WILLIAMS LAW GROUP, P.A.
2503 W. Gardner Ct.
Tampa FL 33611
December 14, 2000
Adar Alternative Two, Inc.
Mashpee MA
Re: Federal Income Tax Consequences of Merger of Xfone, Inc. and Adar
Alternative Two, Inc.
Gentlemen:
As special counsel to Adar Alternative Two, Inc., a Florida corporation
("Adar Alternative Two"), 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 Xfone, Inc. into Adar
Alternative Two in exchange for shares of Adar Alternative Two'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 Adar Alternative Two, File No. 333-XXXXX (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 the Examined
Documents may be rendered unenforceable due to matters outside the scope of the
documents themselves, such as
(i) 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; and
(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 and , unless amended prior to the closing of the merger, as
of the date of that closing, 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) 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.
3) We have addressed this opinion to most of the typical shareholders of
companies such as Xfone. 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
4) We also do not address the tax consequences of the merger under
foreign, state or local tax laws.
5) Neither Adar Alternative Two nor Xfone 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 Adar Alternative Two ,
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 Xfone common stock upon the receipt of Adar Alternative
Two common stock solely in exchange for Xfone 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 Adar Alternative Two common stock
received by Xfone shareholders in the merger will be the same as the
aggregate tax basis of the Xfone common stock surrendered in merger.
o The holding period of the Adar Alternative Two common stock received by
each Xfone shareholder in the merger will include the period for which
the Xfone common stock surrendered in merger was considered to be held,
provided that the Xfone common stock so surrendered is held as a
capital asset at the closing of the merger.
o A holder of Xfone common stock who exercises dissenters' rights for the
Xfone 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 Adar Alternative Two nor Xfone 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 Xfone. This is because shareholders of Xfone have
represented to us that they will not, under a plan or intent existing
at or prior to the closing of the merger of the merger, dispose of so
much of their Xfone common stock in anticipation of the merger, plus
the Adar Alternative Two common stock received in the merger that the
Xfone shareholders, as a group, would no longer have a significant
equity interest in the Xfone business being conducted by Adar
Alternative Two 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 Xfone 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 Adar Alternative Two common stock issued in the merger plus
the amount of the liabilities of Xfone assumed by Adar Alternative
Two
and
o Xfone' basis in the assets
o Xfone shareholders would recognize gain or loss with respect to each
share of Xfone 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 Adar Alternative Two common stock
received in merger therefore.
In this event, a shareholder's aggregate basis in the Adar Alternative Two
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 Adar
Alternative Two 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
Xfone common stock surrendered. Generally, income is taxable as ordinary income
upon receipt. In addition, to the extent that Xfone shareholders were treated as
receiving, directly or indirectly, consideration other than Adar Alternative Two
common stock in merger for Xfone' shareholder's common stock, gain or loss would
have to be recognized.
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This opinion shall be automatically updated as of the date of closing of the
merger unless you are advised in writing by us to the contrary. We hereby
consent to being named as experts in the registration statement of First Irving,
File No. 333-XXXXX.
Sincerely,
Michael T. Williams, Esq.
