Exhibit 8.1
February 2, 1999
Ovation Communications, Inc.
400 South Highway 169
Minneapolis, Minnesota 55426
RE: Merger of Ovation Communications, Inc. with and into Bravo Acquisition
Corporation
Gentlemen:
We have acted as counsel to you, Ovation Communications, Inc., a Delaware
corporation (the "Company"), in connection with the contemplated merger (the
"Merger") of the Company with and into Bravo Acquisition Corporation ("Acquiror
Sub"), a Delaware corporation and a wholly-owned subsidiary of McLeodUSA
Incorporated ("Acquiror"), a Delaware corporation. The terms and conditions of
the Merger are described in the Agreement and Plan of Merger (the "Agreement"),
dated January 7, 1999, by and among you, Acquiror, Acquiror Sub and certain
stockholders of the Company. Unless otherwise indicated, all capitalized terms
used herein shall have the meanings ascribed to them in the Agreement. This
opinion is being furnished to you in connection with Section 7.03(e) of the
Agreement.
In connection with our opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Agreement and such other documents as we have deemed necessary or
appropriate as a basis for our opinion set forth below. In our examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents. As to any facts
material to our opinion that we did not independently establish or verify, we
have relied upon statements and representations of officers and other
representatives of the Company, Acquiror and Acquiror Sub (including the tax
certificates attached hereto). Our opinion is conditioned on, among other
things, the initial and continuing accuracy of the facts, information, covenants
and representations set forth in the documents referred to above. In addition,
we have assumed that the Merger will be consummated in accordance with the terms
and conditions contained in the Agreement, and that the Merger will qualify as a
merger under applicable state law.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder (the "Regulations"), pertinent judicial authorities,
interpretive rulings of the Internal Revenue Service (the "Service") and such
other authorities as we have
considered relevant. It should be noted that statutes, regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some cases, with retroactive effect. A change in the authorities upon
which our opinion is based could affect our conclusions herein. Moreover, there
is no assurance that the Service will not take a position contrary to our
opinion or that a court considering the issues would not hold contrary to our
opinion. None of the parties to the Agreement have requested a ruling from the
Service with respect to any issue addressed in this opinion, and no ruling from
the Service will be sought.
Based upon and subject to the foregoing, we are of the opinion that, under
current law, the Merger will qualify as a reorganization described in Section
368(a)(2)(D) of the Code and, accordingly, that for United States federal income
tax purposes:
(i) no gain or loss will be recognized by a Company Stockholder as a
result of the receipt of solely shares of Acquiror Common Stock in exchange for
his or her Company Common Stock, except to the extent of any cash received in
lieu of fractional shares;
(ii) a Company Stockholder who receives cash as consideration for his
or her Company Common Stock, whether in whole or in part, will recognize gain
equal to the lesser of (I) the difference between (A) the fair market value of
the Acquiror Common Stock and the amount of cash received in the Merger and (B)
the holder's tax basis in the Company Common Stock exchanged (assuming the
Company Common Stock was held by such holder as a capital asset) or (II) the
amount of cash received for the Company Common Stock;
(iii) a Company Stockholder who receives cash in lieu of a fractional
share of Acquiror Common Stock will be treated as if it received such fractional
share and then sold such share back to the Acquiror. Such stockholder will
recognized gain or loss on the sale of the fractional share equal to the
difference between (A) the amount of cash received for such fractional share and
(B) the holder's tax basis in such fractional share;
(iv) a Company Stockholders' tax basis in the Acquiror Common Stock
received pursuant to the Merger in respect of Company Common Stock will
initially be (A) equal to the Company Stockholders' tax basis in his or her
Company Common Stock immediately prior to the Merger, (B) increased by the
amount of gain recognized in the Merger under paragraph (ii) above, (C) reduced
by the amount of cash received for the Company Common Stock pursuant to
paragraph (ii) above and (D) reduced by the amount of basis allocable to the
fractional share (as described in paragraph (iii) above); and
(v) a Company Stockholders' holding period for Acquiror Common Stock
received pursuant to the Merger will include the holding period of the Company
Common Stock for which it was exchanged (assuming such Company Common Stock was
held as a capital asset).
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Except as set forth above, we express no other opinions as to the tax
consequences of the Merger to any party under federal, state, local or foreign
law. We are furnishing this opinion to you solely in connection with the Merger
and this opinion is not to be used, circulated, quoted or otherwise referred to
by any other person or for any other purpose without our express written
consent, except as may be required by you under federal or state securities
laws. This opinion is being rendered on the basis of the facts and the law as
they exist or are understood on the date hereof. Any change in the facts or the
applicable law subsequent to such date might affect the conclusions expressed
herein. In rendering our opinion, we do not undertake to assume any obligation
whatsoever to advise you of any changes in applicable law which may occur after
the date hereof or of any changes in facts which are brought to our attention
after the date hereof.
Very truly yours,
Edwards & Angell, LLP
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