Exhibit 8.1
[LETTERHEAD OF PEAT MARWICK APPEARS HERE]
August 29, 1994
Board of Directors
Commerce Bank
5101 Cleveland Street
Virginia Beach, Virginia 23462
Board of Directors
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Gentlemen:
You have requested our opinion as to the federal and Virginia income tax
consequences resulting from a plan pursuant to which Branch Banking and Trust
Company of Virginia ("BB&T-VA"), a to be formed Virginia chartered bank and
wholly owned subsidiary of BB&T Financial Corporation ("BB&T Financial"),
established solely to effect the acquisition of Commerce Bank ("Commerce") by
BB&T Financial, will be merged with and into Commerce, whereupon the separate
existence of BB&T-VA will cease (the "Merger"). Pursuant to the Merger, the
shareholders of Commerce will receive shares of BB&T Financial common stock
("BB&T Financial Common Stock") in exchange for their Commerce common stock
("Commerce Common Stock"). After the Effective Date, BB&T Financial will
contribute all of outstanding common stock of the Surviving Corporation to BB&T
Financial Corporation of Virginia ("BB&T Financial-Va") and the Surviving
Corporation will become a wholly owned subsidiary of BB&T Financial-Va.
You have submitted for our consideration certain representations as to the
proposed transaction, and copies of the Agreement and Plan of Reorganization,
dated as of June 24, 1994, as amended, (the "Reorganization Agreement"), a
related Plan of Merger dated as of June 24, 1994 (the "Plan of Merger") and the
Form S-4 Registration Statement to be filed with the Securities and Exchange
Commission on or about August 29, 1994. Our opinion is based on a review of the
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Board of Directors
August 29, 1994
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information above and certain assumption of fact. It is also based on existing
tax law and authorities that are subject to change. We have not reviewed the
legal documents necessary to effectuate the steps to be undertaken and we assume
that all steps will be effectuated under state and federal law and will be
consistent with the legal documentation and with the list of steps submitted to
us.
FACTS
BB&T Financial, a North Carolina corporation, is a registered bank holding
company headquartered in Wilson, North Carolina and the parent holding company
of Branch Banking and Trust Company, a North Carolina chartered bank subsidiary,
and, through BB&T Financial Corporation of South Carolina (which is a
wholly-owned subsidiary of BB&T Financial), Branch Banking & Trust Company of
South Carolina, The Lexington State Bank and The Community Bank of South
Carolina, three South Carolina chartered banking corporations. BB&T Financial
has authorized two classes of capital stock, consisting of common and nonvoting
preferred. Common shareholders are entitled to one vote for each share of stock
held. BB&T-VA and BB&T Financial-Va, both to be formed Virginia corporations,
will be wholly owned subsidiaries of BB&T Financial.
Commerce is a banking corporation formed under the laws of the State of
Virginia. Commerce's authorized capital stock consists of two classes
represented by 5,000,000 shares of common stock, $2.50 par value, ("Commerce
Common Stock") of which 2,725,163 shares are issued and outstanding, and
1,000,000 shares of preferred stock, $5.00 par value, no shares of which are
issued or outstanding.
For valid business purposes, pursuant to the Reorganization Agreement and Plan
of Merger, BB&T-VA will be merged with and into Commerce, with Commerce as the
surviving entity. Each share of Commerce Common Stock will be converted into
newly issued shares of BB&T Financial Common Stock based upon the Exchange
Ratio, as defined in the Plan of Merger. The Exchange Ratio will be 1.305
shares of BB&T Financial Common Stock for every share of Commerce Common Stock
outstanding immediately prior to the Effective Date, provided that in the event
that BB&T Financial shall have a record date between June 24, 1994 and the
Effective Date for a special distribution to stockholders, a stock split, stock
dividend or similar change in capitalization, an equitable and appropriate
adjustment shall be made to the Exchange Ratio to reflect the effect of such
distribution or change.
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Board of Directors
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At the Effective Date, Commerce's obligations with respect to its authorized and
outstanding 10% Convertible Subordinated Capital Notes Due 2002 ("Capital
Notes"), issued by Commerce pursuant to the Indenture, dated as of September 13,
1990, between Commerce and NationsBank of Virginia, N.A., as Trustee
("Indenture"), will be assumed by BB&T Financial and Commerce by a supplemental
indenture and each holder of a Capital Note will have the right, during the
period such Capital Note is convertible, to convert each Capital Note into
shares of BB&T Financial Common Stock at a conversion rate ("Conversion Rate")
equal to 1.305 shares of BB&T Financial Common Stock for each share of Commerce
Common Stock into which such Capital Notes would have been converted immediately
prior to the Effective Date, and cash in lieu of any fractional shares (the
"Note Conversion"). The Conversion Rate is subject to adjustment in accordance
with the terms of the Indenture.
To the extent not exercised prior to the Effective Date, Commerce's obligations
with respect to stock options granted under its 1985 Stock Option Plan and its
1993 Incentive Stock Option Plan (the "Commerce Stock Option Plans") will be
assumed by BB&T Financial and each stock option outstanding under such plan
shall become the right to receive, upon payment of the adjusted exercise price,
that number of shares of BB&T Financial Common Stock the option holder would
have received pursuant to the Merger if he or she had exercised such option
immediately prior thereto, and cash in lieu of any fractional shares (the
"Option Conversion").
No fractional shares of BB&T Financial Common Stock will be issued in connection
with the Merger. Instead, cash will be paid in lieu of fractional shares in an
amount equal to the product of the fractional share multiplied by the average of
the reported closing price of BB&T Financial Common Stock on the NASDAQ/National
Market System (trading symbol "BBTF") on the ten trading days ending on the
tenth business day prior to the Effective Date of the Merger.
After the Effective Date, BB&T Financial will contribute all of outstanding
common stock of the Surviving Corporation to BB&T Financial-Va and the
Surviving Corporation will become a wholly owned subsidiary of BB&T
Financial-Va.
The Merger is subject to the receipt of regulatory approval from appropriate
parties, including the Bureau of Financial Institutions of the Virginia State
Corporation Commission, the Board of Governors of the Federal Reserve System and
the Federal Deposit Insurance Corporation.
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Board of Directors
August 29, 1994
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In addition to the foregoing statement of facts, the following representations
have been made:
(a) The fair market value of BB&T Financial Common Stock received by the
shareholders of Commerce will be approximately equal to the fair market
value of Commerce Common Stock surrendered in the exchange.
(b) There is no plan or intention by the shareholders of Commerce to sell,
exchange or otherwise dispose of any of the BB&T Financial Common Stock
received in the Merger.
(c) Following the Merger, Commerce will hold at least 90% of the fair
market value of its net assets and at least 70% of the fair market value
of its gross assets, and at least 90% of the fair market value of BB&T-
VA's and at least 70% of the fair market value of BB&T-VA's gross assets
held immediately prior to the Merger. For purposes of this representation,
amounts paid by Commerce or BB&T-VA to dissenters, amounts paid by
Commerce or BB&T-VA to shareholders who receive cash or other property,
amounts used by Commerce or BBT&T-VA to pay reorganization expenses, and
all redemptions and distributions (except for regular, normal dividends)
made by Commerce will be included as assets of Commerce or BB&T-VA,
respectively.
(d) Prior to the Merger, BB&T Financial will be in control of BB&T-VA
within the meaning of Section 368(c) of the Internal Revenue Code of
1986 (the "Code").
(e) Commerce has no plan or intention to issue additional shares of its
stock that would result in BB&T Financial losing control of Commerce
within the meaning of Section 368(c)
(f) BB&T Financial has no plan or intention to reacquire any of its stock
issued in the Merger.
(g) BB&T Financial has no plan or intention to liquidate Commerce; to
merge Commerce with or into another corporation; to sell or otherwise
dispose of the stock of Commerce, except for transfers of the stock to
corporations controlled by BB&T Financial; or to cause Commerce to sell or
otherwise dispose of any of its assets or the assets acquired from BB&T-VA
in the Merger, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by Commerce.
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August 29, 1994
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(h) BB&T-VA will have no liabilities assumed by Commerce, and will not
transfer to Commerce any assets subject to liabilities, in the Merger.
(i) Following the Merger, Commerce will continue its historical business
or use a significant portion of its historic business assets in a
business.
(j) BB&T Financial, BB&T-VA, Commerce and the shareholders of Commerce
will pay their respective expenses, if any, incurred in connection with
the Merger.
(k) There is no intercorporate indebtedness existing between BB&T
Financial and Commerce or between BB&T-VA and Commerce that was issued,
acquired, or will be settled at a discount.
(l) In the Merger, shares of Commerce Common Stock representing control
of Commerce, as defined in Section 368(c), will be exchanged solely for
voting stock of BB&T Financial. For purposes of this representation,
shares of Commerce Common Stock exchanged for cash or other property
originating with BB&T Financial will be treated as outstanding Commerce
Common Stock on the date of the Merger.
(m) At the time of the Merger, Commerce will not have outstanding any
warrants, options, convertible securities or any other type of right
pursuant to which any person could acquire stock in Commerce that, if
exercised or converted, would affect BB&T Financial's acquisition or
retention of control of Commerce, as defined in Section 368(c).
(n) BB&T Financial does not own, nor has it owned during the past five
years, any shares of the stock of Commerce.
(o) No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv).
(p) On the Effective Date, the fair market value of the assets of
Commerce will equal or exceed the sum of its liabilities, plus the amount
of liabilities, if any, to which the assets are subject.
(q) Commerce 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.
[LETTERHEAD OF PEAT MARWICK APPEARS HERE]
Board of Directors
August 29, 1994
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(r) The payment of cash in lieu of fractional shares of BB&T Financial
Common Stock is not separately bargained for consideration, rather it is
merely to save the expense and inconvenience of issuing and transferring
fractional share interests. The total cash consideration in lieu of
fractional shares will be less than one percent of the total consideration
paid in the transaction and no Commerce shareholder who elects to exchange
his or her Commerce Common Stock for BB&T Financial Common Stock will
receive cash for more than one share of BB&T Financial Common Stock.
(s) None of the compensation received by any shareholder-employees of
Commerce will be separate consideration for, or allocable to, any of their
shares of Commerce Common Stock; none of the shares of BB&T Financial
Common Stock received by any shareholder-employee of Commerce will be
separate consideration for, or allocable to, any employment agreement; and
the compensation to be paid to any shareholder-employees of Commerce will
be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar services.
Opinion
FEDERAL INCOME TAX CONSEQUENCES
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Based solely on the above facts and representations, it is our opinion that:
(1) Provided that the merger of BB&T-VA with and into Commerce, as
contemplated by the Reorganization Agreement and Plan of Merger, qualifies
as a statutory merger under Virginia law, the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) and Section
368(a)(2)(E) of the Code. The reorganization will not be disqualified by
reason of the fact that the stock of Commerce acquired by BB&T Financial
in the Merger will be contributed to BB&T Financial-Va following the
Merger. Section 368(a)(2)(C) and Treas. Reg. Sec. 1.368-2(j)(4).
(2) Each of BB&T Financial, BB&T-VA and Commerce will be a party to the
reorganization within the meaning of Section 368(b).
(3) No gain or loss will be recognized by BB&T-VA upon the transfer of its
assets to Commerce in the Merger. Sections 357(a) and 361(a). No gain or
loss will be recognized to BB&T Financial upon its transfer of the stock
of Commerce to BB&T Financial-Va following the Merger. Section 361(a).
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(4) No gain or loss will be recognized by Commerce upon the receipt of the
assets of BB&T-VA in the Merger. No gain or loss will be recognized to
BB&T Financial-Va upon the receipt of the stock of Commerce from BB&T
Financial following the Merger. Section 1032(a).
(5) No gain or loss will be recognized by BB&T Financial upon the receipt of
Commerce Common Stock in the Merger. Section 354(a)(1).
(6) The basis of the assets of BB&T-VA in the hands of Commerce will be the
same as the basis of such assets in the hands of BB&T-VA immediately prior
to the Merger. Section 362(b).
(7) The holding period of the assets of BB&T-VA in the hands of Commerce will
include the period during which such assets were held by BB&T-VA
immediately prior to the Merger. Section 1223(2).
(8) No gain or loss will be recognized by the shareholders of Commerce upon
receipt of BB&T Financial Common Stock (including any fractional share
interests to which they may be entitled) in exchange for their holdings
of Commerce Common Stock. Section 354(a)(1).
(9) The basis of the BB&T Financial Common Stock to be received by the
shareholders of Commerce (and any fractional share interests to which they
may be entitled) will be the same as the basis in the Commerce Common
Stock surrendered in the exchange. Section 358(a)(1).
(10) The holding period of the BB&T Financial Common Stock received by the
shareholders of Commerce (and any fractional share interests to which
they may be entitled) will include the holding period of Commerce Common
Stock prior to the exchange, provided that Commerce Common Stock is held
as a capital asset in the hands of the shareholders of Commerce on the
date of the exchange. Section 1223(1).
(11) The tax attributes enumerated in Section 381(c), including any earnings
and profits or a deficit of earnings and profits, will be taken into
account by Commerce following the Merger.
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Board of Directors
August 29, 1994
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(12) The payment of cash in lieu of fractional share interests of BB&T
Financial Common Stock will be treated as if the fractional shares of BB&T
Financial Common Stock were distributed as part of the exchange to
Commerce shareholders and then redeemed by BB&T Financial. The cash
payments will be treated as having been received as distributions in full
payment for the stock redeemed as provided in Section 302(a) of the Code.
Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574.
VIRGINIA INCOME TAX CONSEQUENCES
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It is our opinion that the State of Virginia will, for Virginia income tax
purposes, treat the Merger in an identical manner as it is treated by the
Internal Revenue Service for federal income tax purposes. Virginia Code Sec.
58.1-402 and 58.1-301.
THE NOTE CONVERSION AND THE OPTION CONVERSION
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Nothing in the foregoing opinion is to be construed either explicitly or
implicitly as opining on the federal or Virginia income tax consequences of
either the Note Conversion or the Option Conversion.
Sincerely,
KPMG Peat Marwick LLP
Sheldon M. Fox, Partner