Exhibit 10.5
------------
TAX ALLOCATION AGREEMENT
------------------------
This Tax Allocation Agreement (the "Agreement") is entered into by and
between Cheviot Financial Corp., a Federal corporation (the "Holding Company")
and its first-tier subsidiary, Cheviot Savings Bank, an Ohio state chartered
savings and loan association (the "Bank"), effective this ____ day of
_______________, 2003.
WHEREAS, the Holding Company owns 100 percent of the issued and
outstanding capital stock of the Bank; and
WHEREAS, the Holding Company and the Bank are members of an affiliated
group within the meaning of Section 1504(a) of the Internal Revenue Code of
which the Holding Company is the common parent corporation (the "Group"); and
WHEREAS, the Bank may be willing from time to time to be included in
the filing of a consolidated Federal income tax return for the year ended
December 31, 2003 provided that the Holding Company is willing to undertake the
responsibilities regarding the preparation of, filing of and accounting with
respect to such consolidated Federal income tax return; and
WHEREAS, the Holding Company and the Bank each desire to compensate the
other fully for their individual share of the consolidated tax liability and/or
any tax benefits provided by them in the filing of the consolidated Federal
income tax return; and
WHEREAS, Cheviot Mutual Holding Company owns 55.00 percent of the
issued and outstanding voting stock of the Holding Company and is not a party to
this agreement. As such, Cheviot Mutual Holding Company files a separate Federal
and state income tax return and is responsible for payment of its own tax
liabilities; and
WHEREAS, the Holding Company and the Bank recognize that from time to
time other companies may become members of the affiliated group and, therefore,
parties to this Agreement. The above-named members hereby agree that it will not
be necessary to revise this Agreement, but any new members may sign the existing
Agreement and it will be effective as to such new members as of the date they
join the affiliated group.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings included in this Agreement, the Holding Company and the Bank agree
as follows:
1. CONSOLIDATED RETURN ELECTION
In the event that the Bank agrees to join in the filing of a consolidated
Federal tax return by the Holding Company for the calendar year ending December
31, 2003, and for any subsequent tax periods for which the Group is required to
file such a return or for any tax period for which the Group is permitted to
file such a return if the Holding Company so elects, the Bank and the Holding
Company agree to execute and file such consents, elections and other documents
and to take any actions necessary or appropriate to carry out the purpose of
this Agreement. Any period
for which the Bank is included in a consolidated Federal income tax return filed
by the Holding Company is referred to in this Agreement as a "Consolidated
Return Year."
2. BANK'S LIABILITIES TO THE HOLDING COMPANY FOR CONSOLIDATED RETURN YEARS
In the event that the Bank has elected to file a consolidated Federal tax return
with the Holding Company, the Bank agrees to transfer quarterly to the Holding
Company an amount equal to the estimated payments which it would be required to
pay to the Internal Revenue Service if it were filing a separate income tax
return. The Bank also agrees to pay to the Holding Company, on or before the
fifteenth day of the third month following the close of the tax year, its
pro-rata share of the consolidated tax liability less applicable credits,
estimates and other payments, calculated as if each entity were filing a
separate return. The amount due from or to any entity may be adjusted on an
equitable basis to account for any difference in the amounts due under the
consolidated return calculation and the separate entity calculation. If the
Group's consolidated income tax obligation arising from the alternative minimum
tax (the "AMT") or any form of tax penalty exceeds its regular tax on a
consolidated basis, the excess shall be equitably allocated among the members of
the Group based upon the portion of tax preferences, adjustments and other items
generated by each member which causes the AMT or penalty to be applicable.
3. TREATMENT OF ANY NET OPERATING LOSS OF THE BANK
If Bank incurs a tax loss during a consolidated tax period, the Holding Company
shall pay to the Bank an amount no less than the amount the affiliate would have
been entitled to receive from a taxing authority as a separate entity. This
payment shall be made within a reasonable period following the date the Bank
would have been obligated to file its own return. If the affiliate would not be
entitled to a refund as a separate entity because it has no carryback benefits
available, the Holding Company may utilize the loss on its consolidated return
and must reimburse the Bank for that benefit no later than the time when the
Bank would become able to utilize the loss on a separate basis to offset future
taxable income.
4. TAX ADJUSTMENTS
In the event of any adjustment to a consolidated tax return which includes the
Holding Company and the Bank, the liability of the Holding Company and the Bank
shall be redetermined to give effect to any adjustment as if it had been made as
part of the original computation of tax liability, and any payments required
thereby must be made within a reasonable time after additional tax payments are
made or refunds are received.
5. THE HOLDING COMPANY'S RESPONSIBILITIES
In the event that the Bank elects to file a consolidated tax return which
includes the Holding Company, the Holding Company shall prepare and maintain all
books, records and accounts required by the Internal Revenue Code and
regulations promulgated thereunder for groups filing a consolidated return
including, but not limited to, all books, records and accounts with regard to
intercompany transactions and earnings and profits. The Holding Company shall
timely file all returns required by the Internal Revenue Code and the
regulations promulgated thereunder. The Holding Company will make timely
payments to the Internal Revenue Service, provided that the Bank pays the
Holding Company all amounts required under Section 2 of this Agreement.
6. DEFERRED TAXES
The Holding Company and the Bank agree that there will be no transfer between
the entities of deferred tax liabilities or assets. The Bank shall not pay any
deferred taxes before they are required to.
7. COMPLIANCE WITH SECTION 23A AND 23B OF THE FEDERAL RESERVE ACT
Any payment by the Bank in excess of the amount required by this Agreement or
significantly before the payment is due shall be deemed an extension of credit
by the Bank to the Holding Company and shall comply with Section 23A and 23B of
the Federal Reserve Act and the regulations promulgated thereunder.
8. STATE TAXES
In the event that the Bank so elects, the Group will file an Ohio State Combined
Tax Return. The provisions of this Agreement shall apply for purposes of
allocating Ohio State tax liabilities and benefits between and among the Holding
Company and the Bank. Any other state taxes shall be allocated to the entity for
which that state's tax return must be filed.
9. BINDING EFFECT
This Agreement shall be binding on and inure to the benefit of any successor, by
merger or acquisition of assets or otherwise. This agreement shall also be
binding on any additional members added to the affiliated group by merger or
acquisition of assets or otherwise.
10. WITHDRAWAL
Any party to this agreement may withdraw from this agreement at any time,
without cause, upon 30 days notice to the other party.
CHEVIOT FINANCIAL CORP.
By: Date:
------------------------------ ------------------------------
Xxxxxx X. Xxxxxxxx, President
and Chief Executive Officer
CHEVIOT SAVINGS BANK
By: Date:
------------------------------ ------------------------------
Xxxxxx X. Xxxxxxxx, President
and Chief Executive Officer
