Exhibit 8.2
FORM OF STATE TAX OPINION
September 24, 1999
Westborough Savings Bank
100 East Main Street
Westborough, MA 01581
Re: Mutual Holding Company Formation
Ladies and Gentlemen:
We have acted as counsel to Westborough Savings Bank (the "Bank"), a
Massachusetts chartered mutual savings bank, in connection with certain
Massachusetts state tax consequences of the transactions described in the
Westborough Savings Bank Plan of Reorganization from a Mutual Savings Bank to a
Mutual Holding Company and Stock Issuance Plan, dated as of March 15, 1999 and
amended on April 15, 1999 (the "Plan"). Capitalized terms used but not defined
herein shall have the respective meanings ascribed to them in the Plan.
We have examined the law and such papers, including the Plan of Reorganization,
as deemed necessary to render this opinion. As to questions of fact material to
our opinions we have relied upon representations set forth in the Plan of
Reorganization (including the Exhibits), and such other documents pertaining to
the transactions contemplated by the Plan of Reorganization as we have deemed
appropriate and necessary. In rendering our opinion, we have relied upon the
opinions of Thacher Proffitt & Wood related to the Federal tax consequences of
the transactions contemplated by the Plan of Reorganization (the "Federal Tax
Opinions"), without undertaking to verify the same by independent investigation.
Pursuant to the Plan of Reorganization Bank will reorganize from a
state-chartered mutual savings bank into a mutual holding company structure.
The Reorganization will be effected, pursuant to the Plan, as follows:
(1) The Bank will organize Westborough Bancorp as a mutual savings bank
("Mutual Bank").
Westborough Savings Bank
September 24, 1999
Page 2
(2) Mutual Bank will organize two wholly-owned subsidiaries, one of which
will be Westborough Financial Services, Inc. ("Stock Holding Company"),
and the other of which will be an interim stock savings bank ("Interim").
(3) The Bank will exchange its charter for a Massachusetts stock savings bank
charter and thereby become a stock savings bank ("Stock Bank") known as
The Westborough Bank (the "Conversion"). The holders of deposit accounts
in the Bank (the "Depositors") will constructively exchange their mutual
interests in the Bank for shares of stock in Stock Bank. The Depositors
will hold deposit accounts in Stock Bank in the same amount and on the
same terms and conditions as the deposit accounts previously held in the
Bank.
(4) Mutual Bank will exchange its charter for a Massachusetts mutual
holding company charter and thereby become a mutual holding company
("Mutual Holding Company").
(5) Interim will merge with and into Stock Bank with Stock Bank surviving. In
the merger, the Depositors will exchange the stock of Stock Bank
constructively received in the Conversion for mutual interests in Mutual
Holding Company (the "Exchange"), which mutual interests will be
substantially similar to those previously held in the Bank.
(6) Mutual Holding Company will then contribute all of the stock of Stock Bank
to Stock Holding Company.
(7) Stock Holding Company will offer for sale up to 49% of its common stock
pursuant to the Plan, with priority subscription rights granted in
descending order to certain Depositors, to certain employee stock benefit
plans of the Bank, to other Depositors and to certain members of the
general public.
The transactions of the Reorganization described in (3) through (7) will occur
simultaneously. As a result of the reorganization, Stock Bank will be a
wholly-owned subsidiary of Stock Holding Company and Stock Holding Company will
be a majority-owned subsidiary of Mutual Holding Company.
In our examination we have assumed that (i) each entity that is a party to any
of the documents (the "Documents") described in the preceding paragraphs has
been duly organized under the laws of its state or country of organization, is
validly existing and in good standing under such laws, and is duly qualified and
in good standing in each jurisdiction in which it is required to be qualified to
engage in the transactions contemplated by the Documents; (ii) each such entity
has full power, authority, capacity and legal right to enter into and perform
the terms of the Documents and the transactions contemplated thereby; (iii) the
copies or originals of the Documents furnished to us are authentic (if
originals) or accurate (if copies), those that are contracts or instruments are
enforceable and effective in accordance with their terms against all parties
thereto, and all signatures are genuine; (iv) any representations made in the
Documents are, and will continue to be, true and complete, and no default exists
under any of the Documents; (v) the business and affairs of each of the entities
that is a party to any of the Documents will be conducted in accordance with the
Documents and all relevant laws; (vi) no actions will be taken, no change in any
of the Documents will occur, and no other events will occur,
Westborough Savings Bank
September 24, 1999
Page 3
after the date hereof, that would have the effect of altering the facts,
Documents or assumptions upon which this opinion is based; and (vii) the Federal
Tax Opinions have been delivered and have not been withdrawn.
The opinions rendered herein are based upon the provisions of the Massachusetts
General Laws, proposed, temporary and final regulations of the Massachusetts
Department of Revenue (the "DOR"), judicial decisions, and rulings and
administrative interpretations of the Massachusetts General Laws, as each of the
foregoing exist on the date hereof. The opinions rendered herein are not binding
on the DOR or a court of law, and no assurance can be given that legislative or
administrative action or judicial decisions that differ from the opinions
rendered below will not be forthcoming. Any such differences could be
retroactive to transactions or business operations prior to such action or
decisions.
We express no opinion as to the Massachusetts state tax consequences other than
those described below, if any, or as to any Federal, local or foreign income or
other tax consequences, with respect to the transactions contemplated by the
Plan.
FINANCIAL INSTITUTION EXCISE TAX
Bank will be a state-chartered stock savings bank subject to the Massachusetts
financial institution excise tax under MGL chapter 63, Sections 1 and 2. Mutual
Holding Company will be a Massachusetts chartered corporation subject to the
Massachusetts financial institution excise tax under MGL chapter 63, Section 1
and 2 or the excise imposed under MGL chapter 63, Section 38B(b) if Mutual
Holding Company is classified as a security corporation pursuant to that
Section.
MGL c. 63 ss.2 provides that "[e]very financial institution engaged in business
in the commonwealth shall pay, on account of each taxable year, a tax measured
by its net income..." MGL c. 63, ss.1 defines net income for the purposes of
Section 2 as "gross income other than ninety-five percent of dividends received
in any taxable year beginning on or after January first, nineteen hundred and
ninety-nine from or on account of the ownership of any class of stock if the
financial institution owns fifteen percent or more of the voting stock of the
institution paying the dividend, less the deductions, but not credits, allowable
under the provisions of the Internal Revenue Code, as amended and in effect for
the taxable year." M.G.L. c. 63, ss.1 provides "gross income is income as
defined under the provisions of the Internal Revenue Code, as amended and in
effect for the taxable year, plus the interest from bonds, notes, and evidences
of indebtedness of any state, including this commonwealth."
MGL c 63 ss.1 provides the term "financial institution" includes any bank,
banking association, trust company, federal or state savings and loan
association, whether of issue or not, existing by authority of the United
States, or any state, or a foreign country or any law of Massachusetts. Such
financial institutions are subject to the tax rates at MGL c. 63, ss. 2(a) for
their first taxable year beginning on or after January 1, 1995 that they are
subject to Massachusetts tax. The term "financial institution" also includes a
bank
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September 24, 1999
Page 4
holding company and any subsidiary corporation or corporate trust which
participates with it in the filing of a consolidated Federal tax return and
certain corporations subject to supervision by the Massachusetts division of
banks or any corporation in substantial competition with financial institutions
that derives more than 50% of its gross income, excluding non-recurring,
extraordinary items, from loan origination, lending or credit card activities.
Under MGL Chapter 63, Section 38B, one of the requirements for obtaining
classification as a Massachusetts security corporation is that the company be
engaged "exclusively in buying, selling, dealing in, or holding securities on
its own behalf and not as a broker".
Accordingly, based upon the facts and representation stated herein and the
existing law, it is the opinion of Wolf & Company, P.C. regarding the
Massachusetts excise tax effect of the planned reorganization that:
1. No gain or loss shall be recognized by the Stock Bank or the Stock Holding
Company on the receipt by the Stock Bank of money from the Stock Holding
Company or by the Stock Holding Company upon the receipt of money from the
sale of its Common Stock (Massachusetts Letter Ruling 87-11, Section
1032(a) of the Code).
2. 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 Depositors, tax qualified employee
plans of the Bank and employees, officers, trustees and directors of the
Bank and of the Mutual Holding Company upon the distribution to them of
the nontransferable subscription rights to purchase shares of stock in the
Stock Holding Company (Section 356(a) and Massachusetts Letter Ruling
84-11). Gain, if any, realized 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) and Massachusetts Letter
Ruling 84-11). They will not realize any taxable income as a result of the
exercise of the nontransferable subscription rights (Massachusetts Letter
Ruling 84-11).
3. The basis of the Stock Holding Company Common Stock to its stockholders
will be the purchase price thereof plus the fair market value, if any, of
nontransferable subscription rights (Section 1012 of the Code and
Massachusetts Letter Rulings 84-11 and 83-61). Accordingly, assuming the
nontransferable subscription rights have no value, the basis of the Common
Stock 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 and Massachusetts Letter Ruling
84-11 and 83-61).
4. For purposes of Massachusetts General Laws, chapter 63, sections 1 and 2,
no gross income, gain or loss will be recognized by the Bank, the Mutual
Holding Company, the Stock Bank, or the Stock Holding Company as a result
of the transactions contemplated by the Plan.
Westborough Savings Bank
September 24, 1999
Page 5
Our opinion under paragraph (2) 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 (2) and (3)
above assumes that the subscription rights to purchase shares of Common Stock
have a fair market value of zero. We understand that you have received a letter
from R.P. Financial, LP. 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 the Mutual Holding
Company and/or the Bank may be taxable on the distribution of the subscription
rights.
Our opinion assumes that the Plan of Reorganization qualifies as a
reorganization under Code Sections 368(a)(1)(F) and as a tax free transfer to a
corporation controlled by transferors under Code Section 351. We understand that
the federal tax opinion is being rendered by Thacher Proffitt & Wood.
We express no view regarding whether the Reorganization qualifies as a
reorganization under Code Section 368(a)(1)(F) and tax free Section 351 transfer
under the Code.
CONCLUSION
The opinions contained herein are rendered only with respect to the specific
matters discussed herein and we express NO OPINION with respect to any other
legal, Federal, state, or local tax aspect of these transactions. This opinion
is not binding upon any tax authority including the Massachusetts Department of
Revenue or any court and no assurance can be given that a position contrary to
that expressed herein will not be asserted by a tax authority.
In rendering our opinions we are relying upon the relevant provisions of the
Internal Revenue Code of 1986, as amended, Massachusetts General Laws and the
regulations, judicial and administrative interpretations thereof, all as of the
date of this letter.
However, all of the foregoing authorities are subject to change or modification
which can be retroactive in effect and, therefore, could also affect our
opinions. We undertake no responsibility to update our opinions for any
subsequent change or modification.
We hereby consent to the filing of the opinion as an exhibit to the Stock
Holding Company's Registration Statement on Form SB-2 as filed with the SEC. We
also consent to the references to our firm in the Prospectus contained in the
Form SB-2 under the captions "The Offering and The Reorganization - Federal and
State Tax Consequences of the Reorganization" and "Legal and Tax Matters."
Westborough Savings Bank
September 24, 1999
Page 6
We are furnishing this letter to you solely for the purpose of satisfying
Section 4 of the Plan of Reorganization. This letter is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
prior written consent. We consent, however, to the filing of this opinion letter
as an exhibit to the Registration Statement and to the reference to us under the
caption "Legal and Tax Matters" in the Prospectus.
Very truly yours,
/s/ Wolf & Company P.C.
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Wolf & Company, P.C.