[LETTERHEAD]
June 10, 1997
Board of Directors Board of Directors
Western Interstate Bancorp FIRSTPLUS Financial
Tustin, California Group, Inc.
Dallas, Texas
Gentlemen:
You have requested the opinion of KPMG Peat Marwick LLP ("KPMG") regarding
certain federal income tax and state income and franchise tax consequences of
the merger of Western Interstate Bancorp ("WIB") with Western Interstate
Acquisition, Inc. ("WIA"), a wholly-owned subsidiary of FIRSTPLUS Financial
Group, Inc., formerly known as RAC Financial Group, Inc. ("FPFG"). In preparing
this opinion letter, KPMG has relied in part upon certain factual descriptions
provided in the Agreement and Plan of Merger dated as of February 19, 1997 (the
"Plan") by and between the addressees hereto, as well as the facts and
representations which are made to KPMG as provided below under the headings
STATEMENT OF FACTS and REPRESENTATIONS. Specifically, you have requested us to
opine the following:
1. The form and substance of the merger of WIA with and into WIB constitutes a
tax-free reorganization under Section 368(a)(1)(A) and Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended (hereinafter, all section
references are to the Internal Revenue Code of 1986 unless otherwise
indicated).
2. WIA will not recognize any gain or loss upon the transfer of its assets to
WIB in exchange for WIB stock and the assumption by WIB of the liabilities,
if any, of WIA.
3. WIB will not recognize any gain or loss on the receipt by it of the assets
of WIA solely in exchange for WIB stock.
4. No gain or loss will be recognized to FPFG on the exchange of WIA stock
solely for WIB stock.
5. The basis of the assets of WIA in the hands of WIB will be the same as the
basis of those assets in the hands of WIA immediately prior to the merger.
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June 10, 1997
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6. The holding period of the assets of WIA acquired by WIB in the merger will
include the holding period of those assets in the hands of WIA immediately
prior to the exchange.
7. Based on Regulation Section 1.358-6(c), the basis of the stock of WIB owned
by FPFG after the transaction will equal the sum of (i) FPFG's basis in the
stock of WIA immediately before the merger, plus (ii) WIB's net basis in
its assets immediately before the merger, or at the election of FPFG, the
basis in the stock of WIB in the hands of the WIB shareholders immediately
before the proposed transaction.
8. WIB will succeed to and take into account the earnings and profits, or
deficit in earnings and profits, of WIA as of the date or dates of
transfer. Any deficit in earnings and profits of either WIA or WIB will
be used only to offset earnings and profits accumulated after the date or
dates of transfer.
9. No gain or loss will be recognized to shareholders of WIB upon the exchange
of WIB stock solely for the FPFG voting common stock pursuant to the
merger.
10. The basis of the FPFG Common Stock received by the shareholders of WIB in
the merger will be the same as the basis of the WIB stock surrendered in
exchange therefor.
11. With respect to each shareholder of WIB, the holding period of the FPFG
Common stock received by the shareholders of WIB will include the period
during which the WIB stock surrendered therefor was held, provided the
stock of WIB is a capital asset in the hands of each such shareholder of
WIB on the date of the merger.
12. Any of WIB's common shareholders who exercise their statutory dissenters
rights against the merger and receive only cash in exchange for their Stock
(Dissenters), and who as a result of the transaction own no FPFG common
stock directly, indirectly, or constructively, will be treated as receiving
cash in redemption of and in complete termination of their stock interest
in WIB, provided WIB is not a collapsible corporation as defined in
Section 341(b). Gain or loss will be calculated based on cash received
less the shareholders tax basis in the WIB stock given up in the merger.
See Rev. Rul. 75-515, 1975-2 CB 117.
13. Any dissenting shareholders who receive cash in exchange for their WIB
Common Stock and who directly, indirectly, or constructively own FPFG
common stock as a result of the transaction shall have gain or income,
if any, in an amount not in excess
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June 10, 1997
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of the cash received. As stated in number 12 above, cash received by a
dissenting WIB shareholder is treated as having been received in redemption
of WIB shares. Whether such redemption transaction qualifies for sale or
exchange treatment or is treated as a dividend is determined on a
shareholder by shareholder basis applying the rules of Section 302,
including, apparently, the attribution rules of Section 318. Such WIB
shareholders should consult their own tax advisors.
STATEMENT OF FACTS
FPFG is duly organized and validly existing as a corporation in good standing
under the laws of the State of Nevada. FPFG is a financial services holding
company. FPFG's common stock is traded over-the-counter and is quoted on the
National Association of Securities Dealers Automated Quotation System.
FPFG was formerly known as, and is considered the same legal entity as, RAC
Financial Group, Inc.
The authorized capital stock of the FPFG consists solely of common stock, par
value $.01 per share ("FPFG Common Stock"), of which 29,033,369 shares were
outstanding as of December 31, 1996. Each share of FPFG Common Stock has one
vote.
WIA is a newly-formed Nevada corporation organized as a wholly-owned subsidiary
of FPFG. WIA was incorporated solely for the purpose of effecting the proposed
transaction as described below and will not conduct any actual business after
its incorporation, therefore, at the time of the proposed merger, it will have
no other assets other than the amount with which it is originally capitalized by
FPFG and it will have no liabilities.
WIB is duly organized and validly existing as a corporation in good standing
under the laws of the State of California. WIB is a financial institutions
holding company organized for the primary purpose of holding all the outstanding
shares of Citizens Thrift & Loan Association ("Citizens"), a California
industrial loan company. WIB also owns Citizens Group, Inc., which acts as a
trustee on deeds of trust securing Citizens' real estate loans. Citizens is
supervised and regulated by the California Department of Corporations ("DOC")
and the Federal Deposit Insurance Corporation ("FDIC").
The authorized capital stock of the WIB consists solely of one class of common
stock ("WIB Common Stock"), of which 1,211,156 shares were outstanding as of
December 31, 1996.
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June 10, 1997
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For valid business purposes, FPFG and WIB want to combine their businesses. In
order to reach that result, the following transaction is proposed.
1. Pursuant to an acquisition agreement and plan of merger dated February 19,
1997, by and among FPFG (formerly known as RAC Financial Group, Inc.), WIA
and WIB, WIA will merge with and into WIB, with WIB surviving the merger,
in accordance with all applicable provisions of federal law and the laws of
the states of Nevada and California as may be applicable.
2. On the effective date of the merger, each one of the WIB common shares
outstanding as of the effective date of the merger (except for Dissenting
Shares) shall be converted into the right to receive such fraction of a
share of FPFG Common Stock as is equal to the decimal determined by
dividing (i) "FPFG Share Number" (as defined below) by (ii)(A) the number
of WIB common shares outstanding as of the effective date plus (B) the
number of WIB common shares issuable upon exercise of all Existing Stock
Rights (as defined in paragraph 5 below) as of the effective date (the
"Conversion Ratio"). The term FPFG Share Number means the number
determined by dividing (i) two times the December 31, 1996 "book value
per share" of WIB, by the "Fair Market Value of the FPFG Common Stock."
The term "Fair Market Value of the FPFG Common Stock" means the average
closing price per share of the FPFG Common Stock on the NASDAQ National
Market as reported in the Wall Street Journal for the ten trading days
prior to the date that is (2) calendar days prior to the Closing Date.
3. No fractional shares of FPFG Common Stock shall be issued in the merger,
but rather the total number of shares to be received by each WIB
Shareholder shall be rounded up to the next whole number of shares (the
"Merger Consideration"). Upon the surrender by a WIB shareholder, other
than a dissenting shareholder, of the certificates representing WIB common
shares, FPFG shall deliver to each WIB shareholder certificates
representing the number of shares equal to such WIB shareholder's pro rata
portion (based upon such WIB shareholder's percentage interest immediately
prior to the effective date) of the Merger Consideration.
4. At the effective date, FPFG shall assume all of WIB's rights and
obligations with respect to certain outstanding stock options (the
"Existing Stock Rights") held by employees and directors of WIB.
Immediately following the assumption, FPFG shall substitute new options
(each of which shall be a non-qualified stock option) for such Existing
Stock Rights to be granted under FPFG's option plan for employees of
acquired companies with vesting terms matching those contained in the
Existing Stock Rights at the effective date. The periodic vesting
schedules of the Existing
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June 10, 1997
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Stock Rights shall be matched and the optionholders shall have a period
of not less than one year following termination of their employment within
which to exercise the new options. Each new option evidences the right
to purchase the number of shares of FPFG common stock equal to the
product (rounded up or down as appropriate to the next whole dollar) of
(i) the number of WIB common shares covered by the Existing Stock Right
immediately prior to the effective date, multiplied by (ii) the Conversion
Ratio (as defined in paragraph 4 above). The exercise price of such new
option for each share of Common Stock to which it is subject shall be
equal to the quotient obtained by dividing (i) the per share exercise
price for WIB common shares subject to the Existing Stock Right
immediately prior to the effective time by (ii) the Conversion Ratio.
5. WIB will not grant any options, warrants or other rights to acquire capital
stock or securities of WIB under any plan or otherwise after the date of
the Agreement and Plan of Merger.
6. All expenses incurred by FPFG, WIA and WIB shall be borne by the party
which incurred the expenses. Expenses shall include all out-of-pocket
expenses, including fees and expenses of counsel, accountants,
investment bankers, experts and consultants incurred in connection with
the authorization, preparation, negotiation, execution and performance
of the Agreement, the preparation, printing, filing and mailing of the
Registration Statement and the Proxy Statement, the solicitation of
stockholder approvals and all other matters related to the consummation
of the reorganization.
REPRESENTATIONS
KPMG is relying upon the following representations made to KPMG by the
management of FPFG and WIB in rendering the opinions contained herein. It is
understood that KPMG has not independently verified the accuracy of any of these
representations.
(a) 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 each
of WIA and WIB immediately preceding the merger, will be held by WIB upon
consummation of the merger. For purposes of this assumption, amounts paid
by WIB to dissenters, amounts used by WIB to pay costs of the
reorganization, and all redemptions, and distributions (except for regular,
normal dividends) made by WIB will be included as assets of WIB
immediately prior to the reorganization.
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June 10, 1997
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(b) In the merger, shares of the WIB common stock representing control of WIB,
as defined in section 368(c), will be exchanged solely for voting stock of
the FPFG. For purposes of this assumption, shares of the WIB stock
exchanged for cash or property originating with FPFG will be treated as
outstanding WIB stock on the date of the transaction.
(c) There is no intercorporate debt existing between FPFG and WIB that was
issued, acquired, settled or will be settled at a discount.
(d) The fair market value of the FPFG voting common stock to be received by
each of the WIB shareholders in the merger is approximately equal, in each
instance, to the fair market value of the WIB common stock exchanged
therefor.
(e) There is no plan or intention by the WIB shareholders to sell or otherwise
dispose of any FPFG voting stock received by them in the transaction which
would reduce their ownership of FPFG voting stock to a number of shares
having, in the aggregate, a fair market value as of the date of the
transaction of less than 50 percent of the fair market value of the
formerly outstanding stock of WIB as of the date of the transaction. For
purposes of this assumption, the sale, redemption or other disposition of
stock occurring prior or subsequent to the exchange which is part of the
reorganization will be considered in determining whether there will be a
50 percent continuing interest through stock ownership as of the effective
date of the reorganization.
(f) Prior to the transaction, FPFG will be in control of WIA within the meaning
of section 368(c) of the Code. Additionally, following the proposed
transaction, WIB will not issue additional shares of its stock or create
any new classes of WIB stock that would cause FPFG to lose control within
the meaning of Section 368(c).
(g) WIB will not have any warrants, options, convertible securities or any
other type of right pursuant to which any person could acquire stock in WIB
if exercised or converted, which would affect FPFG's acquisition or
retention of control of WIB as defined in Section 368(c).
(h) FPFG and WIB have no intention of selling or disposing any of the assets of
WIB subsequent to the merger other than in the ordinary course of business.
FPFG plans to continue to actively operate the business conducted by WIB
prior to the merger and FPFG has no plan or intention to liquidate WIB or
cause it to merge with any other corporation.
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June 10, 1997
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(i) FPFG has no plan or intention to redeem or otherwise reacquire any of its
voting stock to be issued in the proposed merger.
(j) No two parties to the merger are investment companies within the meaning
of such term as used in Section 368(a)(2)(F)(iii) and (iv).
(k) The fair market value of the assets of WIB will exceed its liabilities on
the effective date of the merger.
(l) None of the FPFG Common Stock being issued to the WIB shareholders will
represent compensation for past or future services. The compensation to
be paid to WIB officers and employees who are stockholders employed
following the merger will not be part of the consideration paid for their
WIB common stock and will be commensurate, in each instance, with past or
future services.
(m) FPFG does not own, nor has it owned during the past five years, any shares
of the common stock of WIB, and will acquire none prior to the transaction.
(n) WIB 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 code.
(o) The liabilities of WIA, if any, assumed by WIB and the liabilities to which
the transferred assets of WIA are subject were incurred by WIA in the
ordinary course of business.
(p) The rounding up of the FPFG Common Stock to the next whole share in lieu of
fractional shares is solely for the purpose of avoiding the expense and
inconvenience to FPFG of issuing fractional shares and does not represent
separately bargained for consideration.
(q) FPFG was formerly known as, and is considered the same legal entity as, RAC
Financial Group, Inc.
(r) The sole consideration to be received by the WIB shareholders in the merger
will be shares of FPFG Common Stock.
DISCUSSION
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Board of Directors
June 10, 1997
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Section 368(a)(2)(E) in general, provides that a transaction otherwise
qualifying as a statutory merger under Section 368(a)(1)(A) will not be
disqualified by reason of the fact that stock of a corporation ("controlling
corporation") which before the merger was in control of the merged
corporation is used in the transaction if (1) after the transaction, the
corporation surviving the merger holds substantially all of its properties
and substantially all of the properties of the merged corporation (other than
stock of the controlling corporation distributed in the transaction), and (2)
in the transaction, former shareholders of the surviving corporation
exchange, for an amount of voting stock of the controlling corporation, an
amount of stock in the surviving corporation which constitutes control of
such corporation.
Section 368(a)(2)(E)(ii) requires that, in the transaction, former
shareholders of the surviving corporation exchange for voting stock of the
controlling corporation, an amount of stock which constitutes control of the
surviving corporation. Control for this purpose is defined in Section 368(c)
as the direct ownership of stock possessing at least 80 percent of the total
combined voting power and at least 80 percent of the total number of shares
of all other classes of stock. The amount of stock constituting control is
measured immediately before the transaction. See Treasury Regulation (Reg.)
Section 1.368-2(j)(3)(i). Accordingly, if more than 20 percent of the
outstanding stock of the surviving corporation is acquired with consideration
other than voting stock of the controlling corporation, the transaction will
not qualify under Section 368(a)(2)(E).
Section 368(a)(2)(E)(i) requires that after the transaction, the surviving
corporation must hold substantially all of its properties and substantially
all of the properties of the merged corporation. The term "substantially
all" has the same meaning as the phrase is used in Section 368(a)(1)(C). See
Reg. Section 1.368-2(j)(3)(iii). Section 368(a)(1)(C) and the regulations
promulgated thereunder do not define what constitutes "substantially all the
properties" of a corporation. The Service has established a safe harbor
quantitative test as to the amount of assets of a corporation that will
satisfy the substantially all the properties requirement for purposes of
obtaining a private letter ruling. Under Rev. Proc. 77-37, 1977-2 C.B. 568,
the "substantially all" requirement is satisfied only if the acquiring
corporation acquires properties of the transferor corporation representing at
least 90 percent of the fair market value of the net assets and at least 70
percent of fair market value of the gross assets held by the transferor
corporation immediately prior to the reorganization. The "ninety/seventy"
guidelines are arbitrary percentages selected by the Service that do not
represent judicial interpretations of the meaning of the phrase
"substantially all of the properties" under various subdivisions of Section
368. See LOUIS F. VIERECK V. UNITED STATES, 83-2 U.S.T.G. para. 9664 (C1.
Cts.), RALPH C. WILSON, SR. 46 T.C. 334 (1966), JOHN G. MOFFAT 42 T.C. 558,
363 F.2d 860 (9th Cir. 1966) (aff'g T.C.) 66-2 U.S.T.C. para. 9498, JAMES
ARMOUR, INC., 43 T.C. 295 (1964).
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June 10, 1997
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What constitutes "substantially all of the properties" in a nonruling situation
depends upon the facts and circumstances in each case rather than upon any
particular percentage. See Rev. Rul. 57-518, 1957-2 C.B. 253. The Service
is of the view that the substantially all properties requirement applies
separately to each trade or business of the transferor corporation.
In the present merger, it has been represented to KPMG that 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 which WIB holds immediately
preceding the merger will be held by WIB upon consummation of the merger, so
it appears the substantially all test of Section 368(a)(2)(E)(i) will be met.
Requisite to a reorganization under Section 368(a)(1)(A) and Section
368(a)(2)(E) are a continuity of the business enterprise under the modified
corporate form and a continuity of interest in the corporation surviving the
merger on the part of those persons who directly or indirectly were the
owners of the merged corporation prior to the reorganization. See Reg.
Section 1.368-1(b). The term reorganization does not embrace the mere
purchase by one corporation of the properties of another. See Reg. Section
1.368-2(a).
Continuity of business enterprise requires that the transferee corporation
either continue the transferor corporation's historic business or use a
significant portion of the transferor's historic business assets. See Reg.
Section 1.368-1(d).
The Regulations under Section 368(a) do not establish the amount of
qualifying consideration necessary to satisfy the continuity of interest
requirement. Prior to its adoption of its current policy that it will not
issue "comfort rulings" regarding certain corporate reorganizations, the
Service promulgated a definite test as to the amount of consideration
necessary to satisfy the continuity of interest requirement for purposes of
obtaining a private letter ruling. Under Rev. Proc. 77-37, 1977-2 C.B. 568,
the continuity of interest requirement of Reg. Section 1.368-1(b) was
satisfied if:
[T]here is continuing interest through stock ownership in
the acquiring or transferee corporation . . . on the part
of the former shareholders of the acquired or transferor
corporation which is equal in value, as of the effective
date of the reorganization, to at least 50 percent of the
value of all the formerly outstanding stock of the acquired
or transferor corporations as of the same date. It is not
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June 10, 1997
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necessary that each shareholder of the acquired or transferor
corporation receive in the exchange, stock of the acquiring or
transferor corporation . . . , which is equal in value to at
least 50 percent of the value of his former stock interest in
the acquired or transferor corporation, so long as one or more
of the shareholders of the acquired transferor corporation have
a continuing interest through stock ownership in the acquiring
or transferee corporation . . . which is, in the aggregate, equal
in value to at least 50 percent of the value of all of the formerly
outstanding stock of the acquired or transferor corporation.
The 50 percent test of Rev. Proc. 77-37, supra., does not as a matter of law
establish the amount of qualifying consideration necessary to meet the
continuity of interest requirement of Reg. Section 1.368-1(b). In other
words, the surrender of a capital stock ownership of less than 50 percent of
the stock of the acquired corporation does not in itself mark a discontinuity
of interest. The Supreme Court in JOHN A. NELSON CO. V. HELVERING, 296 U.S.
374 (1935), 36-1 U.S.T.C. para. 9019, held that there was a reorganization
even though the shareholders of the acquired corporation received less than
half of their total consideration in the form of stock of the acquiring
corporation and received nonvoting preferred stock. It is only necessary
that the shareholders continue to have a definite and substantial equity
interest in the assets of the acquiring corporation. See Rev. Rul 61-156,
1961-2 C.B. 62.
In the present merger, it appears that the continuity of interest test should
be met, even under the guidelines of Rev. Proc. 77-37. See Representations
(d), (e) and (r).
The WIB common stock being acquired from dissenting shareholders with
consideration furnished by WIB as the surviving corporation will not be
considered as outstanding WIB common shares immediately before the
transaction and will not be included for purposes of determining control as
defined in Section 368(c). See Reg. Section 1.368-2(j)(3)(i) and (j)(7),
example 2.
Section 354(a)(1) provides, in part, that no gain or loss will be recognized
if stock in a corporation a party to a reorganization is, in pursuance of the
plan of reorganization, exchanged solely for stock in such corporation or in
another corporation a party to the reorganization. For purposes of Section
354, stock rights or warrants are not included in the term "stock." See Reg.
Section 1.354-1(e).
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June 10, 1997
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Section 356(a)(1) in relevant part provides that if money or other property
is received in an exchange to which Section 354 would otherwise apply, then
gain, if any, to the recipient will be recognized to the extent of the sum of
the money and fair market value of the other property received. If the
exchange has the effect of the distribution of a dividend, then the amount of
gain recognized that is not in excess of each distributee shareholder's
ratable share of the undistributed earnings and profits of WIB will be
treated as a dividend. See Section 356(a)(2). No loss will be recognized on
the exchange. See Section 356(c).
Any dissenting shareholder of WIB who receives only cash in exchange for the
WIB stock, and who, as a result of the transaction, owns no FPFG common stock
directly, indirectly, or constructively, is treated as having received such
cash as a redemption in complete termination of his or her interest within
the meaning of Section 302(a), as a distribution in full payment in exchange
for the WIB stock.
Under the provisions of Section 358(a)(1) and 1223(1), the shareholders of
WIB will have a basis and holding period for the FPFG stock received in the
merger that will be the same as the basis and holding period of the WIB stock
surrendered, provided in the case of the holding period, that the stock
surrendered was held as a capital asset on the date of the merger.
Under the provisions of Section 362(b) and 1223(2), the basis and holding
period of the assets of WIA in the hands of WIB will be the same as the basis
and holding period of the assets in the hands of WIA immediately prior to the
merger. Additionally, no gain or loss will be recognized by WIA on the
transfer of its assets to WIB in exchange for the WIB stock. See Sections
361(a) and 357(a).
Pursuant to Section 381(a)(2), WIB will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, as the case may be,
of WIA and any deficit in earnings and profits of WIA or WIB shall be used
only to offset earnings and profits accumulated after the date of transfer
pursuant to Section 381(c)(2).
This transaction should not result in any additional net income taxes for
purposes of California, where WIB is incorporated and conducts its business,
and Nevada, where FPFG is incorporated.
California Revenue and Taxation Code Sections 17321, 18151, 24451 and 24990
incorporate the relevant sections of the Internal Revenue Code discussed in
this opinion letter. Thus, as provided by the federal code as discussed
above, the basis and the holding period will carryover, and there will be no
gain or loss on the receipt by the WIB
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June 10, 1997
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shareholders of FPFG stock in exchange for the surrender and cancellation of
their respective stock interests in WIB.
From a California corporate taxation standpoint, WIB is taxed under the
provisions of Section 23181 of the California Revenue and Taxation Code.
Thus, WIB both before and after the merger will be subject to a franchise tax
principally determined under generally accepted accounting principles
("GAAP").
From a Nevada corporate taxation standpoint, Nevada does not have a corporate
income or franchise tax. Thus, there will be no additional Nevada income
taxation as a result of this transaction.
Based solely upon the foregoing facts and representations, as well as the
Plan, KPMG renders the following opinions with respect to the Federal income
and California franchise and income tax consequences of the proposed
transaction:
1. The form and substance of the merger of WIA with and into WIB will
constitute a tax-free reorganization under Section 368(a)(1)(A) and
Section 368(a)(2)(E) of the Code.
2. WIA will not recognize any gain or loss upon the transfer of its assets to
WIB in exchange for WIB stock and the assumption by WIB of the liabilities,
if any, of WIA.
3. WIB will not recognize any gain or loss on the receipt by it of the assets
of WIA solely in exchange for WIB stock.
4. No gain or loss will be recognized to FPFG on the exchange of WIA stock
solely for WIB stock.
5. The basis of the assets of WIA in the hands of WIB will be the same as the
basis of those assets in the hands of WIA immediately prior to the merger.
6. The holding period of the assets of WIA acquired by WIB in the merger will
include the holding period of those assets in the hands of WIA immediately
prior to the exchange.
7. Based on Regulation Section 1.358-6(c), after the proposed transaction, the
basis of the stock of WIB owned by FPFG will equal the sum of (i) FPFG's
basis in the stock of WIA immediately before the merger, plus (ii) WIB's
net basis in its assets immediately before the merger, or at the election
of FPFG, the basis in the stock of
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June 10, 1997
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WIB in the hands of the WIB shareholders immediately before the proposed
transaction.
8. WIB will succeed to and take into account the earnings and profits, or
deficit in earnings and profits, of WIA as of the date or dates of
transfer. Any deficit in earnings and profits of either WIA or WIB will
be used only to offset earnings and profits accumulated after the date or
dates of transfer.
9. No gain or loss will be recognized to shareholders of WIB upon the exchange
of WIB stock solely for the FPFG voting common stock pursuant to the
merger.
10. The basis of the FPFG Common Stock received by the shareholders of WIB in
the merger will be the same as the basis of the WIB stock surrendered in
exchange therefor.
11. With respect to each shareholder of WIB, the holding period of the FPFG
Common stock received by the shareholders of WIB will include the period
during which the WIB stock surrendered therefor was held, provided the
stock of WIB is a capital asset in the hands of each such shareholder
of WIB on the date of the merger.
12. Any of WIB's common shareholders who exercise their statutory dissenters
rights against the merger and receive only cash in exchange for their Stock
(Dissenters), and who as a result of the transaction own no FPFG common
stock directly, indirectly, or constructively, will be treated as receiving
cash in redemption of and in complete termination of their stock interest
in WIB, provided WIB is not a collapsible corporation as defined in
Section 341(b). Gain or loss will be calculated based on cash received
less the shareholders tax basis in the WIB stock given up in the merger.
See Rev. Rul. 75-515, 1974-2 CB 118.
13. Any dissenting shareholders who receive cash in exchange for their WIB
Common Stock and who directly, indirectly, or constructively own FPFG
common stock as a result of the transaction shall have gain or income,
if any, in an amount not in excess of the cash received. As stated in
number 12 above, cash received by a dissenting WIB shareholder is
treated as having been received in redemption of WIB shares. Whether
such redemption transaction qualifies for sale or exchange treatment or
is treated as a dividend is determined on a shareholder by shareholder
basis applying the rules of Section 302, including, apparently, the
attribution rules of Section 318. Such WIB shareholders should consult
their own tax advisors.
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Board of Directors
June 10, 1997
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THE OPINIONS EXPRESSED IN THIS LETTER ARE RENDERED ONLY WITH RESPECT TO THE
SPECIFIC MATTERS DISCUSSED HEREIN, AND WE EXPRESS NO OPINION WITH RESPECT TO ANY
OTHER FEDERAL OR STATE INCOME TAX ASPECT OR LEGAL ASPECT OF THIS TRANSACTION.
IF ANY OF THE ABOVE-STATED FACTS, CIRCUMSTANCES, OR REPRESENTATIONS ARE NOT
ENTIRELY COMPLETE OR ACCURATE, IT IS IMPERATIVE THAT WE BE INFORMED IMMEDIATELY,
AS THE INACCURACY OR INCOMPLETENESS COULD HAVE A MATERIAL EFFECT ON OUR
CONCLUSIONS.
IN RENDERING OUR OPINION, WE ARE RELYING UPON THE RELEVANT PROVISIONS OF THE
NEVADA CODE AS AMENDED TO DATE, THE CALIFORNIA REVENUE AND TAXATION CODE AS
AMENDED TO DATE, THE INTERNAL REVENUE CODE OF 1986 AS AMENDED, THE REGULATIONS
THEREUNDER, AND JUDICIAL AND ADMINISTRATIVE INTERPRETATIONS THEREOF, ALL OF
WHICH ARE SUBJECT TO CHANGE OR MODIFICATION BY SUBSEQUENT LEGISLATIVE,
REGULATORY, ADMINISTRATIVE, OR JUDICIAL DECISIONS. ANY SUCH CHANGE OR
MODIFICATION COULD ALSO HAVE AN EFFECT ON THE VALIDITY OF OUR OPINION. UNLESS
SPECIFICALLY REQUESTED OTHERWISE, KPMG WILL NOT UPDATE THESE OPINIONS FOR ANY
SUBSEQUENT CHANGES OR MODIFICATIONS TO ANY LAW OR REGULATION OR TO THE JUDICIAL
OR ADMINISTRATIVE INTERPRETATIONS THEREOF. THE OPINIONS CONTAINED HEREIN ARE
NOT BINDING UPON THE INTERNAL REVENUE SERVICE, ANY OTHER TAX AUTHORITY OR ANY
COURT, AND NO ASSURANCE CAN BE GIVEN THAT A POSITION CONTRARY TO THAT EXPRESSED
HEREIN WILL NOT BE ASSERTED BY A TAX AUTHORITY.
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KPMG Peat Marwick LLP