Exhibit 8.1
_______________, 1999
FORM OF TAX OPINION
F&M National Corporation Security Bank Corporation
9 Court Square 8780 Centreville Road
Post Office Box 2800 Manassas, Virginia 20110
Winchester, Virginia 22604
Tax Opinion Relating to the Acquisition of
Security Bank Corporation by F&M National Corporation
Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed merger of Security Bank Corporation, a Virginia
chartered banking corporation ("SBC"), with and into F&M Bank-Northern Virginia,
a Virginia chartered banking corporation and wholly-owned subsidiary of F&M
National Corporation ("F&M"), pursuant to an Agreement and Plan of
Reorganization, dated as of November 25, 1998 and a related Plan of Merger
(collectively, the "Agreement"), by and among SBC, F&M and F&M Bank-Northern
Virginia.
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, SBC
will be merged with and into F&M Bank-Northern Virginia in accordance with the
provisions of, and with the effect provided in, the Virginia Stock Corporation
Act (the "Merger"). Upon consummation of the Merger, F&M will continue to serve
as the parent holding company for F&M Bank-Northern Virginia and its other
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 SBC ("SBC 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 $17.25, 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 SBC 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 SBC shareholders
will be approximately equal to the fair market value of SBC 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 SBC, there is no plan or
intention on the part of SBC'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 SBC Common
Stock held by SBC shareholders on the effective date of the Merger. For purposes
of this representation, shares of SBC Common Stock exchanged for cash in lieu of
fractional shares of F&M Common Stock will be treated as outstanding shares of
SBC Common Stock on the effective date of the Merger. In addition, shares of SBC
Common Stock and shares of F&M Common Stock held by SBC 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 SBC 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 of SBC with and into F&M Bank-Northern Virginia,
F&M will continue the historic business of F&M Bank-Northern Virginia.
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 SBC to be assumed by F&M Bank-Northern Virginia as
a result of the Merger and the liabilities to which SBC'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 SBC
that was issued, acquired or will be settled at a discount.
I. The fair market value and adjusted basis of the assets of SBC 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 SBC assets are
subject.
J. No dividends or other distributions will be made with respect to any
SBC 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 SBC in exchange
for SBC 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 SBC, or warrants or options to acquire F&M Common Stock
which are exchanged for warrants or options to acquire SBC Common Stock in
connection with the Merger, will be separate consideration for, or allocable to,
any of such shareholder-employee's SBC Common Stock. In addition, any
compensation paid to any shareholder-employee of SBC, 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 SBC 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 SBC,
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. SBC 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 SBC 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 SBC
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)(2)(D) of the Code.
2. No gain, other income or loss will be recognized by F&M (Section 1032
of the Code) or SBC (Section 361 of the Code) as a result of the Merger.
3. To the extent that shareholders of SBC receive F&M Common Stock solely
in exchange for their shares of SBC Common Stock, they will recognize no gain or
loss as a result of the Merger. Section 354(a)(1) of the Code.
4. An SBC 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 SBC 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 SBC 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 SBC shareholders who
exchange their SBC Common Stock for F&M Common Stock will be the same as the tax
basis of SBC Common Stock surrendered in exchange therefor. Section 358(a)(1) of
the Code.
6. The holding period of F&M Common Stock received by SBC shareholders
will include the period during which SBC Common Stock surrendered in exchange
therefor was held by such SBC shareholders, provided the SBC Common Stock was
held as a capital asset on the date of the exchange. Section 1223(1) of the
Code.
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, SBC and SBC
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