EXHIBIT 10.7
FEDERAL INCOME TAX
ALLOCATION AGREEMENT
THIS FEDERAL INCOME TAX ALLOCATION AGREEMENT (the "Agreement") is
entered into as of the 2nd day February 1997, between Andrx Corporation, a
Florida corporation ("Parent"), and Cybear, Inc., a Florida corporation
("Subsidiary").
WITNESSETH:
WHEREAS, Parent and Subsidiary are members of an "affiliated group" of
corporations (as that term is defined in Section 1504, and is used in Section
1501, of the Internal Revenue Code of 1986, as amended (the "Code")) of which
Parent is the common parent (Parent and Subsidiary are sometimes referred to
herein, collectively, as the "Group" and individually as the "Member");
WHEREAS, Parent and Subsidiary have agreed to file a consolidated
federal income tax return in lieu of separate returns; and
WHEREAS, Parent and Subsidiary desire to establish a method for
apportioning the Group's consolidated federal income tax liability among the
members of the Group and for reimbursing Parent for the payment of the Group's
federal income tax liability.
NOW, THEREFORE, Parent and Subsidiary agree as follows:
1. CONSOLIDATED RETURN TO BE FILED. Parent and Subsidiary shall
file a consolidated return in lieu of separate returns with
respect to the income tax imposed by Chapter 1 of the Code
beginning for the taxable year ending December 31, 1997 and
for any subsequent taxable periods for which the Group is
required or permitted to make a consolidated federal income
tax return. All consolidated federal income tax returns and
amendments thereof required or permitted to be filed by the
Group, including all consents and elections, shall be prepared
and filed by Parent. Parent shall take all other actions it
determines are necessary or appropriate with respect to the
Group's federal income tax liability.
2. APPORTIONMENT OF TAX LIABILITY. The Group's consolidated
federal income tax liability shall be apportioned among the
members of the Group in accordance with the ratio which that
portion of the Group's consolidated taxable income
attributable to each Member having taxable income bears to the
Group's consolidated taxable income, as provided in Sections
1552(a)(1) and 1552(b) of the Code and utilizing the
provisions of Treasury Regulations Section 1.1552-1(a)(1).
3. COMPENSATION FOR USE OF DEDUCTIONS, NET OPERATING LOSSES AND
CREDITS. Parent and Subsidiary acknowledge that the federal
income tax liability apportioned to each Member under Section
2 of this Agreement shall be the federal income tax liability
of the Member for purposes of determining the Member's
earnings and profits under the Code. Parent and Subsidiary,
however, agree that each Member shall be compensated for the
use by other members of the Group of deductions,
net operating losses, credits and other tax attributes
generated by such Member. Accordingly, each Member whose
"separate return tax liability" for the taxable year is in
excess of such Member's apportioned amount of the Group's
consolidated federal income tax liability for the taxable year
determined under Section 2 hereof shall pay such excess to
Parent for allocation and distribution by Parent to the
members of the Group that generated the deductions, net
operating losses, credits and other tax attributes utilized by
such Member. For purposes of this Agreement, the "separate
return tax liability" of each Member for the taxable year
shall be determined as if such Member were filing a separate
tax return under the Code, and shall be determined without
reference to the provisions of Treasury Regulations Section
1.1502-12.
4. LIABILITY FOR THE PAYMENT OF APPORTIONED TAX LIABILITY. Each
Member shall be liable only for (x) the portion of the Group's
consolidated federal income tax liability apportioned to it
under Section 2 hereof and (y) the excess of such Member's
separate return tax liability over the apportioned amount as
determined under Section 3 hereof. Each Member shall pay to
Parent all such amounts within thirty (30) days of receipt of
a statement from Parent indicating such amount or amounts.
Within ten (10) days of receipt thereof, Parent shall allocate
and pay such amounts to the members of the Group that
generated the deductions, net operating losses, credits and
other tax attributes used by other members of the Group. Each
Member hereby agrees to indemnify, hold harmless and defend
all other members of the Group from any and all loss,
liability, cost, expense or claim of or to the other members
of the Group, including without limitation, the fees of
counsel with respect thereto, resulting or arising from the
amounts determined as owed by such Member pursuant to Sections
2 and 3 of this Agreement.
5. ESTIMATED TAX PAYMENTS. Parent may assess each Member for its
share of estimated federal income tax payments to be made by
the Group. Payment of the assessment to Parent shall be made
within thirty (30) days after such assessment. The payment
shall be credited against the portion of the Group's
consolidated tax liability apportioned to the Member under
this Agreement.
6. EFFECT OF CARRYBACK/CARRYFORWARD TO YEAR NOT COVERED BY THIS
AGREEMENT. If part or all of a consolidated net operating loss
or tax credit is allocated to a Member pursuant to Treasury
Regulations Section 1.1502-21T(b), and such loss or credit is
carried back or forward to a year in which the Member filed a
separate income tax return or joined in a consolidated federal
income tax return of another affiliated group, any refund or
reduction in tax liability arising from such carry-back or
carryover shall be retained by the Member. The Parent shall
determine whether an election shall be made not to carry back
any consolidated net operating loss arising in a consolidated
return year (including any portion allocated to a Member under
Treasury Regulations Section 1.1502-79) in accordance with
Section 172(b)(3) of the Code.
7. ADJUSTMENTS FOR REFUNDS AND DEFICIENCIES. If the group's
consolidated federal income tax liability is adjusted for any
taxable period, whether by means of an amended return, claim
for refund, audit by the Internal Revenue Service or
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otherwise, the liabilities of each Member shall be recomputed
under Sections 2 and 3 of the Agreement to give effect to such
adjustments. Parent shall determine the effect of the
adjustments and shall provide to the members of the Group a
statement indicating the portion of each adjustment
attributable to each Member. If the adjustment results in a
refund for any Member, Parent shall pay to such Member the
portion of the refund attributable to such Member within ten
(10) days after being notified by Parent of the receipt of the
refund. If the adjustment results in a deficiency for any
Member, such Member shall pay to Parent the amount of the
deficiency attributable to such Member within ten (10) days
after the receipt of a statement from Parent indicating the
amount attributable to such Member. If any interest is to be
paid or received as a result of a consolidated federal income
tax deficiency or refund, such interest shall be allocated to
the members of the Group in the ratio each Member's portion of
the change in the Group's consolidated federal income tax
liability bears to the total change in the Group's
consolidated federal income tax liability. Any penalty shall
be allocated upon such basis as Parent deems just and proper
in view of all applicable circumstances.
8. TERMINATION. This Agreement shall apply to the taxable year
ending on December 31, 1997 and all subsequent taxable
periods, unless Parent and Subsidiaries terminate this
Agreement in writing. Notwithstanding such termination, this
Agreement shall continue in effect with respect to any payment
or refunds due for all taxable periods to which this Agreement
applies. Failure of one or more parties hereto to qualify by
meeting the definition of a member of an "affiliated group"
under Section 1504 of the Code shall not operate to terminate
this Agreement with respect to the other parties hereto so
long as two or more parties continue to qualify.
9. AVAILABILITY OF RECORDS. All materials, including, but not
limited to, returns, supporting schedules, work papers,
correspondence and other such documents, relating to the
Group's consolidated federal income tax return filed for a
taxable year during which this Agreement was in effect shall
be made available to any Member that was included in the
return during Parent's regular business hours for seven (7)
years after the date the return was filed.
10. MEMBER LEAVING GROUP. Any Member which leaves the Group shall
continue to be bound by this Agreement. Any tax
allocation/sharing or similar agreement subsequently entered
into by any Member leaving the Group, should incorporate the
Agreement therein.
11. ADDITIONAL MEMBERS OF THE GROUP. Parent and Subsidiary
recognize and acknowledge that from time to time other
corporations may become members of the affiliated group (as
that term is defined in Section 1504 of the Code) and hereby
agree that each of those corporations shall become a party to
this Agreement by executing an Addendum Agreement under which
the corporation becomes one of the "Subsidiaries" and a
"Member" under this Agreement as though it was an original
party thereto. For this purpose, the then existing members of
the Group hereby expressly bind themselves to the Addendum
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Agreement by Parent's execution of the Addendum Agreement
without further action on their part.
12. MISCELLANEOUS. This Agreement shall be binding upon and inure
to the benefit of Parent and its successors and each of the
members and their respective successors. This Agreement shall
be construed under and governed by the laws of the State of
Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date written above.
ANDRX CORPORATION
By: /s/ XXXXXX X. XXXXXXXX
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Xxxxxx X. Xxxxxxxx
Its: Vice President and Chief Financial Officer
Date: September 15, 1998
CYBEAR, INC.
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx, M.D.
Its: President and Chief Executive Officer
Date: September 15, 1998
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