Exhibit 8.1
July 30, 1999
Board of Directors
IGA Federal Savings
213 West Street Road
Feasterville, Pennsylvania 19053
Board of Directors
JADE FINANCIAL CORP.
213 West Street Road
Feasterville, Pennsylvania 19053
Re: IGA Federal Savings
Plan of Conversion
Gentlemen:
You have requested our opinion as to certain federal income
tax consequences of the transactions contemplated by the Plan of
Conversion adopted by the Board of Directors of IGA Federal
Savings (the "Bank") on May 26, 1998, as thereafter rescinded,
restated and adopted by the Bank on May 26, 1999 (the "Plan"),
pursuant to which: (i) the Bank caused JADE FINANCIAL CORP.
("JADE") to be incorporated as a Pennsylvania-chartered
corporation, and the Board of Directors of JADE adopted the Plan;
and (ii) upon consummation of the transactions contemplated by
the Plan, (A) the Bank will adopt a new charter in stock form
(the "Conversion"), and thereby convert from a federally-
chartered mutual savings institution to a federally-chartered
stock savings institution (the "Stock Bank"), (B) JADE will offer
and sell shares of its common stock (the "Conversion Stock") to
certain participants in a subscription offering and, possibly, to
members of the public in a community offering or public offering,
and (C) JADE will use the proceeds of the sales of the Conversion
Stock to purchase and acquire all of the capital stock of the
Stock Bank, so that the Stock Bank will become a wholly-owned
subsidiary of JADE.
You have requested our opinion pursuant to Section 23 of the
Plan. Except as otherwise expressly provided herein, when begun
with a capital letter, terms which are used in this opinion or in
Exhibit "A" to this opinion, and which are defined in the Plan,
shall have the meanings given to such terms in the Plan.
In connection with our opinion, we have examined and are
familiar with originals or copies, certified or otherwise
identified to our satisfaction, of the Plan and all exhibits
thereto, the articles of incorporation or charter and bylaws of
the Bank, the Stock Bank and JADE, the Registration Statement on
Form SB-2 filed by JADE with the Securities and Exchange
Commission in connection with the offering of Conversion Stock,
<PAGE 1> the officer's certificates, dated the date hereof,
delivered to us by the Bank and JADE, and such other documents as
we have deemed necessary or appropriate for the opinions set
forth below. In our examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and
the authenticity of all such documents. As to any facts material
to the opinions set forth below, we have relied upon the
foregoing documents and instruments, the assumptions set forth in
Exhibit "A" hereto, and upon statements and representations of
officers and other representatives of the Bank and JADE,
including certain written representations of the management of
the Bank and JADE annexed hereto. The opinions set forth below
are conditioned on the initial and continuing accuracy of the
facts, information, assumptions and representations contained in
the aforesaid documents and instruments or otherwise referred to
above.
In preparing our opinion, we have considered applicable
provisions of the Code, the Treasury regulations now in effect or
proposed under the Code, current interpretive rulings and
practice of the Internal Revenue Service, judicial authority and
such other authorities as we have deemed relevant, all of which
are subject to change, which change may be made with retroactive
effect.
Based solely upon the foregoing and upon the assumptions set
forth or referred to herein, and subject to the qualifications
and caveats set forth herein, we are of the opinion that, under
present law, for federal income tax purposes:
1. The Bank's adoption of a charter in stock form, known
as the Conversion, will qualify as a tax-free reorganization
under Section 368(a)(1)(F) of the Code;
2. No gain or loss will be recognized by the Bank solely
as a result of the Conversion;
3. No gain or loss will be recognized by the Bank's
account holders upon the issuance to them of accounts in the
Stock Bank immediately after the Conversion, in the same dollar
amounts and on the same terms and conditions as their accounts in
the Bank immediately prior to the Conversion;
4. The initial tax basis of each account holder's interest
in the liquidation account in the Stock Bank will be equal to the
value, if any, of such interest on the date and at the time of
the Conversion;
5. The initial tax basis of the Conversion Stock purchased
in the Offerings will be equal to the amount paid therefor;
increased, in the case of Conversion Stock purchased pursuant to
the exercise of subscription rights, by the fair market value, if
any, of such subscription rights;
<PAGE 2>
6. The holding period of the Conversion Stock purchased
pursuant to the exercise of subscription rights will commence
upon the exercise of such holder's subscription rights and, in
all other cases, the holding period of purchased Conversion Stock
will commence on the date following the date of such purchase;
and
7. Account holders will recognize gain upon the receipt of
(a) an interest in the liquidation account in the Stock Bank, and
(b) subscription rights in the Subscription Offering, to the
extent such holder's interest in the liquidation account to be
established by the Stock Bank and subscription rights are deemed
to have value.
Notwithstanding the opinions set forth hereinabove, we call
to your attention that the federal income tax consequences of the
receipt, exercise and lapse of subscription rights are uncertain,
and that the Internal Revenue Service has issued private letter
rulings in transactions that are similar to the Conversion and
the Offerings, which rulings may not be used or cited as
precedent, in which the Internal Revenue Service has taken
positions concerning the tax effects of the receipt, exercise and
lapse of subscription rights that appear to be inconsistent or in
conflict. Nevertheless, based upon the Code and the Treasury
regulations, in the absence of persuasive or controlling
authority, we believe that: (a) account holders should recognize
gain on the receipt of subscription rights, to the extent such
rights are deemed to have value; (b) such gain, if any, should be
capital gain if or to the extent such rights were a capital asset
in the hands of the account holder; (c) account holders should be
allowed to recognize a loss upon and with respect to the lapse of
unexercised subscription rights; and (d) while the issue is not
free from doubt, such loss should be a capital loss if or to the
extent such rights were a capital asset in the hands of the
account holder. It is also possible that the Internal Revenue
Service could assert, and the courts could agree, that the Bank
or the Stock Bank should be (y) treated as distributing the
subscription rights to participants in the Subscription Offering,
and (z) required to recognize gain on the distribution of such
rights to the extent, if any, such rights are deemed to have
value.
We call to your attention the fact that certain portions of
this opinion relating to the federal income tax consequences to
certain participants in the Subscription Offering may not be
applicable to persons who receive subscription rights as
compensation or to foreign persons or persons who, because of
their circumstances or status, are subject to special federal
income tax treatment. Moreover, the opinions expressed herein
are conditioned on our assumption that neither the facts and
assumptions relating to the Plan and the transactions
contemplated by the Plan, nor the applicable federal law, will
change between the date hereof and the consummation of such
transactions.
<PAGE 3>
Except as set forth above, we express no other opinion as to
the tax consequences of the Plan or the transactions thereunder,
or to any person under federal, state, local or foreign laws.
We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to us under the
heading "LEGAL AND TAX OPINIONS" in the related Prospectus. In
giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
STEVENS & LEE
/s/ Stevens & Lee
<PAGE 4>
Exhibit "A" to Opinion of Counsel
ASSUMPTIONS
1. Neither the Stock Bank nor JADE has any plan or
intention to redeem or otherwise reacquire the stock to be issued
by either of them in the proposed transactions. Neither the
Conversion Stock nor the stock of the Stock Bank will be callable
or subject to a put option.
2. Immediately following consummation of the proposed
transactions, the Stock Bank will possess the same assets and
liabilities as were hold by the Bank immediately before the
transactions, except for those assets used to pay expenses
incurred in connection with the Conversion plus the capital
contributed by JADE. Assets used to pay expenses of the
Conversion (without reference to the expenses, if any, incurred
with respect to the distribution by JADE of the subscription
rights and the Community Offering) and all distributions (except
for regular, normal interest payments made by the Bank
immediately preceding the Conversion) will, in the aggregate,
constitute less than 1% of the net assets of the Bank, and any
such expenses and distributions paid by the Stock Bank will be
paid from the proceeds of the sale of shares of the Stock Bank to
JADE.
3. The Stock Bank has no plan or intention to sell or
otherwise dispose of any of its assets after the Conversion other
than in the ordinary course of its business. Following the
Conversion, the Stock Bank will continue the primary historic
business conducted by the Bank prior to the Conversion.
4. The Bank is not insolvent or under the jurisdiction of
a bankruptcy or similar court, or in receivership, foreclosure or
any similar proceeding in a federal or state court.
5. Conversion Stock purchased pursuant to the Subscription
Offering by Participants who are employees or independent
contractors of the Bank, where the purchase is made in the
Participant's status as an Eligible Account Holder or (if
applicable) Supplemental Eligible Account Holder or Other Member,
will not be issued at a discount from the price paid by any other
Participant or as compensation. Any compensation to be paid to
such employees (including the stock options, stock bonus awards
and payments under employment arrangements) will be for services
actually rendered and will be commensurate with the compensation
that would be paid to third parties bargaining at arm's length
for similar services.
6. The aggregate fair market value of the "Qualifying
Deposits" (as defined in Section 2.34 in the Plan of Conversion)
held by Eligible Account Holders and (if applicable) Supplemental
Eligible Account Holders as of the close of business on the
Eligibility Record Date and (if applicable) the Supplemental
<PAGE 5> Eligibility Record Date will equal or exceed 99% of the
aggregate fair market value of all savings accounts (including
those accounts of less than $50) in the Bank as of the close of
business on such dates.
7. No cash or property will be given to Eligible
Account Holders and (if applicable) Supplemental Eligible Account
Holders or others in lieu of (a) subscription rights or (b) an
interest in the liquidation account established by the Stock
Bank.
8. At the time of the proposed transactions, the fair
market value of the assets of the Bank on a going concern basis
will exceed the sum of the Bank's liabilities plus the amount of
liabilities to which such assets are subject.
9. The liabilities of the Bank assumed by the Stock
Bank plus the liabilities, if any, to which the transferred
assets are subject were incurred by the Bank in the ordinary
course of its business and are associated with the assets
transferred. There is no intercorporate indebtedness existing
between JADE and the Bank which was issued, acquired or will be
settled at a discount.
10. There is no plan or intention for the Stock Bank
to be liquidated or merged with another corporation following the
proposed transaction. JADE has no plan or intention to dispose
of any of the stock of the Stock Bank to be acquired pursuant to
the proposed transactions.
11. The Bank's Eligible Account Holders and (if
applicable) Supplemental Eligible Account Holders will pay the
expenses of the transaction solely attributable to them, if any.
The Bank (or the Stock Bank) and JADE will each pay its own
expenses of the transaction.
12. The Eligible Account Holders' and (if applicable)
the Supplemental Eligible Account Holders' proprietary interest
in the Bank arises solely by virtue of the fact that they are
account holders in the Bank.
13. The fair market value of the Stock Bank's savings
accounts and the interests in the liquidation account of Eligible
Account Holders and (if applicable) Supplemental Eligible Account
Holders after the Conversion will, in each instance, be equal to
the fair market value of the Bank's savings accounts and the
interests in the net worth of the Bank of each such Eligible
Account Holder and (if applicable) each such Supplemental
Eligible Account Holder prior to the Conversion.
14. JADE will receive pursuant to the Plan shares of
the Stock Bank and will own 100% of the outstanding stock of the
Stock Bank. The Stock Bank has no plan or intention to issue
additional shares of its stock following the transaction.
<PAGE 6>
15. The Bank currently utilizes the specific charge
off method for bad debts and, following the Conversion, the Stock
Bank will continue to utilize the specific charge off method for
bad debts.
16. The transactions contemplated by the Plan do not
involve a receivership, foreclosure or similar proceeding before
a federal or state agency.
<PAGE 7>