[WILLIAMS, MULLEN, CLARK & DOBBINS LETTERHEAD]
June _, 2000
Board of Directors Board of Directors
Cardinal Financial Corporation Heritage Bancorp, Inc.
10555 Main Street, Suite 500 1313 Dolley Madison Boulevard
P.O. Box 1147 McLean, Virginia 22101-7207
Fairfax, Virginia 22030
Re: Tax Opinion -- Merger of Heritage Bancorp, Inc.
with and into Cardinal Merger Corp., a wholly owned
subsidiary of Cardinal Financial Corporation
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed merger (the "Merger") of Heritage Bancorp, Inc.
("HBI") with and into Cardinal Merger Corp. ("Surviving Bank") a wholly owned
subsidiary of, Cardinal Financial Corporation ("CFC") pursuant to the Amended
and Restated Agreement and Plan of Reorganization, dated June __, 2000, as
amended, between these parties. Our opinion is given pursuant to Section 6.1(d)
of the Agreement and Plan of Reorganization.
FACTS:
HBI is a Virginia corporation and registered bank holding company under
the Bank Holding Company Act of 1956, as amended. HBI's principal executive
offices are located at 1313 Dolley Madison Boulevard, McLean, Virginia
22101-7207.
CFC is a Virginia corporation and registered bank holding company under
the Bank Holding Company Act of 1956, as amended. Surviving Bank, a wholly owned
subsidiary of CFC, is a corporation and state bank organized under Virginia law.
CFC's principal executive office is located at 10555 Main Street, Suite 500,
Fairfax, Virginia 22030.
Pursuant to the Amended and Restated Agreement and Plan of
Reorganization, HBI will be merged with and into Surviving Bank in accordance
with the provisions of Title 13.1 of the Code of Virginia of 1950, as amended.
Each outstanding share of HBI common stock will become converted into the right
to receive, upon a shareholder's election, either (i) 1.2 shares of CFC
Cumulative Convertible Preferred Stock ("Series A Preferred Stock") or (ii)
$6.00 cash. Cash will be paid in lieu of fractional shares; provided, however,
the Series A Preferred Stock must represent 50% of the total Merger
Consideration. If the HBI shareholders collectively elect to receive Series A
Preferred Stock representing in the aggregate more or less than 50% of the
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total Merger consideration, each shareholder's election will be subject to
proration. After the Merger, Surviving Bank will continue its existing business
and operations as a wholly owned subsidiary of CFC.
In connection with this opinion, we have reviewed (i) the Agreement and
Plan of Reorganization, (ii) CFC's Registration Statement on Form S-4, dated
June __, 2000, including the Prospectus and Joint Proxy Statement contained
therein, and (iii) such other documents concerning the Merger as we have deemed
necessary ((i), (ii), and (iii) collectively, the "Merger Documents"). With
respect to the various factual matters material to our opinions, we have relied
upon certificates of certain officers of and HBI and CFC (the "Officers'
Certificates"). We have assumed the correctness of the factual matters contained
in such reliance sources and have made no independent investigation for the
purpose of confirming that such factual matters are correct. As to all matters
in which a person or entity has represented that such person or entity either is
not a party to, does not have, or is not aware of, any plan or intention,
understanding or agreement, we have assumed that there is in fact no plan,
intention, understanding or agreement. We have also assumed that the Merger will
be consummated in accordance with the Amended and Restated Agreement and Plan of
Reorganization.
We have assumed (i) the genuineness of all signatures on the Merger
Documents, (ii) the due authorization, execution, and delivery of all documents
and the validity and binding effect thereof, (iii) the authenticity of all
documents submitted to us as originals, (iv) the conformity to the originals of
all documents submitted to us as copies and the authenticity of the originals
from which the copies were made, and (v) the legal capacity of natural persons.
OPINION:
Based on the foregoing and subject to the limitations and
qualifications set forth herein, we give our opinion as follows:
1. The Merger will qualify as a reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code (the
"Code"), and HBI and CFC will each qualify as a "party to a reorganization"
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized for federal tax purposes by
HBI or CFC as a result of the Merger.
3. No gain or loss will be recognized for federal tax purposes by
the shareholders of HBI as a result of the exchange of their common stock solely
for the Series A Preferred Stock of CFC.
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4. Any shareholder of HBI who receives both Series A Preferred
Stock and cash in exchange for all of such shareholder's shares of HBI common
stock will recognize gain, but not loss, to the extent of the lesser of: (i) the
excess of (A) the sum of the value of Series A Preferred Stock and the cash
received by such shareholder over (B) the shareholder's aggregate tax basis in
the HBI commons stock exchanged; and (ii) the amount of cash received by the
shareholder. Any shareholder of HBI that recognizes gain as a result of the cash
payment shall be treated as receiving a payment in redemption subject to the
provisions of Section 302 of the Code.
5. Any HBI shareholder who receives solely cash in exchange for
all of such shareholder's HBI common stock shall be treated as receiving a
payment in redemption subject to the provisions of Section 302 of the Code. Gain
or loss will be realized and recognized to such shareholder measured by the
difference between cash received and the shareholder's basis in the HBI common
stock.
6. Any shareholder of HBI who receives cash in lieu of a
fractional share interest shall be treated as receiving a payment in redemption
of such fractional interest subject to the provisions of Section 302 of the
Code. Gain or loss will be realized and recognized to such shareholder measured
by the difference between the redemption price and the portion of the
shareholder's basis in HBI stock allocable to such fractional share interest.
7. The aggregate tax basis of the shares of CFC stock received by
each shareholder of HBI will be equal to the aggregate tax basis of such
shareholder's shares of HBI stock surrendered therefor in the Merger.
8. The holding period under Section 1223 of the Code for the
shares of CFC stock received by each shareholder of HBI will include the holding
period for the shares of HBI stock of such shareholder surrendered therefor in
the Merger, provided that the HBI shareholder held such stock as a capital asset
on the date of the Merger.
In rendering our opinion, we have considered the applicable provisions
of the Code, Treasury Regulations promulgated thereunder, pertinent judicial
authorities, interpretive rulings of the Internal Revenue Service, and other
authorities as we have considered relevant. Our opinion is limited to the
federal tax law of the United States of America and is expressed as of the date
hereof. We do not assume any obligation to update or supplement our opinion to
reflect any fact or circumstance which hereafter comes to our attention or any
change in law which hereafter occurs. Our opinions are limited to the matters
expressly stated; no opinion is implied or may be inferred beyond such matters.
Our opinion expressed herein is made in connection with the Merger and
is solely for the benefit of HBI, CFC and its shareholders. We hereby consent to
the filing of this opinion as an
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exhibit to the Registration Statement, which has been filed by CFC with the
Securities and Exchange Commission, and to the reference to our firm under the
caption "Certain Federal Income Tax Consequences" in the Prospectus and Proxy
Statement forming a part of the Registration Statement. This opinion may not,
without our prior written consent, be otherwise distributed or relied upon by
any other person, filed with any other government agency or quoted in any other
document.
Very truly yours,
WILLIAMS, MULLEN, CLARK & DOBBINS
By:_________________________________
