EXHIBIT 8.1
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
ATTORNEYS AT LAW
1301 K STREET, N.W.
SUITE 700 EAST
WASHINGTON, D.C. 20005
(202) 434-4660
FACSIMILE: (202) 434-4661
WRITER's DIRECT DIAL NUMBER
March 13, 1998
Board of Directors
First Kansas Federal Savings Association
600 Main Street
Osawatomie, Kansas 66064
Re: Federal Income Tax Opinion Relating to the Proposed Conversion of
First Kansas Federal Savings Association from a
Federally-Chartered Mutual Savings Association to a
Federally-Chartered Stock Savings Bank Pursuant to Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended
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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 First Kansas Federal Savings Association (the
"Association") from a federally-chartered mutual savings 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 Bank's Plan of Conversion adopted on December 16, 1997,
as amended (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 reliance upon such documents and information,
we understand the relevant facts with respect to the Conversion to be as
follows:
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 2
The Association is a federally-chartered mutual savings association. As
a mutual savings 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 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 stock
held by the Holding Company. Pursuant to the Plan of Conversion, the
Association's certificate of incorporation to operate as a mutual savings bank
will be amended and a new certificate of incorporation will 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 is being formed under the laws of the State of
Kansas 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 Conversion, as described
below, to persons purchasing such shares through a Subscription Offering and to
the general public in a Public 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
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 3
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 Association'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
public 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
September 30, 1996, 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 Public 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 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
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 4
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
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,
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 5
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 Public 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 $200,000 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
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
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 6
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
Association.
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 Association. 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, 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.
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 7
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 stockholders of the Holding Company. 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:
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.
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 8
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 Association 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 Conversion (without reference to the expenses of the
Subscription Offering and the Public 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 Public 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.
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.
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 9
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. For taxable years prior to January 1, 1996, the Association
utilized the reserve method of accounting for bad debts in accordance with
Section 593 of the Code. Pursuant to the Small Business Job Protection Act of
1996, which was signed by the President on August 20, 1996, the Stock Bank will
utilize a reserve for bad debts in accordance with Section 585 of the Code
(following the Conversion).
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"), and if
the Stock Bank immediately thereafter made a distribution 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.
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 10
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.
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).
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 11
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, Inc. ("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 bank to a federally chartered capital stock
savings bank, 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 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 Association as in the hands of the Association immediately prior to
the Conversion. (Section 362(b) of the Code).
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 12
5. The holding period of the assets of the Association to be received
by the Stock Association 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).
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
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 13
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 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 Association 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.
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. 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
Board of Directors
First Kansas Federal Savings Association
March 13, 1998
Page 14
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.
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 SB-2 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 & Fisch
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MALIZIA, SPIDI, SLOANE & FISCH, P.C.