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EXHIBIT 8.1
ALSTON&BIRD LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-4777
www.alston.com
Pinney L. Allen Direct Dial: 404-881-7000
May 11, 1999
LHS Group, Inc.
Six Concourse Parkway
Suite 2700
Atlanta, Georgia 30328
Priority Call Management, Inc.
110 Fordham Road
Wilmington, Massachusetts 01887
Re: Proposed Merger Involving LHS Group Inc. and Priority Call Management,
Inc.
Ladies and Gentlemen:
We have served as counsel to LHS Group Inc., a corporation organized
under the laws of the State of Delaware ("LHS"), in connection with the
reorganization involving LHS, Priority Call Management, Inc., a corporation
organized under the laws of the Commonwealth of Massachusetts ("PCM") and
Patriot Acquisition Corp., a corporation organized under the laws of the
Commonwealth of Massachusetts and a wholly owned subsidiary of LHS ("Sub"),
pursuant to the Agreement and Plan of Merger by and among LHS, Sub and PCM,
dated as of April 20, 1999 (the "Agreement"), which sets forth the terms and
conditions of the acquisition of PCM by LHS pursuant to the merger of Sub with
and into PCM (the "Merger"). In our capacity as counsel to LHS, our opinion has
been requested with respect to certain of the federal income tax consequences
of the Merger.
Pursuant to the Merger, and as more fully described in the Agreement,
at the Effective Time, each share of PCM Capital Stock issued and outstanding
at the Effective Time shall be converted into a certain number of shares of LHS
Common Stock as computed using certain exchange ratios set forth in the
Agreement. As more fully described in the Agreement, to ensure funding for
indemnification obligations of PCM for
1211 East Morehead Street 3605 Glenwood Avenue, Suite 310 601 Pennsylvania Avenue, N.W.
P. O. Drawer 34009 P. O. Drawer 31107 North Building, 11th Floor
Charlotte, NC 28234-4009 Raleigh, NC 27622-1107 Washington, DC 20004-2601
704-331-6000 919-420-2200 202-756-3300
Fax: 704-334-2014 Fax: 919-881-3175 Fax: 202-756-3333
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LHS Group Inc.
Priority Call Management, Inc.
Page 2
breaches of certain representations and warranties, five percent (5%) of the
LHS Common Stock to be issued in the Merger shall be placed in escrow (the
"Escrow Shares"). As a result of the Merger, stockholders of PCM shall become
stockholders of LHS, and PCM shall continue to conduct its business and
operations as a wholly owned subsidiary of LHS. All terms used herein without
definition shall have the respective meanings specified in the Agreement, and
unless otherwise specified, all section references herein are to the Internal
Revenue Code of 1986, as amended (the "Code").
In rendering the opinions expressed herein, we have examined such
documents as we deemed appropriate, including the Agreement and the
Registration Statement on Form S-4, filed as of the date hereof with the
Securities and Exchange Commission under the Securities Act of 1933, including
the Proxy Statement/Prospectus for a special meeting of stockholders of PCM
(the "Registration Statement"). In addition, we have assumed, that the
Agreement and the Registration Statement accurately and completely describe the
Merger and that the Merger will be consummated in accordance with the Agreement
and the Registration Statement.
In rendering the opinions expressed herein, we have relied, with the
consent of LHS and PCM, upon the accuracy and completeness of the factual
statements and factual representations (which factual statements and factual
representations we have neither investigated nor verified) contained in the
certificates of LHS and PCM to us, dated as of the date hereof (together, the
"Certificates"), which we have assumed are correct, complete and accurate as of
the date hereof and will be correct, complete and accurate as of the Effective
Time.
Based on the foregoing, we are of the opinion that, under presently
applicable federal income tax law:
(1) The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, and each of LHS, PCM and Sub will be a
party to the reorganization within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by LHS, PCM, or Sub as a
result of the Merger.
(3) No gain or loss will be recognized by holders of PCM Capital
Stock upon the exchange in the Merger of all of their shares of PCM Capital
Stock solely for shares of LHS Common Stock plus cash in lieu of fractional
shares (except to the extent of gain recognized with respect to the receipt of
cash in lieu of fractional shares).
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LHS Group Inc.
Priority Call Management, Inc.
Page 3
(4) The aggregate tax basis of the LHS Common Stock received by
holders of PCM Capital Stock who exchange all of their shares of PCM Capital
Stock solely for LHS Common Stock plus cash in lieu of fractional shares in the
Merger will be the same as the aggregate tax basis of the PCM Capital Stock
surrendered in exchange therefor, as decreased by the tax basis allocated to
any fractional share interest exchanged for cash.
(5) The holding period of the LHS Common Stock received by
holders who exchange their PCM Capital Stock for LHS Common Stock in the Merger
will include the holding period of the PCM Capital Stock surrendered in
exchange therefor, provided that such PCM Capital Stock is held as a capital
asset at the Effective Time.
(6) The payment of cash to holders of PCM Capital Stock in lieu
of fractional share interests of LHS will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the exchange
and then were redeemed by LHS. These cash payments will be treated as having
been received as distributions in full payment in exchange for the LHS Common
Stock redeemed, as provided in Section 302(a) of the Code. A PCM stockholder
who receives such cash will recognize gain or loss equal to the difference
between the amount of such cash and the tax basis allocated to the fractional
share interest exchanged therefor. Such gain or loss will be capital gain or
loss if such stockholder's PCM Capital Stock is held as a capital asset at the
Effective Time and will be long-term capital gain or loss if such shares of PCM
Capital Stock have been held for more than one year at the Effective Time.
(7) Where solely cash is received by a holder of PCM Capital
Stock in exchange for PCM Capital Stock pursuant to the exercise of dissenters'
rights, such cash will be treated as having been received in redemption of such
holder's PCM Capital Stock, subject to the provisions and limitations of
Section 302 of the Code.
We have participated in the preparation of the materials under the
caption "Certain Federal Income Tax Consequences of the Merger" contained in
the Proxy Statement, and we are of the opinion that the federal income tax
treatment described therein is accurate in all material respects. We hereby
consent to the filing of this opinion as an exhibit to the Proxy Statement and
to the references and discussion of this opinion and the references to the firm
contained therein.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time
with retroactive effect. The federal income tax consequences described herein
may not apply to certain stockholders of PCM with special situations,
including, without limitation, stockholders who hold their PCM Capital Stock
other than as a capital asset, who received their PCM Capital Stock upon the
exercise of employee stock options or otherwise as compensation, who hold their
PCM Capital Stock as part of a "straddle" or "conversion transaction" for
federal income tax purposes, or are foreign persons, insurance companies, or
securities dealers.
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LHS Group Inc.
Priority Call Management, Inc.
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In addition, our opinions are based solely on the documents that we
have examined and the factual statements and factual representations set out in
the Certificates which we have assumed are true on the date hereof and will be
true at the Effective Time. Our opinions cannot be relied upon if any of the
facts pertinent to the federal income tax treatment of the Merger stated in the
Agreements or any of the factual statements or factual representations set out
in the Certificates is, or becomes as of the Effective Time, inaccurate in any
material respect.
Our opinions are limited to the tax matters specifically covered
thereby, and we have not been asked to address, nor have we addressed, any
other tax consequences of the Merger, including for example any issues related
to intercompany transactions, changes in accounting methods resulting from the
Merger, the conversion of options, or the consequences of the Merger under
state, local or foreign law.
These opinions are provided by Alston & Bird LLP solely for the
benefit and use of LHS, PCM and the stockholders of PCM. No other party or
person is entitled to rely on the opinions.
Very truly yours,
ALSTON & BIRD LLP
By: /s/ Pinney L. Allen
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Pinney L. Allen, Partner