Exhibit 8.0
FORM OF TAX OPINION
_______________, 2000
F&M National Corporation The State Bank of the Alleghenies
9 Court Square 116 West Riverside Avenue
Post Office Box 2800 P.O. Box 860
Winchester, Virginia 22604 Covington, Virginia 24426
Opinion With Respect to Certain Tax Matters
Relating to the Share Exchange Between
F&M National Corporation and The State Bank of the Alleghenies
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Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed reorganization and share exchange to be effected
among F&M National Corporation, a Virginia corporation ("F&M"), The State Bank
of the Alleghenies, a Virginia chartered banking corporation ("State Bank"), and
the holders of State Bank's issued and outstanding shares of common stock
pursuant to an Agreement and Plan of Reorganization, dated as of October 5, 1999
and a related Plan of Share Exchange (collectively, the "Agreement") by and
between F&M and State Bank.
The Reorganization Transaction
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Pursuant to the Agreement and subject to various regulatory approvals,
State Bank will become a wholly-owned subsidiary of F&M under the name "F&M
Bank-Highlands" in accordance with the provisions of, and with the effect
provided in, Title 13.1 of the Code of Virginia (the "Share Exchange"). As a
result of the Share Exchange, F&M will become the parent holding company of
State Bank, and State Bank will continue to conduct its business in
substantially the same manner as prior to the Share Exchange.
At the effective date of the Share Exchange, each outstanding share of
common stock of State Bank ("State Bank 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
F&M National Corporation
The State Bank of the Alleghenies
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equal to $18.00, provided, that in no event shall F&M issue more than 0.651
shares or less than 0.554 shares for each such share of State Bank, plus cash in
lieu of issuing fractional shares of F&M Common Stock.
Examination
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In connection with the preparation of this opinion, we have examined
such documents concerning the Share Exchange 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 State Bank to sell or
otherwise dispose of the F&M Common Stock received by them in the Share Exchange
which would have the effect set forth in paragraph C of the "Additional
Representations" below.
Additional Representations
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In connection with the proposed Share Exchange, the following
additional representations have been made to and relied upon by us in the
preparation of this opinion:
A. The Share Exchange will be consummated in compliance with the
Agreement.
B. The fair market value of F&M Common Stock received by State Bank
shareholders will be approximately equal to the fair market value of State Bank
Common Stock to be surrendered in exchange therefor.
C. To the best knowledge of the management of State Bank, there is no
plan or intention on the part of State Bank's shareholders to sell or otherwise
dispose of F&M Common Stock received by them in the Share Exchange 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 State Bank Common Stock held by State Bank shareholders on the
effective date of the Share Exchange. For purposes of this representation,
shares of State Bank Common Stock exchanged for cash in lieu of fractional
shares of F&M Common Stock will be treated as outstanding shares of State Bank
Common Stock on the effective date of the Share Exchange. In addition, shares of
State Bank Common Stock and shares of F&M Common Stock
F&M National Corporation
The State Bank of the Alleghenies
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held by State Bank shareholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the Share Exchange will be considered in making this
representation.
D. F&M and State Bank have no plans or intentions to redeem or
reacquire any of F&M Common Stock issued in the Share Exchange.
E. There is no plan or intention to sell or otherwise dispose of any of
the assets of State Bank, except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C) of the Code, State Bank
has no plan or intention to issue additional shares of its capital stock that
would result in F&M's ceasing to own 80 percent of the voting power of all State
Bank voting stock and 80 percent of each class of any State Bank nonvoting
stock, and F&M has no plan to liquidate State Bank, to merge State Bank into
another corporation, or to sell or otherwise dispose of any of the State Bank
stock acquired in the Share Exchange.
F. Each party to the Share Exchange, including each State Bank
shareholder, will pay its own expenses, if any, incurred in connection with the
Share Exchange.
G. Following the Share Exchange, F&M will continue the historic
business of State Bank or use a significant portion of its historic business
assets in its business.
H. No property will be transferred and no liabilities will be assumed
in the Share Exchange.
I. There is no intercorporate indebtedness existing between or among
F&M and State Bank that was issued, acquired or will be settled at a discount,
and in acquiring the State Bank Common Stock, F&M will not assume any liability
or take the State Bank Common Stock subject to any liability.
J. F&M will acquire State Bank Common Stock solely in exchange for F&M
voting stock. For purposes of this representation, State Bank Common Stock
redeemed for cash or other property furnished by F&M will be considered as
acquired by F&M. Further, no liabilities of State Bank or State Bank
shareholders will be assumed by F&M nor will any of the State Bank Common Stock
be subject to any liabilities.
K. F&M and State Bank did not separately bargain for the cash to be
paid by F&M to State Bank shareholders in lieu of issuing fractional shares of
F&M Common Stock to State Bank shareholders. The payment of cash in lieu of a
fractional share of F&M Common Stock is solely for the purpose of avoiding the
expense and inconvenience to F&M of issuing fractional shares
F&M National Corporation
The State Bank of the Alleghenies
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and does not represent separately bargained-for consideration. The cash in lieu
of issuing fractional shares represents a mechanical rounding-off of the
fractions in the exchange.
L. No dividends or other distributions will be made with respect to any
State Bank Common Stock immediately before the Share Exchange, except for
regular, normal distributions.
M. None of the shares of F&M Common Stock, cash in lieu of fractional
shares or other property received by any shareholder-employee of State Bank in
exchange for State Bank Common Stock pursuant to the Share Exchange 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 State Bank, or warrants or options to acquire F&M Common
Stock which are exchanged for warrants or options to acquire State Bank Common
Stock in connection with the Share Exchange, will be separate consideration for,
or allocable to, any of such shareholder-employee's State Bank Common Stock. In
addition, any compensation paid to any shareholder-employee of State Bank,
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 State Bank Common
Stock existing as of the effective date of the Share Exchange, 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.
N. No two parties to the Share Exchange are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code, and for each of F&M
and State Bank, 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.
O. On the date of the Share Exchange, the fair market value of the
assets of State Bank will exceed the sum of its liabilities plus the
liabilities, if any, to which the assets are subject.
P. State Bank 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.
Q. Cash paid to State Bank 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
F&M National Corporation
The State Bank of the Alleghenies
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and will represent only a mechanical rounding off of the number of shares of F&M
Common Stock to be issued to State Bank shareholders
R. Cash paid to State Bank 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 State
Bank shareholders.
S. Any cash payments to State Bank shareholders who elect to dissent
from the Share Exchange pursuant to Article 15 of the Virginia Stock Corporation
Act shall be paid by State Bank or funded from its assets and shall not be
attributable directly or indirectly to F&M.
T. Upon the consummation of the Share Exchange, State Bank will not
have outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire any State Bank stock.
U. F&M does not own directly or indirectly, nor has it directly or
indirectly owned during the past 5 years, any State Bank stock.
Opinion
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Based upon the foregoing, 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 Share Exchange will constitute and qualify as a "reorganization"
within the meaning of Section 368(a)(1)(B) of the Code, provided that (a) all
cash payments to dissenting State Bank shareholders are made by State Bank or
from its own funds or assets, and are not directly or indirectly attributable to
the funds or assets of F&M (see Revenue Ruling 68-285, 1968-1 C.B. 147), and (b)
that any cash payments to State Bank shareholders in lieu of issuing fractional
shares of F&M Common Stock do not represent separately bargained-for
consideration, but, rather, constitute a mechanical rounding off of the
fractions in the exchange (as described in Revenue Ruling 66-365, 1966-2 C.B.
116). Each of the following opinions below assume that the foregoing provisos of
this opinion 1 are satisfied.
2. No gain, other income or loss will be recognized by F&M (pursuant to
Section 1032 of the Code) or State Bank as a result of the Share Exchange.
F&M National Corporation
The State Bank of the Alleghenies
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3. Shareholders of State Bank who receive solely F&M Common Stock in
exchange for their shares of State Bank Common Stock will recognize no gain or
loss as a result of the Share Exchange, as provided in Section 354(a)(1) of the
Code.
4. A State Bank 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 State Bank shareholder shall be treated
as receiving a distribution in redemption of such fractional share, subject to
the provisions and limitations of Section 302(a) of the Code. If the deemed
redemption distribution is essentially equivalent to a dividend, then the State
Bank shareholder shall 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, 109 S.
Ct. 1455 (1989).
5. A State Bank shareholder-employee who receives shares of F&M Common
Stock in exchange for and in cancellation of an outstanding option to acquire
State Bank Common Stock will recognize ordinary income in amount equal to the
fair market value of F&M Common Stock so received, subject to the provisions and
limitations of Section 83 of the Code, and State Bank will be entitled to a
deduction in the year such income is recognized, subject to the provisions of
Section 280 G of the Code.
6. A dissenting State Bank shareholder who receives solely cash in
exchange for his State Bank Common Stock will be treated as receiving a
distribution in redemption of his State Bank Common Stock, subject to the
provisions and limitations of Section 302(a) of the Code. Where, as a result of
such distribution, a State Bank shareholder no longer holds any shares of F&M
Common Stock directly and, furthermore, is not deemed to own any such shares
pursuant to the constructive ownership rules under Section 318 of the Code, the
distribution will be treated as a complete termination of such shareholder's
interest within the meaning of Section 302(b)(3) of the Code and will be treated
as a distribution in full payment in exchange for the shareholder's shares
pursuant to Section 302(a) of the Code.
7. The tax basis of F&M Common Stock received by State Bank
shareholders who exchange their State Bank Common Stock solely for F&M Common
Stock will be the same as the tax basis of State Bank Common Stock surrendered
in exchange therefor, as provided in Section 358(a)(1) of the Code.
8. The holding period of F&M Common Stock received by State Bank
shareholders will include the period during which State Bank Common Stock
surrendered in exchange therefor was held
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The State Bank of the Alleghenies
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by such State Bank shareholders, provided the State Bank Common Stock was held
as a capital asset on the date of the exchange, as provided in Section 1223(i)
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 made in connection with the Share Exchange and is
solely for the benefit of F&M, State Bank and State Bank's shareholders. It may
not be relied upon in any other manner or by any other person.
Sincerely,
LECLAIR RYAN
A Professional Corporation