue
its historic business or use a significant portion of its historic business
assets in a business. Following the Subsequent Merger, Chittenden will
continue the historic business of VFSC or use a significant portion of
VFSC's historic business assets in a business.
G. Other than as provided in the Agreement, each of Xxxxxxxxxx, XXXX, VFSC and
the shareholders of VFSC has paid and will pay all and only its respective
expenses, if any, incurred in connection with each of the Mergers.
H. There is no intercorporate indebtedness existing between or among any of
Chittenden, VFSC, or CASI that was issued, acquired, or will be settled at a
discount.
I. None of Xxxxxxxxxx, XXXX, or VFSC is an investment company, and following
the Merger and prior to the Subsequent Merger, Chittenden will not become,
and Chittenden will not cause or permit VFSC to become, an investment
company. As used in this assumption, investment company means any of: (i) a
regulated investment company; (ii) a real estate investment trust; or (iii)
a corporation fifty percent (50%) or more of the value of whose total assets
are stock and securities, and eighty percent (80%) or more of the value of
whose total assets are assets held for investment. In making the fifty-
percent and eighty-percent determinations under the preceding sentence:
. stock and securities in any subsidiary corporation are disregarded; the
parent corporation is deemed to own its ratable share of the
subsidiary's assets; and a corporation is considered a subsidiary for
these purposes if the parent owns fifty percent (50%) or more of the
combined voting power of all classes of stock entitled to vote, or fifty
percent (50%) or more of the total value of shares of all classes of
stock outstanding; and
. the determination of a corporation's total assets excludes: cash and
cash items (including receivables); government securities; and assets
acquired (through incurring indebtedness or otherwise) for purposes of
ceasing to be an investment company; and
. securities include obligations of state and local governments, commodity
futures contracts, shares of regulated investment companies and real
estate investment trusts, and other investments constituting a security
within the meaning of the federal securities laws.
J. None of Xxxxxxxxxx, XXXX, or VFSC is in, and Chittenden will not cause or
permit VFSC to enter into, a bankruptcy, insolvency, receivership,
foreclosure, or similar case or proceeding under federal or state law.
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K. From the Effective Time and through the Subsequent Effective Time, each of
the fair market value and the aggregate adjusted tax bases of the assets of
VFSC will equal or exceed the sum of VFSC's liabilities, plus the amount of
the liabilities, if any, to which such assets are subject.
L. The payment of cash in lieu of fractional shares of Chittenden Common Stock
is solely for the purpose of avoiding the expense and inconvenience to
Chittenden of issuing fractional shares and does not represent separately-
bargained-for consideration. The total cash consideration that will be paid
in the Merger to the shareholders of VFSC instead of issuing fractional
shares of Chittenden Common Stock will not exceed three percent (3%) of the
total consideration that will be issued in the Merger to the shareholders of
VFSC in exchange for their shares of VFSC stock. The fractional share
interests of each shareholder of VFSC will be aggregated, and no shareholder
of VFSC will receive, for such shareholder's fractional share interests,
cash in an amount equal to or greater than the value of one full share of
Chittenden Common Stock.
M. Any compensation paid by Chittenden or an affiliate of Chittenden to any
shareholder-employee or shareholder-consultant of VFSC will be for services
actually rendered or to be rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar services. None
of the compensation paid to any such shareholder-employee or shareholder-
consultant of VFSC will be separate consideration for, or allocable to, any
of his VFSC shares. None of the Chittenden Common Stock received by any such
shareholder-employee or shareholder-consultant of VFSC pursuant to the
Merger will be separate consideration for, or allocable to, any employment,
consulting, or similar agreement or arrangement.
N. At all times during the five-year period ending at the Effective Time, the
fair market value of all of VFSC's United States real property interests has
been less than fifty percent (50%) of the total fair market value of: (i)
its United States real property interests; (ii) its interests in real
property located outside the United States; plus (iii) any other of its
assets which are used or held for use in a trade or business. United States
real property interests include all interests (other than an interest solely
as a creditor) in real property and associated personal property (such as
movable walls and furnishings) located in the United States or the Virgin
Islands and interests in any corporation (other than a controlled
corporation) owning any United States real property interest. VFSC is
treated as owning its proportionate share (based on the relative fair market
value of its ownership interest to all ownership interests) of the assets
owned by any controlled corporation or any partnership, trust, or estate in
which VFSC is a partner or beneficiary, and any such entity in turn is
treated as owning its proportionate share of the assets owned by any
controlled corporation or any partnership, trust, or estate in which the
entity is a partner or beneficiary. As used in this assumption, "controlled
corporation" means any corporation at least fifty percent (50%) of the fair
market value of the stock of which is owned by VFSC, in the case of a first-
tier subsidiary of VFSC, or by a controlled corporation, in the case of a
lower-tier subsidiary.
O. Following the Merger and prior to the Subsequent Merger, VFSC will hold at
least ninety percent (90%) of the fair market value of its net assets and at
least seventy percent (70%) of the fair market value of its gross assets
held immediately prior to the Merger. For purposes of this assumption,
amounts used by VFSC to pay reorganization expenses, and all redemptions and
distributions made by VFSC in contemplation of the Merger (except for
regular, normal dividends, e.g., as contemplated by Section 5.3 of the
Agreement) are included as assets of VFSC held immediately prior to the
Merger. Moreover, liabilities of VFSC to pay reorganization expenses are
excluded from the computation of the fair market value of its net assets
immediately prior to the Merger.
P. No dividends or distributions have been made with respect to the stock of
VFSC immediately preceding or in contemplation of the Merger, other than
regular, normal dividends as contemplated by Section 5.3 of the Agreement.
X. Xxxxxxxxxx does not own nor has it owned during the past five years, in
either case directly or indirectly through subsidiaries or other affiliates,
any stock of VFSC other than shares held in a fiduciary capacity.
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R. In the Merger, shares of VFSC stock representing control of VFSC will be
exchanged solely for voting stock of Chittenden and no shares of VFSC stock
will be exchanged for cash or other property originating with Chittenden
(except for cash in lieu of fractional shares). Further, no liabilities of
VFSC's shareholders will be assumed by Chittenden. As used in this
assumption, "control" means the ownership of stock possessing at least
eighty percent (80%) of the total combined voting power of all classes of
stock entitled to vote and at least eighty percent (80%) of the total number
of shares of all other classes (and each other class) of stock of a
corporation.
Opinions. Based on the foregoing facts and assumptions, and assuming the
accuracy thereof, we are of the opinion that, for federal income tax purposes:
1. The Mergers will qualify as a reorganization within the meaning of Section
368(a) of the Code.
2. Chittenden and VFSC will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by a VFSC shareholder as a result of the
Mergers, except with respect to cash received by such shareholder in lieu of
fractional shares of Chittenden Common Stock (as discussed below). Sections
354 and 356 of the Code.
4. The aggregate basis in Chittenden Common Stock received in the Merger by a
VFSC shareholder will equal such shareholder's basis in the VFSC stock
surrendered in exchange therefor, decreased by any basis allocable to cash
received in lieu of fractional shares (as discussed below). Section 358 of
the Code.
5. The holding period of Chittenden Common Stock received in the Merger by a
VFSC shareholder will include his holding period of VFSC stock surrendered
in exchange therefor, provided that such VFSC stock surrendered was held as
a capital asset on the date of the Merger. Section 1223(1) of the Code.
6. A VFSC shareholder who receives cash in the Merger in lieu of a fractional
share interest in Chittenden Common Stock will be treated as if (i) the
fractional share interest was actually received by such shareholder as part
of the Merger, (ii) basis was allocated proportionately to such fractional
share interest in the manner described above, and (iii) such fractional
share interest was then redeemed by Chittenden, with the result that the
cash that the shareholder receives in lieu of a fractional share interest is
treated as having been received in full payment in a taxable sale of the
fractional share interest redeemed as provided in Section 302(a) of the
Code.
No opinion is expressed concerning the consequences to any party of any
matter other than those specifically addressed above, and in particular, we
express no opinion with respect to the state or local tax treatment of the
Merger. In addition, the above opinions may in certain circumstances be
inapplicable to VFSC shareholders who received their VFSC stock pursuant to the
exercise of employee stock options or otherwise as compensation, in that
special Code provisions applicable in the compensation context may provide for
different results.
Miscellaneous. The foregoing opinions are based on the Code as in effect on
the date hereof and administrative and judicial interpretations of it. No
assurance can be given that the Code will not change or that such
interpretations will not be revised or amended adversely, possibly with
retroactive effect. This opinion is not intended to satisfy the closing opinion
required by Section 8.8 of the Agreement, which closing opinion will be
delivered at the Effective Time and be based upon executed representations made
by Chittenden and VFSC.
This opinion is intended solely for the benefit and use of Vermont Financial
Services Corp. and its shareholders, and it is not to be used, released,
quoted, or relied upon by anyone else for any purpose (other than as required
by law) without our prior written consent. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement and to the reference
to our firm made therein under the captions "LEGAL MATTERS" and "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES--Tax Consequences of the
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Merger". In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ Xxxxxxxx & Worcester LLP
XXXXXXXX & WORCESTER LLP
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