February 10, 2009
February
10, 2009
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Old
Forge Bank
000
X. Xxxx Xxxxxx
Xxx
Xxxxx, XX 00000
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Ladies
and Gentlemen:
Pursuant to the Agreement and Plan of
Merger, dated as of December 5, 2008 (the “Agreement”), by and among Penseco
Financial Services Corporation, a Pennsylvania corporation (“Penseco”), Penn
Security Bank and Trust Company, a Pennsylvania commercial bank and trust
company and direct wholly-owned subsidiary of Penseco (“Penn Security”), and Old
Forge Bank, a Pennsylvania commercial bank (“Old Forge”), a newly-formed
interim Pennsylvania commercial bank and direct wholly-owned subsidiary of
Penseco (“Merger Sub”) is to merge with and into Old Forge and immediately
thereafter Old Forge is to merge with and into Penn Security (the two mergers
together, the “Merger”). Capitalized terms not otherwise defined in
this opinion have the meanings ascribed to such terms in the
Agreement.
We have acted as legal counsel to Old
Forge in connection with the Merger. We are delivering this opinion
in connection with the filing by Penseco, with the Securities and Exchange
Commission (the “SEC”), of Penseco’s Form S-4 (the “Registration Statement”) and
the proxy statement/prospectus included therein (the Proxy
Statement/Prospectus”). For the purpose of rendering our opinion, we
have examined and are relying, with your permission (without any independent
investigation or review thereof other than such investigation and review as we
have deemed necessary to comply with our professional obligations under IRS
Circular 230 or otherwise), upon the truth and accuracy, at all relevant times,
of the statements, covenants, representations and warranties contained in the
following documents (the “Documents”):
1. The
Agreement;
2. The
Registration Statement and the Proxy Statement/Prospectus;
3. The
representations made to us by Penseco and Penn Security in their letter to us
dated the date hereof;
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Bank
February
10, 2009
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2
4. The
representations made to us by Old Forge in its letter to us dated the date
hereof; and
5. Such
other instruments and documents related to the formation, organization and
operation of Penseco, Penn Security, Merger Sub and Old Forge and to the
consummation of the Merger as we have deemed necessary or appropriate for
purposes of our opinion.
For purposes of this opinion, we have
assumed, with your permission and without independent investigation (other than
such investigation as we have deemed necessary to comply with our professional
obligations under IRS Circular 230 or otherwise), (i) that the Merger will be
consummated in the manner contemplated by the Proxy Statement/Prospectus and in
accordance with the provisions of the Agreement without the waiver of any
conditions to any party’s obligation to effect the Merger, (ii) that original
documents (including signatures) are authentic, (iii) that documents submitted
to us as copies conform to the original documents, (iv) that there has been (or
will be by the date of the Merger) due execution and delivery of all documents
where due execution and delivery are prerequisites to the effectiveness of those
documents, (v) that the statements and representations contained in the
Documents are accurate and will continue to be accurate at all relevant times,
(vi) that covenants and warranties set forth in the Documents will be complied
with and (vii) that the Merger will be effective under applicable
law.
Furthermore, we have assumed, with your
permission and without independent investigation (other than such investigation
as we have deemed necessary to comply with our professional obligations under
IRS Circular 230 or otherwise), that, as to all matters in which a person or
entity making a representation has represented that such person or entity or a
related party is not a party to, does not have, or is not aware of, any plan,
intention, understanding or agreement to take action, there is in fact no plan,
intention, understanding or agreement and such action will not be taken, and we
have further assumed that any statement made “to the knowledge of” or otherwise
similarly qualified is correct without such qualification.
Subject to the foregoing and any other
assumptions, limitations and qualifications specified herein, it is our opinion
that the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”).
Our opinion expressed herein is based
upon the Code, regulations promulgated thereunder, administrative pronouncements
and judicial authority, all as in effect as of the date hereof. It
represents our best legal judgment as to the matters addressed herein but is not
binding on the Internal Revenue Service or the courts. Accordingly,
no assurance can be given that the
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Bank
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10, 2009
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3
Internal
Revenue Service would agree with the opinion expressed herein or, if contested,
the opinion would be sustained by a court. Furthermore, the
authorities upon which we rely may be changed at any time, potentially with
retroactive effect. No assurances can be given as to the effect of
any such changes on the conclusions expressed in this opinion. We
undertake no responsibility to advise you of any new developments in the
application or interpretation of relevant federal tax laws. If any of
the facts or assumptions pertinent to the U.S. federal income tax treatment of
the Merger specified herein or any of the statements, covenants, representations
or warranties contained in the Documents are, or later become, inaccurate, such
inaccuracy may adversely affect the conclusions expressed in this
opinion. In addition, our opinion is limited to the tax matters
specifically covered hereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the Merger or any other
transactions.
This opinion is being provided solely
for the benefit of Old Forge. No other person or party shall be
entitled to rely on this opinion. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement and to the reference to
us in the section captioned “Material United States Federal Income Tax
Consequences of the Merger” therein. In giving this consent, we do
not hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the SEC thereunder.
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Very
truly yours,
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Stradley,
Ronon, Xxxxxxx & Young, LP
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/s/
Stradley, Ronon, Xxxxxxx & Young,
LP
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