Exhibit 8.0
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DRAFT
[Form of Tax Opinion]
___________, 2001
F&M National Corporation Community Bankshares of Maryland, Inc.
9 Court Square 16410 Heritage Boulevard
Post Office Box 2800 Bowie, Maryland 20716
Winchester, Virginia 22604
Opinion With Respect to Certain Tax Matters
Relating to Merger of
Community Bankshares of Maryland, Inc.
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 Community Bankshares of Maryland, Inc., a
Maryland corporation ("Community Bankshares"), with and into F&M National
Corporation, a Virginia corporation ("F&M") pursuant to an Agreement and Plan of
Reorganization, dated as of August 23, 2000 (the "Agreement"), between F&M and
Community Bankshares.
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,
Community Bankshares will be merged with and into F&M in accordance with the
provisions of, and with the effects provided in, the Virginia Stock Corporation
Act and the Corporations and Associations Article, Maryland Code (the "Merger").
As soon as practicable after the Merger, Community Bank of Maryland, the banking
subsidiary of Community Bankshares, will merge with and into F&M Bank-Maryland,
a banking subsidiary of F&M. After the Merger, F&M will remain the parent
holding company of its 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 Community Bankshares ("Community Bankshares Common Stock")
will be exchanged for
F&M National Corporation
Community Bankshares of Maryland, Inc.
______________, 2001
Page 2
and converted into 0.75 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 Community Bankshares 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 Community
Bankshares shareholders will be approximately equal to the fair market value of
Community Bankshares 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 Community Bankshares, there
is no plan or intention on the part of Community Bankshares '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 Community Bankshares Common Stock held by Community
Bankshares shareholders on the effective date of the Merger. For purposes of
this representation, shares of Community Bankshares Common Stock exchanged for
cash in lieu of fractional shares of F&M Common Stock will be treated as
outstanding shares of Community Bankshares Common Stock on the effective date of
the Merger. In addition, shares of Community Bankshares Common Stock and shares
of F&M Common Stock held by Community Bankshares shareholders and otherwise
sold, redeemed, or disposed of prior or subsequent to the Merger will be
considered in making this representation.
C. F&M has no plan or intention to sell or otherwise dispose of any of
the assets of Community Bankshares 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).
F&M National Corporation
Community Bankshares of Maryland, Inc.
____________, 2001
Page 3
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
Community Bankshares.
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 Community Bankshares to be assumed by F&M as a
result of the Merger and the liabilities to which Community Bankshares' 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
Community Bankshares that was issued, acquired or will be settled at a discount.
I. The fair market value and adjusted basis of the assets of Community
Bankshares 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
Community Bankshares assets are subject.
J. No dividends or other distributions will be made with respect to any
Community Bankshares 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 Community
Bankshares in exchange for Community Bankshares 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 Community Bankshares, or options
to acquire F&M Common Stock which are exchanged for options to acquire Community
Bankshares Common Stock in connection with the Merger, will be separate
consideration for, or allocable to, any of such shareholder-employee's Community
Bankshares Common Stock. In addition, any compensation paid to any shareholder-
employee of Community Bankshares, 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
Community Bankshares 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.
F&M National Corporation
Community Bankshares of Maryland, Inc.
____________, 2001
Page 4
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
Community Bankshares, 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. Community Bankshares 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 Community Bankshares 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 Community Bankshares 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 Community Bankshares (Section 361 of the Code) as a result of
the Merger.
3. To the extent that shareholders of Community Bankshares receive F&M
Common Stock solely in exchange for their shares of Community Bankshares Common
Stock, they will recognize no gain or loss as a result of the Merger. Section
354(a)(1) of the Code.
4. An Community Bankshares 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 Community Bankshares
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 Community Bankshares 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.
F&M National Corporation
Community Bankshares of Maryland, Inc.
____________, 2001
Page 5
5. The tax basis of F&M Common Stock received by Community Bankshares
shareholders who exchange their Community Bankshares Common Stock for F&M Common
Stock will be the same as the tax basis of Community Bankshares Common Stock
surrendered in exchange therefor.
6. The holding period of F&M Common Stock received by Community
Bankshares shareholders will include the period during which Community
Bankshares Common Stock surrendered in exchange therefor was held by such
Community Bankshares shareholders, provided the Community Bankshares 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, Community
Bankshares and Community Bankshares 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,