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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 1, 2000
USBANCORP, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-11204 25-1424278
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
Main and Franklin Streets, Johnstown, Pennsylvania 15901
(Address of principal executive offices) (Zip Code)
(814) 533-5300
Registrant's telephone number, including area code
N/A
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On April 1, 2000, USBANCORP, Inc. distributed to its
shareholders all of the issued and outstanding common stock of
Three Rivers Bancorp, Inc. ("TRBC"), on the basis of one share
of TRBC common stock for every two shares of USBANCORP common
stock outstanding on March 24, 2000, the record date for this
distribution (hereinafter, the "Distribution"). TRBC owns all
of the issued and outstanding capital stock of Three Rivers Bank
and Trust Company ("Three Rivers Bank"), a Pennsylvania bank and
trust company with 24 branches located in the Pennsylvania
counties of Allegheny, Washington and Westmoreland. At
December 31, 1999, Three Rivers Bank had $1.07 billion in
assets, $572.7 million in deposits, $479.8 million in loans and
$45.4 million in shareholders' equity (excluding net assets of
discontinued mortgage banking operations).
USBANCORP's management completed the Distribution in order
to (i) enhance the ability of Three Rivers Bank to raise equity
capital on a substantially more cost effective basis and to
facilitate potential acquisitions; (ii) improve the ability of
both Three Rivers Bank and U.S. Bank to focus on their
respective banking businesses; and (iii) permit U.S. Bank to
negotiate with its labor union with respect to the possible
implementation of an employee stock ownership plan.
As of and after April 1, 2000, USBANCORP, together with its
subsidiaries U.S. Bank, Standard Mortgage Corporation of Georgia
(which was spun off to USBANCORP by Three Rivers Bank prior to
the Distribution), USBANCORP Trust and Financial Services
Company, United Bancorp Life Insurance Company, USNB Financial
Services Corporation, UBAN Associates, Inc. and UBAN Mortgage
Company, is continuing to conduct business principally in the
Pennsylvania Counties of Cambria, Somerset, Westmoreland and
Centre. On a pro forma basis as of December 31, 1999, assuming
the Distribution was completed on such date, USBANCORP has total
assets of $1.4 billion, total deposits of $658 million, total
loans of $611 million and total shareholders' equity of
$67 million.
In connection with the Distribution, Orlando B. Hanselman
has been elected as the President and Chief Executive Officer of
USBANCORP. Mr. Hanselman, who has served as the President and
Chief Executive Officer of U. S. Bank since 1995, succeeds
former Chairman, President and Chief Executive Officer Terry K.
Dunkle, who is now the Chairman and Chief Executive Officer of
TRBC. Robert L. Wise, a director of USBANCORP since 1987, has
been elected non-executive Chairman of the Board of Directors of
USBANCORP.
USBANCORP maintains no ownership interest in TRBC or Three
Rivers Bank, and TRBC is an independent, publicly-owned company,
the common stock of which trades on the Nasdaq national market
under the symbol TRBC. However, approximately 49,600 shares of
TRBC Common Stock (0.75% of the total outstanding shares) is
owned by USBANCORP's and U.S. Bank's Pension Plan, Profit
Sharing Plan and 401(k) Plan.
TRBC, Three Rivers Bank and USBANCORP have entered into the
Corporate Separation and Reorganization Agreement, dated
March 31, 2000, pursuant to which, among other things, the
Distribution was completed and the parties agreed to make
certain services, records and personnel available to each other
and to indemnify each other after the Distribution Date.
USBANCORP and TRBC have also entered into a Tax Separation
Agreement, dated as of April 1, 2000, providing for, among other
things, the allocation of tax liabilities and obligations
arising from periods prior to and after the Distribution. They
also intend to enter into a Services Agreement pursuant to which
USBANCORP will continue to provide, upon annual review, certain
services to TRBC, with the related costs and expenses being paid
by TRBC. The Tax Separation Agreement is filed herewith as
Exhibit 2.1. Copies of the forms of these other agreements have
been or, upon execution, will be filed with the Securities and
Exchange Commission (the "SEC") as exhibits to reports filed
therewith. The foregoing summary of such agreements is
qualified by reference to the text of such agreements.
USBANCORP has received a ruling (the "Tax Ruling") from the
Internal Revenue Service to the effect that the Distribution
qualifies as a tax-free distribution under Sections 355 and 368
of the Internal Revenue Code of 1986, as amended. For a
description of the Tax Ruling and certain United States Federal
income tax consequences of the Distribution, as well as a more
complete description of the Distribution, reference is made to
the Information Statement mailed by USBANCORP to its
shareholders and on file with the SEC.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information
The Pro Forma Condensed Consolidated Financial
Statements of USBANCORP at and for the year ended
December 31, 1999 reflecting the Distribution, which
are set forth in USBANCORP's Schedule 14C Information
Statement filed with the SEC, are incorporated herein
by reference.
(c) Exhibits.
Exhibit 2.1 Corporate Separation and Reorganization
Agreement among USBANCORP, Inc., Three
Rivers Bancorp, Inc. and Three Rivers
Bank & Trust Company, dated as of
March 31, 2000, is incorporated herein
by reference to Exhibit 10.1 to the
Form 10 of Three Rivers Bancorp, Inc.
Exhibit 2.2 Tax Separation Agreement between
USBANCORP, Inc. and Three Rivers
Bancorp, Inc., dated as of April 1,
2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Dated: April 14, 2000 USBANCORP, INC.
By_/s/ Jeffrey A. Stopko_______
Jeffrey A. Stopko
Senior Vice President and
Chief Financial Officer
TAX SEPARATION AGREEMENT
between
USBANCORP, INC.,
on behalf of itself
and the members
of the USBANCORP GROUP
and
THREE RIVERS BANCORP, INC.,
on behalf of itself
and the members
of the THREE RIVERS GROUP
TAX SEPARATION AGREEMENT
This Agreement is entered into as of the first (1st) day of
April, 2000, between USBANCORP, Inc. ("USBANCORP"), a
Pennsylvania corporation, on behalf of itself and the members of
the USBANCORP Group, and Three Rivers Bancorp, Inc. ("Three
Rivers"), a Pennsylvania corporation, on behalf of itself and
the members of the Three Rivers Group.
W I T N E S S E T H:
WHEREAS, pursuant to the tax laws of the United States and
various state and local jurisdictions within the United States,
certain members of the Three Rivers Group, as defined below,
presently file certain tax returns separately and certain
federal income tax returns as part of a consolidated group, as
permitted by Section 1501 of the Internal Revenue Code of 1986,
as amended (the "Code"), with certain members of the USBANCORP
Group, as defined below (each such federal income tax
consolidated group, a "Consolidated Group");
WHEREAS, USBANCORP and Three Rivers intend to enter into a
Separation Agreement dated as of the first (1st) day of April,
2000 (the "Separation Agreement"), providing for the
distribution by USBANCORP to its shareholders of all of the
common stock of Three Rivers that is held by USBANCORP (the
"Distribution") and certain other matters;
WHEREAS, USBANCORP and Three Rivers desire to set forth
their agreement on the rights and obligations of USBANCORP,
Three Rivers and the members of the USBANCORP Group and the
Three Rivers Group, respectively, with respect to the
administration and allocation of certain federal, state and
local (a) Taxes incurred in Taxable periods beginning prior to
the Distribution Date, (b) Taxes resulting from transactions
effected in connection with, or as part of the plan for, the
Distribution (the "Restructuring"), and (c) Taxes that may be
incurred in Taxable periods after the Distribution Date, and
various other Tax matters;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements hereinafter set forth, the parties agree as
follows:
1. Definitions
(a) As used in this Agreement:
"Affiliate" of any Person shall mean (i) any individual,
corporation, partnership or other entity directly or indirectly
owning more than 50 percent (by vote or value) of, owned more
than 50 percent (by vote or value) by, or under more than 50
percent (by vote or value) common ownership with, such Person,
and (ii) any entity that is entitled to the benefit of any Tax
Asset of such Person under applicable law, any entity with any
Tax Asset to which such Person is entitled to the benefit of
under applicable law, or any entity which is entitled or
required to transfer or assign income, revenues, receipts, or
gains to such Person under applicable law.
"After-Tax Amount" shall mean an additional amount
necessary to reflect the Tax consequences of the receipt or
accrual of any payment, using the maximum statutory rate (or
rates, in the case of an item that affects more than one Tax)
applicable to the recipient of such payment for the relevant
year, reflecting, for example, the amount of any increased Tax
liability (or reduction of a Tax Asset), and the amount of any
interest or penalty attributable to such increased Tax liability
(or reduction of a Tax Asset), as adjusted for the effect of the
deductions available for interest paid or accrued and for Taxes
such as state and local income Taxes.
"Consolidated Group" shall have the meaning ascribed to it
in the first "whereas" clause in this Agreement.
"Distribution" shall mean the distribution by USBANCORP of
all of the common stock of Three Rivers that is held by
USBANCORP to USBANCORP's shareholders pursuant to the Separation
Agreement.
"Distribution Date" shall mean the date on which the
Distribution shall be effected.
"Federal Tax" shall mean any Tax imposed under Subtitle A
of the Code and any related penalty imposed under Subtitle F of
the Code.
"Final Determination" shall mean: (i) with respect to
Federal Taxes, (A) a "determination" as defined in Section
1313(a) of the Code, or (B) the date of acceptance by or on
behalf of the IRS of Form 870-AD (or any successor form
thereto), as a final resolution of Tax liability for any Taxable
period, except that a Form 870-AD (or successor form thereto)
that reserves the right of the taxpayer to file a claim for
refund or the right of the IRS to assert a further deficiency
shall not constitute a Final Determination with respect to the
item or items so reserved; (ii) with respect to Taxes other than
Federal Taxes, any final determination of liability in respect
of a Tax that, under applicable law, is not subject to further
appeal, review or modification through proceedings or otherwise;
(iii) any final disposition by reason of the expiration of the
applicable statute of limitations; or (iv) the payment of Tax by
USBANCORP, Three Rivers, or any member of the USBANCORP Group or
the Three Rivers Group, whichever is responsible for payment of
such Tax under applicable law, with respect to any item
disallowed or adjusted by a Taxing Authority, provided that the
provisions of Section 8 hereof have been complied with, or, if
such section is inapplicable, that the party responsible under
the terms of this Agreement for such Tax (the responsible party)
is notified by the party paying such Tax (the paying party) that
it, the paying party, has determined that no action should be
taken to recoup such disallowed item, and the responsible party
either agrees with such determination or fails to respond within
30 days to the paying party's notice of such determination.
"IRS" shall mean the Internal Revenue Service.
"LIBOR" shall be determined on the basis of the offered
rates for deposits in U.S. Dollars for a period of 30 days which
appear on the Reuters Screen LIBOR Page as of 11:00 a.m., London
time. If at least two rates appear on the Reuters Screen LIBO
Page, the rate will be the arithmetic mean of such rates.
"Person" shall have the meaning ascribed to it in Section
7701(a)(1) of the Code.
"Post-Distribution Period" shall mean any Taxable period
(or portion thereof) beginning after the close of business on
the Distribution Date; provided, that if a Taxable period ending
after the Distribution Date contains any days which fall prior
to or on the Distribution Date, any portion of such Taxable
period after the Distribution Date shall also be included in the
Post-Distribution Period.
"Pre-Distribution Period" shall mean any Taxable period
ending on or before the close of business on the Distribution
Date; provided, that if a Taxable period ending after the
Distribution Date contains any days which fall prior to or on
the Distribution Date, any portion of such Taxable period up to
and including the Distribution Date shall also be included in
the Pre-Distribution Period.
"Prime" shall mean the rate announced from time to time as
"prime" in the "Money Rates" column of the Wall Street Journal.
"Return" shall mean any Tax return, statement, report,
form, election, claim or surrender (including estimated Tax
returns and reports, extension requests and forms, and
information returns and reports) required to be filed with any
Taxing Authority.
"Tax" (and the correlative meaning, "Taxes," "Taxing" and
"Taxable") shall mean (A) any tax imposed under Subtitle A of
the Code, or any net income, gross income, gross receipts,
alternative or add-on minimum, sales, use, business and
occupation, value-added, trade, goods and services, ad valorem,
shares, capital stock, franchise, profits, license, business
royalty, withholding, payroll, employment, capital, excise,
transfer, recording, severance, stamp, occupation, premium,
property, asset, real estate acquisition, environmental, custom
duty, or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest and
any penalty, addition to tax or additional amount imposed by a
Taxing Authority; (B) any liability of a member of the USBANCORP
Group or the Three Rivers Group, as the case may be, for the
payment of any amounts of the type described in clause (A) for
any Taxable period resulting from such member being a part of a
Consolidated Group pursuant to the application of Treasury
Regulation Section 1.1502-6 or any similar provision applicable
under state or local law; or (C) any liability of a member of
the USBANCORP Group or the Three Rivers Group for the payment of
any amounts described in clause (A) as a result of any express
or implied obligation to indemnify any other party.
"Tax Asset" shall mean any net operating loss, net capital
loss, investment Tax credit, foreign Tax credit, target jobs Tax
credit, low income housing credit, research and experimentation
credit, charitable deduction, or any other loss, credit or Tax
attribute, including additions to basis of property, which could
reduce any Tax, including, without limitation, deductions,
credits, or alternative minimum net operating loss carryforwards
related to alternative minimum Taxes.
"Tax Packages" shall mean one or more packages of
information that are (i) reasonably necessary for the purpose of
preparing Returns of any Consolidated Group, or of any member of
the USBANCORP Group or the Three Rivers Group, with respect to a
Pre-Distribution Period, and (ii) completed in all material
respects in accordance with the standards that USBANCORP has
established for its subsidiaries with respect to the relevant
Pre-Distribution Period.
"Tax Proceeding" shall mean any Tax audit, dispute or
proceeding (whether administrative or judicial).
"Taxing Authority" shall mean any governmental authority,
including, without limitation, any state, municipality,
political subdivision or governmental agency, responsible for
the imposition of any Tax.
"Three Rivers Group" shall mean Three Rivers and its
Affiliates immediately after the Distribution Date, including
any predecessors thereto; provided, however, that for purposes
of determining whether an entity is a member of the Three Rivers
Group, a transfer of beneficial ownership of an entity shall be
treated as a transfer of title, regardless of whether title has
actually passed.
"Three Rivers Tax Liability" shall mean, with respect to
any Consolidated Group and any Taxable period, the share of the
Tax liability of such Consolidated Group that is attributable or
allocable to Three Rivers Group members that are also members of
such Consolidated Group, computed as if the relevant members of
the Three Rivers Group were not and never were part of such
Consolidated Group, but rather were a separate affiliated group
of corporations filing a similar group Return (provided,
however, that transactions with any member of the USBANCORP
Group that is included in such Consolidated Group shall not be
taken into account until the first Taxable period in which such
transaction is required to be taken into account for Tax
purposes under applicable law). Such computation shall be made
(A) without regard to the income, deductions (including net
operating loss and capital loss deductions) and credits in any
year of any relevant member of the USBANCORP Group, except to
the extent that a payment was made to any such member of the
USBANCORP Group with respect thereto, (B) by taking account of
any Tax Asset of the relevant members of the Three Rivers Group,
(C) with regard to net operating loss and capital loss
carryforwards and carrybacks and minimum Tax credits from
earlier years of the relevant members of the Three Rivers Group
and without reduction for any such losses, carryforwards,
carrybacks or credits used by any relevant member of the
USBANCORP Group, except to the extent that such losses,
carryforwards, carrybacks or credits have been used (and a
payment therefor was made to the relevant member of the Three
Rivers Group) by any relevant member of the USBANCORP Group,
(D) by applying the maximum applicable statutory Tax rate in
effect under applicable law during the relevant year, and
(E) reflecting the positions, elections and accounting methods
used by the Consolidated Group in preparing the relevant Return
for the Consolidated Group.
"USBANCORP Chief Financial Officer" shall include any
successor position or title.
"USBANCORP Group" shall mean, with respect to any Taxable
period, USBANCORP and its Affiliates (including their
predecessors and successors) at any time prior to the
Distribution other than those Affiliates comprising the Three
Rivers Group.
"USBANCORP Tax Liability" shall mean, with respect to any
Consolidated Group and any Taxable period, the share of the Tax
liability of such Consolidated Group that is attributable or
allocable to USBANCORP Group members that are also members of
such Consolidated Group, computed as if the relevant members of
the USBANCORP Group were not and never were part of such
Consolidated Group, but rather were a separate affiliated group
of corporations filing a similar group Return (provided,
however, that transactions with any member of the Three Rivers
Group that is included in such Consolidated Group shall not be
taken into account until the first Taxable period in which such
transaction is required to be taken into account for Tax
purposes under applicable law). Such computation shall be made
(A) without regard to the income, deductions (including net
operating loss and capital loss deductions) and credits in any
year of any relevant member of the Three Rivers Group, except to
the extent that a payment was made to any such member of the
Three Rivers Group with respect thereto, (B) by taking account
of any Tax Asset of the relevant members of the USBANCORP Group,
(C) with regard to net operating loss and capital loss
carryforwards and carrybacks and minimum Tax credits from
earlier years of the relevant members of the USBANCORP Group and
without reduction for any such losses, carryforwards, carrybacks
or credits used by any relevant member of the Three Rivers
Group, except to the extent that such losses, carryforwards,
carrybacks or credits have been used (and a payment therefor was
made to the relevant member of the USBANCORP Group) by any
relevant member of the Three Rivers Group, (D) by applying the
maximum applicable statutory Tax rate in effect under applicable
law during the relevant year, and (E) reflecting the positions,
elections and accounting methods used by the Consolidated Group
in preparing the relevant Return for the Consolidated Group.
(b) Any term used in this Agreement which is not
defined in this Agreement shall, to the extent the context
requires, have the meaning assigned to it in the Code or the
applicable United States Treasury regulations thereunder (as
interpreted in administrative pronouncements and judicial
decisions) or in comparable provisions of applicable law.
2. Administrative and Compliance Matters.
(a) Sole Tax Sharing Agreement. Any and all existing Tax
sharing agreements or arrangements, written or unwritten,
between any member of the USBANCORP Group and any member of the
Three Rivers Group for Tax Returns or Tax matters of a
Consolidated Group, for Tax years that end in 1998, 1999 or
2000, shall be terminated as of the Distribution Date. As of the
Distribution Date, neither the members of the Three Rivers Group
nor the members of the USBANCORP Group shall have any further
rights or liabilities thereunder, and this Agreement shall be
the sole Tax sharing agreement between the members of the Three
Rivers Group and the members of the USBANCORP Group.
Notwithstanding the foregoing, if any such termination is not
binding on any Taxing Authority, the Three Rivers Group shall
hold the affected member of the USBANCORP Group harmless against
any adverse effect which would have been avoided if such
termination had been given effect by such Taxing Authority.
(b) Designation of Agent. Three Rivers and each member of
Three Rivers Group, and USBANCORP and each member of the
USBANCORP Group, as the case may be, in each case with respect
to any Consolidated Group of which such Person is a member,
hereby irrevocably authorize USBANCORP or Three Rivers,
respectively, and consistent with past practice and applicable
law, to designate a member of the USBANCORP Group or the Three
Rivers Group, as appropriate, or a successor of such member, as
its agent, coordinator, and administrator, for the purpose of
taking any and all actions (including the execution of waivers
of applicable statutes of limitation) necessary or incidental to
the filing of any Return, any amended Return, or any claim for
refund (even where an item or Tax Asset giving rise to an
amended Return or refund claim arises in a Post-Distribution
Period), credit or offset of Tax or any other proceedings, and
for the purpose of making payments to, or collecting refunds
from, any Taxing Authority, in each case relating only to any
Pre-Distribution Period. Such designated member of the USBANCORP
Group or the Three Rivers Group, as the case may be, as agent,
covenants to Three Rivers or USBANCORP, respectively, that it
shall be responsible to see that all such administrative matters
relating thereto shall be handled promptly and appropriately.
(c) Pre-Distribution Period Returns. With respect to a
Consolidated Group, the member of the USBANCORP Group or the
Three Rivers Group, as applicable, that is required by
applicable law to file any Return(s) for any Pre-Distribution
Period will prepare such Return(s) with the assistance of the
relevant members of the Three Rivers Group and the USBANCORP
Group, respectively. With respect to each Consolidated Group,
either a member of the USBANCORP Group or a member of the Three
Rivers Group, as consistent with past practice and applicable
law, will file the Pre-Distribution Period Returns for such
Consolidated Group. USBANCORP and the relevant members of the
USBANCORP Group shall have the right with respect to any
Consolidated Group Returns to determine (x) the manner in which
such returns, documents or statements shall be prepared and
filed, including, without limitation, the manner in which any
item of income, gain, loss, deduction or credit shall be
reported, (y) whether any extensions should be requested, and
(z) the elections that will be made by any relevant member of
the USBANCORP Group or the Three Rivers Group. In addition, with
respect to all Pre-Distribution Periods, except as provided in
Section 8(b), USBANCORP and the relevant members of the
USBANCORP Group shall have the right to (i) contest, compromise
or settle any adjustment or deficiency proposed, asserted or
assessed as a result of any audit of any Consolidated Return
filed by the relevant members of the USBANCORP Group or the
Three Rivers Group, (ii) file, prosecute, compromise or settle
any claim for refund, (iii) determine whether any refunds to
which the relevant members of the USBANCORP Group may be
entitled shall be received by way of refund or credited against
the tax liability of the USBANCORP Group and (iv) determine
whether a deposit will be made with a Taxing Authority to stop
the running of interest. With respect to the 1999 and 2000 Tax
years, Three Rivers and the members of the Three Rivers Group
shall prepare and deliver to USBANCORP within 120 days after the
Distribution Date all Tax Packages requested by any member of
the USBANCORP Group, regardless of whether the member's Taxable
year ends on the Distribution Date.
3. Tax Sharing.
(a) General. For each Taxable period of each Consolidated
Group during which income, profits, gains, shares, capital
stock, franchise, net worth, receipts, sales, loss or credit
against Tax of at least one member of each of the Three Rivers
Group and the USBANCORP Group are includible in a Return of such
Consolidated Group, the Three Rivers Group or the USBANCORP
Group, as appropriate, shall pay, as provided in this Section 3,
to the USBANCORP Group or the Three Rivers Group, respectively,
an amount equal to the Three Rivers Tax Liability or the
USBANCORP Tax Liability, as appropriate, for such Taxable
period, if any.
(b) Estimated Tax and Extension Payments. Not later than
five business days after a member of the USBANCORP Group or a
member of the Three Rivers Group, as the case may be, makes an
estimated Tax or extension payment with respect to a Taxable
period of a Consolidated Group, whether or not such payment is
made prior to the Distribution, the USBANCORP Group shall (i) in
good faith determine the amount of the Three Rivers Tax
Liability or the USBANCORP Tax Liability, as appropriate,
pursuant to this Agreement and (ii) deliver a written statement
to Three Rivers reflecting such determination. Not later than
five business days after receipt of such statement, the Three
Rivers Group shall pay to the USBANCORP Group or the USBANCORP
Group shall pay to the Three Rivers Group, as appropriate, the
amount so determined in accordance with Section 9 hereof.
(c) Payment of Taxes at Year-End.
(i) Not later than five business days before a member
of the USBANCORP Group or a member of the Three Rivers Group, as
the case may be, is required to file a Return (after taking
extensions into account) with respect to any Consolidated Group
for which payments are to be made under this Agreement, whether
or not such Return is filed prior to the Distribution, the
USBANCORP Group shall deliver to the Three Rivers Group a
written statement setting forth the difference between (x) the
Three Rivers Tax Liability and the USBANCORP Tax Liability,
respectively, for such Return, and (y) the aggregate amount of
payments with respect to the Three Rivers Tax Liability and the
USBANCORP Tax Liability, respectively, made for such year
pursuant to Section 3(b). Not later than the date such Return is
required to be filed, the Three Rivers Group shall pay to the
USBANCORP Group or the USBANCORP Group shall pay to the Three
Rivers Group, as appropriate, in accordance with Section 9
hereof, an amount equal to such difference, if any; provided,
however, that to the extent such payment is to be made to the
Three Rivers Group and is attributable to a claim for refund of
Taxes previously paid to a Taxing Authority, the USBANCORP Group
will not be required to make such payment to the Three Rivers
Group until the amount of such refund has been determined and
paid to USBANCORP by the Taxing Authority. Within five business
days of the receipt of such refund, USBANCORP shall pay to the
Three Rivers Group the amount equal to the excess, if any, of
(i) the amount of such refund, together with all interest paid
thereon by the Taxing Authority, over (ii) the amount, if any,
of the increased Tax liability of USBANCORP attributable to the
receipt of such refund and any interest thereon.
(ii) With respect to each Consolidated Group Return
described in Section 3(a) above previously or hereafter filed by
a Consolidated Group for the Tax years ended in 1998, 1999 and
2000, and for which the Three Rivers Tax Liability or the
USBANCORP Tax Liability, as the case may be, has not been
satisfied in full, the Three Rivers Group shall pay to the
USBANCORP Group or the USBANCORP Group shall pay to Three Rivers
Group, as appropriate, within 30 days of demand therefor, the
amount of the unpaid Three Rivers Tax Liability or the unpaid
USBANCORP Tax Liability, as the case may be, in respect of such
Return as determined by the USBANCORP Chief Financial Officer.
(d) Intentionally omitted.
(e) Treatment of Adjustments.
(i) Intentionally omitted.
(ii) If any adjustment is made in, or if a Taxing
Authority assesses any deficiency with respect to, a Return of a
Consolidated Group filed by a member of the USBANCORP Group
which would have increased the Three Rivers Tax Liability under
Section 3(c)(i), then within 30 days after any member of the
USBANCORP Group makes a payment to a Taxing Authority or makes a
deposit with a Taxing Authority to stop the running of interest
with respect to such adjustment, the Three Rivers Group shall
pay to the USBANCORP Group the difference between all payments
actually made under Section 3(c)(i) and all payments that would
have been made under Section 3(c)(i) taking such adjustment into
account.
(iii) Intentionally omitted.
(iv) Any refunds or credits of Tax, or the portion
thereof, received by (or credited to the Tax Return of) the
USBANCORP Group relating to a Pre-Distribution Period
Consolidated Return for a Tax year or period ending in 1999 or
2000, which results from an adjustment which decreases the Three
Rivers Tax Liability with respect to such Return, shall be paid
within thirty days of the receipt of such refund, or notice of
Final Determination of such credit, by the USBANCORP Group to
the Three Rivers Group, but only to the extent of the actual
decrease in the Three Rivers Tax Liability with respect to such
Return and the interest, if any, paid thereon by the Taxing
Authority.
4. Certain Representations and Covenants.
(a) (i) Three Rivers Representations. Three Rivers and
each member of the Three Rivers Group represent that as of the
date hereof, and covenants that on the Distribution Date, there
is no agreement, understanding, arrangement, negotiation, plan
or intention (A) to liquidate Three Rivers or to merge or
consolidate Three Rivers, or any member of Three Rivers Group,
with any other Person subsequent to the Distribution, except as
otherwise disclosed to the IRS in connection with the USBANCORP
request for a private letter ruling with respect to the
Distribution or the Restructuring, (B) to sell or otherwise
dispose of any asset, or transfer, terminate or discontinue any
business, of Three Rivers or any member of the Three Rivers
Group subsequent to the Distribution, in a manner that would
result in any increased Tax liability or reduction of any Tax
Asset of the USBANCORP Group or any member thereof, (C) to take
any action inconsistent with, or fail to take any action
required on its part by, the information and representations
furnished to the IRS in connection with the USBANCORP request
for a private letter ruling with respect to the Distribution or
the Restructuring, (D) to enter into any negotiations,
agreements, understandings, plans or arrangements with respect
to transactions or events (including, without limitation, the
issuance or sale of capital stock pursuant to the exercise of
options or otherwise, capital contributions or acquisitions, but
not including the Distribution or any other transaction
disclosed to the IRS in connection with the USBANCORP request
for a private letter ruling with respect to the Distribution or
the Restructuring) which, if treated as consummated before the
proposed Distribution, would result in USBANCORP not having
"control" of Three Rivers within the meaning of sections
355(a)(1)(A) and 368(c) of the Code at the time of the
Distribution, or if treated as consummated on or after the
Distribution Date, would result in any increased Tax liability
or reduction of any Tax Asset of the USBANCORP Group or any
member thereof, (E) to make any change in equity structure that
would result in USBANCORP not having such "control" (except for
the Distribution or any other transaction disclosed to the IRS
in connection with the USBANCORP request for a private letter
ruling with respect to the Distribution or the Restructuring),
(F) to repurchase stock of Three Rivers in a manner contrary to
the requirements of Revenue Procedure 96-30 or in a manner
contrary to the representations made in connection with the
USBANCORP request for a private letter ruling with respect to
the Distribution or the Restructuring, or (G) to take any action
that contravenes any existing gain recognition agreement or
other agreement with a Taxing Authority to which any member of
Three Rivers Group or the USBANCORP Group is a party.
(ii) Three Rivers and USBANCORP Representations. Each
of Three Rivers, USBANCORP and the members of the Three Rivers
Group and the USBANCORP Group, respectively, represents that as
of the date hereof, and covenants that on the Distribution Date,
neither Three Rivers or USBANCORP, nor the members of the Three
Rivers Group or the USBANCORP Group, respectively (as
applicable), is aware of any present agreement, understanding,
arrangement, negotiation, plan or intention by the current
shareholders of USBANCORP to sell, exchange, transfer by gift,
or otherwise dispose of any of their stock in, or securities of,
USBANCORP or Three Rivers subsequent to the Distribution. In
making this representation, the parties hereto recognize that
the shares of USBANCORP are, and the shares of Three Rivers will
be, listed on certain stock exchanges and regular public trading
in such shares can be expected.
(b) Three Rivers Covenants. Three Rivers covenants to
USBANCORP that, (i) during the two-year period following the
Distribution Date, neither Three Rivers, nor any member of the
Three Rivers Group, will liquidate, merge or consolidate, or
enter into or negotiate any agreement, understanding, plan or
arrangement to liquidate, merge or consolidate, with any other
Person, in a manner that would result in any increased Tax
liability or reduction of any Tax Asset of the USBANCORP Group
or any member thereof, (ii) during the two-year period
following the Distribution Date, Three Rivers will not sell,
exchange, distribute or otherwise dispose of its assets or those
of any member of the Three Rivers Group, or transfer, terminate
or discontinue any business of any member of the Three Rivers
Group, in a manner that would result in any increased Tax
liability or reduction of any Tax Asset of the USBANCORP Group
or any member thereof, (iii) following the Distribution, Three
Rivers Bank and Trust Company will, for a minimum of two years,
continue the active conduct of the historic business conducted
by Three Rivers Bank and Trust Company throughout the five year
period prior to the Distribution, (iv) during the two-year
period following the Distribution Date, Three Rivers will not,
nor will it permit any member of the Three Rivers Group to,
enter into or negotiate any transaction or make any change, or
enter into or negotiate any agreement, understanding, plan or
arrangement to make any change, in equity structure (including,
without limitation, the issuance or sale of capital stock
pursuant to the exercise of options or otherwise, capital
contributions or acquisitions, but not including the
Distribution) which, (A) if treated as consummated before the
proposed distribution, would result in USBANCORP not having
"control" of Three Rivers within the meaning of sections
355(a)(1)(A) and 368(c) of the Code at the time of the
Distribution, or (B) if treated as occurring or consummated
during the two-year period following the proposed Distribution
would result in any increased Tax liability or reduction of any
Tax Asset of the USBANCORP Group or any member thereof, (v)
Three Rivers will not, nor will it permit any member of Three
Rivers Group to, take any action inconsistent with, or fail to
take any action required on its part by, the information and
representations furnished to the IRS in connection with the
USBANCORP request for a private letter ruling with respect to
the Distribution or the Restructuring, (vi) Three Rivers will
not take any action that contravenes any existing gain
recognition agreement or other agreement with a Taxing Authority
to which any member of the Three Rivers Group or the USBANCORP
Group is a party, (vii) Three Rivers will not repurchase stock
of Three Rivers in a manner contrary to the requirements of
Revenue Procedure 96-30 or in a manner contrary to the
representations made in connection with the USBANCORP request
for a private letter ruling with respect to the Distribution or
the Restructuring, and (viii) on or after the Distribution Date
Three Rivers will not, nor will it permit any member of the
Three Rivers Group to, make or change any accounting method,
amend any Return or take any Tax position on any Return, take
any other action, omit to take any action or enter into any
transaction that results in any increased Tax liability or
reduction of any Tax Asset of the USBANCORP Group or any member
thereof in respect of any Pre-Distribution Period. Three Rivers
agrees that USBANCORP is to have no liability for any Tax
resulting from any action referred to in the preceding sentence
and agrees to indemnify and hold harmless the USBANCORP Group
against any such Tax, all interest and penalties thereon, and
all costs of investigation and defense reasonably incurred by
USBANCORP in connection with USBANCORP's determination whether
USBANCORP or any member of the USBANCORP Group has incurred any
liability for any such Tax, interest or penalty as a result of
any breach or violation of any covenant or agreement to be kept
or performed by Three Rivers and the members of the Three Rivers
Group under this Section 4(b).
(c) Deductions and Certain Taxes Related to Options. Tax
deductions attributable to the exercise of options to purchase
the stock of Three Rivers shall be deducted by the Three Rivers
Group if the holder of the option is an employee of any member
of the Three Rivers Group immediately after the Distribution.
Tax Deductions attributable to the exercise of all other options
to purchase the stock of Three Rivers or the stock of USBANCORP
shall be deducted by the USBANCORP Group. The Tax Returns of the
Three Rivers Group and the USBANCORP Group shall reflect the
entitlement of the Three Rivers Group and the USBANCORP Group,
respectively, to such deductions in accordance with this Section
4(c). To the extent that any such Tax deduction is, or the
USBANCORP Chief Financial Officer determines that any such Tax
deduction, if asserted, would be, disallowed:
(i) If the USBANCORP Group is entitled under the
provisions of this Section 4(c) to any such Tax deduction which
is, or, if asserted, would be, disallowed, the Three Rivers
Group shall pay to the USBANCORP Group an amount equal to the
Tax paid by the USBANCORP Group as a result of such
disallowance, or an amount equal to the Tax that would become
payable if the USBANCORP Group claimed the Tax deduction and
such deduction was disallowed, respectively; and
(ii) If the Three Rivers Group is entitled under the
provisions of this Section 4(c) to any such Tax deduction which
is, or, if asserted, would be, disallowed, the USBANCORP Group
shall pay to the Three Rivers Group an amount equal to the Tax
paid by the Three Rivers Group as a result of such disallowance,
or an amount equal to the Tax that would become payable if the
Three Rivers Group claimed the Tax deduction and such deduction
was disallowed, respectively.
The Three Rivers Group and each member of the Three Rivers
Group will indemnify the USBANCORP Group, and the USBANCORP
Group and each member of the USBANCORP Group will indemnify the
Three Rivers Group, against any Tax liability under the Federal
Insurance Contributions Act or the Federal Unemployment Tax Act,
and all interest thereon and all penalties related thereto,
incurred by the USBANCORP Group or the Three Rivers Group,
respectively, in connection with the exercise of any option with
respect to which the Tax deduction is allocated to the Three
Rivers Group or the USBANCORP Group, respectively, under the
provisions of this Section 4(c), except to the extent such Tax
is withheld from a payment to the holder of the exercised option
and remitted to a Taxing Authority.
5. Indemnities.
(a) Three Rivers Indemnity. Three Rivers and each member of
the Three Rivers Group will, jointly and severally, indemnify
USBANCORP and the members of the USBANCORP Group against and
hold them harmless from:
(i) any Tax liability of the Three Rivers Group, any
Three Rivers Group Tax Liability, and any Tax liability
attributable to the Restructuring, except for such Tax
liability, if any, as may be incurred by the USBANCORP Group in
connection with the 1994 intercompany sale of the assets of
Standard Mortgage Corporation of Georgia, which shall be the
liability and obligation of the USBANCORP Group;
(ii) any liability or damage resulting from a breach
by Three Rivers or any member of the Three Rivers Group of any
representation or covenant made by Three Rivers herein;
(iii) any Tax liability of USBANCORP or any
shareholder of USBANCORP resulting from the Distribution, unless
such Tax liability arises solely as a result of any action of
USBANCORP or any member of the USBANCORP Group;
(iv) any Tax liability under Section 355(e) of the
Code, any Tax liability under any state or local Tax law
corresponding to Section 355(e) of the Code or resulting from a
Tax liability under Section 355(e) of the Code, and any
liability, damage, cost or expense which the USBANCORP Group, or
any member of the USBANCORP Group, may suffer or incur as a
result of a Final Determination that Section 355(e)(1) of the
Code applies to the Distribution or the Restructuring, unless
such Tax liability, or other liability, damage, cost or expense,
arises solely as a result of any action of USBANCORP or any
member of the USBANCORP Group; and
(v) all liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and
attorneys' fees, court costs and all expenses related or
incidental thereto), losses, damages, interest, penalties,
assessments, settlements or judgments arising out of or incident
to the imposition, assessment or assertion of any Tax liability
or damage described in (i), (ii), (iii), or (iv), above,
including those incurred in the contest in good faith in
appropriate proceedings relating to the imposition, assessment
or assertion of any such Tax, liability or damage.
(b) USBANCORP Indemnity. USBANCORP and each member of the
USBANCORP Group will, jointly and severally, indemnify Three
Rivers and the members of the Three Rivers Group that were
members of a Consolidated Group that included a USBANCORP
Affiliate against and hold them harmless from:
(i) any Tax liability of the USBANCORP Group and any
USBANCORP Tax Liability, other than any such liabilities
described in Section 5(a) above;
(ii) any liability or damage resulting from a breach
by USBANCORP or any member of the USBANCORP Group of any
representation or covenant made by USBANCORP herein; and
(iii) all liabilities, costs, expenses (including,
without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, interest,
penalties, assessments, settlements or judgments arising out of
or incident to the imposition, assessment or assertion of any
Tax liability or damage described in (i) or (ii), above,
including those incurred in the contest in good faith in
appropriate proceedings relating to the imposition, assessment
or assertion of any such Tax, liability or damage.
If a member of the USBANCORP Group ceases to be an Affiliate of
USBANCORP as a result of a sale of its stock to a third party
(whether or not treated as a sale or exchange of stock for Tax
purposes), such member of the USBANCORP Group shall be released
from its obligations under this Agreement upon such sale and
neither USBANCORP nor any member of the USBANCORP Group shall
have any obligation to indemnify Three Rivers or any member of
the Three Rivers Group under Section 5(b)(ii) or the portion of
Section 5(b)(iii) that relates to Section 5(b)(ii), above, for
any liability or damage attributable to actions taken by such
Affiliate after such sale.
(c) Discharge of Indemnity. Three Rivers, USBANCORP and
the members of the Three Rivers Group and the USBANCORP Group,
respectively, shall discharge their obligations under Sections
5(a) and 5(b) hereof, respectively, by paying the relevant
amount within 30 days of demand therefor. The USBANCORP Group
shall be entitled to make such a demand at any time after a
member of the USBANCORP Group makes a payment or deposit in
respect of a Tax for which any member of the Three Rivers Group
has an obligation under Section 5(a); or, in the case of a Tax
liability or Tax item under Sections 5(a)(iii) or 5(a)(iv),
notwithstanding the other provisions of this Section 5(c), at
any time after the amount is claimed or asserted by the IRS or
any other Taxing Authority. The Three Rivers Group shall be
entitled to make such a demand at any time after a Final
Determination of an obligation of any member of the USBANCORP
Group under Section 5(b). Any such demand shall include a
statement showing the amount due under Section 5(a) or 5(b), as
the case may be. Certain calculation mechanics relating to
certain items described in Section 5(a)(i) and 5(b)(i) are set
forth in Section 3(c). Notwithstanding the foregoing, except in
the case of a Tax liability or a claim for indemnity under
Sections 5(a)(iii) or 5(a)(iv), if either Three Rivers,
USBANCORP or any member of the Three Rivers Group or the
USBANCORP Group disputes in good faith the fact or the amount of
its obligation under Section 5(a) or Section 5(b), then no
payment of the amount in dispute shall be required until any
such good faith dispute is resolved in accordance with Section
16 hereof; provided, however, that any amount not paid within 30
days of demand therefor shall bear interest as provided in
Section 9.
(d) Tax Benefits. If an indemnification obligation of any
member of the USBANCORP Group or any member of the Three Rivers
Group, as the case may be, under this Section 5 with respect to
a Consolidated Group arises in respect of an adjustment that
makes allowable to a member of Three Rivers Group or a member of
the USBANCORP Group, respectively, any deduction, amortization,
exclusion from income or other allowance (a "Tax Benefit") which
would not, but for such adjustment, be allowable, then any
payment by any member of the USBANCORP Group or any member of
the Three Rivers Group, respectively, pursuant to this Section 5
shall be an amount equal to (x) the amount otherwise due but for
this subsection (d), minus (y) the present value of the product
of the Tax Benefit multiplied (i) by the maximum applicable
federal, state or local, as the case may be, corporate tax rate
in effect at the time such Tax Benefit becomes allowable to a
member of the Three Rivers Group or a member of the USBANCORP
Group (as the case may be) or (ii) in the case of a credit, by
100 percent. The present value of such product shall be
determined by discounting such product from the time the Tax
Benefit becomes allowable at a rate equal to Prime.
(e) For purposes of this Section 5, in the case of Taxes
that are imposed on a periodic basis and are payable for a Tax
period that includes (but does not end on) the Distribution
Date, the portion of such Tax related to the portion of such Tax
period ending on the Distribution Date shall (x) in the case of
any Taxes other than Taxes based upon or related to income,
sales, gross receipts, wages, capital expenditures or expenses,
be deemed to be the amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of
days in the Tax period ending on the Distribution Date and the
denominator of which is the number of days in the entire Tax
period, and (y) in the case of any Tax based upon or related to
income, sales, gross receipts, wages, capital expenditures or
expenses, be deemed equal to the amount which would be payable
if the relevant Tax period ended on the Distribution Date.
6. Guarantees. USBANCORP or Three Rivers, as the case may be,
shall guarantee the obligations of each member of the USBANCORP
Group or the Three Rivers Group, respectively, under this
Agreement.
7. Communication and Cooperation.
(a) Consult and Cooperate. Three Rivers and USBANCORP
shall consult and cooperate (and shall cause each member of the
Three Rivers Group or the USBANCORP Group, respectively, to
cooperate) fully at such time and to the extent reasonably
requested by the other party in connection with all matters
subject to this Agreement. Such cooperation shall include,
without limitation:
(i) the retention and provision on reasonable request
of any and all information, including all books, records,
documentation or other information, pertaining to Tax matters
relating to the USBANCORP Group and the Three Rivers Group, any
necessary explanations of information and access to personnel,
until one year after the expiration of the applicable statute of
limitation (giving effect to any extension, waiver, or
mitigation thereof);
(ii) the execution of any document that may be
necessary or helpful in connection with any required Return or
in connection with any audit, proceeding, suit or action; and
(iii) the use of the parties' best efforts to obtain
any documentation from a governmental authority or a third party
that may be necessary or helpful in connection with the
foregoing.
(b) Provide Information. USBANCORP and Three Rivers shall
keep each other fully informed with respect to any material
development relating to the matters subject to this Agreement.
(c) Tax Attribute Matters. USBANCORP and Three Rivers
shall promptly advise each other with respect to any proposed
Tax adjustments, which are the subject of an audit or
investigation, or are the subject of any proceeding or
litigation, and which may affect any Tax liability or any Tax
attribute of USBANCORP, Three Rivers, the USBANCORP Group, the
Three Rivers Group or any member of the Three Rivers Group or
the USBANCORP Group (including, but not limited to, basis in an
asset or the amount of earnings and profits).
8. Audits and Contest.
(a) Notwithstanding anything in this Agreement to the
contrary, USBANCORP shall have full control over all matters
relating to any Return or any Tax Proceeding relating to any Tax
matters of at least one member of the USBANCORP Group. Except as
provided in Section 8(b), USBANCORP shall have absolute
discretion with respect to any decisions to be made, or the
nature of any action to be taken, with respect to any matter
described in the preceding sentence.
(b) No settlement of any Tax Proceeding relating to any
matter which would cause a payment obligation under Sections
5(a) or 5(b) shall be accepted or entered into by or on behalf
of the party entitled to receive a payment under either Section
5(a) or 5(b), whichever is applicable, unless the party
ultimately responsible for such payment under either Section
5(a) or 5(b), whichever is applicable (the "Indemnitor"),
consents thereto in writing (which consent shall not be
unreasonably withheld or delayed); provided, however, that,
notwithstanding anything to the contrary in this Agreement,
USBANCORP may settle any Tax Proceeding if it determines, in its
sole judgment, that Three Rivers is not cooperating in such Tax
Proceeding. If the Indemnitor does not respond to the
indemnified party's request for consent within 30 days, the
Indemnitor will be deemed to have consented to the settlement
unless the Indemnitor shall have given a timely Dispute
Resolution Notice under Section 16 hereof.
(c) The indemnified party agrees to give notice to the
Indemnitor of the assertion of any claim, or the commencement of
any suit, action or proceeding in respect of which indemnity may
be sought hereunder within 30 days of such assertion or
commencement, or such earlier time that would allow the
Indemnitor to timely respond to such claim, suit action or
proceeding.
(d) Intentionally omitted.
9. Payments. All payments to be made hereunder shall be made in
immediately available funds. Except as otherwise provided, all
payments required to be made pursuant to this Agreement will be
due 30 days after the receipt of notice of such payment or,
where no notice is required, 30 days after the fixing of
liability or the resolution of a dispute. Payments shall be
deemed made when received. Any payment that is not made by the
USBANCORP Group when due shall bear interest at LIBOR plus 25
basis points, as quoted from time to time, for each day until
paid. Any payment that is not made by the Three Rivers Group
when due shall bear interest at LIBOR plus 25 basis points, as
quoted from time to time, for each day until paid. If, pursuant
to a Final Determination, any amount paid by USBANCORP or the
members of the USBANCORP Group or Three Rivers or the members of
the Three Rivers Group, as the case may be, pursuant to this
Agreement results in any increased Tax liability or reduction of
any Tax Asset of Three Rivers or any member of the Three Rivers
Group or USBANCORP or any member of the USBANCORP Group,
respectively, then USBANCORP or Three Rivers, as appropriate,
shall indemnify the other party and hold it harmless from any
interest or penalty attributable to such increased Tax liability
or the reduction of such Tax Asset and shall pay to the other
party, in addition to amounts otherwise owed, the After-Tax
Amount. With respect to any payment required to be made under
this Agreement, the USBANCORP Chief Financial Officer has the
right to designate, by written notice to Three Rivers, which
member of the Three Rivers Group or the USBANCORP Group, as the
case may be, will make or receive such payment and in which
currency such payment will be made.
10. Notices. Any notice, demand, claim, or other communication
under this Agreement shall be in writing and shall be deemed to
have been given upon the delivery or mailing thereof, as the
case may be, if delivered personally or sent by certified mail,
return receipt requested, postage prepaid, to the parties at the
following addresses (or at such other address as a party may
specify by notice to the other):
If to USBANCORP or the USBANCORP Group, to:
Jeffrey A. Stopko
Senior Vice President and Chief Financial Officer
USBANCORP, Inc.
Main and Franklin Streets
Johnstown, Pennsylvania 15907
If to Three Rivers or Three Rivers Group, to:
Anthony Eramo
Chief Financial Officer
Three Rivers Bancorp, Inc.
2681 Moss Side Boulevard
Monroeville, Pennsylvania 15146
11. Costs and Expenses.
(a) Except as expressly set forth in this Agreement, each
party shall bear its own costs and expenses incurred pursuant to
this Agreement. For purposes of this Agreement, costs and
expenses shall include, but not be limited to, reasonable
attorney fees, accountant fees and other related professional
fees and disbursements. Notwithstanding anything to the contrary
in this Agreement, the Three Rivers Group will be responsible
for its allocable portion, as determined by the USBANCORP Chief
Financial Officer, of (i) all costs and expenses attributable to
filing any Return that reflects the income, assets or operations
of the Three Rivers Group and any Return required to be filed in
connection with the Distribution or the Restructuring, and (ii)
all costs and expenses incurred by USBANCORP in complying with
the provisions of Section 7 of this Agreement.
(b) With respect to all Tax Proceedings, including pending
litigation with any Taxing Authority, costs shall be allocated
in good faith by the USBANCORP Chief Financial Officer. Each
party hereto shall be liable for its allocable portion of such
costs as provided in Section 5.
(c) The IRS provided USBANCORP with certain rulings in
connection with the Restructuring and the Distribution by letter
dated February 4, 2000 (the "PLR"). USBANCORP reserves the right
and privilege at any time to apply to the IRS for a supplemental
ruling or rulings to the PLR (a "Supplemental Ruling") if
USBANCORP determines, in its sole discretion, that a
Supplemental Ruling is necessary or advisable in connection with
the Restructuring or the Distribution or any circumstances that
exist from time to time after the Distribution Date. USBANCORP
agrees to apply for a Supplemental Ruling at the request of
Three Rivers if USBANCORP determines in good faith that a
Supplemental Ruling is necessary or desirable in connection with
the Restructuring or the Distribution or any circumstances that
exist from time to time after the Distribution Date. All
expenses reasonably incurred by members of the USBANCORP Group
and members of the Three Rivers Group in connection with any
USBANCORP application for a Supplemental Ruling, including,
without limitation, all fees, costs and expenses of or relating
to accountants, lawyers, investment bankers and other experts
and advisors, engaged or retained by any member of the USBANCORP
Group or any member of the Three Rivers Group (hereinafter,
collectively, "PLR Costs"), shall be allocated as follows:
(i) All such PLR Costs shall be paid by the USBANCORP
Group as they are incurred by USBANCORP or any member of the
USBANCORP Group, or by Three Rivers or any member of the Three
Rivers Group, if USBANCORP and the members of the USBANCORP
Group would incur sole liability as the "Indemnitor" (as defined
in Section 8(b) hereof) under Section 5 of this Agreement in
favor of Three Rivers or any member of the Three Rivers Group,
if the IRS were to decline (whether or not the IRS actually
declines) to issue or provide the Supplemental Ruling; and
(ii) All such PLR Costs shall be paid by the Three
Rivers Group as they are incurred by USBANCORP or any member of
the USBANCORP Group, or by Three Rivers or any member of the
Three Rivers Group, in all cases where such PLR Costs are not
allocated to the USBANCORP Group under Section 11(c)(i) above.
12. Effectiveness; Termination and Survival. This Agreement
shall become effective upon the consummation of the
Distribution. All rights and obligations arising hereunder with
respect to a Pre-Distribution Tax Period shall survive until
they are fully effectuated or performed and, provided, further,
that notwithstanding anything in this Agreement to the contrary,
this Agreement shall remain in effect and its provisions shall
survive for one year after the full period of all applicable
statutes of limitation (giving effect to any extension, waiver
or mitigation thereof) and, with respect to any claim hereunder
initiated prior to the end of such period, until such claim has
been satisfied or otherwise resolved.
13. Section Headings. The headings contained in this Agreement
are inserted for convenience only and shall not constitute a
part hereof or in any way affect the meaning or interpretation
of this Agreement.
14. Entire Agreement; Amendments and Waivers.
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein. No alteration, amendment, modification,
or waiver of any of the terms of this Agreement shall be valid
unless made by an instrument signed by an authorized officer of
each of USBANCORP and Three Rivers, or in the case of a waiver,
by the party against whom the waiver is to be effective.
(b) Amendments and Waivers. No failure or delay by any
party in exercising any right, power or privilege hereunder
shall operate as a waiver hereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege. This Agreement
shall not be waived, amended or otherwise modified except in
writing, duly executed by all of the parties hereto.
15. Governing Law and Interpretation. This Agreement shall be
construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania without giving effect to laws and
principles relating to conflicts of law.
16. Dispute Resolution. If the parties hereto are unable to
resolve any disagreement or dispute relating to this Agreement,
including, but not limited to, whether a transaction is part of
the Distribution or the Restructuring and whether a Tax
liability is a USBANCORP Tax Liability or a Three Rivers Tax
Liability, such dispute shall be resolved in good faith, as
follows:
(a) If the dispute involves an amount of Tax (exclusive of
interest, penalties and costs, if any) that is less than
$250,000, such dispute shall be resolved in good faith by the
USBANCORP Chief Financial Officer; and
(b) If the dispute involves an amount of Tax (exclusive of
interest, penalties and costs, if any) that is equal to or
greater than $250,000, such dispute shall be resolved by a three
member panel composed of accountants or lawyers or any
combination of accountants and lawyers (the "Panel"). For this
purpose:
(i) "Accountant" means a member of an accounting firm
of recognized national standing, including, without limitation,
an accounting firm that regularly audits the financial
statements of any Person bound by this Agreement;
(ii) "Lawyer" means an individual lawyer or a member
of a law firm licensed to practice in the Commonwealth of
Pennsylvania, including, without limitation, a lawyer or law
firm that regularly or from time to time represents a Person
bound by this Agreement;
(iii) Any member of the USBANCORP Group or the Three
Rivers Group shall be entitled to demand the formation of a
Panel to resolve a dispute at any time after giving or receiving
a written notice under Sections 7(a), 7(b), 8(b) or 8(c), or in
the event of a dispute concerning the allocation of PLR Costs
under Section 11(c), of this Agreement. Any such demand for the
formation of a Panel shall be made in writing and shall include
a statement showing the matters or items in dispute, the amount
thereof, the calculation mechanics thereof, the demanding
party's statement of the relevant facts, issues, analysis and
conclusions, and the name and address of the Accountant or
Lawyer the demanding party (the "Petitioner") nominates to serve
on the Panel (the "Dispute Resolution Notice"). Except as set
forth in Section 8(b) hereof, neither a dispute nor a Dispute
Resolution Notice shall suspend, abate or delay the performance
or the time set forth in this Agreement for the performance by
any party of any actions, covenants or agreements on its part to
be kept or performed hereunder.
(iv) Within ten days of receiving the Dispute
Resolution Notice, the party who receives such notice (the
"Respondent") shall give written notice to the Petitioner of the
name and address of the Accountant or Lawyer nominated by the
Respondent to serve on the Panel and the Respondent's statement
of the relevant facts, issues, analysis and conclusions (the
"Respondent's Notice"). If the Respondent fails or refuses to
give the Respondent's Notice within the time herein allowed, the
Petitioner shall have the right to nominate a second Person to
the Panel (who must be an Accountant or Lawyer who, and whose
firm, if any, is independent of the Petitioner and has never
been retained or engaged by the Petitioner to perform services
for the Petitioner) by written notice of such nomination within
ten days after the expiration of the period allowed herein for
the Respondent's Notice.
(v) The two Persons named by the Petitioner and the
Respondent (or, by the Petitioner if the Respondent fails or
refuses to give the Respondent's Notice within the time herein
allowed) shall select by mutual agreement a third Accountant or
Lawyer to serve on the Panel and the Panel so constituted shall
resolve or decide the dispute within sixty days following the
last appointment to the Panel. The third Person so appointed
must be an Accountant or Lawyer who, and whose firm, if any, is
independent of both the Petitioner and the Respondent, and has
never been retained or engaged by the Petitioner or the
Respondent to perform services for the Petitioner or the
Respondent. It is the intention and agreement of the parties
that the Panel shall decide the dispute based on the parties'
statements, consultations with the parties and their
representatives, agents and experts, if any, and upon such other
sources and resources, including experts, as the Panel may
select. The Panel shall issue a written statement that sets
forth its decision on the matters in dispute and its explanation
of the basis for, or reasoning in support of, its decision,
including, where appropriate, calculations of any liabilities.
(vi) All costs of the dispute resolution process,
including the compensation of the Panel and costs incurred by
the Panel, and all costs reasonably incurred by each party,
shall be divided equally between the parties, unless the Panel,
at the request of either party, allocates the liability for
payment of all or any portion of such costs entirely or
disproportionately to the Petitioner or Respondent because of
the Panel's determination that either the Petitioner or the
Respondent failed to act in good faith in demanding the
formation of the Panel or at any time during the dispute
resolution proceedings.
17. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
Agreement.
18. Assignments; Third Party Beneficiaries. Except as provided
below, this Agreement shall be binding upon and shall inure only
to the benefit of the parties hereto and their respective
successors and assigns, by merger, acquisition of assets or
otherwise (including but not limited to any successor of a party
hereto succeeding to the Tax attributes of such party under
applicable law). This Agreement is not intended to benefit any
person other than the parties hereto and such successors and
assigns, and no such other person shall be a third party
beneficiary hereof. If, during the period beginning on the
Distribution Date and ending upon the expiration of the survival
period set forth in Section 12, any corporation becomes an
Affiliate of Three Rivers, such Affiliate shall be bound by the
terms of this Agreement and Three Rivers shall provide evidence
to USBANCORP of such Affiliate's agreement to be bound by the
terms of this Agreement.
19. Authorization, etc. Each of the parties hereto hereby
represents and warrants that it has the power and authority to
execute, deliver and perform this Agreement, that this Agreement
has been duly authorized by all necessary corporate action on
the part of such party, that this Agreement constitutes a legal,
valid and binding obligation of each such party, and that the
execution, delivery and performance of this Agreement by such
party does not contravene or conflict with any provision or law
or of its charter or bylaws or any agreement, instrument or
order binding on such party.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year first written above.
USBANCORP on its own behalf and on
behalf of the members of
the USBANCORP Group.
By: /s/Jeffrey A. Stopko___
Title: Senior Vice President_
THREE RIVERS on its own behalf and
on behalf of the members of
the Three Rivers Group.
By:_/s/Anthony M. V. Eramo________
Title:_Vice President and Chief
Financial Officer
