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Exhibit 8.1
[LETTERHEAD OF RSM McGLADREY, INC.]
January 2, 2001
Board of Directors Board of Directors
Sierra Bancorp Bank of the Sierra
86 N. Main Street 86 N. Main Street
Porterville, CA 93257 Porterville, CA 93257
re: Tax Opinion Concerning Reorganization under Internal Revenue Code
368(a)(2)(E)
You have requested our opinion as to certain Federal Income Tax consequences of
the merger (Merger) of Sierra Merger Corporation (Sierra Merger) a newly formed
wholly owned subsidiary of Sierra Bancorp with and into The Bank of the Sierra
(BOTS). Sierra Merger was formed exclusively to engage in this transaction. The
shareholders of BOTS will receive stock of Sierra Bancorp (SB) in exchange for
their stock of BOTS. In connection with your request, you have provided us with
the Plan of Reorganization and Agreement of Merger dated as of December 14, 2000
(Agreement), by and among SB, Sierra Merger and BOTS. We have also received and
relied upon the following representations made by and on behalf of SB, Sierra
Merger, and BOTS:
o To the extent not inconsistent with the representations, the "Merger" will
be consummated in accordance with the Plan of Reorganization and Agreement
of Merger, by and among SB, BOTS and Sierra Merger.
o The fair market value of SB stock to be received by BOTS' shareholders in
the "Merger" will, in each instance, be approximately equal to the fair
market value of BOTS stock surrendered in exchange therefore.
o In the "Merger", shares of BOTS representing at least 90% of the
outstanding stock of BOTS will be exchanged solely for voting stock of SB.
Shares of BOTS stock held by BOTS shareholders and otherwise sold, redeemed
or disposed of prior or subsequent to the "Merger" will be considered as
outstanding stock of BOTS in making this representation.
o BOTS has no plan intention or obligation, including pursuant to outstanding
options to acquire its stock, to issue stock that would cause SB's
ownership to be less than control as defined in 368(c) of the Code. For
this purpose control means the ownership of stock possessing at least 80%
of the total combined voting power of all classes of stock entitled to vote
and at least 80% of the total number of shares of all other classes of
stock of the corporation
o Other than the proposed Taft National Bank merger, SB has no plan or
intention to liquidate or merge BOTS after the "Merger".
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o Neither SB nor any party "related", as defined in the Internal Revenue Code
of 1986 for purposes of Treasury Regulation 1.368-1(e)(3), to SB has a
plan, binding commitment or intention to redeem or otherwise reacquire any
of the SB stock issued in the "Merger".
o Following the "Merger", BOTS will retain substantially all (defined to be
at least 70% of the gross assets and 90% of the net assets) of the assets
of BOTS and Sierra Merger and continue the historic business of BOTS.
o Sierra Merger was formed solely for purpose of effectuating the "Merger"
and has no other purpose.
o 100% of the stock of Sierra Merger will be owned by SB prior to the
"Merger".
o Sierra Merger will have no liabilities to be assumed by BOTS and will
transfer no assets to BOTS in the "Merger".
o The merger expenses are expenses of BOTS and will be borne by BOTS.
Shareholders' cost, if any, will be paid by the shareholders.
o There is and will be no intercorporate indebtedness between or among BOTS,
SB and Sierra Merger that was or will be issued, acquired or settled at a
discount.
o BOTS, SB and Sierra Merger are not investment companies as defined in
368(a)(2)(F)(iii) and (iv) of the Code.
o Neither BOTS or nor SB are under the jurisdiction of a court in a Title 11
or similar case within the meaning of 368(a)(3)(A) of the Code.
o None of the compensation to be received by any shareholder- employees of
BOTS or SB is separate consideration for, or allocable to, any of their
shares of BOTS or SB stock. SB stock received by any shareholder-employee
of BOTS or SB is not separate consideration for, or allocable to, any
employment agreement or other compensation owed to such shareholder-
employee.
o Prior to the "Merger" SB has not nor will own any stock of BOTS.
o The reasons for the "Merger" of Sierra Merger into BOTS constitute
substantial business purposes of BOTS, SB and Sierra Merger and can be
documented and demonstrated clearly.
o No dividends will be paid by BOTS or SB before the consummation of the
"Merger", other than regular periodic dividends, consistent in amount and
in effect with prior dividend distributions.
o BOTS has 400,000 non-qualified stock options outstanding for the purchase
of BOTS shares. The exercise price for all the outstanding options is $9
per share. The sample non-qualified stock option agreement provided is
identical to all other non-qualified stock option agreements except as to
the name of the optionee.
o BOTS has 373,600 Incentive Stock Options outstanding for the purchase of
BOTS shares. The exercise price for all the outstanding options is $9 per
share. The sample Incentive Stock Option agreement provided is identical to
all other Incentive Stock Option agreements except as to the name of the
optionee.
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o No fractional shares of stock will be issued as a result of the "Merger"
and no fractional shares will be purchased for cash as a result of the
Merger.
o As a result of the "Merger" no cash will be paid to dissenting
shareholders.
o It is intended that BOTS's outstanding Incentive Stock Options will be
assumed by SB and that subsequent to the "Merger" upon exercise of the
Incentive Stock Options the optionee will receive SB stock. With this
assumption by SB the terms of the outstanding stock options will not change
except that the number of shares subject to an option issued or assumed may
be adjusted to compensate for any change in the aggregate spread between
the option price and the fair market value of the stock subject to the
option immediately after the substitution or assumption as compared to the
aggregate spread between the option price and the aggregate fair market
value of the stock subject to the option immediately before such
substitution or assumption which would not be treated as a modification
under Treasury Regulation 1.425-1(e)(5).
o The options granted under the incentive stock option agreement are
incentive stock options within the meaning of Section 422 of the code.
o No individual ISO optionee, when considering stock owned directly or
indirectly by a corporation partnership estate or trust or when considering
stock held by spouse, brother, sister, ancestor or lineal descendents will
own more than 10% of the stock of SB or BOTS.
Assumptions
We have assumed all of the representations contained herein are true and
correct. We have relied upon the opinion of Fried, Bird & Crumpacker counsel to
SB and BOTS, and upon which such counsel has expressly stated we are entitled to
rely, that the Merger qualifies as a merger under applicable state law as more
fully described in such opinion.
Opinion
Based on our understanding of the facts, and relying upon the opinion of Fried,
Bird & Crumpacker with respect to the qualification of the Merger, the
representations made to us and assumptions stated herein, our review of the
relevant sections of the Internal Revenue Code of 1986, as amended, (Code) the
regulations promulgated thereunder, and cases, rulings and other authorities, it
is our opinion that the transaction will be treated as follows for Federal
Income Tax purposes:
1. The Merger of Sierra Merger into BOTS will qualify as a reorganization
within the meaning of 368(a)(2)(E) of the Code, and Sierra Merger, SB and
BOTS will each be a "party to a reorganization" within the meaning of
368(b) of the Code.
2. No gain or loss will be recognized by Sierra Merger, SB or BOTS as a result
of the Merger under 361(a) and 357(a) of the Code and Rev. Rul. 57-278.
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3. No gain or loss will be recognized by the shareholders of BOTS upon receipt
of SB Common Stock in exchange for their shares of BOTS Common Stock
pursuant to the reorganization.
4. The tax basis of the assets of BOTS retained by BOTS will be the same as
the tax basis of such assets immediately before the transaction.
5. The holding period of BOTS assets will include the holding period of such
assets immediately before the transaction.
6. The SB stock received by BOTS shareholders in exchange for their BOTS stock
will have the same basis for Federal Income Tax purposes as the basis of
the BOTS stock surrendered in exchange therefore under 358(a)(1) of the
Code.
7. The holding period of SB stock received by the BOTS shareholders in
exchange for their BOTS stock will include the holding period for the BOTS
shares surrendered in the Merger under 1223(a)(1) of the Code, provided
that BOTS shares surrendered were held as capital assets by the BOTS
shareholders at the time of the Merger.
8. No gain or loss will be recognized by SB upon the issuance of its own stock
under 361(a) of the Code.
Our opinion is based on the representations made to us and the assumptions
stated herein. If any of the facts, representations or assumptions are
determined to be incorrect, our opinion may be adversely affected. We express
no opinion as to the accuracy of the facts, representations and assumptions
stated herein. We express no opinion regarding Federal, state, local, foreign
or other tax matters not contained in items 1. through 8. above.
Our opinion is based upon existing law, Treasury Regulations and on
administrative and judicial interpretations of the law and regulations.
Administrative positions of the Internal Revenue Service contained in Revenue
Rulings and Revenue Procedures as well as judicial decisions are subject to
change either prospectively or retroactively. We undertake no obligation to
update this opinion for changes in facts or law occurring subsequent to the date
of this opinion. This opinion is effective as of closing effective time as
provided in Agreement. This opinion is not binding on the Internal Revenue
Service or the courts.
We consent to the inclusion of this opinion as an exhibit to the Registration
Statement on Form S-4 filed by Sierra Bancorp with the Securities and Exchange
Commission for the purpose of registering securities under the Securities Act of
1933, as amended.
/s/ RSM McGladrey, Inc.
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