Exhibit 8.1
Opinion of Muldoon, Murphy & Faucette LLP
re: Federal Tax Matters
[LETTERHEAD OF MULDOON, MURPHY & FAUCETTE LLP]
FEDERAL TAX OPINION
October 18, 2000
Board of Directors
Lawrence Financial Holdings, Inc.
311 South Fifth Street
Ironton, Ohio 45638
Board of Directors
Lawrence Federal Savings Bank
311 South Fifth Street
Ironton, Ohio 45638
Re: Federal Tax Consequences of the Conversion of Lawrence Federal
Savings Bank from a Federally-chartered Mutual Savings Bank to a
Federally-chartered Stock Savings Bank and the Offer and Sale of
Common Stock of Lawrence Financial Holdings, Inc. (the
"Conversion")
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To the Members of the Board of Directors:
You have requested an opinion regarding all the material federal income
tax consequences of the proposed conversion of Lawrence Federal Savings Bank
(the "Bank") from a federally-chartered mutual savings bank to a
federally-chartered stock savings bank (the "Converted Bank") and the
acquisition of the Converted Bank's capital stock by Lawrence Financial
Holdings, Inc., a Maryland corporation (the "Holding Company"), pursuant to the
plan of conversion adopted by the Board of Directors on July 31, 2000 (the "Plan
of Conversion").
The proposed transaction is described in the Prospectus and the Plan of
Conversion, and the tax consequences of the proposed transaction will be as set
forth in the section of this letter entitled "FEDERAL TAX OPINION."
Board of Directors
October 18, 2000
Page 2
We have made such inquiries and have examined such documents and
records as we have deemed appropriate for the purpose of this opinion. In
rendering this opinion, we have received factual representations of the Holding
Company and the Bank concerning the Holding Company and the Bank as well as the
transaction ("Representations"). We will rely upon the accuracy of the
Representations of the Holding Company and the Bank and the statements of facts
contained in the examined documents, particularly the Plan of Conversion. We
have also assumed the authenticity of all signatures, the legal capacity of all
natural persons and the conformity to the originals of all documents submitted
to us as copies. Each capitalized term used herein, unless otherwise defined,
has the meaning set forth in the Plan of Conversion. We have assumed that the
Conversion will be consummated strictly in accordance with the terms of the Plan
of Conversion.
The Plan of Conversion and the Prospectus contain a detailed
description of the Conversion. These documents as well as the Representations to
be provided by the Holding Company and the Bank are incorporated in this letter
as part of the statement of the facts.
The Bank, with its headquarters in Ironton, Ohio, is a
federally-chartered mutual savings bank. As a mutual savings bank, the Bank has
never been authorized to issue stock. Instead, the proprietary interest in the
reserves and undivided profits of the Bank belong to the deposit account holders
of the Bank, hereinafter sometimes referred to as "shareholders." A shareholder
of the Bank has a right to share, pro rata, with respect to the withdrawal value
of his respective deposit account in any liquidation proceeds distributed in the
event the Bank is ever liquidated. In addition, a shareholder of the Bank is
entitled to interest on his account balance as fixed and paid by the Bank.
In order to provide organizational and economic strength to the Bank,
the Board of Directors has adopted the Plan of Conversion whereby the Bank will
convert itself into a federally-chartered stock savings bank, the stock of which
will be held entirely by the Holding Company. The Holding Company will acquire
the stock of the Converted Bank by purchase, in exchange for the Conversion
proceeds that are not permitted to be retained by the Holding Company. The
Holding Company will apply to the Office of Thrift Supervision ("OTS") to retain
up to 50% of the proceeds received from the Conversion. The aggregate sales
price of the Common Stock issued in the Conversion will be based on an
independent appraiser's valuation of the estimated pro forma market value of the
Holding Company and the Converted Bank. The Conversion and sale of the Common
Stock will be subject to applicable regulatory approval and the approval by the
affirmative vote of a majority of the Members.
The Bank shall establish at the time of Conversion a liquidation
account in an amount equal to its net worth as of the latest practicable date
prior to Conversion. The liquidation account will be maintained by the Converted
Bank for the benefit of the Eligible Account Holders and Supplemental Eligible
Account Holders who continue to maintain their deposit accounts at the Converted
Bank.
Board of Directors
October 18, 2000
Page 3
Each Eligible Account Holder and Supplemental Eligible Account Holder shall,
with respect to his Savings Account, hold a related inchoate interest in a
portion of the liquidation account balance, in relation to his deposit account
balance on the Eligibility Record Date and/or Supplemental Eligibility Record
Date or to such balance as it may be subsequently reduced, as provided in the
Plan of Conversion.
In the unlikely event of a complete liquidation of the Converted Bank
(and only in such event), following all liquidation payments to creditors
(including those to Account Holders to the extent of their deposit accounts),
each Eligible Account Holder and Supplemental Eligible Account Holder shall be
entitled to receive a liquidating distribution from the liquidation account, in
the amount of the then adjusted subaccount balance for his deposit accounts then
held, before any liquidation distribution may be made to any holders of the
Converted Bank's capital stock. No merger, consolidation, purchase of bulk
assets with assumption of Savings Accounts and other liabilities, or similar
transaction with a Federal Deposit Insurance Corporation ("FDIC") institution,
in which the Converted Bank is not the surviving institution, shall be deemed to
be a complete liquidation for this purpose. In such transactions, the
liquidation account shall be assumed by the surviving institution.
LIMITATIONS ON OPINION
Our opinions expressed herein are based solely upon current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), including
applicable regulations thereunder and current judicial and administrative
authority. Any future amendments to the Code or applicable regulations, or new
judicial decisions or administrative interpretations, any of which could be
retroactive in effect, could cause us to modify our opinion. No opinion is
expressed herein with regard to the federal, state, or city tax consequences of
the Conversion under any section of the Code except if and to the extent
specifically addressed.
FEDERAL TAX OPINION
Based upon the Representations and the other factual information
referred to in this letter, and assuming the transaction occurs in accordance
with the Plan of Conversion, and taking into consideration the limitations noted
throughout this opinion, it is our opinion that under current federal income tax
law:
(1) Pursuant to the Conversion, the changes at the corporate
level other than changes in the form of organization will
be insubstantial. Based upon that fact and the fact that
the equity interest of a shareholder in a mutual entity is
more nominal than real, unlike that of a shareholder of a
corporation, the Conversion of the Bank from a
Board of Directors
October 18, 2000
Page 4
mutual entity to a stock savings bank is a tax-free
reorganization since it is a mere change in identity, form
or place of organization within the meaning of section
368(a)(1)(F) of the Code (see Rev. Rul. 80-105, 1980-1 C.B.
78). Neither the Bank nor the Converted Bank shall
recognize gain or loss as a result of the Conversion. The
Bank and the Converted Bank shall each be "a party to a
reorganization" within the meaning of section 368(b) of the
Code.
(2) No gain or loss shall be recognized by the Converted Bank
or the Holding Company on the receipt by the Converted Bank
of money from the Holding Company in exchange for shares of
the Converted Bank's capital stock or by the Holding
Company upon the receipt of money from the sale of its
Common Stock (Section 1032(a) of the Code).
(3) The basis of the assets of the Bank in the hands of the
Converted Bank shall be the same as the basis of such
assets in the hands of the Bank immediately prior to the
Conversion (Section 362(b) of the Code).
(4) The holding period of the assets of the Bank in the hands
of the Converted Bank shall include the period during which
the Bank held the assets (Section 1223(2) of the Code).
(5) No gain or loss shall be recognized by the Eligible Account
Holders and the Supplemental Eligible Account Holders of
the Bank on the issuance to them of withdrawable deposit
accounts in the Converted Bank plus interests in the
liquidation account of the Converted Bank in exchange for
their deposit accounts in the Bank or to the other
depositors on the issuance to them of withdrawable deposit
accounts (Section 354(a) of the Code).
(6) Provided that the amount to be paid for such stock pursuant
to the subscription rights is equal to the fair market
value of the stock, no gain or loss will be recognized by
Eligible Account Holders and Supplemental Eligible Account
Holders upon the distribution to them of the
nontransferable subscription rights to purchase shares of
stock in the Holding Company (Section 356(a)). Gain
realized, if any, by the Eligible Account Holders and
Supplemental Eligible Account Holders on the distribution
to them of nontransferable subscription rights to purchase
shares of Common Stock will be recognized but only in an
amount not in excess of the fair market value of such
subscription rights (Section 356(a)). Eligible Account
Holders and Supplemental Eligible Account Holders will not
realize any taxable income as
Board of Directors
October 18, 2000
Page 5
a result of the exercise by them of the nontransferable
subscription rights (Rev. Rul. 56-572, 1956-2 C.B. 182).
(7) The basis of the deposit accounts in the Converted Bank to
be received by the Eligible Account Holders, Supplemental
Eligible Account Holders and other shareholders of the Bank
will be the same as the basis of their deposit accounts in
the Bank surrendered in exchange therefor (Section
358(a)(1) of the Code). The basis of the interests in the
liquidation account of the Converted Bank to be received by
the Eligible Account Holders and Supplemental Eligible
Account Holders of the Bank shall be zero (Rev. Rul.
71-233, 1971-1 C.B. 113). The basis of the Holding Company
Common Stock to its stockholders will be the purchase price
thereof plus the basis, if any, of nontransferable
subscription rights (Section 1012 of the Code).
Accordingly, assuming the nontransferable subscription
rights have no value, the basis of the Common Stock to the
Eligible Account Holders and Supplemental Eligible Account
Holders will be the amount paid therefor. The holding
period of the Common Stock purchased pursuant to the
exercise of subscription rights shall commence on the date
on which the right to acquire such stock was exercised
(Section 1223(6) of the Code).
Our opinion under paragraph (6) above is predicated on the
Representation that no person shall receive any payment, whether in money or
property, in lieu of the issuance of subscription rights. Our opinion under
paragraphs (6) and (7) above assumes that the subscription rights to purchase
shares of Common Stock received by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members have a fair market value of zero. We
understand that you have received a letter from Keller & Company, Inc. that the
subscription rights do not have any value. We express no view regarding the
valuation of the subscription rights.
If the subscription rights are subsequently found to have a fair market
value, income may be recognized by various recipients of the subscription rights
(in certain cases, whether or not the rights are exercised) and Holding Company
and/or the Converted Bank may be taxable on the distribution of the subscription
rights.
* * *
Since this letter is rendered in advance of the closing of this
transaction, we have assumed that the transaction will be consummated in
accordance with the Plan of Conversion as well as all the information and
Representations referred to herein. Any change in the transaction could cause us
to modify our opinion.
Board of Directors
October 18, 2000
Page 6
We consent to the inclusion of this opinion as an exhibit to the Form
AC Application for Conversion of the Bank and the references to and summary of
this opinion in such Application for Conversion. We also consent to the
inclusion of this opinion as an exhibit to the Form SB-2 Registration Statement
and the Form H-(e)1-S Application of the Holding Company and the references to
and summary of this opinion in both the Form SB-2 and the Form H-(e)1-S.
Sincerely,
/s/ MULDOON, MURPHY & FAUCETTE LLP
MULDOON, MURPHY & FAUCETTE LLP