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Exhibit 8.0
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DRAFT
[Form of Tax Opinion]
___________, 2001
F&M National Corporation Atlantic Financial Corp.
9 Court Square 737 J. Clyde Morris Blvd.
Post Office Box 2800 Newport News, Virginia 23061
Winchester, Virginia 22604
Opinion With Respect to Certain Tax Matters
Relating to Merger of
Atlantic Financial Corp.
into
F&M National Corporation
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Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed merger of Atlantic Financial Corp., a Virginia
corporation ("Atlantic Financial"), with and into F&M National Corporation, a
Virginia corporation ("F&M") pursuant to an Agreement and Plan of
Reorganization, dated as of July 5, 2000 (the "Agreement"), by and between F&M
and Atlantic Financial.
The Merger
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Pursuant to the Agreement and the Plan of Merger (the "Plan") attached as
Exhibit A to the Agreement, and subject to various regulatory approvals,
Atlantic Financial 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 Peninsula Trust Bank, the banking subsidiary of Atlantic
Financial (which shall change its name to F&M Bank-Atlantic after the Merger),
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 Atlantic Financial ("Atlantic Financial Common Stock") will
be
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F&M National Corporation
Atlantic Financial Corp.
____________, 2001
Page 2
exchanged for and converted into 0.753 shares of common stock of F&M ("F&M
Common Stock"), plus cash in lieu of issuing fractional shares of F&M Common
Stock.
Our Examination
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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 Atlantic Financial 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
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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 Atlantic
Financial shareholders will be approximately equal to the fair market value of
Atlantic Financial 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 Atlantic Financial, there is
no plan or intention on the part of Atlantic Financial '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 Atlantic Financial Common Stock held by Atlantic Financial
shareholders on the effective date of the Merger. For purposes of this
representation, shares of Atlantic Financial Common Stock exchanged for cash in
lieu of fractional shares of F&M Common Stock will be treated as outstanding
shares of Atlantic Financial Common Stock on the effective date of the Merger.
In addition, shares of Atlantic Financial Common Stock and shares of F&M Common
Stock held by Atlantic Financial shareholders and otherwise sold, redeemed, or
disposed of prior or subsequent to the Merger will be
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F&M National Corporation
Atlantic Financial Corp.
____________, 2001
Page 3
considered in making this representation.
C. F&M has no plan or intention to sell or otherwise dispose of any of the
assets of Atlantic Financial 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
Atlantic Financial.
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 Atlantic Financial to be assumed by F&M as a result
of the Merger and the liabilities to which Atlantic Financial '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
Atlantic Financial that was issued, acquired or will be settled at a discount.
I. The fair market value and adjusted basis of the assets of Atlantic
Financial 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
Atlantic Financial assets are subject.
J. No dividends or other distributions will be made with respect to any
Atlantic Financial 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 Atlantic
Financial in exchange for Atlantic Financial 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 Atlantic Financial, or options to
acquire F&M Common Stock which are exchanged for options to acquire Atlantic
Financial Common Stock in connection with the Merger, will be separate
consideration for, or allocable to, any of such shareholder-employee's
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F&M National Corporation
Atlantic Financial Corp.
____________, 2001
Page 4
Atlantic Financial Common Stock. In addition, any compensation paid to any
shareholder-employee of Atlantic Financial, including any shares of F&M Common
Stock or options 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 Atlantic Financial 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
Atlantic Financial, 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. Atlantic Financial 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 Atlantic Financial 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 Atlantic Financial shareholders.
Tax Opinion
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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 Atlantic Financial (Section 361 of the Code) as a result of the
Merger.
3. To the extent that shareholders of Atlantic Financial receive F&M
Common Stock solely in exchange for their shares of Atlantic Financial Common
Stock, they will recognize no gain or loss as a result of the Merger. Section
354(a)(1) of the Code.
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F&M National Corporation
Atlantic Financial Corp.
____________, 2001
Page 5
4. An Atlantic Financial 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 Atlantic Financial
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 Atlantic Financial 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
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C.B. 116.
5. The tax basis of F&M Common Stock received by Atlantic Financial
shareholders who exchange their Atlantic Financial Common Stock for F&M Common
Stock will be the same as the tax basis of Atlantic Financial Common Stock
surrendered in exchange therefor. Section 358(a)(1) of the Code.
6. The holding period of F&M Common Stock received by Atlantic Financial
shareholders will include the period during which Atlantic Financial Common
Stock surrendered in exchange therefor was held by such Atlantic Financial
shareholders, provided the Atlantic Financial 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, Atlantic
Financial and Atlantic Financial 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,
