EXHIBIT 8.1
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MALIZIA SPIDI & FISCH, PC
ATTORNEYS AT LAW
1301 K STREET, N.W. 637 KENNARD ROAD
SUITE 700 EAST STATE COLLEGE, PENNSYLVANIA 16801
WASHINGTON, D.C. 20005 (814) 466-6625
(202) 434-4660 FACSIMILE: (814) 466-6703
FACSIMILE: (202) 434-4661
October 5, 2000
Board of Directors
BUCS Federal
10455 Mill Run Circle
Owings Mills, MD 21117
Re: Federal Income Tax Opinion Relating to the Proposed Conversion of
BUCS Federal from a Federal Mutual Savings Bank to a Federal
Capital Stock Savings Bank Pursuant to Section 368(a)(1)(F)
of the Internal Revenue Code of 1986, as amended
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Members of the Board:
In accordance with your request, set forth hereinbelow is the opinion
of this firm relating to the material federal income tax consequences of the
proposed conversion (the "Conversion") of BUCS Federal (the "Institution") from
a federally-chartered mutual savings bank to a federally- chartered capital
stock savings bank (the "Stock Bank"), and formation of a parent holding company
BUCS Financial Corp (the "Holding Company") which will simultaneously acquire
all of the outstanding stock of Stock Bank. As proposed, the Conversion will be
implemented pursuant to Section 368(a)(1)(F) of the Internal Revenue Code of
1986, as amended (the "Code").
We have examined such corporate records, certificates and other
documents as we have considered necessary or appropriate for this opinion. In
such examination, we have accepted, and have not independently verified, the
authenticity of all original documents, the accuracy of all copies, and the
genuineness of all signatures. Further, the capitalized terms which are used in
this opinion and are not expressly defined herein shall have the meaning
ascribed to them in the Institution's Plan of Conversion adopted on September
25, 2000 (the "Plan of Conversion").
STATEMENT OF FACTS
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Based solely upon our review of such documents, and upon such
information as the Institution has provided to us (which we have not attempted
to verify in any respect), and in reliance upon such documents and information,
we understand the relevant facts with respect to the Conversion to be as
follows:
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 2
The Institution is a federally-chartered mutual savings bank. As a
mutual savings bank, the Institution has no authorized capital stock. Instead,
the Institution, in mutual form, has a unique equity structure. A savings
depositor of the Institution is entitled to interest income on his or her
account balance as declared and paid by the Institution. A savings depositor has
no right to a distribution of any earnings of the Institution, but rather these
amounts become retained earnings of the Institution. However, a savings
depositor has a right to share pro rata, with respect to the withdrawal value of
his or her respective savings account, in any liquidation proceeds distributed
in the event the Institution is ever liquidated. Voting rights in the
Institution are held by its members. Each member is entitled to cast one vote
for each $100 or a fraction thereof of the withdrawal value of the member's
account. All of the interests held by a savings depositor in the Institution
cease when such depositor closes his or her account(s) with the Institution.
The Board of Directors of the Institution has decided that in order to
promote the growth and expansion of the Institution through the raising of
additional capital, it would be advantageous for the Institution to: (i) convert
from a federally-chartered mutual savings bank to a federally- chartered capital
stock savings bank, and (ii) arrange for the Holding Company to simultaneously
acquire all of the Stock Bank's stock. The Institution's Board of Directors has
determined that in order to provide greater flexibility in future operations of
the Institution, including diversification of business opportunities and
acquisitions, it is advantageous to have the Stock Bank's stock held by the
Holding Company. Pursuant to the Plan of Conversion, the Institution's federal
mutual charter to operate as a mutual savings bank will be amended and a new
federal stock charter will be acquired to allow it to continue its operations in
the form of a federally-chartered capital stock savings bank. The Plan of
Conversion provides for the conversion of the Institution from mutual- to-stock
form, and an appraisal of the pro forma market value of the stock of the Stock
Bank, which will be owned solely by the Holding Company. The Plan of Conversion
must be approved by the Office of Thrift Supervision ("OTS"), and by an
affirmative vote of at least a majority of the total votes eligible to be cast
at a special meeting of the Institution's members called to vote on the Plan of
Conversion.
The Holding Company is being formed under the laws of the State of
Maryland, for the purpose of the proposed transaction described herein, to
engage in business as a savings and loan holding company and to hold all of the
stock of the Stock Bank. The Holding Company will issue shares of its voting
common stock ("Holding Company Stock") upon completion of the Conversion, as
described below, to persons purchasing such shares through a Subscription
Offering and to the general public in a Public Offering.
The aggregate purchase price at which all shares of Holding Company
Stock will be offered and sold pursuant to the Plan of Conversion will be equal
to the estimated pro forma market value
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 3
of the Institution at the time of the Conversion as held as a subsidiary of the
Holding Company. The estimated pro forma market value will be determined by an
independent appraiser. Pursuant to the Plan of Conversion, all such shares of
Holding Company Stock will be issued and sold at a uniform price per share. The
Conversion and the sale of newly issued shares of the Stock Bank's stock to the
Holding Company will be deemed effective concurrently with the closing of the
sale of Holding Company Stock.
As required by OTS regulations, shares of Holding Company Stock will be
offered pursuant to non-transferable subscription rights on the basis of
preference categories. All shares must be sold and to the extent that Holding
Company Stock is available, no subscriber will be allowed to purchase less than
25 shares of Holding Company Stock, unless the aggregate purchase price exceeds
$500. The Institution has established various preference categories under which
shares of Holding Company Stock may be purchased and a public offering category
for the sale of shares not purchased under the preference categories. If the
third preference category is determined to be inappropriate to the Conversion,
then there will only be three preference categories consisting of the first,
second, and fourth preference categories set forth below, and all references
herein to Supplemental Eligible Account Holder and the Supplemental Eligibility
Record Date shall not be applicable to the Conversion.
The first preference category is reserved for the Institution's
Eligible Account Holders. The Plan of Conversion defines "Eligible Account
Holder" as any person holding a Qualifying Deposit. The Plan of Conversion
defines "Qualifying Deposit" as the aggregate balance of all savings accounts of
an Eligible Account Holder in the Institution at the close of business on
February 28, 1998, which is at least equal to $50.00. If a savings account
holder of the Institution qualifies as an Eligible Account Holder, he or she
will receive, without payment, non-transferable subscription rights to purchase
Holding Company Stock. The number of shares that each Eligible Account Holder
may subscribe to is equal to the greater of (a) the maximum purchase limitation
established for the Public Offering; (b) one tenth of one percent of the total
offering of shares; or (c) fifteen times the product (rounded down to the next
whole number) obtained by multiplying the total number of shares of Holding
Company Stock to be issued by a fraction of which the numerator is the amount of
the Qualifying Deposit of the Eligible Account Holder and the denominator is the
total amount of the Qualifying Deposits of all Eligible Account Holders. If
there is an oversubscription, shares will be allocated among subscribing
Eligible Account Holders so as to permit each account holder, to the extent
possible, to purchase a number of shares sufficient to make his or her total
allocation equal to 100 shares. Any shares not then allocated shall be allocated
among the subscribing Eligible Account Holders on an equitable basis, related to
the amounts of their respective deposits as compared to the total deposits of
Eligible Account Holders on the Eligibility Record Date. Non-transferable
subscription rights to purchase Holding Company Stock received by officers and
directors of the Institution and their associates based on
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 4
their increased deposits in the Institution in the one year period preceding the
Eligibility Record Date shall be subordinated to all other subscriptions
involving the exercise of nontransferable subscription rights to purchase shares
of Holding Company Stock under the first preference category.
The second preference category is reserved for tax-qualified employee
stock benefit plans of the Stock Bank. The Plan of Conversion defines "tax
qualified employee stock benefit plans" as any defined benefit plan or defined
contribution plan, such as an employee stock ownership plan, stock bonus plan,
profit-sharing plan or other plan, which, with its related trust meets the
requirements to be "qualified" under Section 401 of the Code. Under the Plan of
Conversion, the Stock Bank's tax-qualified employee stock benefit plans may
subscribe for up to 10% of the shares of Holding Company Stock to be offered in
the Conversion.
The third preference category is reserved for the Institution's
Supplemental Eligible Account Holders. The Plan of Conversion defines
"Supplemental Eligible Account Holder" as any person (other than officers or
directors of the Institution and their associates) holding a deposit in the
Institution on the last day of the calendar quarter preceding the approval of
the Plan of Conversion by the OTS ("Supplemental Eligibility Record Date"). This
third preference category will only be used in the event that the Eligibility
Record Date is more than 15 months prior to the date of the latest amendment to
the Application for Approval of Conversion on Form AC filed prior to approval by
the OTS. The third preference category provides that each Supplemental Eligible
Account Holder will receive, without payment, nontransferable subscription
rights to purchase Holding Company Stock to the extent that such shares of
Holding Company Stock are available after satisfying subscriptions for shares in
the first and second preference categories above. The number of shares to which
a Supplemental Eligible Account Holder may subscribe to is the greater of (a)
the maximum purchase limitation established for the Community Offering; (b)
one-tenth of one percent of the total offering of shares; or (c) fifteen times
the product (rounded down to the next whole number) obtained by multiplying the
total number of the shares of Holding Company Stock to be issued by a fraction
of which the numerator is the amount of the deposit of the Supplemental Eligible
Account Holder and the denominator is the total amount of the deposits of all
Supplemental Eligible Account Holders on the Supplemental Eligibility Record
Date. Subscription rights received pursuant to the third preference category
shall be subordinated to all rights under the first and second preference
categories. Non-transferable subscription rights to be received by a
Supplemental Eligible Account Holder in the third preference category shall be
reduced by the subscription rights received by such account holder as an
Eligible Account Holder under the first and second preference categories. In the
event of an oversubscription, shares will be allocated so as to enable each
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation, including shares
previously allocated in the first and second preference categories, equal to 100
shares or the total
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 5
amount of his subscription, whichever is less. Any shares not then allocated
shall be allocated among the subscribing Supplemental Eligible Account Holders
on an equitable basis related to the amount of their respective deposits as
compared to the total deposits of Supplemental Eligible Account Holders on the
Supplemental Eligibility Record Date.
If there is no oversubscription of the Holding Company Stock in the
first, second, and third preference categories, the fourth preference category
becomes operable. In the fourth preference category, members of the Institution
entitled to vote at the special meeting of members to approve the Plan of
Conversion who are not Eligible Account Holders or Supplemental Eligible Account
Holders ("Other Members") will receive, without payment, non-transferable
subscription rights entitling them to purchase Holding Company Stock. Other
Members shall each receive subscription rights to purchase up to the maximum
purchase limitation established for the Public Offering or one-tenth of one
percent of the total offering of shares, to the extent that Holding Company
Stock is available. In the event of an oversubscription by Other Members,
Holding Company Stock will be allocated pro rata according to the number of
shares subscribed for by each Other Member.
The Plan of Conversion further provides for limitations upon purchases
of Holding Company Stock. Specifically, any person by himself or herself may not
purchase or subscribe more than $125,000 of Holding Company Stock. In addition,
any person with an associate or a group of persons acting in concert may
purchase or subscribe for not more than $150,000 of Holding Company Stock
offered pursuant to the Plan of Conversion. However, Tax-Qualified Employee
Stock Benefit Plans may purchase up to 10% of the total shares of Holding
Company Stock issued. Subject to any required regulatory approval and the
requirements of applicable laws and regulations, the Institution may increase or
decrease any of the purchase limitations set forth herein at any time. The Board
of Directors of the Institution may, in its sole discretion, increase the
maximum purchase limitation up to 5.0%. Requests to purchase additional shares
of Holding Company Stock under this provision will be allocated by the Board of
Directors on a pro rata basis giving priority in accordance with the priority
rights set forth in the Plan of Conversion. Officers and directors of the
Institution and their associates may not purchase in the aggregate more than 34%
of the Holding Company Stock issued pursuant to the Conversion. Directors of the
Institution will not be deemed associates or a group acting in concert solely as
a result of their membership on the Board of Directors of the Institution. All
of the shares of Holding Company Stock purchased by officers and directors will
be subject to certain restrictions on sale for a period of one year.
The Plan of Conversion provides that no person will be issued any
subscription rights or be permitted to purchase any Holding Company Stock if
such person resides in a foreign country or in a state of the United States with
respect to which all of the following apply: (a) a small
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 6
number of persons otherwise eligible to subscribe for shares under the Plan of
Conversion reside in such state; (b) the issuance of subscription rights or the
offer or sale of the Holding Company Stock in such state, would require the
Institution or the Holding Company under the securities laws of such state to
register as a broker or dealer or to register or otherwise qualify its
securities for sale in such state; and (c) such registration or qualification
would be impracticable for reasons of cost or otherwise.
The Plan of Conversion also provides for the establishment of a
Liquidation Account by the Stock Bank for the benefit of all Eligible Account
Holders and Supplemental Eligible Account Holders (if applicable). The
Liquidation Account will be equal in amount to the net worth of Institution as
of the time of the Conversion. The establishment of the Liquidation Account will
not operate to restrict the use or application of any of the net worth accounts
of the Stock Bank, except that the Stock Bank will not declare or pay cash
dividends on or repurchase any of its stock if the result thereof would be to
reduce its net worth below the amount required to maintain the Liquidation
Account. The Liquidation Account will be for the benefit of the Institution's
Eligible Account Holders and Supplemental Eligible Account Holders who maintain
accounts in the Institution at the time of the Conversion. All such account
holders, including those not entitled to subscription rights for reasons of
foreign or out-of-state residency (as described above), will have an interest in
the Liquidation Account. The interest an Eligible Account Holder and
Supplemental Eligible Account Holder will have a right to receive, in the event
of a complete liquidation of the Stock Bank, is a distribution from the
Liquidation Account in the amount of the then current adjusted subaccount
balances for savings accounts then held, which will be made prior to any
liquidation distribution with respect to the capital stock of the Stock Bank.
The initial subaccount balance for a savings account held by an
Eligible Account Holder and/or Supplemental Eligible Account Holder shall be
determined by multiplying the opening balance in the Liquidation Account by a
fraction of which the numerator is the amount of the qualifying deposit in the
savings account, and the denominator is the total amount of qualifying deposits
of all Eligible Account Holders and Supplemental Eligible Account Holders in the
Stock Bank. The initial subaccount balance will never be increased, but may be
decreased if the deposit balance in any qualifying savings account of any
Eligible Account Holder or any savings account of any Supplemental Eligible
Account Holder on any annual closing date subsequent to the Eligibility Record
Date or Supplemental Eligibility Record Date, whichever is applicable, is less
than the lesser of (1) the deposit balance in the savings account at the close
of business on any other annual closing date subsequent to the Eligibility
Record Date or the Supplemental Eligibility Record Date, or (2) the amount of
the qualifying deposit in such savings account. In such event, the subaccount
balance for the savings account will be adjusted by reducing each subaccount
balance in an amount proportionate to the reduction in the savings account
balance. Once decreased, the Plan of Conversion provides that the subaccount
balance will never be subsequently
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 7
increased, and if the savings account of an Eligible Account Holder or
Supplemental Eligible Account Holder is closed, the related subaccount balance
in the Liquidation Account will be reduced to zero.
The net proceeds from the sale of the shares of Holding Company Stock
will become the permanent capital of Holding Company, and the Holding Company
will in turn purchase 100% of the stock issued by Stock Bank, in exchange for up
to 50% of the Holding Company's stock offering net proceeds or such other
percentage as is approved by the Board of Directors with the concurrence of the
OTS.
Following the Conversion, voting rights in Stock Bank will rest
exclusively in the Holding Company. Voting rights in the Holding Company will
rest exclusively in the stockholders of the Holding Company. The Conversion will
not interrupt the business of the Institution, and its business will continue as
usual under the Stock Bank. Each depositor will retain a withdrawable savings
account or accounts equal in amount to the withdrawable account or accounts at
the time of the Conversion. Mortgage loans of the Institution will remain
unchanged and retain their same characteristics in the Stock Bank after the
Conversion. The Stock Bank will continue membership in the Federal Home Loan
Bank System, and will remain subject to the regulatory authority of the OTS.
Immediately prior to the Conversion, the Institution will have a
positive net worth in accordance with generally accepted accounting principles.
The savings account holders of the Institution will pay expenses of the
Conversion solely attributable to them, if any. Further, the Institution will
pay its own expenses of the Conversion and will not pay any expenses solely
attributable to the Institution's savings account holders or to the purchasers
of Holding Company Stock.
REPRESENTATIONS BY MANAGEMENT
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In connection with the Conversion, the following statements,
representations and declarations have been made to us by management of the
Institution:
1. The Conversion will be implemented in accordance with the terms of
the Plan of Conversion and all conditions precedent contained in the Plan of
Conversion shall be performed prior to the consummation of the Conversion.
2. The fair market value of the withdrawable savings accounts plus
interests in the Liquidation Account to be constructively received under the
Plan of Conversion will in each instance be equal to the fair market value of
each savings account of the Institution plus the interest
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 8
in the residual equity of the Institution surrendered in exchange therefor. All
proprietary rights in the Institution form an integral part of the withdrawable
savings accounts being surrendered in the Conversion.
3. The Holding Company and the Stock Bank each have no plan or
intention to redeem or otherwise acquire any of the Holding Company Stock issued
in the proposed transaction.
4. To the best of the knowledge of the management of the Institution,
there is not now nor will there be at the time of the Conversion, any plan or
intention, on the part of the depositors in the Institution to withdraw their
deposits following the Conversion. Deposits withdrawn immediately prior to or
immediately subsequent to the Conversion (other than maturing deposits) are
considered in making these assumptions.
5. Immediately following the consummation of the proposed transaction,
the Stock Bank will possess the same assets and liabilities as the Institution
held immediately prior to the proposed transaction, plus substantially all of
the net proceeds from the sale of its stock to the Holding Company (except for
assets used to pay expenses in the Conversion). Assets used to pay expenses of
the Conversion (without reference to the expenses of the Subscription Offering
and the Public Offering) and all distributions (except for regular normal
interest payments made by the Institution immediately preceding the transaction)
will in the aggregate constitute less than one percent (1%) of the assets of the
Institution, net of liabilities associated with such assets, and will be paid by
the Institution and the Holding Company from the proceeds of the Subscription
Offering and Public Offering.
6. Following the Conversion, the Stock Bank will continue to engage in
its business in substantially the same manner as engaged in by the Institution
prior to the Conversion. The Stock Bank has no plan or intention to sell or
otherwise dispose of any of its assets, except in the ordinary course of
business.
7. No cash or property will be given to any member of the Institution
in lieu of subscription rights or an interest in the Liquidation Account of the
Stock Bank.
8. None of the compensation to be received by any deposit account
holder-employees of the Institution or the Holding Company will be separate
consideration for, or allocable to, any of their deposits in the Institution. No
interest in the Liquidation Account of the Stock Bank will be received by any
deposit account holder-employees as separate consideration for, or will
otherwise be allocable to, any employment agreement, and the compensation paid
to each deposit account holder-employee, during the twelve month period
preceding or subsequent to the Conversion, will be for services actually
rendered and will be commensurate with amounts paid
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 9
to third parties bargaining at arm's length for similar services. No shares of
Holding Company Stock will be issued to or purchased by any deposit account
holder-employee of the Institution or the Holding Company at a discount or as
compensation in the Conversion.
9. The aggregate fair market value of the Qualifying Deposits held by
Eligible Account Holders or Supplemental Eligible Account Holders (if
applicable) as of the close of business on the Eligibility Record Date or
Supplemental Eligibility Record Date (if applicable) entitled to interests in
the Liquidation Account to be established by Stock Bank equalled or exceeded 99%
of the aggregate fair market value of all savings accounts (including those
accounts of less than $50.00) in the Institution as of the close of business on
such date.
10. There is no plan or intention for the Stock Bank to be liquidated
or merged with another corporation following the consummation of the Conversion.
11. The Institution and the Stock Bank are business entities organized
under a Federal or State statute which describes or refers to the entity as
incorporated or as a corporation.
12. The Holding Company has no plan or intention to sell or otherwise
dispose of the stock of the Stock Bank received by it in the proposed
transaction.
13. Both the Stock Bank and the Holding Company have no plan or
intention, either currently or at the time of the Conversion, to issue
additional shares of common stock following the proposed transaction, other than
shares that may be issued to employees or directors pursuant to certain stock
option and stock incentive plans or that may be issued to employee benefit
plans.
14. At the time of the proposed transaction, the fair market value of
the assets of the Institution on a going concern basis (including intangibles)
will equal or exceed the amount of its liabilities plus the amount of liability
to which such assets are subject. The Institution will have a positive
regulatory net worth at the time of the Conversion.
15. The Institution is not currently in bankruptcy or involved in a
bankruptcy proceeding. The proposed transaction does not involve a receivership,
foreclosure, or similar proceeding before a federal or state agency involving a
financial institution.
16. The Institution's savings depositors will pay expenses of the
Conversion solely attributable to them, if any. The Holding Company, the Stock
Bank, and the Institution will pay their own expenses of the Conversion and will
not pay any expenses solely attributable to the savings depositors or to the
Holding Company stockholders.
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 10
17. The liabilities of the Institution assumed by the Stock Bank plus
the liabilities, if any, to which the transferred assets are subject were
incurred by the Institution in the ordinary course of its business and are
associated with the assets transferred.
18. There will be no purchase price advantage for the Institution's
deposit account holders who purchase Holding Company Stock in the Conversion.
19. Neither the Institution nor the Stock Bank is a regulated
investment company, a real estate investment trust, or a corporation 50% or more
of the value of whose total assets are stock and securities and 80% or more of
the value of whose total assets are assets held for investment.
20. No creditors of the Institution have taken any steps to enforce
their claims against the Institution by instituting bankruptcy or other legal
proceedings, in either a court or appropriate regulatory agency, that would
eliminate the proprietary interests of the members of the Institution prior to
the Conversion.
21. The proposed transaction does not involve the payment to the Stock
Bank or the Institution of financial assistance by the federal government.
22. The Eligible Account Holders' and Supplemental Eligible Account
Holders' proprietary interest in the Institution arise solely by virtue of the
fact that they are account holders in the Institution.
23. At the time of the Conversion, the Institution will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire an equity interest in the
Holding Company or the Stock Bank.
24. The Stock Bank has no plan or intention to sell or otherwise
dispose of any of the assets of the Institution acquired in the transaction
(except for dispositions, including deposit withdrawals, made in the ordinary
course of business).
25. On a per share basis, the purchase price of the Holding Company
Stock in the Conversion will be equal to the fair market value of such stock at
the time of the completion of the proposed transaction.
26. The Institution has received or will receive an opinion from
FinPro, Inc. ("Appraiser's Opinion"), which concludes that subscription rights
to be received by Eligible Account Holders, Supplemental Eligible Account
Holders, and other eligible subscribers do not have any ascertainable fair
market value, because they are acquired by the recipients without cost,
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 11
are non-transferable, exist for such a short duration, and merely afford the
recipients a right only to purchase Holding Company Stock at a price equal to
its estimated fair market value, which will be the same price used in the Public
Offering for unsubscribed shares of Holding Company Stock.
27. The Institution will not have any net operating losses, capital
loss carryovers, or built-in losses at the time of the Conversion.
OPINION OF COUNSEL
------------------
Based solely upon the foregoing information and our analysis and
examination of current applicable federal income tax laws, rulings, regulations,
judicial precedents, and the Appraiser's Opinion, and provided the Conversion is
undertaken in accordance with the above assumptions, we render the following
opinion of counsel:
1. The change in the form of operation of the Institution from a
federally-chartered mutual savings bank to a federally chartered capital stock
savings bank, as described above, will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Code, and no gain or loss will be
recognized to either the Institution or to the Stock Bank as a result of such
Conversion. (See Rev. Rul. 80-105, 1980-1 C.B. 78). The Institution and the
Stock Bank will each be a party to a reorganization within the meaning of
Section 368(b) of the Code. (Rev. Rul. 72-206, 1972-1 C.B. 104).
2. No gain or loss will be recognized by the Stock Bank on the receipt
of money in exchange for shares of Stock Bank stock. (Section 1032(a) of the
Code).
3. The Holding Company will recognize no gain or loss upon its receipt
of money in exchange for shares of Holding Company Stock. (Section 1032(a) of
the Code).
4. Depositors will realize gain, if any, upon the issuance to them of
(i) withdrawable deposit accounts of the Stock Bank, (ii) subscription rights in
connection with the Conversion, and/or (iii) interests in the Liquidation
Account of the Stock Bank. Any gain resulting therefrom will be recognized, but
only in an amount not in excess of the fair market value of the Liquidation
Accounts and/or subscription rights received. The Liquidation Accounts will have
nominal, if any, fair market value. Based solely on the accuracy of the
conclusion reached in the Appraiser's Opinion, and our reliance on such opinion,
that the subscription rights have no value at the time of distribution or
exercise, no gain or loss will be required to be recognized by depositors upon
receipt or distribution of subscription rights. (Section 1001 of the Code). See
Paulsen v. Commissioner, 469 U.S. 131, 139 (1985).
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MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 12
Likewise, based solely on the accuracy of the aforesaid conclusion
reached in the Appraiser's Opinion, and our reliance thereon, we give the
following opinions: (a) no taxable income will be recognized by the members of
the Institution upon distribution to them of subscription rights to acquire
Holding Company Stock at fair market value; (b) no taxable income will be
realized by the members of the Institution as a result of the exercise or lapse
of the subscription rights to purchase Holding Company Stock at fair market
value (Rev. Rul. 56-572, 1956-2 C.B. 182); and (c) no taxable income will be
realized by the Institution, the Stock Bank, or the Holding Company on the
issuance or distribution of subscription rights to members of the Institution to
purchase shares of Holding Company Stock at fair market value (Section 311 of
the Code).
Notwithstanding the Appraiser's Opinion, if the subscription rights are
subsequently found to have a fair market value greater than zero, income may be
recognized by various recipients of the subscription rights (in certain cases,
whether or not the rights are exercised) and the Holding Company and/or the
Stock Bank may be taxable on the distribution of the subscription rights.
(Section 311 of the Code). In this regard, the subscription rights may be taxed
partially or entirely at ordinary income tax rates.
5. The part of the taxable year of the Institution before the
Conversion and the part of the taxable year of the Stock Bank after the
Conversion will constitute a single taxable year of the Stock Bank. (See Rev.
Rul. 57-276, 1957-1 C.B. 126). Consequently, the Institution will not be
required to file a federal income tax return for any portion of such taxable
year (Section 1.381(b)-1(a)(2) of the Treasury Regulations).
6. As provided by Section 381(c)(2) of the Code and Section
1.381(c)(2)-1 of the Treasury Regulations, the Stock Bank will succeed to and
take into account the earnings and profits or deficit in earnings and profits of
the Institution as of the date or dates of transfer.
<PAGE>
MALIZIA SPIDI & FISCH, PC
Board of Directors
BUCS Federal
October 5, 2000
Page 13
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
state, local, foreign, or other tax considerations. If any of the information on
which we have relied is incorrect, or if changes in the relevant facts occur
after the date hereof, our opinion could be affected thereby. Moreover, our
opinion is based on the Internal Revenue Code of 1986, as amended, applicable
Treasury regulations promulgated thereunder, and Internal Revenue Service
rulings, procedures, and other pronouncements published by the United States
Internal Revenue Service. These authorities are all subject to change, and such
change may be made with retroactive effect. We can give no assurance that, after
such change, our opinion would not be different. We undertake no responsibility
to update or supplement our opinion. This opinion is not binding on the Internal
Revenue Service, and there can be no assurance, and none is hereby given, that
the Internal Revenue Service will not take a position contrary to one or more of
the positions reflected in the foregoing opinion, or that our opinion will be
upheld by the courts if challenged by the Internal Revenue Service.
USE OF OPINION
--------------
This opinion is given solely for the benefit of the parties to the Plan
of Conversion, the shareholders of Stock Bank and Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members who purchase stock
pursuant to the Plan of Conversion, and may not be relied upon by any other
party or entity or referred to in any document without our express written
consent.
We hereby consent to the filing of this opinion as an exhibit to the
Application for Conversion on Form AC of the Institution filed with the OTS, the
Application H-(e)(1)-S of the Holding Company filed with the OTS, and the
Registration Statement on Form SB-2 of the Holding Company filed under the
Securities Act of 1933, as amended, and to the reference of our firm in the
prospectus related to this opinion.
Very truly yours,
/s/Malizia Spidi & Fisch, PC
---------------------------------
MALIZIA SPIDI & FISCH, PC
