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Exhibit 2(b)
STOCK OPTION AGREEMENT
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Stock Option Agreement, dated as of August 7, 1999, between Camco
Financial Corporation, a Delaware corporation ("Grantee"), and Westwood
Homestead Financial Corporation, an Indiana corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement of Merger
and Plan of Reorganization of even date herewith (the "Merger Agreement"),
providing for, among other things, the merger of Issuer with and into Grantee
(the "Merger");
WHEREAS, as a condition and an inducement to Grantee to enter into the
Merger Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined); and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Subject to the terms and conditions set forth herein, Issuer
hereby grants to Grantee an irrevocable option (the "Option") to purchase,
subject to the terms hereof, up to an aggregate of 431,595 fully paid and
nonassessable shares (the "Option Shares") of common stock, par value $0.01 per
share, of Issuer (the "Common Stock") at a price per share equal to $10.50 (the
"Option Price"); provided, however, that in no event shall the number of shares
for which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock without giving effect to any shares subject to or issued
pursuant to the Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), including, without limitation, pursuant to stock option or
other employee plans or as a result of the exercise of conversion rights, the
number of shares of Common Stock subject to the Option shall be increased so
that, after such event, such number equals 19.9% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject to or issued pursuant to the Option. Nothing contained in this Section
l(b) or elsewhere in this Agreement shall be deemed to authorize Issuer to issue
shares in breach of any provision of the Merger Agreement.
2. (a) Subject to the terms and conditions set forth herein, the Holder
(as hereinafter defined) may exercise the Option, in whole or part, and from
time to time, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of the first exercise (as provided in paragraph (e) of this Section 2)
within 60 days following the first Subsequent Triggering Event to occur (or such
later period as provided in Section 10). Each of
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the following shall be an Exercise Termination Event: (i) the Effective Time (as
defined in the Merger Agreement); (ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event, except a termination by Grantee
pursuant to Section 8.01(c) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination was non-volitional); or (iii) the
passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 8.01(c) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional), provided that if an Initial Triggering Event continues or
occurs beyond such termination and prior to the passage of such 12-month-period,
the Exercise Termination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination. The term "Last Triggering Event" shall mean the last "Initial
Triggering Event" to expire, and the term "Holder" shall mean the holder or
holders of the Option pursuant to this Agreement. Notwithstanding anything to
the contrary contained herein, the Option may not be exercised at any time when
(i) Grantee shall be in material breach of any of its covenants or agreements
contained in the Merger Agreement such that Issuer shall be entitled to
terminate the Merger Agreement pursuant to Section 8.01(d) thereof as a result
of such a material breach and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option issued by any
court of competent jurisdiction shall be in effect.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any Subsidiary of Issuer (an "Issuer
Subsidiary"), without having received Grantee's prior written consent, shall
have entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
rules and regulations thereunder), other than Grantee or any Subsidiary of
Grantee (a "Grantee Subsidiary") or the Board of Directors of Issuer (the
"Issuer Board") shall have recommended that the shareholders of Issuer approve
or accept any Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary. For purposes of this Agreement, (a) "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Issuer Subsidiary (other than mergers,
consolidations or similar transactions (i) involving solely Issuer and/or one or
more wholly-owned Subsidiaries of Issuer, provided any such transaction is not
entered into in violation of the terms of the Merger Agreement, or (ii) in which
the shareholders of Issuer immediately prior to the completion of such
transaction own at least 50% of the Common Stock of Issuer (or the resulting or
surviving entity in such transaction) immediately after completion of such
transaction, provided any such transaction is not entered into in violation of
the terms of the Merger Agreement), (x) a purchase, lease or other acquisition
of all or any substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, (y) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Issuer or any Issuer Subsidiary or (z) any
substantially similar transaction; and (b) "Subsidiary" shall have the meaning
set forth in Rule 12b-2 under the 1934 Act;
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(ii) Any person, other than Grantee or a Grantee
Subsidiary, shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 20% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iii) The Issuer Board, without having received
Grantee's prior written consent, shall have withdrawn or modified, or publicly
announced its interest to withdraw or modify in any manner adverse in any
respect to Grantee, its recommendation that the stockholders of Issuer approve
the transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction, or Issuer or any Issuer Subsidiary shall
have authorized, recommended or proposed, or publicly announced its intention to
authorize, recommend or propose, an agreement to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary;
(iv) Any person other than Grantee or a Grantee
Subsidiary shall have filed with the Securities and Exchange Commission ("SEC")
a registration statement or tender offer materials with respect to a potential
exchange or tender offer that would constitute an Acquisition Transaction (or
filed a preliminary proxy statement with the SEC with respect to a potential
vote by its stockholders to approve the issuance of shares to be offered in such
an exchange offer);
(v) After a bona fide written proposal is made by any
person, other than Grantee or a Grantee Subsidiary, to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have breached
any covenant or obligation contained in the Merger Agreement and such breach (x)
would entitle Grantee to terminate the Merger Agreement (whether immediately or
after the giving of notice or passage of time or both) and (y) shall not have
been cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or a Grantee
Subsidiary shall have filed an application or notice with the Federal Reserve
Board (the "FRB") or other federal or state bank regulatory or antitrust
authority, which application or notice has been accepted for processing, for
approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of
the following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 25% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) of the second sentence thereof shall be
25%.
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(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event") of which it has notice, it being understood
that the giving of such notice by Issuer shall not be a condition to the right
of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option (or any portion thereof), it shall send to Issuer a written
notice (the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares of Common Stock it will purchase
pursuant to such exercise and (ii) a place and date not earlier than three
business days nor later than 45 business days from the Notice Date for the
closing of such purchase (the "Closing"); provided that if prior notification to
or approval of the FRB or any other regulatory or antitrust agency is required
in connection with such purchase, the Holder shall promptly file the required
notice or application for approval, shall promptly notify Issuer of such filing
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto. The term "business day" for purposes of this Agreement means
any day, excluding Saturdays, Sundays and any other day that is a legal holiday
in the State of Ohio or a day on which banking institutions in the State of Ohio
are authorized by law or executive order to close.
(f) At a Closing, the Holder shall (i) pay to Issuer the
aggregate purchase price for the shares of Common Stock purchased pursuant to
the exercise of the Option in immediately available funds by wire transfer to a
bank account designated by Issuer, and (ii) present and surrender this Agreement
to Issuer at its principal executive offices, provided that the failure or
refusal of the Issuer to designate such a bank account or accept surrender of
this Agreement shall not preclude the Holder from exercising the Option.
(g) At a Closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a Closing
hereunder may be endorsed (in the sole discretion of Issuer) with a restrictive
legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the
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principal office of Issuer and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the reasonable written opinion of
counsel to the Holder; and (iii) the legend shall be removed in its entirety if
the conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under paragraph (e) of
this Section 2, the tender of the applicable purchase price in immediately
available funds and the tender of a copy of this Agreement to Issuer, the Holder
shall be deemed, subject to the receipt of any necessary regulatory approvals,
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by amendment of its Articles of Incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including without limitation (x) complying with all applicable
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the
event, under the Federal Reserve Act, the Home Owners Loan Act ("HOLA"), or the
Change in Bank Control Act of 1978, as amended, or any state or other federal
banking law, prior approval of or notice to the FRB, the FDIC, the OTS or to any
state or other federal regulatory authority is necessary before the Option may
be exercised, cooperating fully with the Holder in connection with the
preparation of such applications or notices and providing such information to
the FRB or the OTS or such state or other federal regulatory authority as they
may require) in order to permit the Holder to exercise the Option and
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Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement and the Option granted hereby are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase
on the same terms and subject to the same conditions as are set forth herein in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, subject to the
aforementioned indemnification, if applicable, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of Option Shares purchasable upon the exercise of the
Option and the Option Price shall be subject to adjustment from time to time as
provided in this Section 5.
(a) In the event of any change in, or distributions in respect
of, the Common Stock by reason of stock dividend, split-up, merger,
recapitalization, combination, subdivision, conversion, exchange of shares,
distribution on or in respect of the Common Stock or similar transaction, the
type and number of Option Shares shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction, so that
Grantee shall receive upon exercise of the Option the number and class of Option
Shares that Grantee would have held immediately after such event if the Option
had been exercised immediately prior to such event, or the record date therefor,
as applicable.
(b) Whenever the number of Option Shares is adjusted as
provided in this Section 5, the Option Price shall be adjusted by multiplying
the Option Price by a fraction, the numerator of which shall be equal to the
number of Option Shares purchasable prior to the adjustment and the denominator
of which shall be equal to the number of Option Shares purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within four months (or such later period as provided in Section 10)
following such Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent holder of this Option (or part thereof) or any of the
Option Shares issued pursuant hereto), promptly prepare, file and keep current,
with respect to the Option and the Option Shares, a registration statement under
the 1933 Act and qualify such Option and Option Shares for resale or other
disposition under applicable state securities laws, in each case in accordance
with any plan of disposition requested by Grantee.
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Issuer will use all reasonable efforts to cause such registration statement
promptly to become effective and then to remain effective for such period not in
excess of 180 days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect such
sales or other dispositions. Grantee shall have the right to demand two such
registrations. The Issuer shall bear the costs of such registrations (including,
but not limited to, Issuer's attorneys' fees, printing costs and filing fees,
except for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering by Issuer of shares of Common Stock,
and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering, the inclusion of the Option and/or Option Shares would interfere with
the successful marketing of the shares of Common Stock offered by Issuer, the
number of shares represented by the Option and/or the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may be
reduced; provided, however, that after any such required reduction the number of
shares represented by the Option and/or the number of Option Shares to be
included in such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder and Issuer in
the aggregate; and provided further, however, that if such reduction occurs,
then Issuer shall file a registration statement for the balance as promptly as
practicable thereafter as to which no reduction pursuant to this Section 6 shall
be permitted or occur. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any such registration statement to be filed
hereunder. If requested by any such Holder in connection with such registration,
Issuer shall become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in secondary offering underwriting agreements for Issuer. Upon
receiving any request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of any Holder
delivered within 90 days following such occurrence (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which the Option may then
be exercised, and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 60 days following such occurrence (or such
later period as provided in Section 10), Issuer (or any successor thereto) shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the greater
of (A) the Market/Offer Price and (B) the average exercise price per share paid
by the Owner for the Option Shares so designated. The term "Market/Offer Price"
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shall mean the highest of (i) the price per share of Common Stock at which a
tender offer or exchange offer therefor has been made, (ii) the price per share
of Common Stock to be paid by any person, other than Grantee or a Grantee
Subsidiary, pursuant to an agreement with Issuer, (iii) the highest sale price
for shares of Common Stock within the six-month period immediately preceding the
date of such required repurchase of the Option or Option Shares, as the case may
be, or (iv) in the event of a sale of all or any substantial part of Issuer's
assets or deposits, the sum of the price paid in such sale for such assets or
deposits and the current market value of the remaining assets of Issuer as
determined by a nationally-recognized investment banking firm selected by a
majority in interest of the Holders or the Owners, as the case may be, and
reasonably acceptable to Issuer, divided by the number of shares of Common Stock
of Issuer outstanding at the time of such sale. In determining the Market/Offer
Price, the value of consideration other than cash shall be determined by a
nationally-recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to Issuer.
(b) Each Holder and Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that such Holder
or Owner, as the case may be, elects to require Issuer to repurchase this Option
and/or Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, or as a result
of a written agreement or other binding obligation with a governmental or
regulatory body or agency, from repurchasing the Option and/or the Option Shares
in full, Issuer shall immediately so notify each Holder and/or each Owner and
thereafter deliver or cause to be delivered, from time to time, to such Holder
and/or such Owner, as appropriate, the portion of the Option Repurchase Price
and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation, or as a consequence
of administrative policy, or as a result of a written agreement or other binding
obligation with a governmental or regulatory body or agency, from delivering to
the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in part or in full (and Issuer
hereby undertakes to use all reasonable efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), such Holder or Owner may
revoke its notice of repurchase of the Option and/or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering with respect to Options or Option
Shares as to which the Holder
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or the Owner, as the case may be, has not revoked its repurchase demand; and
(ii) deliver, as appropriate, either (A) to the Holder, a new Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, and/or (B) to such Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary, and in either case,
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger or the acquiror in such plan of exchange, (ii) to permit
any person, other than Grantee or a Grantee Subsidiary, to merge into Issuer or
be acquired by Issuer in a plan of exchange and Issuer shall be the continuing
or surviving or acquiring corporation, but, in connection with such merger or
plan of exchange, the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property or the then outstanding shares of Common Stock shall after
such merger or plan of exchange represent less than 50% of the outstanding
shares and share equivalents of the merged or acquiring company, or (iii) to
sell or otherwise transfer all or a substantial part of its or any Issuer
Subsidiary's assets or deposits to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of any Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer is
acquired, (iii) Issuer in a merger or plan of exchange in which Issuer is the
continuing or surviving or acquiring person, and (iv) the transferee of all or a
substantial part of Issuer's assets or deposits (or the assets or deposits of an
Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger, share exchange or sale in question, but in no event
higher than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger, share exchange or
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sale; provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock issued
by the person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall, to the extent legally
permissible, be as similar as possible to, and in no event less advantageous to
the Holder than, the terms of the Option. The issuer of the Substitute Option
also shall enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after giving
effect for such purpose to the provisions of Section 9), which agreement shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence of
Section 8(a), divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option was exercisable immediately prior to
the event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this paragraph (e), the issuer of the Substitute Option (the "Substitute Option
Issuer") shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
paragraph (e) over (ii) the value of the Substitute Option after giving effect
to the limitation in this paragraph (e). This difference in value shall be
determined by a nationally- recognized investment banking firm selected by a
majority in interest of the Holders and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in
paragraph (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of each owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the
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"Substitute Share Repurchase Price") equal to the greater of (A) the Highest
Closing Price and (B) the average exercise price per share paid by the
Substitute Share Owner for the Substitute Shares so designated, multiplied by
the number of Substitute Shares so designated. The term "Highest Closing Price"
shall mean the highest closing price for shares of Substitute Common Stock
within the six-month period immediately preceding the date the Substitute Option
Holder gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the Substitute
Shares, as applicable.
(b) Each Substitute Option Holder and Substitute Share Owner,
as the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and/or
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor, or the portion(s) thereof which the Substitute Option Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, or as a result of a written agreement or other binding
obligation with a governmental or regulatory body or agency, from repurchasing
the Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Issuer following a request for repurchase pursuant to this
Section 9 shall immediately so notify the Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be delivered, from
time to time, to the Substitute Option Holder and/or the Substitute Share Owner,
as appropriate, the portion of the Substitute Option Repurchase Price and/or the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute
Option Repurchase Price and the Substitute Share Repurchase Price, respectively,
in full (and the Substitute Option Issuer shall use all reasonable efforts to
obtain all required regulatory and legal approvals as promptly as practicable in
order to accomplish such repurchase), the Substitute Option Holder and/or
Substitute Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or
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Substitute Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Substitute Option Holder, a new Substitute Option
evidencing the right of the Substitute Option Holder to purchase that number of
shares of the Substitute Common Stock obtained by multiplying the number of
shares of the Substitute Common Stock for which the surrendered Substitute
Option was exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Substitute Option Repurchase Price less
the portion thereof theretofore delivered to the Substitute Option Holder and
the denominator of which is the Substitute Option Repurchase Price, and/or (B)
to the Substitute Share Owner, a certificate for the Substitute Option Shares it
is then so prohibited from repurchasing.
10. The periods for exercise of certain rights under Sections 2, 6, 7
and 12 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights (for so long as the Holder, Owner,
Substitute Option Holder or Substitute Share Owner, as the case may be, is using
its reasonable best efforts to obtain such regulatory approvals), and for the
expiration of all statutory waiting periods; (ii) during the pendency of any
temporary restraining order, injunction or other legal bar to exercise of such
rights; and (iii) to the extent necessary to avoid liability under Section 16(b)
of the 1934 Act by reason of such exercise.
11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Issuer.
(ii) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer that:
(i) Grantee has full corporate power and authority to execute
and deliver this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
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(ii) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within four months
following such Subsequent Triggering Event; provided, however, that until the
date 15 days following the date on which the FRB approves an application by
Grantee under the Bank Holding Company Act or the OTS approves an application by
Grantee under the HOLA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the sole purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the FRB or
the OTS.
13. Each of Grantee and Issuer will use all reasonable efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the FRB under the
Bank Holding Company Act or the OTS under the HOLA for approval to acquire the
shares issuable hereunder and applying for listing or quotation of such shares
on any exchange or quotation system on which the Common Stock is then listed or
quoted.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer or Substitute Option
Issuer, as the case may be, is not permitted to repurchase pursuant to Section 7
or Section 9, as the case may be, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer (which shall be binding on the
Substitute Option Issuer) to allow the Holder to acquire or to require Issuer or
Substitute Option Issuer, as the case may be, to repurchase such lesser number
of shares as may be permissible, without any amendment or modification hereof.
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16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
17. This Agreement shall be governed by and construed in accordance
with the laws of the State of Indiana, without regard to the conflict of law
principles thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
21. The transactions provided for in this Agreement are in addition to
and supplemental of the provisions of the Merger Agreement.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
WESTWOOD HOMESTEAD FINANCIAL
CORPORATION
Attest:
/s/ Xxxx Xxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------- ---------------------------------------------
Name: Xxxx Xxx Xxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: Secretary Title: President and Chief Executive Officer
CAMCO FINANCIAL CORPORATION
Attest:
/s/ Xxxxxxx X. Xxxx By: /s/ Xxxxx X. Xxxxxxxx
-------------------------- ---------------------------------------------
Name: Xxxxxxx X. Xxxx Name: Xxxxx X. Xxxxxxxx
Title: Secretary Title: President, Chief Executive Officer and
Chairman of the Board
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