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Exhibit 10.5
TAX ALLOCATION AGREEMENT
This Tax Allocation Agreement (the "Agreement") is made between Peoples
Financial Corporation, a savings and loan holding company incorporated under the
laws of the State of Ohio ("PFC"), and Peoples Federal Savings and Loan
Association of Massillon, a savings and loan association chartered under the
laws of the United States ("Peoples Federal").
WHEREAS, PFC owns all of the issued and outstanding shares of capital
stock of Peoples Federal;
WHEREAS, Peoples Federal has become a member of an affiliated group
(the "Group") within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), of which PFC is the common parent corporation;
WHEREAS, PFC proposes to include Peoples Federal in filing consolidated
federal income tax returns for its tax years; and
WHEREAS, PFC and Peoples Federal have considered that Peoples Federal
should be liable to PFC for taxes as if Peoples Federal filed a separate tax
return and desire to formalize the method for allocating the consolidated tax
liability of the Group among its members and establish the procedure for future
payments to PFC of such tax liability attributable to members of the Group other
than PFC;
NOW, THEREFORE, PFC and Peoples Federal agree as follows:
1. CONSOLIDATED RETURN ELECTION.
If at any time and from time to time PFC is required to file a
consolidated federal tax return with Peoples Federal or is permitted to
do so and so elects, Peoples Federal will join in the filing of such
consolidated federal income tax return for any taxable period for which
the Group is required or permitted to file such a return under the
rules of Section 1502-1552 of the Code and the Treasury regulations
promulgated thereunder. Peoples Federal agrees to file such consents,
elections, and other required documents and take such other action as
may be necessary or appropriate to carry out the purpose of this
Section 1. Any period for which Peoples Federal is included in a
consolidated federal income tax return filed by PFC is referred to in
this Agreement as a "Consolidated Return Year."
2. PEOPLES FEDERAL LIABILITY TO PFC FOR CONSOLIDATED RETURN
YEARS.
(a) For each Consolidated Return Year, Peoples Federal shall
compute the amount which would have been its tax liability for such
period as though Peoples Federal filed a separate return for such
Consolidated Return Year. The separate return of Peoples Federal shall
mean a return for Peoples Federal consolidated with its subsidiaries
includable in a consolidated return, unless (if such consolidation is
not otherwise required)
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PFC and Peoples Federal mutually agree that for any Consolidated
Return Year the separate return shall mean an unconsolidated, Peoples
Federal-only return or any other permissible return.
(b) Peoples Federal shall pay to PFC, as provided in
Section 4 below, the amount computed pursuant to paragraph (a) of this
Section.
(c) Notwithstanding any provision of this Agreement to the
contrary, at no time shall Peoples Federal pay or become obligated to
pay to PFC deferred income taxes and at no time shall PFC forgive any
portion of Peoples Federal's deferred tax liability.
3. TAX BENEFITS OF PEOPLES FEDERAL
To the extent that a taxable loss, tax credit or other tax
attribute ("Tax Attribute") is incurred by Peoples Federal for a
Consolidated Return Year, as computed pursuant to paragraph (a) of
Section 2, and to the extent a tax benefit arising from such Bank Tax
Attribute could be achieved by Peoples Federal if it filed a separate
return, PFC shall pay to Peoples Federal the amount of such tax
benefit. PFC shall pay the benefit as provided in Section 4 below as if
the benefit could be achieved in the current Consolidated Return Year.
Notwithstanding the above, PFC is not obligated to pay benefits to
Peoples Federal which Peoples Federal can obtain directly from the
Internal Revenue Service (the "Service").
4. PAYMENTS
(a) Prior to the end of any Consolidated Return Year, Peoples
Federal shall advance to PFC, at the approximate time estimated federal
income taxes are to be submitted, the amount of such estimated tax for
any such Consolidated Return Year period attributable to Peoples
Federal as computed in accordance with Section 2 of this Agreement. The
payment of the amount of such estimated tax to PFC by Peoples Federal
shall not be made significantly prior to the payment date on which
PFC's consolidated federal tax liability is required to be paid.
(b) After the end of any Consolidated Return Year, Peoples
Federal shall pay to PFC, at the approximate time federal income taxes
are to be submitted: (i) the amount of tax for such Consolidated Return
Year attributable to Peoples Federal as computed in accordance with
Section 2 of this Agreement minus (ii) the amount of any estimated tax
payments for such Consolidated Return Year previously advanced to PFC
pursuant to paragraph (a) of this Section. If the amount of estimated
payments or advances (i.e., (ii) above) is greater than the tax
obligations of Peoples Federal (i.e., (i) above), then PFC shall pay
the amount of such excess of estimated payments over actual obligation
to Peoples Federal as soon as reasonably determined and possible after
the end of the Consolidated Return Year.
(c) For tax benefits of Peoples Federal governed by Section 3
of this Agreement, PFC shall make advances or payments for estimated
tax benefits to Peoples
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Federal in the same manner and at the same time as Peoples Federal
would make advances or payments to PFC for tax liability under
paragraphs (a) and (b) above, and Peoples Federal shall repay to PFC
any excess of such advances for estimated tax benefits paid to it by
PFC over the amount of the tax benefit for the Consolidated Return
Year in the manner and at the same time as PFC would make repayments
to Peoples Federal for excess estimated advances under paragraph (b)
above.
(d) PFC shall confirm to Peoples Federal the payment of
taxes and estimated taxes to the Service within five days after such
payment is made.
5. TAX ADJUSTMENTS.
In the event of any adjustment to the tax returns of PFC and
Peoples Federal as filed (by reason of an amended return, claim for
refund, or an audit by the Service), the liability of PFC and Peoples
Federal under Sections 2, 3, and 4 shall be redetermined to give effect
to any such adjustment as if it had been made as part of the original
computation of tax liability, and payments between PFC and Peoples
Federal shall be made at the approximate time such payments are made or
refunds are received from the Service.
6. STATE AND LOCAL TAXES.
To the extent required by applicable state law or permitted
thereby and so elected by PFC, Peoples Federal will also join in the
filing of any state or local consolidated income tax return of PFC in
the same manner as for a federal income tax return pursuant to Section
1 and, in such case, the state and local income tax liability shall be
allocated and payments made between PFC and Peoples Federal in
accordance with the rules provided in this Agreement with regard to
federal income taxes.
7. LIABILITY TO THE SERVICE OR STATE AUTHORITIES.
This Agreement does not affect the liability of any party
under the applicable provisions of the Code or State law; it merely
allocates how the members of the Group share among the Group such tax
liabilities and benefits. To the extent Peoples Federal has made tax or
estimated tax payments to PFC, PFC is obligated to Peoples Federal to
pay to the Internal Revenue Service the tax liability of Peoples
Federal.
8. CONSOLIDATED RETURNS NOT FILED.
Where a consolidated income tax return of PFC which includes
Peoples Federal is not filed, Peoples Federal is responsible for the
filing of its individual income tax returns and payment of related
income taxes, PFC is responsible for the filing of its own return.
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9. SUCCESSORS.
This Agreement shall be binding on and inure to the benefit of
any successor, by merger, acquisition of assets or otherwise, to any of
the parties hereto to the same extent as if such successor had been an
original party to the Agreement.
10. TERMINATION.
Either party may terminate this Agreement upon thirty days
prior written notice to the other party.
IN WITNESS WHEREOF, PFC and Peoples Federal have executed this
Agreement by the authorized officers thereof as of _________________, 1996.
Peoples Financial Corporation
By:_______________________________
Paul von Gunten
its: President
Peoples Federal Savings and Loan Association of Massillon
By:_______________________________
Paul von Gunten
its: President
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