Exhibit 8.1
FORM OF TAX OPINION
June ___, 1996
Union Bankshares Corporation King George State Bank, Inc.
211 North Main Street State Route 3
Post Office Box 446 Post Office Box 81
Bowling Green, Virginia 22427-0446 King George, Virginia 22495
OPINION WITH RESPECT TO CERTAIN TAX MATTERS
RELATING TO SHARE EXCHANGE BETWEEN
UNION BANKSHARES CORPORATION
AND
KING GEORGE STATE BANK, INC.
Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization and share exchange to be effected among Union
Bankshares Corporation, a Virginia corporation ("Union"), King George State
Bank, Inc., a Virginia corporation ("King George"), and the holders of King
George's issued and outstanding shares of common stock pursuant to an Agreement
and Plan of Reorganization dated as of March 12, 1996 (the "Agreement"), by and
between Union and King George.
THE REORGANIZATION TRANSACTION
Pursuant to the Agreement and subject to various regulatory
approvals, King George will become a wholly-owned subsidiary of Union 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, Union will become the parent holding company of King George, and King
George 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 King George ("King George Common Stock") will be exchanged
for and converted into 5.5 shares of common stock of Union ("Union Common
Stock"), plus cash in lieu of issuing fractional shares of Union Common Stock.
EXAMINATION
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.
ADDITIONAL REPRESENTATIONS
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 fair market value of Union Common Stock received by King
George shareholders will be approximately equal to the fair market value of King
George Common Stock to be surrendered in exchange therefor on the effective date
of the Share Exchange.
B. To the best knowledge of the management of King George, there is
no plan or intention on the part of King George's shareholders to sell or
otherwise dispose of Union Common Stock received by them in the Share Exchange
that will reduce their holdings of Union 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 King George Common Stock held by King George
shareholders on the effective date of the Share Exchange. For purposes of this
representation, shares of King George Common Stock exchanged for cash in lieu of
fractional shares of Union Common Stock will be treated as outstanding King
George Common Stock on the effective date of the Share Exchange. In addition,
shares of King George Common Stock and shares of Union Common Stock held by King
George shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Share Exchange will be considered in making this
representation.
C. Union has no plan or intention to reacquire any of the Union
Common Stock issued in the Share Exchange.
D. There is no plan or intention to sell or otherwise dispose of any
of the assets of King George, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the Code,
King George has no plan or intention to issue additional shares of its capital
stock that would result in Union's ceasing to own 80 percent of the voting power
of all King George voting stock and 80 percent of each class of any King George
nonvoting stock, and Union has no plan to liquidate King George, to merge King
George into another corporation, or to sell or otherwise dispose of any of the
King George stock acquired in the Share Exchange.
E. Each party to the Share Exchange, including each King George
shareholder, will pay its own expenses, if any, incurred in connection with the
Share Exchange.
F. Following the Share Exchange, Union will continue the historic
business of King George.
G. No property will be transferred and no liabilities will be assumed
in the Share Exchange.
H. There is no intercorporate indebtedness existing between or among
Union and King George that was issued, acquired or will be settled at a
discount, and in acquiring the King George Common Stock, Union will not assume
any liability or take the King George Common Stock subject to any liability.
I. Union and King George did not separately bargain for the cash to
be paid by Union to King George shareholders in lieu of issuing fractional
shares of Union Common Stock to King George shareholders. The payment of cash in
lieu of a fractional share of Union Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Union of issuing fractional shares 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.
J. No dividends or other distributions will be made with respect to
any King George Common Stock immediately before the Share Exchange, except for
regular, normal distributions.
K. None of the shares of Union Common Stock or cash in lieu of
fractional shares received by a shareholder-employee of King George in exchange
for King George Common Stock pursuant to the Share Exchange constitutes or is
intended to be compensation for services rendered, and will not be separate
consideration for, or allocable to, any employment agreement or relationship.
None of the compensation received by, or indeminification provided to, a
shareholder-employee, or officer or director, of King George will be separate
consideration for, or allocable to, any of such shareholder-employee's, or
officer's or director's, King George Common Stock. In addition, any compensation
paid to any shareholder-employee of King George, including any shares of Union
Common Stock received by a shareholder-employee in exchange for and in
cancellation of any option to purchase shares of King George Common Stock
existing as of the effective date of the Share Exchange, and indemnification
provided to any shareholder of King George who may become an officer or director
of Union, will constitute and be intended as compensation for, or
indemnification in consideration of, 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 Share Exchange are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code, and for each of Union
and King George, 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. King George 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. Any cash payments to King George shareholders who elect to dissent
from the Share Exchange pursuant to Article 15 of the Virginia Stock Corporation
Act shall be paid by King George or funded from its assets and shall not be
attributable directly or indirectly to Union.
O. Upon the consummation of the Share Exchange, King George will not
have outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire any King George stock.
P. Union does not own directly or indirectly, nor has it directly or
indirectly owned during the past 5 years, any King George stock.
OPINION
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 King George shareholders are
made by King George or from its own funds or assets, and are not directly or
indirectly attributable to the funds or assets of Union (see Revenue Ruling
68-285, 1968-1 C.B. 147), and (b) that any cash payments to King George
shareholders in lieu of issuing fractional shares of Union 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 Union
(pursuant to Section 1032 of the Code) or King George (Section 361 of the Code)
as a result of the Share Exchange.
3. Shareholders of King George who receive solely Union
Common Stock in exchange for their shares of King George 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 King George shareholder who receives cash in lieu of a
fractional share of Union Common Stock will be treated as if the fractional
share of Union Common Stock had been issued and then redeemed by Union. 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 King George
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 King George 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) and Revenue Ruling 66-365, 1966-2
C.B. 116.
5. A King George shareholder-employee who receives shares of Union
Common Stock in exchange for and in cancellation of an outstanding option to
acquire King George Common Stock will recognize ordinary income in amount equal
to the fair market value of Union Common Stock so received, subject to the
provisions and limitations of Section 83 of the Code, and King George will be
entitled to a deduction in the year such income is recognized, subject to the
provisions of Section 280G of the Code.
6. A dissenting King George shareholder who receives solely cash in
exchange for his King George Common Stock will be treated as receiving a
distribution in redemption of his King George Common Stock, subject to the
provisions and limitations of Section 302(a) of the Code. Where, as a result of
such distribution, a King George shareholder no longer holds any shares of King
George 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 Union Common Stock received by King George
shareholders who exchange their King George Common Stock solely for Union Common
Stock will be the same as the tax basis of King George Common Stock surrendered
in exchange therefor, as provided in Section 358(a)(1) of the Code.
8. The holding period of Union Common Stock received by King George
shareholders will include the period during which King George Common Stock
surrendered in exchange therefor was held by such King George shareholders,
provided the King George 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 made in connection with the Share Exchange and is
solely for the benefit of Union, King George and King George's shareholders. It
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