Attached files
file | filename |
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S-1/A - FORM S-1/A - Oneida Financial Corp. | g22285a1sv1za.htm |
EX-2 - EX-2 - Oneida Financial Corp. | g22285a1exv2.htm |
EX-3.1 - EX-3.1 - Oneida Financial Corp. | g22285a1exv3w1.htm |
EX-99.4 - EX-99.4 - Oneida Financial Corp. | g22285a1exv99w4.htm |
EX-99.5 - EX-99.5 - Oneida Financial Corp. | g22285a1exv99w5.htm |
EX-23.2 - EX-23.2 - Oneida Financial Corp. | g22285a1exv23w2.htm |
EX-10.12 - EX-10.12 - Oneida Financial Corp. | g22285a1exv10w12.htm |
Exhibit 8
LUSE GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
Attorneys at Law
Attorneys at Law
5335 WISCONSIN AVENUE, N.W., SUITE 780
Washington, D.C. 20015
Washington, D.C. 20015
TELEPHONE (202) 274-2000
Facsimile (202) 362-2902
Facsimile (202) 362-2902
www.luselaw.com
April 26, 2010
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
Ladies and Gentlemen:
You have requested this firms opinion regarding the material federal income tax consequences
that will result from the conversion of Oneida Financial, MHC, a federal mutual holding company
(the Mutual Holding Company) into the capital stock form of organization (the Conversion),
pursuant to the Plan of Conversion and Reorganization of Oneida Financial, MHC, dated February 19,
2010, as amended (the Plan) and the integrated transactions described below.
In connection with rendering our opinion, 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 we have relied upon the accuracy of the factual matters set forth in
the Plan and the Registration Statement filed by Oneida Financial Corp., a Maryland stock
corporation (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 by the
Mutual Holding Company with the Office of Thrift Supervision (the OTS). In addition, we are
relying on a letter from RP Financial, LC. to you, dated March 12, 2010, stating its belief as to
certain valuation matters described below. Capitalized terms used but not defined herein shall
have the same meaning as set forth in the Plan. Furthermore, we assume that each of the parties
to the Conversion will comply with all reporting obligations with respect to the Conversion
required under the Internal Revenue Code of 1986, as amended (the Code), and the regulations
thereunder (the Treasury Regulations).
Our opinion is based upon the existing provisions of the Code, and 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
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 2
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 2
change in the facts and assumptions stated below, upon which this opinion is based, could modify
the conclusions herein. 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.
We opine only as to the matters we expressly set forth herein, 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 representations as to factual matters
provided to us by the Mutual Holding Company, Oneida Savings Bank (the Bank), Oneida Financial
Corp., a federal corporation (referred to as the Mid-Tier Holding Company) and the Holding
Company, as set forth in the certificates for each of those aforementioned entities and signed
by authorized officers of each of the aforementioned entities, incorporated herein by reference.
Description of Proposed Transactions
Based upon our review of the documents described above, and in reliance upon such documents,
we understand that the relevant facts are as follows. The Bank is a New York-chartered savings
bank headquartered in Oneida, New York. It was originally founded in 1866 as a state-chartered
mutual savings bank. In 1998, it converted to a state-chartered mutual savings bank and
reorganized from the mutual to the two-tiered mutual holding company form of organization. At that
time, the Bank sold approximately 44.5% of its shares to depositors of the Bank and issued
approximately 2% to a charitable foundation which it established. The remaining 53.5% of the
outstanding shares were issued to the Mutual Holding Company. The owners of the Mutual Holding
Company are the depositors of the Bank, who are entitled upon the complete liquidation of the
Mutual Holding Company to any liquidation proceeds after the payment of creditors.
The Boards of Directors of the Mutual Holding Company, the Mid-Tier Holding Company, and the
Bank have adopted the Plan providing for the Conversion of the Mutual Holding Company from a
federally chartered mutual holding company to the capital stock form of organization. As part of
the Conversion, the Holding Company will succeed to all the rights and obligations of the Mutual
Holding Company and the Mid-Tier Holding Company, and will offer shares of Holding Company Common
Stock to depositors, current stockholders of the Mid-Tier Holding Company and members of the
general public in the Offering.
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 3
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 3
Pursuant to the Plan, the Conversion will be effected as follows and in such order as is
necessary to consummate the Conversion:
(1) | The Mid-Tier Holding Company will organize the Holding Company as a Maryland-chartered stock holding company subsidiary. | ||
(2) | The Mutual Holding Company will merge with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the resulting entity (the MHC Merger) whereby the shares of Mid-Tier Holding Company held by the Mutual Holding Company will be cancelled and the Members of the Mutual Holding Company (e.g., the depositors of the Bank) will constructively receive liquidation interests in Mid-Tier Holding Company in exchange for their ownership interests in the Mutual Holding Company. | ||
(3) | Immediately after the MHC Merger, the Mid-Tier Holding Company will merge with the Holding Company, with the Holding Company as the resulting entity (the Mid-Tier Merger). As part of the Mid-Tier Merger, the liquidation interests in Mid-Tier Holding Company constructively received by the Members of the Mutual Holding Company will automatically, without further action on the part of the holders thereof be exchanged for an interest in the Liquidation Account and the Minority Shares shall be converted into and become the right to receive Holding Company Common Stock based on the Exchange Ratio. | ||
(4) | Immediately after the Mid-Tier Merger, the Holding Company will offer for sale its Holding Company Common Stock in the Offering. | ||
(5) | The Holding Company will contribute at least 50% of the net proceeds of the Offering to the Bank in constructive exchange for common stock of the Bank and the Bank Liquidation Account. |
Following the Conversion, a Liquidation Account will be maintained by the Holding Company for
the benefit of Eligible Account Holders and Supplemental Eligible Account Holders who continue to
maintain their deposit accounts with the Bank. Pursuant to Section 19 of the Plan, the Liquidation
Account will be equal to the product of (a) the percentage of the outstanding shares of the common
stock of the Mid-Tier Holding Company owned by the Mutual Holding Company multiplied by (b) the
Mid-Tier Holding Companys total stockholders equity
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 4
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 4
as reflected in the latest statement of financial condition contained in the final Prospectus
utilized in the Conversion, plus the value of the net assets of the Mutual Holding Company as
reflected in the latest statement of financial condition of the Mutual Holding Company prior to the
effective date of the Conversion (excluding its ownership of Mid-Tier Holding Company common
stock). The terms of the Liquidation Account and Bank Liquidation Account, are set forth in
Section 19 of the Plan.
As part of the Conversion, all of the then-outstanding shares of Mid-Tier Holding Company
common stock owned by the Minority Stockholders will be converted into and become shares of Holding
Company Common Stock pursuant to the Exchange Ratio which ensures that after the Conversion,
Minority Stockholders will own in the aggregate the same percentage of Holding Company Common Stock
as they held in Mid-Tier Holding Company common stock immediately prior to the Conversion,
exclusive of Minority Stockholders purchases of additional shares of Holding Company Common Stock
in the Offering and receipt of cash in lieu of fractional shares. As part of the Conversion,
additional shares of Holding Company Common Stock will be offered for sale on a priority basis to
depositors of the Bank, current shareholders of the Mid-Tier Holding Company, and to members of the
public in the Offering.
As a result of the Conversion and Offering, the Holding Company will be a publicly-held
corporation, will register the Holding Company Common Stock under Section 12(b) 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 Conversion, 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 Eligible Account
Holders, the Banks tax-qualified employee plans (Employee Plans), Supplemental Eligible Account
Holders Record Date and certain depositors of the Bank as of the Voting Record Date (Other
Depositors). 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 or Syndicated Community Offering to certain members of the general public
(with preferences given to persons residing in the New York counties of Chenango, Cortland,
Herkimer, Lewis, Madison, Oneida, Onondaga, Oswego and Otsego) and if shares remain after the
subscription and community offerings, shares
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 5
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 5
may be offered to members of the general public in a syndicated community offering by
broker-dealers.
Opinions
Based on the foregoing description of the Conversion, including the MHC Merger, and the
Mid-Tier Merger, and subject to the qualifications and limitations set forth in this letter, we
are of the opinion that:
1. The MHC Merger will qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code. (Section 368(a)(l)(A) of the Code.)
2. The constructive exchange of the Eligible Account Holders and Supplemental Eligible Account
Holders ownership interests in the Mutual Holding Company for liquidation interests in the Mid-Tier
Holding Company 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.)
3. No gain or loss will be recognized by the Mutual Holding Company on the transfer of its
assets to the Mid-Tier Holding Company and the Mid-Tier Holding Companys assumption of its
liabilities, if any, in constructive exchange for a liquidation interest in the Mid-Tier Holding
Company or on the constructive distribution of such liquidation interests to members of the Mutual
Holding Company. (Section 361(a), 361(c) and 357(a) of the Code.)
4. No gain or loss will be recognized by the Mid-Tier Holding Company upon the receipt of
the assets of the Mutual Holding Company in the MHC Merger in exchange for the constructive
transfer of liquidation interests in the Mid-Tier Holding Company to the members of the Mutual
Holding Company. (Section 1032(a) of the Code)
5. Persons who have liquidation interests in the Mutual Holding Company will recognize no
gain or loss upon the constructive receipt of a liquidation interest in the Mid-Tier Holding
Company in exchange for their liquidation interests in the Mutual Holding Company. (Section
354(a) of the Code)
6. The basis of the assets of Mutual Holding Company (other than stock in the Mid-Tier
Holding Company) to be received by the Mid-Tier Holding Company will be the same as the basis of
such assets in the Mutual Holding Company immediately prior to the transfer. (Section 362(b) of
the Code)
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 6
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 6
7. The holding period of the assets of the Mutual Holding Company transferred to the Mid-Tier
Holding Company will include the holding period of those assets in the Mutual Holding Company.
(Section 1223(2) of the Code)
8. The Mid-Tier Merger will constitute a mere change in identity, form or place of
organization within the meaning of Section 368(a)(1)(F) of the Code and therefore will qualify as
a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code. (Section
368(a)(1)(F) of the Code)
9. The Mid-Tier Holding Company will not recognize any gain or loss on the transfer of its
assets to the Holding Company and the Holding Companys assumption of its liabilities in exchange
for shares of Holding Company Common Stock or the distribution of such stock to Minority
Stockholders and constructive distribution of interests in the Liquidation Account to the Eligible
Account Holders and Supplemental Eligible Account Holders. (Sections 361(a), 361(c) and 357(a) of
the Code)
10. No gain or loss will be recognized by the Holding Company upon the receipt of the
assets of Mid-Tier Holding Company in the Mid-Tier Merger. (Section 1032(a) of the Code.)
11. The basis of the assets of the Mid-Tier Holding Company (other than stock in the Bank)
to be received by the Holding Company will be the same as the basis of such assets in the
Mid-Tier Holding Company immediately prior to the transfer. (Section 362(b) of the Code.)
12. The holding period of the assets of Mid-Tier Holding Company (other than stock in Bank)
to be received by the Holding Company will include the holding period of those assets in the
Mid-Tier Holding Company immediately prior to the transfer. (Section 1223(2) of the Code)
13. Mid-Tier Holding Company shareholders will not recognize any gain or loss upon their
exchange of Mid-Tier Holding Company common stock for Holding Company Common Stock. (Section
354 of the Code)
14. Eligible Account Holders and Supplemental Eligible Account Holders will not recognize any
gain or loss upon their constructive exchange of their liquidation interests in Mid-Tier Holding
Company for interests in the Liquidation Account in the Holding Company. (Section 354 of the
Code)
15. The constructive exchange of the Eligible Account Holders and Supplemental Eligible
Account Holders liquidation interests in the Mid-Tier Holding Company for interests in the
Liquidation Account established in the Holding Company will satisfy the continuity of interest
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 7
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 7
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)
16. The payment of cash to the Minority Stockholders in lieu of fractional shares of Holding
Company Common Stock will be treated as though the fractional shares were distributed as part of
the Mid-Tier 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)
17. It is more likely than not that the fair market value of the nontransferable subscription
rights to purchase Holding Company Common Stock is zero. Accordingly, it is more likely than not
that no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account
Holders and Other Depositors upon distribution to them of nontransferable subscription rights to
purchase shares of Holding Company Common Stock. (Section 356(a) of the Code.) Eligible Account
Holders, Supplemental Eligible Account Holders and Other Depositors will not realize any taxable
income as a result of their exercise of the nontransferable subscriptions rights. (Rev. Rul.
56-572, 1956-2 C.B. 182)
18. It is more likely than not that the fair market value of the benefit provided by the Bank
Liquidation Account supporting the payment of the Liquidation Account in the event the Holding
Company lacks sufficient net assets is zero. Accordingly, it is more likely than not that no gain
or loss will be recognized by Eligible Account Holders and Supplemental Eligible Account Holders
upon the constructive distribution to them of such rights in the Bank Liquidation Account as of the
effective date of the Mid-Tier Merger. (Section 356(a) of the Code)
19. Each shareholders aggregate basis in his or her Holding Company Common Stock received
in the exchange will be the same as the aggregate basis of the Mid-Tier Holding Company common
stock surrendered in exchange therefor. (Section 358(a) of the Code.)
20. It is more likely than not that the basis of the Holding Company Common Stock
purchased in the Offering by the exercise of the nontransferable subscription rights will be
the purchase price thereof. (Section 1012 of the Code)
21. Each shareholders holding period in his or her Holding Company Common Stock received in
the exchange will include the period during which the Mid-Tier Holding Company
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 8
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 8
common stock surrendered was held, provided that the common stock surrendered is a capital
asset in the hands of the shareholder on the date of the exchange. (Section 1223(1) of the Code)
22. The holding period of the Holding Company Common Stock purchased pursuant to the exercise
of subscriptions rights will commence on the date on which the right to acquire such stock was
exercised. (Section 1223(5) of the Code.)
23. No gain or loss will be recognized by the Holding Company on the receipt of money in
exchange for Holding Company Common Stock sold in the Offering. (Section 1032 of the Code.)
Our opinion under paragraph 20 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 opinions under paragraphs 17 and 19 are based on the position that the subscription rights to
purchase shares of Holding Company Common Stock received by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Depositors have a fair market value of zero. We understand that
the subscription rights will be granted at no cost to the recipients, will be legally
nontransferable and of short duration, and will provide the recipient with the right only to
purchase shares of Holding Company Common Stock at the same price to be paid by members of the
general public in any Community Offering or Syndicated Community Offering. We also note that the
IRS has not in the past concluded that subscription rights have value. In addition, we are relying
on a letter from RP Financial, LC. to you stating its belief that subscription rights do not have
any economic value at the time of distribution or at the time the rights are exercised in the
Subscription Offering. Based on the foregoing, we believe it is more likely than not that the
nontransferable subscription rights to purchase Holding Company Common Stock have no value.
If the subscription rights are subsequently found to have an economic value, 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 Bank may be subject to taxon the
distribution of the subscription rights.
Our opinion under paragraph 18 above is based on the position that the benefit provided by
the Bank Liquidation Account supporting the payment of the Liquidation Account in the event the
Holding Company lacks sufficient net assets has a fair market value of zero. We understand
that: (i) no holder of an interest in a liquidation account has ever received payment
attributable to such interest in a liquidation account; (ii) the interests in the Liquidation
Account and Bank Liquidation Account are not transferable; (iii) the amounts due under the
Liquidation Account with respect to each Eligible Account Holder and Supplemental
Boards of Directors
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 9
Oneida Financial, MHC
Oneida Financial Corp. (Federal)
Oneida Financial Corp. (Maryland)
Oneida Savings Bank
April 25, 2010
Page 9
Eligible Account Holder will be reduced as their deposits in the Bank are reduced as
described in the Plan; and (iv) the Bank Liquidation Account payment obligation arises only if
the Holding Company lacks sufficient net assets to fund the Liquidation Account. We also note
that the U.S. Supreme Court in Paulsen v. Commissioner, 469 U.S. 131 (1985) stated the
following:
The right to participate in the net proceeds of a solvent liquidation is also not a significant part of the value of the shares. Referring to the possibility of a solvent liquidation of a mutual savings association, this Court observed: It stretches the imagination very far to attribute any real value to such a remote contingency, and when coupled with the fact that it represents nothing which the depositor can readily transfer, any theoretical value reduces almost to the vanishing point. Society for the Savings v. Bowers, 349 U.S. 143, 150 (1955). |
In addition, we are relying on a letter from RP Financial, LC. to you stating its belief that
the benefit provided by the Bank Liquidation Account supporting the payment of the Liquidation
Account in the event the Holding Company lacks sufficient net assets does not have any economic
value at the time of the Conversion. Based on the foregoing, we believe it is more likely than
not that such rights in the Bank Liquidation Account have no value.
If such rights in the Bank Liquidation Account are subsequently found to have an economic
value, income may be recognized by each Eligible Account Holder and Supplemental Eligible
Account Holder in the amount of the fair market value of their interest in the Bank Liquidation
Account as of the effective date of the Conversion.
CONSENT
We hereby consent to the filing of the opinion as an exhibit to the Mutual Holding Companys
Application for Conversion filed with the OTS and to the Holding Companys 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 Conversion and Form S-1 under the captions The Conversion and
Offering-Material Income Tax Consequences and Legal and Tax Matters.
Very truly yours,
/S/ Luse Gorman Pomerenk & Schick
Luse Gorman Pomerenk & Schick