EXHIBIT 8.1
FORM OF TAX OPINION
MID-AMERICAN ALLIANCE CORPORATION
________________________, 2003
Citizens, Inc.
400 East Anderson Lane, 6th Floor
Austin, Texas 78752
Re: Plan and Agreement of Merger among Mid-American Corporation,
Citizens, Inc. and Citizens Acquisition, Inc.
Ladies and Gentlemen:
Our opinion as expressed below is based upon the following documents
("Documents"): (1) the information contained in the proxy statement-prospectus
dated _______________, 2003 (the "Proxy Statement") as filed with the Securities
and Exchange Commission; (2) the Plan and Agreement of Merger (the "Plan") dated
March 7, 2003, among Mid-American Alliance Corporation ("Mid-American"),
Citizens, Inc. ("Citizens") and Citizens Acquisition, Inc. ("Acquisition"),
together with the Exhibits thereto; and (3) officers' certificates provided by
the officers of Citizens and Mid-American. Our opinion as expressed below is
also based upon the Internal Revenue Code of 1986, as amended ("IRC"), the
regulations promulgated thereunder and the current administrative positions of
the Internal Revenue Service ("IRS") contained in published Revenue Rulings and
Revenue Procedures, and existing judicial decisions, all of which are subject to
change or modification by subsequent legislative, regulatory, administrative or
judicial decisions which could adversely affect our opinions.
This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this letter should be read in
conjunction therewith.
"Merger" refers to the transaction set forth in the Plan. Capitalized
terms herein have the same meaning as in the Plan.
The consequences described herein are not applicable to nonresident
aliens, to foreign corporations, to debtors under the jurisdiction of a court in
a case under Title 11 of the United States Code or in a receivership,
foreclosure or similar proceeding, to shareholders that are real estate
investment trusts, to shareholders that are regulated investment companies, to
shareholders that are tax exempt persons, to shareholders that are persons that
hold their Mid-American Common Stock as part of a position in a "straddle" or as
part of a "hedging" or other integrated transaction, to shareholders that are
investment companies within the meaning of IRC Section
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351(e), to shareholders who are dealers in securities, to shareholders who do
not hold their common stock as capital assets, to shareholders who are financial
institutions or to shareholders who acquired or will acquire their shares in
connection with stock option or stock purchase plans or in other compensatory
transactions.
The principal reasons for the Merger can be summarized as follows:
(1) to become part of a combined entity with greater financial
strength and an enhanced competitive position as compared to the
separate entities;
(2) to achieve improved capitalization and economies of scale;
and
(3) to provide greater liquidity to Mid-American shareholders.
This letter is conditioned on the accuracy of the factual information,
assumptions and representations contained in the Proxy Statement and provided by
Citizens and Mid-American, including the principal reasons for the Merger
expressed above and the following:
(1) that Citizens and Mid-American, in arriving at the method
used to determine the number of shares of Citizens Class A Voting
Common Stock to be received by each Mid-American shareholder, attempted
in good faith to value the Mid-American Common Stock to be transferred
and to value the Citizens Class A Voting Common Stock to be exchanged
for such Mid-American Common Stock in an effort to ensure that each
shareholder receiving Citizens Class A Voting Common Stock pursuant to
the Merger receive a number of shares of such stock approximately equal
in value to the Mid-American Common Stock exchanged therefor;
(2) that prior to the Merger, Citizens will be in control of
Acquisition within the meaning of IRC Section 368(c);
(3) that following the Merger, Mid-American will hold at least
90 percent of the fair market value of its net assets and at least 70
percent of the fair market value of its gross assets and at least 90
percent of the fair market value of Acquisition's net assets and at
least 70 percent of the fair market value of Acquisition's gross assets
held immediately prior to the Merger. For purposes of this
representation, amounts paid by Mid-American to dissenters, amounts
paid by Mid-American to shareholders who receive cash or other
property, amounts used by Mid-American to pay reorganization expenses,
and all redemptions and distributions (except for regular, normal
dividends) made by Mid-American will be included as assets of
Mid-American immediately prior to the Merger, which it does not hold
after the Merger;
(4) that Mid-American has no plan or intention to issue
additional shares of its stock that would result in Citizens losing
control of Mid-American within the meaning of IRC Section 368(c);
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(5) that none of Citizens, Mid-American, any entity related
thereto as described in Treasury Regulation Section 1.368-1(e) or
shareholder thereof, have any plan or intention to redeem or otherwise
reacquire any Citizens Class A Voting Common Stock to be issued to
Mid-American shareholders in the Merger, and will not so redeem or
otherwise reacquire such stock;
(6) that Citizens has no plan or intention to liquidate
Mid-American; to merge Mid-American with or into another corporation;
to sell or otherwise dispose of the stock of Mid-American except for
transfers of stock to corporations controlled by Citizens, as defined
in IRC Section 368(c); or to cause Mid-American to sell or otherwise
dispose of any of its assets or of any of the assets acquired from
Acquisition, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by
Mid-American, as defined in IRC Section 368(c);
(7) that following the Merger, Citizens will continue the
historic business of Mid-American or use a significant portion of its
historic business assets in a business;
(8) that Citizens, Acquisition, Mid-American and Mid-American
shareholders will assume and pay their respective reorganization
expenses, if any, incurred in connection with the Merger;
(9) that there is no corporate indebtedness between Citizens
and Mid-American or between Acquisition and Mid-American that was
issued, acquired or will be settled at a discount;
(10) that Acquisition will have no liabilities assumed by
Mid-American, and will not transfer to Mid-American any assets subject
to liabilities, in the Merger;
(11) that in the Merger, shares of Mid-American Common Stock
representing control of Mid-American, as defined in IRC Section 368(c),
will be exchanged solely for voting Common Stock of Citizens. For
purposes of this representation, shares of Mid-American Common Stock
exchanged for cash or other property originating with Citizens will be
treated as outstanding Mid-American Common Stock on the date of the
Merger;
(12) that on the Effective Date of the Merger, Mid-American
will not have outstanding any warrants, options, convertible securities
or any other type of right pursuant to which any person could acquire
stock in Mid-American that, if exercised or converted, would affect
Citizens' acquisition or retention of control of Mid-American, as
defined in IRC Section 368(c);
(13) that Citizens does not own, nor has it owned during the
past five (5) years, directly or indirectly, any shares of Mid-American
Common Stock;
(14) that neither Citizens nor Mid-American are investment
companies as defined in IRC Section 368(a)(2)(F)(iii) and (iv);
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(15) that neither Citizens nor Mid-American are under the
jurisdiction of a court in a Title 11 or similar case within the
meaning of IRC Section 368(a)(3) (A);
(16) that the Merger will be consummated and qualify as a
statutory merger in full compliance with Kentucky law, subject to the
perfection of dissenters' rights, if any, and will be consummated in
accordance with the terms of the Plan;
(17) that in the event more than 2.5 percent of the
shareholders of Mid-American dissent to the Merger, Citizens would
exercise its option not to proceed with the Merger (as permitted under
the Plan) and the Merger consequently would not be consummated;
(18) that no Mid-American Common Stock will be acquired for
consideration other than solely Citizens Class A Voting Common Stock.
For purposes of this representation, Mid-American Common Stock redeemed
for cash or other property furnished by Citizens will be considered as
acquired by Citizens. Further, no liabilities of Mid-American or of the
Mid-American shareholders will be assumed by Citizens, nor will any of
the Mid-American Common Stock be subject to any liabilities;
(19) that Citizens will not assume or repay any Mid-American
debt guaranteed by Mid-American shareholders nor will Citizens assume
or repay any outstanding loans between Mid-American and its
shareholders;
(20) that no compensation or agreement for services received
by any shareholder of Mid-American, or any entity related to a
Mid-American shareholder, will be separate consideration for, or
allocable to, any of their shares of Mid-American Common Stock; no
shares of Citizens Class A Voting Common Stock received by any
Mid-American shareholder, or any entity related to any Mid-American
shareholder, will be separate consideration for, or allocable to, any
employment agreement or compensation agreement; and the compensation
paid to any Mid-American shareholder, or any entity related to a
Mid-American shareholder, will be for services actually performed, will
be reasonable in light of the services to be performed and will be
commensurate with amounts paid to third parties bargaining at
arm's-length for similar services;
(21) that Mid-American will pay its dissenting shareholders
the value of their Mid-American Common Stock out of its own funds. No
funds will be supplied or are required to be supplied (by law or
otherwise) for that purpose, directly or indirectly, by Citizens, nor
will Citizens, directly or indirectly, reimburse Mid-American for any
payments to dissenters; and
(22) that on the Effective Date of the Merger, the fair market
value of the assets of Mid-American will exceed the sum of its
liabilities plus the liabilities, if any, to which its assets are
subject;
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For purposes of rendering this opinion, we have assumed that the
Documents provide a true, complete and accurate description of all relevant
facts and circumstances surrounding the Merger and all such facts will be true,
complete and accurate at all relevant times. In rendering this opinion, we are
relying on, and the opinion is expressly conditioned on, the Merger being
carried out in all material respects, and in the same form, as described in the
Documents. This opinion will be signed on the Effective Time of the Merger.
Jones & Keller has made no independent verification of any of the facts
and representations set forth in the Documents, and therefore, has relied upon
the completeness, correctness and accuracy of the Documents for purposes of
rendering this opinion. While Jones & Keller may have had discussions with
management personnel of Citizens and Mid-American in connection with rendering
this opinion, (i) the substance of those discussions is in all material respects
is reflected in the Citizens Officer's Certificate and the Mid-American
Officer's Certificate, (ii) the management personnel of Citizens and
Mid-American have imparted no information materially additional to, or
inconsistent with, that contained in the Citizens Officer's Certificate and the
Mid-American Officer's Certificate, (iii) Jones & Keller has assumed that any
information imparted in such discussions with management personnel is true, and
has not made (and has at no time had any means of making) any independent
verification of any information imparted in such discussions, and (iv) the
issuance of this opinion shall not imply anything to the contrary of (i) - (iii)
preceding. For purposes of rendering this opinion, Jones & Keller has assumed
that all representations or warranties (including representations as to future
conduct, e.g. that no inconsistent filing or return position will be taken)
qualified by "to the knowledge of," "belief" or "expect" or similar
qualifications are true without any such qualification, and that future conduct
will occur consistently with such knowledge, belief, expectation or similar
qualification.
The opinion expressed below is rendered only with respect to the
specific matters described herein, and we express no opinion, and no opinion
should be implied or inferred, with respect to any other federal income tax
aspects of the Merger beyond the matters expressly stated. Shareholders residing
or conducting business in foreign countries, states or municipalities having tax
laws could be required to pay tax with respect to the Merger in those countries,
states or municipalities. We do not express any opinion as to foreign, state or
local tax consequences of the Merger. We do not opine as to the taxable or
nontaxable status of any previous transactions not part of the Merger. We do not
express any opinion regarding alternative minimum tax issues, employee benefit
issues, consolidated return issues or IRC Section 306 or 382 consequences of the
Merger, nor do we express an opinion on the valuations of Mid-American or
Citizens assets or common stock or the ratio of exchange of Mid-American Common
Stock for Citizens Class A Voting Common Stock. Should any of the facts,
circumstances or assumptions specified herein be subsequently determined
incorrect or inaccurate, our conclusions may vary from those set forth below and
such variance could be material.
Accordingly, in our opinion:
(1) The Merger will constitute a reorganization within the
meaning of IRC Section 368(a) and Citizens, Acquisition and
Mid-American will each be a "party to a
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reorganization" within the meaning of IRC Section 368(b). No gain or
loss will be recognized by the shareholders of Mid-American solely upon
the exchange of their shares of Mid-American Common Stock for shares of
Citizens Class A Voting Common Stock. IRC Section 354(a).
(2) The tax basis of the shares of Citizens Class A Voting
Common Stock received by a shareholder of Mid-American will be the same
as the basis of the Mid-American Common Stock surrendered in exchange
therefor by that shareholder in the Merger. IRC Section 358(a);
Treasury Regulation Section 1.358-1(a).
(3) The holding period of the shares of Citizens Class A
Voting Common Stock received by a shareholder of Mid-American will
include the period during which such shareholder held the Mid-American
Common Stock exchanged therefor, to the extent that such stock was held
by the shareholder as a capital asset on the date of the consummation
of the Merger. IRC Section 1223(1).
(4) Cash received by Mid-American shareholders who properly
exercise their dissenters' rights will be treated as having been
received in redemption of the shares so cashed out, and may result in
taxable gain or loss, measured by the difference (if any) between the
amount of cash received and such shareholder's basis in the
Mid-American Common Stock. Provided the shares were held as capital
assets at the time of the redemption, such gain or loss will constitute
capital gain or loss, and such gain or loss will be long term capital
gain or loss if the holding period for such shares was greater than one
year. It is possible, that for some Mid-American shareholders, the
distribution of cash may be treated as a dividend taxable as ordinary
income. IRC Sections 302, 301.
Each shareholder of Mid-American must file pursuant to Treasury
Regulation Section 1.368-3(b), with his or her income tax return for the year in
which the Merger is consummated, a statement which provides details relating to
the property transferred and securities received in the Merger.
The preceding discussion and opinions are based on our interpretations
of the facts and assumptions, based on the IRC, the regulations thereunder and
judicial and administrative interpretations thereof, all of which are subject to
change by subsequent regulatory, administrative, legislative or judicial actions
which could have an adverse effect on the validity of our opinion. In addition,
our opinion is based on the information contained in the Documents and assumes
that the facts, assumptions and representations contained therein could, in
fact, be established in a court of law in accordance with the appropriate
governing laws and burdens of proof.
This opinion is rendered as of the date hereof, and we undertake no,
and hereby disclaim any, obligation to advise you of any changes in or new
developments which might affect any matters or opinion set forth herein. The
opinion merely represents our interpretation of existing federal income tax law,
and is not binding on the IRS or any court of law. No ruling has been, or will
be, sought from the Internal Revenue Service as to the Federal tax consequences
of the
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Merger. No assurance can be given that the IRS would not adopt a position
contrary to our opinion and prevail in a court of law.
If the Merger is transacted as outlined in the facts given, the
material tax issues addressed singularly and in the aggregate will more likely
than not be upheld under challenge by the IRS.
Each Mid-American shareholder should consult his own qualified tax
advisor to evaluate the tax effects of the Merger based on his personal facts
and circumstances.
Very truly yours,
JONES & KELLER, P.C.
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