FORM OF FEDERAL TAX OPINION OF COUNSEL
___________, 2000
Board of Directors
First Federal Savings and Loan Association of Olathe
100 East Park Street
Olathe, Kansas 66061
Re: Federal Income Tax Consequences Relating to Conversion of the
Association from a Federal Mutual Savings and Loan Association to
a Federal Stock Savings and Loan Association and the Acquisition
of the Stock Institution's Stock by a Stock Holding Company
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Gentlemen:
In accordance with your request, set forth herein is the opinion of
this firm relating to the federal income tax consequences of the proposed
conversion of First Federal Savings and Loan Association of Olathe (the
"Association") from a federal mutual savings and loan association to a federal
stock savings and loan association (the "Stock Association"), and the
acquisition of the Stock Association's capital stock by First Federal of Olathe
Bancorp, Inc. (the "Holding Company"), pursuant to the plan of conversion
adopted by the Board of Directors on October 13, 1999 (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 fort in the section of this letter entitled "OPINION"
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate.
In issuing our opinion, we have assumed that the Plan of Conversion has
been duly and validly authorized and has been approved and adopted by the board
of directors of the Association at a meeting duly called and held; that the
Association will comply with the terms and conditions of the Plan of Conversion,
and that the various representations and warranties which are provided to us are
accurate, complete, true and correct. Accordingly, we express no opinion
concerning the effect, if any, of variations from the foregoing. We specifically
express no opinion concerning tax matters relating to the Plan of Conversion
under state and local tax laws and under Federal income tax laws except on the
basis of the documents and assumptions described above. Terms used herein but
not defined herein, whether capitalized or not, shall have the same meaning as
set forth in the Plan of Conversion.
For purposes of this opinion, we are also relying on the
representations provided to us by the Association as described in the Affidavit
of the Association's President and Chief Executive Officer as attached hereto
and incorporated herein.
Board of Directors
First Federal Savings and Loan Association of Olathe
____________, 2000
Page 2
In issuing the opinion set forth below, we have relied solely on
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"); existing and proposed Treasury Regulations (the "Regulations")
thereunder; current administrative rulings, notices and 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.
The Association, with its headquarters in Olathe, Kansas is a
federally-chartered mutual savings and loan association. As a mutual savings and
loan association, the Association has never been authorized to issue stock.
Instead, the proprietary interest in the reserves and undivided profits of the
Association belong to the deposit account holders of the Association,
hereinafter sometimes referred to as "depositors." A depositor of the
Association has a right to share, pro rate, with respect to the withdrawal value
of his respective Deposit Account in any liquidation proceeds distributed in the
event the Association is ever liquidated. In addition, a depositor of the
Association is entitled to interest in his account balance as fixed and paid by
the Association.
In order to provide organizational and economic strength to the
Association, the Board of Directors has adopted the plan of Conversion whereby
the Association 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 Stock Association by purchase, in
exchange for a portion of the proceeds from the Conversion. 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
Conversion Stock will be based on an independent appraiser's valuation of the
estimated pro forma market value of the Holding Company and the Stock
Association. The Conversion and sale of the Conversion Stock will be subject to
the applicable regulatory approval and the approval by the affirmative vote of a
majority of the Members of the Association.
The Association 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 Stock
Association for the benefit of the Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain their deposit accounts at the
Stock Association. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to his Deposit 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 Stock
Association (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 Stock Association's capital stock. No merger, consolidation,
purchase of bulk assets with assumption of Savings Accounts and other
Board of Directors
First Federal Savings and Loan Association of Olathe
____________, 2000
Page 3
liabilities, or similar transaction with a Federal Deposit Insurance Corporation
("FDIC") institution, in which the Stock Association 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.
Following the Conversion, voting rights in the Stock Association will
rest exclusively with the shareholder of stock in the Stock Association, which
will be the Holding Company. Voting rights in the Holding Company will rest
exclusively with the holders of its capital stock. The Conversion will not
interrupt the business of the Association, and its business will continue as
usual under the Stock Association. Each depositor will retain a withdrawable
savings account or accounts equal in dollar amount to, and on the same terms and
conditions as, the withdrawable account or accounts at the time of the
Conversion except to the extent funds or deposits are used to pay for Holding
Company Conversion Stock. All loans of the Association will remain unchanged and
retain their same characteristics in the Stock Association after the Conversion.
Following the Conversion, the Stock Association will continue to engage in the
same business as the Association immediately prior to the Conversion, and the
Stock Association will continue to have its savings accounts insured by the
Federal Deposit Insurance Corporation up to applicable limits.
Immediately prior to the Conversion, the Association will have a
positive net worth determined in accordance with generally accepted accounting
principles.
LIMITATIONS ON OPINION
Our opinions expressed herein are based upon current provisions of the
Internal Revenue Code of 1986, as amended ("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.
OPINION
Based on the foregoing, and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed Conversion:
1. The conversion of the Association from mutual to stock form will
qualify as a reorganization under Section 368(a)(1)(F) of the
Internal Revenue Code, and no gain or loss will be recognized by
the Association in either its mutual form or its stock form by
reason of the proposed conversion.
2. No gain or loss will be recognized by the Association upon the
receipt of money from Holding Company for stock of the Stock
Association; and no gain or loss will
Board of Directors
First Federal Savings and Loan Association of Olathe
____________, 2000
Page 4
be recognized by the Holding Company upon the receipt of money
for common stock of the Holding Company. (Code Section 1032(a)).
3. No gain or loss will be recognized by Eligible Account Holders
and Supplemental Eligible Account Holders of the Association upon
the issuance to them of withdrawable deposit accounts in the
Stock Association plus an interest in the liquidation account of
Stock Association in exchange for their deposit accounts in the
Association in its mutual form. (Code Section 354(a)).
4. Assuming the non-transferable subscription rights to purchase
common stock have no value, the tax basis of an account holder's
deposit accounts in the Stock Association will be the same as the
basis of the account holder's deposit accounts in the Association
in its mutual form.
5. Assuming the non-transferable subscription rights to purchase
common stock have no value, the tax basis of each Eligible
Account Holder's and Supplemental Eligible Account Holder's
interest in the liquidation account will be zero.
6. The basis of the Holding Company common stock to its shareholders
will be the purchase price thereof and a shareholder's holding
period for Holding Company common stock acquired through the
exercise of subscription rights shall begin on the date of
consummation of the Conversion. (Code Sections 1012 and 1223(6)).
CONSENT
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form SB-2 ("Registration Statement") of the Holding
Company filed with the Securities and Exchange Commission with respect to the
Conversion and as an exhibit to the Application for Conversion on Form AC ("Form
AC") of the Association filed with the OTS with respect to the Conversion. We
also hereby consent to the references to this firm in the prospectus which is a
part of both the Registration Statement and the Form AC.
USE OF OPINION
This opinion is rendered solely for the benefit of the Holding Company
and the Association in connection with the proposed transactions described
herein and is not to be relied upon or used for any other purpose without our
prior written consent.
Very truly yours,
LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation