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EXHIBIT 2.5
EXECUTION COPY
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TAX ALLOCATION AGREEMENT
Dated as of September 1, 1995
Among
U.S. TRUST CORPORATION
NEW USTC HOLDINGS CORPORATION
and
THE CHASE MANHATTAN CORPORATION
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TAX ALLOCATION AGREEMENT (the "Agreement")
dated as of September 1, 1995, among
U.S. TRUST CORPORATION, a New York corporation
(the "Company"),
NEW USTC HOLDINGS CORPORATION, a New York corporation
("New Holdings") and THE CHASE MANHATTAN CORPORATION,
a Delaware corporation ("Parent").
WHEREAS, the Company is currently the common parent of an affiliated group of
corporations (the "Affiliated Group") filing consolidated Federal income Tax
returns and unitary or combined state income Tax returns ("Consolidated
Returns"), pursuant to which the Company and one or more other members of the
Affiliated Group pay Taxes on a consolidated, combined or unitary basis
("Consolidated Taxes");
WHEREAS, on September 1, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust Company of New York, a New
York State chartered bank and trust company ("USTNY") and a wholly owned
subsidiary of the Company, transferred certain assets and liabilities
associated with USTNY's private banking and asset management businesses to New
U.S. Trust Company of New York, a New York State chartered bank and trust
company ("New Trustco") and a newly formed, wholly owned subsidiary of USTNY
("Contribution No. 1");
WHEREAS, immediately thereafter, USTNY distributed the stock of New Trustco to
the Company ("Spinoff No. 1") in a transaction intended to qualify as a
tax-free distribution under Section 355 of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, immediately thereafter, the Company contributed the stock of New
Trustco, the stock of certain other subsidiaries of the Company and certain
other assets to New Holdings, a newly formed, wholly owned subsidiary of the
Company ("Contribution No. 2");
WHEREAS, the company intends to distribute all the stock of New Holdings to its
shareholders ("Spinoff No. 2") in a transaction intended to qualify as a
tax-free spin-off under Section 355 of the Code (Contribution ▇▇. ▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇. ▇ and Spinoff No. 2 are referred to,
collectively, herein as the "Spinoffs");
WHEREAS, on the beginning of the first day after the date on which Spinoff No.
2 occurs (the "Distribution Date"), New Holdings and its subsidiaries,
including New Trustco (collectively, the "Holdings Group") will cease to be
members of the Affiliated Group of which the Company is the common parent
corporation, within the meaning of Section 1502 of the Code, and which has
elected to file Consolidated Returns;
WHEREAS, immediately following Spinoff No. 2 pursuant to an agreement between
the Company and the Parent, the Company shall merge with the Parent or a
subsidiary of the Parent and USTNY may merge with a subsidiary of the Parent
(collectively, the "Merger");
WHEREAS, the Company and New Holdings desire to allocate the liability for the
Taxes (including any interest or penalties thereon and additions thereto) of
members of the Affiliated Group for any taxable period (including short taxable
periods and any portion of any taxable period) which period (or portion) ends on
or before the effective date of the Merger (a "Pre-Merger Tax Period") and to
provide for certain other tax-related matters;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows.
1. Indemnification by the Company and USTNY. The Company and its
subsidiaries, other than USTNY, shall indemnify and hold harmless New Holdings
against any Federal, state, local and foreign income,
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property, sales, excise, transfer, withholding, employment or other
taxes, tariffs or governmental charges (and all penalties and interest relating
thereto) imposed by a governmental authority pursuant to the exercise of its
power to tax (collectively, "Taxes") (i) imposed on the Company, USTNY or any
of their respective subsidiaries at the Effective Time of the Merger for any
taxable period (including short taxable periods and any portion of any taxable
period) which period (or portion) begins on or after and ends after the
effective date of the Merger (a "Post-Merger Tax Period"), (ii) imposed on any
member of the Affiliated Group as a result of the Merger failing to qualify as
a reorganization under Section 368(a) of the Code solely by reason of one or
more actions, other than a Contemplated Action, taken by the Company, the
Parent or any of their respective subsidiaries after the Merger or (iii)
imposed as a result of the Spinoffs on any member of the Affiliated Group
solely by reason of one or more actions, other than a Contemplated Action,
taken by the Company, the Parent or any of their respective subsidiaries after
the Merger. As used herein, "Contemplated Action" shall mean any action or
inaction set forth in the documents prepared in connection with the Spinoffs
and the Merger, and actions or inactions contemplated to be taken as specified
in writing by the Parent to New Holdings in connection with the preparation of
a private letter ruling request to be completed in connection with the Spinoffs
and the Merger. Except as specifically provided in this ▇▇▇▇▇▇▇ ▇, ▇▇▇▇ of
Parent, the Company nor any of their respective subsidiaries shall have any
obligation to any of New Holdings, New Trustco or any of their respective
subsidiaries for any Taxes arising from or related to the Spinoffs or the
Merger.
2. INDEMNIFICATION BY NEW HOLDINGS. New Holdings and each direct or indirect
subsidiary thereof, other than New Trustco, shall indemnify and hold harmless
the Parent, the Company, USTNY and each direct or indirect subsidiary thereof
against any and all Taxes, other than Taxes for which New Holdings, New Trustco
and each direct or indirect subsidiary thereof has been indemnified under
Section 1, (i) imposed on any member of the Affiliated Group with respect to a
Pre-Merger Tax Period or (ii) imposed on Parent, Company and each direct or
indirect subsidiary thereof as a result of the Spinoffs or the Merger.
3. CONTROL OF TAX MATTERS. (a) The Company hereby irrevocably designates,
and agrees to cause each of its subsidiaries to so designate, New Holdings as
its agent to take any and all actions, at New Holdings' sole expense, necessary
or incidental to the preparation of Tax returns and the filing of claims for
refunds or forms relating to any Pre-Merger Tax Period. For any Straddle
Period (as defined in Section 4) of the Company or any of its subsidiaries that
was a member of the Affiliated Group for any Pre-Merger Tax Period, Parent, at
Parent's sole expense, will timely file (in a manner consistent with past
practice of the Company, unless Parent reasonably determines that such practice
is inconsistent with the then existing state of the law) with the appropriate
Taxing authorities all Tax returns required to be filed.
(b) If requested by New Holdings the Company will, and will cause each of its
subsidiaries that was a member of the Affiliated Group for any Pre-Merger Tax
Period to, and New Holdings will, and will cause each of its subsidiaries that
was a member of the Affiliated Group for any Pre-Merger Tax Period to, join in
the filing of Consolidated Returns for all Pre-Merger Tax Periods to the extent
the Company, New Holdings and their subsidiaries are respectively eligible to
join in such Consolidated Returns. Such Consolidated Returns will be filed on
behalf of the Affiliated Group by New Holdings or, if so requested by New
Holdings, by the Company.
(c) The Company shall refrain, and shall cause each of its subsidiaries to
refrain, from making any material tax election (including an election under
Section 13261(g)(2) of the Revenue Reconciliation Act of 1993) without the
prior written consent of New Holdings that would (i) bind New Holdings or any
member of the Holdings Group or (ii) materially affect the Tax liability of the
Affiliated Group.
(d) Without the prior written consent of Parent, New Holdings shall refrain,
and shall cause each of its subsidiaries to refrain, from making, filing or
amending any Tax return that includes any Pre-Merger Tax Period that (i) is
inconsistent with the existing and historic method used by the Affiliated Group
in
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calculating the taxable income of the Affiliated Group and (ii) would
materially affect the Tax liability of the Parent, Company and each direct or
indirect subsidiary thereof for any Post-Merger Tax Period.
4. ALLOCATION BETWEEN TAXABLE PERIODS. (a) In the case of any taxable
period that includes but does not end on the effective date of the Merger (a
"Straddle Period"),
(i) real, personal and intangible property Taxes, other than transfer
and similar Taxes, ("Property Taxes") allocated to the Pre-Merger Tax Period
shall be equal to the amount of such Property Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number of days
during the Straddle Period that are in the Pre-Merger Tax Period and the
denominator of which is the number of days in the Straddle Period; and
(ii) all Taxes (other than Property Taxes) for the Pre-Merger Tax
Period shall be computed based on an actual closing of the books as if such
taxable period ended as of the close of business on the effective date of the
Merger and, in the case of any Taxes attributable to the ownership of any
equity interest in any partnership or other "flow through" entity, based on an
actual closing of the books as if the taxable period of such partnership or
other "flow through" entity ended as of the close of business on the effective
date of the Merger; PROVIDED, HOWEVER, the transfers and transactions
(including Taxes attributable thereto) which occur to effectuate the Spinoffs
or the Merger shall be allocated to the Pre-Merger Tax Period.
(b) In the case of any taxable period other than a Straddle Period, all
income, deductions and other items shall be allocated between the Pre-Merger
Tax Period and the Post-Merger Tax Period in a manner consistent with
applicable tax accounting principles and based on an actual closing of the
books of the Company on the effective date of the Merger except that (i)
allowances or deductions that are calculated on an annual basis (such as the
deductions for amortization, depreciation or capital allowances) and Property
Taxes shall be prorated on a daily basis, (ii) transfers and transactions
(including Taxes attributable thereto) which occur to effectuate the Spinoffs
or the Merger shall be allocated to the Pre-Merger Tax Period, and (iii) if the
effective date of the Merger occurs on a date other than the first day of a
fiscal month of the Company, all income, deductions and other items for such
month (other than amounts attributable to transactions not in the ordinary
course of business and other than closing adjustments and other similar
adjustments) will be prorated on a daily basis. Any adjustments made by any
Taxing authority shall be allocated in accordance with the principles of this
Section 4(b).
(c) Without limiting the foregoing provisions of this Section 4 setting forth
the principles for allocating income, gain, loss, deduction, credits, events or
transfers between Pre-Merger and Post-Merger Tax Periods, and any Straddle
Period, New Holdings, Parent, and the Company shall file, or cause to be filed,
all relevant Tax returns and execute, or cause to be executed, such other
documents as may be required by any Taxing authority, on the basis that the
Spinoffs and the Merger shall occur for Tax purposes as of the close of
business on the day before the effective date of the Merger and refrain from
taking any position inconsistent with such basis with any Taxing authority
unless the relevant Taxing authority will not accept a Tax return filed on such
basis, or unless otherwise required under applicable law after a final
determination thereof.
5. COOPERATION. The Company agrees to cooperate with New Holdings, and will
cause each of its subsidiaries to so cooperate, in a timely manner consistent
with existing practice in filing any return or consent contemplated by this
Agreement. The Company also agrees to take, and will cause the appropriate
subsidiary to take, such action or actions as New Holdings may reasonably
request, including but not limited to the filing of requests for the extension
of time within which to file tax returns, and to cooperate in connection with
any refund claim with respect to any Pre-Merger Tax Period. The Company
further agrees to furnish timely, and to cause each of its subsidiaries to so
furnish, New Holdings with any and all
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information reasonably requested by New Holdings in order to carry out the
provisions of this Agreement. Without limiting the generality of the foregoing
sentence, the Company specifically agrees to provide to New Holdings promptly,
but in any event within 10 days of receipt thereof, copies of any correspondence
or notices received from the Internal Revenue Service or any other Taxing
authority with respect to Taxes of the Affiliated Group for a Pre-Merger Tax
Period. New Holdings agrees to furnish timely to the Company any and all
information requested by the Company in order to carry out the provisions of
this Agreement.
6. REFUNDS AND CARRYBACKS; CARRYFORWARDS. (a) Any refund or reduction of any
Tax that results from any refund or carryback of a loss, credit or similar
item of the Company arising from or attributable to a PreMerger Tax Period to a
Taxable period beginning prior to the effective date of the Merger shall be
for the account of New Holdings. The Company shall, promptly upon receipt by
the Company, pay to New Holdings any such refund or reduction (whether payable
pursuant to a Consolidated Return or not) together with any interest relating
thereto at the Federal statutory rate used by the Internal Revenue Service or
the relevant Taxing authority in computing the interest payable by or to it,
regardless of whether such refund is attributable to a carryback, adjustment or
any other factor. The Company's obligations under this Section 6(a) shall be
limited to amounts (including interest) actually received by the Company with
respect to such refund. A refund or reduction will be considered to have been
received by the Company or its affiliate (i) to the extent that the amount of
Taxes such person would be required to pay but for such refund or carryback is
reduced, or the amount of a Tax refund such person would receive but for such
refund or carryback is increased and (ii) at the time a Tax payment or refund
referred to in clause (i) is actually paid or received, as the case may be, by
the Company or its then existing affiliates. New Holdings and its direct and
indirect subsidiaries shall reimburse Company for any payment (including any
expenses, interest or penalties related thereto) made by Company under this
Section 6(a) promptly upon a determination that the refund or reduction to
which such payment relates was erroneous.
(b) Any refund or reduction of any Tax that results from any carryforward of a
loss, credit or similar item of the Company from a Taxable period beginning
prior to the effective date of the Merger to a Taxable period beginning on or
after the effective date of the Merger shall be for the account of New
Holdings. In the event the Company, USTNY or any subsidiary of the Company
that was a member of the Affiliated Group for a Pre-Merger Tax Period carries
forward such loss, credit or similar item from a Pre-Merger Tax Period to a
taxable period ending after the date of the Merger, the Company shall pay to
New Holdings the Tax benefit attributable to such carryforward as and when such
Tax benefit is realized. In computing the amount of any such refund or
reduction of Tax, the Company or its affiliate will be deemed to recognize all
items of income, gain, loss, reduction or credit before recognizing any item so
carried forward. A refund or reduction will be considered to have been
received by the Company or its affiliate (i) to the extent that the amount of
Taxes such person would be required to pay but for such carryforward is
reduced, or the amount of a Tax refund such person would receive but for such
carryforward is increased and (ii) at the time a Tax payment or refund referred
to in clause (i) is actually paid or received, as the case may be, by the
Company or its affiliates. Such amount shall be paid by the Company to New
Holdings within five business days of a written request therefor by New
Holdings, which request shall set forth in reasonable detail the computation of
such amount and the date such Tax benefit was received. New Holdings and its
direct and indirect subsidiaries shall reimburse Company for any payment
(including any expenses, interest or penalties related thereto) made by Company
under this Section 6(b) promptly upon a determination that the refund or
reduction to which such payment relates was erroneous.
(c) To the extent Parent reasonably determines that any refund or reduction
received by Company or its direct or indirect subsidiaries which is payable to
New Holdings under this Section 6 is based on a position that is likely to be
successfully challenged by Taxing authorities, Company shall have the right to
require New Holdings to secure its reimbursement obligation in a manner and for
a term reasonably satisfactory to Parent; PROVIDED, FURTHER, Company's
obligations hereunder to pay such refund to New Holdings shall be conditioned
upon the prior receipt of such security. Provided, however, if the amount
Company or its direct
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or indirect subsidiaries must pay to any Taxing authority with respect to any
such refund or reduction exceeds the amount of security, if any, provided the
Company pursuant to this Section 6(c), New Holdings shall pay such excess to
the Company as provided in Sections 6(a) or 6(b), as applicable.
7. CONTESTS. (a) Except as provided below, in the event that any
deficiencies or refund claims arise with respect to a Tax liability of the
Affiliated Group for a Pre-Merger Tax Period, New Holdings shall control all
proceedings with respect thereto. In the event that any issue or issues are
raised during such proceedings that may result, directly or indirectly, in
deficiencies or refund claims related to Taxes that would be required to be
paid by the Company pursuant to Section 1 hereof, both New Holdings and Parent
agree and acknowledge that the contest of any such issue or issues shall be
conducted jointly; provided, however, all major decisions regarding the conduct
of such contest shall be made by Parent. New Holdings' right to indemnity
hereunder shall be conditioned on New Holdings' compliance with Section 4 of
the Post Closing Covenants Agreement except that New Holdings' shall be
required to give notice to Parent under Section 4 of the Post Closing Covenants
Agreement upon the receipt of oral or written notice by New Holdings from any
governmental authority or agent thereof of an issue that may result in Taxes
for which a claim for indemnity from Parent, Company or USTNY may be made
under this Agreement.
(b) New Holdings and the Company agree to cooperate in all reasonable respects
with respect to Tax deficiencies or refund claims described in Sections 6(a)
and (b), which cooperation shall include executing and filing such waivers,
consents, forms, court petitions, refund claims, complaints, powers of attorney
and other documents needed from time to time in order to defend, prosecute or
resolve such deficiencies or claims.
8. COMPUTATIONS. Other than determinations of whether there are any
indemnity obligations under this Agreement, all computations or recomputations
of Tax liability and all determinations, computations or recomputations of any
amount or any payment (including, but not limited to, computations of the
amount of the Tax liability, the amount or effect of any loss, credit or
deduction, the effect of a Federal statutory Tax rate change for a Taxable
year, and the amount of any interest, penalties or additions imposed with
respect to any Tax) shall be prepared by New Holdings and submitted to Parent
for its written approval. Any disagreement as to such computations after
submission to the Parent by New Holdings shall be resolved by a nationally
recognized accounting firm, with expertise in Tax, independent of each of the
parties hereto. Without limiting the foregoing, New Holdings shall calculate
the Taxable income of the Affiliated Group in accordance with the existing and
historic methodology used by the Affiliated Group in calculating Taxable income
of the Affiliated Group and submit such calculation to the Parent in accordance
with the provisions of this Section 8.
9. OFFSETS. No payment shall be required to be made by either party to the
other pursuant to this Agreement to the extent that there is an amount then due
and payable under this Agreement to the party that is to make such payment.
10. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties hereto and their respective successors and assigns.
11. SURVIVAL. The provisions of this Agreement shall survive the effective
date of the Merger and remain in full force until all periods of limitations,
including any extensions or waiver periords, for all Taxable periods of the
Company and New Holdings prior to or including the effective date of the Merger
have expired.
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12. NOTICES. Any notices, payments or other communications required by this
Agreement shall be made as provided in the Section 10 of the Post Closing
Covenants Agreement; however, copies of such notices, payments or other
communications shall, for both New Holdings and the Company, be sent to the
attention of the Director of Taxes.
13. GOVERNING LAW. The principles and provisions of Section 8.7 of the Merger
Agreement shall apply to this Agreement.
14. ENTIRE AGREEMENT. This Agreement (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and (b)
is not intended to confer upon any person other than the parties hereto any
rights or remedies. The parties agree that to the extent the provisions of any
other agreements executed in connection with the Spinoffs or the Merger are
inconsistent with the provisions hereof, the provisions of this Agreement shall
prevail.
15. COUNTERPARTS. The principles and provisions of Section 8.5 of the Merger
Agreement shall apply to this Agreement.
16. SERVERABILITY. If any provision of this Agreement or the application of
any such provision to any person or circumstances shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof.
17. HEADINGS. Headings of sections in this Agreement are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
18. DEFINITIONS. Any capitalized item not defined in this Agreement shall have
the meaning given to such term by the Contribution and Assumption Agreement,
the Agreement and Plan of Distribution or the Merger Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
U.S. TRUST CORPORATION
By: /s/
---------------------------------
Name:
Title:
NEW USTG HOLDINGS CORPORATION
By: /s/
---------------------------------
Name:
Title:
THE CHASE MANHATTAN
CORPORATION
By: /s/
---------------------------------
Name:
Tile:
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