Exhibit 8.1
Lathrop & Gage L.C.
2345 Grand Boulevard
Kansas City, Missouri 64108
Russell D. Jones
(816) 460-5725
Email: rjones@lathropgage.com
__________, 1999
(Draft)
Lab Holdings, Inc.
5000 West 95th Street
Suite 260, Box 7568
Shawnee Mission, Kansas 66207
LabOne, Inc.
10101 Renner Boulevard
Lenexa, Kansas 66219
Re: Merger of LabOne, Inc. into Lab Holdings, Inc.
Dear Sirs:
We represent Lab Holdings, Inc., a Missouri corporation ("Lab Holdings"), in
connection with the merger (the "Merger") of LabOne, Inc., a Delaware
corporation ("LabOne"), into Lab Holdings pursuant to that certain Agreement and
Plan of Merger, as amended and restated, dated as of March 7, 1999 (the "Merger
Agreement"). The Merger is described in a joint Proxy Statement/Prospectus of
Lab Holdings and LabOne (as amended to date, the "Prospectus") that is included
in a Registration Statement on Form S-4 (Registration No. 333-_____) filed with
the Securities and Exchange Commission with respect to the Merger (as amended to
date, the "Registration Statement").
Section 6.1(g) of the Merger Agreement provides that the obligation of each
of you to effect the Merger shall be subject to your receipt of an opinion
letter of counsel to the effect that the Merger will have certain federal income
tax consequences. This opinion letter is being delivered to each of you pursuant
to such Section 6.1(g).
We have examined such documents and records and made such inquiries as we
consider relevant and necessary for purposes of this opinion letter. In
particular we have reviewed the Merger Agreement, the Prospectus, and the
Registration Statement. Also in particular we have reviewed upon a Certificate
of Fact that has been provided to us by you. Based upon such examination and
inquiry, and further based on the assumptions and subject to the qualifications
set forth below, we are of the opinion that the federal income tax consequences
of the Merger include the following.
___________, 1999
Page 2
Holdings
With respect to Holdings the Merger will qualify as a tax-free liquidation of
LabOne under Section 332 of the Internal Revenue Code of 1986 (the "Code").
Accordingly, and taking into account other applicable rules, no gain or loss
will be recognized by Holdings upon the receipt by it of all of LabOne's
property and the cancellation of its LabOne stock pursuant to the Merger or as a
result of the stock split that precedes the Merger. However, and notwithstanding
the preceding sentence, Holdings will at the time of the Merger recognize any
gain or loss that is realized by it upon its receipt of property from LabOne in
satisfaction of any debt that is then owed to it by LabOne. Also, and again
notwithstanding the first sentence of this paragraph, Holdings may at the time
of the Merger recognize income from the discharge of indebtedness if any
indebtedness is then owed by it to LabOne.
Holdings' initial tax basis in each of the properties received by it from
LabOne pursuant to the Merger will be the same as LabOne's tax basis therein
immediately before the Merger. Holdings' holding period for the property
received by it from LabOne pursuant to the Merger will include the period for
which the property was held by LabOne.
LabOne
With respect to LabOne the Merger will qualify as a tax-free liquidation of
LabOne under Section 332. Accordingly, no gain or loss will be recognized by
LabOne upon the distribution by it of all of its property to Holdings pursuant
to the Merger.
Holdings Stockholders
In general the Merger will have no effect on Holdings stockholders. However,
and notwithstanding the preceding sentence, Holdings stockholders who receive
cash in lieu of fractional shares in connection
_________, 1999
Page 3
with the stock split that precedes the Merger will be treated as if they had
received the fractional shares and such shares were then redeemed by Holdings.
As discussed in more detail below, the specific tax consequences to Holdings
stockholders of a deemed redemption of Holdings stock will depend on the
stockholders' individual circumstances. Therefore, we express no opinion with
respect to the specific tax consequences to any Holdings stockholder of the
receipt of cash in lieu of a fractional share of Holdings stock in the stock
split that precedes the Merger. We note, however, that the Internal Revenue
Service (the "IRS") has ruled that a stockholder who receives cash in lieu of a
fractional share in connection with a stock dividend or stock split will
generally recognize gain or loss on the deemed redemption of such fractional
share in an amount equal to the difference between the amount of cash received
and the stockholder's tax basis in such fractional share, provided that the cash
is distributed 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.
Similarly, and also notwithstanding the first sentence of the preceding
paragraph, Holdings stockholders who receive cash as a result of their exercise
of statutory dissenters' rights will be treated as if their Holdings stock were
redeemed by Holdings. This deemed redemption will be treated as a sale or
exchange of such a stockholder's Holdings stock, and thus will trigger capital
gain or loss, if it is considered to be "not essentially equivalent to a
dividend" under Section 302(b)(1) or if it is considered to be "substantially
disproportionate" with respect to the stockholder under Section 302(b)(2) or if
it results in a complete termination of the stockholder's interest in Holdings
under Section 302(b)(3); otherwise the cash received will be treated as a
dividend. In determining whether the deemed redemption is treated as a sale or
exchange the constructive ownership rules of Section 318, pursuant to which a
stockholder is treated as owning stock that is actually owned by certain other
related parties, are generally applicable.
A deemed redemption of Holdings stock held by a dissenting Holdings
stockholder will be considered to be "not essentially equivalent to a dividend"
under Section 302(b)(1) if the redemption results in a
_______________, 1999
Page 4
"meaningful reduction" in the stockholder's proportionate interest in
Holdings. U.S. v. Davis, 397 U.S. 301, 313, reh'g denied, 397 U.S. 1071 (1970).
The existence and extent of any decrease in voting control appears to be the
most significant factor to be taken into account in applying this "meaningful
reduction" test, although the existence and extent of decreases in economic
ownership are also relevant considerations.
A deemed redemption of Holdings stock held by a dissenting Holdings
stockholder will be considered to be "substantially disproportionate" with
respect to the stockholder under Section 302(b)(2) if the stockholder actually
and constructively owns less than 50 percent of the voting power of the
outstanding Holdings stock after the deemed redemption and if the percentage of
Holdings stock actually and constructively owned by such stockholder after the
deemed redemption is less than 80 percent of the percentage of Holdings stock
actually and constructively owned by such stockholder immediately before the
deemed redemption.
As indicated in the foregoing discussion, the specific tax consequences of a
deemed redemption of the Holding stock of a Holdings stockholder who exercises
statutory dissenters' rights will depend on such stockholder's individual
circumstances. Therefore, we express no opinion with respect to the specific tax
consequences of such deemed redemption treatment to any particular Holdings
stockholder.
LabOne Stockholders (Other Than Holdings)
With respect to LabOne stockholders (other than Holdings) the Merger will
qualify as a tax-free reorganization under Section 368(a) and both Holdings and
LabOne will be parties to such reorganization under Section 368(b). Accordingly,
the principal tax consequences of the Merger to such stockholders are as
follows.
No gain or loss will be recognized by LabOne stockholders who receive only
Holdings stock in exchange for their LabOne stock pursuant to the Merger.
___________, 1999
Page 5
LabOne stockholders who receive only cash in exchange for their LabOne stock
pursuant to the Merger will likely be treated as if they had received Holdings
stock in the Merger and such stock was redeemed by Holdings immediately
thereafter, although the law in this regard is unclear and such stockholders may
be treated as if they had sold their LabOne stock to Holdings. A deemed
redemption of LabOne stock will be treated, under the rules discussed above
regarding deemed redemptions of Holdings stock, either as a sale or exchange of
LabOne stock (with the recognition of capital gain or loss) or as a dividend,
depending on the stockholder's individual circumstances. A deemed sale of LabOne
stock to Lab Holdings would cause the recognition of capital gain or loss.
Because of the uncertainty in the law, and because of the LabOne stockholders'
varying circumstances, we express no opinion with respect to the specific tax
consequences of the Merger to LabOne stockholders who receive only cash in
exchange for their LabOne stock pursuant thereto.
LabOne stockholders who receive some Holdings stock and some cash in exchange
for their LabOne stock pursuant to the Merger will recognize gain, but not loss,
on such exchange. The amount of the gain recognized by such a stockholder will
be equal to the lesser of: one, the total gain realized by such stockholder on
the exchange (i.e., the value of the Merger consideration received by such
stockholder, including both cash and Holdings stock, less such stockholder's tax
basis in the LabOne stock that is given up in the exchange); or two, the amount
of cash received. The gain that is realized by a LabOne stockholder may be
capital gain or ordinary income, depending on the stockholder's individual
circumstances (determined in accordance with the rules regarding deemed
redemptions that are discussed above, applied as if the LabOne stockholder
exchanged all of his LabOne stock for Holdings stock and Holdings immediately
redeemed a portion of such Holdings stock for cash). Because of the LabOne
stockholders' varying circumstances, we express no opinion with respect to the
character of the gain, if any, recognized by LabOne stockholders who receive
some Holdings stock and some cash in exchange for their LabOne stock pursuant to
the Merger.
The aggregate tax basis of the shares of Holdings stock received by a LabOne
stockholder pursuant to the Merger will equal the aggregate
_________, 1999
Page 6
tax basis of such stockholder's shares of LabOne stock exchanged in the
Merger, increased by the amount of any gain recognized by such stockholder and
decreased by the amount of any cash received by such stockholder. The holding
period for shares of Holdings stock received by a LabOne stockholder pursuant to
the Merger will include the holding period for the shares of LabOne stock
exchanged in the Merger.
The foregoing opinions are based on the Code, its legislative history,
Treasury Regulations, judicial authority, and administrative rulings and
practice, all as currently existing and in effect. This opinion letter is not
binding on the IRS or upon the courts, and if the IRS challenges any of the
opinions that are expressed herein substantial expense may at a minimum be
incurred in dealing therewith. Legislative, judicial, or administrative changes
or interpretations may be forthcoming that could alter or modify the opinions
expressed by us herein. Any such changes may be retroactive and could affect,
possibly adversely, the tax consequences of the Merger.
In rendering the foregoing opinions we have assumed the accuracy of all
statements of fact contained in the Merger Agreement, the Prospectus, the
Registration Statement, and other documents examined by us or made to us by
officers or other representatives of Lab Holdings and LabOne in response to our
inquiries. We have also assumed the due authorization, execution and delivery,
and binding effect of all contracts examined by us by and on all parties
thereto. We have further assumed the genuineness of all signatures on all
contracts and other documents examined by us, the authenticity of all documents
submitted to us as originals, and the conformity to original documents of all
documents submitted to us as copies.
We express no opinion as to the federal income tax consequences of the Merger
if any of the assumptions that we are relying upon in issuing this opinion
letter are incorrect. We also express no opinion as to the tax consequences of
the Merger under any state, local, or foreign tax law.
The opinions set forth in this letter are effective as of the date hereof. We
express no opinions other than as herein expressly set forth, and no expansion
of our opinions may be made by implication or otherwise. We do not undertake to
advise you of any matter within the scope of this letter which comes to our
attention after the delivery of this letter and disclaim any responsibility to
advise you of future changes in law or fact which may affect the above opinions.
___________, 1999
Page 7
This opinion letter may not be filed with any governmental agency or be used
for any other purpose without our prior written consent, except that this
opinion letter may be filed as an exhibit to the Registration Statement. Also,
we consent to the reference that is made to this opinion letter in the
Prospectus under the caption "The Proposed Merger--Federal Income Tax
Consequences."
Very truly yours,
LATHROP & GAGE L.C.
By:
----------------------------
Russell D. Jones