EXHIBIT 8.0 DRAFT OPINION OF MULDOON, MURPHY & FAUCETTE
RE: FEDERAL TAX MATTERS
DRAFT
_______________, 1996
Board of Directors
Delphos Citizens Bancorp, Inc.
114 East Third Street
Delphos, Ohio 45833
Board of Directors
Citizens Federal Savings and Loan Association
of Delphos
114 East Third Street
Delphos, Ohio 45833
Re: Certain Federal Tax Consequences of the Conversion of Citizens
Federal Savings and Loan Association of Delphos from a
federally-chartered mutual savings and loan association to a
federally-chartered capital stock savings bank
Ladies and Gentlemen:
You have requested an opinion on certain federal income tax consequences of
the proposed conversion of Citizens Federal Savings and Loan Association of
Delphos ("Citizens" or the "Association") from a federally-chartered mutual
savings and loan association to a federally-chartered capital stock savings bank
(the "Converted Association") and the acquisition of the stock of the Converted
Association by Delphos Citizens Bancorp, Inc., a Delaware corporation (the
"Company" or the "Holding Company") pursuant to the Plan of Conversion, as
adopted by the Board of Directors on June 11, 1996 (the "Plan of Conversion").
The proposed transaction is described in the Prospectus and the Plan of
Conversion, and the tax consequences of the proposed transaction will be as set
forth in the section of this letter entitled "FEDERAL TAX OPINION."
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We have made such inquiries and have examined such documents and records as
we have deemed appropriate for the purpose of this opinion. In rendering this
opinion, we have received certain standard representations of the Company and
the Association concerning the Company and the Association as well as the
transaction ("Representations"). These Representations are required to be
furnished prior to the execution of this letter and again prior to the closing
of the Conversion. We will rely upon the accuracy of the Representations of the
Company and the Association and the statements of facts contained in the
examined documents, particularly the Plan of Conversion. We have also assumed
the authenticity of all signatures, the legal capacity of all natural persons
and the conformity to the originals of all documents submitted to us as copies.
Each capitalized term used herein, unless otherwise defined, has the meaning set
forth in the Plan of Conversion. We have assumed that the Conversion will be
consummated strictly in accordance with the terms of the Plan of Conversion.
The Plan of Conversion and the Prospectus contain a detailed description of
the Conversion. These documents as well as the Representations to be provided
by the Company and the Association are incorporated in this letter as part of
the statement of the facts.
As a mutual savings and loan association, the Association has never been
authorized to issue stock. Instead, the proprietary interest in the reserves
and undivided profits of the Association belong to the deposit account holders
of the Association, hereinafter sometimes referred to as "depositors." A
depositor of the Association has a right to share, pro rata, with respect to the
withdrawal value of his respective deposit account in any liquidation proceeds
distributed in the event the Association is ever liquidated. In addition, a
depositor of the Association is entitled to interest on his account balance as
fixed and paid by the Association.
In order to provide organizational and economic strength to the
Association, the Board of Directors has adopted the Plan of Conversion whereby
the Association will convert itself into a federally-chartered stock savings and
loan association (the "Converted Association"), the stock of which will be held
entirely by the Holding Company. The Holding Company will acquire the stock of
the Association by purchase, using 50% of the net proceeds received from the
sale of its own stock under the Plan of Conversion. The aggregate sales price
of the Common Stock issued in the Conversion will be based on an independent
appraiser's valuation of the estimated pro forma market value of the Common
Stock of the Converted Association. The Conversion and sale of the Common Stock
will be subject to approval by the Office of Thrift Supervision and the approval
of the Voting Members.
ESTABLISHMENT OF LIQUIDATION ACCOUNT. The Association shall establish at
the time of Conversion a liquidation account in an amount equal to its net worth
as of the latest practicable date prior to Conversion. The liquidation account
will be maintained by the Association for the benefit of the Eligible Account
Holders and Supplemental Eligible
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Account Holders who continue to maintain their savings accounts at the
Association. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to his savings account, hold a related inchoate
interest in a portion of the liquidation account balance, in relation to his
savings account balance on the Eligibility Record Date and/or Supplemental
Eligibility Record Date or to such balance as it may be subsequently reduced.
In the unlikely event of a complete liquidation of the Association (and
only in such event), following all liquidation payments to creditors (including
those to account holders to the extent of their savings accounts) each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the liquidation account, in the amount
of the then adjusted subaccount balance for his savings account then held,
before any liquidation distribution may be made to any holders of the
Association's capital stock. No merger, consolidation, purchase of bulk assets
with assumption of savings accounts and other liabilities, or similar
transaction with an FDIC institution, in which the Association is not the
surviving institution, shall be deemed to be a complete liquidation for this
purpose. In such transactions, the liquidation account shall be assumed by the
surviving institution.
* * *
You have provided the following representations concerning this
transaction:
(a) The fair market value of the withdrawable deposit accounts plus
interests in the liquidation account of the Converted Association to
be constructively received under the Plan of Conversion will, in each
instance, be equal to the fair market value of the withdrawable
deposit accounts (plus the related interest in the residual equity of
the Association) deemed to be surrendered in exchange therefor.
(b) If an individual's total deposits in the Association equal or exceed
$50 as of the Eligibility Record Date or the Supplemental Eligibility
Record Date, then no amount of that individual's total deposits will
be excluded from participating in the liquidation account. The fair
market value of the deposit accounts of the Association which have a
balance of less than $50 on the Eligibility Record Date or the
Supplemental Eligibility Record Date will be less than 1% of the total
fair market value of all deposit accounts of the Association.
(c) Immediately following the Conversion, the Eligible Account Holders and
the Supplemental Eligible Account Holders of the Association will own
all of the outstanding interests in the liquidation account and will
own such interest solely
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by reason of their ownership of deposits in the Association
immediately before the Conversion.
(d) After the Conversion, the Converted Association will continue the
business of the Association in the same manner as prior to the
Conversion. The Converted Association has no plan or intention and
the Holding Company has no plan or intention to cause the Converted
Association to sell its assets other than in the ordinary course of
business.
(e) The Holding Company has no plan or intention to sell, liquidate or
otherwise dispose of the stock of the Converted Association other than
in the ordinary course of business.
(f) The Holding Company and the Converted Association have no current plan
or intention to redeem or otherwise acquire any of the Common Stock
issued in the Conversion transaction.
(g) Immediately after the Conversion, the assets and liabilities of the
Converted Association will be identical to the assets and liabilities
of the Association immediately prior to the Conversion, plus the net
proceeds from the sale of the Converted Association's common stock to
the Holding Company and any liability associated with indebtedness
incurred by the Employee Plans in the acquisition of Common Stock by
the Employee Plans.
(h) The Association, Converted Association and the Holding Company are
corporations within the meaning of section 7701(a)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
(i) None of the shares of the Common Stock to be purchased by the
depositor-employees of the Association in the Conversion will be
issued or acquired at a discount. However, shares may be given to
certain Directors and employees as compensation by means of the
Employee Plans. Compensation to be paid to such Directors and
depositor-employees will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services.
(j) The fair market value of the assets of the Association, which will be
transferred to the Converted Association in the Conversion, will equal
or exceed the sum of the liabilities of the Association which will be
assumed by the Converted Association and any liabilities to which the
transferred assets are subject.
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(k) The Association is not under the jurisdiction of a bankruptcy or
similar court in any Title 11 or similar case within the meaning of
section 368(a)(3)(A) of the Code.
(l) Upon the completion of the Conversion, the Holding Company will own
and hold 100% of the issued and outstanding capital stock of the
Converted Association and no other shares of capital stock of the
Converted Association will be issued and/or outstanding. At the time
of the Conversion, the Converted Association does not have any plan or
intention to issue additional shares of its stock following the
transaction. Further, no shares of preferred stock of the Converted
Association will be issued and/or outstanding.
(m) Upon the completion of the Conversion, there will be no rights,
warrants, contracts, agreements, commitments or understandings with
respect to the capital stock of the Converted Association, nor will
there be any securities outstanding which are convertible into the
capital stock of the Converted Association.
(n) No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders, or others in lieu of (a)
nontransferable subscription rights, or (b) an interest in the
liquidation account of the Converted Association.
(o) The Association utilizes a reserve for bad debts in accordance with
section 593 and, following the Conversion, the Converted Association
shall likewise utilize a reserve for bad debts in accordance with
section 593.
(p) The Association currently satisfies the 60% "qualified assets" test of
section 7701(a)(19) of the Code. Management expects the Converted
Association to be able to continue to satisfy the test in the future.
The Converted Association will also satisfy the "qualified thrift
lender" tests set out in sections 301 and 303 of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA").
(q) Depositors will pay the expenses of the Conversion solely applicable
to them, if any. The Holding Company and the Association will each
pay expenses of the transaction attributable to them and will not pay
any expenses solely attributable to the depositors or to the Holding
Company shareholders.
(r) The exercise price of the subscription rights received by the
Association's Eligible Account Holders, Supplemental Eligible Account
Holders, and other
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holders of subscription rights to purchase Holding Company Common
Stock will be equal to the fair market value of the stock of the
Holding Company at the time of the completion of the Conversion as
determined by an independent appraisal.
(s) The proprietary interests of the Eligible Account Holders and the
Supplemental Eligible Account Holders in the Association arise solely
by virtue of the fact that they are account holders in the
Association.
(t) There is no plan or intention for the Converted Association to be
liquidated or merged with another corporation following this proposed
transaction.
(u) The liabilities of the Association assumed by the Converted
Association plus the liabilities, if any, to which the transferred
assets are subject were incurred by the Association in the ordinary
course of its business and are associated with the assets transferred.
(v) The Association currently has no net operating losses for federal tax
purposes, and has no such losses available for carryover to future tax
years. The Association has neither generated nor carried forward a
net operating loss for federal tax purposes in the past five tax
years.
LIMITATIONS ON OPINION
Our opinions expressed herein are based solely upon current provisions of
the Internal Revenue Code of 1986, as amended, including applicable regulations
thereunder and current judicial and administrative authority. Any future
amendments to the Code or applicable regulations, or new judicial decisions or
administrative interpretations, any of which could be retroactive in effect,
could cause us to modify our opinion. No opinion is expressed herein with
regard to the federal, state, or city tax consequences of the Conversion under
any section of the Code, or with respect to any aspect of the transaction,
except if and to the extent specifically addressed.
FEDERAL TAX OPINION
Based solely upon the foregoing representations and information and
assuming the transaction occurs in accordance with the Plan of Conversion (and
taking into consideration
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the limitations at the end of this opinion), it is our opinion that under
current federal income tax law:
(1) Pursuant to the Conversion, the changes at the corporate level other
than changes in the form of organization will be insubstantial. Based
upon that fact and the fact that the equity interest of a depositor in
a mutual savings and loan association is more nominal than real,
unlike that of a shareholder of a corporation, the Conversion of the
Association from a mutual savings and loan association to a stock
savings and loan association is a tax-free reorganization since it is
a mere change in identity, form or place of organization within the
meaning of section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105,
1980-1 C.B. 78). Neither the Association nor the Converted
Association shall recognize gain or loss as a result of the
Conversion. The Association and the Converted Association shall each
be "a party to a reorganization" within the meaning of section 368(b)
of the Code.
(2) No gain or loss shall be recognized by the Converted Association or
the Holding Company on the receipt by the Converted Association of
money from the Holding Company in exchange for shares of the Converted
Association's capital stock or by the Holding Company upon the receipt
of money from the sale of its Common Stock (Section 1032(a) of the
Code).
(3) The basis of the assets of the Association in the hands of the
Converted Association shall be the same as the basis of such assets in
the hands of the Association immediately prior to the Conversion
(Section 362(b) of the Code).
(4) The holding period of the assets of the Association in the hands of
the Converted Association shall include the period during which the
Association held the assets (Section 1223(2) of the Code).
(5) No gain or loss shall be recognized by the Eligible Account Holders
and the Supplemental Eligible Account Holders of the Association on
the issuance to them of withdrawable deposit accounts in the Converted
Association plus interests in the liquidation account of the Converted
Association in exchange for their deposit accounts in the Association
or to the other depositors on the issuance to them of withdrawable
deposit accounts (Section 354(a) of the Code).
(6) 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 Eligible Account Holders and
Supplemental Eligible Account
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Holders upon the distribution to them of the nontransferable
subscription rights to purchase shares of stock in the Holding Company
(Section 356(a)). Gain realized, if any, by the Eligible Account
Holders and Supplemental Eligible Account Holders 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)).
Eligible Account Holders and Supplemental Eligible Account Holders
will not realize any taxable income as a result of the exercise by
them of the nontransferable subscription rights (Rev. Rul. 56-572,
1956-2 C.B. 182).
(7) The basis of the deposit accounts in the Converted Association to be
received by the Eligible Account Holders, Supplemental Eligible
Account Holders and other depositors of the Association will be the
same as the basis of their deposit accounts in the Association
surrendered in exchange therefor (Section 358(a)(1) of the Code). The
basis of the interests in the liquidation account of the Converted
Association to be received by the Eligible Account Holders of the
Association shall be zero (Rev. Rul. 71-233, 1971-1 C.B. 113). The
basis of the Holding Company Common Stock to its stockholders will be
the purchase price thereof plus the basis, if any, of nontransferable
subscription rights (Section 1012 of the Code). Accordingly, assuming
the nontransferable subscription rights have no value, the basis of
the Common Stock to the Eligible Account Holders and Supplemental
Eligible Account Holders 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).
Our opinion under paragraph (6) 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 (6) and
(7) above assumes that the subscription rights to purchase shares of Common
Stock received by Eligible Account Holders and Supplemental Eligible Account
Holders have a fair market value of zero. We understand that you have received
a letter from Keller & Company, Inc. 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 Holding Company
and/or the Converted Association may be taxable on the distribution of the
subscription rights.
* * *
Board of Directors DRAFT
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Since this letter is rendered in advance of the closing of this
transaction, we have assumed that the transaction will be consummated in
accordance with the Plan of Conversion as well as all the information and
representations referred to herein. Any change in the transaction could cause
us to modify our opinion.
We consent to the inclusion of this opinion as an exhibit to the Form S-1
Registration Statement of Delphos Citizens Bancorp, Inc. and the references to
and summary of this opinion in such Form S-1 Registration Statement.
Sincerely,
MULDOON, MURPHY & FAUCETTE