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Exhibit 8
Board of Directors Board of Directors
Camco Financial Corporation Westwood Homestead Financial Corp.
000 Xxxxxxxx Xxxxxx 0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000 Xxxxxxxxxx, Xxxx 00000
Dear Directors:
We have reviewed the Agreement of Merger and Plan of Reorganization
(the "Agreement") dated August 6, 1999, by and among Camco Financial
Corporation, a Delaware corporation ("Camco"), Westwood Homestead Financial
Corporation, an Indiana corporation ("WHFC"), and The Westwood Homestead Savings
Bank, a savings bank organized under Chapter 1161 of the laws of the State of
Ohio, which is a wholly-owned subsidiary of WHFC ("Bank"), with a view to
rendering our opinion on the federal income tax consequences of the proposed
merger of WHFC with and into Camco.
THE MERGER
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The transaction contemplated by the Agreement is a merger (the
"Merger") under the laws of the State of Delaware and the State of Indiana, and
applicable federal laws and regulations of WHFC with and into Camco. Camco will
be the surviving corporation, and the separate existence of WHFC will cease.
At the Effective Time of the Merger, each of the outstanding shares of
WHFC common stock (the "WHFC Shares") will be canceled and extinguished in
consideration and exchange for $5.20 in cash and 0.611 share of Camco common
stock (the "Camco Shares"), subject to adjustment to reflect any stock split,
stock dividend or distributions in, or combinations or subdivisions of, Camco
Shares, between August 6, 1999, and the Effective Time as defined in the
Agreement.
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No fractional shares will be issued, and cash will be paid in lieu of
fractional shares based on the average of the bid and asked price quotes of the
Camco Shares as reported on the NASDAQ National Market System by a mutually
agreed upon authoritative source on the last day of trading of Camco Shares
prior to the date of Closing.
Shareholders of WHFC are not entitled to the appraisal rights described
in Section 23-1-44-8 of the Indiana Business Corporation Law.
In connection with the Merger, management of Camco or WHFC have made
the following representations:
1. The fair market value of the Camco Shares and cash
consideration to be received by each WHFC stockholder
will be approximately equal to the fair market value
of the WHFC Shares surrendered by each such
stockholder pursuant to the Merger.
2. There is no plan or intention by the WHFC
stockholders who own one percent (1%) or more of WHFC
Shares, and, to the best of the knowledge of WHFC's
management, there is no plan or intention on the part
of the remaining WHFC stockholders, to sell,
exchange, or otherwise dispose of a number of Camco
Shares received in the Merger which would reduce the
WHFC's stockholders' ownership of Camco Shares to a
number of shares having a value, as of the date of
the Merger, of less than fifty percent (50%) of the
value of all of the formerly outstanding stock of
WHFC as of the same date. [For purposes of this
representation, WHFC Shares exchanged for cash or
other property or exchanged for cash in lieu of
fractional Camco Shares, will be treated as
outstanding WHFC Shares on the date of the Merger.
Moreover, WHFC Shares and Camco Shares held by the
WHFC stockholders and otherwise sold, redeemed, or
disposed of prior or subsequent to the Merger will be
considered in making this representation.]
3. The liabilities of WHFC assumed by Xxxxx and the
liabilities to which the transferred assets of
WHFC are subject were incurred by WHFC in the
ordinary course of its business.
4. Camco has no plan or intention to reacquire any of
Camco Shares issued in the Merger.
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5. Camco has no plan or intention to sell or otherwise
dispose of any of the assets of WHFC acquired in the
Merger, except for dispositions made in the ordinary
course of business or transfers described in Section
368(a)(2)(C) of the Internal Revenue Code of 1986, as
amended (the "Code").
6. Following the Merger, Camco will continue the
historic business of WHFC or use a significant
portion of WHFC's business assets in a business.
7. WHFC, WHFC's stockholders, and Camco will pay their
respective expenses, if any, incurred in connection
with the Merger.
8. There is no intercorporate indebtedness existing
between Camco and WHFC that was issued, acquired, or
will be settled, at a discount.
9. No two parties to the Merger are "investment
companies" as defined in Section 368(a)(2)(F)(iii)
and (iv) of the Code.
10. WHFC 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.
11. The fair market value of the assets of WHFC
transferred to Camco will equal or exceed the sum of
the liabilities assumed by Camco, plus the amount of
liabilities, if any, to which the transferred assets
are subject.
12. The payment of cash in lieu of fractional Camco
Shares is solely for the purpose of avoiding the
expense and inconvenience to Camco of issuing
fractional shares and does not represent separately
bargained-for consideration. The total cash
consideration that will be paid in the Merger to WHFC
stockholders instead of issuing fractional Camco
Shares will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to
the stockholders in exchange for their WHFC Shares.
The fractional share interests of each stockholder
will be aggregated, and no WHFC stockholder will
receive cash in an amount equal to or greater than
the value of one (1) full Camco Share.
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DISCUSSION
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Section 368(a)(1)(A) of the Code defines a reorganization to include a
statutory merger. Since the Merger will be a statutory merger under the laws of
the State of Delaware and the State of Indiana, this statutory requirement is
satisfied.
In addition, certain non-statutory requirements have been imposed by
the courts and by the Internal Revenue Service in determining whether
reorganizations are in compliance with Section 368 of the Code. These include
requirements that there be a business purpose for the reorganization, that there
be a continuity of the business enterprise of the acquired corporation, and that
the shareholders of all corporate parties to the reorganization emerge with some
continuing proprietary interest in the entity resulting from the reorganization.
Section 3.02 of Revenue Procedure 77-37, 1977-2 C.B. 568, provided that the
continuity of interest requirement is satisfied "if there is a continuing
interest through stock ownership in the acquiring or transferee corporation . .
. on the part of the former shareholders of the acquired or transferor
corporation which is equal in value, as of the effective date of the
reorganization, to at least fifty percent (50%) of the value of all of the
formerly outstanding stock of the acquired or transferor corporation as of the
same date."
Pursuant to the representations that have been made, it is our opinion
that the non-statutory requirements of business purpose and continuity of
business enterprise are satisfied. Furthermore, assuming that the value of Camco
Shares to be received by WHFC stockholders in the Merger exceeds the amount of
cash boot and cash paid for fractional shares, the continuity of interest
requirement will be satisfied in that WHFC stockholders will receive Camco
Shares equal in value to the WHFC Shares exchanged therefor, which will ensure
that WHFC stockholders will have a continuing interest through stock ownership
in Camco which is equal in value to at least fifty percent (50%) of the value of
all the formerly outstanding WHFC Shares as of the effective date of the Merger.
Even though the Merger will be a "tax-free" reorganization, WHFC
stockholders will receive tax free only Camco Shares in accordance with Section
354 of the Code. Section 356(a)(1) of the Code provides that if a stockholder of
the acquired corporation in a reorganization receives "boot" as well as
nonrecognition property, his or her gain, if any, is to be recognized, but in an
amount not in excess of the boot. Since WHFC stockholders will receive cash boot
for each WHFC Share in addition to receiving Camco Shares, their gain, if any,
must be recognized, but not in excess of the cash received. Section 356(c),
however, precludes a WHFC stockholder from recognizing any loss which may be
realized on the exchange of WHFC Shares for both Camco Shares and cash.
Section 356 also determines whether any gain realized will be taxed as
an ordinary dividend or as capital gain. Section 356(a)(2) provides that, if the
exchange has the "effect of the distribution of a dividend," the taxpayer's
recognized gain must be so treated to the
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extent of his ratable share of earnings and profits. Such dividend will qualify
for the dividends-received deduction generally allowed to corporations, subject
to certain limitations under the Code. In determining whether the receipt of
boot has the effect of the distribution of a dividend, the courts and the
Internal Revenue Service agree that the principles developed in interpreting the
redemption provisions of Section 302 of the Code are applicable to cases under
Section 356. XXXXXX V. U.S., 482 F.2d 800 (8th Cir. 1973); XXXXXXXX V. U.S., 577
F.2d 283 (5th Cir. 1978); Rev. Rul. 74-515, 1974-2 C.B. 118; Rev. Rul. 74-516,
1974-2 C.B. 121. Furthermore, the precise formula for the application of a
Section 302(b)-type analysis to acquisitive reorganizations was prescribed by
the United States Supreme Court in COMMISSIONER X. XXXXX, 489 U.S. 726, 109
S.Ct. 1455 (1989). In XXXXX, the Court treated a tax-free exchange of stock
accompanied by cash boot as though the stockholder of the acquired corporation
had received only stock of the acquiring corporation, part of which stock was
immediately redeemed by the acquiring corporation for cash. The IRS reflected
this conclusion in Rev. Rul. 93-61, 1993-2 C.B. 188. This ordering almost always
will produce a disproportionate redemption under Section 302(b)(2) or at least a
meaningful reduction under Section 302(b)(1) and, therefore, result in a capital
gain treatment.
In general, in order for a holder of WHFC Shares to qualify for
substantially disproportionate redemption treatment under Section 302(b)(2), the
following conditions must be satisfied immediately after the Merger: such
stockholder owns less than fifty percent (50%) of the total combined voting
power of all classes of stock entitled to vote, and such stockholder's
percentage ownership of the total number of Camco Shares outstanding after the
Merger is less than eighty percent (80%) of the percentage of ownership that he
or she would have had of the total number of Camco Shares that would have been
outstanding after the Merger if all WHFC stockholders (including such
stockholders) had received solely Camco Shares with no cash boot.
This determination must take into account WHFC Shares or Camco Shares
actually owned by a WHFC stockholder or constructively owned by such stockholder
under the constructive ownership rules of Section 318 of the Code. Under Section
318, a stockholder is considered to own shares that are directly or indirectly
owned by certain members of his or her family or by certain trusts, partnerships
or corporations in which he or she has an ownership or beneficial interest. He
or she is also considered to own any shares with respect to which he or she
holds options. The constructive ownership rules are important in determining
whether the tests contained in Section 302 are met. In certain cases, a holder
of WHFC Shares may be deemed to own constructively Camco Shares held by persons
who do not own WHFC Shares and do not participate in the Merger.
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OPINIONS
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Therefore, based on the description of the Merger in the Agreement, the
representations set forth above upon which we have relied, and the foregoing
legal authorities, it is our opinion that:
1. The Merger will constitute a reorganization under Section
368(a)(1)(A) of the Code. Camco and WHFC will each be a
party to the reorganization.
2. No gain or loss will be recognized to WHFC upon the
transfer of its assets to Camco in exchange for Camco's
Shares, cash boot, and the assumption by Camco of
liabilities of WHFC.
3. No gain or loss will be recognized to Camco on the receipt
of the assets of WHFC in exchange for Camco Shares and
cash.
4. The basis of the assets of WHFC in the hands of Camco will
be the same as the basis of such assets in the hands of
WHFC immediately prior to the Merger.
5. The holding period of the assets of WHFC to be received by
Camco will include the period during which the assets were
held by WHFC.
6. The gain, if any, to be realized by a WHFC stockholder who
receives Xxxxx Xxxxxx and cash in exchange for his or her
WHFC Shares will be recognized, but not in excess of the
amount of cash received. If the exchange has the effect of
the distribution of a dividend (determined with the
application of Section 318), then the amount of gain
recognized that is not in excess of such stockholder's
ratable share of undistributed earnings and profits will
be treated as a dividend. The determination of whether the
exchange has the effect of a distribution of a dividend
will be made on a stockholder-by-stockholder basis in
accordance with the principles set forth in COMMISSIONER
X. XXXXX, 49 U.S. 726 (1989) and Rev. Rul. 93-61, 1993-2
C.B. 188. No loss will be recognized pursuant to Section
356(c).
7. The basis of the Camco Shares (including any fractional
share interest) to be received by a WHFC stockholder will
be the same as the basis of the WHFC Shares surrendered in
exchange therefor, decreased by the amount of cash
received, and increased by the amount of gain which was
recognized on the exchange. The holding period of Camco
Shares (including any fractional share interest) to be
received by such WHFC
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stockholder will be the same as the holding period of the
WHFC Shares surrendered in exchange therefor.
8. Payment of cash to a WHFC stockholder in lieu of
fractional Camco Shares will be treated as if such shares
were distributed as part of the exchange and then redeemed
by Camco. The payment received by a WHFC stockholder will
be treated as having been received as a distribution in
full payment and exchange for the shares redeemed as
provided in Section 302(a) of the Code.
OVERALL EVALUATION
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Based upon, and subject to, the foregoing, it is our opinion that the
Merger should result in the federal income tax consequences described above.
This opinion is not binding on the Internal Revenue Service and no
ruling has been, or will be, requested from the Internal Revenue Service as to
any federal income tax consequence described above. Although this opinion is
based upon our best interpretation of current provisions of the Code and the
Treasury Department regulations promulgated thereunder, as well as existing
court decisions and administrative rulings and procedures, and sets forth the
conclusions we believe would be reached by a court if the issues were properly
briefed and presented to it, no assurance can be provided that a court in fact
would agree with our interpretation. Further, no assurance can be provided that
the applicable law will not change in a manner that will adversely affect these
consequences, and any such adverse change could be retroactive.
No opinion is expressed as to any federal income tax consequence
other than as specifically set forth herein, and no opinion is expressed with
respect to the amount or timing of any federal income tax deduction or credit or
with respect to any tax issue arising under state, local, or foreign tax
provisions. Further, any change in the facts as set forth herein or in the
Agreement or the representations could affect this opinion, perhaps in an
adverse manner.
Very truly yours,
Xxxxx, Xxxxx, Xxxxxxx and Xxxxx LLP
