December 28, 1998
Board of Directors
First Merchants Corporation
200 East Jackson Street
Muncie, IN 47305-2814
Board of Directors
Jay Financial Corporation
112 West Main Street
Portland, IN 47371
Re: Merger of Jay Financial Corporation with and into First Merchants
Corporation
Ladies and Gentlemen:
We have acted as special counsel to First Merchants Corporation, an Indiana
corporation registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended ("First Merchants"), in connection with the proposed
merger of Jay Financial Corporation, an Indiana corporation registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended ("Jay
Financial"), with and into First Merchants, pursuant to the terms of the
Agreement of Reorganization and Merger between First Merchants and Jay
Financial, dated August 20, 1998 (the "Merger Agreement"), as described in the
Registration Statement on Form S-4 to be filed by First Merchants with the
Securities and Exchange Commission on or about December 28, 1998 (the
"Registration Statement").
This opinion is being rendered as required by Section 9 of the Merger
Agreement. All capitalized terms herein, unless otherwise specified, have the
meaning assigned to them in the Registration Statement.
In connection with this opinion, we have relied on and have examined, and
we are familiar with originals or copies of, certified or otherwise identified
to our satisfaction, (i) the Merger Agreement, (ii) the Registration Statement,
and (iii) such other documents as we have deemed necessary or appropriate in
order to enable us to render the opinions 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. This opinion is subject to the receipt by us prior to the effective time
of the merger of Jay Financial with and into First Merchants (the "Merger") of
certain written representations and covenants of Jay Financial and First
Merchants, the accuracy and truthfulness of which we shall assume and rely upon
without investigation. 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 and such other authorities as we have
considered relevant.
Ex. 8-1
First Merchants Corporation
Jay Financial Corporation
December 28, 1998
Page 2
Based upon and subject to the foregoing, provided that the merger of Jay
Financial with and into First Merchants qualifies as a statutory merger under
applicable state law, and assuming that (i) after the transaction, First
Merchants, as successor of Jay Financial, will hold substantially all of its
assets, and that (ii) in the transaction, the Jay Financial shareholders will
exchange an amount of stock constituting majority control of Jay Financial
solely for First Merchants common stock, we are of the opinion that the Merger
will, under current law, constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code and that Jay Financial and First Merchants will
each be a party to the reorganization within the meaning of Section 368(b) of
the Code. As a reorganization under Section 368(a)(1)(A) of the Code, the Merger
will have the following federal income tax consequences for Jay Financial
shareholders, Jay Financial, and First Merchants:
1. No gain or loss will be recognized by Jay Financial shareholders who
exchange all of their Jay Financial common stock for First Merchants common
stock pursuant to the Merger, except to the extent of gain or loss attributable
to any cash received in lieu of receipt of a fractional share of First Merchants
common stock.
2. The basis of First Merchants common stock (including deemed fractional
share interests) received by Jay Financial shareholders who exchange all of
their Jay Financial common stock for First Merchants common stock will be the
same as the basis of the Jay Financial common stock surrendered in exchange
therefor.
3. The holding period of the First Merchants common stock received by the
Jay Financial shareholders (including deemed fractional share interests) who
exchange all of their Jay Financial common stock for First Merchants common
stock will include the period during which the Jay Financial common stock was
held, provided the Jay Financial common stock was held as a capital asset on the
date of the exchange.
4. Where a cash payment is received by a Jay Financial shareholder in
lieu of fractional shares of First Merchants common stock, the cash payment will
be treated as a distribution in redemption of the deemed fractional share
interest by First Merchants, subject to the provisions and limitations of
Section 302 of the Code. Where such exchange qualifies under Section 302(a) of
the Code, such shareholder will recognize a capital gain or loss provided that
the Jay Financial common stock was held as a capital asset on the date of the
Merger.
5. Any Jay Financial shareholder who perfects dissenter's rights and
receives solely cash in exchange for such shareholder's Jay Financial common
stock shall be treated as having received such cash as a distribution in
redemption of the Jay Financial common stock subject to the provisions and
limitations of Section 302 of the Code. If, as a result of such distribution,
such Jay Financial shareholder owns no First Merchants common stock, either
directly or through the application of the constructive ownership rules of
Section 318(a) of the Code, the redemption will be a complete termination of
interest within the meaning of Section 302(b)(3) of the Code and the cash will
be treated as a distribution in full payment and exchange for the Jay Financial
Ex. 8-2
First Merchants Corporation
Jay Financial Corporation
December 28, 1998
Page 3
common stock as provided in Section 302(a) of the Code. Under Section 1001 of
the Code, gain or loss (subject to any applicable limitations of the Code) will
be realized and recognized by such Jay Financial shareholder in an amount equal
to the difference between the redemption price and the adjusted basis of the Jay
Financial common stock surrendered in exchange therefor.
6. No gain or loss will be recognized by Jay Financial or First Merchants
in connection with the transaction.
7. The basis of the assets of Jay Financial acquired by First Merchants
in the Merger will be the same as the basis of such assets in the hands of Jay
Financial immediately prior to the Merger.
The opinions expressed herein represent our conclusions as to the
application of existing federal income tax law to the facts as presented to us,
and we give no assurance that changes in such law or any interpretation thereof
will not affect the opinions expressed by us. Moreover, there can be no
assurance that these opinions will not be challenged by the Internal Revenue
Service or that a court considering the issues will not hold contrary to such
opinions. We express no opinion on the treatment of this transaction under the
income tax laws of any state or other taxing jurisdictions. We assume no
obligation to advise of any changes concerning the above, whether or not deemed
material, which may hereafter come or be brought to our attention.
Except as set forth above, we express no opinion as to the tax consequences
to any party, whether federal, state, local or foreign, of the Merger or of any
transactions related to the Merger or contemplated by the Merger Agreement. This
opinion is addressed to you and is being furnished to you solely for your use in
connection with the transaction that is the subject of the Merger Agreement. We
assume no professional responsibility to any other person or entity.
Accordingly, the opinions expressed herein are not to be utilized or quoted by,
delivered or disclosed to, in whole or in part, any other person, corporation,
entity or governmental authority, or for any other purpose, without the prior
written consent of this firm. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement.
Very truly yours,
BINGHAM SUMMERS WELSH & SPILMAN
Ex. 8-3