FORM OF FEDERAL TAX OPINION
(202) 274-2000
______________, 2001
Boards of Directors
Wayne Savings Bankshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
151 North Market Street
Wooster, Ohio 44691
Ladies and Gentlemen:
You have requested this firm's opinion regarding certain federal income
tax consequences which will result from the conversion of Wayne Savings
Bankshares, M.H.C., a federal mutual holding company (the "Mutual Holding
Company") into the capital stock form of organization, as effectuated pursuant
to the three integrated transactions described below.
In connection therewith, we have made such investigations as we have
deemed relevant or necessary for the purpose of this opinion. In our
examination, we have assumed the authenticity of original documents, the
accuracy of copies and the genuineness of signatures. We have further assumed
the absence of adverse facts not apparent from the face of the instruments and
documents we examined and have relied upon the accuracy of the factual matters
set forth in the Plan of Conversion and Reorganization (the "Plan") and the
Registration Statement filed by Wayne Savings Bancshares, Inc. (the "Holding
Company") with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended, and the Application for Conversion on Form
AC filed with the Office of Thrift Supervision (the "OTS").
Our opinion is based upon the existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code), and regulations thereunder (the
"Treasury Regulations"), and upon current Internal Revenue Service ("IRS")
published rulings and existing court decisions, any of which could be changed at
any time. Any such changes may be retroactive and could significantly modify the
statements and opinions expressed herein. Similarly, any change in the facts and
assumptions stated below, upon which this opinion is based, could modify the
conclusions. 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.
Boards of Directors
Wayne Savings Bancshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
_______________, 2001
Page 2
We, of course, opine only as to the matters we expressly set forth, and
no opinions should be inferred as to any other matters or as to the tax
treatment of the transactions that we do not specifically address. We express no
opinion as to other federal laws and regulations, or as to laws and regulations
of other jurisdictions, or as to factual or legal matters other than as set
forth herein.
For purposes of this opinion, we are relying on the opinion of RP
Financial LC, the appraiser of the Holding Company, to the effect that the
subscription rights distributed to Eligible Account Holders and Supplemental
Eligible Account Holders have no value. We are also relying on the
representations as to certain factual matters provided to us by the Mutual
Holding Company, Wayne Savings Community Bank (as described below), and the
Holding Company, as set forth in the affidavits of the authorized officers of
each of the aforementioned entities, incorporated herein by reference.
Capitalized terms used but not defined herein shall have the same meaning as set
forth in the Plan.
DESCRIPTION OF PROPOSED TRANSACTIONS
Based solely upon our review of the documents described above, and in
reliance upon such documents, we understand that the relevant facts are as
follows.
Based solely upon our review of the documents described above, and in
reliance upon such documents, we understand that the relevant facts are as
follows. On June 23, 1993, The Wayne Savings and Loan Company, an Ohio chartered
mutual savings bank ("Wayne Savings") reorganized from a mutual savings and loan
association to become the majority-owned stock subsidiary of the Mutual Holding
Company. To accomplish this transaction, The Wayne Savings and Loan Company
organized The Wayne Savings and Loan Company, an Ohio chartered stock bank (the
"Bank"), as a wholly-owned subsidiary. The Wayne Savings and Loan Company then
transferred substantially all of its assets and liabilities, including all of
its deposit-taking, lending and other banking functions and its corporate name
to the newly created stock savings bank called The Wayne Savings and Loan
Company (which has subsequently changed its name to the Wayne Savings Community
Bank). The Wayne Savings and Loan Company then converted its charter to a mutual
holding company charter to become the Mutual Holding Company.
In connection with the foregoing transaction, the Bank sold less than
50% of its outstanding shares of Bank common stock to depositors, certain
tax-qualified plans and members of the public (the "Bank Minority
Stockholders"). The remaining shares of Bank common stock were held by the
Mutual Holding Company. The reorganization of The Wayne Savings and Loan Company
into the mutual holding company form of organization, and the sale to the Bank
Minority Stockholders of
Boards of Directors
Wayne Savings Bancshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
_______________, 2001
Page 3
stock in the Bank, are sometimes herein collectively referred to as the "MHC
Reorganization." On November 25, 1997, the Bank reorganized into a two-tier
holding company form of organization whereby Wayne Savings Bancshares, Inc., a
federally-chartered mutual holding company with the power to issue stock
("Mid-Tier Holding Company") became the parent of the Bank and the Mid-Tier
Holding Company became the majority owned subsidiary of the Mutual Holding
Company. To accomplish this transaction, the Bank chartered the Mid-Tier Holding
Company as a wholly owned subsidiary and the Mid-Tier Holding Company chartered
an interim federal stock savings bank as a wholly owned subsidiary. The interim
federal savings bank then merged into the Bank with the Bank's shareholders,
including the Mutual Holding Company, receiving shares of the Mid-Tier Holding
Company in exchange for their shares of Bank common stock. The shares of the
Mid-Tier Holding Company owned by the Bank were canceled.
On July 10, 2001, the Board of Directors of the Mutual Holding Company
adopted the Plan of Conversion and Reorganization ("Plan") providing for the
conversion of the Mutual Holding Company from a federally chartered mutual
holding company to a Delaware stock corporation to be named "Wayne Savings
Bancshares, Inc."
At the present time, three transactions referred to as the "MHC
Merger", the "Mid-Tier Merger", and the "Bank Merger" are being undertaken.
Pursuant to the Plan, the conversion ("Conversion") will be effected in the
following steps, each of which will be completed contemporaneously.
(i) The Bank will establish the Holding Company as a first-tier
Delaware chartered stock holding company subsidiary.
(ii) The Holding Company will charter an interim federal savings
bank ("Interim") as a wholly owned subsidiary.
(iii) The Mid-Tier Holding Company will convert into or exchange its
charter for an interim stock savings bank (which shall
continue to be referred to as "Mid-Tier Holding Company") and
will merge with and into the Bank (the "Mid-Tier Merger"),
with the Bank as the resulting entity, and the Mid-Tier
Holding Company stockholders will constructively receive
shares of the Bank common stock in exchange for their Mid-Tier
Holding Company common stock.
(vi) The Mutual Holding Company will exchange its charter for an
interim stock savings bank charter and simultaneously merge
with and into the Bank (the MHC Merger"),
Boards of Directors
Wayne Savings Bancshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
_______________, 2001
Page 4
and shares of common stock of the Bank constructively held
by the Mutual Holding Company will be canceled and each
Eligible Account Holder and Supplemental Eligible Account
Holder will receive an interest in a Liquidation Account of
the Bank in exchange for such person's interest in the
Mutual Holding Company.
(vii) Contemporaneously with the MHC Merger, Interim will merge with
and into the Bank, with the Bank as the surviving entity (the
"Bank Merger"). Constructive shareholders of the Bank (i.e.,
Minority Holders) will exchange the shares of Bank common
stock that they constructively received in the Mid-Tier Merger
for Holding Company Common Stock.
(viii) Contemporaneously with the Bank Merger, the Holding Company
will offer for sale its common stock in the Offering.
As part of the conversion, each of the Minority Shares shall
automatically, without further action of the holder thereof, be converted into
and become the right to receive Holding Company common Stock based upon the
exchange ratio ("Exchange Ratio"). Options to purchase shares of Mid-Tier
Holding Company common stock which are outstanding immediately prior to the
consummation of the Conversion will be converted into options to purchase shares
of Holding Company Common Stock, with the number of shares subject to the option
and the exercise price per share to be adjusted based upon the Exchange Ratio so
that the aggregate exercise price remains unchanged, and with the duration of
the option remaining unchanged.
As a result of the Mid-Tier Merger, the MHC Merger and the Bank Merger,
the Holding Company will be a publicly held corporation, will register the
Holding Company Common Stock under Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and will become subject to the rules
and regulations thereunder and file periodic reports and proxy statements with
the SEC. The Bank will become a wholly owned subsidiary of the Holding Company
and will continue to carry on its business and activities as conducted
immediately prior to the Conversion.
The stockholders of the Holding Company will be the former Minority
Stockholders of the Mid-Tier Holding Company immediately prior to the MHC
Merger, plus those persons who purchase shares of Holding Company Common Stock
in the Offering. Nontransferable rights to subscribe for the Holding Company
Common Stock have been granted, in order of priority, to depositors of the Bank
who have account balances of $50.00 or more as of the close of business on June
30, 2000 ("Eligible Account Holders"), the Bank's tax-qualified employee plans
("Employee Plans"),
Boards of Directors
Wayne Savings Bancshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
_______________, 2001
Page 5
depositors of the Bank who have account balances of $50.00 or more as of the
close of business on _______________ ("Supplemental Eligible Account Holders"),
other members of the Bank (other than Eligible Account Holders and Supplemental
Eligible Account Holders) ("Other Members"), and owners of shares of Bank common
stock other than the Mutual Holding Company. Subscription rights are
nontransferable. The Holding Company will also offer shares of Holding Company
Common Stock not subscribed for in the subscription offering, if any, for sale
in a community offering to certain members of the general public.
OPINIONS
Based on the foregoing description of the MHC Merger, the Mid-Tier
Merger and the Bank Merger, and subject to the qualifications and limitations
set forth in this letter, we are of the opinion that:
1. The conversion of the Mid-Tier Holding Company to a federally
chartered interim stock savings association (which we shall continue to refer to
as "Mid-Tier Holding Company") will constitute a mere change in identity, form
or place of organization within the meaning of Section 368(a)(1)(F) of the Code.
2. The Mid-Tier Merger qualifies as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Code. (Section 368(a)(1)(A) of
the Code.)
3. The Mid-Tier Holding Company will not recognize any gain or
loss on the transfer of its assets to the Bank in exchange for shares of common
stock in the Bank which are constructively received by Minority Stockholders and
the Mutual Holding Company. (Section 361 of the Code.)
4. No gain or loss will be recognized by the Bank upon the
receipt of the assets of Mid-Tier Holding Company in the Mid-Tier Merger
(Section 1032(a) of the Code).
5. The basis of the assets of the Mid-Tier Holding Company (other
than stock in the Bank) to be received by Bank will be the same as the basis of
such assets in the hands of Mid-Tier Holding Company immediately prior to the
transfer. (Section 362(b) of the Code.)
6. The holding period of the assets of Mid-Tier Holding Company
(other than stock in Bank) to be received by Bank will include the holding
period of those assets in the hands of Mid-Tier Holding Company immediately
prior to the transfer. (Section 1223(2) of the Code.)
Boards of Directors
Wayne Savings Bancshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
_______________, 2001
Page 6
7. Mid-Tier Holding Company shareholders will not recognize any
gain or loss upon their constructive or actual exchange of Mid-Tier Holding
Company common stock for Bank common stock.
8. The conversion of the Mutual Holding Company to a federally
chartered interim stock savings association will constitute a mere change in
identity, form or place of organization within the meaning of section
368(a)(1)(F) of the Code.
9. The MHC Merger qualifies as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Code. (Section 368(a)(1)(A) of
the Code.)
10. The exchange of the members' equity interests in the Mutual
Holding Company for interests in a Liquidation Account established in the Bank
in the MHC Merger will satisfy the continuity of interest requirement of Section
1.368-1(b) of the Income Tax Regulations (CF. Rev. Rul. 69-3, 1969-1 C.B. 103,
and Rev. Rul. 69-646, --- 1969-2 C.B. 54).
11. The Mutual Holding Company will not recognize any gain or loss
on the transfer of its assets to the Bank in exchange for an interest in a
Liquidation Account established in the Bank for the benefit of the Mutual
Holding Company's members who remain depositors of the Bank. (Section 361 of the
Code.)
12. No gain or loss will be recognized by the Bank upon the
receipt of the assets of the Mutual Holding Company in the MHC Merger in
exchange for the transfer to the members of the Mutual Holding Company of an
interest in the Liquidation Account in the Bank. (Section 1032(a) of the Code.)
13. Persons who have an interest in the Mutual Holding Company
will recognize no gain or loss upon the receipt of an interest in the
Liquidation Account in the Bank in exchange for their voting and liquidation
rights in the Mutual Holding Company. (Section 354(a) of the Code).
14. The basis of the assets of Mutual Holding Company (other than
stock in the Bank) to be received by Bank will be the same as the basis of such
assets in the hands of the Mutual Holding Company immediately prior to the
transfer. (Section 362(b) of the Code.)
Boards of Directors
Wayne Savings Bancshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
_______________, 2001
Page 7
15. The holding period of the assets of the Mutual Holding Company
in the hands of the Bank will include the holding period of those assets in the
hands of the Mutual Holding Company. (Section 1223(2) of the Code.)
16. The Bank Merger qualifies as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code, pursuant to Section 368(a)(2)(E)
of the Code. For these purposes, each of the Bank, the Holding Company and
Interim are "a party to the reorganization" within the meaning of Section 368(b)
of the Code.
17. Interests in the Liquidation Account established at the Bank,
and the shares of Bank common stock held by Mutual Holding Company prior to
consummation of the MHC Merger, will be disregarded for the purpose of
determining that an amount of stock in the Bank which constitutes "control" of
such corporation was acquired by the Holding Company in exchange for shares of
common stock of the Holding Company pursuant to the Bank Merger (Code Section
368(c)).
18. The exchange of shares of Bank common stock for the shares of
the Holding Company Common Stock in the Bank Merger, following consummation of
the Mid-Tier Merger and the MHC Merger, will satisfy the continuity of interest
requirement of Income Tax Regulation Section 1.368-1(b) in the Bank Merger.
19. Interim Savings Bank will not recognize any gain or loss on
the transfer of its assets to Bank in exchange for Bank common stock and the
assumption by Bank of the liabilities, if any, of Interim. (Section 361(a) and
357(a) of the Code.)
20. The Holding Company will not recognize any gain or loss upon
its receipt of Bank common stock in exchange for Interim Savings Bank common
stock. (Section 354(a) of the Code.)
21. Bank shareholders will not recognize any gain or loss upon
their exchange of Bank common stock solely for shares of Holding Company Common
Stock. (Section 354(a) of the Code.)
22. The payment of cash to the Minority Stockholders in lieu
of fractional shares of Holding Company will be treated as though the fractional
shares were distributed as part of the Bank Merger and then redeemed by Holding
Company. The cash payments will be treated as distributions in full payment for
the fractional shares deemed redeemed under Section 302(a) of the Code, with the
result that such shareholders will have short-term or long-term capital gain or
loss to the extent that the cash they receive differs from the basis allocable
to such fractional shares. (Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc.
77-41, 1977-2 C.B. 574)
Boards of Directors
Wayne Savings Bancshares, Inc.
Wayne Savings Bankshares, M.H.C.
Wayne Savings Community Bank
_______________, 2001
Page 8
23. Each Bank shareholder's aggregate basis in his or her Holding
Company Common Stock received in the exchange will be the same as the aggregate
basis of the Bank common stock surrendered in exchange therefor.
(Section 358(a) of the Code.)
24. Each Bank shareholder's holding period in his or her Holding
Company Common Stock received in the exchange will include the period during
which the Bank common stock surrendered was held, provided that the Bank common
stock surrendered is a capital asset in the hands of the Bank shareholder on the
date of the exchange. (Section 1223(1) of the Code.)
25. No gain or loss will be recognized by Eligible Account Holders
and Supplemental Eligible Account Holders upon distribution to them of
subscription rights to purchase shares of Holding Company Common Stock, provided
that the amount to be paid for the Holding Company Common Stock is equal to the
fair market value of the Holding Company Common Stock.
26. No gain or loss will be recognized by Holding Company on
the receipt of money in exchange for Holding Company Common Stock sold in the
Offering. (Section 1032 of the Code.)
We hereby consent to the filing of the opinion as an exhibit to the
MHC's Application for Approval for Conversion filed with the Commissioner and to
the Holding Company's Registration Statement on Form S-1 as filed with the SEC.
We also consent to the references to our firm in the Prospectus contained in the
Application for Approval of Conversion and S-1 under the captions "The
Conversion-Tax Aspects" and "Legal Opinions."
Very truly yours,
/s/ LUSE LEHMAN GORMAN POMERENK SCHICK
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LUSE LEHMAN GORMAN POMERENK &
SCHICK, A PROFESSIONAL CORPORATION
By:
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