EXHIBIT 8.1
FORM OF FEDERAL TAX OPINION OF BREYER & AGUGGIA
FORM OF FEDERAL TAX OPINION
________, 1996
Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
410 Market Street
P.O. Box 700
Fulton, Missouri 65251-0700
Re: Certain Federal Income Tax Consequences Relating to Proposed Holding
Company Conversion of Fulton Savings
Bank, FSB
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Gentlemen:
In accordance with your request, set forth herein is the opinion of this
firm relating to certain federal income tax consequences of (i) the proposed
conversion of Fulton Savings Bank, FSB (the "Savings Bank") from a federally-
chartered mutual savings bank to a federally-chartered stock savings bank (the
"Converted Savings Bank") (the "Stock Conversion") and (ii) the concurrent
acquisition of 100% of the outstanding capital stock of the Converted Savings
Bank by a parent holding company formed at the direction of the Board of
Directors of the Savings Bank and to be known as Fulton Bancorp, Inc. (the
"Holding Company").
For purposes of this opinion, we have examined such documents and questions
of law as we have considered necessary or appropriate, including but not limited
to the Plan of Conversion as adopted by the Savings Bank's Board of Directors on
January 9, 1996 (the "Plan"); the federal mutual charter and bylaws of the
Savings Bank; the certificate of incorporation and bylaws of Holding Company;
the Affidavit of Representations dated ________, 1996 provided to us by the
Savings Bank (the "Affidavit"), and the Prospectus (the "Prospectus") included
in the Registration Statement on Form S-1 filed with the Securities and Exchange
Commission ("SEC") on _______, 1996 (the "Registration Statement"). In such
examination, we have assumed, and have not independently verified, the
genuineness of all signatures on original documents where due execution and
delivery are requirements to the effectiveness thereof. Terms used but not
defined herein, whether capitalized or not, shall have the same meaning as
defined in the Plan.
Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
_________, 1996
Page 2
BACKGROUND
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Based solely upon our review of such documents, and upon such information
as the Savings Bank has provided to us (which we have not attempted to verify in
any respect), and in reliance upon such documents and information, we set forth
herein a general summary of the relevant facts and proposed transactions,
qualified in its entirety by reference to the documents cited above.
The Savings Bank is a federally-chartered mutual savings bank which is in
the process of converting to a federally-chartered stock savings bank. The
Savings Bank was initially organized in 1912. The Savings Bank is also a member
of the Federal Home Loan Bank System and its deposits are federally insured
under the Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation. The Savings Bank operates out of its main office in
Fulton, Missouri and a branch office in Holts Summit, Missouri.
The Savings Bank is primarily engaged in the business of attracting
deposits from the general public and originating permanent loans secured by
first mortgages on one- to four-family residential properties. At April 30,
1996, the Savings Bank had total assets of $85.5 million, deposits of $70.3
million, and total equity of $9.1 million.
As a federally-chartered mutual savings bank, the Savings Bank has no
authorized capital stock. Instead, the Savings Bank, in mutual form, has a
unique equity structure. A savings depositor of the Savings Bank is entitled to
payment of interest on his account balance as declared and paid by the Savings
Bank, but has no right to a distribution of any earnings of the Savings Bank
except for interest paid on his deposit. Rather, such earnings become retained
earnings of the Savings Bank.
However, a savings depositor does have a right to share pro rata, with
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respect to the withdrawal value of his respective savings account, in any
liquidation proceeds distributed if the Savings Bank is ever liquidated.
Savings depositors and certain borrowers are members of the Savings Bank and
thereby have voting rights in the Savings Bank. Each savings depositor is
entitled to cast votes in proportion to the size of their account balances or
fraction thereof held in a withdrawable deposit account of the Savings Bank, and
each borrower member (hereinafter "borrower") is entitled to one vote in
addition to the votes (if any) to which such person is entitled in such
borrower's capacity as a savings depositor of the Savings Bank. All of the
interests held by a
Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
_________, 1996
Page 3
savings depositor in the Savings Bank cease when such depositor closes his
accounts with the Savings Bank.
The Holding Company was incorporated in May 1996 under the laws of the
State of Delaware as a general business corporation in order to act as a savings
institution holding company. The Holding Company has an authorized capital
structure of six million shares of common stock and one million shares of
preferred stock.
PROPOSED TRANSACTION
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Management of the Savings Bank believes that the Stock Conversion offers a
number of advantages which will be important to the future growth and
performance of the Converted Savings Bank in that it is intended to (i) provide
substantially increased capital for investment in its business to expand the
operations of the Converted Savings Bank; (ii) provide future access to capital
markets; (iii) enhance the ability to diversify its operations into new business
activities; and (iv) afford depositors and others the opportunity to become
stockholders of the Converted Savings Bank and thereby participate more directly
in any future growth of the Converted Savings Bank.
Accordingly, pursuant to the Plan, the Savings Bank will undergo the Stock
Conversion whereby it will be converted from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank. As part of the Stock
Conversion, the Savings Bank will amend its existing mutual savings bank charter
and bylaws to read in the form of a Federal Stock Charter and Bylaws. The
Converted Savings Bank will then issue to the Holding Company shares of the
Converted Savings Bank's common stock, representing all of the shares of capital
stock to be issued by the Converted Savings Bank in the Conversion, in exchange
for payment by the Holding Company of 50% of the net proceeds realized by the
Holding Company from such sale of its Common Stock, less amounts necessary to
fund the Employee Stock Ownership Plan of the Savings Bank, or such other
percentage as the Office of Thrift Supervision ("OTS") may authorize or require.
Also pursuant to the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering and, if necessary, a Direct
Community Offering. The aggregate purchase price at which all shares of Common
Stock will be offered and sold pursuant to the Plan and the total number of
shares of Common Stock to be offered in the Conversion will be determined by the
Boards of Directors of the Savings Bank and the Holding Company on the basis of
the estimated pro forma market value of the Converted Savings
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Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
_________, 1996
Page 4
Bank as a subsidiary of the Holding Company. The estimated pro forma market
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value will be determined by an independent appraiser. Pursuant to the Plan, all
such shares will be issued and sold at a uniform price per share. The Stock
Conversion, including the sale of newly issued shares of the stock of the
Converted Savings Bank to the Holding Company, will be deemed effective
concurrently with the closing of the sale of the Common Stock.
Under the Plan and in accordance with regulations of the OTS, the shares of
Common Stock will first be offered through the Subscription Offering pursuant to
nontransferable subscription rights on the basis of preference categories in the
following order of priority:
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans of the Savings Bank;
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
Any shares of Common Stock not subscribed for in the Subscription Offering
may be offered in the Direct Community Offering in the following order of
priority:
(a) Natural persons who are permanent residents of Boone or Callaway
Counties, Missouri; and
(b) The general public.
Any shares of Common Stock not subscribed for in the Direct Community
Offering may be offered to certain members of the general public on a best
efforts basis by a selling group of broker dealers in a Syndicated Community
Offering.
The Plan also provides for the establishment of a Liquidation Account by
the Converted Savings Bank for the benefit of all Eligible Account Holders and
any Supplemental Eligible Account Holders in an amount equal to the net worth of
the Savings Bank as of the date of the latest statement of financial condition
contained in the final prospectus issued in connection with the Conversion. The
establishment of the Liquidation Account will not operate to restrict the use or
application of any of the net worth accounts of the Converted Savings Bank. The
account holders will have an inchoate interest in a proportionate amount of the
Liquidation Account with respect to each savings account held and
Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
_________, 1996
Page 5
will be paid by the Converted Savings Bank in event of liquidation prior to any
liquidation distribution being made with respect to capital stock.
Following the Stock Conversion, voting rights in the Converted Savings Bank
shall be vested in the sole holder of stock in the Converted Savings Bank, which
will be the Holding Company. Voting rights in the Holding Company after the
Stock Conversion will be vested in the holders of the Common Stock.
The Stock Conversion will not interrupt the business of the Savings Bank.
The Converted Savings Bank will continue to engage in the same business as the
Savings Bank immediately prior to the Stock Conversion, and the Converted
Savings Bank will continue to have its savings accounts insured by the SAIF.
Each depositor will retain a withdrawable savings account or accounts equal in
dollar amount to, and on the same terms and conditions as, the withdrawable
account or accounts at the time of Stock Conversion except to the extent funds
on deposit are used to pay for Common Stock purchased in the Stock Conversion.
All loans of the Savings Bank will remain unchanged and retain their same
characteristics in the Converted Savings Bank.
The Plan must be approved by the OTS and by an affirmative vote of at least
a majority of the total votes eligible to be cast at a meeting of the Savings
Bank's members called to vote on the Plan.
Immediately prior to the Conversion, the Savings Bank will have a positive
net worth determined in accordance with generally accepted accounting
principles.
OPINION
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Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Stock Conversion will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended (the "Code"), and no gain or loss will be recognized to
either the Savings Bank or the Converted Savings Bank as a result of
the Stock Conversion (see Rev. Rul. 80-105, 1980-1 C.B. 78).
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Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
_________, 1996
Page 6
2. The assets of the Savings Bank will have the same basis in the hands
of the Converted Savings Bank as in the hands of the Savings Bank
immediately prior to the Stock Conversion (Section 362(b) of the
Code).
3. The holding period of the assets of the Savings Bank to be received by
the Converted Savings Bank will include the period during which the
assets were held by the Savings Bank prior to the Stock Conversion
(Section 1223(2) of the Code).
4. No gain or loss will be recognized by the Converted Savings Bank on
the receipt of money from the Holding Company in exchange for shares
of common stock of the Converted Savings Bank (Section 1032(a) of the
Code). The Holding Company will be transferring solely cash to the
Converted Savings Bank in exchange for all the outstanding capital
stock of the Converted Savings Bank and therefore will not recognize
any gain or loss upon such transfer. (Section 351(a) of the Code; see
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Rev. Rul. 69-357, 1969-1 C.B. 101).
5. No gain or loss will be recognized by the Holding Company upon receipt
of money from stockholders in exchange for shares of Common Stock
(Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account Holders and
Supplemental Eligible Account Holders of the Savings Bank upon the
issuance of them of deposit accounts in the Converted Savings Bank in
the same dollar amount and on the same terms and conditions in
exchange for their deposit accounts in the Savings Bank held
immediately prior to the Stock Conversion (Section 1001(a) of the
Code; Treas. Reg. (S)1.1001-1(a)).
7. The tax basis of the Eligible Account Holders' and Supplemental
Eligible Account Holders' savings accounts in the Converted Savings
Bank received as part of the Stock Conversion will equal the tax basis
of such account holders' corresponding deposit accounts in the Savings
Bank surrendered in exchange therefor (Section 1012 of the Code).
8. Gain or loss, if any, will be realized by the deposit account holders
of the Savings Bank upon the constructive receipt of their interest in
the liquidation account of the Converted Savings Bank and on the
nontransferable
Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
_________, 1996
Page 7
subscription rights to purchase stock of the Holding Company in
exchange for their proprietary rights in the Savings Bank. Any such
gain will be recognized by the Savings Bank deposit account holders,
but only in an amount not in excess of the fair market value of the
liquidation account and subscription rights received. (Section 1001
of the Code; Paulsen v. Commissioner, 469 U.S. 131 (1985); Rev. Rul.
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69-646, 1969-2 C.B. 54.)
9. The basis of each account holder's interest in the Liquidation Account
received in the Stock Conversion and to be established by the
Converted Savings Bank pursuant to the Stock Conversion will be equal
to the value, if any, of that interest.
10. No gain or loss will be recognized upon the exercise of a subscription
right in the Stock Conversion. (Rev. Rul. 56-572, 1956-2 C.B. 182).
11. The basis of the Common Stock acquired in the Stock Conversion will be
equal to the purchase price of such stock, increased, in the case of
such stock acquired pursuant to the exercise of subscription rights,
by the fair market value, if any, of the subscription rights exercised
(Section 1012 of the Code).
12. The holding period of the Common Stock acquired in the Stock
Conversion pursuant to the exercise of subscription rights will
commence on the date on which the subscription rights are exercised
(Section 1223(6) of the Code). The holding period of the Common Stock
acquired in the Community Offering will commence on the date following
the date on which such stock is purchased (Rev. Rul. 70-598, 1970-2
C.B. 168; Rev. Rul. 66-97, 1966-1 C.B. 190).
SCOPE OF OPINION
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Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any federal,
state, local, foreign or other tax considerations. If any of the information
upon which we have relied is incorrect, or if changes in the relevant facts
occur after the date hereof, our opinion could be affected thereby. Moreover,
our opinion is based on the case law, Code, Treasury Regulations thereunder and
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change, and such
Boards of Directors
Fulton Savings Bank, FSB
Fulton Bancorp, Inc.
_________, 1996
Page 8
change may be made with retroactive effect. We can give no assurance that,
after such change, our opinion would not be different. We undertake no
responsibility to update or supplement our opinion. This opinion is not binding
on the Internal Revenue Service and there can be no assurance, and none is
hereby given, that the Internal Revenue Service will not take a position
contrary to one or more of the positions reflected in the foregoing opinion, or
that our opinion will be upheld by the courts if challenged by the Internal
Revenue Service.
CONSENTS
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We hereby consent to the filing of this opinion with the OTS as an exhibit
to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and the
OTS as exhibits to the Registration Statement and the Savings Bank's Application
for Conversion on Form AC ("Form AC"), respectively, and the reference on our
firm in the Prospectus, which is a part of both the Registration Statement and
the Form AC, under the headings "THE CONVERSION -- Effect of Conversion to Stock
Form on Depositors and Borrowers of the Savings Bank -- Tax Effects" and "LEGAL
AND TAX OPINIONS."
Very truly yours,
BREYER & AGUGGIA