1
Exhibit 8
[Watkins Ludlam & Stennis, P.A. Letterhead]
[Date of Closing]
Board of Directors Board of Directors
Community Bancshares, Inc. Hancock Holding Company
203 N. Railroad Avenue Post Office Box 4019
Independence, LA 70443-9101 Gulfport, MS 39502
RE: THE FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN MATTERS ARISING
UNDER THE CORPORATE REORGANIZATION PROVISIONS OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED.
Gentlemen:
We have acted as special counsel to Hancock Holding Company, a
Mississippi corporation ("HHC"), and Hancock Bank of Louisiana, a Louisiana
state bank ("Hancock Bank"), in connection with certain federal income tax
matters relating to the transactions described in: (a) that certain Agreement
and Plan of Reorganization, dated as of June 19, 1996 (the "Merger Agreement"),
by and between Community Bancshares, Inc., a Louisiana corporation ("CBI"),
Community State Bank ("Bank"), a Louisiana state bank, Hancock Bank, and HHC,
(b) that certain Company Merger Agreement between CBI and HHC, dated as of June
19, 1996, and (c) that certain Bank Merger Agreement between Bank and Hancock
Bank, dated as of June, 1996. This opinion is furnished to you pursuant to
Section 8.2(e) of the Merger Agreement. Except as otherwise defined herein,
all capitalized terms herein have the meanings set forth in the Merger
Agreement.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Merger Agreement and such other documents as we have deemed necessary or
appropriate in order to enable us to render the opinion below. In our
examination, we have assumed the genuineness 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. In rendering the opinion set
forth below, we
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 2
have relied upon certain written representations and covenants of the parties
to the Company Merger and the Bank Merger set forth in the Certificates which
are attached hereto as Exhibits "A," "B," and "C."
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service (the "Service") and such other authorities as we have
considered relevant.
I. DESCRIPTION OF PROPOSED COMPANY MERGER
The proposed Company Merger will be structured in accordance with the
Merger Agreement, the Company Merger Agreement, the laws of the State of
Louisiana, applicable federal law, the statements and representations of the
parties to the transactions, and the following descriptions:
(1) On the Effective Date, CBI will be merged with and into HHC on
the terms and subject to the conditions set forth in the Merger
Agreement and the Company Merger Agreement, some of which are
further described below. HHC will acquire all of the assets and
assume all of the liabilities of CBI. HHC will continue in
existence as the surviving corporation. CBI will cease to exist
at the Effective Date of the Company Merger.
(2) Except for shares as to which dissenters' rights, if any, have
been perfected and not withdrawn or otherwise forfeited under
applicable Louisiana law, and except for shares held by certain
"Small Shareholders" as described below, on the Effective Date
(pursuant to Section 3.1(b) of the Merger Agreement), the issued
and outstanding shares of CBI Common Stock shall automatically be
exchanged for and converted into the right to receive a fixed
number of shares of HHC Common Stock and a fixed amount of cash
(collectively the "CBI Exchange Ratio"). Each holder of 25 or
fewer shares of CBI Common Stock (a "Small Shareholder"), shall
not receive HHC Common Stock, but rather shall be entitled to
receive as consideration a fixed cash amount for each share of
CBI Common Stock held.
(3) If after calculation of the CBI Exchange Ratio, a holder of
shares of CBI Common Stock is entitled to receive a fraction of a
share of HHC's Common Stock, no such fractional share will be
issued. In lieu thereof, cash will be paid to such shareholder
in an amount equal to such fractional part of a share of HHC
Common Stock multiplied by $36.50.
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 3
(4) As a result of the Company Merger, the CBI shareholders (other
than the Small Shareholders and those CBI shareholders who
perfect any applicable dissenters' rights) will become
shareholders of HHC.
(5) After the Company Merger, HHC will continue its historical
business in a substantially unchanged manner.
II. DESCRIPTION OF PROPOSED BANK MERGER
The proposed Bank Merger will be structured in accordance with the
Merger Agreement, the Bank Merger Agreement, the laws of the State of
Louisiana, the statements and representations of the parties to the
transactions, and the following descriptions:
(1) Immediately after the Company Merger on the Effective Date, Bank
will be merged with and into Hancock Bank on the terms and
subject to the conditions set forth in the Merger Agreement and
the Bank Merger Agreement, some of which are further described
below. Hancock Bank will acquire all of the assets and assume
all of the liabilities of Bank. Hancock Bank will continue in
existence as the surviving corporation. Bank will cease to exist
at the Effective Date of the Bank Merger.
(2) Except for (a) shares as to which dissenters' rights, if any,
have been perfected and not withdrawn or otherwise forfeited
under applicable Louisiana law, (b) shares held by certain "Small
Bank Shareholders" as described below, and (c) shares held by
CBI, on the Effective Date (pursuant to Section 3.1(c) of the
Merger Agreement), the issued and outstanding shares of Bank
Common Stock shall automatically be exchanged for and converted
into the right to receive from HHC, a fixed number of shares of
HHC Common Stock and a fixed amount of cash (collectively the
"Bank Exchange Ratio"). (The holders of such remaining issued
and outstanding Bank Common Stock are hereinafter referred to as
the "Bank Minority Shareholders.")
(3) Each holder of 25 or fewer shares of Bank Common Stock (a "Small
Bank Shareholder"), shall not receive HHC Common Stock, but
rather shall be entitled to receive as consideration from HHC, a
fixed cash amount for each share of Bank Common Stock held. The
Bank Common Stock held by HHC immediately after and as a result
of the Company Merger will be canceled or retired as a result of
the Bank Merger, and no additional Hancock Bank Common Stock will
be issued to HHC in connection with the Bank Merger.
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 4
(4) If after calculation of the Bank Exchange Ratio, a Bank Minority
Shareholder is entitled to receive a fraction of a share of HHC
Common Stock, no such fractional share will be issued. In lieu
thereof, cash will be paid to such shareholder in an amount equal
to such fractional part of a share of HHC Common Stock multiplied
by $36.50.
(5) As a result of the Bank Merger, the Bank Minority Shareholders
(i.e., shareholders other than the Small Bank Shareholders and
those Bank shareholders who perfect any applicable dissenters'
rights) will become shareholders of HHC.
(6) No Hancock Bank Common Stock will be issued in the Bank Merger.
(7) The ownership structure between HHC and Hancock Bank will not
change as a result of the Bank Merger. After the Bank Merger,
Hancock Bank will continue its historical business in a
substantially unchanged manner.
III. OPINION
In reliance upon the foregoing facts and the representations of the
parties to the Merger transactions, and based upon our review of such documents
and consideration of such legal matters as we have deemed relevant and
sufficient to enable us to render an informed opinion, we are of the opinion
that the federal income tax consequences of the proposed Mergers will be as
follows:
A. With respect to the Company Merger:
1. Provided the proposed Company Merger of CBI with and into HHC
qualifies as a statutory merger under applicable state or federal
law, the acquisition by HHC of all of the assets of CBI in
exchange for the CBI Exchange Ratio, cash, and the assumption of
liabilities of CBI will constitute a reorganization within the
meaning of Code section 368(a)(1)(A).(1/) HHC and CBI will each be
"a party to a reorganization" within the meaning of section
368(b) of the Code.
2. No gain or loss will be recognized to CBI on the transfer of all
of its assets to HHC in exchange for the CBI Exchange Ratio and
cash (all of which will be distributed
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_____1/Unless otherwise noted, hereafter all section references
are to the Code.
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 5
to the CBI shareholders), and the assumption by HHC of the
liabilities of CBI (Code sections 361(b)(1)(A) and 357(a)).
3. No gain or loss will be recognized to HHC upon the receipt by HHC
of all of the assets of CBI in exchange for the CBI Exchange
Ratio and cash paid to the CBI shareholders and the assumption by
HHC of the liabilities of CBI and the liabilities to which the
transferred assets are subject (Rev. Rul 57-278, 1957-1 C.B.
124).
4. Gain, if any, will be realized by the CBI shareholders who
receive HHC Common Stock and cash (i.e., the CBI Exchange Ratio)
in exchange for their CBI Common Stock. Such gain will be
recognized, but not in excess, in each instance, of the sum of
such cash received (section 356(a)(1)). If the exchange has the
effect of the distribution of a dividend (determined with the
application of section 318(a)), then the amount of the gain
recognized that is not in excess of the CBI shareholder's ratable
share of undistributed earnings and profits of CBI will be
treated as a dividend (section 356(a)(2)). The determination of
whether the exchange has the effect of the distribution of a
dividend must be made on a shareholder by shareholder basis in
accordance with the principles set forth in Commissioner v.
Clark, 489 U.S. 726 (1989), Rev. Rul. 93-61, 1993-2 C.B. 118, and
United States v. Davis, 397 U.S. 301 (1970). The remainder, if
any, of the gain recognized will be treated as gain from the
exchange of property. No loss will be recognized on the exchange
of CBI Common Stock for the CBI Exchange Ratio (section 356(c)).
5. Where a dissenting CBI shareholder receives solely cash in
exchange for all of his or her CBI Common Stock, such cash will
be treated as having been received by the shareholder as a
distribution in redemption of his or her stock subject to the
provisions and limitations of section 302.
6. In the case of a Small Shareholder of CBI who receives solely
cash in exchange for all of his or her CBI Common Stock, such
cash will be treated as having been received by the shareholder
as a distribution in redemption of his or her stock subject to
the provisions and limitations of section 302.
7. The basis of the HHC Common Stock to be received by certain CBI
shareholders (including any fractional share interests to which
they may be entitled) will be, in each instance, the same as the
basis of the CBI Common Stock surrendered in exchange therefor,
decreased by the amount of cash received, and increased by (i)
the amount that is treated as a dividend, and (ii) any gain
recognized on the exchange
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 6
(not including any portion of the gain that is treated as a
dividend) (Code section 358(a)(1)).
8. The holding period of the HHC Common Stock to be received by
certain CBI shareholders (including any fractional share
interests to which they may be entitled) will include, in each
case, the period during which the CBI Common Stock surrendered in
exchange therefor was held, provided that the CBI Common Stock is
held as a capital asset in the hands of the CBI shareholder on
the Effective Date of the Company Merger (Code section 1223(1)).
9. The basis of the assets of CBI in the hands of HHC will be, in
each instance, the same as the basis of those assets in the hands
of CBI immediately prior to the Company Merger (Code section
362(b)).
10. The holding period of CBI's assets in the hands of HHC will, in
each instance, include the period during which such assets were
held by CBI (Code section 1223(2)).
11. The payment of cash to CBI shareholders in lieu of fractional
shares of HHC Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of
the reorganization exchange and then redeemed by HHC. The cash
payments will be treated as having been received as distributions
in redemption of such stock, subject to the provisions and
limitations of section 302 of the Code (Rev. Rul. 66-365, 1966-2
C.B. 116; Rev. Proc. 77-41, 1977-2 C.B. 574).
B. With respect to the Bank Merger:
1. Provided the proposed Merger of Bank with and into Hancock Bank
qualifies as a statutory merger under applicable Louisiana law,
the acquisition by Hancock Bank of substantially all of the
assets of Bank in exchange for the Bank Exchange Ratio, cash, and
the assumption of liabilities of Bank will constitute a
reorganization within the meaning of Code section 368(a)(1)(A)
and section 368(a)(2)(D).
For purposes of this opinion, "substantially all" means 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 of
Bank held immediately prior to the Bank Merger. HHC, Hancock
Bank, and Bank will each be "a party to a reorganization" within
the meaning of section 368(b) of the Code.
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 7
2. No gain or loss will be recognized by Bank upon the transfer of
substantially all of it assets to Hancock Bank in exchange for
the Bank Exchange Ratio and cash (all of which will be
distributed to the Bank shareholders), and the assumption by
Hancock Bank of the liabilities of Bank (Code sections
361(b)(1)(A) and 357(a)).
3. No gain or loss will be recognized by either HHC or Hancock Bank
on the receipt by Hancock Bank of substantially all of the assets
of Bank in exchange for the Bank Exchange Ratio, cash, and the
assumption by Hancock Bank of the liabilities of Bank and the
liabilities to which the transferred assets are subject (Rev.
Rul. 57-278, 1957-1 C.B. 124).
4. The basis of the assets of Bank in the hands of Hancock Bank will
be, in each instance, the same as the basis of those assets in
the hands of Bank immediately prior to the Bank Merger (Code
section 362(b)).
5. The holding period of Bank's assets in the hands of Hancock Bank
will, in each instance, include the period during which such
assets were held by Bank (Code section 1223(2)).
6. Gain, if any, will be realized by the Bank Minority Shareholders
who receive Common Stock and cash (i.e., the Bank Exchange
Ratio) in exchange for their Bank Common Stock. Such gain will
be recognized, but not in excess, in each instance, of the sum
of such cash received (section 356(a)(1)). If the exchange has
the effect of the distribution of a dividend (determined with the
application of section 318(a)), then the amount of the gain
recognized that is not in excess of the Bank Minority
Shareholder's ratable share of undistributed earnings and profits
of Bank will be treated as a dividend (section 356(a)(2)). The
determination of whether the exchange has the effect of the
distribution of a dividend must be made on a shareholder by
shareholder basis in accordance with the principles set forth in
Commissioner v. Clark, 489 U.S. 726 (1989), Rev. Rul. 93-61,
1993-2 C.B. 118, and United States v. Davis, 397 U.S. 301 (1970).
The remainder, if any, of the gain recognized will be treated as
gain from the exchange of property. No loss will be recognized
on the exchange of Bank Common Stock for the Bank Exchange Ratio
(section 356(c)).
7. Where a dissenting Bank shareholder receives solely cash in
exchange for all of his or her Bank Common Stock, such cash will
be treated as having been received by the
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 8
shareholder as a distribution in redemption of his or her stock
subject to the provisions and limitations of section 302.
8. In the case of a Small Bank Shareholder who receives solely cash
in exchange for all of his or her Bank Common Stock, such cash
will be treated as having been received by the shareholder as a
distribution in redemption of his or her stock subject to the
provisions and limitations of section 302.
9. The basis of the HHC Common Stock to be received by the Bank
Minority Shareholders (including any fractional share interests
to which they may be entitled) will be, in each instance, the
same as the basis of the Bank Common Stock surrendered in
exchange therefor, decreased by the amount of cash received, and
increased by (i) the amount that is treated as a dividend, and
(ii) any gain recognized on the exchange (not including any
portion of the gain that is treated as a dividend) (Code section
358(a)(1)).
10. The holding period of the HHC Common Stock to be received by the
Bank Minority Shareholders (including any fractional share
interests to which they may be entitled) will include, in each
case, the period during which the Bank Common Stock surrendered
in exchange therefor was held, provided that the Bank Common
Stock is held as a capital asset in the hands of the Bank
Minority Shareholder on the Effective Date of the Bank Merger
(Code section 1223(1)).
11. The payment of cash to Bank Minority Shareholders in lieu of
fractional shares of HHC Common Stock will be treated for federal
income tax purposes as if the fractional shares were distributed
as part of the reorganization exchange and then redeemed by HHC.
The cash payments will be treated as having been received as
distributions in redemption of such stock, subject to the
provisions and limitations of section 302 of the Code (Rev. Rul.
66-365, 1966-2 C.B. 116; Rev. Proc. 77-41, 1977-2 C.B. 574).
We have qualified our opinions by reference to the Code, the Treasury
Regulations promulgated thereunder, and existing judicial and administrative
interpretations thereof. In so opining, we have relied upon the foregoing
facts and representations and have reviewed such documents and have considered
such legal matters as we have deemed relevant and sufficient to enable us to
render an informed opinion. While we have not been requested nor have we
undertaken to make independent investigations to verify the representations and
statements described above or set forth in the Certificates attached as
Exhibits "A," "B," and "C," based upon our discussions with
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Board of Directors
Community Bancshares, Inc.
Hancock Holding Company
[Date of Closing]
Page 9
representatives of the parties and our limited review of certain background
material, we believe that it is reasonable for us to rely on such
representations and statements.
Our opinion is limited to the specific opinions expressed above, and no
other opinions are intended nor should they be inferred. An opinion of counsel
has no binding effect upon the Service and no assurances can be given that the
conclusions reached in any opinion will not be contested by the Service, or if
contested, will be sustained by a court.
The opinions we have expressed above are based on the facts and
representations outlined herein being correct in all material respects as of
the dates indicated or at the time of the proposed transactions as the case may
be. In the event that one or more of the facts or representations are
incorrect for any such time, our opinion would likely be substantially
different than that expressed above.
The opinion expressed herein is for the sole benefit of HHC, CBI, Bank,
and Hancock Bank, together with their respective shareholders for their use in
connection with the proposed Mergers, and is not to be used, delivered to or
relied upon by any other party for any other purpose, and may not be
circulated, quoted, or otherwise referred to for any other purpose without our
prior written consent.
Very truly yours,
/s/WATKINS LUDLAM & STENNIS, P.A.
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CERTIFICATE OF HANCOCK HOLDING COMPANY AND
COMMUNITY BANCSHARES, INC.
RELATING TO SECTION 368 OPINION ON THE COMPANY MERGER
This Certificate has been requested by the law firm of Watkins Ludlam &
Stennis, P.A. in connection with the rendering of its opinion as to certain
federal income tax consequences relating to the merger of Community Bancshares,
Inc. ("CBI") with and into Hancock Holding Company ("HHC") (the "Company
Merger") as such transaction is described in that certain Agreement and Plan of
Reorganization by and between CBI, Community State Bank ("Bank") Hancock Bank
of Louisiana ("Hancock Bank") and HHC, dated as of June 19, 1996 (the "Merger
Agreement"). Watkins Ludlam & Stennis, P.A. will rely on the representations
stated hereinafter, as well as on other facts, assumptions, and representations
described in its opinion letter dated [____________, 1996 (date of closing)]
(the "WL&S Tax Opinion") in opining on the federal income tax issues stated
therein. Accordingly, this Certificate is an integral part of the WL&S Tax
Opinion. Unless otherwise noted, all defined or capitalized terms used in this
Certificate have the same meaning ascribed to such terms in the Merger
Agreement or in the WL&S Tax Opinion.
The following representations numbered 1, 7, 8, 11, 12, 13 and 15 are
being made jointly by HHC and CBI in connection with the Company Merger; the
following representations numbered 3, 4, 6, 9, and 14 are being made
individually by HHC; and the following representations numbered 2, 5, 9, and 10
are being made individually by CBI:
The fair market value of the HHC Common Stock and cash (or, where the CBI
shareholder is entitled to receive cash only, the cash) received in the merger
exchange by each CBI shareholder will be approximately equal to the fair market
value of the CBI common stock (the "CBI Common Stock") surrendered in the
exchange.
1. To the best of the knowledge of management of CBI, there is no
plan or intention on the part of any of the shareholders of CBI
who own one percent (1%) or more of the CBI Common Stock, and to
the best of the knowledge of management of CBI, there is no plan
or intention on the part of the remaining shareholders of CBI, to
sell, exchange, or otherwise dispose of, including through any
put arrangement, a number of shares of HHC Common Stock received
in the Company Merger that would reduce the CBI shareholders'
ownership of HHC Common Stock to a number of shares having a
value, as of the date of the Company Merger, of less than fifty
percent (50%) of the value of all of the formerly outstanding
stock of CBI as of the same date. For purposes of this
representation, shares of CBI Common Stock exchanged for cash in
lieu of fractional shares of HHC Common Stock, exchanged for cash
or other property, or surrendered by dissenters will be treated
as outstanding shares of CBI Common Stock on the date of the
Company Merger. Moreover, shares of CBI Common Stock and shares
of HHC Common Stock held by CBI shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Company
Merger will be considered as part of this representation.
EXHIBIT "A" TO TAX OPINION
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2. HHC has no plan or intention to reacquire any of its stock issued
in the Company Merger.
3. HHC has no plan or intention to sell or otherwise dispose of any
of the assets of CBI acquired in the Company Merger, except for
dispositions made in the ordinary course of business, or
transfers described in section 368(a)(2)(C) of the Code.
4. The liabilities of CBI assumed by HHC and the liabilities, if
any, to which the transferred assets of CBI are subject, were
incurred by CBI in the ordinary course of its business.
5. Following the Company Merger, HHC will continue the historic
business of CBI or use a significant portion of CBI's historic
business assets in a business.
6. HHC, CBI, and the shareholders of CBI will pay their respective
expenses, if any, incurred in connection with the Company Merger
(subject to representation 14 below).
7. There is no intercorporate indebtedness existing between HHC and
CBI that was issued, acquired, or that will be settled at a
discount.
8. Neither HHC nor CBI is an investment company as defined in Code
section 368(a)(2)(F)(iii) and (iv).
9. CBI 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.
10. The fair market value of the assets of CBI transferred to HHC
will equal or exceed the sum of the liabilities assumed by HHC,
plus the amount of the liabilities, if any, to which the
transferred assets are subject.
11. The payment of cash in lieu of fractional shares of HHC Common
Stock is solely for the purpose of avoiding the expense and
inconvenience to HHC of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the Company Merger to the CBI
shareholders instead of issuing fractional shares of HHC Common
Stock will not exceed one percent (1%) of the total consideration
that will be issued in the Company Merger to the CBI shareholders
in exchange for their shares of CBI Common Stock. The fractional
share interests of each CBI shareholder will be aggregated, and
no CBI shareholder will receive cash (in payment for fractional
share interests) in an amount equal to or greater than the value
of one (1) full share of HHC Common Stock.
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12. None of the compensation received by any shareholder-employee of
CBI pursuant to any employment, consulting or similar arrangement
is or will be separate consideration for, or allocable to, any of
his shares of CBI Common Stock; none of the shares of HHC Common
Stock received by any shareholder-employee of CBI pursuant to the
Company Merger will be separate consideration for, or allocable
to, any employment agreement; and the compensation paid to any
shareholder-employee of CBI pursuant to any employment,
consulting or similar arrangement is or will be for services
actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services.
13. HHC will pay or assume only those expenses of CBI that are solely
and directly related to the Company Merger in accordance with the
guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
14. The information in the "Background Facts Concerning Corporate
Parties" relative to HHC and CBI as set forth in Part I of the
WL&S Tax Opinion is true and accurate as of the date of this
Certificate.
HHC and CBI hereby certify that the noted officer of each corporation
executing this Certificate has knowledge of the pertinent information set forth
herein and that he has examined the foregoing representations and, to the best
of such officer's knowledge and belief, the representations made are true,
complete and correct as of the effective date, ________________, 1996, of this
Certificate, and he further certifies that he is duly authorized and empowered
to execute and deliver this Certificate.
HANCOCK HOLDING COMPANY
By:
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Title:
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COMMUNITY BANCSHARES, INC.
By:
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Title:
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CERTIFICATE OF COMMUNITY STATE BANK
RELATING TO SECTION 368 OPINION ON THE BANK MERGER
This Certificate has been requested by the law firm of Watkins Ludlam
& Stennis, P.A. in connection with the rendering of its opinion as to certain
federal income tax consequences relating to the merger of Community State Bank
("Bank") with and into Hancock Bank of Louisiana ("Hancock Bank") (the "Bank
Merger") as such transaction is described in that certain Agreement and Plan of
Reorganization by and between Community Bancshares, Inc. ("CBI"), Bank, Hancock
Holding Company ("HHC"), and Hancock Bank dated as of June 19, 1996 (the
"Merger Agreement"). Watkins Ludlam & Stennis, P.A. will rely on the
representations stated hereinafter, as well as on other facts, assumptions, and
representations described in its opinion letter dated [____________________,
1996 (date of closing)] (the "WL&S Tax Opinion") in opining on the federal
income tax issues stated therein. Accordingly, this Certificate is an integral
part of the WL&S Tax Opinion. Unless otherwise noted, all defined or
capitalized terms used in this Certificate have the same meaning ascribed to
such terms in the Merger Agreement or in the WL&S Tax Opinion.
The following representations are being made in connection with the
Bank Merger:
1. The fair market value of the HHC Common Stock and cash (or,
where a Bank shareholder is entitled to receive cash only, the
cash) received in the Bank Merger exchange by each Bank
shareholder (collectively, the "HHC Consideration") will be
approximately equal to the fair market value of the Bank
Common Stock surrendered in the exchange.
2. The aggregate fair market value of the HHC Common Stock
portion of the HHC Consideration will, on the Effective Date
of the Bank Merger, constitute at least fifty-one percent
(51%) of the total fair market value of the HHC Consideration
exchanged in the Bank Merger.
3. To the best of the knowledge of management of Bank, there is
no plan or intention by the shareholders of Bank who own one
percent (1%) or more of the Bank Common Stock, and to the best
of the knowledge of 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 HHC Common Stock received in the Bank Merger that would
collectively reduce the Bank shareholders' ownership of HHC
Common Stock to a number of shares having a value, as of the
date of the Bank Merger, of less than fifty percent (50%) 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 Common Stock exchanged for cash in lieu of fractional
shares of HHC Common Stock, exchanged for cash or other
property, or surrendered by dissenters will be treated as
outstanding shares of Bank Common Stock on the date of the
Bank Merger. Moreover, shares of Bank Common Stock
EXHIBIT "B" TO TAX OPINION
14
and shares of HHC Common Stock held by Bank shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent
to the Bank Merger will be considered as part of this
representation.
4. Bank will transfer and Hancock 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 Bank Merger. For
purposes of this representation, amounts paid by Bank to
dissenters, assets used by Bank to pay its reorganization
expenses, amounts paid by Bank to shareholders who receive
cash or other property in connection with the Bank Merger, and
all redemptions and distributions (except for regular, normal
dividends) made by Bank immediately preceding the Bank Merger,
are included as assets of Bank held immediately prior to the
Bank Merger.
5. The liabilities of Bank assumed by Hancock Bank and the
liabilities, if any, to which the transferred assets of Bank
are subject, were incurred by Bank in the ordinary course of
its business.
6. Bank and the shareholders of Bank will pay their respective
expenses, if any, incurred in connection with the Bank Merger
(subject to representation 14 below).
7. There is no intercorporate indebtedness existing between HHC
and Bank or between Hancock Bank and Bank that was issued,
acquired, or will be settled at a discount.
8. Bank is not an investment company as defined in Code section
368(a)(2)(F)(iii) and (iv).
9. 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
Code.
10. The fair market value of the assets of Bank transferred to
Hancock Bank will equal or exceed the sum of the liabilities
assumed by Hancock Bank, plus the amount of the liabilities,
if any, to which the transferred assets are subject.
11. No stock of Hancock Bank will be issued in the Bank Merger.
12. The payment of cash in lieu of fractional shares of HHC Common
Stock is solely for the purpose of avoiding the expense and
inconvenience to HHC of issuing fractional shares and does not
represent separately bargained-for consideration. The total
cash consideration that will be paid in the Bank Merger to the
Bank shareholders instead of issuing fractional shares of HHC
Common Stock will not exceed one percent (1%) of the total
consideration that will be issued in the Bank Merger to the
Bank shareholders in exchange for their shares of Bank Common
Stock. The fractional share interests of each Bank
shareholder will be aggregated, and no Bank
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shareholder will receive cash (in payment for fractional share
interests) in an amount equal to or greater than the value of
one (1) full share of HHC Common Stock.
13. None of the compensation received by any shareholder-employee
of Bank pursuant to any employment, consulting or similar
arrangement is or will be separate consideration for, or
allocable to, any of his shares of Bank Common Stock; none of
the shares of HHC Common Stock received by any shareholder-
employee of Bank pursuant to the Bank Merger will be separate
consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employee of Bank
pursuant to any employment, consulting or similar arrangement
is or will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
14. Hancock Bank will pay or assume only those expenses of Bank
that are solely and directly related to the Bank Merger in
accordance with the guidelines established in Rev. Rul. 73-54,
1973-1 C.B. 187.
15. The information in the "Background Facts Concerning Corporate
Parties" relative to Bank as set forth in Part I of the WL&S
Tax Opinion is true and accurate as of the date of this
Certificate.
Bank hereby certifies that the officer of the corporation executing
this Certificate has knowledge of the pertinent information set forth herein
and that he has examined the foregoing representations and, to the best of such
officer's knowledge and belief, the representations made are true, complete and
correct as of the date, ______________, 1996, of this Certificate, and he
further certifies that he is duly authorized and empowered to execute and
deliver this Certificate.
COMMUNITY STATE BANK
By:
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Title:
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CERTIFICATE OF HANCOCK HOLDING COMPANY AND
HANCOCK BANK OF LOUISIANA RELATING TO
SECTION 368 OPINION ON THE BANK MERGER
This Certificate has been requested by the law firm of Watkins Ludlam
& Stennis, P.A. in connection with the rendering of its opinion as to certain
federal income tax consequences relating to the merger of Community State Bank
("Bank") with and into Hancock Bank of Louisiana ("Hancock Bank") (the "Bank
Merger") as such transaction is described in that certain Agreement and Plan of
Reorganization by and between Community Bancshares, Inc. ("CBI"), Bank, Hancock
Holding Company ("HHC"), and Hancock Bank dated as of June 19, 1996 (the
"Merger Agreement"). Watkins Ludlam & Stennis, P. A. will rely on the
representations stated hereinafter, as well as on other facts, assumptions, and
representations described in its opinion letter dated [____________________,
1996 (date of closing)] (the "WL&S Tax Opinion") in opining on the federal
income tax issues stated therein. Accordingly, this Certificate is an integral
part of the WL&S Tax Opinion. Unless otherwise noted, all defined or
capitalized terms used in this Certificate have the same meaning ascribed to
such terms in the Merger Agreement or in the WL&S Tax Opinion.
The following representations are being made in connection with the
Bank Merger:
1. Prior to the Bank Merger, HHC will be in control of Hancock
Bank within the meaning of section 368(c)(1) of the Code.
2. Following the Bank Merger, Hancock Bank will not issue
additional shares of its stock that would result in HHC losing
control of Hancock Bank within the meaning of section
368(c)(1) of the Code.
3. HHC has no plan or intention to reacquire any of the HHC
Common Stock issued in the Bank Merger.
4. HHC has no plan or intention to liquidate Hancock Bank; to
merge Hancock Bank with and into another corporation; to sell
or otherwise dispose of the stock of Hancock Bank; or to cause
Hancock Bank to sell or otherwise dispose of any of the assets
of Bank acquired in the Bank Merger, except for dispositions
made in the ordinary course of business or transfers described
in section 368(a)(2)(C) of the Code.
5. Following the Bank Merger, Hancock Bank will continue the
historic business of Bank or use a significant portion of
Bank's historic business assets in a business.
6. HHC, Hancock Bank, Bank, and the shareholders of Bank will pay
their respective expenses, if any, incurred in connection with
the Bank Merger (subject to representation 9 below).
7. There is no intercorporate indebtedness existing between HHC
and Bank or between Hancock Bank and Bank that was issued,
acquired, or will be settled at a discount.
EXHIBIT C TO TAX OPINION
17
8. Neither HHC nor Hancock Bank is an investment company as
defined in Code section 368(a)(2)(F)(iii) and (iv).
9. Hancock Bank will pay or assume only those expenses of Bank
that are solely and directly related to the Bank Merger in
accordance with the guidelines established in Rev. Rul. 73-54,
1973-1 C.B. 187.
10. No stock of Hancock Bank will be issued in the Bank Merger.
11. The payment of cash in lieu of fractional shares of HHC Common
Stock is solely for the purpose of avoiding the expense and
inconvenience to HHC of issuing fractional shares and does not
represent separately bargained-for consideration. The total
cash consideration that will be paid in the Bank Merger to
certain of the Bank shareholders instead of issuing fractional
shares of HHC Common Stock will not exceed one percent (1%) of
the total consideration that will be issued in the Bank Merger
to the Bank shareholders in exchange for their shares of Bank
Common Stock. The fractional share interests of each Bank
shareholder of record will be aggregated, and no Bank
shareholder, will receive cash (in payment of fractional share
interests) in an amount equal to or greater than the value of
one (1) full share of HHC Common Stock.
12. The fair market value of the HHC Common Stock portion of the
total consideration paid by HHC in the Bank Merger will, on
the Effective Date of the Bank Merger, constitute at least
fifty-one percent (51%) of the fair market value of the total
consideration paid by HHC in the Bank Merger.
13. The information in the "Background Facts Concerning Corporate
Parties" relative to HHC and Hancock Bank as set forth in Part
I of the WL&S Tax Opinion is true and accurate as of the date
of this Certificate.
HHC and Hancock Bank hereby certify that the officer of the
corporation executing this Certificate has knowledge of the pertinent
information set forth herein and that he has examined the foregoing
representations and, to the best of such officer's knowledge and belief, the
representations made are true, complete and correct as of the date,
________________, 1996, of this Certificate, and he further certifies that he
is duly authorized and empowered to execute and deliver this Certificate.
HANCOCK HOLDING COMPANY
By:
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Title:
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HANCOCK BANK OF LOUISIANA
By:
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Title:
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