Tax Allocation And Indemnity Agreement

Exhibit 10.10


TAX ALLOCATION AND INDEMNITY AGREEMENT


Agreement dated as of July 10, 1996, by and among, on the one hand, Parent Group, consisting of Capital Bancorp, a Florida corporation ("Parent"), Capital Bank and the other direct and indirect wholly owned subsidiaries of Parent other than Capital Factors Holding, Inc., a Florida corporation ("Factors Holding"), and its direct and indirect wholly owned subsidiaries ("Factors Group"), and, on the other hand, Factors Group.


WITNESSETH


WHEREAS, the parties hereto are members of an affiliated group (the "Affiliated Group") as defined in section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and


WHEREAS, an affiliated group as defined in Code section 1504(a) of which Parent is the common parent has filed consolidated Federal income tax returns for prior taxable years, and the Affiliated Group will be required to file a consolidated Federal income tax return for its taxable year ending December 31, 1995 and for subsequent taxable years; and


WHEREAS, prior to July 10, 1996, Factors Holding was an indirect wholly-owned subsidiary of Parent but as of that date acquired new shareholders unrelated to members of the Affiliated Group; and


WHEREAS, it is the intent of the parties hereto that an agreement be entered into (i) to allocate the consolidated Federal income tax liability of the Affiliated Group between the Parent Group and the Factors Group pursuant to a method specified in regulations of the Treasury Department that would impose on Parent Group and Factors Group, for the period beginning January 1, 1995 through December 31, 1995 and for subsequent periods, liability for an amount that approximates the liability that Parent Group and Factors Group each would incur if they filed Federal income tax returns as separate affiliated groups as defined in Code section 1504(a) and (ii) to provide that Parent Group and Factors Group each shall bear its appropriate portion of the liability of the Affiliated Group for consolidated Federal income tax in respect of prior periods.


NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto agree as follows:


1. FILING OF CONSOLIDATED RETURNS. A consolidated Federal income tax return shall be filed by Parent for the taxable year ending December 31, 1995, and for each subsequent taxable period in respect of which this Agreement is in effect and for which the Affiliated Group is required or permitted to file a consolidated Federal income tax return. 2


2. CURRENT AND FUTURE TAXABLE PERIODS. For the taxable year of the Affiliated Group ending December 31, 1995 and for each taxable period thereafter, the Affiliated Group shall be divided into two separate groups, one consisting of Parent Group and the other consisting of Factors Group. The consolidated Federal income tax liability of the Affiliated Group shall be allocated between the two groups in accordance with the method set forth in Treasury regulation sections 1.1552-1(a)(2) and 1.1502-33(d)(3) (using a fixed percentage of 100%) by considering each group as a separate affiliated group, except that (i) modifications to the separate taxable income will be made in accordance with Treasury regulation section 1.1552-1(a)(2)(ii)(a) through (i) in the same manner as if all corporations were members of a single affiliated group, (ii) (a) carryforwards of losses and credits shall not be taken into account to the extent those items are deemed absorbed in allocating the tax liability of the Affiliated Group for prior taxable years, and (b) carrybacks of losses and credits shall be taken into account only to the extent those items are deemed absorbed in allocating the tax liability of the Affiliated Group for the taxable year. The corporate surtax exemption shall be allocated equally among all members of the Affiliated Group. Any liability of the Affiliated Group for alternative minimum tax, environmental tax or any other Federal income tax imposed on the Affiliated Group on a consolidated basis by any section of the Code other than Code section 11 shall be allocated in accordance with any reasonable method that is consistent with the principles of this Agreement and the provisions of any governing Treasury regulations or other administrative pronouncements of the Internal Revenue Service. In no event shall the Factors Group pay more income tax in any period of one or more taxable years than the Factors Group would have paid for the same period if it had filed a separate consolidated Federal income tax return, and any taxes not paid by reason of this limitation shall be paid by Parent Group.


3. PAYMENTS. Factors Group shall pay to Parent installments of estimated tax, computed pursuant to the principles set forth in section 2 above, no later than ten days after the due dates for payments of estimated tax by the Affiliated Group. Any payments of estimated tax by Factors Group to Parent shall be taken into account in determining the payment due from Factors Group pursuant to section 2, and any overpayment of estimated tax shall be refunded to Factors Group. A refund or payment of tax, calculated on the basis of the amount of tax payable for the taxable year as calculated by Parent as of the due date (without regard to extensions) for the Federal income tax return of the Affiliated Group, shall be paid within ten days of that due date, and any adjustment to the amount of refund or payment of tax, calculated on the basis of the amount of tax payable for that taxable year as shown on the Federal income tax return of the Affiliated Group as of the due date (with regard to extensions), shall be paid within ten days of that due date.


4. PRIOR TAXABLE PERIODS. For the taxable year of the Affiliated Group ending December 31, 1994 and for each taxable period prior thereto to which the Tax Allocation Agreement of the Affiliated Group made November 14, 1983 (the "Prior Agreement") applies, the Federal income tax liability of the Affiliated Group shall be allocated among the members of the Affiliated Group in accordance with the Prior Agreement. For purposes of other portions of this Agreement, references to Parent Group or Factors Group shall be treated, in respect of taxable periods to which the Prior Agreement applies, as references to the members of the Affiliated Group that are members of Parent Group or Factors Group.


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5. ADJUSTMENTS TO TAX LIABILITY. If the consolidated Federal income tax liability of the Affiliated Group is adjusted for any taxable period, whether by means of an amended return or claim for refund or after an audit by the Internal Revenue Service, the Federal income tax liability of Factors Group pursuant to section 2 or section 4 of this Agreement shall be recomputed, if necessary, to give effect to those adjustments as if they had been part of the original computation pursuant to section 2 or section 4. The obligation to make any payment of additional Federal income tax or the right to receive any refund of Federal income tax shall be allocated between Parent Group and Factors Group accordingly. Any additional tax that Factors Group is obligated to pay shall be paid to Parent, and any refund of tax to which Factors Group is entitled to receive shall be paid by Parent, within ten days of, respectively, the date Factors Group receives notice from Parent or the date Parent receives the refund from the Treasury Department.


6. APPOINTMENT OF PARENT AS AGENT. Parent shall prepare and file the consolidated Federal income tax returns of the Affiliated Group and any other returns, documents or statements required to be filed with the Internal Revenue Service. In its sole discretion, Parent shall have the right in connection with any of those returns, documents or statements to determine (i) the manner in which the return, document or statement shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction, credit or any other item shall be reported, (ii) whether any extension shall be requested and (iii) the el ...