Exhibit 8.1
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
One Franklin Square
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Telephone: (202) 434-4660
Telecopier: (202) 434-4661
July 29, 1996
Board of Directors
Amsterdam Federal Savings
and Loan Association
161 Church Street
Amsterdam, New York 12010
Re: Federal Income Tax Opinion Relating to the Proposed Conversion of
Amsterdam Federal Savings and Loan Association from a
Federally-Chartered Mutual Savings and Loan Association to a
Federally-Chartered Stock Savings Bank Pursuant to Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
Members of the Board:
In accordance with your request, set forth hereinbelow is the opinion of
this firm relating to certain federal income tax consequences of the proposed
conversion (the "Conversion") of Amsterdam Federal Savings and Loan Association
(the "Association") from a federally-chartered mutual savings and loan
association to a federally-chartered capital stock savings bank (the "Stock
Bank"), and formation of a parent holding company (the "Holding Company") which
will simultaneously acquire all of the outstanding stock of Stock Bank. As
proposed, the Conversion will be implemented pursuant to Section 368(a)(1)(F) of
the Internal Revenue Code of 1986, as amended (the "Code").
We have examined such corporate records, certificates and other documents
as we have considered necessary or appropriate for this opinion. In such
examination, we have accepted, and have not independently verified, the
authenticity of all original documents, the accuracy of all copies, and the
genuineness of all signatures. Further, the capitalized terms which are used in
this opinion and are not expressly defined herein shall have the meaning
ascribed to them in the Association's Plan of Conversion adopted on April 26,
1996 (the "Plan of Conversion").
STATEMENT OF FACTS
Based solely upon our review of such documents, and upon such information
as the Association has provided to us (which we have not attempted to verify in
any respect), and in
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 2
reliance upon such documents and information, we understand the relevant facts
with respect to the Conversion to be as follows:
The Association is a federally-chartered mutual savings and loan
association. As a mutual savings and loan association, the Association has no
authorized capital stock. Instead, the Association, in mutual form, has a unique
equity structure. A savings depositor of the Association is entitled to interest
income on his or her account balance as declared and paid by the Association. A
savings depositor has no right to a distribution of any earnings of the
Association, but rather these amounts become retained earnings of the
Association. However, a savings depositor has a right to share pro rata, with
respect to the withdrawal value of his or her respective savings account, in any
liquidation proceeds distributed in the event the Association is ever
liquidated. Voting rights in the Association are held by its members. Each
member is entitled to cast one vote for each $100 or a fraction thereof of the
withdrawal value of the member's account and each borrower member is entitled to
one vote. Each member shall have a maximum of 1,000 votes. All of the interests
held by a savings depositor in the Association cease when such depositor closes
his or her account(s) with the Association.
The Board of Directors of the Association has decided that in order to
promote the growth and expansion of the Association through the raising of
additional capital, it would be advantageous for the Association to (i) convert
from a federally-chartered mutual savings and loan association to a
federally-chartered capital stock savings bank, and (ii) arrange for the Holding
Company to simultaneously acquire all of the Stock Bank's stock. The
Association's Board of Directors has determined that in order to provide greater
flexibility in future operations of the Association, including diversification
of business opportunities and acquisition, it is advantageous to have the Stock
Bank's held by the Holding Company. Pursuant to the Plan of Conversion, the
Association's certificate of incorporation to operate as a mutual savings and
loan association be amended and a new certificate of incorporation be acquired
to allow it to continue its operations in the form of a federally-chartered
capital stock savings bank. The Plan of Conversion provides for the conversion
of the Association from mutual-to-stock form, and an appraisal of the pro forma
market value of the stock of the Stock Bank, which will be owned solely by the
Holding Company. The Plan of Conversion must be approved by the Office of Thrift
Supervision ("OTS"), and by an affirmative vote of at least a majority of the
total votes eligible to be cast at a special meeting of the Association's
members called to vote on the Plan of Conversion.
The Holding Company has been formed under the laws of the State of
Delaware for the purpose of the proposed transaction described herein, to engage
in business as a savings and loan holding company and to hold all of the stock
of the Stock Bank. The Holding Company will issue shares of its voting common
stock ("Holding Company Stock") upon completion of the
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 3
Conversion, as described below, to persons purchasing such shares through a
Subscription Offering and to the general public in a Community Offering.
Following appropriate regulatory approval, the Plan of Conversion provides
for the issuance of shares of Holding Company Stock to eligible depositors and
borrowers of the Association and others as described below and set forth in the
Plan of Conversion. The aggregate purchase price at which all shares of Holding
Company Stock will be offered and sold pursuant to the Plan of Conversion will
be equal to the estimated pro forma market value of the Association at the time
of the Conversion as held as a subsidiary of the Holding Company. The estimated
pro forma market value will be determined by an independent appraiser. Pursuant
to the Plan of Conversion, all such shares of Holding Company Stock will be
issued and sold at a uniform price per share. The Conversion and the sale of
newly issued shares of the Stock Bank's stock to the Holding Company will be
deemed effective concurrently with the closing of the sale of Holding Company
Stock.
As required by OTS regulations, shares of Holding Company Stock will be
offered pursuant to non-transferable subscription rights on the basis of
preference categories. All shares must be sold and to the extent that Holding
Company Stock is available, no subscriber will be allowed to purchase less than
25 shares of Holding Company Stock, provided that the aggregate purchase price
does not exceed $500. The Association has established various preference
categories under which shares of Holding Company Stock may be purchased and a
community offering category for the sale of shares not purchased under the
preference categories. If the third preference category is determined to be
inappropriate to the Conversion, then there will only be three preference
categories consisting of the first, second, and fourth preference categories set
forth below, and all references herein to Supplemental Eligible Account Holder
and the Supplemental Eligibility Record Date shall not be applicable to the
subject transaction.
The first preference category is reserved for the Association's Eligible
Account Holders. The Plan of Conversion defines "Eligible Account Holder" as any
person holding a Qualifying Deposit. The Plan of Conversion defines "Qualifying
Deposit" as the aggregate balance of all savings accounts of an Eligible Account
Holder in the Association at the close of business on March 31, 1995, which is
at least equal to $50.00. If a savings account holder of the Association
qualifies as an Eligible Account Holder, he or she will receive, without
payment, non-transferable subscription rights to purchase Holding Company Stock.
The number of shares that each Eligible Account Holder may subscribe to is equal
to the greater of (a) the maximum purchase limitation established for the
Community Offering; (b) one tenth of one percent of the total offering of
shares; or (c) fifteen times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Holding Company Stock to
be issued by a fraction of which the numerator is the amount of the Qualifying
Deposit of the Eligible Account Holder and the denominator is the total amount
of the Qualifying Deposits of
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 4
all Eligible Account Holders. If there is an oversubscription, shares will be
allocated among subscribing Eligible Account Holders so as to permit each
account holder, to the extent possible, to purchase a number of shares
sufficient to make his or her total allocation equal to 100 shares. Any shares
not then allocated shall be allocated among the subscribing Eligible Account
Holders on an equitable basis, related to the amounts of their respective
deposits as compared to the total deposits of Eligible Account Holders on the
Eligibility Record Date. Non-transferable subscription rights to purchase
Holding Company Stock received by officers and directors of the Association and
their associates based on their increased deposits in the Association in the one
year period preceding the Eligibility Record Date shall be subordinated to all
other subscriptions involving the exercise of nontransferable subscription
rights to purchase shares of Holding Company Stock under the first preference
category.
The second preference category is reserved for tax-qualified employee
stock benefit plans of the Stock Bank. The Plan of Conversion defines "tax
qualified employee stock benefit plans" as any defined benefit plan or defined
contribution plan, such as an employee stock ownership plan, stock bonus plan,
profit-sharing plan or other plan, which, with its related trust meets the
requirements to be "qualified" under Section 401 of the Code. Under the Plan of
Conversion, the Stock Bank's tax-qualified employee stock benefit plans may
subscribe for up to 10% of the shares of Holding Company Stock to be offered in
the Conversion.
The third preference category is reserved for the Association's
Supplemental Eligible Account Holders. The Plan of Conversion defines
"Supplemental Eligible Account Holder" as any person (other than officers or
directors of the Association and their associates) holding a deposit in the
Association on the last day of the calendar quarter preceding the approval of
the Plan of Conversion by the OTS ("Supplemental Eligibility Record Date"). This
third preference category will only be used in the event that the Eligibility
Record Date is more than 15 months prior to the date of the latest amendment to
the Application for Approval of Conversion on Form AC filed prior to approval by
the OTS. The third preference category provides that each Supplemental Eligible
Account Holder will receive, without payment, nontransferable subscription
rights to purchase Holding Company Stock to the extent that such shares of
Holding Company Stock are available after satisfying subscriptions for shares in
the first and second preference categories above. The number of shares to which
a Supplemental Eligible Account Holder may subscribe to is the greater of (a)
the maximum purchase limitation established for the Community Offering; (b)
one-tenth of one percent of the total offering of shares; or (c) fifteen times
the product (rounded down to the next whole number) obtained by multiplying the
total number of the shares of Holding Company Stock to be issued by a fraction
of which the numerator is the amount of the deposit of the Supplemental Eligible
Account Holder and the denominator is the total amount of the deposits of all
Supplemental Eligible Account Holders on the Supplemental Eligibility Record
Date. Subscription rights received pursuant to the third preference category
shall be subordinated to all rights under the first and second preference
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 5
categories. Non-transferable subscription rights to be received by a
Supplemental Eligible Account Holder in the third preference category shall be
reduced by the subscription rights received by such account holder as an
Eligible Account Holder under the first and second preference categories. In the
event of an oversubscription, shares will be allocated so as to enable each
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation, including shares
previously allocated in the first and second preference categories, equal to 100
shares or the total amount of his subscription, whichever is less. Any shares
not then allocated shall be allocated among the subscribing Supplemental
Eligible Account Holders on an equitable basis related to the amount of their
respective deposits as compared to the total deposits of Supplemental Eligible
Account Holders on the Supplemental Eligibility Record Date.
If there is no oversubscription of the Holding Company Stock in the first,
second, and third preference categories, the fourth preference category becomes
operable. In the fourth preference category, members of the Association entitled
to vote at the special meeting of members to approve the Plan of Conversion who
are not Eligible Account Holders or Supplemental Eligible Account Holders
("Other Members") will receive, without payment, non-transferable subscription
rights entitling them to purchase Holding Company Stock. Other Members shall
each receive subscription rights to purchase up to the maximum purchase
limitation established for the Community Offering or one-tenth of one percent of
the total offering of shares, to the extent that Holding Company Stock is
available. In the event of an oversubscription by Other Members, Holding Company
Stock will be allocated pro rata according to the number of shares subscribed
for by each Other Member.
The Plan of Conversion further provides for limitations upon purchases of
Holding Company Stock. Specifically, any person by himself or herself or with an
associate or a group of persons acting in concert may subscribe for not more
than $150,000 of Holding Company Stock offered pursuant to the Plan of
Conversion, except that Tax-Qualified Employee Stock Benefit Plans may purchase
up to 10% of the total shares of Holding Company Stock issued. Subject to any
required regulatory approval and the requirements of applicable laws and
regulations, the Association may increase or decrease any of the purchase
limitations set forth herein at any time. The Board of Directors of the
Association may, in its sole discretion, increase the maximum purchase
limitation up to 5.0%. Requests to purchase additional shares of Holding Company
Stock under this provision will be allocated by the Board of Directors on a pro
rata basis giving priority in accordance with the priority rights set forth in
the Plan of Conversion. Officers and directors of the Association and their
associates may not purchase in the aggregate more than 33% of the Holding
Company Stock issued pursuant to the Conversion. Directors of the Association
will not be deemed associates or a group acting in concert solely as a result of
their membership on the board of directors of the Association. All of the shares
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 6
of Holding Company Stock purchased by officers and directors will be subject to
certain restrictions on sale for a period of one year.
The Plan of Conversion provides that no person will be issued any
subscription rights or be permitted to purchase any Holding Company Stock if
such person resides in a foreign country or in a state of the United States with
respect to which all of the following apply: (a) a small number of persons
otherwise eligible to subscribe for shares under the Plan of Conversion reside
in such state; (b) the issuance of subscription rights or the offer or sale of
the Holding Company Stock in such state, would require the Association or the
Holding Company under the securities law of such state to register as a broker
or dealer or to register or otherwise qualify its securities for sale in such
state; and (c) such registration or qualification would be impracticable for
reasons of cost or otherwise.
The Plan of Conversion also provides for the establishment of a
Liquidation Account by Stock Bank for the benefit of all Eligible Account
Holders and Supplemental Eligible Account Holders (if applicable). The
Liquidation Account will be equal in amount to the net worth of Association as
of the time of 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 Stock Bank, except that the Stock Bank will not declare or pay cash
dividends on or repurchase any of its stock if the result thereof would be to
reduce its net worth below the amount required to maintain the Liquidation
Account. The Liquidation Account will be for the benefit of the Association's
Eligible Account Holders and Supplemental Eligible Account Holders who maintain
accounts in the Association at the time of the Conversion. All such account
holders, including those not entitled to subscription rights for reasons of
foreign or out-of-state residency (as described above), will have an interest in
the Liquidation Account. The interest an Eligible Account Holder and
Supplemental Eligible Account Holder will have a right to receive, in the event
of a complete liquidation of the Stock Bank, is a distribution from the
Liquidation Account in the amount of the then current adjusted subaccount
balances for savings accounts then held, which will be made prior to any
liquidation distribution with respect to the capital stock of the Stock Bank.
The initial subaccount balance for a savings account held by an Eligible
Account Holder and/or Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the Liquidation Account by a fraction of
which the numerator is the amount of the qualifying deposit in the savings
account, and the denominator is the total amount of qualifying deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders in the Stock
Bank. The initial subaccount balance will never be increased, but may be
decreased if the deposit balance in any qualifying savings account of any
Eligible Account Holder or any savings account of any Supplemental Eligible
Account Holder on any annual closing date subsequent to the Eligibility Record
Date or Supplemental Eligibility Record Date, whichever is applicable,
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 7
is less than the lesser of (1) the deposit balance in the savings account at the
close of business on any other annual closing date subsequent to the Eligibility
Record Date or the Supplemental Eligibility Record Date, or (2) the amount of
the qualifying deposit in such savings account. In such event, the subaccount
balance for the savings account will be adjusted by reducing each subaccount
balance in an amount proportionate to the reduction in the savings account
balance. Once decreased, the Plan of Conversion provides that the subaccount
balance will never be subsequently increased, and if the savings account of an
Eligible Account Holder or Supplemental Eligible Account Holder is closed, the
related subaccount balance in the Liquidation Account will be reduced to zero.
The net proceeds from the sale of the shares of Holding Company Stock will
become the permanent capital of Holding Company, and the Holding Company will in
turn purchase 100% of the stock issued by Stock Bank, in exchange for up to 50%
of the Holding Company's stock offering net proceeds or such other percentage as
is approved by the Board of Directors with the concurrence of the OTS.
Following the Conversion, voting rights in Stock Bank will rest
exclusively in the Holding Company. Voting rights in the Holding Company will
rest exclusively in the holders of the Holding Company Stock. The Conversion
will not interrupt the business of the Association, and its business will
continue as usual under the Stock Bank. Each depositor will retain a
withdrawable savings account or accounts equal in amount to the withdrawable
account or accounts at the time of the Conversion. Mortgage loans of the
Association will remain unchanged and retain their same characteristics in the
Stock Bank after the Conversion. The Stock Bank will continue membership in the
Federal Home Loan Bank System, and will remain subject to the regulatory
authority of the OTS. Deposits in Stock Bank will continue to be insured by the
Savings Association Insurance Fund administered by the Federal Deposit Insurance
Corporation up to applicable limits of insurance coverage.
Immediately prior to the conversion, the Association will have a positive
net worth in accordance with generally accepted accounting principles. The
savings account holders of the Association will pay expenses of the conversion
solely attributable to them, if any. Further, the Association will pay its own
expenses of the Conversion and will not pay any expenses solely attributable to
the Association's savings account holders or to the purchasers of Holding
Company Stock.
REPRESENTATIONS BY MANAGEMENT
In connection with the Conversion, the following statements,
representations and declarations have been made to us by management of the
Association:
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 8
1. The Conversion will be implemented in accordance with the terms of the
Plan of Conversion and all conditions precedent contained in the Plan of
Conversion shall be performed prior to the consummation of the Conversion.
2. The fair market value of the withdrawable savings accounts plus
interests in the Liquidation Account to be constructively received under the
Plan of Conversion will in each instance be equal to the fair market value of
each savings account of the Association plus the interest in the residual equity
of the Association surrendered in exchange therefor. All proprietary rights in
the Association form an integral part of the withdrawable savings accounts being
surrendered in the Conversion.
3. The Holding Company and the Stock Bank each have no plan or intention
to redeem or otherwise acquire any of the Holding Company Stock issued in the
proposed transaction.
4. To the best of the knowledge of the management of the Association,
there is not now nor will there be at the time of the Conversion, any plan or
intention, on the part of the depositors in the Association to withdraw their
deposits following the Conversion. Deposits withdrawn immediately prior to or
immediately subsequent to the Conversion (other than maturing deposits) are
considered in making these assumptions.
5. Immediately following the consummation of the proposed transaction, the
Stock Bank will possess the same assets and liabilities as the Association held
immediately prior to the proposed transaction, plus substantially all of the net
proceeds from the sale of its stock to the Holding Company (except for assets
used to pay expenses in the Conversion). Assets used to pay expenses of the
reorganization (without reference to the expenses of the Subscription Offering
and the Community Offering) and all distributions (except for regular normal
interest payments made by the Association immediately preceding the transaction)
will in the aggregate constitute less than one percent (1%) of the assets of the
Association, net of liabilities associated with such assets, and will be paid by
the Association and the Holding Company from the proceeds of the Subscription
Offering and Community Offering.
6. Following the Conversion, Stock Bank will continue to engage in its
business in substantially the same manner as engaged in by the Association prior
to the Conversion. The Stock Bank has no plan or intention to sell or otherwise
dispose of any of its assets, except in the ordinary course of business.
7. No cash or property will be given to any member of the Association in
lieu of subscription rights or an interest in the Liquidation Account of the
Stock Bank.
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 9
8. None of the compensation to be received by any deposit account
holder-employees of the Association or the Holding Company will be separate
consideration for, or allocable to, any of their deposits in the Association. No
interest in the Liquidation Account of the Stock Bank will be received by any
deposit account holder-employees as separate consideration for, or will
otherwise be allocable to, any employment agreement, and the compensation paid
to each deposit account holder-employee, during the twelve month period
preceding or subsequent to the Conversion, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services. No shares of Holding Company Stock will be
issued to or purchased by any deposit account holder-employee of the Association
or the Holding Company at a discount or as compensation in the Conversion.
9. The aggregate fair market value of the Qualifying Deposits held by
Eligible Account Holders or Supplemental Eligible Account Holders (if
applicable) as of the close of business on the Eligibility Record Date or
Supplemental Eligibility Record Date (if applicable) entitled to interests in
the Liquidation Account to be established by Stock Bank equalled or exceeded 99%
of the aggregate fair market value of all savings accounts (including those
accounts of less than $50.00) in the Association as of the close of business on
such date.
10. There is no plan or intention for the Stock Bank to be liquidated or
merged with another corporation following the consummation of the Conversion.
11. The Association utilizes a reserve for bad debts in accordance with
Section 593 of the Code and, following the Conversion, the Stock Bank shall
likewise utilize a reserve for bad debts in accordance with Section 593 of the
Code.
12. The Association and the Stock Bank are corporations within the meaning
of Section 7701(a)(3) of the Code.
13. The Holding Company has no plan or intention to sell or otherwise
dispose of the stock of the Stock Bank received by it in the proposed
transaction.
14. Both the Stock Bank and the Holding Company have no plan or intention,
either currently or at the time of the Conversion, to issue additional shares of
common stock following the proposed transaction, other than shares that may be
issued to employees or directors pursuant to certain stock option and stock
incentive plans or that may be issued to employee benefit plans.
15. If all of the net proceeds from the sale of Holding Company Stock had
been contributed by the Holding Company to the Stock Bank in exchange for common
stock of the Stock Bank in the Conversion, as opposed to the Holding Company
retaining a portion of such net proceeds ("retained proceeds"), the Stock Bank
immediately thereafter made a distribution
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 10
of the retained proceeds to the Holding Company, the Stock Bank would have
sufficient current and accumulated earnings and profits for tax purposes such
that the distribution would not result in the recapture of any portion of the
bad debt reserves of the Stock Bank under Section 593(e) of the Code.
16. At the time of the proposed transaction, the fair market value of the
assets of the Association on a going concern basis (including intangibles) will
equal or exceed the amount of its liabilities plus the amount of liability to
which such assets are subject. The Association will have a positive regulatory
net worth at the time of the Conversion.
17. The Association is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code. The
proposed transaction does not involve a receivership, foreclosure, or similar
proceeding before a federal or state agency involving a financial institution to
which Section 585 or 593 of the Code applies.
18. The Association's savings depositors will pay expenses of the
conversion solely attributable to them, if any. The Holding Company, the Stock
Bank, and the Association will pay their own expenses of the Conversion and will
not pay any expenses solely attributable to the savings depositors or to the
Holding Company stockholders.
19. The liabilities of the Association assumed by the Stock Bank plus the
liabilities, if any, to which the transferred assets are subject were incurred
by the Association in the ordinary course of its business and are associated
with the assets transferred.
20. There will be no purchase price advantage for the Association's
deposit account holders who purchase Holding Company Stock in the Conversion.
21. Neither the Association nor the Stock Bank is an investment company as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
22. No creditors of the Association have taken any steps to enforce their
claims against the Association by instituting bankruptcy or other legal
proceedings, in either a court or appropriate regulatory agency, that would
eliminate the proprietary interests of the members of the Association prior to
the Conversion.
23. The proposed transaction does not involve the payment to the Stock Bank
or the Association of financial assistance from federal agencies within the
meaning of Notice 89-102, 1989-40 C.B. 1.
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 11
24. The Eligible Account Holders' and Supplemental Eligible Account
Holders' proprietary interest in the Association arise solely by virtue of the
fact that they are account holders in the Association.
25. At the time of the Conversion, the Association will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire an equity interest in the
Holding Company or the Stock Bank.
26. The Stock Bank has no plan or intention to sell or otherwise dispose
of any of the assets of the Association acquired in the transaction (except for
dispositions, including deposit withdrawals, made in the ordinary course of
business).
27. On a per share basis, the purchase price of the Holding Company Stock
in the Conversion will be equal to the fair market value of such stock at the
time of the completion of the proposed transaction.
28. The Association has received or will receive an opinion from Capital
Resources Group ("Appraiser's Opinion"), which concludes that subscription
rights to be received by Eligible Account Holders, Supplemental Eligible Account
Holders, and other eligible subscribers do not have any ascertainable fair
market value, because they are acquired by the recipients without cost, are
non-transferable, exist for such a short duration, and merely afford the
recipients a right only to purchase Holding Company Stock at a price equal to
its estimated fair market value, which will be the same price used in the Public
Offering for unsubscribed shares of Holding Company Stock.
29. The Association will not have any net operating losses, capital loss
carryovers, or built-in losses at the time of the Conversion.
OPINION OF COUNSEL
Based solely upon the foregoing information and our analysis and
examination of current applicable federal income tax laws, rulings, regulations,
judicial precedents, and the Appraiser's Opinion, and provided the Conversion is
undertaken in accordance with the above assumptions, we render the following
opinion of counsel:
1. The change in the form of operation of the Association from a federally
chartered mutual savings association to a federally chartered capital stock
savings association, as described above, will constitute a reorganization within
the meaning of Section 368(a)(1)(F) of the Code, and no gain or loss will be
recognized to either the Association or to the Stock Bank as a result of such
conversion. (See Rev. Rul. 80-105, 1980-1 C.B. 78). The Association and the
Stock
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 12
Bank will each be a party to a reorganization within the meaning of Section
368(b) of the Code. (Rev. Rul. 72-206, 1972-1 C.B. 104).
2. No gain or loss will be recognized by the Stock Bank on the receipt of
money in exchange for shares of Stock Bank stock. (Section 1032(a) of the Code).
3. The Holding Company will recognize no gain or loss upon its receipt of
money in exchange for shares of Holding Company Stock. (Section 1032(a) of the
Code).
4. The assets of the Association will have the same basis in the hands of
the Stock Bank as in the hands of the Association immediately prior to the
Conversion. (Section 362(b) of the Code).
5. The holding period of the assets of the Association to be received by
the Stock Bank will include the period during which the assets were held by the
Association prior to the Conversion. (Section 1223(2) of the Code).
6. Depositors will realize gain, if any, upon the issuance to them of (i)
withdrawable deposit accounts of the Stock Bank, (ii) subscription rights in
connection with the Conversion, and/or (iii) interests in the Liquidation
Account of the Stock Bank. Any gain resulting therefrom will be recognized, but
only in an amount not in excess of the fair market value of the Liquidation
Accounts and/or subscription rights received. The Liquidation Accounts will have
nominal, if any, fair market value. Based solely on the accuracy of the
conclusion reached in the Appraiser's Opinion, and our reliance on such opinion,
that the subscription rights have no value at the time of distribution or
exercise, no gain or loss will be required to be recognized by depositors upon
receipt or distribution of subscription rights. (Section 1001 of the Code). See
Paulsen v. Commissioner, 469 U.S. 131, 139 (1985).
Likewise, based solely on the accuracy of the aforesaid conclusion reached
in the Appraiser's Opinion, and our reliance thereon, we give the following
opinions: (a) no taxable income will be recognized by the borrowers, directors,
officers, and employees of the Association upon distribution to them of
subscription rights or upon the exercise or lapse of the subscription rights to
acquire Holding Company Stock at fair market value; (b) no taxable income will
be realized by the depositors of the Association as a result of the exercise or
lapse of the subscription rights to purchase Holding Company Stock at fair
market value (Rev. Rul. 56-572, 1956-2 C.B. 182); and (c) no taxable income will
be realized by the Association, the Stock Bank, or the Holding Company on the
issuance or distribution of subscription rights to depositors of the Association
to purchase shares of Holding Company Stock at fair market value (Section 311 of
the Code).
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 13
Notwithstanding the Appraiser's Opinion, if the subscription rights are
subsequently found to have a fair market value greater than zero, income may be
recognized by various recipients of the subscription rights (in certain cases,
whether or not the rights are exercised) and the Holding Company and/or the
Stock Bank may be taxable on the distribution of the subscription rights.
(Section 311 of the Code). In this regard, the subscription rights may be taxed
partially or entirely at ordinary income tax rates.
7. The basis of the savings accounts in the Stock Bank received by the
account holders of the Association will be the same as the basis of their
savings accounts in the Association surrendered in exchange therefor (Section
358(a)(1)). The basis of the interests in the Liquidation Account of the Stock
Bank received by the Eligible Account Holders and Supplemental Eligible Account
Holders will be zero, that being the cost of such property. (Paulsen v.
Commissioner, 469 U.S. 131, 139 (1985)). The basis of the non-transferable
subscription rights will be zero, provided that such subscription rights are not
deemed to have a fair market value and that the subscription price of such stock
issuable upon exercise of such rights is equal to the fair market value of such
stock. The basis of the Holding Company Stock to its stockholders will be
purchase price thereof, increased by the basis, if any, of the subscription
rights exercised (Section 1012 of the Code). The holding period of Holding
Company Stock will commence upon the effective date of exercise of the
subscription rights (Section 1223(6) of the Code). The holding period for the
Holding Company Stock purchased pursuant to the direct community offering,
public offering or under other purchase arrangements will commence on the date
following the date on which such stock is purchased. (Rev. Rul. 70- 598, 1970-2
C.B. 168).
8. The part of the taxable year of the Association before the Conversion
and the part of the taxable year of the Stock Bank after the Conversion will
constitute a single taxable year of the Stock Bank. (See Rev. Rul. 57-276,
1957-1 C.B. 126). Consequently, the Association will not be required to file a
federal income tax return for any portion of such taxable year (Section
1.381(b)-1(a)(2) of the Treasury Regulations).
9. As provided by Section 381(c)(2) of the Code and Section 1.381(c)(2)-1
of the Treasury Regulations, the Stock Bank will succeed to and take into
account the earnings and profits or deficit in earnings and profits of the
Association as of the date or dates of transfer.
10. Pursuant to the provisions of Section 381(c)(4) of the Code and Section
1.381(c)(4)-1(a)(1)(ii) of the Treasury Regulations, the Stock Bank will succeed
to and take into account, immediately after the reorganization, those accounts
of the Association which represent
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 14
bad debt reserves in respect of which the Association has taken a bad debt
deduction for taxable years ending on or before the date of the reorganization.
The bad debt reserves will not be required to be restored to the gross income of
either the Association or the Stock Bank for the taxable year of the
reorganization, and such bad debt reserves will have the same character in the
hands of the Stock Bank as they would have had in the hands of the Association
if no distribution or transfer had occurred. No opinion is being expressed as to
whether the bad debt reserves will be required to be restored to the gross
income of either the Association or the Stock Bank for the taxable year of the
reorganization if the Association or the Stock Bank fails to meet the
requirements of Section 593(a)(2) of the Code during such taxable year.
11. Regardless of book entries made for the creation of the Liquidation
Account, the conversion, as described above, will not diminish the accumulated
earnings and profits of the Stock Bank available for the subsequent distribution
of dividends within the meaning of Section 316 of the Code. (Section 1.312-11(b)
and (c) of the Treasury Regulations).
12. The creation of the Liquidation Account on the records of the Stock
Bank will have no effect on the taxable income of the Association or the Stock
Bank, deductions or additions to reserves for bad debts under Section 593 of the
Code, or distributions to shareholders under Section 593(e). (Rev. Rul. 68-475,
1968-2 C.B. 259).
13. For purposes of Section 381 of the Code, the Stock Bank will be
treated the same as the Association would have been had there been no
reorganization. Accordingly, the taxable year of the Association will not end on
the effective date of the proposed transaction merely because of the transfer of
assets of the Association to the Stock Bank and the tax attributes of the
Association enumerated in Section 381(c) will be taken into account by the Stock
Bank as if there had been no reorganization (Section 1.381(b)-1(a)(2)) of the
Treasury Regulations).
No opinion is expressed as to the tax treatment of the Conversion under
the provisions of any of the other sections of the Code and Treasury Regulations
which may also be applicable thereto, or under federal law, or to the tax
treatment of any conditions existing at the time of, or effects resulting from,
the transactions which are not specifically covered by the items set forth
above. Notwithstanding any reference to Section 381 above, no opinion is
expressed or intended to be expressed herein as to the effect, if any, of this
transaction on the continued existence of, the carryover or carryback of, or the
limitation on, any net operating losses of the Association or its successor, the
Stock Bank, under the Code.
Board of Directors
Amsterdam Federal Savings
and Loan Association
July 29, 1996
Page 15
We hereby consent to the filing of this opinion as an exhibit to the
Application for Conversion on Form AC of the Association filed with the OTS, the
Application H-(e)(1)-S of the Holding Company filed with the OTS, and the
Registration Statement on Form S-1 of the Holding Company filed under the
Securities Act of 1933, as amended, and to the reference of our firm in the
prospectus related to this opinion.
Very truly yours,
/s/Malizia, Spidi, Sloane & Fishch, P.C.
MALIZIA, SPIDI, SLOANE & FISCH, P.C.