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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.
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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 elections that will be made by
the Affiliated Group or any members thereof. Each member of the Affiliated
Group shall execute and file those consents, elections, appointments, powers of
attorney and other documents that Parent determines may be necessary or
appropriate for the proper filing of those returns, documents or statements.
Each member of the Affiliated Group shall provide Parent or any other member of
the Affiliated Group any data necessary for the proper and timely filing of
returns, documents or statements and otherwise shall cooperate as necessary to
carry out the purposes of this Agreement.
7. NEW MEMBERS. If during any taxable period Parent or
any other member of the Affiliated Group acquires or organizes another
corporation that is required to be included in the consolidated Federal income
tax return of the Affiliated Group, that corporation shall join in and be bound
by this Agreement.
8. INDEMNIFICATION
a. GENERAL PRINCIPLES. It is the intent of this
Agreement that Parent Group and Factors Group each be liable for an amount in
respect of Federal income tax of the Affiliated Group as that amount is
determined pursuant to this Agreement or the Prior Agreement and that Parent
Group and Factors Group each receive its respective share, as so allocated, of
any reduction in Federal income tax liability of the Affiliated Group.
b. INDEMNIFICATION. The members of Parent
Group, jointly and severally, shall be responsible for, and shall protect,
defend, indemnify and hold harmless the members of Factors Group from, any
amount in respect of Federal income tax allocable to Parent Group pursuant
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to this Agreement or the Prior Agreement. The members of Factors Group,
jointly and severally, shall be responsible for, and shall protect, defend,
indemnify and hold harmless the members of Parent Group from, any amount in
respect of Federal income tax allocable to Factors Group pursuant to this
Agreement or the Prior Agreement.
9. RETENTION OF BOOKS AND RECORDS. No member of the
Affiliated Group shall destroy or permit the destruction of any books, records
or files pertaining to any other member of the Affiliated Group without first
having offered in writing to deliver those books, records and files to the
other member, and the other member shall have the right upon prior notice to
inspect and to copy the same at any time during business hours for any proper
purpose.
10. ALLOCATION OF TAX LIABILITY WITHIN GROUPS.
a. CALCULATION OF SEPARATE TAX LIABILITIES. The
tax liability allocated to Parent Group and Factors Group pursuant to section 2
shall be allocated further among the members of each of those 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%),
provided, however, that in no event shall Capital Bank pay more income tax in
any period of one or more taxable years than Capital Bank 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
the other members of Parent Group.
b. PAYMENTS AND ADJUSTMENTS. The provisions of
sections 3 and 5 hereof shall apply in respect of payments and adjustments of
the Federal income tax liability within Parent Group and Factors Group.
11. OTHER INCOME AND FRANCHISE TAXES. The liability of
Parent Group and of Factors Group in respect of state, local and foreign income
and franchise taxes that are computed pursuant to provisions applicable to
affiliated, combined, unitary or other groups shall be determined and paid in a
manner consistent with the provisions of this Agreement used to determine the
liability of Parent Group and of Factors Group in respect of Federal income
tax. Calculation of the separate liability of Parent Group and of Factors
Group for these other taxes shall conform to the appropriate state, local and
foreign income and franchise tax provisions governing affiliated, combined,
unitary or other groups. Notwithstanding the foregoing, (i) the credit against
Florida corporate income tax for Florida intangible tax shall not be computed
on a separate company basis to the extent a computation on that basis would
disentitle any member of the Affiliated Group to a credit that is available to
that member by reason of joining in the filing of a consolidated return of
Florida corporate income tax with any member of the Affiliated Group that is a
bank, and (ii) no member of the Affiliated Group ("First Member") shall be
required to make any payment to any other member of the Affiliated Group
("Second Member") in respect of any tax imposed by the State of California on a
unitary basis solely because the liability of the First Member for that tax is
reduced by the Second Member joining in the filing of the return when the
activities of the Second Member in California would not subject any member of
the Affiliated Group to any liability for that tax.
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12. ENTIRE UNDERSTANDING. This Agreement constitutes the
entire agreement of the parties concerning the subject matter hereof and,
effective as of the date hereof and for the taxable periods to which this
Agreement applies, supersedes all other agreements. This Agreement shall
allocate the tax liabilities of the Affiliated Group for the period January 1,
1995 through December 31, 1995, and all subsequent taxable years unless Parent
and Factors Holding agree to terminate this Agreement. Notwithstanding its
termination, this Agreement shall continue in effect with respect to any
payment or refunds due for all taxable periods prior to termination.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be
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 the
Agreement.
14. EXPENSES. Parent Group and Factors Group each shall
bear any and all expenses that arises from its obligations under this
Agreement.
15. NOTICES. All notices and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which the
notice is received.
If to Parent:
Xxxxxxx X. Xxxxxx
Capital Bancorp
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
If to Factors Holding:
Xxxxxx X. XxXxxxxxx
Capital Factors Holding, Inc.
0000 X. Xxxxxxx Xxxx Xxxx.
Xxxxxxx Xxxx, Xxxxxxx 00000
16. RESOLUTION OF DISPUTES. Any dispute between the
parties with respect to this Agreement shall be resolved by a public accounting
firm or a law firm reasonably satisfactory to Parent and Factors Holding or
pursuant to an alternative dispute arrangement agreed to by the parties.
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17. LEGAL ENFORCEABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall be ineffective
as to that jurisdiction to the extent of that prohibition or unenforceability
without invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable that provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any breach
of the provisions of this Agreement and agrees that the obligations of the
parties hereunder shall be specifically enforceable.
18. CONTROLLING LAW. This Agreement shall be governed by
the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the
date first written above.
Capital Bancorp
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer and Senior Vice President
Capital Bank
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Chief Financial Officer and
Executive Vice President
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Bay Estates, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Cap Coral, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Cap Holdings, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Cap Harbor, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Cap Personalty, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
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Cap Plaza, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Cap Realty, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Cap Temp, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Capital Factors Holding, Inc.
by /s/ Xxxxxx X. XxXxxxxxx
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Xxxxxx X. XxXxxxxxx
Treasurer
Capital Foreclosed Property, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
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Capital Trade Development Corp.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Capital Trading Group, Inc.
by /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
Secretary
Marina Real, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Pointe Park, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Villages At Imperial Lake, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
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DJM Holdings & Co.
by /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Treasurer
Cap Properties, Inc.
by /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Treasurer
Capital Factors, Inc.
by /s/ Xxxxxx X. XxXxxxxxx
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Xxxxxx X. XxXxxxxxx
Chief Financial Officer and
Senior Vice President
CF Funding Corp.
by /s/ Xxxxxx X. XxXxxxxxx
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Xxxxxx X. XxXxxxxxx
Treasurer
CF One, Inc.
by /s/ Xxxxxx X. XxXxxxxxx
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Xxxxxx X. XxXxxxxxx
Treasurer
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