Document:

Exhibit 10.3

 

EXHIBIT 10.3

TAX ALLOCATION AGREEMENT

     THIS TAX ALLOCATION AGREEMENT (this “Agreement”) is made between GREENVILLE FEDERAL FINANCIAL
CORPORATION, a federally chartered corporation (the “Holding Company”), and GREENVILLE FEDERAL, a
federal stock savings bank (the “Bank”), as of this ___day of ___2005.

     WHEREAS, the Holding Company is the common parent corporation of an affiliated group of
corporations (the “Group”) within the meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (“Code”), and the United States Treasury Regulations promulgated thereunder (the
“Regulations”), and the Bank is a member of the Group (the Holding Company and the Bank hereinafter
sometimes referred to as “Members”);

     WHEREAS, the Group may exercise the privilege granted to it by Code Section 1501 to file a
consolidated federal income tax return (a “Consolidated Return”), beginning with the taxable year
in which the Holding Company acquired the Bank or in any taxable year thereafter;

     WHEREAS, the Holding Company and the Bank desire to establish a method for allocating the
consolidated federal income tax liability of the Group in a manner consistent with the Interagency
Policy Statement on Income Tax Allocation in a Holding Company Structure (developed by the Office
of Thrift Supervision, the Federal Deposit Insurance Corporation, the Federal Reserve Board, and
the Office of the Comptroller of the Currency); for reimbursing the Holding Company for payment of
such tax liability; for compensating any Member for use of its net operating losses or tax credits
in arriving at such tax liability; and to provide for the allocation and payment of any refund
arising from a carryback of net operating losses or tax credits in subsequent taxable years;

     NOW, THEREFORE, the Holding Company and the Bank hereby agree as follows, intending to be
legally bound:

     1. Filing and Preparation of Future Returns. Beginning with the taxable year in which
the Members elect to file a Consolidated Return and for each taxable year thereafter, the Holding
Company agrees that it will (a) prepare and file in a timely manner all such Consolidated Returns
required to be filed by the Holding Company and (b) pay the taxes shown to be due thereon in a
timely manner.

     2. Determination of Tax Payments.

          (a) Payments by the Bank. If a Consolidated Return is filed by the Group for any
taxable year, the Bank’s payment obligation for such taxable year (the “Bank Payment Obligation”)
shall be the amount set forth in paragraph (i) below as modified by paragraph (ii) below.

               (i) Allocation of Consolidated Tax Liability. The amount referred to in this
paragraph (i) shall be an amount equal to the product of (A) the Consolidated Tax Liability (as
defined in subsection (c) below) for such taxable year and (B) a fraction, the numerator of which
is the Bank’s Taxable Income (as defined in subsection (c) below) for such taxable year and the
denominator of which

 

 

is the sum of the Taxable Incomes of all Members for such taxable year. This method of allocating
Consolidated Tax Liability is intended to conform to the method provided for in Code Section
1552(a)(1) and Regulations Section 1.1552-1(a)(1).

               (ii) Additional Amounts. The amount computed pursuant to paragraph (i) above shall be
increased by one hundred percent (100%) of the excess, if any, of the Bank’s Separate Return Tax
Liability (as defined in subsection (c) below) for such taxable year over the amount computed
pursuant to paragraph (i). This method for allocating additional amounts of Separate Return Tax
Liability is intended to conform to the “percentage method” provided for in Regulations Section
1.1502-33(d)(3).

          (b) Compensation to the Bank for Tax Benefits to the Group. If a Consolidated Return
is filed by the Group for any taxable year, the Holding Company’s payment obligation with respect
to the Bank (the “Holding Company Payment Obligation”) shall be equal to the sum of (i) the portion
of the tax refund (if any) received by the Group that is attributable to the net operating losses
and/or tax credits of the Bank and (ii) the “additional amount” (if any) that would be allocated to
the Holding Company if tax liability were allocated to it in accordance with the principles in
subsection 2(a) of this Agreement. In no event, however, shall the Holding Company be required to
pay to the Bank an amount in excess of the refund the Bank would be due if the Bank never had
joined in the filing of a Consolidated Return. This provision is intended to ensure that, when the
Bank incurs losses, it receives a payment from the Holding Company in an amount no less than the
amount of the refund the Bank would have been entitled to receive as a separate entity.

          (c) Applicable Definitions. For purposes of this Agreement:

          (i) “Consolidated Tax Liability” shall mean the consolidated federal income tax liability
of the Group for any taxable year for which the Group files a Consolidated Return;

          (ii) “Taxable Income” shall mean the separate taxable income of a Member computed in
accordance with Regulations Section 1.1502-12 for the applicable taxable year, with the
adjustments set forth in Regulations Section 1.1552-1(a)(1)(ii). If the computation of a
Member’s Taxable Income, as provided herein, does not result in a positive amount, such Member’s
Taxable Income shall be deemed to be zero; and

          (iii) “Separate Return Tax Liability” with respect to any Member for any taxable year is an
amount equal to the federal income tax liability that would have been due if such Member had
filed a separate federal income tax return for such taxable year with the modifications set
forth in Regulations Section 1.1552-1(a)(2)(ii).

           (d) Examples. The following examples serve to illustrate the operation of this
section (2).

                  (i) Suppose in year 1, the first year in which the Bank and the Holding Company file a
Consolidated Return, that the Bank has Taxable Income of $100.00 and the Holding Company has
Taxable Income of ($50.00) (a loss). The Consolidated Tax Liability, assuming a corporate tax rate
of 35%, would be $17.50. The Bank’s Separate Return Tax Liability would be $35.00, and the Holding
Company’s Separate Return Tax Liability would be $0.00. Under subsection 2(a), the Bank Payment
Obligation is equal to $35.00, the amount calculated under paragraph 2(a)(i) plus the “additional
amount” calculated under paragraph 2(a)(ii). The amount calculated under paragraph 2(a)(i)

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is $17.50, i.e., the product of the Consolidated Tax Liability ($17.50) and a fraction the
numerator of which is the Bank’s Taxable Income and the denominator of which is the sum of the
positive Taxable Incomes of the Bank and the Holding Company ($35.00/($35.00 + $0.00) = 1). The
amount calculated under paragraph 2(a)(ii) is an additional $17.50, i.e., the amount by which the
Bank’s Separate Return Tax Liability ($35.00) exceeds the amount allocated to it under paragraph
2(a)(i) ($17.50). Thus, the Bank would pay the Holding Company $35.00, the same amount the Bank
would have been required to pay if no Consolidated Return had been filed.

               (ii) Suppose in year 2 that the Bank has Taxable Income of ($200.00) (a loss) and the Holding
Company has Taxable Income of $50.00. The Group would have no Consolidated Tax Liability and would
be entitled to a $17.50 refund (as a result of carrying back the Bank’s year 2 loss to year 1).
The Bank’s Separate Return Tax Liability would be $0.00, and the Holding Company’s Separate Return
Tax Liability would be $17.50. The Holding Company Payment Obligation under subsection 2(b) is
equal to $35.00, that is, the sum of (i) the portion of the $17.50 tax refund received by the Group
that is attributable to the net operating losses and/or tax credits of the Bank ($17.50) and (ii)
the “additional amount” that would be allocated to the Holding Company if tax liability were
allocated to it in accordance with the principles in subsection 2(a) ($17.50). Thus, the Holding
Company is required to pay the Bank $35.00, the amount of the refund the Bank would have received
if no Consolidated Return had been filed.

               (iii) Alternatively, suppose in year 2 that the Bank has Taxable Income of ($200.00) (a loss)
and the Holding Company has income of $100.00. The Bank’s Separate Return Tax Liability would be
$0.00, and the Holding Company’s Separate Return Tax Liability would be $35.00. On these facts,
the sum of the refund attributable to the Bank’s losses ($17.50) and the “additional amount” that
would be allocated to the Holding Company if tax liability were allocated to it in accordance with
the principles of subsection 2(a) ($35.00) is an amount ($52.50) that exceeds the refund the Bank
would be due if the Bank always had filed separately. Because subsection 2(b) provides that the
Holding Company is not required to pay the Bank an amount exceeding the refund the Bank would be
due if the Bank never had joined in the filing of a Consolidated Return, the Holding Company
Payment Obligation would be limited to $35.00.

     3. Alternative Minimum Tax. In the event the Group’s income tax obligation arising
from the alternative minimum tax (the “AMT”) exceeds its regular tax on a consolidated basis, the
amount by which the AMT exceeds the regular tax shall be equitably allocated to the Members for the
purposes of determining the Bank Payment Obligation or the Holding Company Payment Obligation. The
allocation shall be based on the portion of tax preferences, adjustments, and other items generated
by each Member which causes the AMT to be applicable to the Group.

     4. Payments. For each taxable year with respect to which the Holding Company files a
Consolidated Return which includes the Bank, the Bank Payment Obligation or the Holding Company
Payment Obligation with respect to such taxable year shall be made as follows:

          (a) On (or within five business days of ) the date the Holding Company files the Consolidated
Return, the Bank shall pay the Holding Company an amount equal to the Bank Payment Obligation; or

          (b) The Holding Company shall pay the Bank an amount equal to the Holding Company Payment
Obligation within the time frame that the Bank normally would expect to receive a

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refund or credit for an overpayment from the respective taxing authorities had separate returns
been filed.

     5. Other Income Taxes. In the event that there shall be imposed on the Bank any state
or local tax based on net income to which the principles of consolidated income taxation such as
those currently in effect under federal income tax rules may be applied and practiced, the parties
agree that the provisions of this Agreement shall be applicable with respect to such state or local
income taxes.

     6. Tax Adjustments. The effect of any changes to the taxable income, deductions or
credits reported in a Consolidated Return as a result of adjustments made by the Internal Revenue
Service or other appropriate authority or by the filing of an amended Consolidated Return shall be
reflected in appropriate adjustments to the payments made by or to the Members pursuant to this
Agreement. Any adjustment pursuant to this section 6 to a Bank Payment Obligation or to a Holding
Company Payment Obligation shall be paid by the Bank or by the Holding Company, as the case may be,
within thirty (30) days after a final determination of the related tax adjustment. Any adjustments
to be made under this section 6 shall include any interest attributable thereto under Code Sections
6601 or 6611 and any penalties or additional amounts which may be imposed.

     7. Contests. Although the Holding Company shall have control of any audit or other
proceeding involving a Consolidated Return, the Holding Company shall consult with the Bank prior
to the settlement of any issue that would affect a separate tax return of the Bank for the taxable
year in question, and shall treat and compensate the Bank equitably with regard to the settlement
of any such issue.

     8. Termination. This Agreement shall be terminated if the Members unanimously agree
in writing to such termination. Notwithstanding the termination of this Agreement, the obligations
of the Members hereunder shall remain in effect with respect to any period of time during the
taxable year in which the termination occurs for which income, gains, losses, deductions and
credits of the Bank are required to be included in a Consolidated Return.

     9. Miscellaneous Provisions.

          (a) This Agreement contains the entire understanding of the parties hereto with respect to the
subject matter contained herein.

          (b) This Agreement has been made in and shall be construed and enforced in accordance with the
laws of the State of Ohio from time to time obtaining.

          (c) This Agreement shall be binding upon and inure to the benefit of each party hereto and its
respective successors and assigns.

          (d) The headings of the sections of this Agreement are inserted for convenience only and shall
not constitute a part hereof.

     IN WITNESS WHEREOF, this Agreement has been executed as of the date first set forth above on
behalf of the Holding Company and the Bank by their duly authorized officers and/or
representatives.

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	GREENVILLE FEDERAL FINANCIAL CORPORATION	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Its:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	GREENVILLE FEDERAL	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Its:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

5Exhibit 10.4

 

EXHIBIT 10.4

EXPENSE ALLOCATION AGREEMENT

     THIS EXPENSE ALLOCATION AGREEMENT (the “Agreement”), dated as of this ___ day of
___, 2005, is made by and among Greenville Federal MHC (the “MHC”), Greenville Federal
Financial Corporation (the “Holding Company”) and Greenville Federal (the “Bank”).

     WHEREAS, the MHC owns a majority of the outstanding common stock of the Holding Company, and
the Holding Company owns all of the outstanding common stock of the Bank;

     WHEREAS, each of the MHC, the Holding Company and the Bank (each a “Party” and together the
“Parties”) may provide certain management services and pay expenses that benefit the other Parties;
and

     WHEREAS, it is the intent of the Parties that each Party hereto pay, or provide reimbursement,
as appropriate, for the operating expenses, fees and costs which are allocable to such Party;

     NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and
valuable consideration, the adequacy and receipt of which is hereby acknowledged, the Parties agree
as follows:

	 	1.	 	Each Party shall pay the expenses incurred in its operations and shall not be
responsible for the payment of the expenses of any other Party.
	 
	 	2.	 	In case of facilities and services that are shared by the Parties hereto,
including, without limitation, tax return preparation expenses, auditing, office
facilities, data processing, accounting and other operating expenses, the Parties shall
allocate on a quarterly basis the expense of such facilities and services between them
in good faith.
	 
	 	3.	 	Each Party shall reimburse the appropriate other Party for any expenses
allocable to the reimbursing Party.
	 
	 	4.	 	Each Party hereto, as the case may be, shall reimburse any other Party
quarterly for its share of the salaries, benefits and expenses of the other Party’s
officers and employees for services they rendered to the Party.
	 
	 	5.	 	Whenever this Agreement calls for reimbursement from one Party to another
Party, such reimbursement shall occur within five business days after the allocation or
appropriate reimbursement is determined.
	 
	 	6.	 	This Agreement shall be (i) binding upon and inure to the benefit of any
successor, whether by statutory merger, acquisition of assets or otherwise, to any of
the parties hereto, to the same extent as if the successor had been an original Party
to this Agreement and (ii) governed by, and construed in accordance with, the laws of
the State of Ohio.

 

 

     IN WITNESS WHEREOF, the Parties hereto caused this Agreement to be executed by their duly
authorized representatives on the date first written above.

	 	 	 	 	 
	 	 	GREENVILLE FEDERAL MHC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 

	 	 	 	 	 
	 	 	GREENVILLE FEDERAL FINANCIAL CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 

	 	 	 	 	 
	 	 	GREENVILLE FEDERAL
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 

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