EXHIBIT 8
OPINION OF WATKINS LUDLAM & STENNIS, P.A. REGARDING TAX MATTERS
FORM OF TAX OPINION TO BE GIVEN AT CLOSING
The tax opinion will contain the following individual
opinions (or opinions substantially similar thereto):
, 1997
Board of Directors Board of Trustees
Stoneville Insurance Company Delta Agricultural and
633 North State Street, Suite 200 Industial Trust
Jackson, Mississippi 39202 833 Washington Avenue
Greenville, Mississippi 38704-
5037
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 Delta Agricultural and
Industrial Trust, a Mississippi workers' compensation self
insurance trust (the "Trust"), and Stoneville Insurance Company,
a Mississippi corporation (the "Company"), in connection with
certain federal income tax matters relating to the transactions
described in the Plan and Agreement of Reorganization and
Conversion of Delta Agricultural and Industrial Trust (the
"Plan"), dated as of March 20, 1997. This opinion is furnished
to you pursuant to Section 11(ii) of the Plan. Except as
otherwise defined herein, all capitalized terms herein have the
meanings set forth in the Plan.
In connection with this opinion, we have examined and are
familiar with originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement on
Form S-4, the Plan 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 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 have relied upon certain written
representations and covenants of the parties to the Plan set
forth in the Certificates which are attached hereto as Exhibits
"A" and "B." 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 PLAN OF REORGANIZATION
AND CONVERSION
The proposed Plan will be structured in accordance with the
laws of the State of Mississippi, the statements and
representations of the parties to the transaction, and the
following descriptions:
(1) Former Members of the Trust may dissent from the Plan upon
perfection of dissenters' rights. Former Members as a group
holding not more than twenty percent (20%) of the Trust
Units may perfect dissenters' rights.
(2) On the Effective Date, the following events shall be deemed
to have occurred simultaneously.
(a) The Trust will transfer substantially all its
assets, less an amount sufficient to pay the Trust's
remaining costs and expenses including amounts required
to consummate the Reinsurance Agreement and amounts due
to dissenters, to the Company in exchange for Company
Stock. After this exchange, the Trust will own all the
issued and outstanding shares of stock of the Company.
(b) The Trust will distribute to Former Members
perfecting dissenters' rights, if any, four dollars
($4.00) in cash in redemption of each Trust Unit held
by such Former Members up to an aggregate amount
payable to all Former Members perfecting dissenters'
rights not to exceed two hundred thousand dollars
($200,000.00).
(c) The Trust will be liquidated and will distribute to
Former Members all the Company stock at one (1) share of Company
Stock for each Trust Unit allocable to such Former Member at
December 31, 1996, except for those Trust Units with respect to
which rights of dissent have been exercised.
(d) In the event that Former Members as a group
perfect dissenters' rights resulting in an obligation
to redeem Trust Units with a value in excess of two
hundred thousand dollars ($200,000.00) at the
redemption rate of four dollars ($4.00) for each Trust
Unit, the excess amount due to such Former Members
perfecting dissenters' rights will be paid to such
Former Members by the Company. Such payments, if any,
paid by the Company to such Former Members perfecting
dissenters rights shall be paid from operating funds of
the Company and not out of assets transferred to the
Company from the Trust pursuant to the Plan.
(3) Subsequent to the liquidation of the Trust, any amounts
remaining with the Trust not needed to pay expenses or
dissenters, if any, shall be contributed to the Company as an
additional contribution to capital.
(4) After the reorganization and conversion, the Company will
continue the historical business of the Trust in a substantially
unchanged manner.
II. DISCUSSION OF APPLICABLE REORGANIZATION PROVISIONS
The parties intend that the Plan will satisfy the
requirements for nonrecognition (i.e., treatment as a tax free
reorganization) under section 368(a)(1)(D) of the Code. This
Code section describes a non-divisive or acquisitive Type "D"
reorganization under which the transferor corporation (the Trust)
transfers substantially all of its assets to a controlled
corporation (the Company), the stock of which the transferor
corporation distributes to its shareholders in pursuance to the
plan of reorganization. The Code describes a Type "D"
reoganization involving the transfer of assets to a controlled
corporation as follows:
1. A transfer by a corporation, of all or part of its assets to
another corporation if immediately after the transfer the
transferor, or one or more of its shareholders (including persons
who were shareholders immediately before the transfer) or any
combination thereof, is in control of the corporation to which
the assets are transferred(1); but only if, in pursuance of the
plan, stock or securities of the corporation to which the assets
are transferred are distributed in a transaction which qualifies
under section 354 (2) . . . or 356, and
2. In effect, a complete liquidation of the transferor
corporation. (Although Code section 354(b) does not explicitly
require a complete liquidation of the transferor, the requisite
distribution of all of the transferor's properties will have the
effect of a complete liquidation).
In addition to the requirements under the Code which have
been generally described above, nonrecognition for the Plan is
subject to several other nonstatutory rules that have been
established through case law and Treasury Regulations. These
requirements involve continuity of proprietary interest,
continuity of business enterprise, and the existence of a valid
business purpose for the transaction. The judicially developed
step transaction doctrine, wherein a series of formally separate
steps are considered together as component parts of an overall
plan, must also be considered when evaluating whether a
transaction, in substance, qualifies as a valid reorganization
under Code section 368(a)(1)(D).
III. OPINION
In reliance upon the foregoing facts and representations of
the parties to the Plan 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 Plan will be as follows:
1. The acquisition by the Company of substantially all the
assets of the Trust in exchange for Company Stock and the
liquidation of the Trust and distribution of the Company
Stock to the Former Members will constitute a reorganization
within the meaning of Code section 368(a)(1)(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 maket value
of the gross assets of the Trust held immediately prior
to the reorganization and conversion (Rev. Proc. 77-37,
1977-2 C.B. 568, 569 section 3.01). The Trust and the
Company 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 by the Trust upon the
transfer of substantially all of its assets to the Company
in exchange for the Company Stock (all of which will be
distributed to the Former Members) (Code section 361(a).
3. No gain or loss will be recognized by the Company on the
receipt by the Company of substantially all of the assets of
the Trust in exchange for the Company Stock (Code section
1032(a)).
4. No gain or loss will be recognized by the Former Members on
the receipt of Company Stock solely in exchange for their
Trust Units (Code section 354(a)(1)).
5. Where a dissenting Former Member receives solely cash in
exchange for all of his or her Trust Units, such cash will
be treated as having been received by the Former Member as a
distribution in redemption of his or her Trust Units subject
to the provisions and limitations of Code section 302.
6. The basis of the Company Stock to be received by the Former
Members will be the same as the Former Members' basis in the
Trust Units allocable to such Former Members (Code section
358(a)(1)).
7. The holding period of the Company Stock received by the
Former Members will include, in each instance, the period
during which the Former Members held an interest in the
equity of the Trust as determined under the Plan, provided
such Trust equity constituted a capital asset on the date of
the exchange (Code section 1223(1)).
8. The basis of the assets of the Trust in the hands of the
Company will be the same as the basis of those assets in the
hands of the Trust immediately prior to the transfer (Code
section 362(b)).
9. The holding period of the assets of the Trust in the hands
of the Company will include the period during which such
assets were held by the Trust (Code section 1223(2)).
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" and "B," based upon our discussions with
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 the
Trust and the Company, together with the Former Members for their
use in connection with the proposed Plan of Reorganization and
Conversion, 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,
WATKINS LUDLAM & STENNIS, P.A.
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(1) The determination of whether a corporation is "controlled"
for this purpose is made using the 50% ownership test of section
304(c) as the "control" threshold, as mandated by Code section
368(a)(2)(H).
(2) Code section 354 shall not apply to an exchange in pursuance
to a Type "D" reorganization unless (1) the corporation to which
the assets are transferred acquires substantially all of the
assets of the transferor of such assets; and (2) the stock or
other property received by the transferor corporation, as well as
the other properties of such transferor, are distributed under
the plan of reorganization, as mandated by Code section
354(b)(1).
CERTIFICATE OF DELTA AGRICULTURAL AND INDUSTRIAL TRUST
RELATING TO SECTION 368 OPINION ON THE PLAN OF
REORGANIZATION AND CONVERSION
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 conversion of Delta Agricultural and Industrial
Trust (the "Trust") into Stoneville Insurance Company (the
"Company") (the "Conversion") as such transaction is described in
that certain Plan and Agreement of Reorganization and Conversion
of Delta Agricultural and Industrial Trust dated as of March 20,
1997 (the "Plan"). 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 , 1997 (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 Plan or in the WL&S
Tax Opinion.
The following representations are being made in connection
with the Plan:
1. The Trust is classified as a corporation for federal income
tax purposes.
2. The Trust will distribute the Company Stock it receives in
the transaction in pursuance to the Plan.
3. The fair market value of the Company Stock and other
consideration received by each Former Member will be
approximately equal to the fair market value of the Trust
Units surrendered in the exchange.
4. There is no plan or intention by the Former Members who own
one percent (1%) or more of the Trust Units, and to the best
of the knowledge of the management of the Trust, there is no
plan or intention on the part of the nondissenting Former
Members to sell, exchange, or otherwise dispose of a number
of shares of Company Stock received in the transaction that
would reduce the Former Members' ownership of Company Stock
to a number of shares having a value, as of the date of the
transaction, of less than fifty percent (50%) of the value
of all of the formerly outstanding Trust Units of the Trust
as of the same date. For purposes of this representation,
the Trust Units exchanged for cash, surrendered by
dissenters, will be treated as outstanding Trust Units on
the date of the transaction. Moreover, Trust Units and
Company Stock held by Former Members and otherwise sold,
redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this
representation.
5. The Company will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets
held by the Trust immediately prior to the transaction. For
purposes of this representation, amounts paid by the Trust
to dissenters, amounts paid by the Trust to Former Members
who receive cash or other property, amounts used by the
Trust to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal
dividends) made by the Trust immediately preceding the
transfer will be included as assets of the Trust held
immediately prior to the transaction.
6. After the transaction, the Former Members of the Trust will
own at least eighty percent (80%) of the issued and
outstanding Company Stock.
7. The liabilities of the Trust assumed by the Company, if any,
plus the liabilities, if any, to which the transferred
assets are subject were incurred by the Trust in the
ordinary course of its business and are associated with the
assets transferred.
8. The Trust, the Company and the Former Members will pay their
respective expenses, if any, incurred in connection with the
transaction.
9. There is no intercorporate indebtedness existing between the
Trust and the Company that was issued, acquired, or will be
settled at a discount.
10. The Trust is not an investment company as defined in Code
section 368(a)(2)(F)(iii) and (iv).
11. The fair market value of the assets of the Trust transferred
to the Company will equal or exceed the sum of the
liabilities assumed by the Company, if any, plus the amount
of liabilities, if any, to which the transferred assets are
subject.
12. The total adjusted basis of the assets of the Trust
transferred to the Company will equal or exceed the sum of
the liabilities to be assumed by the Company, if any, plus
the amount of liabilities, if any, to which the transferred
assets are subject.
13. The Trust is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Code section
368(a)(3)(A).
The Trust hereby certifies that the officer of the Trust
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, , 1997, of this
Certificate, and he further certifies that he is duly authorized
and empowered to execute and deliver this Certificate.
DELTA AGRICULTURAL AND
INDUSTRIAL TRUST
By:
Title:
CERTIFICATE OF STONEVILLE INSURANCE COMPANY
RELATING TO SECTION 368 OPINION ON THE PLAN OF
REORGANIZATION AND CONVERSION
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 conversion of Delta Agricultural and Industrial
Trust (the "Trust") into Stoneville Insurance Company (the
"Company") (the "Conversion") as such transaction is described in
that certain Plan and Agreement of Reorganization and Conversion
of Delta Agricultural and Industrial Trust dated as of March 20,
1997 (the "Plan"). 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 , 1997 (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 Plan or in the WL&S Tax Opinion.
The following representations are being made in connection
with the Plan:
1. The Company does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly,
any equity of the Trust.
2. The fair market value of the Company Stock and other
consideration received by each Former Member will be
approximately equal to the fair market value of the Trust
Units surrendered in the exchange.
3. There is no plan or intention by the Former Members who own
one percent (1%) or more of the Trust Units, and to the best
of the knowledge of the management of the Company, there is
no plan or intention on the part of the nondissenting Former
Members to sell, exchange, or otherwise dispose of a number
of shares of Company Stock received in the transaction that
would reduce the Former Members' ownership of Company Stock
to a number of shares having a value, as of the date of the
transaction, of less than fifty percent (50%) of the value
of all of the formerly outstanding Trust Units of the Trust
as of the same date. For purposes of this representation,
the Trust Units exchanged for cash, surrendered by
dissenters, will be treated as outstanding Trust Units on
the date of the transaction. Moreover, Trust Units and
Company Stock held by Former Members and otherwise sold,
redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this
representation.
4. The Company will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets
held by the Trust immediately prior to the transaction. For
purposes of this representation, amounts paid by the Trust
to dissenters, amounts paid by the Trust to Former Members
who receive cash or other property, amounts used by the
Trust to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal
dividends) made by the Trust immediately preceding the
transfer will be included as assets of the Trust held
immediately prior to the transaction.
5. After the transaction, the Former Members of the Trust will
own at least eighty percent (80%) of the issued and
outstanding Company Stock.
6. The Company has no plan or intention to reacquire any of its
stock issued in the Conversion.
7. The Company has no plan or intention to sell or otherwise
dispose of any of the assets of the Trust acquired in the
transaction, except for dispostions made in the ordinary
course of business.
8. The liabilities of the Trust assumed by the Company, if any,
plus the liabilities, if any, to which the transferred
assets are subject were incurred by the Trust in the
ordinary course of its business and are associated with the
assets transferred.
9. Following the Conversion, the Company will continue the
historic business of the Trust or use a significant portion
of the Trust's historic business assets in a business.
10. At the time of the Conversion, the Company will not have
outstanding any warrants, options, convertible securities,
or any other type of right pursuant to which any person
could acquire Company Stock that, if exercised or converted,
would affect the Former Members' acquisition or retention of
at least eighty percent (80%) of the issued and outstanding
Company Stock.
11. The Company, the Trust, and the Former Members will pay
their respective expenses, if any, incurred in connection
with the transaction.
12. There is no intercorporate indebtedness existing between the
Trust and the Company that was issued, acquired, or will be
settled at a discount.
13. The Company is not an investment company as defined in Code
section 368(a)(2)(F)(iii) and (iv).
14. The fair market value of the assets of the Trust transferred
to the Company will equal or exceed the sum of the
liabilities assumed by the Company, if any, plus the amount
of liabilities, if any, to which the transferred assets are
subject.
15. The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Code section
368(a)(3)(A).
The Company hereby certifies that the officer of the Company
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, , 1997, of this
Certificate, and he further certifies that he is duly authorized
and empowered to execute and deliver this Certificate.
STONEVILLE INSURANCE COMPANY
By:
Title: