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EXHIBIT 8
[PricewaterhouseCoopers Letterhead]
September 29, 1998
Xx. Xxxxx Xxxxxx
Chief Financial Officer
Colonial BancGroup, Inc.
P.O. Box 1109
Montgomery, AL 36101
Dear Xx. Xxxxxx:
For various business reasons, TB&T, Inc. (Acquired Corporation) and The Colonial
BancGroup, Inc. (BancGroup), both U.S. corporations, have entered into an
Agreement and Plan of Merger (Agreement) on August 6, 1998. Pursuant to your
request, our letter addresses certain federal income tax consequences of the
proposed transaction as outlined below. We will address whether the merger will
qualify as reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986 (I.R.C.). We will also address certain additional federal
income tax consequences to Acquired Corporation, BancGroup, and shareholders.
This letter is not a comprehensive analysis of the income tax consequences to
Acquired Corporation shareholders. Acquired Corporation shareholders should
consult their own tax advisors regarding the income tax consequences of the
merger.
BACKGROUND
Acquired Corporation operates as a bank holding company for its indirect 100%
owned U.S. subsidiary, Texas Bank & Trust (Bank). Acquired Corporation is the
sole shareholder of TB&T Holdings, Inc., (Holdings), a Delaware corporation,
which is the sole shareholder of Bank. BancGroup, a Delaware corporation, is a
bank holding company with a wholly owned subsidiary, Colonial Bank. Colonial
Bank currently operates in Alabama, Florida, Georgia, Nevada, Tennessee, and
Texas.
CERTAIN TERMS OF THE MERGER
At the effective date of the merger, Acquired Corporation will merge with and
into BancGroup, with BancGroup as the surviving corporation. Pursuant to the
terms of the transaction, each share of common stock of Acquired Corporation
outstanding and held by Acquired Corporation's shareholders other than shares
held by shareholders who perfect their dissenter's rights, will be converted by
operation of law and without any action on the part of the parties or the
holders thereof into 0.3203 shares (.6406 shares after giving effect to the
Stock Split) of BancGroup common stock as provided in the Agreement. On the
effective date and as a result of the merger, BancGroup will assume all of the
outstanding options of Acquired Corporation, whether or not vested or
exercisable. Each such option will cease to
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represent a right to acquire Acquired Corporation common stock and will,
instead, represent a right to acquire BancGroup common stock on substantially
the same terms applicable to the Acquired Corporation options except as
specified in the agreement.
The holders of Acquired Corporation options may provide written notice, no later
than five days prior to the effective date of the merger, to Acquired
Corporation that they wish to surrender their Acquired Corporation options to
BancGroup in exchange for BancGroup common stock. The amount of BancGroup common
stock issued in exchange for Acquired Corporation options will be equal to the
difference between the total value of the shares of BancGroup common stock to be
issued pursuant to such Acquired Corporation options less the aggregate exercise
price of such Acquired Corporation options divided by the market value.
No fractional shares of BancGroup common stock will be issued. Instead, each
holder of shares of Acquired Corporation stock having a fractional interest
arising upon the conversion of such shares into shares of BancGroup common stock
shall, at the time of surrender of the certificates previously representing
Acquired Corporation stock, be paid by BancGroup an amount in cash. Any
shareholder of Acquired Corporation who does not vote in favor of the Agreement
and who complies with certain procedures relating to the rights of dissenting
shareholders will be entitled to receive payment for the fair value of his or
her Acquired Corporation stock.
Further, after consummation of the merger, BancGroup and Acquired Corporation
anticipate merging Bank with and into either the Colonial Bank or FirstBank, a
Texas state bank which may be wholly owned by BancGroup by the effective date.
After the merger, Holdings will remain a subsidiary of BancGroup.
REPRESENTATIONS OF PARTIES - HOLDING COMPANY MERGER
[] BancGroup and Acquired Corporation intend that the merger will qualify
for federal income tax purposes as a "reorganization" within the
meaning of I.R.C. Section 368(a) of the Code.
[] The fair market value of the BancGroup stock received by each
shareholder of Acquired Corporation pursuant to the terms of the
Agreement will be approximately equal to the fair market value of
Acquired Corporation stock surrendered in the exchange. The terms of
the Agreement are the result of arm's-length negotiations between
unrelated parties.
[] There is no plan or intention by the shareholders of Acquired
Corporation to sell, exchange, or otherwise dispose of a number of
shares of BancGroup stock received in the transaction to BancGroup (or
to a party related, as defined in Regulation Section 1.368-1(e)(3), to
BancGroup) that will reduce the Acquired Corporation shareholders'
ownership of BancGroup stock to a number of shares having a value, as
of the date of the
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transaction, of less than fifty percent of the value of all of the
formerly outstanding stock of Acquired Corporation as of the same date.
For purposes of this representation, shares of Acquired stock exchanged
for cash, and surrendered by dissenters, or exchanged for cash in lieu
of fractional shares of BancGroup stock will be treated as outstanding
Acquired Corporation stock on the date of the transaction. Shares of
Acquired stock and shares of BancGroup stock held by Acquired
Corporation shareholders and otherwise sold, redeemed or disposed of
prior or subsequent to the transaction will be considered in making
this representation.
[] BancGroup has no plan or intention to reacquire any of its stock issued
in the transaction.
[] BancGroup has no plan or intention to sell or otherwise dispose of any
of the assets of Acquired Corporation acquired in the transaction,
except for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(c) of the Internal Revenue
Code.
[] The liabilities of Acquired Corporation assumed by BancGroup and the
liabilities to which the transferred assets of Acquired Corporation are
subject were incurred by Acquired Corporation in the ordinary course of
its business.
[] Following the merger, BancGroup will continue the historic business of
Acquired Corporation or use a significant portion of Acquired
Corporation's historic business assets in a business.
[] Acquired Corporation, BancGroup and Acquired Shareholders will pay
their respective expenses, if any, incurred in connection with the
transaction.
[] There is no intercorporate indebtedness existing between Acquired
Corporation and BancGroup that was issued, acquired, or will be settled
at a discount.
[] No two parties to the transaction are investment companies as defined
in section 368(a)(2)(f)(iii) and (iv) of the Internal Revenue Code.
[] Acquired Corporation is not under the jurisdiction of a court in a
title 11 or similar case within the meaning of section 368(a)(3)(a) of
the Internal Revenue Code.
[] No part of the consideration received by the Acquired Corporation
shareholders will be received by them in their capacity as debtor,
creditor, employee, or any way other than as shareholder.
[] The fair market value of the assets of Acquired Corporation transferred
to BancGroup will equal or exceed the sum of the liabilities assumed by
BancGroup plus the amount of liabilities, if any, to which the assets
transferred are subject.
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[] If nonqualified stock options to purchase Acquired Corporation common
stock are exchanged for nonqualified stock options to purchase
BancGroup common stock, then the difference between the option price
and fair market value of BancGroup common stock subject to options
immediately after the exchange will be equal to (or greater than) the
difference between the option price and the fair market value of
Acquired Corporation common stock subject to options immediately before
the exchange. All other terms of the BancGroup nonqualified stock
options will be the same as those of Acquired Corporation's
nonqualified stock options.
[] Any incentive stock options acquired from Acquired Corporation as a
part of the merger and reissued by BancGroup will be issued at
substantially the same terms, so as not to create material modification
as defined in I.R.C. Section 424.
[] The compensation to be paid by BancGroup or Acquired Corporation to the
officers and employees of Acquired Corporation under any stock option,
employment, or noncompete agreement will be at a rate equal to the fair
market value of the services actually performed and will be
commensurate with amounts paid to third parties bargaining at arm's
length for similar services. In addition none of the compensation to be
received by the shareholder-employees of Acquired Corporation will be
part of the consideration for their target stock.
[] At the time of the merger, Acquired Corporation will not have
outstanding any warrants, convertible securities, or any other right
pursuant to which any person could acquire stock in Acquired
Corporation except for the 138,000 shares of Acquired Corporation stock
subject to the Stock Option Agreement.
[] The Merger will be consummated in compliance with the material terms of
the Agreement and none of the material terms and conditions therein
have been waived or modified and BancGroup has no plan or intention to
waive or modify any such material condition
TAX CONSEQUENCES TO ACQUIRED CORPORATION AND BANCGROUP
The merger of Acquired Corporation with and into BancGroup will constitute a
merger within the meaning of I.R.C. Section 368(a)(1)(A), provided that the
merger qualifies as a statutory merger pursuant to state law. Acquired
Corporation and BancGroup will each be "a party to the reorganization" within
the meaning of I.R.C. Section 368(b) of the Code. Based upon I.R.C. Sections
357(a) and 361(a), Acquired Corporation will recognize no gain or loss when it
transfers its assets to BancGroup in a constructive exchange solely for
BancGroup's stock and the assumption of Acquired Corporation's liabilities by
BancGroup. Acquired Corporation will also not recognize any gain or loss upon
the receipt of cash in the exchange since Acquired Corporation will be merging
out of existence and it will not retain any of the
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consideration paid by BancGroup in the merger as part of the plan of
reorganization under I.R.C. Section 361(b).
IRS Regulation Section 1.368-1(e) requires a continuity of interest to be
maintained in Acquired Corporation such that a substantial part of the value of
the proprietary interests in Acquired Corporation be preserved in the
reorganization. A proprietary interest is preserved if it is exchanged for a
proprietary interest in BancGroup, it is exchanged by BancGroup for a direct
interest in Acquired Corporation, or it otherwise continues as a proprietary
interest in Acquired Corporation Further, a proprietary interest will be
maintained if there is a continuing interest through stock ownership in
BancGroup on the part of the former shareholders of the Acquired Corporation
which is equal in value, as of the effective date of the reorganization, to at
least 50% of the value of all the formerly outstanding stock of the Acquired
Corporation as of the same date.
Pursuant to I.R.C. Section 1032 of the Code, no gain or loss will be recognized
by BancGroup upon the acquisition by BancGroup of the assets of Acquired
Corporation in exchange for BancGroup common stock and the assumption of
Acquired Corporation's liabilities. BancGroup's basis in the assets acquired in
the transaction will be equal to the basis of the assets in the hands of
Acquired Corporation immediately before the transaction under I.R.C. Section
362(b). I.R.C. Section 1223(2) provides that BancGroup's holding period for each
Acquired Corporation asset received in the merger will include the period during
which the asset was held by Acquired Corporation immediately before the
transaction.
Pursuant to I.R.C. Section 381(a), BancGroup will succeed to and take into
account the items of Acquired Corporation described in I.R.C. Section 381(c),
subject to the conditions and limitations of I.R.C. Sections 381, 382, 383, 384,
and 1502 and the regulations thereunder. BancGroup will succeed to and take into
account the earnings and profits, or deficit in earnings and profits, of
Acquired Corporation as provided by I.R.C. Section 381(c)(2) of the Code and
Section 1.381(c)(2)-1 of the Regulations.
TAX CONSEQUENCES TO ACQUIRED CORPORATION SHAREHOLDERS
I.R.C. Section 354 states that a shareholder who receives solely BancGroup
common stock in exchange for Acquired Corporation common stock will recognize no
gain or loss on the exchange, except with respect to cash received in lieu of a
fractional interest in BancGroup common stock. I.R.C. Section 358 of the Code
provides that the shareholder's tax basis in the BancGroup common stock received
in the exchange will be the same as the basis of the Acquired Corporation common
stock surrendered, decreased by the amount of cash (if any) received by the
shareholder and increased by the amount of gain (if any) recognized in the
exchange. I.R.C. Section 1223 of the Code provides that such shareholder will
include the period during which Acquired Corporation stock was held in his
holding period for the BancGroup common stock received in the exchange.
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The payment of cash in lieu of fractional shares of BancGroup common stock will
be treated as if the fractional shares were issued as part of the exchange and
then redeemed by BancGroup. These cash payments will be treated as having been
received as distributions in full payment in exchange for the stock redeemed as
provided in I.R.C. Section 302(a) of the Code. Generally, any gain or loss
recognized upon such exchange will be capital gain or loss, provided the
fractional share constitutes a capital asset in the hands of the exchanging
shareholder. The shareholders will recognize capital gain or loss equal to the
difference between the cash received and the basis of the fractional share
interest that would have been issued.
Holders of shares of Acquired Corporation common stock who receive cash upon the
exercise of any appraisal rights will be subject to a taxable transaction for
federal income tax purposes. Such a shareholder will recognize gain or loss
measured by the difference between the tax basis for his or her shares and the
amount of cash received pursuant to I.R.C. Section 1012 of the Code (unless the
receipt of cash is treated as a dividend, as described below).
In certain circumstances, the receipt of solely cash by an Acquired Corporation
shareholder could be treated as a dividend under Section 302(a) (to the extent
of the shareholder's ratable share of applicable earnings and profits) if the
shareholder constructively owns shares of Acquired Corporation Common Stock that
are exchanged for BancGroup Common Stock in the Merger. Generally, a shareholder
constructively owns stock that is owned by members of the shareholder's family,
and by certain controlled or related partnerships, estates, trusts and
corporations, pursuant to the constructive ownership rules of I.R.C. Section 318
of the Code, as well as any shares that the shareholder has an option to
acquire.
The receipt of solely cash by an Acquired Corporation shareholder in exchange
for his stock will not be treated as a dividend if such exchange or receipt
results in a meaningful reduction or a substantially disproportionate reduction
in the shareholder's ownership interest or results in a complete termination of
the shareholder's interest, taking into account, in each case, the constructive
ownership rules described above. A complete termination of a shareholder's
interest will occur if, after the receipt of cash in exchange for stock, the
shareholder owns no shares of stock in BancGroup. Thus, a shareholder who
receives solely cash for all of the stock actually owned by him will generally
qualify for capital gain treatment under the complete termination test if none
of the shares constructively owned by him are exchanged in the merger for
BancGroup Common Stock and the shareholder does not otherwise own, actually or
constructively, any shares of BancGroup Common Stock after the merger.
Where the complete termination of interest test is not satisfied with respect to
a particular shareholder (because, for example, Acquired Corporation shares
owned by a related party are exchanged for BancGroup Common Stock in the
merger), that shareholder will nonetheless generally be entitled to capital gain
treatment if the receipt of cash in exchange for his shares results in a
"substantially disproportionate" reduction or a "meaningful" reduction in his
ownership interest. I.R.C. Section 302 of the Code provides that a shareholder's
reduction in ownership interest should normally be "substantially
disproportionate," and capital gain
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treatment should normally result, if (1) the shareholder owns less than 50% of
the total combined voting power of all classes of stock immediately after the
merger, and (2) the shareholder's proportionate stock interest in BancGroup
immediately after the merger is 20% or more below what his proportionate
interest in BancGroup would have been if he had received solely BancGroup Common
Stock in the merger.
Acquired Corporation shareholders who constructively own stock in Acquired
Corporation should consult a tax advisor regarding the characterization of cash
payments received in the reorganization in exchange for Acquired Corporation
stock as either capital gain income or dividend income.
CONVERSION OF ACQUIRED CORPORATION OPTIONS INTO BANCGROUP STOCK
INCENTIVE STOCK OPTIONS
The shareholders of Acquired Corporation can elect to receive shares of
BancGroup common stock for the difference between the exercise price of Acquired
Corporation options and the fair market value of BancGroup stock at the
effective date of the Agreement. This election, if made, is effectively a
"cashless exercise" of an incentive stock option (i.e., the option holder is
treated as exercising all of the options and remitting a portion of the
BancGroup stock to Acquired Corporation in satisfaction of the exercise price
("foregone stock")). The cashless exercise of Acquired Corporation incentive
stock options will result in the option holder recognizing ordinary income equal
to the amount of the bargain purchase element of the BancGroup stock foregone.
In addition, if Acquired Corporation's incentive stock plan does not have a
cashless exercise feature, the cashless exercise of an incentive stock option by
an option holder could be interpreted as a material modification under I.R.C.
Section 424. If the cashless exercise feature constitutes a material
modification, such modifications will result in the deemed granting of new
options to all holders of incentive stock options. The new options will be
subject to the requirements of I.R.C. Section 424 at the date of material
modification. The exercise of a disqualified incentive stock option will entitle
Acquired Corporation to a compensation deduction when the option is exercised.
NONQUALIFIED STOCK OPTIONS
The shareholders of Acquired Corporation can elect to receive shares of
BancGroup common stock for the difference between the exercise price of Acquired
Corporation options and the fair market value of BancGroup stock at the
effective date of the Agreement. The cashless exercise of nonqualified stock
options does not alter the timing or character of income recognition. The
shareholders of Acquired Corporation will recognize ordinary income for the fair
market value of the stock received in conjunction with the exercise of the
options (i.e., the difference between the fair market value of BancGroup stock
and the exercise price).
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Acquired Corporation is entitled to a corresponding compensation deduction in
the same amount.
REPRESENTATIONS OF PARTIES - SUBSIDIARY BANK MERGER
[] Subsequent to the merger of Acquired Corporation with and into
BancGroup, Bank will merge with and into Colonial Bank with Colonial
Bank surviving in a statutory merger pursuant to state law. Colonial
Bank and Bank intend for the merger to qualify as a tax-free
reorganization under Section 368(a).
[] The fair market value of the Bank stock and other consideration
received by each Bank shareholder will be approximately equal to the
fair market value of the Bank stock surrendered in the exchange.
[] There is no plan or intention by the shareholders of Bank who own 5
percent or more of the Bank stock, and to the best of the knowledge of
the management of Bank, there is no plan or intention on the part of
the remaining shareholders of Bank to sell, exchange, or otherwise
dispose of a number of shares of Colonial Bank stock received in the
transaction to Colonial Bank (or to a party related, as defined in
Regulation Section 1.368-1(e)(3), to Colonial Bank) that would reduce
the Bank shareholders' ownership of Colonial Bank stock to a number of
shares having a value, as of the date of the transaction, of less than
50 percent of the value of all of the formerly outstanding stock of
Bank as of the same date. For purposes of this representation, shares
of Bank stock exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of
Colonial Bank stock will be treated as outstanding Bank stock on the
date of the transaction. Moreover, shares of Bank stock and shares of
Colonial Bank stock held by Bank shareholders and otherwise sold,
redeemed, or disposed of prior to subsequent to the transaction will be
considered in making this representation.
[] Colonial Bank will acquire at least 90 percent of the fair market value
of the net assets and at least 70 percent of the fair market value of
the gross assets held by Bank immediately prior to the transaction. For
purposes of this representation, amounts paid by Bank to dissenters,
amounts paid by Bank to shareholders who receive cash or other
property, amounts used by Bank to pay its reorganization expenses, and
all redemptions and distributions (except for regular, normal
dividends) made by Bank immediately preceding the transfer will be
included as assets of Bank held immediately prior to the transaction.
[] After the transaction, the shareholders of Bank will be in control of
Colonial Bank within the meaning of section 368(c)(2) of the Internal
Revenue Code.
[] Colonial Bank has no plan or intention to reacquire any of its stock
issued in the transaction.
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[] Colonial Bank has no plan or intention to sell or otherwise dispose of
any of the assets or Bank acquired in the transaction, except for
dispositions made in the ordinary course of business.
[] The liabilities of Bank assumed by Colonial Bank plus the liabilities,
if any, to which the transferred assets are subject were incurred by
Bank in the ordinary course of its business and are associated with the
assets transferred.
[] Following the transaction, Colonial Bank will continue the historic
business of Bank or use a significant portion of Bank's historic
business assets in a business.
[] At the time of the transaction, Colonial Bank will not have outstanding
any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in Colonial Bank
that, if exercised or converted, would affect the Bank shareholders'
acquisition or retention of control of Colonial Bank, as defined in
section 368(c)(2) of the Internal Revenue Code.
[] Colonial Bank, Bank, and the shareholders of Bank will pay their
respective expenses, if any, incurred in connection with the
transaction.
[] There is no intercorporate indebtedness existing between Colonial Bank
and Bank that was issued, acquired, or will be settled at a discount.
[] No two parties to the transaction are investment companies as defined
in section 368(a)(2)(f)(iii) and (iv) of the Internal Revenue Code.
[] The fair market value of the assets of Bank transferred to Colonial
Bank will equal or exceed the sum of the liabilities assumed by
Colonial Bank, plus the amount of liabilities, if any, to which the
transferred assets are subject.
[] The total adjusted basis of the assets of Bank transferred to Colonial
Bank will equal or exceed the sum of the liabilities to be assumed by
Colonial Bank, plus the amount of liabilities, if any, to which the
transferred assets are subject.
[] Bank is not under the jurisdiction of a court in a title 11 or similar
case within the meaning of section 368(a)(3)(a) of the Internal Revenue
Code.
TAX CONSEQUENCES OF SUBSIDIARY BANK MERGER
The merger of Bank with and into Colonial Bank should constitute a
reorganization within the meaning of I.R.C. Section 368(a)(1)(A) and Section
368(a)(1)(D), provided that the merger qualifies as a statutory merger pursuant
to state law. Bank and Colonial Bank should
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each be "a party to the reorganization" within the meaning of I.R.C. Section
368(b) of the Code. Based upon I.R.C. Sections 357(a) and 361(a), Bank should
recognize no gain or loss when it transfers its assets to Colonial Bank in a
constructive exchange solely for Colonial Bank's stock and the assumption of
Bank's liabilities by Colonial Bank. Bank should also not recognize any gain or
loss upon the receipt of cash in the exchange since Bank will be merging out of
existence and it will not retain any of the consideration paid by Colonial Bank
in the merger as part of the plan of reorganization under I.R.C. Section 361(b).
Pursuant to I.R.C. Section 1032 of the Code, no gain or loss should be
recognized by Colonial Bank upon the acquisition by Colonial Bank of the assets
of Bank in exchange for Colonial Bank's common stock common stock and the
assumption of Bank's liabilities. Colonial Bank's basis in the assets acquired
in the transaction be equal to the basis of the assets in the hands of Bank
immediately before the transaction per I.R.C. Section 362(b). I.R.C. Section
1223(2) provides that Colonial Bank's holding period for each Bank asset
received in the merger should include the period during which the asset was held
by Bank immediately before the transaction.
Pursuant to I.R.C. Section 381(a), Colonial Bank should succeed to and take into
account the items of Bank described in I.R.C. Section 381(c), subject to the
conditions and limitations of I.R.C. Sections 381, 382, 383, 384, and 1502 and
the regulations thereunder. Colonial Bank should succeed to and take into
account the earnings and profits, or deficit in earnings and profits, of Bank as
provided by I.R.C. Section 382(c)(2) of the Code and Section 1.381(c)(2)-1 of
the Regulations.
If Holdings distributes the Colonial Bank stock to BancGroup, gain shall be
realized to Holdings as if the stock were sold to BancGroup at its fair market
value (section 311(b)). However, Regulation Section 1.1502-13(b)(1) treats the
distribution of property from Holdings to BancGroup as an intercompany
transaction. Per Regulation Section 1.1502-13(c) and Regulation Section
1.1502-13(f)(2)(iii), the recognition of any Section 311(b) gain from an
intercompany transaction is not immediately taken into account. Holdings should
take that gain into account under the matching and acceleration rules of
Regulation Section 1.1502-13(c) and (3).
SUMMARY
The merger of BancGroup and Acquired Corporation will qualify as a tax-free
reorganization within the meaning of I.R.C. Section 368(a)(1)(A). BancGroup's
basis in Acquired Corporation's assets will be the same as Acquired
Corporation's basis in its assets before the merger. The merger of Colonial Bank
and Bank will also qualify as a tax-free reorganization within the meaning of
I.R.C. Section 368(a)(1)(A) and Section 368(a)(1)(D). Colonial Bank's basis in
Bank's assets will be the same as Bank's basis in its assets before the merger.
Acquired Corporation shareholders will retain a substituted basis in the shares
of BancGroup stock received in the merger decreased by the amount of cash
received and increased by the
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amount of gain recognized in the transaction. The only taxable consequences will
be to those shareholders who receive cash in lieu of fractional shares and those
shareholders who receive solely cash in the exchange upon perfecting their
dissenter's rights. Shareholders receiving cash must examine their actual and
constructive ownership of Acquired Corporation and BancGroup stock for purposes
of determining the tax consequences of the cash payments.
The conversion of Acquired Corporation incentive stock options directly into
BancGroup stock will result in the incentive stock option holders recognizing
ordinary income equal to the bargain purchase element of the BancGroup stock
foregone. In addition, if Acquired Corporation's incentive stock option plan
does not have a cashless exercise feature, the conversion of Acquired
Corporation incentive stock options directly into BancGroup stock could be
treated as a material modification of Acquired Corporation's incentive stock
option plan. I.R.C. Section 424 states that a material modification of an
incentive stock option plan results in the deemed granting of new options to all
incentive stock option holders subject to the requirements of I.R.C. Section 424
at the date of the material modification. The conversion of Acquired Corporation
nonqualified stock options directly into BancGroup stock will result in the
nonqualified option holders recognizing ordinary income equal to the fair market
value of BancGroup stock received. Acquired Corporation will be entitled to a
corresponding compensation deduction equal to the amount of ordinary income
recognized by Acquired Corporation option holders on the "cashless exercise" of
both incentive stock options and nonqualified stock options.
Caveat
In rendering our opinion, we have relied upon (i) the Agreement; (ii) the
representations given by the parties, which are listed in the "Representations
of Parties" sections; and (iii) such other documents as we have deemed necessary
or appropriate. We have assumed the genuiness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified, conformed or photostatic copies, and the authenticity of the
originals of such copies. We have also assumed that the Agreement reflects all
the material facts relating to Acquired, Holdings, Bank, BancGroup, and Colonial
Bank. Our opinion is expressly conditioned on, among other things, the accuracy
as of the date hereof, and the continuing accuracy, of all such facts and
representations. If any of the representations incorporated herein are incorrect
in whole or in part, or if the terms of the Agreement are altered before
consummation of the Acquisition, such inaccuracies or alterations may have a
material effect upon our opinion expressed in this letter.
The foregoing opinion addresses only the items set forth herein and therefore,
no tax opinion is hereby expressed regarding any other federal, state, local, or
other tax issues or about any other matter not specifically mentioned herein.
Our opinion is based on the relevant provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the regulations thereunder, and the judicial and
administrative
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interpretations thereof. There are no assurances that the conclusions reached
herein will be accepted by the Internal Revenue Service or judicial authorities
if challenged. Any legislative, regulatory, administrative, or judicial
decisions subsequent to the date of this opinion may have an impact on the
validity of our conclusions. Unless you specifically request otherwise, we will
not update our opinion for changes to the law, regulations, or the judicial and
administrative interpretations thereof.
This opinion is being furnished only to you in connection with the Merger and
solely for your benefit in connection therewith and may not be used or relied on
for any other purpose (other than inclusion in the Proxy and Joint Disclosure
Statement to be distributed to the shareholders of the various parties to the
reorganization) and may not be circulated, quoted, or otherwise referred to for
any other purpose without our express written consent.
If you have any questions or comments, please call Xxxxxx Xxx or Xxxx Xxxxxx at
(000) 000-0000.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
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