[XXXXX, XXXXXXXX & XXXXXXX, LLP LETTERHEAD]
XXXXX X. XXXXX
(000) 000-0000
E-MAIL: XXXXXX@xxxxxx.xxx
December 10, 1997
Citizens Bancshares Corporation
000 Xxxx Xxxxxx Xxxxx Xxxxxx, X.X.
Atlanta, Georgia 30303
First Southern Bancshares, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Re: Agreement and Plan of Merger under which First Southern Bancshares,
Inc. will merge with and into Citizens Bancshares Corporation
Gentlemen:
We have acted as counsel to Citizens Bancshares Corporation ("CBC") in
connection with the proposed merger (the "Merger") of First Southern Bancshares,
Inc. ("FSB"), with and into CBC, pursuant to the terms of and as described in
that certain Agreement and Plan of Merger (the "Merger Agreement") dated as of
October 1, 1997 by and between CBC and FSB, described in the CBC Registration
Statement on Form S-4, to be filed with the Securities and Exchange Commission
on or about October 16, 1997 (the "Registration Statement"). At your request,
in connection with the filing by CBC of the Registration Statement and the Proxy
Statement/Prospectus of CBC and FSB as amended through the date hereof (the
"Proxy Statement/Prospectus") included as part of the Registration Statement, we
are rendering our opinion concerning certain federal income tax consequences of
the Merger. Unless otherwise indicated, all capitalized terms used in this
opinion have the same meanings given therefor in the Proxy Statement/Prospectus.
For purposes of rendering our opinion herein, we have conducted an
examination of the Internal Revenue Code of 1986, as amended (the "Code"), and
such other applicable laws, regulations, rulings, decisions, documents and
records as we have deemed necessary. With respect to factual matters, we have
relied upon the Merger Agreement, including, without limitation, the
representations of CBC and FSB set forth therein, and upon certain statements
and representations made to us in certificates by officers of CBC and FSB,
respectively, in each case without independent verification thereof. We have,
with your consent, assumed the accuracy and completeness of the statements and
representations contained in such certificates and have further assumed that the
statements and representations contained in such certificates will be complete
and
accurate as of the Effective Time. We have also relied on the accuracy and
completeness of the statements and representations contained in the Proxy
Statement/Prospectus. In addition, for purposes of this opinion, we have
assumed that at least fifty percent (50%) of the outstanding shares of FSB
Common Stock will be exchanged for CBC Common Stock in the Merger, and that the
shares of FSB Common Stock constitute capital assets in the hands of each holder
thereof.
Based on the foregoing, and subject to the qualifications set forth below,
we are of the opinion that under the Code:
(1) The Merger will constitute a reorganization under Code SS368(a)(1)(A).
(2) Holders of shares of FSB Common Stock who exchange such shares solely
for shares of CBC Common Stock will not recognize gain or loss on the exchange.
The federal income tax basis of shares of CBC Common Stock received in exchange
for shares of FSB Common Stock will be equal to the holder's basis of the shares
of FSB Common Stock surrendered in exchange therefor (reduced by the basis
allocable to any fractional interest in any share of CBC Common Stock for which
cash is received), and the holding period of such CBC Common Stock will include
the holding period of the shares of FSB Common Stock surrendered in exchange
therefor.
(3) The receipt of cash in lieu of fractional shares of CBC Common Stock
will be treated as if the fractional shares were distributed as part of the
exchange and then redeemed by CBC. These cash payments will be treated as
having been received as distributions in full payment in exchange for the
fractional shares of CBC Common Stock redeemed as provided under S302(a) of the
Code. Any gain or loss recognized will be capital gain or loss in an amount
equal to the difference between the cash received and the basis of the
fractional share of CBC Common Stock surrendered.
(4) Holders of FSB Common Stock who dissent from the Merger and receive
cash in an amount equal to the "fair value" of their shares will recognize
capital gain or loss in an amount equal to the difference between the cash
received and the basis of each share of FSB Common Stock surrendered.
(5) Neither FSB nor CBC will recognize gain or loss for federal income tax
purposes as a consequence of the Merger.
The opinions expressed herein are based upon our interpretation of existing
legal authorities, and no assurance can be given that such interpretations would
be followed if the exchange of shares contemplated by the Merger became the
subject of administrative or judicial proceedings. Statements of opinion herein
are opinions only and should not be interpreted as guarantees of the current
status of the law, nor should they be accepted as a guarantee that a court of
law or administrative agency will concur in such statement.
No opinion is expressed with respect to any of the following:
(i) The appropriate method to determine the fair market value of any
stock or other consideration received in any sale or exchange;
(ii) The state, local or foreign tax consequences of any aspect of the
Merger; or
(iii) The federal income tax consequences of any aspect of the Merger to
holders of FSB Common Stock who are subject to special tax treatment for federal
income tax purposes, including among others, life insurance companies, tax
exempt entities and foreign taxpayers, or to holders of FSB Options which are
exchanged for or converted into options or warrants to acquire CBC Common Stock.
We expressly consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to this opinion in the Proxy Statement/Prospectus. In giving this
opinion, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
XXXXX, XXXXXXXX & XXXXXXX, LLP
/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
