TAX SHARING AGREEMENT

Exhibit 10.1

TAX SHARING AGREEMENT

This amended and restated Tax Sharing Agreement (“ Tax Sharing Agreement ”) is executed on [ — ], 2011 by and among Ambac Financial Group, Inc. (formerly known as AMBAC Inc., and hereinafter referred to as “ AFGI ” or “ Parent ”) and each of the other corporations that is a signatory to this Tax Sharing Agreement below.

WHEREAS, Parent and each of the Subsidiaries (as defined below), including Ambac Assurance Corporation (formerly known as AMBAC Indemnity Corporation) (“ AAC ”), are includible corporations in an affiliated group of corporations of which AFGI is the common parent, all within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the “ Code ”).

WHEREAS, Parent and the Subsidiaries are parties to a tax sharing agreement dated as of July 18, 1991 (the “ 1991 TSA ”), as amended by Amendment No. 1, effective as of October 1, 1997 (“ Amendment No.1 ”), as amended by Amendment No. 2, effective as of November 19, 2009 (“ Amendment No. 2 ”), and as amended by Amendment No. 3, effective as of January 1, 2010 (“ Amendment No. 3 ”), which sets forth a method to allocate and settle among them the consolidated federal tax liability of the Group (as defined below) and certain other related matters.

WHEREAS, Parent filed a petition in the United States Bankruptcy Court for the Southern District of New York (the “ Bankruptcy Court ”), under chapter 11 of title 11 of the United States Code (the “ Bankruptcy Code ”), on November 8, 2010, as referenced by Case No. 10-15973 (SCC) (the “ Chapter 11 Case ”).

WHEREAS, Parent intends to continue to file consolidated federal income tax returns on behalf of itself and the other Members (as defined below) of the Group.

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

1. Effective Date . The effective date of this Tax Sharing Agreement (the “ Effective Date ”) shall be the later of (a) the Bankruptcy Plan Confirmation Date (as defined below) and (b) the date on which a non-stayed order is entered by the Rehabilitation Court (as defined below) approving the transactions contemplated by the Mediation Agreement (as defined below); provided , however , that once this Tax Sharing Agreement becomes effective, it shall have effect for all Taxable Periods (as defined below) beginning on or after January 1, 2011, subject to the following:

 

(a)

For purposes of subparagraph 3(c), this Tax Sharing Agreement shall have effect as of October 1, 2011, and the portion of the Taxable Period beginning on October 1, 2011 and ending on December 31, 2011 shall be considered a separate Taxable Period.

 

(b)

The 1991 TSA as amended by Amendment No. 1 and Amendment No. 2 (the “ Prior Agreement ”) shall remain in effect with respect to all Taxable Periods beginning before January 1, 2011. For the avoidance of doubt:

 

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Amended and Restated Tax Sharing Agreement

(i)

In the event that tax attributes of the Group, including, but not limited to, NOLs (as defined below), AMT NOLs (as defined below) and tax credit carryforwards, arising in a Taxable Period beginning prior to January 1, 2011 are carried over to a Taxable Period beginning on or after January 1, 2011, the effect, in the Taxable Period to which the tax attribute is carried over, shall be determined by applying the provisions of this Tax Sharing Agreement; and

 

(ii)

In the event that tax attributes of the Group, including, but not limited to, NOLs, AMT NOLs, and tax credit carryforwards, arising in a Taxable Period beginning on or after January 1, 2011 are carried back to a Taxable Period beginning prior to January 1, 2011, the effect, in the Taxable Period to which the tax attribute is carried back, shall be determined by applying the provisions of the Prior Agreement; provided that any carryback of any portion of the Allocated AAC NOL Amount, Allocated AAC AMT NOL Amount, Post-Deconsolidation Allocated NOL Amount, Post-Deconsolidation Allocated AMT NOL Amount or Post-Determination Date NOLs shall be subject to subparagraph 3(c) of this Tax Sharing Agreement with respect to such Taxable Period.

 

(c)

Prior to the Effective Date, payments shall be made by the Subsidiaries to Parent, and by Parent to the Subsidiaries, in accordance with the provisions of the Prior Agreement.

 

(d)

Within sixty (60) days after the Effective Date, Parent shall calculate, in the case of each Subsidiary, the difference between (i) the aggregate amount paid (prior to the Effective Date) by the Subsidiary to Parent pursuant to the Prior Agreement with respect to Taxable Periods beginning on or after January 1, 2011, and (ii) the aggregate amount that would have been payable (prior to the Effective Date) by the Subsidiary to Parent with respect to such Taxable Periods if such payments had been determined under this Tax Sharing Agreement. If the amount in clause (i) exceeds the amount in clause (ii), this excess shall be paid by Parent to the Subsidiary no later than ninety (90) days after the Effective Date. If the amount in clause (ii) exceeds the amount in clause (i), this excess shall be paid by the Subsidiary to Parent no later than ninety (90) days after the Effective Date.

2. Defined Terms . For purposes of this Tax Sharing Agreement, the following terms shall be defined as follows:

“ AAC AMT ” for a Taxable Period shall mean, with respect to the AAC Subgroup, the AMT liability, if any, that the AAC Subgroup would have for such Taxable Period determined on a Separate Subsidiary Basis.

 

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Amended and Restated Tax Sharing Agreement

“ AAC AMT NOL Usage Amount ” shall mean, with respect to any Taxable Period, the amount determined pursuant to subclause 3(c)(iii)(3).

“ AAC Federal Tax Usage Amount ” shall mean, with respect to any Taxable Period, the sum of the amounts due and payable by the AAC Subgroup under clauses 3(c)(i) and 3(c)(ii).

“ AAC Notional AMT Amount ” shall mean , with respect to any Taxable Period, the aggregate amount of the increase in the AAC Subgroup’s AMT liability that would have been owed and payable with respect to such Taxable Period (determined on a Separate Subsidiary Basis), disregarding any exclusion from gross income pursuant to Section 108(a) of the Code, to the extent that no portion of the (i) Allocated AAC AMT NOL Amount or (ii) Post-Deconsolidation Allocated AMT NOL Amount within the applicable NOL Usage Tier or Usage Tiers, as the case may be, would have been available in connection with such determination with respect to such Taxable Period (after applying all applicable modifications provided in subparagraph 3(c)).

“ AAC Notional Federal Tax Amount ” shall mean, with respect to any Taxable Period, the aggregate amount of the increase in the AAC Subgroup’s Federal Tax liability that would have been owed and payable with respect to such Taxable Period (determined on a Separate Subsidiary Basis), disregarding any exclusion from gross income pursuant to Section 108(a) of the Code, to the extent that no portion of the (i) (A) Allocated AAC NOL Amount or (B) Post-Deconsolidation Allocated NOL Amount within the applicable NOL Usage Tier or Usage Tiers, as the case may be, or (ii) AFGI NOL Amount, as the case may be, would have been available in connection with such determination with respect to such Taxable Period (after applying all applicable modifications provided in subparagraph 3(c)).

“ AAC Subgroup ” shall mean AAC and any direct or indirect Subsidiary of AAC, including Everspan, which would be treated as an includable corporation of an affiliated group of corporations under Section 1504(a) of the Code as if AAC were the common parent of such affiliated group; provided , however , that for purposes of paragraphs 3, 4 and 5 and subparagraphs 6(e) and 6(f), the AAC Subgroup shall be treated as a single separate Subsidiary of the Group.

“ AAC Subsidiary ” shall mean any Subsidiary included in the AAC Subgroup.

“ Adjustment Event ” shall mean any event resulting in the application of Treasury Regulation Section 1.1502-36 to AAC or the AAC Subgroup, other than a Deconsolidation Event.

 

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Amended and Restated Tax Sharing Agreement

“ AFGI NOL Amount or AFGI NOLs ” shall mean, with respect to any Taxable Period, the NOLs of the Group MINUS the sum of (i) the Allocated AAC NOL Amount that has not been previously utilized to offset income for Federal Tax purposes and (ii) the portion of the Post-Determination Date NOLs that has not been previously utilized to offset income for Federal Tax purposes, in each case, as determined as of the end of such Taxable Period (or the portion of each Taxable Period ending on the date of the occurrence of a Deconsolidation Event).

“ AFGI Subgroup ” shall mean each Member of the Group other than any Member included in the AAC Subgroup.

“ AFGI Subsidiary ” shall mean each Subsidiary other than any Subsidiary included in the AAC Subgroup.

“ Allocated AAC AMT NOL Amount ” shall mean an aggregate amount of AMT NOLs equal to the product of (i) the AMT NOLs of the Group and (ii) the percentage (expressed as a decimal) determined by dividing (1) the Allocated AAC NOL Amount by (2) the total NOLs of the Group MINUS any Debt Related Income, such NOLs to be determined as of the Determination Date, in each case, to the extent not previously utilized by the AAC Subgroup.

“ Allocated AAC NOL Amount ” shall mean the lesser of (i) $3.8 billion and (ii) the total amount of Pre-Determination Date NOLs MINUS the Debt Related Income.

“ AMT ” shall mean the alternative minimum tax imposed pursuant to Sections 55 through 59 of the Code.

“ AMT NOL or AMT NOLs ” shall mean any NOL or NOLs as determined for purposes of the AMT provisions of the Code, including any adjustments or limitations provided pursuant to Sections 55 though 59 of the Code.

“ Annual AMT NOL Usage Credit ” shall mean, subject to subclause 3(c)(iii)(4):

 

i.

with respect to the Taxable Period beginning on October 1, 2011, $1 million;

 

ii.

during the second (2 nd ) through seventh (7 th ) Taxable Periods following the Taxable Period beginning on October 1, 2011, the sum of (1) $3 million and (2) the excess of $3 million over the lesser of (Y) the portion of the Annual AMT NOL Usage Credit actually utilized in the immediately prior Taxable Period and (Z) $3 million;

 

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iii.

during the eighth (8 th ) Taxable Period following the Taxable Period beginning on October 1, 2011, the sum of (1) $10 million and (2) the excess of $3 million over the lesser of (Y) the portion of the Annual AMT NOL Usage Credit actually utilized in the immediately prior Taxable Period and (Z) $3 million; and

 

iv.

during the ninth (9 th ) Taxable Period following the Taxable Period beginning on October 1, 2011 and any Taxable Period thereafter, the Annual AMT NOL Usage Credit shall be equal to the sum of (1) $10 million and (2) the excess of $10 million over the lesser of (Y) the portion of the Annual AMT NOL Usage Credit actually utilized in the immediately prior Taxable Period and (Z) $10 million.

“ Bankruptcy Plan ” shall mean the Plan of Reorganization of Ambac Financial Group, Inc. filed with the Bankruptcy Court on July 6, 2011 (as amended, supplemented or otherwise modified).

“ Bankruptcy Plan Confirmation Date ” shall mean the date on which an order is entered pursuant to Bankruptcy Code Section 1129 by the Bankruptcy Court confirming the Bankruptcy Plan.

“ Carryback Payment ” shall have the meaning provided in subparagraph 5(a).

“ Cash Grant ” shall mean the $30 million paid by AAC to AFGI (through an escrow account) pursuant to the Mediation Agreement.

“ Closing Date ” shall have the meaning provided in paragraph 11 of the Mediation Agreement.

“ CODI ” shall mean cancellation of indebtedness income as determined under Sections 61(a)(12) and 108(a) of the Code and the Treasury Regulations thereunder.

“ Cooperation Agreement ” shall mean the Cooperation Agreement, dated as of March 24, 2010, among AAC, the Segregated Account, AFGI and the Rehabilitator, as amended.

“ Cost Allocation Agreement ” shall mean the Expense Sharing and Cost Allocation Agreement effective as of the Effective Date among AFGI, AAC and the affiliates listed on Schedule A thereto.

“ Debt Related Income ” shall mean any Interest Recapture plus any CODI, in each case, realized by AFGI or an AFGI Subsidiary in connection with the Bankruptcy Plan and the Chapter 11 Case.

 

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Amended and Restated Tax Sharing Agreement

“ Deconsolidation Event ” shall mean any event that results in neither AAC nor any entity that, pursuant to Section 381 of the Code, succeeds to the tax attributes of AAC described in Section 381(b) of the Code, being characterized as an includible corporation with the Group, all within the meaning of Section 1504 of the Code.

“ Determination Date ” shall mean September 30, 2011.

“ Effective Date ” shall have the meaning provided in paragraph 1.

“ Estimated Tax Payments ” shall mean, for a Taxable Period, the aggregate payments for such Taxable Period provided in paragraph 4 hereof.

“ Everspan ” shall mean Everspan Financial Guarantee Corp.

“ Federal Tax ” shall mean any tax imposed under the Code other than AMT.

“ Final Determination ” shall have the meaning provided in subparagraph 5(a).

“ Group ” shall mean (i) Parent and (ii) any corporation (whether now existing or hereafter formed or acquired) which is includible in the affiliated group, as defined in Section 1504(a) of the Code, which includes Parent (or a new common parent if the affiliated group of which Parent is the common parent as of January 1, 2011 remains in existence under Treasury Regulation Section 1.1502-75(d)(3)).

“ Initial Date ” shall mean the date on which Parent ceased to be a member of the affiliated group of which Citicorp is the common parent.

“ Interest Recapture ” shall mean the amount of any interest expense of AFGI or an AFGI Subsidiary that is disallowed pursuant to Section 382(l)(5)(B) of the Code upon the consummation of the Bankruptcy Plan or otherwise related to the Chapter 11 Case.

“ IRS ” shall mean the U.S. Internal Revenue Service.

“ IRS Dispute ” shall mean the adversary proceeding (including appeals, if any) initiated by AFGI as debtor in the Chapter 11 Case against the IRS (captioned Ambac Financial Group, Inc. vs. United States of America, Case No. 10-04210).

“ Maximum Annual AMT NOL Usage Credit” shall mean, with respect to any Taxable Period, an amount of the Annual AMT NOL Usage Credit equal to the excess, if any, of (i) the AAC AMT NOL Usage Amount (determined before giving effect to the Annual AMT NOL Usage Credit)

 

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Amended and Restated Tax Sharing Agreement

over (ii) the AAC Federal Tax Usage Amount, such excess, subject to the payment provisions of subclause 3(c)(iii)(2).

“ Mediation Agreement ” shall mean the mediation agreement, dated as of September 21, 2011, by and among AFGI, AAC, the Segregated Account, the Wisconsin Office of the Commissioner of Insurance, the Rehabilitator and the Official Committee of Unsecured Creditors of AFGI.

“ Member ” shall mean each corporation (whether now existing or hereafter formed or acquired), including Parent and each of the Subsidiaries, that is entitled, or required, to join with Parent in filing a consolidated federal income tax return with the Group.

“ NOL or NOLs ” shall mean any net operating loss or losses as determined pursuant to Section 172 of the Code.

“ NOL Usage Table ” shall mean the table contained in subclauses 3(c)(i)(2), 3(c)(ii)(2) and 3(c)(iii)(3).

“ NOL Usage Tier ” shall mean the applicable tier for calculating payments as described in each NOL Usage Table.

“ Post-Deconsolidation Allocated AMT NOL Amount ” shall mean an amount equal to (i) the Allocated AAC AMT NOL Amount MINUS (ii) the Pre-Deconsolidation Utilized AMT NOL Amount; provided , however , that AFGI, in its sole discretion, may increase the Post-Deconsolidation Allocated AMT NOL Amount.

“ Post-Deconsolidation Allocated NOL Amount ” shall mean an amount equal to (i) the Allocated AAC NOL Amount, MINUS (ii) the Pre-Deconsolidation Utilized NOL Amount; provided , however , that AFGI in its sole discretion, may increase the Post-Deconsolidation Allocated NOL Amount.

“ Post-Determination Date AMT NOLs ” shall mean, subject to subparagraph 6(f), any AMT NOLs directly accruing and attributable to the AAC Subgroup (determined on a Separate Subsidiary Basis) after the Determination Date.

“ Post-Determination Date NOLs ” shall mean, subject to subparagraph 6(f), any NOLs directly accruing and attributable to the AAC Subgroup (determined on a Separate Subsidiary Basis) after the Determination Date.

“ Pre-Deconsolidation Utilized AMT NOL Amount ” shall mean the aggregate portion of the Allocated AAC AMT NOL Amount deemed utilized by the AAC Subgroup to offset income for AMT purposes pursuant to the provisions of clause 3(c)(iii) following the Determination Date and on or prior to the date on which a Deconsolidation Event occurs

 

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Amended and Restated Tax Sharing Agreement

(including any AMT NOLs that were not directly or indirectly subject to the payment requirements of clause 3(c)(iii)).

“ Pre-Deconsolidation Utilized NOL Amoun t” shall mean the aggregate sum of the Allocated AAC NOL Amount deemed utilized by (i) the AAC Subgroup to offset income for Federal Tax purposes pursuant to the provisions of subclause 3(c)(i)(2) and (ii) the AFGI Subgroup to offset income for Federal Tax purposes pursuant to the provisions of clause 3(c)(vii), in each case, following the Determination Date and on or prior to the date on which a Deconsolidation Event occurs (including any NOLs that were not directly or indirectly subject to the payment requirements of clause 3(c)(i)).

“ Pre-Determination Date AMT NOLs ” shall mean, subject to subparagraph 6(f), any AMT NOLs generated by the Group on or prior to, and existing as of, the Determination Date, not taking into account the consequences of any settlement with respect to the IRS Dispute.

“ Pre-Determination Date NOLs ” shall mean, subject to the provisions of subparagraph 6(f), any NOLs generated by the Group on or prior to, and existing as of, the Determination Date, not taking into account the consequences of any settlement with respect to the IRS Dispute.

“ Recovery Payment ” shall have the meaning provided in subparagraph 5(d).

“ Rehabilitation Court ” shall mean the Circuit Court of Dane County Wisconsin, with respect to the Segregated Account rehabilitation proceeding, Case No. 10-cv-1576.

“ Rehabilitator ” shall mean the rehabilitator of the Segregated Account appointed by the Rehabilitation Court.

“ Segregated Account ” shall mean the segregated account of AAC, established pursuant to a plan of operation which sets forth the manner by which AAC shall establish and operate such segregated account in accordance with Wis. Stat. Section 611.24(2).

“ Separate Subsidiary Basis ” shall mean the Federal Tax liability and AMT liability, taking into account all items of income, gain, deduction, loss, credits (including AMT credits), tax item carryforwards or carrybacks or other similar tax attributes that each Subsidiary would have for such Taxable Period (including interest and penalties related to items attributable to each Subsidiary) determined as if such Subsidiary had filed its own federal tax return for any such Taxable Period and for all prior Taxable Periods beginning on or after the Initial Date employing the methods and principles of accounting, elections and conventions actually

 

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Amended and Restated Tax Sharing Agreement

used in the determination of the Federal Tax and AMT liabilities of the Group.

“ Separate Subsidiary Tax ” for a Taxable Period shall mean, with respect to each Subsidiary, the Federal Tax liability and AMT liability that each Subsidiary would have for such Taxable Period (including interest and penalties related to items attributable thereto) determined on a Separate Subsidiary Basis; provided , however , that (i) prior to a Deconsolidation Event, the AAC Subgroup shall be treated as a single separate Subsidiary of the Group and (ii) after a Deconsolidation Event, the AAC Subgroup shall be treated as a single corporation that is not included in any affiliated group as defined in Section 1504 of the Code and that is filing its own separate federal tax return; provided further , in each case, that for purposes of subparagraph 3(c), the AAC Subgroup or the AFGI Subgroup, as the case may be, shall be characterized as having available for its use the NOLs, AMT NOLs and AMT credits specifically allocated to, or made available for use by, the AAC Subgroup pursuant to (and subject to the limitations provided) in this Tax Sharing Agreement.

“ Subsidiary ” shall mean each corporation, or association taxable as a corporation, that is an includible corporation within the meaning of Section 1504 of the Code with respect to the Group, the AAC Subgroup, or both the Group and the AAC Subgroup, as the case may be.

“ Taxable Period ” shall mean any taxable year (or portion thereof) ending after the Initial Date with respect to which a federal income tax return is filed on behalf of (i) the Group, (ii) the AAC Subgroup or (iii) AAC.

3. Provisions Relating to Payments . For each Taxable Period, the parties hereto shall make payments to each other in accordance with this Tax Sharing Agreement as follows:

 

(a)

Payments to Parent and AAC .

 

(i)

For each Taxable Period of the Group, each AFGI Subsidiary shall pay to Parent the Separate Subsidiary Tax due with respect to such AFGI Subsidiary no later than the due date (excluding extensions) of the Group’s consolidated federal tax return for the Taxable Period in question.

 

(ii)

For each Taxable Period of the Group beginning prior to the occurrence of a Deconsolidation Event, AAC on behalf of the AAC Subgroup, shall pay to Parent the Separate Subsidiary Tax due with respect to the AAC Subgroup no later than the due date (excluding extensions) of the Group’s consolidated federal tax return for the Taxable Period in question; provided , however , that, solely for purposes of this clause 3(a)(ii), in the event that AAC is required to make a payment to Parent pursuant to subclause

 

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Amended and Restated Tax Sharing Agreement

3(c)(i)(3) with respect to the Taxable Period, the Separate Subsidiary Tax of the AAC Subgroup for the Taxable Period shall be calculated by treating any portion of the AFGI NOL Amount that is utilized by the AAC Subgroup as if such NOLs had been generated by the AAC Subgroup rather than by AFGI or an AFGI Subsidiary; and provided further that to the extent that Parent has not previously made all payments to AAC required under this Tax Sharing Agreement and the Prior Agreement, AAC shall be entitled to offset and retain any portion of the payment of Separate Subsidiary Tax that would otherwise be due to Parent.

 

(iii)

For each Taxable Period of the Group beginning prior to the occurrence of a Deconsolidation Event, AAC on behalf of the AAC Subgroup shall pay to Parent any amounts due pursuant to subparagraph 3(c) hereof no later than forty-five (45) days after the due date (excluding extensions) of the Group’s consolidated federal tax return for the Taxable Period in question; provided , however , that any such amounts due prior to the Closing Date shall be deposited in an escrow account established pursuant to the Mediation Agreement and subsequently transferred to AFGI on the Closing Date; provided further , that AAC shall be entitled to offset and retain any portion of any amounts due pursuant to subparagraph 3(c) to the extent that Parent has not previously made all payments to AAC required under this Tax Sharing Agreement and the Prior Agreement.

 

(iv)

With respect to any Taxable Period of the AAC Subgroup beginning after a Deconsolidation Event, AAC shall provide AFGI with (1) a copy of any tax return that includes the AAC Subgroup and that reflects the utilization of any portion of the Post-Deconsolidation Allocated NOL Amount or Post-Deconsolidation Allocated AMT NOL Amount and (2) a reasonably detailed written calculation either of the amounts due to Parent under clauses 3(c)(ii) or 3(c)(iii) or an explanation of why no amounts are due, in each case, at least thirty (30) days before the filing of such tax return. If AFGI agrees in writing within thirty (30) days of the receipt of the items referenced in (1) and (2) above with AAC’s calculation of the amounts due to AFGI, AAC shall pay to AFGI any amounts due pursuant to subparagraph 3(c) no later than the due date of such tax return including extensions; provided , however , that AAC shall be entitled to offset and retain any portion of any amounts due pursuant to subparagraph 3(c) to the extent that Parent has not previously made all payments to AAC required under this Tax Sharing Agreement and the Prior Agreement. Any disputed item related to such tax return shall be subject to the dispute resolution and payment provisions of paragraph 8.

 

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(v)

For each Taxable Period of the Group, each AAC Subsidiary (other than AAC) shall pay to AAC (1) such Subsidiary’s allocable portion of the AAC Subgroup’s Separate Subsidiary Tax, as determined solely in AAC’s discretion, no later than the due date (excluding extensions) of the Group’s consolidated federal tax return for the Taxable Period in question and (2) such subsidiary’s allocable portion of the AAC Subgroup’s amount due to Parent under clause 3(a)(iii), as determined solely in AAC’s discretion, no later than forty-five (45) days after the due date (excluding extensions) of the Group’s consolidated federal tax return for the Taxable Period in question.

 

(b)

Payments by Parent .

 

(i)

To the extent that payments made by any AFGI Subsidiary pursuant to clause 3(a)(i) and paragraph 4 exceed the Separate Subsidiary Tax liability of such AFGI Subsidiary for a Taxable Period, AFGI shall, no later than thirty (30) days after the filing of the Group’s consolidated federal tax return with respect to such Taxable Period, pay such excess to such AFGI Subsidiary.

 

(ii)

To the extent that payments made by AAC on behalf of the AAC Subgroup pursuant to clause 3(a)(ii) and paragraph 4 with respect to a Taxable Period exceed the Separate Subsidiary Tax liability of the AAC Subgroup for such Taxable Period, AFGI shall, no later than thirty (30) days after the filing of the Group’s consolidated federal tax return with respect to such Taxable Period, pay such excess to AAC; provided , however , that Parent shall be entitled to offset and retain any portion of such excess to the extent that AAC has not previously made all payments required under this Tax Sharing Agreement and the Prior Agreement.

 

(iii)

With respect to (1) any Taxable Period of the Group that does not include a Deconsolidation Event or (2) the portion of any Taxable Period of the Group prior to the occurrence of a Deconsolidation Event, to the extent that payments made by AAC on behalf of the AAC Subgroup pursuant to subparagraph 3(c) exceed the payments required to be made thereunder, AFGI shall, no later than thirty (30) days after the filing of the Group’s consolidated federal tax return with respect to such Taxable Period, pay such amounts to AAC; provided , however , that Parent shall be entitled to offset and retain any portion of such excess to the extent that AAC has not previously made all payments required under this Tax Sharing Agreement and the Prior Agreement.

 

(iv)

For each Taxable Period of the Group beginning on or prior to the date on which a Deconsolidation Event occurs, Parent shall pay to

 

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AAC on behalf of the AAC Subgroup any amounts due pursuant to clause 3(c)(vii) hereof no later than the due date (excluding extensions) of the Group’s consolidated federal tax return with respect to such Taxable Period.

 

(v)

For the avoidance of doubt, the provisions of paragraph 5 shall be taken into account with respect to any payments made as a result of a Final Determination or Carryback Payment (as such terms are defined below).

 

(c)

Payments Related to the Notional Utilization of NOLs . For purposes of determining any payments required under this subparagraph 3(c) related to the notional utilization of NOLs:

 

(i)

Allocated AAC NOL Amount during Consolidation . Subject to clauses 3(c)(iv) through 3(c)(viii):

 

(1)

Allocated NOLs . Unless and until there has been a Deconsolidation Event, the aggregate amount of Pre-Determination Date NOLs allocated to, and available for use by, the AAC Subgroup to offset income for Federal Tax purposes shall be an aggregate amount equal to the Allocated AAC NOL Amount.

 

(2)

NOL Usage Payment . The AAC Subgroup in the aggregate may utilize Pre-Determination Date NOLs to offset income for Federal Tax purposes in an amount up to the Allocated AAC NOL Amount (to the extent not previously utilized in a prior Taxable Period pursuant to this subclause 3(c)(i)(2)). During any Taxable Period that the AAC Subgroup offsets income for Federal Tax purposes by utilizing any portion of the available Allocated AAC NOL Amount with respect to any NOL Usage Tier set forth in the NOL Usage Table below (taking into account all prior NOL utilization within each NOL Usage Tier during any Taxable Period), AAC shall make payments to AFGI within the time and in the manner prescribed herein in an amount equal to (Y) the applicable percentages with respect to the applicable NOL Usage Tier, multiplied by (Z) the AAC Notional Federal Tax Amount attributable to the utilization of such portion of the Allocated AAC NOL Amount within the applicable NOL Usage Tier or NOL Usage Tiers, as the case may be.

 

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Amended and Restated Tax Sharing Agreement