EXHIBIT 8.0
June 11, 1997
Board of Directors
Life Savings Bank, Federal Savings Bank
1598 East Highland Avenue
San Bernardino, California 92404
Board of Directors
Life Financial Corp.
4110 Tigris Way
Riverside, California 92503
Re: Federal Tax Consequences of Reorganization of
Life Savings Bank, Federal Savings Bank
into a Holding Company Form of Ownership
To the Members of the Board of Directors:
You have requested an opinion regarding certain federal income tax
consequences of a proposed transaction involving the reorganization of Life
Savings Bank, Federal Savings Bank ("Life Savings" or the "Bank") into a holding
company form of ownership. This transaction will be completed pursuant to the
Amended Agreement and Plan of Reorganization dated as of December 12, 1996 and
amended on January 16, 1997 (the "Plan"), between Life Savings, a federal stock
savings bank, Life Financial Corp., a Delaware corporation ("Life Financial
Corp." or the "Holding Company"), and Life Interim Federal Savings Bank, an
interim federal stock savings bank ("Interim").
Under the terms of the Plan, the Bank has caused Life Financial Corp. to be
organized under Delaware law as a wholly-owned subsidiary for the purpose of
becoming the holding company of the Bank. The Reorganization will be
accomplished by causing Life Financial Corp. to become the sole stockholder of
the newly formed Interim, and then merging Interim into the Bank, so that as
part of the merger each of the outstanding shares of common stock of the Bank
will automatically be converted into three shares of common stock of Life
Financial Corp., which would then become the sole stockholder of the Bank
("Reorganization").
Board of Directors
June 11, 1997
Page 2
The proposed transaction will be described in the section of this letter
entitled "STATEMENT OF FACTS," and the federal income tax consequences of the
proposed transaction will be set forth in the section of this letter entitled
"OPINION."
STATEMENT OF FACTS
Life Financial Corp. is a recently organized Delaware corporation formed by
the Bank as a financial services holding company to facilitate the
Reorganization. Life Financial Corp. has no prior operating history. Pursuant
to the Plan of Reorganization, Life Financial Corp. will become a savings and
loan holding company subject to the Home Owners' Loan Act. The Reorganization
will be accomplished by means of the steps set forth in the Plan.
Life Financial Corp. intends to organize as its wholly-owned subsidiary an
interim federal stock savings bank, with the name, Life Interim Federal Savings
Bank ("Interim"), in order to effect the Reorganization. If the Reorganization
is approved by the shareholders of the Bank, and subject to satisfaction of all
other conditions set forth in the Plan of Reorganization, on the Effective Date,
Interim will be merged with and into the Bank ("Merger"), with Life Savings as
the Resulting Institution.
Upon the Effective Date of the Reorganization, all shares of common stock
of Life Financial Corp. held by Life Savings shall be cancelled and shall no
longer be deemed to be issued or outstanding for any purpose. On the Effective
Date, each share of common stock, $8.00 stated value, of Life Savings (the "Bank
Common Stock") issued and outstanding immediately prior to the Effective Date
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become three (3) shares of fully paid and non-
assessable common stock, par value $.01 per share, of Life Financial Corp. (the
"Company Common Stock"). From and after the Effective Date, each certificate
which, prior to the Effective Date, represented shares of the Bank, shall
evidence ownership of Life Financial Corp. on the basis set forth in the Plan.
Following the Merger, the existence of Life Savings shall continue
unaffected and unimpaired by the Merger, with all the rights, privileges,
immunities and powers, and subject to all the duties and liabilities, of a stock
savings bank organized under federal law, with a charter and bylaws in the form
approved by the Office of Thrift Supervision; and the Charter and Bylaws of Life
Savings, as in effect on the Effective Date, shall continue in full force and
effect and shall not be changed in any manner whatsoever by the Merger.
From and after the Effective Date, and subject to the actions of the Board
of Directors of Life Savings, the business presently conducted by the Bank will
continue to be conducted
Board of Directors
June 11, 1997
Page 3
by the Resulting Institution. It is the parties' intention that the continuity
of operation of Life Savings' business will be maintained as a wholly-owned
subsidiary of the Company.
The Plan of Reorganization sets forth several conditions which must be
satisfied before the Reorganization will be consummated. We have assumed that
the Reorganization will be completed as set out in the Plan and that all
conditions will be satisfied prior to the Reorganization.
* * *
You have also provided the following representations concerning the above
described transaction:
(a) The fair market value of the Holding Company stock received by each
Bank shareholder is approximately equal to the fair market value of
the Bank stock surrendered in the exchange.
(b) There is no plan or intention by the shareholders of the Bank who own
five percent or more of the Bank stock, and to the best of the
knowledge of the management of the Bank, there is no plan or intention
on the part of the remaining shareholders of the Bank to sell,
exchange, or otherwise dispose of a number of shares of Holding
Company stock received in the transaction that would reduce the Bank
shareholders' ownership of Holding Company stock to a number of shares
having a value, as of the date of the transaction, of less than 50
percent of the value of all of the formerly outstanding stock of the
Bank as of the same date. Shares of Bank stock and shares of Holding
Company stock held by Bank shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the transaction will be
considered in making this representation.
(c) Following the transaction, the Bank will hold at least 90 percent of
the fair market value of its net assets and at least 70 percent of the
fair market value of its gross assets and at least 90 percent of the
fair market value of Interim's net assets and at least 70 percent of
the fair market value of Interim's gross assets held immediately prior
to the transaction. For purposes of this representation, amounts used
by the Bank or Interim to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends)
will be included as assets of the Bank or Interim, respectively,
immediately prior to the transaction.
Board of Directors
June 11, 1997
Page 4
(d) Prior to the transaction, the Holding Company was in control of
Interim within the meaning of section 368(c) of the Code (i.e., owned
at least 80% in vote and value of all classes of stock).
(e) The Bank has no plan or intention to issue additional shares of its
stock that would result in the Holding Company losing control of the
Bank within the meaning of section 368(c) of the Code.
(f) The Holding Company has no plan or intention to reacquire any of its
stock issued in the transaction.
(g) The Holding Company has no plan or intention to liquidate the Bank; to
merge the Bank with or into another corporation; to sell or otherwise
dispose of the stock of the Bank except for transfers of stock to
corporations controlled by the Holding Company; or to cause the Bank
to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Interim, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation
controlled by the Bank.
(h) Interim had no liabilities assumed by the Bank, and did not transfer
to the Bank any assets subject to liabilities, in the transaction.
(i) Following the transaction, the Bank will continue its historic
business or use a significant portion of its historic business assets
in a business.
(j) Interim, the Holding Company, the Bank and Bank shareholders will pay
their respective expenses, if any, incurred in connection with the
transaction.
(k) There is no intercorporate indebtedness existing between/among any of
the parties to the transaction that was issued, acquired, or will be
settled at a discount.
(l) In the transaction, shares of Bank stock representing control of the
Bank, as defined in section 368(c) of the Code, will be exchanged
solely for voting stock of the Holding Company. For purposes of this
representation, shares of Bank stock exchanged for cash or other
property originating with Holding Company will be treated as
outstanding Bank stock on the date of the transaction.
(m) At the time of the transaction, the Bank did not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in the Bank that, if
exercised or converted, would
Board of Directors
June 11, 1997
Page 5
affect the Holding Company's acquisition or retention of control of
the Bank, as defined in section 368(c) of the Code.
(n) At the time of the transaction, the Holding Company did not own, nor
had it owned during the five years preceding the transaction, any
shares of stock of the Bank.
(o) None of the parties to the transaction is an investment company as
defined in sections 368(a)(2)(F)(iii) and (iv) of the Code.
(p) On the date of the transaction, the fair market value of the assets of
the Bank exceeded the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets were subject.
(q) At the time of the transaction, the Bank was not under the
jurisdiction of a bankruptcy court in a Title 11 or similar case
within the meaning of section 368(a)(3)(A) of the Code.
(r) Immediately after the assumption of the Stock Option Plan by the
Holding Company, the spread between the aggregate fair market value of
the shares subject to the options over the aggregate option price of
such shares was not (or will not be) greater than such spread
immediately before the assumption.
(s) The ratio of the option price to the fair market value of the stock
subject to the options immediately after the assumption of the Stock
Option Plan by the Holding Company is not more favorable to the
holders than the ratio of the option price to the fair market value of
the stock subject to the options immediately before such assumption.
(t) The options under the Stock Option Plan were not traded on an
established securities market prior to the transaction, and will not
be traded on an established securities market after the transaction.
(u) None of the compensation received by any shareholder-employees of the
Bank is separate consideration for, or allocable to, any of their
shares of Bank stock; none of the shares of Holding Company stock
received by any shareholder-employees is separate consideration for,
or allocable to, any employment agreement; and the compensation paid
to any shareholder-employees is for services actually rendered and is
commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
Board of Directors
June 11, 1997
Page 6
(v) The Bank has been entitled to take a deduction for additions to its
reserve for bad debts under section 593 of the Code.
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. This opinion is based on the
assumption that the transaction will be consummated in accordance with the Plan
of Reorganization as well as all the information and representations referred to
herein. Any change in the transaction could cause us to modify our opinion. No
opinion is expressed herein with regard to the federal, state, or local tax
consequences of the proposed transactions under any section of the Code (or
under state or local tax law) except if and to the extent specifically
addressed.
OPINION
Based solely upon the foregoing representations and information and
assuming the transaction occurs in accordance with the Plan of Reorganization,
and taking into consideration the limitations outlined in this opinion, it is
our opinion that under current federal income tax law:
1. The proposed merger will constitute a reorganization within the
meaning of section 368(a)(1)(A) of the Code. The reorganization will
not be disqualified by reason of the fact that the voting stock of the
Holding Company is used in the merger (section 368(a)(2)(E)). The
Bank, Holding Company and Interim will each be "a party to a
reorganization" within the meaning of section 368(b).
2. No gain or loss will be recognized by the stockholders of the Bank
upon the transfer of their Common Stock in the Bank to Bank solely in
exchange for the Holding Company's Common Stock. Section 354(a)(1) of
the Code.
Board of Directors
June 11, 1997
Page 7
3. The basis of Life Financial Corp.'s Common Stock to be received by the
stockholders of the Bank in the transaction will, in each instance, be
the same as the basis of such Common Stock of the Bank exchanged
therefor. Section 358(a)(1) of the Code.
4. The holding period of Life Financial Corp. Common Stock received by
the stockholders of the Bank in the transaction will, in each
instance, include the period during which the stockholders held the
Bank Common Stock exchanged therefor, provided that the Bank's Common
Stock is held as a capital asset on the date of the transaction.
Section 1223(1) of the Code.
5. No gain or loss will be recognized by Interim as a result of the
reorganization. Section 361 of the Code.
6. No gain or loss will be recognized by Bank upon the receipt of the
assets of Interim in exchange for Bank Common Stock. Section 1032(a)
of the Code.
7. No gain or loss will be recognized by the Holding Company upon its
receipt of the Bank's common stock in exchange for the surrender of
its Interim Common Stock solely for Bank Common Stock. Section
354(a)(1) of the Code.
Accordingly, the transaction will have no adverse federal income tax
effects on Life Financial Corp., the Bank, or the stockholders of the Bank.
However, as we have previously advised, each Bank stockholder should consult his
or her tax counsel as to the specific federal, state and local tax consequences
of the transaction, if any, applicable to such stockholder.
Sincerely,
/s/ MULDOON, MURPHY & FAUCETTE
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MULDOON, MURPHY & FAUCETTE