EXHIBIT 8.1
[LETTERHEAD OF MULDOON MURPHY
FAUCETTE & AGUGGIA LLP]
August 2, 2004
Board of Directors
Naugatuck Valley Financial Corporation
333 Church Street
Naugatuck, Connecticut 06770
Dear Board Members:
You have asked our opinion regarding certain federal income tax
consequences of the proposed transactions (collectively, the "Reorganization and
Charter Conversion"), more fully described below, pursuant to which Naugatuck
Valley Savings and Loan, S.B. (the "Bank") will (i) convert from a
Connecticut-chartered mutual savings bank to a federal mutual savings bank (the
"Charter Conversion") and (ii) the federal savings bank will reorganize into the
federally chartered mutual holding company structure (the "Reorganization"). We
are rendering this opinion pursuant to Section 22 of the Plan of Reorganization
and Minority Stock Issuance ("Plan of Reorganization") and Section 6 of the Plan
of Charter Conversion. As used in this letter, "Mutual State Savings Bank"
refers to the Bank before the Charter Conversion, Mutual Federal Savings Bank"
refers to the Bank after the Charter Conversion and before the Reorganization
and "Stock Savings Bank" refers to the Savings Bank after the Reorganization.
All other capitalized terms used but not defined in this letter shall have the
meanings assigned to them in the Plan of Reorganization and Plan of Charter
Conversion.
The Reorganization and Charter Conversion will be effected, pursuant to
the Plan of Reorganization and Plan of Charter Conversion, as follows:
(i) the Mutual State Saving Bank will exchange its Connecticut
charter for a federal mutual savings bank charter;
(ii) the Mutual Federal Savings Bank will organize an interim
federal stock savings bank as a wholly owned subsidiary
("Interim One");
(iii) Interim One will organize a stock corporation as a wholly
owned subsidiary ("Naugatuck Valley Financial Corporation");
(iv) Interim One will organize an interim federal stock savings
bank as a wholly owned
Board of Directors
August 2, 2004
Page 2
subsidiary ("Interim Two");
(v) the Mutual Federal Savings Bank will convert its charter to a
federal stock savings bank charter to become the Stock Savings
Bank (the "Conversion") and Interim One will exchange its
charter for a federal mutual holding company charter to become
the "Mutual Holding Company";
(vi) sequentially with step (iv), Interim Two will merge with and
into Stock Savings Bank with Stock Savings Bank as the
resulting institution;
(vii) 100% of the issued common stock of the Stock Savings Bank will
be transferred to the Mutual Holding Company in exchange for
membership interests in Mutual Federal Savings Bank which are
conveyed to the Mutual Holding Company; and
(viii) the Mutual Holding Company will transfer 100% of the issued
common stock of the Stock Savings Bank to Naugatuck Valley
Financial Corporation in a capital distribution.
Simultaneously with the Reorganization, Naugatuck Valley Financial
Corporation will offer to sell additional shares of its common stock pursuant to
the Plan of Reorganization, with priority subscription rights granted in
descending order as follows:
(i) to depositors of the Bank with deposits having an aggregate
account balance of at least fifty dollars on April 30, 2003
("Eligible Account Holders");
(ii) to tax-qualified employee benefit plans of the Bank;
(iii) to depositors of the Bank with deposits having an aggregate
account balance of at least fifty dollars on the last day of
the calendar quarter preceding the Office of Thrift
Supervision's approval of the Reorganization ("Supplemental
Eligible Account Holders");
(iv) to other depositors of the Bank who do not already have
subscription rights pursuant to (i) through (iii), above
("Other Members"); and
(v) to members of the general public.
In connection with the opinions expressed below, we have examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of the Plan of Reorganization, Plan of Charter Conversion, the
Prospectus, and of such corporate records of the parties to the Reorganization
as we have deemed appropriate. We have also relied, without independent
verification, upon the factual representations of the Bank included in a
Certificate of Representations dated August 2, 2004. We have assumed that
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August 2, 2004
Page 3
such representations are true and that the parties to the Reorganization and
Charter Conversion will act in accordance with the Plan of Reorganization and
the Plan of Charter Conversion. We express no opinion concerning the effects, if
any, of variations from the foregoing.
In issuing the opinions set forth below, we have referred solely to
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations thereunder, current
administrative rulings, notices, procedures and court decisions. Such laws,
regulations, administrative rulings, notices and procedures and court decisions
are subject to change at any time. Any such change could affect the continuing
validity of the opinions set forth below. This opinion is as of the date hereof,
and we disclaim any obligation to advise you of any change in any matter
considered herein after the date hereof.
Based on and subject to the foregoing, it is our opinion that for federal
income tax purposes, under current tax law:
(a) With regard to the Charter Conversion:
(1) The Charter Conversion will constitute a reorganization under
Section 368(a)(1)(F) of the Code; and
(2) The Bank, in either its status as the Mutual State Savings
Bank or the Mutual Federal Savings Bank, will recognize no
gain or loss as a result of the Charter Conversion.
(b) With regard to the Conversion:
(1) the Conversion will constitute a reorganization under section
368(a)(1)(F) of the Code, and the Savings Bank (in either its
status as a Mutual Federal Savings Bank or Stock Savings Bank)
will recognize no gain or loss as a result of the Conversion;
(2) the basis of each asset of Mutual Federal Savings Bank held by
Stock Savings Bank immediately after the Conversion will be
the same as Mutual Federal Savings Bank's basis for such asset
immediately prior to the Conversion;
(3) the holding period of each asset of Mutual Federal Savings
Bank held by Stock Savings Bank immediately after the
Conversion will include the period during which such asset was
held by Mutual Federal Savings Bank prior to the Conversion;
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August 2, 2004
Page 4
(4) for purposes of Code section 381(b), Stock Savings Bank will
be treated as if there had been no reorganization and,
accordingly, the taxable year of the Mutual Federal Savings
Bank will not end on the effective date of the Conversion and
the tax attributes of Mutual Federal Savings Bank (subject to
application of Code Sections 381, 382 and 384), including
Mutual Federal Savings Bank's bad debt reserves and earnings
and profits, will be taken into account by Stock Savings Bank
as if the Conversion had not occurred;
(5) Mutual Federal Savings Bank's members will recognize no gain
or loss upon their constructive receipt of shares of Stock
Savings Bank common stock, pursuant to the Conversion, solely
in exchange for their mutual ownership interest (i.e.,
liquidation and voting rights) in Mutual Federal Savings Bank;
and
(6) Mutual Federal Savings Bank's members will recognize no gain
or loss upon the issuance to them of deposits in Stock Savings
Bank in the same dollar amount and upon the same terms as
their deposits in Mutual Federal Savings Bank.
(c) With regard to the Exchange:
(1) the Exchange will qualify as an exchange of property for stock
under Code section 351;
(2) the initial shareholders of Stock Savings Bank (the former
Mutual Federal Savings Bank members) will recognize no gain or
loss upon the constructive transfer to the Mutual Holding
Company of the shares of Stock Savings Bank common stock they
constructively received in the Conversion solely in exchange
for mutual ownership interests (i.e., liquidation and voting
rights) in the Mutual Holding Company; and
(3) the Mutual Holding Company will recognize no gain or loss upon
its receipt from the shareholders of Stock Savings Bank of
shares of Stock Savings Bank common stock solely in exchange
for membership interests in the Mutual Holding Company.
(d) With regard to the Mutual Holding Company's transfer of 100% of the
common stock of Stock Savings Bank to Naugatuck Valley Financial
Corporation:
(1) Naugatuck Valley Financial Corporation will recognize no gain
or loss upon its receipt of 100% of the common stock of Stock
Savings Bank from the Mutual Holding Company; and
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August 2, 2004
Page 5
(2) the Mutual Holding Company will recognize no gain or loss upon
its transfer of 100% of the common stock of Stock Savings Bank
from the Mutual Holding Company.
(e) With regard to those who hold subscription rights:
(1) it is more likely than not that the fair market value of the
non-transferable subscription rights to purchase shares of
common stock of Naugatuck Valley Financial Corporation to be
issued to Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members is zero (the "Subscription
Right") and, accordingly, that no income will be realized by
Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members upon the issuance to them of the
Subscription Rights (Section 356(a) of the Code) or upon the
exercise of the Subscription Rights (Rev. Rul. 56-572, 1956-2
C.B. 182);
(2) it is more likely than not that the tax basis to the holders
of shares of common stock purchased in the offering pursuant
to the exercise of the Subscription Rights will be the amount
paid therefor, and that the holding period for such shares of
common stock will begin on the date of completion of the
Reorganization (Section 1012 of the Code); and
(3) the holding period for shares of common stock purchased in the
Community Offering or Syndicated Community Offering will begin
on the day after the date of the purchase (Section 1223(6) of
the Code).
The opinions set forth in (e)(1) and (e)(2) above are based on the
position that the subscription rights do not have any market value at the time
of distribution or at the time they are exercised. Whether subscription rights
have a market value for federal income tax purposes is a question of fact,
depending upon all relevant facts and circumstances. The Internal Revenue
Service will not issue rulings on whether subscription rights have a market
value. We are unaware of any instance in which the Internal Revenue Service has
taken the position that nontransferable subscription rights issued by a
converting financial institution have a market value. The subscription rights
will be granted at no cost to the recipients, will be nontransferable and of
short duration, and will afford the recipients the right only to purchase
Naugatuck Valley Financial Corporation common stock at a price equal to its
estimated fair market value, which will be the same price as the purchase price
for the unsubscribed shares of common stock. We believe that it is more likely
than not (i.e., that there is a more than a 50% likelihood) that the
subscription rights have no market value for federal income tax purposes.
This opinion is given solely for the benefit of the parties to the Plan of
Reorganization, the Plan of Charter Conversion, the shareholders of Stock
Savings Bank and Eligible Account Holders, Supplemental
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August 2, 2004
Page 6
Eligible Account Holders and other investors who purchase pursuant to the Plan
of Reorganization, and may not be relied upon by any other party or entity or
referred to in any document without our express written consent. We consent to
the filing of this opinion as an exhibit to the Forms MHC-1, MHC-2 and H-(e)1-S
filed with the Office of Thrift Supervision and as an exhibit to the
registration statement on Form S-1 filed by Naugatuck Valley Financial
Corporation with the Securities and Exchange Commission in connection with the
Reorganization , and to the reference thereto in the prospectus included in the
registration statement on Form S-1 under the headings "The Reorganization and
Stock Issuance- Material Income Tax Consequences" and "Legal and Tax Opinions."
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ Muldoon Murphy Faucette & Aguggia LLP
MULDOON MURPHY FAUCETTE & AGUGGIA LLP