EXHIBIT 8.1
[FORM OF TAX OPINION]
July 5, 1996
F&M National Corporation Allegiance Banc Corporation
38 Rouss Avenue 4719 Hampden Lane
Post Office Box 2800 Bethesda, Maryland 20814
Winchester, Virginia 22604
OPINION WITH RESPECT TO CERTAIN TAX MATTERS
RELATING TO MERGER OF
ALLEGIANCE BANC CORPORATION
INTO
F&M NATIONAL CORPORATION
Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed merger of Allegiance Banc Corporation, a Delaware
corporation ("ABC"), with and into F&M National Corporation, a Virginia
corporation ("F&M") pursuant to an Agreement and Plan of Reorganization, dated
as of April 22, 1996 (the "Agreement"), by and between F&M and ABC.
THE MERGER
Pursuant to the Agreement and the Plan of Merger (the "Plan") attached
as Exhibit A to the Agreement, and subject to various regulatory approvals, ABC
will be merged with and into F&M in accordance with the provisions of, and with
the effect provided in, the Virginia Stock Corporation Act (the "Merger"). As a
result of the Merger, F&M will become the parent holding company of Allegiance
Bank, N.A., the banking subsidiary of ABC ("Allegiance Bank"), as well as F&M's
current subsidiary banks, all of which will continue to conduct their businesses
in substantially the same manner as prior to the Merger.
At the effective date of the Merger, and pursuant to the Plan, each
share of common stock of ABC ("ABC Common Stock") will be exchanged for and
converted into that number of shares of common stock of F&M ("F&M Common Stock")
having an aggregate market value equal to $15.00, plus cash in lieu of issuing
fractional shares of F&M Common Stock.
OUR EXAMINATION
In connection with the preparation of this opinion, we have examined
such documents concerning the Merger as we have deemed necessary. We have based
our conclusions on the Internal Revenue Code of 1986 (the "Code") and the
regulations promulgated pursuant thereto, each as amended from time to time and
in effect as of the date hereof, as well as existing judicial and administrative
interpretations thereof.
As to various questions of fact material to our opinion, we have relied
upon the representations made in the Agreement as well as the additional
representations set forth below. In particular, we have assumed that there is no
plan or intention on the part of the shareholders of ABC to sell or otherwise
dispose of the F&M Common Stock received by them in the Merger which would have
the effect set forth in paragraph B of the "Additional Representations" below.
ADDITIONAL REPRESENTATIONS
In connection with the proposed Merger, the following additional
representations have been made to and relied upon by us in the preparation of
this opinion:
A. The fair market value of F&M Common Stock received by ABC
shareholders will be approximately equal to the fair market value of ABC Common
Stock to be surrendered in exchange therefor, and the exchange ratio used in
such exchange is the result of arm's length negotiations.
B. To the best knowledge of the management of ABC, there is no plan or
intention on the part of ABC's shareholders to sell or otherwise dispose of F&M
Common Stock received by them in the Merger that will reduce their holdings of
F&M Common Stock to a number of shares having in the aggregate a fair market
value of less than 50 percent of the fair market value of all of the ABC Common
Stock held by ABC shareholders on the effective date of the Merger. For purposes
of this representation, shares of ABC Common Stock exchanged for cash in lieu of
fractional shares of F&M Common Stock will be treated as outstanding shares of
ABC Common Stock on the effective date of the Merger. In addition, shares of ABC
Common Stock and shares of F&M Common Stock held by ABC shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the Merger will
be considered in making this representation.
C. F&M has no plan or intention to sell or otherwise dispose of any of
the assets of ABC to be transferred to F&M in the Merger, except for
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C).
D. Each party to the Merger will pay its own expenses, if any, incurred
in connection with the Merger.
E. Following the Merger, F&M will continue the historic business of
ABC.
F. F&M has no plan or intention to redeem or reacquire any of its stock
to be issued in the Merger.
G. The liabilities of ABC to be assumed by F&M as a result of the
Merger and the liabilities to which ABC's assets are subject were incurred in
the ordinary course of business and are associated with the assets to be
transferred in the Merger.
H. There is no intercorporate indebtedness existing between F&M and ABC
that was issued, acquired or will be settled at a discount.
I. The fair market value and adjusted basis of the assets of ABC to be
transferred to F&M in the Merger will equal or exceed the sum of the liabilities
assumed by F&M plus the amount of liabilities to which the ABC assets are
subject.
J. No dividends or other distributions will be made with respect to any
ABC Common Stock immediately before the proposed Merger, except for regular,
normal distributions.
K. None of the shares of F&M Common Stock, cash in lieu of fractional
shares or other property received by any shareholder-employee of ABC in exchange
for ABC Common Stock pursuant to the Merger constitutes or is intended as
compensation for services rendered, or is considered separate consideration for,
or allocable to, any employment agreement, warrant, stock option or other
relationship. None of the compensation to be received by any
shareholder-employee of ABC, or warrants or options to acquire F&M Common Stock
which are exchanged for warrants or options to acquire ABC Common Stock in
connection with the Merger, will be separate consideration for, or allocable to,
any of such shareholder-employee's ABC Common Stock. In addition, any
compensation paid to any shareholder-employee of ABC, including any shares of
F&M Common Stock or options or warrants to purchase F&M Common Stock received by
such shareholder-employee in exchange for and in cancellation of any option or
warrant to purchase shares of ABC Common Stock existing as of the effective date
of the Merger, will constitute and be intended as compensation for services
actually rendered and bargained for at arm's length, and will be commensurate
with amounts paid to third parties bargaining at arm's length for similar
services.
L. No two parties to the Merger are investment companies as defined in
Section 368(a)((2)(F)(iii) and (iv) of the Code, and for each of F&M and ABC,
less than 50 percent of the fair market value of its total assets (excluding
cash, cash items, government securities, and stock and securities in any 50
percent or greater subsidiary) consists of stock and securities.
M. ABC is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
N. Cash paid to ABC shareholders in lieu of issuing fractional shares
of F&M Common Stock will be paid solely for the purpose of saving the expense
and administrative inconvenience of issuing fractional shares, will not be
separately bargained for consideration and will represent only a mechanical
rounding off of the number of shares of F&M Common Stock to be issued to ABC
shareholders.
TAX OPINION
Based upon the foregoing, subject to the limitations expressed herein,
and with due regard to such legal considerations as we deem necessary, we are of
the opinion that for federal income tax purposes:
1. The Merger will constitute and qualify as a "reorganization" within
the meaning of Section 368(a)(1)(A) of the Code.
2. No gain, other income or loss will be recognized by F&M (Section
1032 of the Code) or ABC (Section 361 of the Code) as a result of the Merger.
3. To the extent that shareholders of ABC receive F&M Common Stock
solely in exchange for their shares of ABC Common Stock, they will recognize no
gain or loss as a result of the Merger. Section 354(a)(1) of the Code.
4. An ABC shareholder who receives cash in lieu of a fractional share
of F&M Common Stock will be treated as if the fractional share of F&M Common
Stock had been issued and then redeemed by F&M. If the deemed redemption
distribution is not essentially equivalent to a dividend within the meaning of
Section 302(b)(1) of the Code, then the ABC shareholder will be treated as
receiving a distribution in redemption of such fractional share, subject to the
provisions and limitations of Section 302 of the Code. If the deemed redemption
distribution is essentially equivalent to a dividend, then the ABC shareholder
will be treated as receiving a dividend distribution under Section 301(c)(1) of
the Code, as provided in Section 302(d) of the Code. See Section 356(a)(2) of
the Code, as interpreted by Clark v. Commissioner, 489 U.S. 726 (1989) and
Revenue Ruling 66-365, 1966-2 C.B. 116.
5. The tax basis of F&M Common Stock received by ABC shareholders who
exchange their ABC Common Stock for F&M Common Stock will be the same as the tax
basis of ABC Common Stock surrendered in exchange therefor. Section 358(a)(1) of
the Code.
6. The holding period of F&M Common Stock received by ABC shareholders
will include the period during which ABC Common Stock surrendered in exchange
therefor was held by such ABC shareholders, provided the ABC Common Stock was
held as a capital asset on the date of the exchange.
This opinion is based upon the provisions of the Code, as interpreted
by regulations, administrative rulings, and case law, in effect as of the date
hereof.
This opinion is provided in connection with the Merger as required by
Section 5.1(d) of the Agreement, is solely for the benefit of F&M, ABC and ABC
shareholders, and may not be relied upon in any other manner or by any other
person. This opinion may not be disclosed to any other person or used in any
other manner without the prior written consent of the undersigned.
Very truly yours,
LECLAIR RYAN,
A Professional Corporation