WILLIAMS LAW GROUP, P.A.
2503 W. Gardner Ct.
Tampa FL 33611
October 6, 2000
First Irving Strategic Group, Inc.
Tampa, FL
Re: Federal Income Tax Consequences of Merger of PC Universe, Inc. and First
Irving Strategic Group, Inc.
Gentlemen:
As special counsel to First Irving Strategic Group, Inc., a Florida
corporation ("First Irving Strategic Group"), we have been asked to advise you
concerning the anticipated federal income tax consequences of the merger
pursuant to the Agreement and Plan of Merger (the "Merger Agreement") of PC
Universe into First Irving Strategic Group in exchange for shares of First
Irving Strategic Group's Common Stock (the "Common Stock"). The transfer of the
assets and liabilities in exchange for the Common Stock (the "Merger") will be
carried out pursuant to the Merger Agreement, as described in the Registration
Statement on Form S-4, as amended, filed by First Irving Strategic Group, File
No. 333-48000 (the "Registration Statement"). Unless otherwise specified, all
capitalized terms have the meaning assigned to them in the Registration
Statement.
In connection with the preparation of this opinion, we have examined such
documents concerning the Merger, including the Merger Agreement, as we deemed
necessary (the "Examined Documents"). In our review and examination we have
assumed, without independent investigation or examination, (a) the genuineness
of all signatures, the authenticity of all documents submitted to us, the
conformity to all original documents of all documents submitted to us as
certified or photostatic copies, and the authenticity of all such originals of
such latter documents; (b) the due execution, completion, acknowledgment and
public filing, where applicable, of any of the Examined Documents, as indicated
in such documents, and the delivery of all documents and instruments and the
consideration recited in such documents by all parties; (c) that all parties
have the necessary power and authority, corporate or otherwise, to execute and
deliver the Examined Documents, and documents attendant therewith, to which they
are a party and to perform their obligations under such documents, and that all
such actions have been duly and validly authorized by all necessary proceedings;
(d) that the Examined Documents and the documents attendant therewith,
constitute legal, valid and binding obligations to each party thereto
enforceable against each party in accordance with their respective terms, except
(i) as enforcement of such documents may be limited by applicable
bankruptcy, insolvency, reorganization, receivership,
moratorium, and other similar laws, both state and federal,
affecting the enforcement of creditors' rights or remedies in
general, from time to time in effect;
(ii) subject to general principles of equity, regardless of
whether such enforceability is considered in a proceeding
in equity or at law and the availability of equitable
remedies; an
(iii) subject to implied covenants of good faith, fair dealing and
commercially reasonable conduct, judicial discretion and
instances of multiple or equitable remedies and applicable
public policies and laws.
In rendering our opinion, we have made the following factual assumptions:
1. The factual representations and warranties of the parties contained in
the Merger Agreement, which we may deem material to our opinion, are all true in
all respects as of the date of our opinion, except as may otherwise be set forth
in or contemplated by, any of the Examined Documents.
2. The factual representations and warranties, other than those matters
about which we specifically opine, of the parties contained in the Examined
Documents, which we may deem material to our opinion, are all true in all
respects as of the date hereof, except as may be otherwise set forth in or
contemplated by the Examined Documents.
3. The transaction contemplated by the Examined Documents and all the
transactions related thereto or contemplated thereby shall be consummated in
accordance with the terms and conditions of such documents, except as may be set
forth in and or contemplated by any closing document delivered by the parties at
the closing of the Merger.
4. Each document derived from a public authority is accurate, complete and
authentic and all official records (including their proper indexing and filing)
are accurate and complete.
5. There are no agreements or understandings among the parties, written or
oral, and there is no usage of trade or course of prior dealings among any of
the foregoing which would, in any case, define, supplement or qualify the terms
of the Examined Documents.
LIMITATIONS ON OUR OPINION
The following limitations shall apply with respect to our opinion:
1) Our opinion is based upon the various provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder and the interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters as of the
date hereof, all of which are subject to change either prospectively or
retroactively. No opinion is rendered with respect to the effect, if
any, of any pending or future legislation, judicial or administrative
regulations or rulings, which may have a bearing on any of the
foregoing. We have not been asked to render an opinion with respect to
any federal income tax matters except those set forth below. Likewise,
we have not been asked to render any opinion with respect to any
foreign, local or state income tax consequences of the Merger. By
rendering our opinion, we undertake no responsibility to advise you of
any new developments in the application or interpretation of the
federal income tax laws. Accordingly, our opinion should not be
construed as applying in any manner to any aspect of the transactions
contemplated by the Examined Documents, other than as set forth below.
2) Our opinion does not consider the tax consequences of other
transactions effected prior to or after the Merger (whether or not such
transactions are consummated in connection with the Merger).
3) We have not discussed this opinion with representatives of the Internal
Revenue Service, and it is not binding on the Service. The Service is
not bound by and may not concur in the conclusions we have reached.
4) We have addressed this opinion to most of the typical shareholders of
companies such as PC Universe. However, some special categories of
shareholders listed below will have special tax considerations that
need to be addressed by their individual tax advisors:
o Dealers in securities
o Banks
o Insurance companies
o Foreign persons
o Tax-exempt entities
o Taxpayers holding stock as part of a conversion, straddle, hedge or
other risk reduction transaction
o Taxpayers who acquired their shares in connection with stock option or
stock purchase plans or in other compensatory transactions
5) We also do not address the tax consequences of the merger under
foreign, state or local tax laws.
6) Neither First Irving Strategic Group nor PC Universe has requested, or
will request, a ruling from the Internal Revenue Service, IRS, with
regard to any of the federal income tax consequences of the merger. The
tax opinions will not be binding on the IRS or preclude the IRS from
adopting a contrary position.
OPINION
It is the opinion of Williams Law Group, P.A., counsel to First Irving Strategic
Group , that the merger will constitute a reorganization under Section 368(a) of
the code. As a result of the merger's qualifying as a reorganization, the
following federal income tax consequences will, under currently applicable law,
result:
o No gain or loss will be recognized for federal income tax purposes by
the holders of PC Universe common stock upon the receipt of First
Irving Strategic Group common stock solely in exchange for PC Universe
common stock in the merger, except to the extent that cash is received
by the exercise of dissenters' rights.
o The aggregate tax basis of the First Irving Strategic Group common
stock received by PC Universe shareholders in the merger will be the
same as the aggregate tax basis of the PC Universe common stock
surrendered in merger.
o The holding period of the First Irving Strategic Group common stock
received by each PC Universe shareholder in the merger will include the
period for which the PC Universe common stock surrendered in merger was
considered to be held, provided that the PC Universe common stock so
surrendered is held as a capital asset at the closing of the merger.
o A holder of PC Universe common stock who exercises dissenters' rights
for the PC Universe common stock and receives a cash payment for the
shares generally will recognize capital gain or loss, if the share was
held as a capital asset at the closing of the merger, measured by the
difference between the shareholder's basis in the share and the amount
of cash received, provided that the payment is not essentially
equivalent to a dividend within the meaning of Section 302 of the code
or does not have the effect of a distribution of a dividend within the
meaning of Section 356(a)(2) of the code after giving effect to the
constructive ownership rules of the code.
o Neither First Irving Strategic Group nor PC Universe will recognize
gain solely as a result of the merger.
o There is a continuity of interest for IRS purposes with respect to
the business of PC Universe. This is because shareholders of PC
Universe have represented to us that they will not, under a plan
or intent existing at of prior to the closing of the merger of the
merger, dispose of so much of their PC Universe common stock in
anticipation of the merger, plus the First Irving Strategic Group
common stock received in the merger that the PC Universe
shareholders, as a group, would no longer have a significant equity
interest in the PC Universe business being conducted by First Irving
Strategic Group after the merger. Our opinion is based upon IRS ruling
guidelines that require eighty percent continuity, although the
guidelines do not purport to represent the applicable substantive law.
A successful IRS challenge to the reorganization status of the merger would
result in significant tax consequences. For example,
o PC Universe would recognize a corporate level gain or loss on the
deemed sale of all of its assets equal to the difference between
o the sum of the fair market value, as of the closing of the
merger, of the First Irving Strategic Group common stock
issued in the merger plus the amount of the liabilities of
PC Universe assumed by First Irving Strategic Group
and
o PC Universe's basis in the assets
o PC Universe shareholders would recognize gain or loss with respect
to each share of PC Universe common stock surrendered equal to the
difference between the shareholder's basis in the share and the
fair market value, as of the closing of the merger, of the First
Irving Strategic Group common stock received in merger therefore.
In this event, a shareholder's aggregate basis in the First Irving Strategic
Group common stock so received would equal its fair market value and the
shareholder's holding period for this stock would begin the day after the merger
is consummated.
Even if the merger qualifies as a reorganization, a recipient of First Irving
Strategic Group common stock would recognize income to the extent if, among
other reasons any shares were determined to have been received in merger for
services, to satisfy obligations or in consideration for anything other than the
PC Universe common stock surrendered. Generally, income is taxable as ordinary
income upon receipt. In addition, to the extent that PC Universe shareholders
were treated as receiving, directly or indirectly, consideration other than
First Irving Strategic Group common stock in merger for PC Universe's
shareholder's common stock, gain or loss would have to be recognized.
Sincerely,
Michael T. Williams, Esq.
