AMBAC FINANCIAL GROUP INC (Form: 8-K, Received: 06/08/2010 09:10:34)

USA Patriot Act

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): June 8, 2010 (June 7, 2010)

AMBAC FINANCIAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware

1-10777

13-3621676

(State of incorporation)

(Commission

file number)

(I.R.S. employer

identification no.)

One State Street Plaza, New York, New York 10004

(Address of principal executive offices) (Zip Code)

(212) 668-0340

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

Item 1.01

Entry into a Material Definitive Agreement.

On June 7, 2010, Ambac Assurance Corporation (“AAC”), the principal operating subsidiary of Ambac Financial Group, Inc. (the “Company”), entered into a Settlement Agreement (the “Settlement Agreement”) with the counterparties (the “Counterparties”) to outstanding credit default swaps with Ambac Credit Products, LLC (“ACP”) that were guaranteed by AAC. A copy of the Settlement Agreement is filed as Exhibit 10.1 hereto and is incorporated by reference herein. Pursuant to the terms of the Settlement Agreement, in exchange for the termination of the Commuted CDO of ABS Obligations (as defined below), AAC paid to the Counterparties in the aggregate (i) $2.6 billion in cash and (ii) $2 billion of newly issued surplus notes of AAC (the “AAC Surplus Notes”). In addition, effective June 7, 2010, the outstanding credit default swaps with the Counterparties remaining in the general account of AAC have been amended to remove certain events of default and termination events, as set forth in the Settlement Agreement.

Pursuant to the Settlement Agreement, AAC has filed an amendment to its articles of incorporation. Under such amendment, at all times after September 30, 2010, at least two members of the board of directors of AAC must be Unaffiliated Qualified Directors (as defined in the Settlement Agreement) and, at all times after November 29, 2010, at least one-third (and, in any event, not less than three members) of the board of directors of AAC must be Unaffiliated Qualified Directors. If at any time AAC does not have the requisite number of Unaffiliated Qualified Directors, AAC has agreed to use its commercially reasonable efforts to find additional Unaffiliated Qualified Directors.

The Settlement Agreement includes covenants that remain in force until the AAC Surplus Notes have been redeemed, repurchased or repaid in full. These covenants generally restrict the operations of AAC and its subsidiaries to runoff activities. Certain of these restrictions may be waived with the approval of a majority of the Unaffiliated Qualified Directors and/or the Office of the Commissioner of Insurance of the State of Wisconsin (the “OCI”). However, other restrictions may only be waived with the approval of the holders of a majority of the outstanding AAC Surplus Notes (excluding any notes held by AAC or its affiliates) that cast a ballot and, in certain cases, with the approval of all of the Counterparties.

Pursuant to a commutation agreement entered into with each of the Counterparties that is a party to credit default swaps written by ACP with respect to certain CDO of ABS obligations and related financial guaranty insurance policies written by AAC with respect to ACP’s obligations thereunder, AAC and ACP have commuted all of such obligations (the “Commuted CDO of ABS Obligations”), totaling approximately $16.4 billion of par. The form of the Commutation Agreement entered into with each Counterparty is filed as Exhibit 10.2 hereto and is incorporated by reference herein. In addition to the commutation of the Commuted CDO of ABS Obligations, AAC has also commuted for $96.5 million of cash certain additional obligations, including certain non-CDO of ABS obligations, to the Counterparties with par or notional amounting to approximately $1.4 billion. It is expected that, subject to certain conditions, certain other non-CDO of ABS obligations with par amounting to a maximum of approximately $1.5 billion will be commuted within the next twelve months for a maximum amount of approximately $115 million of cash plus $60 million of surplus notes of AAC. Each of the Counterparties, on the one hand, and AAC, ACP and the Company, on the other hand, have released the other party from any claims relating to any credit default swaps or financial guaranty insurance policies commuted pursuant to the Commutation Agreements. In addition, AAC, ACP and the Company, on the one hand, and a Counterparty have generally released the other party from any claims relating to actions taken or omitted to be taken prior to June 7, 2010, subject to certain exceptions.

The AAC Surplus Notes have a scheduled maturity of June 7, 2020. Interest on the AAC Surplus Notes is payable annually at the rate of 5.1%. All payments of principal and interest on the AAC Surplus Notes are subject to the prior approval of the OCI. If the OCI does not approve the payment of interest on the AAC Surplus Notes, such interest will accrue and compound annually until paid. The AAC Surplus Notes were issued pursuant to a Fiscal Agency Agreement entered into on June 7, 2010 with The Bank of New York Mellon, as fiscal agent (the “Fiscal Agency Agreement”). A copy of the Fiscal Agency Agreement (including the form of AAC Surplus Notes attached as exhibits thereto) is filed as Exhibit 10.3 hereto and is incorporated by reference herein.

AAC has entered into call options with certain of the Counterparties pursuant to which, with the prior consent of OCI, AAC may repurchase AAC Surplus Notes from such Counterparties. As of the date hereof, AAC has options to call an aggregate of $940 million of AAC Surplus Notes at a weighted average call price of $0.22 per $1.00 face amount. These options have a weighted average maturity of approximately 30 months.

Pursuant to the terms of the Settlement Agreement, on June 7, 2010, the Company entered into Amendment No. 3 to the Tax Sharing Agreement (the “Tax Sharing Agreement”) with its affiliates. A copy of the Tax Sharing Agreement is filed as Exhibit 10.4 hereto and is incorporated by reference herein. Under the Tax Sharing Agreement, the consolidated net operating losses (“NOL”) of the group are treated as an asset of AAC and its subsidiaries. The Company is required to compensate AAC on a current basis for use of any portion of that asset, except that the Company is not required to compensate AAC for the Company’s use of NOL in connection with cancellation of debt income associated with restructurings of its debt outstanding as of March 15, 2010.

Impact on Ambac Financial Group, Inc.

The Company’s liquidity and solvency, both on a near-term basis and a long-term basis, are largely dependent on dividends and other payments from AAC and on the value of AAC after the Surplus Notes (as defined below) have been redeemed, repurchased or repaid in full. The Company’s principal uses of liquidity are for the payment of principal (including maturing principal in the amount of $142.5 million on its 9.375% senior notes due August 2011) and interest on its debt (including annual interest expense of approximately $88.7 million, after taking into account the deferral of interest on the DISCs), its operating expenses, and capital investments in and loans to its subsidiaries. Further, other contingencies (e.g., an unfavorable outcome in the outstanding class action lawsuits against the Company) could cause additional strain on its capital and liquidity. It is highly unlikely that AAC will be able to make dividend payments to the Company for the foreseeable future.

While management believes that the Company will have sufficient liquidity to satisfy its needs through the second quarter of 2011, no guarantee can be given that it will be able to pay all of its operating expenses and debt service obligations thereafter, and its liquidity may run out prior to the second quarter of 2011. Further, prior to the second quarter of 2011, and as early as the second quarter of 2010, the Company may decide not to pay interest on its debt. The failure by the Company to pay interest or principal on its debt when due would result in an event of default, thereby permitting the debt holders to accelerate the maturity of the Company’s outstanding debt. As a result, the Company may

consider, among other things, raising additional capital to the extent possible, a negotiated restructuring of its outstanding debt through a prepackaged bankruptcy proceeding or a bankruptcy without agreement concerning a plan of reorganization with major creditor groups. No assurance can be given that the Company will be successful in executing any or all of these strategies.

Under the terms of the Settlement Agreement, AAC has issued AAC Surplus Notes to the Counterparties. In addition, pursuant to the terms of the proposed rehabilitation plan for the Segregated Account of Ambac Assurance Corporation (the “Segregated Account”), AAC will issue additional surplus notes (together with the AAC Surplus Notes, the “Surplus Notes”) to pay a portion of the claims of the Segregated Account. The aggregate amount of the Surplus Notes issued by AAC will be substantial. The Surplus Notes rank senior to the Company’s equity investment in AAC. There is residual value to the Company in AAC only to the extent that funds remain at AAC after the payment of claims under outstanding financial guaranty policies and the redemption, repurchase or repayment in full of the Surplus Notes and AAC’s auction market preferred shares. The value of the Company’s equity investment in AAC is difficult to estimate, and will primarily depend on the performance of AAC’s insured portfolio (i.e., the ultimate losses therein relative to its claims paying resources), ongoing remediation efforts of AAC with respect to policies allocated to the Segregated Account, including those relating to residential mortgage-backed securities, and on other factors, including AAC’s ability to repurchase Surplus Notes and auction market preferred shares at less than their face value.

In addition, the rehabilitator of the Segregated Account retains significant decision-making authority with respect to the Segregated Account and has the discretion to oversee and approve certain actions taken by AAC in respect of assets and liabilities which remain in AAC, and such decisions will be for the benefit of policyholders and will not take into account the interests of securityholders of the Company. Actions taken by the rehabilitator could further reduce the equity value of AAC.

Certain U.S. Federal Income Tax Considerations Related to the Surplus Notes

It is possible that the Surplus Notes may be characterized as equity of AAC for U.S. federal income tax purposes. If the Surplus Notes are characterized as equity of AAC and it is determined the Surplus Notes represent more than 20% of the total value of the stock of AAC, AAC may no longer be characterized as an includable corporation that is affiliated with the Company. As a result, AAC may no longer be characterized as a member of the U.S. federal income tax consolidated group of which the Company is the common parent (the “Company Consolidated Tax Group”) and AAC would be required to file a separate consolidated tax return as the common parent of a new U.S. federal income tax consolidated group including AAC as the new common parent and AAC’s affiliated subsidiaries (the “Ambac Assurance Consolidated Tax Group”).

To the extent AAC is no longer a member of the Company Consolidated Tax Group, the AAC NOL (and certain other available tax attributes of AAC and the other members of the Ambac Assurance Consolidated Tax Group) may no longer be available for use by the Company or any of the remaining members of the Company Consolidated Tax Group to reduce the U.S. federal income tax liabilities of the Company Consolidated Tax Group. This could result in a material increase in the tax liabilities of the Company Consolidated Tax Group. In addition, certain other benefits resulting from U.S. federal income tax consolidation may no longer be available to the Company Consolidated Tax Group, including certain favorable rules relating to transactions occurring between members of the Company Consolidated Tax Group and members of the Ambac Assurance Consolidated Tax Group.

If the Surplus Notes are characterized as equity of AAC and it is determined the Surplus Notes represent more than 50% of the total value of the stock of AAC, the AAC NOL (and certain other tax attributes or tax benefits of the Ambac Assurance Consolidated Tax Group) may be subject to limitation, including the limitation provided by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). If Section 382 were applicable with respect to the Ambac Assurance Consolidated Tax Group, in general the Ambac Assurance Consolidated Tax Group annual use of the group’s NOL may be limited to an amount equal to the product of (i) the value of the Ambac Assurance Consolidated Tax Group’s stock and (ii) the applicable federal long term tax exempt interest rate. However, certain exemptions to the Code Section 382 limitation may be applicable.

Furthermore, to the extent AAC is no longer characterized as a member of the Company Consolidated Tax Group, the Ambac Assurance Consolidated Tax Group may not reconsolidate with the Company Consolidated Tax Group for a period of five years following such event, even if the Company were to be characterized as reacquiring or owning 80% or more of the stock of the Ambac Assurance Consolidated Tax Group following any deconsolidation. In addition, depending upon certain facts related to the potential deconsolidation of the Ambac Assurance Consolidated Tax Group and any reconsolidation with the Company Consolidated Tax Group, the acquisition by the Company Consolidated Tax Group of additional value with respect to the stock of the Ambac Assurance Consolidated Tax Group may also result in the imposition of a Code Section 382 limitation with respect to the Ambac Assurance Consolidated Tax Group’s NOL reducing or eliminating the potential tax benefit of the NOL to the Company Consolidated Tax Group.

Item 9.01.

Financial Statements and Exhibits.


Exhibit No.		Description

10.1		Settlement Agreement, dated as of June 7, 2010, by and among Ambac Assurance Corporation, Ambac Credit Products, LLC, Ambac Financial Group, Inc. and the parties listed on Schedule A thereto.

10.2		Form of Commutation Agreement.

10.3		Fiscal Agency Agreement, dated as of June 7, 2010, by and between Ambac Assurance Corporation and The Bank of New York Mellon, as fiscal agent.

10.4		Amendment No. 3 to Tax Sharing Agreement, dated as of June 7, 2010, by and among Ambac Financial Group, Inc. and certain of its affiliates.

SIGNATURES

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 thereunto duly authorized.


	Ambac Financial Group, Inc.
	(Registrant)

Dated: June 8, 2010

	By:	/s/ David Trick
		David Trick
		Senior Managing Director, Chief Financial Officer and Treasurer

Exhibit 10.1

EXECUTION COPY

SETTLEMENT AGREEMENT

SETTLEMENT AGREEMENT (this “ Agreement ”), dated as of June 7, 2010 is entered into by and among:

(a) Ambac Assurance Corporation, a Wisconsin-domiciled insurance company (“ AAC ”);

(b) Ambac Credit Products, LLC, a Delaware limited liability company (“ ACP ”);

(d) The Persons listed on Schedule A hereto, each of which has become a Party to this Agreement on the date hereof pursuant to the execution of a joinder agreement in the form attached hereto as Exhibit A (each, a “ Joinder Agreement ”) and delivery of such joinder agreement to AAC (each individually, a “ Policy Beneficiary ” and collectively, the “ Policy Beneficiaries ”).

Capitalized terms used in this Agreement shall have the meanings set forth in Section 1.01 hereof.

RECITALS

WHEREAS, the Policy Beneficiaries are beneficiaries of financial guaranty insurance policies issued by AAC; and

WHEREAS, the parties hereto have been in ongoing negotiations regarding a comprehensive settlement with respect to certain obligations under such policies and related matters.

NOW, THEREFORE, in consideration of the premises and the covenants, conditions and agreements contained herein, and for other fair and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01 . Certain Defined Terms. For purposes of this Agreement:

“ AAC ” has the meaning set forth in the Preamble.

“ AAC Surplus Notes ” means the 5.1% Surplus Notes scheduled to mature on the 10th anniversary of the Closing Date, issued at the Closing to certain of the Commuting Policy Beneficiaries solely as set forth on the ABS CDO Consideration Schedule, in the form attached hereto as Exhibit B.

“ ABS CDO CDSs ” means each of the CDSs between a Policy Beneficiary and ACP that are guaranteed by AAC and reference asset backed securities collateralized debt obligations and are listed as a “Commuted Transaction” on the ABS CDO Consideration Schedule.

“ ABS CDO Consideration Schedule ” means that certain Schedule dated as of June 3, 2010 and delivered by FTI Consulting, Inc. to AAC and each of the Commuting Policy Beneficiaries that signs a Commutation Agreement pertaining to ABS CDO CDSs, which sets forth on an anonymous, transaction-by-transaction basis (with such transactions not grouped together, even on an anonymous basis, on a Policy Beneficiary-by-Policy Beneficiary basis), the Liability Appraiser Base Case, the Liability Appraiser Stress Case and the Liability Appraiser Market Value, and the related Commutation Consideration (and calculation thereof) for each of the ABS CDO CDSs. The information on the ABS CDO Consideration Schedule has been provided by FTI Consulting, Inc., confirmed by AAC and, with respect to each ABS CDO CDS to which a Commuting Policy Beneficiary is a party, confirmed by such Commuting Policy Beneficiary.

“ ACP ” has the meaning set forth in the Preamble.

“ Action ” means any judicial, administrative or arbitral action, suit, or proceeding by or before any Governmental Authority.

“ Affiliate ” means, with respect to any specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the specified Person. For the purposes of this definition, “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ controlled ” have meanings correlative thereto. For the avoidance of doubt, no Person will be deemed to control another Person by virtue of acting in an agency, advisory, asset management, investment management, fiduciary or similar capacity.

“ AFGI ” has the meaning set forth in the Preamble.

“ Allocated Share ” means, with respect to a Commuting Policy Beneficiary, the arithmetic average of the percentage of total losses (out to three decimal places) under each of the Liability Appraiser Base Case, the Liability Appraiser Stress Case and the Liability Appraiser Market Value attributable to such Commuting Policy Beneficiary’s ABS CDO CDSs, in each case as set forth on the ABS CDO Consideration Schedule.

“ Ambac Parties ” means AAC, ACP and AFGI.

“ Ambac UK ” means Ambac Assurance UK Limited, a United Kingdom-domiciled insurance company.

“ Ambac UK Reinsurance Agreement ” means that certain Amended and Restated 1997 Reinsurance Agreement between Ambac UK (f/k/a Ambac Insurance UK Ltd.) and AAC (f/k/a Ambac Indemnity Corp.) dated November 17, 2009.

“ Amended CDSs ” has the meaning set forth in Section 3.06.

“ Ancillary Agreements ” means (i) the Commutation Agreements, (ii) the AAC Surplus Notes and the related Fiscal Agency Agreement, (iii) the Tax Sharing Agreement, (iv) the SL Agreement, (v) the Charter Amendment, (vi) all other documents, instruments and other agreements executed (or, when referred to prior to the Closing, to be executed at the Closing) in connection with this Agreement as contemplated hereby (other than the agreement between AAC and OCI contemplated by Section 2.03(c)(ix) or any agreement with a Policy Beneficiary relating to the purchase, repurchase or call of AAC Surplus Notes, as contemplated by Section 3.04(l)).

“ Business Day ” means any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized by Law to be closed in New York.

“ CDS ” means a credit default swap.

“ Charter Amendment ” means the amended and restated articles of incorporation of AAC in the form attached hereto as Exhibit C.

“ Closing ” has the meaning set forth in Section 2.02.

“ Closing Date ” means the date of the Closing.

“ Common Advisors ” mean Davis Polk & Wardwell LLP, Godfrey & Kahn, SC and FTI Consulting, Inc.

“ Commutation Agreement ” means each Commutation Agreement by and among the Ambac Parties and each Commuting Policy Beneficiary in the form attached hereto as Exhibit D (with variations as provided in such form), executed and delivered (or, when referred to prior to the Closing, contemplated hereby to be executed and delivered) at the Closing.

“ Commutation Consideration ” means, with respect to any Commuting Policy Beneficiary:

(a) with respect to the ABS CDO CDSs (and related financial guaranty insurance policies), such Commuting Policy Beneficiary’s Allocated Share of cash in the aggregate amount of $2.6 billion; plus

(b) with respect to the ABS CDO CDSs (and related financial guaranty insurance policies), such Commuting Policy Beneficiary’s Allocated Share of $2.0 billion in original principal amount of AAC Surplus Notes; plus

(c) if such Commuting Policy Beneficiary is commuting a policy referred to on Schedule B hereto on the Closing Date (it being understood that such policies cover certain non-ABS CDO transactions), an amount equal to the amount set forth opposite such policy on Schedule B hereto.

“ Commuting Policy Beneficiary ” means each Policy Beneficiary listed on the schedule marked “Commuting Policy Beneficiary Schedule – Execution Copy” dated as of June 3, 2010 and delivered by FTI Consulting, Inc. to AAC, Davis Polk & Wardwell LLP and Godfrey & Kahn, SC.

“ Cooperation Agreement ” means that certain Cooperation Agreement dated as of March 24, 2010 by and between the Segregated Account and AAC.

“ Everspan ” means Everspan Financial Guarantee Corp., a Wisconsin-domiciled insurance company.

“ Financial Reporting Package ” means the financial reports and other information set forth in Schedule C hereto.

“ Fiscal Agency Agreement ” means the fiscal agency agreement in the form attached hereto as Exhibit E, relating to the AAC Surplus Notes.

“ Forbearance Agreement ” means that certain Forbearance and Standstill Agreement dated as of March 24, 2010 among AAC, ACP, OCI and the Policy Beneficiaries signatory thereto, as amended prior to the date hereof.

“ GA Remediation Action ” means any remediation, commutation, synthetic commutation, settlement, release or termination, any amendment or restructuring as a loss mitigation or value preservation effort or transaction, or any other similar loss mitigation or value preservation effort or transaction by AAC or its Affiliates with respect to an obligation of the General Account that either (A) involves the issuance, incurrence or assumption by AAC or any of its Subsidiaries of less than or equal to $10,000,000 in face amount of Surplus Notes, policies or other obligations (measured on an individual or, in the case of related series of transactions, on an aggregate basis) or (B) satisfies the OCI Approval Standard.

“ GAAP ” means United States generally accepted accounting principles in effect from time to time.

“ General Account ” means the general account of AAC.

“ Governmental Authority ” means any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award issued or entered by or with any Governmental Authority.

“ Intercompany Agreements ” means (i) all of the agreements or other arrangements between or among any of AAC or its Subsidiaries and their respective Affiliates in existence on the date hereof and (ii) such other agreements and arrangements between or among any of AAC or its Subsidiaries and their respective Affiliates entered into after the date hereof that satisfies the OCI Approval Standard.

“ Joinder Agreement ” has the meaning set forth in the Preamble.

“ Law ” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule (including any rules regarding discovery), code, order, requirement or rule of law (including common law).

“ Legal Opinion ” means a written opinion by Dewey & LeBoeuf LLP, in the form attached hereto as Exhibit F1.

“ Liability Appraiser ” means that firm engaged by Davis Polk & Wardwell LLP (in its capacity as counsel to the Policy Beneficiaries) and AAC (on behalf of itself and its Affiliates) pursuant to that certain Advisory Services Agreement dated as of January 8, 2010.

“ Liability Appraiser Base Case ” means the “Base Case Losses” with respect to the insured tranches of collateralized debt obligations underlying all ABS CDO CDSs as determined by the Liability Appraiser as of October 31, 2009 and set forth on the ABS CDO Consideration Schedule.

“ Liability Appraiser Stress Case ” means the “Stress Case Losses” with respect to the insured tranches of collateralized debt obligations underlying all ABS CDO CDSs as determined by the Liability Appraiser as of October 31, 2009 and set forth on the ABS CDO Consideration Schedule.

“ Liability Appraiser Market Value ” means the “Market Value Losses” as determined by the Liability Appraiser by subtracting the “Market Value” (as determined

by the Liability Appraiser) of the insured tranches of the collateralized debt obligations underlying all ABS CDO CDSs from the current notional exposure thereof, calculated as of October 31, 2009 and set forth on the ABS CDO Consideration Schedule.

“ Lien ” means any lien, pledge, mortgage, deed of trust, security interest, claim, lease or similar encumbrance.

“ Material Intercompany Agreement ” means each Intercompany Agreement (or group or series of related Intercompany Agreements as contemplated by Wis. Admin. Code Ins. § 40.04(4)) (i) entered into other than in the ordinary course of business (where the ordinary course of business, for the avoidance of doubt, shall include policies, indemnitees, guarantees or other contractual arrangements entered into in connection with the issuance of policies) that requires cash payments or asset transfers by AAC of amounts in excess of $15,000,000 in any twelve-month period or (ii) pursuant to which either AAC or any Subsidiary is obligated to make payments or transfer assets to an Affiliate (other than to AAC or any wholly-owned Subsidiary (other than Ambac UK)).

“ Moody’s ” means Moody’s Investors Services, Inc.

“ Note Amendment ” has the meaning set forth in Section 3.07.

“ OCI ” means the Office of the Commissioner of Insurance of the State of Wisconsin.

“ OCI Approval Standard ” shall be satisfied with respect to any matter, action or transaction if OCI has determined in its sole and absolute discretion that such matter, action or transaction does not violate the law, is reasonable and fair to the interests of AAC, and protects and is equitable to the interests of AAC policyholders generally. Matters, actions or transactions that require cash payments or asset transfers by AAC or one of its Subsidiaries of amounts less than $15,000,000 in any twelve-month period and involve the incurrence of obligations or commitments of less than $15,000,000 (in each case, measured per matter, action or transaction or, in the case of related matters, actions or transactions, in the aggregate) and, in the case of Section 3.04(e)(iii), less than $50,000,000 in any twelve-month period, shall be deemed to have satisfied such standard.

“ Other Seg Account Policy Notes ” means Surplus Notes (other than the AAC Surplus Notes, the RMBS Surplus Notes and the SL Surplus Notes), issued to satisfy claims made under policies in the Segregated Account on a pay as you go basis in accordance with the Segregated Account Rehabilitation Plan approved by the Rehabilitator or the Rehabilitation Court pursuant to Wis. Stat. § 645.33(5).

“ Party ” or “ Parties ” means any party or all parties, as applicable, to this Agreement.

“ Permitted Liens ” means (a) Liens for taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the financial statements of AAC or the Segregated Account in accordance with GAAP or SAP, as applicable, (b) statutory Liens of landlords, (c) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the ordinary course of business consistent with past practice, (d) in the case of real property, zoning, building, or other restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title, none of which, individually or in the aggregate, (i) interfere in any material respect with the present use of or occupancy of the affected parcel by the Ambac Parties, (ii) have more than an immaterial effect on the value thereof or its use, or (iii) would impair the ability of such parcel to be sold for its present use, (e) Liens securing obligations arising as a result of any actions under or pursuant to the RMBS Remediation Plan, the SL Remediation Plan, the SA Remediation Plan or any GA Remediation Action, (f) Liens incurred directly in connection with AAC’s and Ambac Capital Funding, Inc.’s obligations under the guaranteed investment contracts entered into by Ambac Capital Funding, Inc. and in connection with futures contracts and swap agreements entered into by Ambac Financial Services, LLC, (g) Liens incurred pursuant to the Secured Note, (h) Liens existing on the date hereof, (i) other Liens (X) incurred in the ordinary course of business, (Y) securing obligations (other than Surplus Notes) not prohibited under this Agreement and (Z) on property posted as collateral having an aggregate fair market value of not more than $50,000,000 (disregarding any property posted as collateral on the date hereof (so long as the relevant collateral arrangement continues to exist)), (j) Liens in favor of wholly-owned Subsidiaries granted in the ordinary course of business, (k) Liens that satisfy the OCI Approval Standard and (l) Liens by Affiliates in favor of AAC.

“ Person ” means an individual, corporation, partnership, limited partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“ Plan of Operation ” means the Plan of Operation for the Segregated Account of Ambac Assurance Corporation attached as Tab 1 to the Verified Petition for Order of Rehabilitation filed on March 24, 2010 in the Rehabilitation Court as part of the Rehabilitation Proceeding, as amended from time to time.

“ Policy Beneficiary ” has the meaning set forth in the Preamble.

“ Qualified ” means a person, as reasonably determined by AAC, who has the personal characteristics of independence, integrity, high personal and professional ethics, sound business judgment, and the relevant experience and ability and willingness to commit sufficient time to serving on the board of directors of AAC.

“ Rehabilitation Court ” means the Dane County Circuit Court in the State of Wisconsin.

“ Rehabilitation Proceeding ” means the proceeding commenced in the Rehabilitation Court with the caption “In the Matter of the Rehabilitation of: Segregated Account of Ambac Assurance Corporation,” Case No. 10-CV-1576.

“ Rehabilitator ” means the rehabilitator of the Segregated Account, appointed by the Rehabilitation Court, and such rehabilitator’s successors.

“ Reinsurance Agreement ” means that certain Aggregate Excess of Loss Reinsurance Agreement, dated as of March 24, 2010, by and between the Segregated Account and AAC.

“ Released Matters ” has the meaning set forth in Section 6.09(c).

“ Released Party ” has the meaning set forth in Section 6.09(c).

“ Representatives ” means, with respect to any Party, such Party’s directors, officers, partners, principals, members, employees, attorneys, agents, accountants, auditors, advisors, sub-contractors and each Person, if any, who controls such Party or any such other Person or entity.

“ Restricted Payment ” means (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock or other equity interest of AAC or any Subsidiary of AAC (other than those payable or distributable solely to AAC or any wholly-owned Subsidiary of AAC (other than Ambac UK)) now or hereafter outstanding, except a dividend payable solely in shares of a class of stock or other equity interest to the holders of that class, (b) any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for value (whether for cash, assets or other consideration, other than payments made with common equity or non-redeemable preferred stock issued by AAC), direct or indirect, of any shares of any class of stock or other equity interests of AAC or any of its Subsidiaries (other than those payable or distributable solely to AAC or any wholly-owned Subsidiary of AAC (other than Ambac UK)) now or hereafter outstanding, (c) investments by AAC or its Subsidiaries in any other Person (including loans to, or guarantees of obligations of, such Person), including any such investment by AAC or any Subsidiary of AAC in any Subsidiary of AAC, (d) any management or service fee to, or payment to reimburse expenses of, any Affiliate of AAC except pursuant to any Intercompany Agreement permitted hereby or any Ancillary Agreement and except for reimbursement of legal or administrative expenses of wholly-owned Subsidiaries and (e) any payment by AAC or its Subsidiaries on any other Surplus Notes or any class of obligations of AAC that, in each case, ranks junior to the AAC Surplus Notes but senior to the stock or other equity interests issued by AAC or any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for value (whether for cash, assets or other consideration other than payments made with common equity or non-redeemable preferred stock issued by AAC), direct or indirect, of any such Surplus Note or class of obligations.

“ Restructuring ” means: (a) the commutation of CDSs and other transactions and financial guaranty insurance policies and mutual releases and other agreements pursuant to the Commutation Agreements as provided in Section 2.01 hereof, including the payment of the cash commutation payments and the issuance of AAC Surplus Notes in connection therewith, (b) the Plan of Operation and the consummation of the transactions contemplated thereby, (c) the adoption of the Charter Amendment and (d) the other transactions expressly contemplated by this Agreement and the Ancillary Agreements, including the restructuring of the SL Obligations.

“ RMBS ” means residential mortgage backed securities.

“ RMBS Obligations ” means the Segregated Account’s payment obligations under the financial guaranty insurance policies issued by it on bonds, certificates, notes or other securities payable solely from RMBS assets.

“ RMBS Remediation Plan ” means (a) the payment of RMBS Obligations on a pay as you go basis in accordance with the Segregated Account Rehabilitation Plan approved by the Rehabilitation Court pursuant to Wis. Stat. § 645.33(5) and (b) other remediation, commutation, synthetic commutation, settlement, release or termination, any amendment or restructuring as a loss mitigation or value preservation effort or transaction or any other similar loss mitigation or value preservation efforts or transactions by AAC or its Affiliates with respect to RMBS Obligations, including litigation related to any alleged breaches of representations and warranties, commutations and restructurings, and purchases of RMBS Obligations, including a possible tender offer for the RMBS Obligations but not the underlying RMBS (other than through a synthetic commutation pursuant to which AAC does not directly acquire such RMBS)), in each case if and to the extent such actions or transactions are approved by the Rehabilitator or the Rehabilitation Court, or satisfy the OCI Approval Standard.

“ RMBS Surplus Notes ” means Surplus Notes issued pursuant to the RMBS Remediation Plan.

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

“ SA Remediation Plan ” means remediation, commutation, synthetic commutation, settlement, release or termination, any amendment or restructuring as a loss mitigation or value preservation effort or transaction, or any other similar loss mitigation or value preservation efforts or transactions by AAC or its Affiliates with respect to Segregated Account payment obligations (other than (i) the RMBS Obligations or (ii) the SL Obligations (to the extent in the Segregated Account)) if and to the extent such actions or transactions are approved by the Rehabilitator or the Rehabilitation Court, or satisfy the OCI Approval Standard.

“ SAP ” means statutory accounting principles for insurance companies in the State of Wisconsin.

“ Section 3.04 Benefited Parties ” has the meaning set forth in Section 3.04.

“ Secured Note ” means that certain Secured Note, dated as of March 24, 2010, from AAC to the Segregated Account.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Segregated Account ” means the segregated account of AAC established under Wis. Stat. § 611.24(2) by AAC on March 24, 2010.

“ Segregated Account Rehabilitation Plan ” means a plan of rehabilitation for the Segregated Account submitted or to be submitted by the Rehabilitator for approval by the Rehabilitation Court pursuant to Wis. Stat. § 645.33(5).

“ SL Agreement ” means that certain agreement to be executed and delivered at the Closing by AAC and the Policy Beneficiary identified therein with respect to the potential commutation or synthetic commutation, amendment, restructuring or other treatment of certain bonds, certificates, notes or other securities that are the subject of SL Obligations.

“ SL Obligations ” means AAC’s payment obligations under financial guaranty insurance policies and surety bonds issued by AAC on, or in connection with, bonds, certificates, notes or other securities payable principally from assets consisting of student loans and the proceeds thereof.

“ SL Remediation Plan ” means (a) the payment of certain SL Obligations on a pay as you go basis in accordance with the Segregated Account Rehabilitation Plan and (b) the remediation, commutation, synthetic commutation, settlement, release or termination, amendment or restructuring as a loss mitigation or value preservation effort or transaction, or any other similar loss mitigation or value preservation treatment of certain SL Obligations (i) as provided in the SL Agreement (or any other post-Closing agreement or arrangement) with respect to SL Obligations that are not in the Segregated Account or (ii) with respect to SL Obligations that are in the Segregated Account, which in each case may include purchases of SL Obligations or related insured obligations, including a possible tender offer, in each case, if and to the extent such actions or transactions are approved by the Rehabilitator or the Rehabilitation Court, or satisfy the OCI Approval Standard.

“ SL Surplus Notes ” means Surplus Notes issued pursuant to the SL Remediation Plan.

“ Statement of Intent ” means that Statement of Intent executed by OCI and AAC (on behalf of itself and its Affiliates) on March 24, 2010.

“ Subsidiary ” or “ Subsidiaries ” means, with respect to a specified Person, any corporation, partnership, limited partnership, limited liability company or other entity as to which the specified Person, directly or indirectly (including through one or more Subsidiaries), owns a majority of the outstanding shares of stock or other ownership interests having voting power under ordinary circumstances to elect directors of such corporation or other Persons performing similar functions for such entity.

“ Surplus Notes ” means surplus or contribution notes (or other similar securities that are preferred to common or preferred equity but junior in right of payment to indebtedness (other than surplus notes) and policy obligations), issued by AAC out of the General Account in the case of the AAC Surplus Notes or out of the General Account or the Segregated Account in the case of any other such surplus or contribution notes (or other such similar securities), including the Other Seg Account Policy Notes, the SL Surplus Notes and the RMBS Surplus Notes.

“ Tax Sharing Agreement ” means the tax sharing agreement among AFGI and certain of its Affiliates, dated as of the Closing Date in the form attached hereto as Exhibit G.

“ Transactions ” means all transactions contemplated by this Agreement and the Ancillary Agreements.

“ Unaffiliated ” means a person, as reasonably determined by AAC, who (i) qualifies as an independent director on the board of directors of AAC under the listing standards of the New York Stock Exchange, (ii) is not an officer or employee of AAC, or a director, officer or employee of any Affiliate of AAC and (iii) immediately prior to his appointment is not a director of AAC.

“ Unaffiliated Qualified Director ” means a director of AAC who is Unaffiliated and Qualified. Unaffiliated Qualified Directors for this purpose shall not include any director appointed solely by the vote of AAC’s preferred shareholders.

“ Wisconsin Legal Opinion ” means a written opinion by DeWitt Ross & Stevens S.C., in the form attached hereto as Exhibit F2.

Section 1.02 . Interpretation and Rules of Construction. In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

(a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated;

(b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c) whenever the words “ include ,” “ includes ” or “ including ” are used in this Agreement, they are deemed to be followed by the words “ without limitation ”;

(d) the words “ hereof ,” “ herein ” and “ hereunder ” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

(f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

(g) any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time to time amended, modified or supplemented, including by succession of comparable successor Laws;

(h) references to a Person are also to its successors and permitted assigns;

(i) the use of “ or ” is not intended to be exclusive unless expressly indicated otherwise; and

(j) references to “ agreements ” and words of similar import refer to those agreements as they are amended from time to time in accordance with their respective terms.

ARTICLE 2

C LOSING T RANSACTIONS

Section 2.01 . Commutation of Certain Swaps and Policies and Mutual Releases. At the time of the Closing, the Ambac Parties and each Commuting Policy Beneficiary shall enter into a Commutation Agreement providing for (a) the termination of certain CDSs and other transactions between such Policy Beneficiary and ACP as specified in such Commutation Agreement and (b) to the extent specified in the relevant Commutation Agreement, the termination or modification of certain insurance policies issued by AAC to or for the benefit of such Commuting Policy Beneficiary, in exchange for (x) the delivery to such Commuting Policy Beneficiary at the Closing of such Commuting Policy Beneficiary’s Commutation Consideration and (y) the mutual releases and other agreements, as therein provided.

Section 2.02 . Closing. The closing of the transactions that are the subject of this Agreement (the “ Closing ”) will be held at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, NY 10017, immediately upon the satisfaction or waiver of all conditions to the obligations of the Parties set forth in Article 4 (other than those conditions anticipated to occur at the Closing). All of the actions to be taken at the Closing will be deemed to occur simultaneously.

Section 2.03 . Closing Deliveries by the Ambac Parties.

(a) At the Closing, the Ambac Parties shall deliver or cause to be delivered to each Policy Beneficiary the related Commutation Agreement (if applicable) with such Policy Beneficiary executed by the Ambac Parties together with (i) the Commutation Consideration (if applicable) required to be delivered thereunder at the Closing and (ii) the premiums and other payments contemplated to be returned to such Policy Beneficiary by Section 3(b) of the Forbearance Agreement.

(b) At the Closing, the Ambac Parties shall deliver or cause to be delivered to each Policy Beneficiary payment in full of all reasonable fees and expenses of such Policy Beneficiary’s external legal counsel and other professionals incurred in connection with matters relating to the Restructuring for which invoices (including hours and rates used in calculating fee amounts) have been delivered to the Ambac Parties prior to the Closing, subject to an aggregate cap for all Policy Beneficiaries of $15 million; provided that, to the extent such fees and expenses are in excess of $15 million, the Policy Beneficiaries shall determine how the $15 million payment by the Ambac Parties shall be allocated; provided , further , that the reasonable fees and expenses of Davis Polk & Wardwell LLP, FTI Consulting, Inc. and Godfrey & Kahn, SC shall be paid in full at the Closing and shall not be counted against such cap; provided , further , that, for the avoidance of doubt, and notwithstanding the definition of Restructuring, the costs, fees and expenses that the Ambac Parties agree to pay in connection with the potential commutation or restructuring of SL Obligations pursuant to any SL Agreement shall not be counted against such cap.

(i) a true and complete copy, certified by the Secretary or Director of each of the Ambac Parties, of the resolutions duly and validly adopted by the board of directors of each of the Ambac Parties evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the Transactions;

(ii) a certificate signed by the chief financial officer of AAC (A) to the effect set forth in Section 4.02(a) hereof and (B) stating that, as of the Closing after giving effect to the Transactions, the pro forma assets, liabilities and policy obligations of AAC, restated as of December 31, 2009, are substantially as set forth in Schedule E hereto;

(iii) the Legal Opinion;

(iv) the Wisconsin Legal Opinion;

(v) the Charter Amendment (which shall have become effective and shall remain in full force and effect as of the Closing);

(vi) the executed Tax Sharing Agreement;

(vii) the executed Fiscal Agency Agreement;

(viii) the executed SL Agreement;

(ix) a copy of an executed agreement between AAC and OCI pursuant to which AAC agrees to make publicly available the Financial Reporting Package as contemplated by Section 3.10 hereof; and

(x) evidence of receipt and effectiveness of all consents, licenses, approvals, non-disapprovals and other authorizations, and the filings, set forth in Schedule F hereto, including a copy of OCI’s approval or non-disapproval of those of the Transactions scheduled to occur on or before the Closing.

Section 2.04 . Closing Deliveries by the Policy Beneficiaries. At the Closing, each Commuting Policy Beneficiary shall deliver to the Ambac Parties the Commutation Agreement to which such Commuting Policy Beneficiary is a party, executed by such Policy Beneficiary.

ARTICLE 3

A DDITIONAL A GREEMENTS

Section 3.01 . Confidentiality. Each Ambac Party covenants to each Policy Beneficiary that, notwithstanding anything to the contrary herein, the identity of such Policy Beneficiary shall not be disclosed (other than as disclosed (i) prior to the date hereof to a reinsurer of AAC, or (ii) to a reinsurer of AAC on or after the date hereof, to the extent such disclosure is necessary for AAC to obtain payment (with respect to the Commutation Consideration or amounts due under the Ancillary Agreements) under its existing reinsurance agreements and such reinsurer is subject to confidentiality restrictions prohibiting it from disclosing such information to third parties, subject to customary exceptions) as a participant in the Restructuring, in relation to the terms of the Restructuring as they apply individually and particularly to such Policy Beneficiary or in relation to any particular transaction (including swap transactions), policies or other

agreements to which an Ambac Party is (or was) a party or any of the terms thereof, except (x) with such Policy Beneficiary’s prior written consent, which consent may be withheld for any reason, or (y) to the extent such information becomes public other than due to a breach by any Ambac Party of this Section 3.01 or any other confidentiality agreement or obligation to which such party is subject. Each of the Ambac Parties acknowledges that such information consists of trade secrets and/or confidential commercial information, in each case that, if disclosed, would cause substantial injury to the competitive position of the relevant Policy Beneficiary. Notwithstanding the foregoing, an Ambac Party may disclose the identity of a Policy Beneficiary if it is requested or required by any Governmental Authority or by Law, including by order or any other determination of any court or administrative authority or any other legal proceeding or by Law, to disclose such information (after requesting any exemption or confidential treatment to the fullest extent permitted by applicable Law, including but not limited to the exceptions to Wisconsin’s Open Records Law and the Securities and Exchange Commission’s procedures for requesting confidential treatment under 17 CFR § 240.24b-2). Prior to making such disclosure, the relevant Ambac Party or Ambac Parties shall, to the extent lawfully permitted to do so, provide reasonable advance notice to the affected Policy Beneficiary prior to such disclosure, and shall, at such Policy Beneficiary’s expense, reasonably cooperate with the relevant Policy Beneficiary if such Policy Beneficiary determines to seek (in addition to the steps that the Ambac Parties themselves are required to take pursuant to the preceding sentence) to obtain confidential treatment or a protective order concerning such identification of such Policy Beneficiary.

Section 3.02 . Regulatory and Other Authorizations; Notices and Consents. The Ambac Parties and each Policy Beneficiary, respectively, shall use their or its commercially reasonable efforts to obtain and maintain all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary to be made or secured by them or it for the execution and delivery of, and the performance of their or its respective obligations pursuant to this Agreement and the Ancillary Agreements, and will reasonably cooperate with the other Party in promptly seeking to obtain all such authorizations, consents, orders and approvals. The Ambac Parties and each Policy Beneficiary shall reasonably cooperate with one another to resolve objections, if any, as may be asserted by any Governmental Authority with respect to the Transactions under any Law. In connection therewith, if any Action is instituted (or threatened to be instituted) challenging any of the transactions contemplated hereby as violative of any Law, the Ambac Parties and each Policy Beneficiary that is party to such Action will reasonably cooperate with one another to contest and resist any such Action and to have vacated, lifted, reversed, or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents, or restricts consummation of the transactions contemplated hereby, including by pursuing all available avenues of administrative and judicial appeal, unless, by mutual agreement, the Ambac Parties and each Policy Beneficiary that is party to such Action decide that litigation is not in their respective best interests. Nothing in this Agreement shall require any Party not otherwise party to such action to commence or

join in any litigation (including any regulatory or administrative proceeding). Nothing contained in this Section 3.02 shall require any Party to waive or release any material benefit, right or remedy of such Party hereunder or under any Ancillary Agreement or otherwise.

Section 3.03 . Further Action. Subject to the terms and conditions of this Agreement and the Ancillary Agreements, each of the Parties will use its respective commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under applicable Law to be taken or done by it in order for it to consummate and maintain the enforceability of the transactions contemplated by this Agreement and the Ancillary Agreements to which it is (or is contemplated hereby to become) a party, including (i) preparing and filing as promptly as practicable with any Governmental Authority or other third party all documentation to effect all filings, notices, petitions, statements, registrations, submissions of information, applications and other documents necessary to be effected by it and (ii) obtaining and maintaining all approvals, non-disapprovals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other third party that are necessary, proper or advisable in order for it to consummate the transactions contemplated by this Agreement and the Ancillary Agreements to which it is (or is contemplated hereby to become) a party. Notwithstanding any provision herein to the contrary, it shall be the sole responsibility of the Ambac Parties to obtain and maintain, and the Ambac Parties shall use their respective commercially reasonable efforts to obtain and maintain as promptly as practicable, each of the approvals, non-disapprovals, consents, registrations, permits, authorizations and other confirmations set forth on Schedule F hereto. Each Party agrees to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary, or as another Party may request and is commercially reasonable, in each case solely to the extent consistent with the terms and conditions hereof, in order for such first Party to consummate or effectuate expeditiously the transactions contemplated by this Agreement and the Ancillary Agreements to which it is (or is contemplated hereby to become) a party to be consummated by it (including, if requested by the Ambac Parties or any Policy Beneficiary, formal revisions or supplements to the documentation relating to any Amended CDSs held by such Policy Beneficiary to reflect the amendments thereto set forth in Section 3.05).

Section 3.04 . Further Agreements of the Ambac Parties . From the Closing until all of the AAC Surplus Notes have been paid in full, redeemed or repurchased (whether as scheduled or pursuant to a call or other early redemption), the Ambac Parties agree, for the benefit of the Policy Beneficiaries that hold or (directly or indirectly) beneficially own AAC Surplus Notes and each other holder of AAC Surplus Notes from time to time (other than any Ambac Party or an Affiliate thereof) (collectively, the “ Section 3.04 Benefited Parties ”), as follows:

(a) At all times after the 120th day after the Closing, at least two members of the board of directors of AAC shall be Unaffiliated Qualified Directors. At all times after the 180th day after the Closing, at least one-third (and, in any event not less than three members) of the board of directors of AAC shall be Unaffiliated Qualified Directors. At the time a statement of qualifications for any nominee for Unaffiliated Qualified Director is delivered to OCI pursuant to the Charter Amendment, the Ambac Parties shall deliver a copy of such statement to each of the Section 3.04 Benefited Parties that has requested such information to provide such Section 3.04 Benefited Parties with an opportunity to provide comments to OCI regarding the qualifications, independence and unaffiliated status of such proposed Unaffiliated Qualified Director. Notwithstanding the foregoing, if at any time at least two members of the board of directors of AAC are Unaffiliated Qualified Directors, those actions specified in this Agreement as requiring the approval of the Unaffiliated Qualified Directors may be taken upon the unanimous approval of such Unaffiliated Qualified Directors. In addition, if at any time fewer than two members of the board of directors of AAC are Unaffiliated Qualified Directors, those actions specified in this Agreement as requiring the approval of the Unaffiliated Qualified Directors may be taken (i) upon the approval of the remaining Unaffiliated Qualified Director (if any) and (ii) if they satisfy the OCI Approval Standard. If at any time AAC has fewer Unaffiliated Qualified Directors than is required by the provisions of this Section 3.04(a), AAC shall use its commercially reasonable efforts to find additional Unaffiliated Qualified Directors, which efforts shall include considering in its sole discretion any potential directors recommended by any Section 3.04 Benefitted Party. Without limiting the foregoing, if at any time the board of directors of AAC does not include the minimum number of Unaffiliated Qualified Directors required by this Section 3.04(a), the sole consequence shall be as set forth in this Section 3.04(a).

(b) The provisions in the Charter Amendment relating to Unaffiliated Qualified Directors shall not be amended in a manner adverse to the Policy Beneficiaries.

(d) Other than as permitted pursuant to the provisions of Section 3.04(e) or Section 3.04(h), AAC and its Subsidiaries shall not write new business (including through any reinsurance or guarantee arrangement or under existing treaties), unless (A) approved by OCI and (B) AAC has a financial strength rating of at least A by S&P and A2 by Moody’s (provided, that if at such time only one such rating organization is in the business of rating financial guarantors, then by such organization), or, if neither S&P nor Moody’s is in the business of rating financial guarantors, then the equivalent rating by any other nationally recognized statistical rating organization (and, in each case, is not on negative watch for downgrade while it has a financial strength rating of A or A2 (or, if applicable, such equivalent thereof)), and except that new business may be undertaken solely by Everspan (for the avoidance of doubt, without any reinsurance or other guarantee by AAC or any other Subsidiary of AAC) using the proceeds of outside capital received by AAC or any of its Affiliates after the Closing and invested in Everspan, if

approved by the board of directors of AAC, including a majority of the Unaffiliated Qualified Directors. For the avoidance of doubt, the provisions of this Section 3.04(d) shall not apply to (X) any recaptures of policies ceded to reinsurers if such recapture is specifically approved by OCI at or about the time of such recapture, (Y) the issuance of a financial guaranty insurance policy or surety bond (A) pursuant to a contractual commitment in effect on the date hereof or (B) pursuant to or in connection with the RMBS Remediation Plan, the SL Remediation Plan, the SA Remediation Plan or any GA Remediation Action, or (Z) any hedging activity that satisfies the OCI Approval Standard.

(e) AAC will not, and will cause each of its Subsidiaries not to, issue, incur or assume any Surplus Notes, policies or other material obligations that are pari passu with or senior to the AAC Surplus Notes (including, without limitation, debt instruments of Affiliates that are structurally senior to the AAC Surplus Notes), other than (subject to Section 3.04(f)) (i) the RMBS Surplus Notes, the SL Surplus Notes and the Other Seg Account Policy Notes, (ii) any other Surplus Notes or policies that satisfy the OCI Approval Standard or are approved by the Rehabilitator or the Rehabilitation Court in satisfaction or partial satisfaction of any liabilities of the Segregated Account, (iii) Surplus Notes, policies or other material obligations in connection with the RMBS Remediation Plan, the SA Remediation Plan, the SL Remediation Plan or any GA Remediation Action, (iv) Surplus Notes, policies or other material obligations issued to AAC or any of its wholly-owned Subsidiaries (other than Ambac UK) that satisfy the OCI Approval Standard, or (v) as permitted pursuant to the provisions of Section 3.04(d) or Section 3.04(h). In addition, the provisions of this Section 3.04(e) shall not apply to the issuance of a financial guaranty insurance policy or surety bond pursuant to a contractual commitment in effect on the Closing Date.

(f) All Surplus Notes shall rank pari passu with or junior to the AAC Surplus Notes. No Surplus Note issued by AAC shall have a scheduled maturity or scheduled principal payment prior to the 10th anniversary of the Closing Date, have an interest rate in excess of 5.1% per annum, or otherwise be on terms materially more favorable to the holders of such Surplus Notes than the AAC Surplus Notes; provided that the existence or absence of transfer restrictions pursuant to section 3(a)(10) or section 4(2) of the Securities Act shall not be considered a more or less favorable term for the purpose of this subsection. No principal or interest payment (other than PIK interest) on any indebtedness ranking junior to the Surplus Notes shall be made until all of the Surplus Notes have been paid in full, repurchased or redeemed or otherwise provided for to the satisfaction of OCI. Notwithstanding anything in this Agreement to the contrary, all Surplus Notes shall be approved by OCI.

(g) Intentionally Omitted

(h) AAC will not, and will cause each of its Subsidiaries not to:

(i) solely with respect to AAC, dissolve or liquidate;

(ii) merge, consolidate or amalgamate with any other Person (other than mergers, consolidations or amalgamations between wholly-owned Subsidiaries (other than Ambac UK) of AAC or, where AAC is the surviving entity, between AAC and its wholly-owned Subsidiaries (other than Ambac UK));

(iii) solely with respect to AAC, sell, lease, assign, or otherwise dispose or transfer all or substantially all of its assets in a single transaction or series of related transactions;

(iv) sell, lease, assign, or otherwise dispose of or transfer assets, or cede any material business to third parties, with an aggregate (for all such transactions by all of AAC and all of its Subsidiaries, including transactions among AAC and its Subsidiaries) fair value exceeding, during any six month-period (whether (A) in one transaction or any number of related transactions or (B) any number of unrelated transactions occurring (in the case of this subclause (B)) within any six month time period), 10% of AAC’s admitted assets, determined in accordance with statutory accounting principles;

(v) make any Restricted Payment in excess of $5,000,000 in the aggregate (for all Restricted Payments by AAC and/or any of its Subsidiaries) per annum; or

(vi) create or suffer to exist any Lien on or over its assets (other than Permitted Liens),

in each case, whether such transaction is with an Affiliate or a non-Affiliate third party; provided that the transactions set forth below shall not be prohibited pursuant to this clause (h):

(A) transactions or payments pursuant to Intercompany Agreements;

(B) recaptures of policies ceded to reinsurers that satisfy the OCI Approval Standard;

(C) Restricted Payments from AAC to AFGI in an amount (1) up to $52 million per annum solely to pay interest on indebtedness of AFGI outstanding as of March 15, 2010, or any indebtedness issued as a result of a restructuring or refinancing thereof and (2) up to $7.5 million per annum solely to pay operating expenses of AFGI; provided that, (x) concurrently with any such Restricted Payment, the total principal amount, including any capitalized interest thereon, of all outstanding Surplus Notes shall be prepaid on a pro rata basis by an amount equal to the amount of such Restricted Payment and (y) such Restricted Payment satisfies the OCI Approval Standard;

(D) for the avoidance of doubt, (i) payment of claims and expenses on or in connection with insurance policies or other insured obligations existing on the Closing Date in the General Account or thereafter issued as permitted by this Agreement, (ii) the Secured Note, including payments thereunder, (iii) the Reinsurance Agreement, including payments thereunder, and (iv) the Cooperation Agreement, including payments thereunder;

(E) (i) obligations under financial guarantees and related policies and obligations existing on the Closing Date in the General Account or thereafter issued as permitted by this Agreement, (ii) investments in accordance with investment guidelines as required by statutory accounting principles and as approved by OCI; provided that AAC’s and each of its Subsidiary’s investment plan and performance shall be reviewed at least annually by the board of directors of AAC and modified as necessary and approved by the board of directors of AAC including a majority of the Unaffiliated Qualified Directors; (iii) dividends or other payments by any Subsidiary of AAC to AAC and (iv) other investments in AAC or any wholly-owned Subsidiary of AAC (other than Ambac UK) pursuant to Intercompany Agreements permitted hereby;

(F) transactions related to and arising from the RMBS Remediation Plan, the SL Remediation Plan, the SA Remediation Plan or any GA Remediation Actions;

(G) bulk cession(s) of liabilities to direct or indirect Subsidiaries together with a transfer of corresponding assets and necessary capital to such Subsidiaries that satisfy the OCI Approval Standard;

(H) transactions not permitted by Section 3.04(h)(iv), (v) or (vi) and not expressly prohibited by, or otherwise contemplated by, subparts (A) through (G) of this Section 3.04(h) if approved by (i) a majority of the Unaffiliated Qualified Directors and (ii) that satisfy the OCI Approval Standard; and

(I) transactions otherwise not permitted by this Section 3.04(h) that satisfy the OCI Approval Standard and, if, after giving effect thereto, AAC has a financial strength rating of at least A by S&P and A2 by Moody’s (provided, that if at such time only one such rating organization is in the business of rating financial guarantors, then by such organization), or, if neither S&P nor Moody’s is in the business of rating financial guarantors, then the equivalent rating by any other nationally recognized statistical rating organization (and, in each case, is not on negative watch for downgrade while it has a financial strength rating of A or A2 (or, if applicable, such equivalent thereof)).

(i) With respect to any financial guaranty insurance policy obligation commuted or CDS terminated pursuant to a Commutation Agreement in respect of which AAC and ACP have been released from all of their respective obligations, the Ambac Parties shall cooperate (without having to incur any material obligation or expenses) with any reasonable requests of any Policy Beneficiary to assist in the restructuring of the underlying insured transactions, including, without limitation, by transferring any voting or consent rights held by any Ambac Party, but only with respect to that portion of the insured obligations that have been commuted or terminated by such Policy Beneficiary, but only to the extent permitted by the applicable transaction documents or, if not permitted and if an Ambac Party is defined as a controlling party, such Ambac Party shall, at such Policy Beneficiary’s expense and at its reasonable request, cooperate to use reasonable endeavors to amend the documents to permit such transfer and shall use reasonable efforts to follow such Policy Beneficiary’s directions.

(j) Other than as set forth on Schedule D-2, no transaction by AAC or any of its Subsidiaries with Affiliates (including any transaction by AAC with any of its Subsidiaries) shall be entered into unless such transaction is (i) pursuant to an Intercompany Agreement and (ii) in accordance with Wis. Stat. §§ 611.61 and 617.21 and Wis. Admin. Code INS § 40.04 (other than with respect to transactions solely among non-insurance Subsidiaries of AAC) and no Material Intercompany Agreement (other than as relates to the RMBS Remediation Plan, the SL Remediation Plan, the SA Remediation Plan or any GA Remediation Action) shall be entered into or amended in any material respect unless approved by a majority of the Unaffiliated Qualified Directors.

(k) The Ambac Parties and their respective Affiliates shall not create any new tax-sharing agreements between or among any of the Ambac Parties, other than the Tax Sharing Agreement, or amend the Tax Sharing Agreement, in each case other than as approved by OCI and a majority of the Unaffiliated Qualified Directors.

(l) With the prior consent of OCI, AAC may purchase, repurchase or call AAC Surplus Notes on a non-pro rata basis pursuant to separate agreements or arrangements between AAC and any holder thereof.

(m) AAC shall not make any distribution, whether in cash, property, securities or a combination thereof (other than payments made with common equity or non-redeemable preferred stock issued by AAC), to the holders of any Surplus Notes (in their capacities as such) or pay, or commit to pay, or directly or indirectly redeem, repurchase, retire, prepay, convert, exchange or otherwise acquire for consideration, or set apart any sum for the aforesaid purpose, any Surplus Note except with respect to all Surplus Notes on a pro rata basis and on the same terms, except as permitted by Section 3.04(l).

Any failure of Ambac UK to comply with the terms of Sections 3.04(d), (e) or (h) of this Agreement shall not constitute a breach of this Agreement to the extent such noncompliance was not directed or caused by AAC or its Affiliates (other than Ambac UK).

Any action expressly permitted by any subsection of this Section 3.04 shall be permitted notwithstanding the terms of any other subsection of this Section 3.04, unless such other subsection expressly prohibits such action.

Section 3.05 . Treatment of Policies and Transactions . AAC will not transfer or allocate or seek to have transferred or allocated to the Segregated Account (or any other segregated account) any policy or contract in the General Account except (i) as set forth in Section IV of the Plan of Operation or (ii) for policies or contracts (a) with actual or expected losses that (taken in the aggregate) are material to the General Account or (b) that threaten the financial viability of the General Account, in each case as determined by OCI in its sole and absolute discretion; provided that no such policies or contracts may be so transferred or allocated to a segregated account unless such transfer or allocation (i) satisfies the OCI Approval Standards and (ii) otherwise meets the standards of Wis. Stat. § 611.24. Notwithstanding this Section 3.05 or any other provision of this Agreement, the right, if any, of a holder or beneficiary of a policy or contract to contest the transfer or allocation of such policy or contract to a segregated account on any ground shall not be deemed waived.

Section 3.06 . Modifications to Amended CDSs. Effective at the time of the Closing, all of the CDSs issued by ACP benefitting from policies in the General Account that are held by the Policy Beneficiaries (the “Amended CDSs”), including those identified on Schedule I to each applicable Joinder Agreement, are hereby amended pursuant to Section 9(b) of the ISDA Master Agreement for each such CDS (prior to giving effect to the amendment below) to delete, solely for so long as such policies remain in the General Account, the following “Events of Default,” “Termination Events” or “Additional Termination Events” with respect to ACP or AAC as the “Defaulting” or “Affected Party” if specified in the relevant Amended CDS as applicable, it being understood that such amendment shall cease to be effective, and the Amended CDS shall be deemed further modified to reinstate such deleted “Events of Default” “Termination Events” and “Additional Termination Events” in the event the policy related to such Amended CDS has been transferred or allocated to the Segregated Account (or any other segregated account):

(a) Misrepresentation (as specified in Section 5(a)(iv) of the 1992 ISDA Master Agreement);

(b) AAC becoming insolvent in the absence of formal insolvency proceedings (as specified in Section 5(a)(vii) of the 1992 ISDA Master Agreement);

(d) Cross Default (as specified in Section 5(a)(vi) of the 1992 ISDA Master Agreement); and

(e) Any “Termination Event,” “Additional Termination Event” or “Event of Default” arising as a result of the commencement or continuation of the rehabilitation of the Segregated Account.

Nothing in this Section 3.06 shall be deemed to limit or impair in any respect OCI’s rights or positions in regards to the Segregated Account or any new segregated account under Chapter 645 of the Wisconsin Statutes.

Section 3.07 . No Additional Consideration. AAC has not and will not directly or indirectly pay or cause to be paid any remuneration in the form of cash payments, securities or other property (including supplemental or additional interest, fees, collateral or other credit support or otherwise, but excluding the application of posted collateral in connection with a single CDS transaction that is not a “Commuted Transaction” on the ABS CDO Consideration Schedule or the return of posted collateral to the party having posted such collateral), to any Policy Beneficiary or Affiliate thereof as consideration for or as an inducement to the entering into by such Policy Beneficiary of this Agreement or any Ancillary Agreement, other than (a) the consideration specifically contemplated by this Agreement and/or by the forms of Ancillary Agreements attached hereto and (b) payments to purchase AAC Surplus Notes under separate agreements permitted by Section 3.04(l) and payments of fees and expenses and granting of releases pursuant to agreements granting AAC an option to purchase AAC Surplus Notes. AAC shall not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any holder of AAC Surplus Notes as consideration for or as an inducement to the entering into, or consent to, by any holder of AAC Surplus Notes of any amendment, waiver, consent, modification, refunding or refinancing of the AAC Surplus Notes (each, a “Note Amendment”), unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder of AAC Surplus Notes then outstanding that agrees to such Note Amendment.

Section 3.08. Amendment to Forbearance Agreement. The parties agree that the Forbearance Agreement shall remain in effect, except that clause (a) of the definition of “Termination Event” set forth therein is hereby amended to read as follows:

“(a) The earlier of (i) the date that the Settlement Agreement dated as of June 7, 2010 among the Policy Beneficiaries, AAC, ACP and OCI terminates in accordance with its terms and (ii) immediately following the “Closing” as defined in such Settlement Agreement.”

The foregoing amendment shall become effective upon the occurrence of both (x) the effectiveness of this Agreement and (y) written consent to such amendment by OCI. In addition, immediately following the Closing, the Forbearance Agreement shall be of no further force or effect.

Section 3.09. Reinstatement. If the Commutation Consideration paid to any Policy Beneficiary has been returned to any of the Ambac Parties because it is determined that such Commutation Consideration constituted a voidable preference or fraudulent transfer or conveyance (or otherwise by reason of or in connection with the insolvency, bankruptcy, rehabilitation or reorganization of any Ambac Party), the Commutation Agreement executed by such Policy Beneficiary shall be voided and all rights and remedies of the Ambac Parties and such Policy Beneficiary as they existed immediately prior to the execution of this Agreement and the Ancillary Agreements shall be reinstated in full.

Section 3.10. Informational Agreements. AAC shall provide (which shall include posting information on its website) the Policy Beneficiaries with the Financial Reporting Packages on a periodic basis as specified in Schedule C. The Ambac Parties shall make each Financial Reporting Package publicly available when delivered (or required to be delivered) pursuant to the immediately preceding sentence (as in effect on the date hereof), except for information set forth in Part II of Schedule C. The information set forth in Part II of Schedule C shall only be provided to a Policy Beneficiary to the extent it enters into (and is not in breach of) a confidentiality agreement in the form of Exhibit H hereto.

Section 3.11. Material Intercompany Agreements. The Ambac Parties represent and warrant that, as of the Closing Date, all Material Intercompany Agreements have been disclosed on Schedule D-1 hereto.

ARTICLE 4

C ONDITIONS TO C LOSING

Section 4.01 . Conditions to Obligations of the Ambac Parties. The obligations of the Ambac Parties to consummate the Transactions are subject to the fulfillment or written waiver (by all of the Ambac Parties), at or prior to the Closing, of each of the following conditions:

(a) Representations, Warranties and Covenants . (i) The representations and warranties of each Policy Beneficiary contained in this Agreement or any Ancillary Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and

correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties will be true and correct as of that date, and (ii) the covenants and agreements contained in this Agreement and each of the Ancillary Agreements to be complied with by such Policy Beneficiary on or before the Closing will have been complied with in all material respects;

(b) No Proceeding or Litigation . No Governmental Authority shall have issued an order, decree or ruling or taken any other Action restraining, rescinding, enjoining or otherwise prohibiting the Transactions or materially and adversely altering any component of the Restructuring or any of the Transactions or otherwise rendering it impossible or unlawful for the Ambac Parties to consummate the Transactions;

(c) Closing Deliveries . All closing documents required to be delivered under Section 2.04 hereof shall have been delivered;

(d) Regulatory Approvals . The consents, licenses, approvals, non-disapprovals and other authorizations, and the filings, set forth in Schedule F hereto shall have been received; and

(e) No Termination Event . No Termination Event (as defined in the Forbearance Agreement) shall have occurred, other than the occurrence of the Closing Date.

Section 4.02 . Conditions to Obligations of the Policy Beneficiaries. The obligations of each Policy Beneficiary to consummate the Transactions are subject to the fulfillment or written waiver (by such Policy Beneficiary), at or prior to the Closing, of each of the following conditions:

(a) Representations, Warranties and Covenants . (i) The representations and warranties of each Ambac Party contained in this Agreement or any Ancillary Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties will be true and correct as of that date, and (ii) the covenants and agreements contained in this Agreement and each of the Ancillary Agreements to be complied with by any Ambac Party on or before the Closing will have been complied with in all material respects;

(c) Closing Deliveries . The closing documents required to be delivered under Section 2.03 hereof shall have been delivered;

(d) Regulatory Approvals . The consents, licenses, approvals, non-disapprovals and other authorizations set forth in Schedule F hereto shall have been received (and shall remain in full force and effect);

(e) Segregated Account Rehabilitation Plan . Any Segregated Account Rehabilitation Plan submitted or approved prior to the Closing shall not be inconsistent with the terms of the Statement of Intent;

(f) Charter Amendment . The Charter Amendment shall have been adopted and become effective (and shall remain in full force and effect as of the Closing);

(g) Fees and Expenses Paid . The Ambac Parties shall have paid the fees and expenses of each of the Policy Beneficiaries in accordance with Section 2.03(b);

(h) Delivery of Portfolio Information . Prior to the Closing, AAC shall have delivered to the Policy Beneficiaries (i) a substantially complete list of the CUSIPs and Single Risks comprising AAC’s insured portfolio and AAC’s investment portfolio (which, for the avoidance of doubt, shall include the insured portfolios of AAC and Ambac UK); provided that AAC will deliver a complete list within 120 days following the Closing; provided , further , that, to the extent practicable, any charts, lists, spreadsheets or similar tables shall be provided in Microsoft Excel format.

(i) Return of Premiums . Such Commuting Policy Beneficiary shall have received from AAC the premiums and/or other payments contemplated to be returned to it by Section 3(b) of the Forbearance Agreement; and

(j) No Termination Event . No Termination Event (as defined in the Forbearance Agreement) shall have occurred, other than the occurrence of the Closing Date.

(k) Ambac UK Obligations. The Ambac UK Reinsurance Agreement has been allocated to and remains in the Segregated Account and the obligations pertaining to it are treated consistently with the junior priority of such obligations in a liquidation proceeding in any Segregated Account Rehabilitation Plan filed or approved prior to the Closing.

Section 4.03 . Frustration of Closing Conditions. Neither the Ambac Parties nor any Policy Beneficiary may rely on the failure of any condition set forth in Section 4.01 or Section 4.02, as the case may be, to be satisfied if such failure was primarily caused by such Party’s or Parties’ breach of any provision of this Agreement or any Ancillary Agreement.

ARTICLE 5

T ERMINATION AND W ITHDRAWAL

Section 5.01 . Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by any Party, in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other Action restraining, rescinding, enjoining or otherwise prohibiting the Transactions or materially and adversely altering any component of the Restructuring or any of the Transactions, and such order, decree, ruling or other Action shall have become final and non-appealable;

(b) by the mutual written consent at any time of the Ambac Parties and the Policy Beneficiaries; or

(c) as to any Policy Beneficiary, by written notice from such Policy Beneficiary to the Ambac Parties and the other Policy Beneficiaries any time after July 31, 2010.

Section 5.02 . Effect of Termination. In the event of termination of this Agreement as provided in Section 5.01 (other than pursuant to Section 5.01(c), which shall only void this Agreement insofar as it pertains to such Policy Beneficiary), this Agreement and the Ancillary Agreements shall forthwith become void and there shall be no continuing obligations on the part of any Party hereto except (a) as set forth in Section 3.01, Section 6.01, Section 6.09 and Section 6.10 and (b) that nothing herein shall relieve any Party from liability for any breach of this Agreement and the Ancillary Agreements prior to their termination.

ARTICLE 6

G ENERAL P ROVISIONS

Section 6.01 . Expenses . Except as otherwise specified in this Agreement (including, without limitation, Section 2.03(b) and Section 4.02(g) herein) or any other written agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the Transactions, shall be paid by the Party incurring such costs and expenses, whether or not the Closing shall have occurred.

Section 6.02 . Notices . All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be

deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or electronic mail (upon electronic confirmation of delivery), or by registered or certified mail (postage prepaid, return receipt requested), to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 6.02;

(a) if to any of the Ambac Parties:


Address:		One State Street Plaza
		New York, NY 10004
Facsimile:		(212) 208-3558
Electronic Mail:		kdoyle@ambac.com
Attention:		Kevin Doyle, General Counsel

with a copy to:

Address:		Barbara Goodstein
		Michael Groll
		Dewey & LeBoeuf LLP
		1301 Avenue of the Americas
		New York, NY 10019
Facsimile:		(212) 259-8000
Electronic Mail:		bgoodstein@dl.com and mgroll@dl.com

(b) if to any Policy Beneficiary, to the address, facsimile or electronic mail address of such Policy Beneficiary listed on Schedule H hereto, with copy to:


Address:		Donald Bernstein
		Joseph Hadley
		Davis Polk & Wardwell LLP
		450 Lexington Ave.
		New York, NY 10017
Facsimile:		(212) 701-5092
Electronic Mail:		donald.bernstein@davispolk.com and joseph.hadley@davispolk.com

provided , however , that any notice of the termination of this Agreement pursuant to Section 5.01 must be delivered to the respective Parties shall be given or made (and shall be deemed to have been duly given or made upon receipt) only by delivery in person, by an internationally recognized overnight courier service, or by registered or certified mail (postage prepaid, return receipt requested).

Section 6.03 . [Reserved] .

Section 6.04 . Entire Agreement. This Agreement and the Ancillary Agreements and any other agreements expressly contemplated by this Agreement or any Ancillary Agreement (which, for the avoidance of doubt, shall not include the Statement of Intent), constitute the entire agreement among all of the Parties with respect to the Transactions and supersede all prior agreements and undertakings, both written and oral, between any Ambac Party on the one hand and any Policy Beneficiary on the other hand with respect to the Transactions. Notwithstanding the foregoing, the Confidentiality Agreement dated as of September 30, 2009, between AAC and its affiliates and the Policy Beneficiaries shall remain in full force and effect according to its terms.

Section 6.05 . Assignment . This Agreement may not be assigned by operation of Law or otherwise without the express written consent of all Parties (which consent may be granted or withheld in the sole discretion of each of the Parties) and any such assignment or attempted assignment without such consent shall be void; provided that this Agreement may be assigned by a Policy Beneficiary without such consent in connection with or as part of a merger, consolidation or sale of substantially all of such Policy Beneficiary’s assets to the Person(s) with whom the Policy Beneficiary is merging or to whom substantially all of such Policy Beneficiary’s assets are being transferred and that (by operation of Law or written instrument of assumption) assumes all obligations of the assignor under this Agreement. For the avoidance of doubt, any transfer that consists solely of Surplus Notes shall not be considered an assignment of this Agreement.

Section 6.06 . Amendment and Waiver. This Agreement may not be amended, altered, supplemented, waived or modified except by an instrument in writing signed by, or on behalf of, the Ambac Parties and all of the Policy Beneficiaries; provided that from and after the Closing, Section 3.10 (and, solely for the purpose of Section 3.10, any defined term used therein) may be amended, altered, supplemented, waived or modified by an instrument in writing signed by, or on behalf of, (i) the Ambac Parties and (ii) a majority of the Policy Beneficiaries; provided , further , that from and after the Closing, Section 3.04 (except in the case of any amendment to the first sentence of Section 3.04(f)) (and, solely for the purpose of Section 3.04, any defined term used therein) may be amended, altered, supplemented, waived or modified by (i) an instrument in writing signed by and only by the Ambac Parties, (ii) with the consent of Section 3.04 Benefited Parties holding more than 50% in aggregate principal amount of the AAC Surplus Notes that cast a ballot (disregarding in any such calculation (in both the numerator and the denominator) the principal amount of any AAC Surplus Notes that are beneficially owned by any Ambac Party or any of its Affiliates, or the voting of which any Ambac Party or any of its Affiliates has the right to direct with respect to such amendment, alteration, supplement, waiver or modification) and (iii) approved by OCI. No amendment, alteration, supplement, waiver or modification shall, unless in writing and signed by a Policy Beneficiary, affect the duties or obligations of such Policy Beneficiary under this Agreement or any Ancillary Agreement.

Section 6.07 . No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the Parties and their respective successors and permitted assigns, and except as provided in Section 6.09 and except that the Section 3.04 Benefited Parties are third party beneficiaries of Section 3.04 and the proviso to Section 6.06, nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit, remedy or right of action of any nature whatsoever, arising directly or indirectly out of, based upon, or in any way related to or in connection with this Agreement.

Section 6.08 . Rights and Remedies. Each Party acknowledges and agrees that each Party may be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any material breach of this Agreement by another Party may not be adequately compensated by monetary damages alone. Accordingly, in addition to any other right or remedy to which such Party may be entitled, at Law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

Section 6.09 . Several Liability of the Policy Beneficiaries; Releases . (a) The obligations, representations, warranties and covenants of the Policy Beneficiaries under this Agreement and the Ancillary Agreements shall be several and not joint or joint and several. No Policy Beneficiary shall be liable for any breach of any other Policy Beneficiary.

(b) Each Policy Beneficiary acknowledges that it has, independently and without reliance upon any other Policy Beneficiary and based on such documents and information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement and its Commutation Agreement and with respect to the Restructuring. Each Policy Beneficiary also acknowledges that it will, independently and without reliance upon any other Policy Beneficiary and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action with respect to the Restructuring, any related agreement or any document furnished hereunder or thereunder, or any other matter relating to any insurance policy issued by AAC for the benefit of such Policy Beneficiary.

(c) Effective automatically upon, and as of, the Closing, each Policy Beneficiary releases (i) each other Policy Beneficiary, (ii) the respective Representatives of each such other Policy Beneficiary (including the Common Advisors) and (iii) to the extent a Policy Beneficiary’s Affiliate (for the avoidance of doubt, excluding any Ambac Party or any of its Affiliates) was involved in the Restructuring, such Affiliate and its Representatives (each party described in (i), (ii) and (iii), a “ Released Party ”) from and against any and all losses, claims, damages, and liabilities, joint or several, to which such Released Party may be or become subject under any applicable federal, state or foreign

law (including common law) or otherwise, caused by or arising in any manner out of the formulation, negotiation or implementation of this Agreement or any Ancillary Agreement, the Restructuring or any agreement executed and delivered in connection with the Restructuring or any document furnished under or in connection with any of the foregoing, including the service of any Released Party on any formal or informal negotiating committee or any action taken or omitted to be taken by it in its capacity as a member of any formal or informal negotiating committee (subject to the following proviso, the “ Released Matters ”); provided , however , that the foregoing release shall not apply with respect to, and the Released Matters shall not include, any particular loss, claim, damage or liability, to the extent that such loss, claim, damage or liability is found in a final judgment by a court of competent jurisdiction to have resulted primarily from such Released Party’s fraud, willful misconduct or gross negligence.

Section 6.10. Governing Law and Jurisdiction. Except as provided herein, this Agreement shall be interpreted under and governed by the Laws of the State of New York without giving effect to conflicts of law provisions thereof that would make the law of any other jurisdiction applicable to this Agreement. In the event that there is a dispute between or among the Parties arising under this Agreement, the Parties (i) agree that the exclusive forum to seek remedy shall be to institute a legal proceeding in the courts of the State of New York located in the City and County of New York or the United States District Court for the Southern District of New York and (ii) hereby expressly submit to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waive any claim of lack of personal jurisdiction and improper venue and any claim that such courts are an inconvenient forum. Each Party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address provided to the Parties in accordance with Section 6.02, such service to become effective 10 days after such mailing.

Section 6.11 . WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HEREBY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.11.

Section 6.12 . Fully Negotiated Agreement. Each Party has had the opportunity to negotiate the terms, consult with counsel, and modify the provisions of this Agreement and the Ancillary Agreements. Therefore, the terms of this Agreement and the Ancillary Agreements shall be considered and interpreted without any presumption, inference or rule requiring construction or interpretation of any provision of this Agreement against the interests of the drafter of the Agreement. The Ambac Parties acknowledge and agree that each Policy Beneficiary, on the one hand, and the Ambac Parties and their Affiliates, on the other hand, have an arms-length business relationship that does not directly or indirectly give rise to, nor do the Ambac Parties or their Affiliates rely on, any fiduciary, advisory or agency relationship or duty with respect to any Policy Beneficiary. Other than relationships under written engagements, no Policy Beneficiary is advising the Ambac Parties or their Affiliates as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction, as to which matters the Ambac Parties are relying on their own advisors. Any review by or on behalf of any Policy Beneficiary of the Ambac Parties, the Transactions, the other transactions contemplated hereby or other matters relating to such transactions have been performed solely for the benefit of such Policy Beneficiary and its Affiliates and not on behalf of any Ambac Party or its Affiliates. The Ambac Parties further acknowledge that the Policy Beneficiaries or their Affiliates are full service banks or securities firms engaged in a broad range of transactions that may involve interests that differ from the interests of the Ambac Parties and their Affiliates, and that no Policy Beneficiary or Affiliate thereof has any obligation to disclose such interests and transactions to the Ambac Parties.

Section 6.13 . Currency. Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars and all payments hereunder shall be made in United States (U.S.) dollars by wire transfer in immediately available funds.

Section 6.14 . Counterparts. This Agreement may be executed and delivered in multiple counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement. A facsimile or Portable Document Format copy of a signature shall have the same force and effect as an original signature.

Section 6.15. Segregated Account. This Agreement is not an obligation of or binding upon the Segregated Account but only AAC acting through the General Account.

[NO FURTHER TEXT ON THIS PAGE]

IN WITNESS WHEREOF, the Ambac Parties and the Policy Beneficiaries have caused this Agreement to be executed as of the date first written above.


AMBAC PARTIES:

AMBAC ASSURANCE CORPORATION

By:	/s/ Kevin J. Doyle
	Name:	Kevin J. Doyle
	Title:	Senior Vice President and General Counsel

AMBAC CREDIT PRODUCTS, LLC

By:	/s/ Kevin J. Doyle
	Name:	Kevin J. Doyle
	Title:	Senior Vice President and General Counsel

AMBAC FINANCIAL GROUP, INC.

By:	/s/ Kevin J. Doyle
	Name:	Kevin J. Doyle
	Title:	Senior Vice President and General Counsel

Exhibit 10.2

EXHIBIT D

CONFIDENTIAL

COMMUTATION AGREEMENT ¹

THIS COMMUTATION AGREEMENT (this “ Agreement ”) is made as of June 7, 2010 by and among the Policy Beneficiary identified on the signature page hereof (the “ Policy Beneficiary ”), Ambac Credit Products, LLC (“ ACP ”) and Ambac Assurance Corporation (“ AAC ”).

Reference is hereby made to [that] [those] certain financial guaranty insurance polic[y][ies] listed on Schedule 1 hereto ([collectively,] the “ Polic[y][ies] ”), issued by AAC in connection with the corresponding transaction[s] listed on Schedule 1 hereto (such listed corresponding transaction[s, collectively], the “ Commuted Swap Transaction[s] ”) between ACP and the Policy Beneficiary. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Settlement Agreement (the “ Settlement Agreement ”) dated as of June 7, 2010 among AAC, ACP and Ambac Financial Group, Inc., on the one hand, and certain beneficiaries of financial guaranty insurance policies issued by AAC, including the Policy Beneficiary, on the other hand.

WHEREAS, the parties have engaged in good faith, arm’s length negotiations to settle the parties’ respective rights and obligations related to the Polic[y][ies] and the Commuted Swap Transaction[s];

WHEREAS, the Policy Beneficiary and ACP have agreed to terminate the Commuted Swap Transaction[s] and each of their respective obligations thereunder subject to the terms hereof; and

[WHEREAS, the Policy Beneficiary and AAC have each agreed to terminate the Polic[y][ies] only in respect of the Commuted Swap Transaction[s], subject to the terms hereof.] ²

[Note: With respect to any Commuted Swap Transaction where a Commuting Policy Beneficiary is not a party thereto but an indirect beneficiary thereof, the related Commutation Agreement shall differ from this form to the extent necessary to release and discharge the liabilities of ACP and AAC thereunder, whether through novation or otherwise.]

²	[Insert if relevant.]

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows:

ARTICLE 1

T ERMINATION OF C OMMUTED S WAP T RANSACTION [ S ]

Section 1.01 . Each party hereto hereby agrees that, from and after the execution of this Agreement by each of the parties hereto and the receipt by the Policy Beneficiary of the cash payment and, if applicable, AAC Surplus Notes referred to in Section 1.02 hereof concurrently with the Closing under the Settlement Agreement (the “ Effective Time ”) and in any event subject to Section 3.01 hereof:

(a) the Commuted Swap Transaction[s] shall be terminated in full and be of no further force or effect and except as provided in Section 1.02 hereof, no party hereto shall have any claims for payment of amounts under the terminated Commuted Swap Transaction[s];

(b) with respect to each Commuted Swap Transaction, the related ISDA Master Agreement, Schedules and Confirmations, control rights agreements, voting agreements, and other contracts and agreements between AAC or ACP, on the one hand, and the Policy Beneficiary, on the other hand, constituting such Commuted Swap Transaction, and any guaranty or other credit support issued to the Policy Beneficiary by AAC or ACP, solely with respect to such Commuted Swap Transaction, shall be terminated in full and be of no further force or effect;

(c) except as provided in Section 1.02 hereof, no party hereto shall owe any other party any termination payment or other amounts in connection with the termination of the Commuted Swap Transaction[s]; and

(d) any requirement of notice of termination or delivery of any other document required in connection with termination of the Commuted Swap Transaction[s] is hereby waived by each party entitled to such notice or other document.

Section 1.02 . In consideration of the termination of the Commuted Swap Transaction[s] and the Policies as they relate solely to the Commuted Swap Transaction[s] and of the other agreements of the Policy Beneficiary contained herein, AAC hereby agrees to pay to the Policy Beneficiary at the Effective Time the Commutation Consideration as follows:

(a) cash, in the amount specified on Annex A hereto as the “ Settlement Amount ,” by wire transfer of immediately available funds to the account of the Policy Beneficiary specified as the “ Payment Account ” on Annex A hereto;

(b) if applicable, AAC Surplus Notes in an aggregate principal amount equal to the “ Surplus Note Amount ” specified on Annex A hereto; such AAC Surplus Notes to be issued in certificated form and delivered to the Policy Beneficiary by The Bank of New York Mellon, as Fiscal Agent for the AAC Surplus Notes; and

(c) premiums or other payments paid by the Policy Beneficiary to AAC or any of its Affiliates on account of the Commuted Swap Transaction[s] since March 24, 2010 (being the amounts segregated by AAC pursuant to Section 3(b) of that certain Forbearance and Standstill Agreement dated as of March 24, 2010 among AAC, ACP, the Office of the Commissioner of Insurance of the State of Wisconsin (“ OCI ”) and the “Policy Beneficiaries” signatory thereto) in the aggregate amount of $ .

Section 1.03 . The Policy Beneficiary represents and warrants that, from the execution and delivery of each Commuted Swap Transaction to the execution and delivery of this Agreement and as of the Effective Time, it has not sold, assigned, conveyed, pledged, encumbered or otherwise transferred (other than pursuant to a lien or security interest previously granted that has been released) any of its interest in such Commuted Swap Transaction.

ARTICLE 2

T ERMINATION OF P OLIC [ Y ][ IES ]

Section 2.01 . The Policy Beneficiary represents and warrants that, from the execution and delivery of the Polic[y][ies] to the execution and delivery of this Agreement and as of the Effective Time, it has not sold, assigned, conveyed, pledged, encumbered or otherwise transferred (other than pursuant to a lien or security interest previously granted that has been released) any of the Policy Beneficiary’s interest in the Polic[y][ies].

Section 2.02 . Each party hereto hereby agrees that, from and after the Effective Time and in any event subject to Section 3.01 hereof:

(a) all obligations of AAC under the Polic[y][ies] (in the case of any Multiple CDS Policy, solely as such obligations pertain to the Commuted Swap Transaction[s]) shall terminate in full and be of no further force or effect and except as provided in Section 1.02 hereof, no party hereto shall have any claims for payment of amounts under such terminated Polic[y][ies] (in the case of any Multiple CDS Policy, solely as such obligations pertain to the Commuted Swap Transaction[s]);

(b) except as provided in Section 1.02 hereof, no party shall owe any other party any termination payment or other amount in connection with the termination of obligations with respect to the Commuted Swap Transaction[s] under the Polic[y][ies];

(c) any requirement of notice of termination or delivery of any other document required in connection with termination of obligations with respect to the Commuted Swap Transaction[s] under the Polic[y][ies] is hereby waived by each party entitled to such notice or other document; and

(d) The Policy Beneficiary acquiesces in and consents and agrees to such termination of obligations with respect to the Commuted Swap Transaction[s] under the Polic[y][ies].

ARTICLE 3 ³

C ONFIRMATION OF M ULTIPLE CDS P OLIC [ Y ][ IES ] AND M ULTIPLE CDS ISDA M ASTERS

Section 3.01. Each of the parties hereto acknowledges that [certain of] the Polic[y][ies] cover[s] (or may cover), and that certain of the ISDA Master Agreement[s], Schedule[s] and other agreements (other than the [Confirmation[s] related to the Commuted Swap Transaction[s]) apply to (or may apply to), both the Commuted Swap Transaction[s] and other CDSs (or other transactions) that are not Commuted Swap Transaction[s] (any such Policy, a “ Multiple CDS Policy ” and each such ISDA Master Agreement, Schedule and other agreement, collectively, a “ Multiple CDS ISDA Master ”), and each of the parties hereto further acknowledges, and, in any event agrees (notwithstanding anything in this Agreement to the contrary), that each such Multiple CDS ISDA Master and/or Multiple CDS Policy shall remain in full force and effect notwithstanding the execution and delivery of this Agreement except only that, from and after the Effective Time, such Multiple CDS ISDA Master and Multiple CDS Policy shall cease to cover or apply to the Commuted Swap Transaction[s] formerly documented and/or insured thereunder. Further, with respect to any Multiple CDS ISDA Master that shall remain in effect from and after the Effective Time (with respect to any CDS (or other transaction) that is not a Commuted Swap Transaction), any obligations of a party hereto to make any payment with respect to any Commuted Swap Transaction documented under any such Multiple CDS ISDA Master shall be terminated as of the Effective Time. Further, this Agreement does not affect and is without prejudice to the obligations of any of the parties with respect to any financial guaranty insurance policies and/or other agreements (including CDSs) that are not either [a/the] Policy (other than a Multiple CDS Policy, but only to the extent not related to [a/the] Commuted Swap Transaction) or [a/the] Commuted Swap Transaction.

ARTICLE 4

R ELEASES AND O THER A GREEMENTS

Section 4.01 . Effective as of the Effective Time, the Policy Beneficiary, for good and valuable consideration, the sufficiency of which it hereby acknowledges, hereby forever releases (i) each of the Ambac Parties, (ii) the respective Subsidiaries of each Ambac Party and (iii) each of the respective past and present parent companies, divisions,

³	This Article may be deleted if there are no Multiple CDS ISDA Masters and/or Multiple CDS Policy(ies) between the relevant Ambac Parties and the Policy Beneficiary.

affiliates, joint ventures, predecessors, successors, transferees, assigns, subrogees, insurers, co-insurers, reinsurers, servants, Representatives, stockholders, owners of the Persons listed or described in clauses (i) and/or (ii) (in the case of each of the foregoing listed or described in this clause (iii), solely as such) (and/or any person claiming by or through any of the foregoing, solely as such) ((i), (ii) and (iii) collectively, the “ Ambac Releasees ”), from any and all Claims (as defined below) of any nature whatsoever that the Policy Beneficiary (and/or any person claiming by or through the Policy Beneficiary) ever had, now has or can, shall or may have, by reason of any matter, cause or thing occurring prior to the Effective Time solely to the extent the same arise out of or in any way relate to (i) the Commuted Swap Transaction[s] and (ii) solely in respect of any Commuted Swap Transaction, the Polic[y][ies]. ⁴

Section 4.02 . Effective as of the Effective Time, the Ambac Parties, for good and valuable consideration, the sufficiency of which they hereby acknowledge, hereby forever release (i) each of the Policy Beneficiaries, (ii) the respective Subsidiaries of each Policy Beneficiary and (iii) each of the respective past and present parent companies, divisions, affiliates, joint ventures, predecessors, successors, transferees, assigns, subrogees, insurers, co-insurers, reinsurers, servants, Representatives, stockholders, owners of the Persons listed or described in clauses (i) and/or (ii) (in the case of each of the foregoing listed or described in this clause (iii), solely as such) (and/or any person claiming by or through any of the foregoing, solely as such) ((i), (ii) and (iii) collectively, the “ Policy Beneficiary Releasees ”), from any and all Claims of any nature whatsoever that the Ambac Parties (and/or any person claiming by or through the Ambac Parties) ever had, now has or can, shall or may have, by reason of any matter, cause or thing occurring prior to the Effective Time solely to the extent the same arise out of or in any way relate to (i) the Commuted Swap Transaction[s] and (ii) solely in respect of any Commuted Swap Transaction, the Polic[y][ies].

Section 4.03 . For the avoidance of doubt, it is explicitly agreed and understood that the parties are not releasing, acquitting, discharging or waiving any Claim of any nature whatsoever that such party ever had, now has or can, shall or may have, by reason of any matter, cause or thing occurring prior to the Effective Time arising directly or indirectly out of, based upon, or in any way related to or in connection with any obligations under, or actions required by, this Agreement, the Settlement Agreement or any Ancillary Agreement. Nothing in this Section 4.03 is intended to, or shall, increase the scope of the releases set forth in Section 4.01 and Section 4.02.

Section 4.04 . “ Claims ” means any action or actions, cause or causes of action, in law or in equity, suits, liens, liabilities, claims, demands, obligations, damages, punitive

⁴	[In lieu of the forms of releases for Commuted Swap Transactions contained in Sections 4.01 and 4.02 hereof, broader releases may be negotiated with applicable bank-specific carve-outs subject to agreed upon consideration.]

damages, losses, costs, expenses and attorneys’ fees of any nature whatsoever, including, but not limited to claims based on breach of fiduciary duty or other legal duty, legal fault, negligence, negligent misrepresentation, offense, quasi-offense, contract or breach of fiduciary duty, ratification, promissory estoppel, breach of the implied covenant of good faith and fair dealing, any securities law or any other theory [other than fraud]. ⁵ The term “ Claims ” includes, but is not limited to, any claim that any Ambac Party or the Policy Beneficiary does not know or even suspect to exist in its favor at the time of this Agreement, which, if known, may have affected its decision to enter into this Agreement. The parties understand that they may have suffered damages that are unknown to them at present and that they may suffer unknown damages in the future. The parties acknowledge that any actions taken in consideration of this Agreement are intended to and in fact do release and discharge any and all Claims stated to be released hereby, whether known or unknown, suspected or unsuspected, contingent or non-contingent, which now exist or have existed upon any theory of law or equity.

Section 4.05. In addition to and without in any way limiting any optional termination rights that the Policy Beneficiary may have under its existing policies issued by AAC and contracts with ACP (with or without make-whole premium), and subject to the limitations set forth below, with respect to any credit default swap (and any associated financial guaranty insurance policy solely to the extent such financial guarantee policy pertains to such credit default swap) or financial guaranty insurance policy listed on Schedule 2 hereto (a “ Potential Tear Up Policy ,”), from and after the Effective Time, the Policy Beneficiary may irrevocably elect to terminate such Potential Tear Up Polic[y] [ies], together with all agreements related to such Potential Tear Up Polic[y] [ies] between the Policy Beneficiary and ACP and/or AAC (together, the “ Related Potential Tear Up Agreements ”), without any obligation of ACP, AAC, or the Policy Beneficiary to make any termination payment, “make whole” payment, or other future payments (a “ Tear Up Election ”), by providing written notice thereof to AAC and ACP (a “ Tear Up Election Notice ”) identifying the Potential Tear Up Polic[y] [ies] (and Related Potential Tear Up Agreements) subject to the Tear Up Election and specifying a date (the “ Tear Up Effective Date ”) on which the Tear Up Election shall be effective. Notwithstanding the foregoing, such Tear Up Election shall be deemed ineffective unless each of the following conditions (the “ Tear Up Conditions ”) is satisfied on or before the Tear Up Effective Date specified in the Tear Up Election:

(a)

the Tear Up Election Notice is received by AAC and ACP no later than 5:00 p.m. (prevailing Eastern time) on Friday, March 23, 2012;

⁵	Bracketed language may be included at the option of the Ambac Parties and the relevant Policy Beneficiary.

(b)

the Tear Up Effective Date specified in the Tear Election Notice is a Business Day at least 10 calendar days, and no more than 180 calendar days, after the receipt by AAC and ACP of the Tear Up Election Notice;

(c)

the Tear Up Election delivered by the Policy Beneficiary applies to, and elects termination of, all (but not less than all) of such Policy Beneficiary’s Potential Tear Up Policies (and Related Potential Tear Up Agreements) in the same asset class as such Potential Tear Up Policy (as such asset classes are listed on Schedule 3 hereto and indicated in parentheses following the description of each Potential Tear Up Policy on Schedule 2); and

(d)

payment by the Policy Beneficiary has been made to ACP and/or AAC of all accrued but unpaid premium and other amounts (if any) due to ACP and/or AAC under the Potential Tear Up Policies and Related Potential Tear Up Agreements to be terminated pursuant to the Tear Up Election Notice up to and including the Tear Up Effective Date (the “ Termination Payments ”).

For the avoidance of doubt, until such time as the Tear Up Effective Date occurs, the delivery of the Tear Up Election Notice shall not limit or have any other effect on the rights and obligations of the parties under the Potential Tear Up Policies (and Related Potential Tear Up Agreements) subject to such Tear Up Election Notice and the parties shall be entitled to exercise any rights and remedies that would otherwise be exercisable in the absence of the Tear Up Election.

Upon the Tear Up Effective Date (subject to the satisfaction of each of the Tear Up Conditions), (i) the Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s] referred to in the Tear Up Election Notice shall be terminated in full and be of no further force or effect and other than the Termination Payments, no party hereto shall have any claims for payment of amounts under such terminated Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s]; (ii) the Policy Beneficiary’s obligations to make premium payments to AAC (or any affiliate of AAC, as applicable) shall cease and other than Termination Payments, no party hereto shall owe any other party any termination payment or other amounts in connection with the termination of such Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s]; (iii) Section 2.01, Section 3.01, and Article 4 of this Agreement shall apply to the Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreements subject to the Tear Up Election Notice on the Tear Up Effective Date and solely for such purposes, (a) the Potential Tear Up Polic[y] [ies] shall constitute Polic[y] [ies], (b) the Related Potential Tear Up Agreements shall constitute Commuted Swap Transactions, and (c) the Tear Up Effective Date shall constitute the Effective Time; and (iv) any requirement of notice of termination or delivery of any other document required in connection with termination of such Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s] is hereby waived by each party entitled to such notice or other document.

For the avoidance of doubt, notwithstanding the foregoing, if the Policy Beneficiary’s Potential Tear Up Polic[y] [ies] included optional termination provisions as of the Effective Date, (i) Section 4.05 hereof shall not apply to any such Polic[y][ies] and (ii) such termination provisions may be exercised in accordance with their terms (including, to the extent required by their terms, payment of any applicable make-whole premium, and without any additional limitation on the form of notice or time of exercise, and without any requirement that the exercise of any such termination provision requires that other policies be terminated, whether pursuant to a Tear Up Election or otherwise).

ARTICLE 5

R EPRESENTATIONS AND W ARRANTIES OF THE P ARTIES

Each of the Ambac Parties, jointly and severally, represents and warrants to the Policy Beneficiary, and the Policy Beneficiary represents and warrants to the Ambac Parties, in each case as follows:

Section 5.01 . Such party is a corporation or business entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all necessary power and authority to enter into this Agreement, the Settlement Agreement and any Ancillary Agreement to which it may be a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby to be consummated by it (the “ Transactions ”).

Section 5.02 . The execution, delivery and performance by such party of this Agreement, the Settlement Agreement and any Ancillary Agreement to which it may be a party, the performance by such party of its obligations hereunder and thereunder and the consummation by such party of the Transactions have been duly authorized by all necessary actions on the part of such party. This Agreement, the Settlement Agreement and any Ancillary Agreement to which it may be a party each constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms.

Section 5.03 . The execution, delivery and performance by such party of this Agreement, the Settlement Agreement and any Ancillary Agreement to which it is a party, the performance by such party of its obligations hereunder and thereunder and the consummation by such party of the Transactions do not and will not, (i) violate, conflict with or result in the breach of any provision of the organizational documents of such party, (ii) conflict with or violate in any material respect any applicable law or order of any governmental authority currently in effect with respect to such party or any of its

properties or assets, or (iii) conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which such party is a party or by which such party is bound, other than, in the case of this clause (iii), breaches or defaults which would not have a material adverse effect on the ability of such party to consummate the Transactions.

Section 5.04 . Neither the execution and delivery by such party of this Agreement, the Settlement Agreement and any Ancillary Agreement to which it may be a party nor compliance by such party with or fulfillment by such party of the terms, conditions and provisions hereof will require any authorization, consent, approval, exemption or license from, or any filing or registration with, or other order of, action by or notification to any governmental authority, other than those which have been obtained or made prior to, and remain in full force and effect as of, the Effective Time.

ARTICLE 6

A DDITIONAL R EPRESENTATIONS AND W ARRANTIES OF AAC

AAC represents and warrants to the Policy Beneficiary as follows:

Section 6.01 . Immediately after giving effect to the Transactions and the consummation of all transactions consummated prior to or simultaneously with this Agreement as of the Effective Time, (a) the present fair saleable value of the property of the general account of AAC will be greater than the amount that will be required to pay the probable liability of its policy obligations, debts and other liabilities, subordinated, contingent or otherwise (except Surplus Notes and preferred shares of AAC), as such policy obligations, debts and other liabilities become absolute and matured; (b) the general account of AAC will be able to pay its policy obligations, debts and liabilities, subordinated, contingent or otherwise (except Surplus Notes and preferred shares of AAC), as such policy obligations, debts and liabilities become absolute and matured; and (c) the general account of AAC will be solvent, and will not be insolvent or otherwise left with an unreasonably small amount of capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Effective Time.

Section 6.02 . AAC has fully disclosed this Agreement, the Settlement Agreement, the Ancillary Agreements to which it is a party, all related agreements and the Transactions to OCI. For each aspect of the Transaction that is subject to the prior reporting and disapproval provisions of Wis. Stat § 617.21, Wis. Admin. Code § INS 40.04 and any other related statutory or code provisions; OCI has declined to disapprove such aspect(s) of the Transaction and the 30-day (or such shorter period as the OCI has approved in writing) prior notice requirement with respect thereto has expired.

Section 6.03 . The consideration provided by the Policy Beneficiary pursuant to the terms of this Agreement, to the knowledge of AAC, constitutes at least reasonably equivalent value to AAC and ACP for the consideration that the Policy Beneficiary is receiving from AAC, under this Agreement.

Section 6.04 . AAC is not transferring any assets to the Policy Beneficiary with any intent to hinder, delay or defraud any of its creditors.

ARTICLE 7

A DDITIONAL R EPRESENTATIONS AND W ARRANTIES OF T HE P OLICY B ENEFICIARY

The Policy Beneficiary represents and warrants to AAC as follows:

Section 7.01 . The AAC Surplus Notes, if any, are being acquired by the Policy Beneficiary for its own account and without a view to the public distribution or sale of the AAC Surplus Notes or any interest in them. The Policy Beneficiary understands and agrees that it may not sell, transfer, assign, pledge or otherwise dispose of any of the AAC Surplus Notes other than pursuant to a registered offering in compliance with, or in a transaction exempt from, the registration requirements of the Securities Act of 1933, as amended, and applicable state and foreign securities Laws.

ARTICLE 8

G OVERNING L AW

Section 8.01 . Except as provided herein, this Agreement shall be interpreted under and governed by the Laws of the State of New York without giving effect to conflicts of law provisions thereof that would make the law of any other jurisdiction applicable to this Agreement.

Section 8.02 . In the event that there is a dispute between or among the Parties arising under this Agreement, the Parties (i) agree that the exclusive forum to seek remedy shall be to institute a legal proceeding in the courts of the State of New York located in the City and County of New York or the United States District Court for the Southern District of New York and (ii) hereby expressly submit to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waive any claim of lack of personal jurisdiction and improper venue and any claim that such courts are an inconvenient forum. Each Party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address provided to the Parties in accordance with Section 6.02 of the Settlement Agreement, such service to become effective 10 days after such mailing.

ARTICLE 9

C ONFIDENTIALITY

Section 9.01. Each party hereto agrees that the terms of this Agreement are confidential and that neither its existence nor its terms (collectively, the “ CA Confidential Information ”) will be disclosed to any person other than such party’s affiliates and their respective Representatives, who agree to keep such CA Confidential Information confidential in accordance with this Section 9.01. Notwithstanding the foregoing, each party may make such disclosures (i) to any governmental or regulatory agencies, or to any self-regulatory authority (including, without limitation, stock exchanges), with authority over (or claiming to have authority over) such party, to any rating agencies and to any bank examiner, in each case to the extent required or requested by them or if such party determines it is advisable to provide them with such information, in each case if (to the extent not prohibited by any Law and if reasonably practicable) such party informs them of the confidential nature of such information and requests that they maintain its confidentiality; (ii) to the extent required by applicable law, rule or regulation; (iii) in connection with any action to enforce this Agreement or any provision of this Agreement or in connection with any proceeding, including steps leading to a potential proceeding, that might involve this Agreement or any provision of this Agreement, and (iv) to the extent such information shall be in the public domain without breach by any party of its obligation hereunder. Notwithstanding anything in this Section 9.01 above to the contrary, the Policy Beneficiary may disclose CA Confidential Information to a transferee or prospective transferee (in each case, direct or indirect) of any right, title or interest of the Policy Beneficiary in, to or under any Surplus Note, any Commuted Swap Transaction or Amended CDS, any Policy or Potential Tear Up Policy, the Settlement Agreement or this Agreement, in each case that has agreed in writing prior to any disclosure to abide by the terms of this Section 9.01 above. Notwithstanding the foregoing restrictions, a party is permitted to disclose the subject matter hereof, notional amount settled and amount of settlement payment, but not the names of the parties hereto, and, in the event of any public notice thereof, shall give the other party or parties a copy of any proposed public release (if any) announcing the termination of the Commuted Swap Transaction[s] and the parties’ respective rights and obligations related to the Commuted Swap Transaction[s] prior to its release to the general public (it being understood and agreed that solely the portion of any such press release which describes the Agreement shall be provided and that the portion of any such press release which relates to items other than solely the Agreement may be redacted). Each party agrees to promptly notify the other parties in the event it shall be required by law to publicly disclose the name of the other parties hereto. Information shall not be considered confidential pursuant to this Section 9.01 to the extent it is or becomes generally known to the public other than due to a breach of this Agreement by a party hereto. This Section 9.01 is in addition to, and does not modify or limit, Section 3.01 of the Settlement Agreement.

ARTICLE 10

W AIVER OF J URY T RIAL

EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR THE COMMUTED SWAP TRANSACTIONS OR THE TERMINATION OF THE POTENTIAL TEAR UP POLICIES AND RELATED POTENTIAL TEAR UP AGREEMENTS. EACH OF THE PARTIES HEREBY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS ARTICLE 10.

ARTICLE 11

C OUNTERPARTS

This Agreement may be executed in several counterparts (including by facsimile transmission or electronic transmission of a Portable Document Format file), each of which shall be an original and all which together shall constitute a single agreement.

ARTICLE 12

A MENDMENTS

No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including writing evidenced by facsimile transmission or electronic transmission of a Portable Document Format file) and executed by each of the parties hereto.

ARTICLE 13

[R ESERVED ]

[Reserved]

ARTICLE 14

E NTIRE A GREEMENT

Except as provided in the Settlement Agreement, this Agreement sets forth the entire understanding and agreement between the parties as to the matters covered herein and supersedes and replaces any prior understanding, agreement or statement of intent, in each case, written or oral.

ARTICLE 15

N OTICES

All demands and notices hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by first class mail, postage prepaid, or by express delivery service, or faxed (with telephone confirmation of receipt by the addressee) to the address and facsimile numbers as advised to the parties by the other parties in writing from time to time. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the other party receives such notice.

ARTICLE 16

S UCCESSORS AND A SSIGNS

This Agreement shall inure to the benefit of and be binding upon each party to this Agreement and each of their respective successors and permitted assigns. This Agreement may be assigned by a Policy Beneficiary in connection with or as part of a merger, consolidation or sale of substantially all of such Policy Beneficiary’s assets to the Person(s) with whom the Policy Beneficiary is merging or to whom substantially all of the Policy Beneficiary’s assets are being transferred and that (by operation of Law or written instrument of assumption) assumes all obligations of the assignor under this Agreement.

ARTICLE 17

N O T HIRD P ARTY B ENEFICIARIES

Except as provided in Sections 4.01, 4.02, 4.03 and 4.04 hereof, nothing in this Agreement is intended or shall be construed to create or give to any persons other than the parties hereto any rights by reason of this Agreement.

EXHIBIT D

IN WITNESS WHEREOF, the Policy Beneficiary, AAC, and ACP have each caused this instrument to be signed in its name by its proper officer thereunto duly authorized, as of the date first above written.


[NAME OF POLICY BENEFICIARY]

By:
		Name:
		Title:

AMBAC CREDIT PRODUCTS, LLC

By:
		Name:
		Title:

AMBAC ASSURANCE CORPORATION

By:
		Name:
		Title:

Schedule 1 to

Commutation Agreement

Insurance Policies and Swaps or Other Commuted Swap Transaction[s] to be Commuted

Schedule 2 to

Commutation Agreement

Potential Tear Up Policies

Schedule 3 to

Commutation Agreement

Asset Classes

1.	Asset Backed

2.	Government General Obligations

Housing

4.	Investor Owned Utility

5.	Mortgage Backed Securities

6.	Private Finance Initiatives

7.	Emerging Market CDOs

8.	TruPs CDOs

CLOs

10.	Other Pooled Debt Obligations

11.	Structured Insurance

12.	Student Loans

13.	Transportation

Annex A to

Commutation Agreement

Settlement Amount: $

Surplus Note Amount: $

Payout Account : [Name of Bank]

ABA#:

BIC:

A/C#:

REF:

FFC:

Exhibit 10.3

Execution Copy

FISCAL AGENCY AGREEMENT

between

AMBAC ASSURANCE CORPORATION

Issuer

and

THE BANK OF NEW YORK MELLON

Fiscal Agent

Dated as of June 7, 2010

5.1% Surplus Notes scheduled to mature on June 7, 2020

Table of Contents


			Page

1.	The Notes		1
	(a)	General	1
	(b)	Forms of Notes	1
	(c)	Book-Entry Provisions	3
	(d)	Persons Deemed Owners	5
	(e)	Denominations	5

2.	Fiscal Agent; Other Agents		5

3.	Authentication		6

4.	Payment and Cancellation		6
	(a)	Payment	6
	(b)	Cancellation	7

5.	Global Notes		8
	(a)	Exchange for Certificated Notes	8
	(b)	Notes Issued in Exchange for Global Notes	8
	(c)	Authorization by Registered Holder	9
	(d)	Certificated Notes Made Available	9

6.	Registration, Transfer and Exchange of Notes		9
	(a)	General	9
	(b)	Transfers of Restricted Certificated Notes	9
	(c)	Transfers of Global Notes and Interests Therein	11
	(d)	Registration of Transfers and Exchanges	14
	(e)	Information from Transfer Agent	15
	(f)	Periods of Non-registration	15
	(g)	Legend	15
	(h)	Repurchases by Issuer	16

7.	Redemption		16
	(a)	Notice to Fiscal Agent	16
	(b)	Selection of Notes to be Redeemed	16
	(c)	Notice of Redemption; Effect of Notice	16
	(d)	Notes Redeemed in Part	17

8.	Delivery of Certain Information		17

9.	Conditions of Fiscal Agent’s Obligations		17
	(a)	Compensation and Indemnity	17
	(b)	Agency	17
	(c)	Advice of Counsel	18

Table of Contents

(continued)


			Page

	(d)	Reliance	18
	(e)	Interest in Notes, etc	18
	(f)	Non-Liability for Interest	18
	(g)	Certifications	19
	(h)	No Implied Obligations	19
	(i)	Enforceability of Rights	19
	(j)	Agents	19
	(k)	Damages	19
	(l)	Recitals	19
	(m)	Occurrences Beyond Reasonable Control	20
	(n)	Default of the Issuer	20

10.	Resignation, Removal and Appointment of Successor		20
	(a)	Fiscal Agent and Paying Agent	20
	(b)	Resignation and Removal	20
	(c)	Successors	21
	(d)	Acknowledgement	22
	(e)	Merger, Consolidation, etc	22

11.	Meetings and Amendments		22
	(a)	Calling of Meeting, Notice and Quorum	22
	(b)	Approval	23
	(c)	Binding Nature of Amendments, Notices, Notations, etc	25
	(d)	“Outstanding” Defined	25

12.	Remedies		26
	(a)	Acceleration of Maturity	26
	(b)	Failure to Pay or Perform Other Obligations	27
	(c)	Rights of Holders	27

13.	Governing Law		27

14.	Notices		28

15.	Severability		28

16.	Headings		28

17.	Counterparts		28

18.	Interpretation		29

19.	Waiver of Jury Trial		29

Table of Contents

(continued)


EXHIBIT A	FORM OF CERTIFICATED NOTE	A-1

EXHIBIT B	FORM OF GLOBAL NOTE	B-1

EXHIBIT C-1	FORM OF CERTIFICATE FOR EXCHANGE OF RESTRICTED CERTIFICATED NOTE	C-1-1

EXHIBIT C-2	FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RESTRICTED CERTIFICATED NOTE TO PERMANENT REGULATION S GLOBAL NOTE	C-2-1

EXHIBIT C-3	FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RESTRICTED CERTIFICATED NOTE TO RESTRICTED GLOBAL SECURITY	C-3-1

EXHIBIT D	FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RESTRICTED GLOBAL NOTE TO TEMPORARY REGULATION S GLOBAL NOTE	D-1

EXHIBIT E	FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM RESTRICTED GLOBAL NOTE TO PERMANENT REGULATION S GLOBAL NOTE	E-1

EXHIBIT F	FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM TEMPORARY REGULATION S GLOBAL NOTE TO RESTRICTED GLOBAL NOTE	F-1

EXHIBIT G	FORM OF CERTIFICATE OF BENEFICIAL OWNERSHIP	G-1

EXHIBIT H	FORM OF RULE 144 CERTIFICATE	H-1

iii

Index of Defined Terms


Defined Term		Section
“Act”		1(b)(i)
“Affiliate”		11(d)
“Agent Members”		1(c)
“Applicable Procedures”		6(c)(ii)
“Authorized Officers”		1(b)(ii)
“Certificate of Beneficial Ownership”		1(b)(ii)(B)
“Certificated Note”		5(a)
“Clearstream Banking”		1(b)(ii)(A)
“Commissioner”		4(a)
“Corporate Trust Office”		2
“Euroclear”		1(b)(ii)(A)
“Exchange Act”		5(a)
“Fiscal Agent”		2
“Global Notes”		1(c)
“Institutional Accredited Investor”		1(b)(i)
“Issuer”		Preamble
“Legend”		6(g)
“Notes”		1(a)
“Outstanding”		11(d)
“Paying Agent”		2
“Payment Restrictions”		1(a)
“Permanent Regulation S Global Note”		1(b)(ii)(A)
“Person”		11(d)
“registered holders”		4(a)
“Regulation S”		1(b)(ii)(A)
“Restricted Certificated Notes”		6(b)
“Restricted Global Notes”		1(b)(i)
“Restricted Notes”		6(g)
“Restricted Period”		1(b)(ii)(A)

Index of Defined Terms

(continued)


Defined Term		Section
“Rule 144A”		6(b)(i)(2)
“Rule 144A Information”		8
“Scheduled Maturity Date”		1(a)
“Settlement Agreement”		1(b)
“Temporary Regulation S Global Note”		1(b)(ii)(A)
“Transfer Agent”		2
“U.S. Depositary”		1(b)(i)
“USA Patriot Act”		20

FISCAL AGENCY AGREEMENT (this “Agreement”), dated as of June 7, 2010, between AMBAC ASSURANCE CORPORATION, a Wisconsin-domiciled insurance corporation (and any successor in interest thereto, the “ Issuer ”), and THE BANK OF NEW YORK MELLON, a New York banking corporation, as Fiscal Agent (as defined herein). The Exhibits attached hereto shall be deemed to be a part of this Agreement.

1. The Notes .

(a) General . The aggregate principal amount of 5.1% Surplus Notes of the Issuer (the “ Notes ”) that may be authenticated and delivered under this Agreement is $2,000,000,000.00. Claims based upon the Notes will rank below all Indebtedness, Policy Claims and Prior Claims (each as defined in the Notes). The payment by the Issuer of principal and interest on the Notes shall be conditioned upon the payment restrictions set forth in paragraphs 4 and 10 of the Notes (the “ Payment Restrictions ”). The Notes are scheduled to mature on June 7, 2020 (the “ Scheduled Maturity Date ”). Any reference herein to the term “scheduled maturity date” or other date for the payment of principal of the Notes shall include ( i ) the date, if any, fixed for redemption in accordance with paragraph 15 of the Notes and ( ii ) the date upon which any state or federal agency obtains an order or grants approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer.

(b) Forms of Notes . The Notes are being issued by the Issuer pursuant to the Settlement Agreement, dated as of June 7, 2010 (as amended, restated, supplemented or otherwise modified from time to time, in each case in accordance with the terms thereof, the “ Settlement Agreement ”), by and among the Issuer, Ambac Credit Products, LLC, Ambac Financial Group, Inc. and the parties listed on Schedule A thereto.

(i) Notes offered and sold pursuant to the Settlement Agreement to “institutional accredited investors” (each, an “ Institutional Accredited Investor ”) within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the “ Act ”), shall be issued in the form of Global Notes (as defined below) (the “ Restricted Global Notes ”) in definitive, fully registered form without interest coupons, substantially in the form attached as Exhibit B hereto, with such applicable legends as are provided for in Exhibit B . Each such Global Note shall be registered in the name of a nominee of The Depository Trust Company (the “ U.S. Depositary ”) and deposited with the Fiscal Agent, at its New York City office, as custodian for the U.S. Depositary, duly executed by the Issuer and authenticated by the Fiscal Agent as hereinafter provided. The aggregate principal amount of each Restricted Global Note may from time to time be increased or decreased by adjustments made on the records of the Fiscal Agent, as custodian for the U.S. Depositary, as hereinafter provided.

(ii) (A) Notes offered and sold in reliance on Regulation S (“ Regulation S ”) under the Act pursuant to the Settlement Agreement shall be issued initially in the form of temporary Global Notes in definitive, fully registered form without interest coupons, substantially in the form of Note attached as Exhibit B hereto, with such applicable legends as are provided for in Exhibit B . Each such Global Note shall be registered in the name of a nominee of the U.S. Depositary and deposited with the Fiscal Agent, at its New York City office, as custodian for the U.S. Depositary, duly executed by the Issuer and authenticated by the Fiscal Agent as hereinafter provided, for credit to the respective accounts of Euroclear Bank S.A./N.V. (“ Euroclear ”) or Clearstream Banking, société anonyme , Luxembourg (“ Clearstream Banking ”). Until such time as the Restricted Period (as defined below) shall have terminated, each such Global Note shall be referred to herein as a “ Temporary Regulation S Global Note .” After the Restricted Period shall have terminated, interests in each such Global Note shall be exchangeable for equivalent interests in a like Global Note, referred to herein as a “ Permanent Regulation S Global Note .” The aggregate principal amount of each Temporary Regulation S Global Note and each Permanent Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Fiscal Agent, as custodian for the U.S. Depositary, as hereinafter provided. As used herein, the term “ Restricted Period ” means the period of 40 consecutive days beginning on and including the issue date of the Temporary Regulation S Global Note.

(B) An owner of a beneficial interest in a Temporary Regulation S Global Note (or a person acting on behalf of such an owner) may provide to Euroclear or Clearstream Banking, as applicable, (and Euroclear or Clearstream Banking will accept) a duly completed certificate in substantially the form of Exhibit G (a “ Certificate of Beneficial Ownership ”) at any time after the termination of the Restricted Period (it being understood that Euroclear or Clearstream Banking, as applicable, will not accept any such certificate during the Restricted Period). Promptly after receipt by the Fiscal Agent of a Certificate of Beneficial Ownership from the U.S. Depositary on behalf of Euroclear or Clearstream Banking, as applicable (or other appropriate confirmation to such effect in accordance with the Applicable Procedures (as defined below)), with respect to such a beneficial interest, the Fiscal Agent will cause such beneficial interest to be exchanged for an equivalent beneficial interest in a Permanent Regulation S Global Note, and will (x) permanently reduce the principal amount of such Temporary Regulation S Global Note by the amount of the beneficial interest certified in such Certificate of Beneficial Ownership and (y) increase the principal amount of such Permanent Regulation S Global Note by the amount of the beneficial interest certified in such Certificate of Beneficial Ownership, in each case subject to the Applicable Procedures.

(iii) Notwithstanding the other provisions of this Section 1(b), Notes offered and sold pursuant to the Settlement Agreement may be issued as certificated securities in definitive, fully registered form without interest coupons, substantially in the form attached as Exhibit A hereto, with such applicable legends as are provided in Exhibit A (“ Certificated Notes ”).

All Notes shall be issued substantially in the form attached hereto as either Exhibit A or B , as applicable, and shall be executed manually, in facsimile or portable document format on behalf of the Issuer by any of its Chief Executive Officer, President, Executive Vice President or Chief Financial Officer (the “ Authorized Officers ”), notwithstanding that such officers, or any of them, shall have ceased, for any reason, to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of any such Note. The Notes also may have such (i) additional provisions, omissions, variations or substitutions as are not inconsistent with the provisions of this Agreement and (ii) letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with this Agreement, any law or with any rules made pursuant thereto or with the rules of any securities exchange, insurance regulatory or other governmental agency or depositary therefor or as may, consistently herewith, be determined by the Authorized Officer executing such Notes, in the case of both (i) and (ii), as conclusively evidenced by the proper execution of such Notes by any such Authorized Officer. All Notes shall be otherwise identical except as to denomination and as otherwise provided herein.

(c) Book-Entry Provisions . This Section 1(c) shall apply to all Notes evidencing all or part of the Notes that are registered in the name of the U.S. Depositary or a nominee thereof (“ Global Notes ”).

The Issuer shall execute and the Fiscal Agent shall, in accordance with this Section 1(c) and with Section 3 , authenticate and deliver one or more Global Notes as required to be issued pursuant to Section 1(b) hereof, which (A) shall be registered in the name of the U.S. Depositary or its nominee, (B) shall be retained by the Fiscal Agent as custodian for the U.S. Depositary and (C) shall bear legends substantially to the following effect:

“UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“ DTC ”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS

IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

“THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A NOTE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN SECTION 5 OF THE FISCAL AGENCY AGREEMENT, AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 6(c) OF THE FISCAL AGENCY AGREEMENT. BENEFICIAL INTERESTS IN THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 6(c) OF THE FISCAL AGENCY AGREEMENT.”

Neither any members of, or participants in, the U.S. Depositary (“ Agent Members ”) nor any other persons on whose behalf Agent Members may act (including, without limitation, Euroclear and Clearstream Banking and account holders and participants therein) shall have any rights under this Fiscal Agency Agreement with respect to any Global Note registered in the name of the U.S. Depositary or any nominee thereof, or under any such Global Note, and the U.S. Depositary or such nominee, as the case may be, may be treated by the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent as the absolute owner and holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Fiscal Agent or any agent of the Issuer or the Fiscal Agent from giving effect to any written certification, proxy or other authorization furnished by the U.S. Depositary or such nominee, as the case may be, or impair, as between the U.S. Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such persons governing the exercise of the rights of a holder of any Note.

(d) Persons Deemed Owners . The Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent may treat the person in whose name a Note is registered as the absolute owner and holder of such Note for all purposes whatsoever, and none of the Issuer, the Fiscal Agent and any agent of any of them shall be affected by notice to the contrary. Any reference herein and in any Note to the term “holder” of a Note or “registered holder” shall be to the person in whose name a Note is registered in the register maintained for such purposes pursuant to Section 6 hereof.

(e) Denominations . The Notes shall be issuable in minimum denominations of $1 and integral multiples of $1 in excess thereof.

2. Fiscal Agent; Other Agents . The Issuer hereby appoints The Bank of New York Mellon, acting through its corporate trust office at 101 Barclay Street, Floor 8W, New York, New York 10286, Attention: Corporate Finance Group (the “ Corporate Trust Office ”), as fiscal agent of the Issuer in respect of the Notes upon the terms and subject to the conditions herein set forth, and The Bank of New York Mellon hereby accepts such appointment. The Bank of New York Mellon, and any successor or successors as such fiscal agent qualified and appointed in accordance with Section 10 hereof, are herein called the “ Fiscal Agent .” The Fiscal Agent shall have the powers and authority granted to and conferred upon it in the Notes and hereby and such further powers and authority to act on behalf of the Issuer as may be mutually agreed upon by the Issuer and the Fiscal Agent. The Fiscal Agent shall keep a copy of this Agreement available for inspection during normal business hours at its Corporate Trust Office. The Fiscal Agent or any Paying Agent (as defined below) shall also act as Transfer Agent (as defined below). All of the terms and provisions with respect to such powers and authority contained in the Notes are subject to and governed by the terms and provisions hereof.

The Issuer may, at its discretion, appoint one or more agents (a “ Paying Agent ” or “ Paying Agents ”) for the payment, to the extent permitted under the Payment Restrictions, of the principal of and any interest on the Notes, and one or more agents (a “ Transfer Agent ” or “ Transfer Agents ”) for the transfer and exchange of Notes, at such place or places as the Issuer may determine; provided , however , that the Issuer shall at all times maintain a Paying Agent and Transfer Agent in the Borough of Manhattan, The City of New York (which Paying Agent and Transfer Agent may be the Fiscal Agent). The Issuer hereby initially appoints the Fiscal Agent at its Corporate Trust Office as Paying Agent, Transfer Agent, authenticating agent and securities registrar, and the Fiscal Agent hereby accepts such appointments. The Transfer Agent shall act as a securities registrar and there shall be kept at the office of the Transfer Agent a register in which, subject to such reasonable regulations as the Issuer may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers or exchanges of Notes. The Issuer shall promptly notify the Fiscal Agent of the name and address of any other Paying Agent or Transfer Agent appointed by it and of the country or countries in

which a Paying Agent or Transfer Agent may act in that capacity, and will notify the Fiscal Agent of the resignation or termination of any such Paying Agent or Transfer Agent. Subject to the provisions of Section 10(c) hereof, the Issuer may vary or terminate the appointment of any such Paying Agent or Transfer Agent at any time and from time to time upon giving not less than 90 days’ notice to such Paying Agent or Transfer Agent, as the case may be, and to the Fiscal Agent. The Issuer shall cause written notice of any resignation, termination or appointment of the Fiscal Agent or any Paying Agent or Transfer Agent and of any change in the office through which any such Agent will act to be provided to holders of Notes as soon as reasonably practicable following the Issuer’s receipt of notice thereof.

3. Authentication . The Fiscal Agent is authorized from time to time, upon receipt of Notes duly executed on behalf of the Issuer and in accordance with the written order or orders of the Issuer signed on its behalf by an Authorized Officer, (i) to manually authenticate and deliver Notes for the purposes of the original issuance of Notes in an aggregate principal amount not in excess of $2,000,000,000.00, and (ii) thereafter to manually authenticate and deliver Notes in accordance with the provisions therein and hereinafter set forth.

The Fiscal Agent may, with the consent of the Issuer, appoint by an instrument or instruments in writing, one or more agents (which may include itself) for the authentication of the Notes and, with such consent, vary or terminate any such appointment upon written notice and approve any change in the office through which any authenticating agent acts. The Issuer (by written notice to the Fiscal Agent and the authenticating agent whose appointment is to be terminated) may also terminate any such appointment at any time. The Fiscal Agent hereby agrees to solicit written acceptances from the entities concerned (in form and substance satisfactory to the Issuer) of such appointments. In its acceptance of such appointment, each such authenticating agent shall agree to act as an authenticating agent pursuant to the terms and conditions of this Agreement.

4. Payment and Cancellation .

(a) Payment . For so long as the Fiscal Agent is acting as a Paying Agent hereunder, the Issuer, subject to the Payment Restrictions, shall provide to the Fiscal Agent, or such other Paying Agent if the Fiscal Agent is no longer acting as a Paying Agent, in immediately available funds on or prior to 11:00 a.m., New York time, on each date on which a payment of principal of or any interest on the Notes shall be payable, as set forth in the text of the Notes, such amounts, in U.S. dollars, as are necessary (with any amounts then held by the Fiscal Agent and available for the purpose) to make such payment, and the Issuer hereby authorizes and directs the Fiscal Agent from funds so provided to it to make or cause to be made payment of the principal of and any interest,

as the case may be, on the Notes in the manner, at the times and for the purposes set forth herein and in the text of said Notes; provided that the Issuer will not provide any such funds to the Fiscal Agent prior to such time as the relevant payment of principal or interest is approved by the Commissioner of Insurance of the State of Wisconsin or any successor thereto (the “ Commissioner ”). Permitted payments of principal of or any interest on the Notes to the persons (the “ registered holders ”) in whose names such Notes are registered on the register maintained pursuant to Section 6 hereof at the close of business on the record dates designated in the text of the Notes will be made (i) by wire transfer of immediately available funds to an account maintained by the payee with a bank as specified in the text of the Notes if such registered holder gives notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the date on which such payments are scheduled to be made, of the account to which payment is to be made or, (ii) if no such notice is given, by mailing a check to the payee at the address reflected in the register maintained pursuant to Section 6 hereof. Unless the designation of the payee’s account to which payment is to be made is revoked, any such designation made by such holder with respect to such Notes shall remain in effect with respect to any future payments with respect to such Notes payable to such holder. The Issuer shall pay any reasonable administrative costs in connection with making any such payments. The Fiscal Agent shall arrange directly with any other Paying Agent who may have been appointed by the Issuer pursuant to the provisions of Section 2 hereof for the payment, subject to the Payment Restrictions, from funds so paid by the Issuer of the principal of and any interest on the Notes in the manner, at the times and for the purposes set forth herein and in the text of said Notes. Notwithstanding the foregoing, the Issuer may provide directly to a Paying Agent (other than the Fiscal Agent) funds for the payment, subject to the Payment Restrictions, of the principal thereof and interest payable thereon under an agreement with respect to such funds containing substantially the same terms and conditions set forth in this Section 4(a) and in Section 9(b) hereof; and the Fiscal Agent shall have no responsibility with respect to any funds so provided by the Issuer to any such Paying Agent. To the extent that the Fiscal Agent is not acting as Paying Agent, references to the Fiscal Agent in this Section 4(a) shall include the Paying Agent in such capacity.

Funds received by the Paying Agent will be applied first to the amounts then due to the Paying Agent, Transfer Agent and Fiscal Agent under Section 9(a) and then to the principal of and interest on the Notes.

Payments of principal of and interest on the Notes shall be made in the manner set forth in the Notes, including the Payment Restrictions set forth therein.

(b) Cancellation . All Notes delivered to the Fiscal Agent (or any other agent appointed by the Issuer pursuant to Section 2 hereof) for payment, redemption or registration of transfer or exchange as provided herein or in the Notes shall be marked “cancelled” and, in the case of any other such agent, forwarded to the Fiscal Agent. All

such Notes shall be disposed of by the Fiscal Agent in accordance with its customary procedures or by such other person as may be jointly designated by the Issuer and the Fiscal Agent, which, upon the Issuer’s written instructions, shall thereupon furnish certificates of such disposition to the Issuer.

5. Global Notes .

(a) Exchange for Certificated Notes . Notwithstanding any other provisions of this Agreement or the Notes, a Global Note shall not be exchanged in whole or in part for a Note registered in the name of any person other than the U.S. Depositary or one or more nominees thereof; provided that a Global Note may also be exchanged for Notes registered in the names of any person designated by the U.S. Depositary in the event that such exchange is permitted by applicable law and (i) the U.S. Depositary has notified the Issuer that it is unwilling or unable to continue as U.S. Depositary for such Global Note or the U.S. Depositary has ceased to be a “clearing agency” registered under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the Issuer fails to appoint a successor depositary within 90 days of receiving such notice, (ii) an event described in paragraph 14(a) or the first sentence of paragraph 14(b) of the Notes has occurred and is continuing with respect to the Notes, (iii) a request for certificates has been made upon 60 days’ prior written notice given to the Fiscal Agent in accordance with the U.S. Depositary’s customary procedures and a copy of such notice has been received by the Issuer from the Fiscal Agent or (iv) the holder of an interest in such Global Note has notified the Fiscal Agent and securities registrar in writing that it is transferring such beneficial interest to an Institutional Accredited Investor and such holder (1) requests in such written notice that certificates be delivered to such transferee and (2) complies with the requirements for transfer specified in Section 6(c)(vi) of this Agreement. Any Global Note exchanged pursuant to clause (i) above shall be so exchanged in whole and not in part and any Global Note exchanged pursuant to clause (ii) , (iii) or (iv) above may be exchanged in whole or from time to time in part as directed by the U.S. Depositary. Any Note issued in exchange for a Global Note or any portion thereof shall be a Global Note; provided that any such Note so issued that is registered in the name of a person other than the U.S. Depositary or a nominee thereof shall be in the form of Certificated Notes.

(b) Notes Issued in Exchange for Global Notes . Notes issued in exchange for a Global Note or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate principal amount equal to that of such Global Note or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the U.S. Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Note to be exchanged in whole shall be surrendered by the U.S. Depositary to the Transfer Agent located in the Borough of Manhattan, The City of New York, to be so exchanged. With regard to any Global Note to be exchanged in part, either such Global Note shall be so surrendered to the

Transfer Agent for exchange or, if the Fiscal Agent is acting as custodian for the U.S. Depositary or its nominee with respect to such Global Note, the principal amount thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Fiscal Agent. Upon any such surrender or adjustment, the Fiscal Agent shall authenticate and deliver the Note duly executed by the Issuer in connection with such exchange to or upon the order of the U.S. Depositary or an authorized representative thereof. Any Note delivered in exchange for the Restricted Global Note or any portion thereof shall, except as otherwise provided by Section 6(g) , bear the legend regarding transfer restrictions applicable to the Registered Global Note set forth on the form of Note attached as Exhibit B hereto.

(c) Authorization by Registered Holder . Subject to the provisions of Section 1(c) above, the registered holder may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a registered holder of a Note is entitled to take under this Fiscal Agency Agreement or the Notes.

(d) Certificated Notes Made Available . In the event of the occurrence of any of the events specified in paragraph (a) of this Section 5 , the Issuer will promptly make available to the Fiscal Agent a reasonable supply of executed Certificated Notes.

6. Registration, Transfer and Exchange of Notes .

(a) General . The Fiscal Agent, as agent of the Issuer for this purpose, shall maintain at its Corporate Trust Office in the Borough of Manhattan, The City of New York, a register of Notes for the registration of Notes and the transfers and exchanges thereof. Subject to the provisions of this Section 6 , upon presentation for the registration, transfer or exchange of any Note at the office of any Transfer Agent accompanied by a written instrument of transfer or exchange in the form reasonably approved by the Issuer (it being understood that, until notice to the contrary is given to holders of Notes, the Issuer shall be deemed to have approved the form of instrument of transfer or exchange, if any, printed on any Note), executed by the registered holder, in person or by such holder’s attorney thereunto duly authorized in writing, such Note shall be transferred upon the register for the Notes, and a new Note shall be authenticated and issued in the name of the transferee. No transfer shall be effected under this Agreement or the Notes until, and such transferee shall succeed to the rights of the transferor only upon, final acceptance and registration of transfer by the Fiscal Agent, as Transfer Agent, or by the Transfer Agent if the Fiscal Agent is not so serving, in the register.

(b) Transfers of Restricted Certificated Notes . If a holder of Certificated Notes that bear or are required to bear the legends set forth in the form of Note attached as Exhibit A hereto (“ Restricted Certificated Notes ”) wishes at any time to transfer such Restricted Certificated Notes or to exchange such Restricted Certificated Notes, such exchange or transfer may be effected only in accordance with the provisions of this Section 6(b) .

(i) Transfer and Exchange of Restricted Certificated Notes . Upon the receipt by the Fiscal Agent, as Transfer Agent, at its office in The City of New York, of ( i ) a Restricted Certificated Note accompanied by a written and executed instrument of transfer or exchange as provided in Section 6(a) and ( ii ) the following additional information and documents, as applicable:

(1) if such Restricted Certificated Note is owned by the holder thereof and is being exchanged, without transfer, a certification from such holder to that effect, substantially in the form of Exhibit C-1 hereto; or

(2) if such Restricted Certificated Note is transferred pursuant to an exemption from registration in accordance with Rule 144A under the Act (“ Rule 144A ”), Rule 144, Regulation S or such other exemption from registration under the Act, a certification from such holder to that effect and if the Fiscal Agent or the Issuer so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to compliance with the restrictions contained in the legend set forth on the security,

the Fiscal Agent shall register the transfer of such Restricted Certificated Note or exchange such Restricted Certificated Note for an equal principal amount of Restricted Certificated Notes of other authorized denominations.

To permit registrations of transfers and exchanges, the Fiscal Agent or Transfer Agent shall communicate to the Issuer any request from a holder of a Note to so transfer or exchange and the Issuer shall execute and the Fiscal Agent (or an authenticating agent appointed pursuant to Section 3 ) shall authenticate and deliver such Restricted Certificated Note. No service charge shall be made for any registration of transfer or exchange, but the Issuer and the Fiscal Agent may require payment by the holder of a Note of a sum sufficient to cover any transfer tax or other governmental charge payable in connection with any registration of transfer or exchange.

All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, subject to the Payment Restrictions, evidencing the same debt, and the applicable provisions of this Agreement shall apply equally thereto, as to the Notes surrendered upon such registration of transfer or exchange.

(ii) Transfer of a Restricted Certificated Note for a Beneficial Interest in a Global Note . Upon the receipt by the Fiscal Agent, as Transfer Agent, at its

Corporate Trust Office in The City of New York of ( i ) a Restricted Certificated Note accompanied by a written and executed instrument of transfer or exchange as provided in Section 6(a) , ( ii ) written instructions from an Agent Member directing the Fiscal Agent to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Restricted Global Note or the Permanent Regulation S Global Note, as the case may be, having a principal amount equal to the principal amount of the Restricted Certificated Note so transferred, ( iii ) a written order containing information regarding the account of the Agent Member to be credited with such beneficial interest and ( iv ) the following additional documents, as applicable:

(1) if such Restricted Certificated Note is transferred pursuant to an exemption from registration in accordance with Regulation S or Rule 144 under the Act, a certification from such holder to that effect, substantially in the form of Exhibit C-2 hereto;

(2) if such Restricted Certificated Note is transferred pursuant to an exemption from registration in accordance with Rule 144A under the Act, a certification from such holder to that effect substantially in the form of Exhibit C-3 hereto; or

(3) if such Restricted Certificated Note is transferred pursuant to any other exemption from registration under the Act, a certification from such holder to that effect and if the Fiscal Agent or the Issuer so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to compliance with the restrictions contained in the legend set forth on the security,

the Fiscal Agent shall cancel such Restricted Certificated Note and shall instruct the U.S. Depositary to increase the principal amount of the Restricted Global Note or the Permanent Regulation S Global Note, as the case may be, by the principal amount of the Restricted Certificated Note so transferred, and to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Restricted Global Note or the Permanent Regulation S Global Note, as the case may be, having a principal amount equal to the principal amount of the Restricted Certificated Note so transferred.

(c) Transfers of Global Notes and Interests Therein . Notwithstanding any other provision of this Agreement or the Notes, transfers of a Global Note, in whole or in part, and transfers of interests therein of the kind described in clauses (ii) , (iii) or (iv) below, shall be made only in accordance with this Section 6(c) , and all transfers of an interest in the Temporary Regulation S Global Note or the Permanent Regulation S Global Note shall comply with Section 6(c)(iv) or (v) below, as applicable.

(i) General . A Global Note may not be transferred, in whole or in part, to any person other than the U.S. Depositary or a nominee thereof, and no such transfer to any such other person may be registered; provided that this clause (i) shall not prohibit any transfer of a Note that is issued in exchange for a Global Note but is not itself a Global Note. No transfer of a Note to any person shall be effective under this Agreement or the Notes unless and until such Note has been registered in the name of such person. The transfer and exchange of any beneficial interest in Global Notes shall be effected through the U.S. Depositary in accordance with this Agreement (including applicable restrictions on transfer set forth herein, if any) and the procedures of the U.S. Depositary therefor and nothing in this Section 6(c)(i) shall prohibit or render ineffective any transfer of a beneficial interest in a Global Note effected in accordance with the other provisions of this Section 6(c) .

(ii) Restricted Global Note to Temporary Regulation S Global Note . If the holder of a beneficial interest in the Restricted Global Note wishes at any time to transfer such interest to a person who wishes to take delivery thereof in the form of a beneficial interest in the Temporary Regulation S Global Note, such transfer may be effected, subject to the rules and procedures of the U.S. Depositary, Euroclear and Clearstream Banking, in each case to the extent applicable (the “ Applicable Procedures ”), only in accordance with the provisions of this Section 6(c)(ii) . Upon receipt by the Fiscal Agent, as Transfer Agent, at its office in The City of New York of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the Fiscal Agent to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Temporary Regulation S Global Note in a principal amount equal to that of the beneficial interest in the Restricted Global Note to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member (and the Euroclear or Clearstream Banking account, as the case may be) to be credited with, and the account of the Agent Member to be debited for, such beneficial interest and (3) a certificate in substantially the form of Exhibit D attached hereto given by the holder of such beneficial interest, the Fiscal Agent, as Transfer Agent, shall instruct the U.S. Depositary to reduce the principal amount of the Restricted Global Note, and to increase the principal amount of the Temporary Regulation S Global Note, by the principal amount of the beneficial interest in the Restricted Global Note to be so transferred, and to credit or cause to be credited to the account of the person specified in such instructions (which shall be the Agent Member for Euroclear or Clearstream Banking or both, as the case may be) a beneficial interest in the Temporary Regulation S Global Note having a principal amount equal to the amount by which the principal amount of the Restricted Global Note was reduced upon such transfer.

(iii) Restricted Global Note to Permanent Regulation S Global Note . If the holder of a beneficial interest in the Restricted Global Note wishes at any time after the expiration of the Restricted Period to transfer such interest to a person who wishes to take delivery thereof in the form of a beneficial interest in the Permanent Regulation S Global Note, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 6(c)(iii) . Upon receipt by the Fiscal Agent, as Transfer Agent, at its office in The City of New York of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the Fiscal Agent to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Permanent Regulation S Global Note in a principal amount equal to that of the beneficial interest in the Restricted Global Note to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member (and, in the case of any such transfer pursuant to Regulation S, if such account is held for Euroclear or Clearstream Banking the Euroclear or Clearstream Banking account for which such Agent Member’s account is held) to be credited with, and the account of the Agent Member to be debited for, such beneficial interest and (3) a certificate in substantially the form of Exhibit E attached hereto given by the holder of such beneficial interest, the Fiscal Agent, as Transfer Agent, shall instruct the U.S. Depositary to reduce the principal amount of the Restricted Global Note, and to increase the principal amount of the Permanent Regulation S Global Note, by the principal amount of the beneficial interest in the Restricted Global Note to be so transferred, and to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Permanent Regulation S Global Note having a principal amount equal to the amount by which the principal amount of the Restricted Global Note was reduced upon such transfer.

(iv) Temporary Regulation S Global Note or Permanent Regulation S Global Note to Restricted Global Note . If the holder of a beneficial interest in the Temporary Regulation S Global Note or the Permanent Regulation S Global Note wishes at any time to transfer such interest to a person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Note, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 6(c)(iv) . Upon receipt by the Fiscal Agent, as Transfer Agent, at its office in The City of New York of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member, directing the Fiscal Agent, as Transfer Agent, to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Restricted Global Note equal to that of the beneficial interest in the Temporary Regulation S Global

Note or the Permanent Regulation S Global Note to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member to be credited with, and the account of the Agent Member (and if such account is held for Euroclear or Clearstream Banking, the Euroclear or Clearstream Banking account, as the case may be) to be debited for, such beneficial interest, and (3) with respect to a transfer of a beneficial interest in the Temporary Regulation S Global Note, a certificate substantially in the form of Exhibit F hereto given by the holder of such beneficial interest, the Fiscal Agent, as Transfer Agent, shall instruct the U.S. Depositary to reduce the principal amount of the Temporary Regulation S Global Note or the Permanent Regulation S Global Note, as the case may be, and increase the principal amount of the Restricted Global Note, by the principal amount of the beneficial interest in the Temporary Regulation S Global Note or the Permanent Regulation S Global Note, as the case may be, to be so transferred, and to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Restricted Global Note having a principal amount equal to the amount by which the principal amount of the Temporary Regulation S Global Note or the Permanent Regulation S Global Note, as the case may be, was reduced upon such transfer.

(v) Interests in Temporary Regulation S Global Note to be Held Through Euroclear or Clearstream Banking . Until the termination of the Restricted Period, any interest in the Temporary Regulation S Global Note may be held only through Agent Members acting for and on behalf of Euroclear and Clearstream Banking, and any purchaser of Notes in a sale made in reliance on Regulation S may not sell or offer to sell such Notes within the United States or to a U.S. person or for the account or benefit of a U.S. person within the meaning of Regulation S; provided that this clause (v) shall not prohibit any transfer in accordance with Section 6(c)(iv) hereof.

(vi) Other Exchanges . In the event that a Global Note, any portion thereof or a beneficial interest therein is exchanged for Notes other than Global Notes, such other Notes may in turn be exchanged (on transfer or otherwise) for Notes that are not Global Notes or for beneficial interests in a Global Note (if any is then outstanding) only in accordance with such procedures, which shall be substantially consistent with the provisions of Section 6(b) ; provided that any beneficial interest in the Temporary Regulation S Global Note shall not be exchangeable for a Certificated Note until the expiration of the Restricted Period.

(d) Registration of Transfers and Exchanges . Successive registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the securities register. No service charge shall be made to a holder for any registration of transfer or exchange of the Notes, but the Fiscal

Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and any other amounts required to be paid by the provisions of the Notes.

(e) Information from Transfer Agent . Any Transfer Agent appointed pursuant to Section 2 hereof shall provide to the Fiscal Agent such information as the Fiscal Agent may reasonably require in connection with the delivery by such Transfer Agent of Notes upon transfer or exchange of Notes.

(f) Periods of Non-registration . No Transfer Agent shall be required to make registrations of transfer or exchange of Notes during any periods designated in the text of the Notes as periods during which such registration of transfer and exchanges need not be made.

(g) Legend . If Notes are issued upon the transfer, exchange or replacement of Notes not bearing the legends required, as applicable, by the Act and by the forms of Notes attached as Exhibit A or Exhibit B hereto, which legends are set forth in the forms of Notes attached as Exhibit A or Exhibit B hereto (collectively, the “ Legend ”), the Notes so issued shall not bear the Legend. If Notes are issued upon the transfer, exchange or replacement of Notes bearing the Legend, or if a request is made to remove the Legend on a Note, the Notes so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Issuer such satisfactory evidence, which may include an opinion of counsel licensed to practice law in the State of New York, as may be reasonably required by the Issuer that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under the Act or that such Notes are not “restricted securities” within the meaning of Rule 144 under the Act. Upon provision of such satisfactory evidence, the Fiscal Agent, at the written direction of the Issuer, shall authenticate and deliver a Note that does not bear the Legend or may remove the Legend, as the case may be. The Issuer agrees to indemnify the Fiscal Agent for, and to hold it harmless against, any loss, liability or expense, including the fees and expenses of counsel, reasonably incurred, arising out of or in connection with actions taken or omitted by the Fiscal Agent in reliance upon such legal opinion and the delivery of a Note that does not bear a Legend. Upon any request for sale or other transfer of a Note (including any Global Note) bearing such Legend (a “ Restricted Note ”) made subsequent to the date which is one year (or for such period as may otherwise be required by Rule 144 under the Act, or any successor rule or regulation permitting resales of the Notes without any conditions) after the later of the date of original issuance of the Notes and the last date on which the Issuer or an affiliate of the Issuer, within the meaning of Rule 144 under the Act, was the holder of such Restricted Note and with respect to which a certification is furnished by the transferor in substantially the form of Exhibit H hereto, ( i ) in the case of any definitive Restricted Note, the Fiscal Agent, or the Transfer Agent if the Fiscal Agent does not also act as the Transfer Agent, will permit the holder thereof to

exchange such Restricted Note for definitive Notes that do not bear the Legend and such request will be effective to rescind any restriction on the further transfer of such Note, and ( ii ) any such Restricted Notes represented by a Global Note will not be subject to any restriction on transfer and may, at the direction of the Issuer, be exchanged for a Global Note that does not bear the Legend; in each such case, such Notes (whether in definitive or global form) will no longer constitute Restricted Notes.

(h) Repurchases by Issuer . With the prior approval of the Commissioner, the Issuer and any person that constitutes an affiliate of the Issuer within the meaning of the Act may at any time purchase Notes in the open market or otherwise at any price, for its own account or the account of others. Any Note so purchased by the Issuer or any such affiliate for its own account shall not thereafter be re-issued or resold, except pursuant to an exemption from registration under the Act.

7. Redemption . Subject to the Payment Restrictions, including the prior approval of the Commissioner, the Notes may be redeemed, as a whole or in part, at the option of the Issuer at any time and from time to time, at the Redemption Price set forth in paragraph 15 of the Notes. The Notes may not be redeemed at the option of a holder thereof.

(a) Notice to Fiscal Agent . If the Issuer elects to redeem Notes pursuant to paragraph 15 of the Notes, it shall notify the Fiscal Agent in writing of the date designated for redemption, the aggregate principal amount of Notes to be redeemed, the Redemption Price (as defined in the Notes) and that such redemption is being made pursuant to paragraph 15 of the Notes. The Issuer shall give each notice to the Fiscal Agent provided for in this Section not less than 45 days (unless a shorter period is acceptable to the Fiscal Agent) nor more than 60 days before the date designated for redemption.

(b) Selection of Notes to be Redeemed . If less than all the Notes are to be redeemed, each Outstanding Note shall be redeemed, pro rata ; provided that if at the time of redemption such Notes are registered as a Global Note, the U.S. Depositary for such Global Note shall determine, in accordance with its procedures, the principal amount of such Notes to be redeemed held by each holder of a beneficial interest in such Global Note. The Fiscal Agent shall notify the Issuer promptly of the Notes or portion thereof selected to be redeemed.

(c) Notice of Redemption; Effect of Notice . Notices to redeem Notes shall be given by the Fiscal Agent on behalf of and at the expense of the Issuer in the manner provided in paragraph 15 of the Notes. The effect of such notice shall be as set forth in such paragraph 15 .

(d) Notes Redeemed in Part . Any Note which is to be redeemed only in part shall be surrendered with, if the Issuer or the Fiscal Agent so requires, due endorsement by, or a written instrument of transfer in form reasonably satisfactory to the Issuer and the Fiscal Agent duly executed by, the holder thereof or such holder’s attorney duly authorized in writing, and the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver to the holder of such Note without service charge, a new registered Note or Notes, of any authorized denomination as requested by such holder, and as permitted by Section 1(d) of this Agreement, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered.

8. Delivery of Certain Information . At any time when the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a holder of a Note or beneficial interest in a Global Note, the Issuer shall promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such holder, or to a prospective purchaser of such Note or interest designated by such holder, in order to permit compliance by such holder with Rule 144A under the Act in connection with the resale of such Note by such holder. “ Rule 144A Information ” shall be such information as is specified pursuant to paragraph (d)(4) of Rule 144A (or any successor provision thereto), as such provisions (or successor provision) may be amended from time to time.

9. Conditions of Fiscal Agent’s Obligations . The Fiscal Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following, to all of which the Issuer agrees and all of which are applicable to the Notes and the holders from time to time thereof:

(a) Compensation and Indemnity . The Fiscal Agent shall be entitled to such compensation as agreed from time to time in writing with the Issuer for all services rendered by it, and the Issuer agrees promptly to pay such compensation and to reimburse the Fiscal Agent for the reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) incurred by it in connection with or arising out of its services hereunder, or the issuance of the Notes and their offering and sale. The Issuer also agrees to indemnify the Fiscal Agent for, and to hold it harmless against, any loss, damages, claim, liability or expense, incurred without bad faith, negligence, fraud or willful misconduct, arising out of or in connection with its acting as Fiscal Agent, Transfer Agent or Paying Agent hereunder, as well as the reasonable costs and expenses actually incurred by the Fiscal Agent of defending against any claim of liability in the premises. The obligations of the Issuer under this Section 9(a) shall survive payment of all the Notes, the resignation or removal of the Fiscal Agent or the termination of this Agreement.

(b) Agency . In acting under this Agreement and in connection with the Notes, the Fiscal Agent is acting solely as agent of the Issuer and does not assume any responsibility for the correctness of the recitals in the Notes (except for the correctness of

the statement in its certificate of authentication thereon) or any obligation or relationship of agency or trust, for or with any of the owners or holders of the Notes, except that all funds held by the Fiscal Agent for the payment of principal of and any interest on the Notes, to the extent permitted under the Payment Restrictions, shall be held in trust for such owners or holders, as the case may be, as set forth herein and in the Notes; provided , however , that monies held in respect of the Notes remaining unclaimed at the end of two years after such principal and such interest shall have become payable in accordance with the Payment Restrictions (whether at the Scheduled Maturity Date or otherwise) and monies sufficient therefor shall have been duly made available for payment shall, together with any interest made available for payment thereon, be repaid to the Issuer. Upon such repayment, the aforesaid trust with respect to the Notes shall terminate and all liability of the Fiscal Agent and Paying Agents with respect to such funds shall thereupon cease.

(c) Advice of Counsel . The Fiscal Agent and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof may consult with their respective counsel or other independent counsel satisfactory to them (to the extent such consultation is contemplated by the terms of this Agreement, at the expense of the Issuer), and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by them hereunder, provided, that such action is without bad faith, negligence, fraud or willful misconduct on its part and in accordance with such advice or opinion.

(d) Reliance . The Fiscal Agent and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof each shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Note, notice, direction, consent, certificate (including a certificate of an Authorized Officer delivered to the Fiscal Agent), affidavit, statement, or other paper or document believed by it, acting without bad faith, negligence, fraud or willful misconduct on its part, to be genuine and to have been passed upon or signed by the proper parties.

(e) Interest in Notes, etc . The Fiscal Agent, any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof and their respective officers, directors and employees may become the owners of, or acquire any interest in, any Notes, with the same rights that they would have if they were not the Fiscal Agent, such other Paying Agent or Transfer Agent or such person, and may engage or be interested in any financial or other transaction with the Issuer, and may act on, or as depositary, trustee or agent for, any committee or body of holders of Notes or other obligations of the Issuer, as freely as if they were not the Fiscal Agent, such other Paying Agent or Transfer Agent or such person.

(f) Non-Liability for Interest . Subject to any agreement between the Issuer and the Fiscal Agent to the contrary, the Fiscal Agent shall not be under any liability for interest on monies at any time received by it pursuant to any of the provisions of this Agreement or the Notes.

(g) Certifications . Whenever in the administration of this Agreement the Fiscal Agent shall deem it desirable that a matter of fact be proved or established prior to taking, suffering or omitting any action hereunder, the Fiscal Agent (unless other evidence be herein specifically prescribed) may, in the absence of bad faith, negligence, fraud or willful misconduct on its part, rely upon a certificate signed by an Authorized Officer and delivered to the Fiscal Agent as to such matter of fact.

(h) No Implied Obligations . The duties and obligations of the Fiscal Agent, the Transfer Agent and the Paying Agent with respect to matters governed by this Agreement shall be determined solely by the express provisions hereof, and none of the Fiscal Agent, the Transfer Agent or the Paying Agent shall be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement and the Notes, as applicable, and no implied covenants or obligations shall be read into this Agreement or the Notes against the Fiscal Agent, the Transfer Agent or the Paying Agent and the Fiscal Agent, the Transfer Agent and the Paying Agent shall be protected and incur no liability in respect of any action taken or omitted to be taken hereunder by the Fiscal Agent, the Transfer Agent or the Paying Agent without bad faith, negligence, fraud or willful misconduct on its part. Nothing in this Agreement shall be construed to require the Fiscal Agent, the Transfer Agent or the Paying Agent to advance or expend their own funds or take any action that may, in their opinion, expose them to any liability unless they receive indemnity satisfactory to them.

(i) Enforceability of Rights . The rights, privileges, protections, immunities and benefits given to the Fiscal Agent, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Fiscal Agent in each of its capacities hereunder, and each agent, custodian and other person employed to act hereunder.

(j) Agents . The Fiscal Agent may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys or custodians.

(k) Damages . In no event shall the Fiscal Agent be liable, directly or indirectly, for any special, indirect or consequential damages, even if the Fiscal Agent has been advised of the possibility of such damages.

(l) Recitals . The recitals contained in this Agreement and in the Notes (except the Fiscal Agent’s certificates of authentication) shall be taken as the statements of the Issuer and the Fiscal Agent does not assume any responsibility for the correctness of the same. The Fiscal Agent does not make any representation (other than with respect

to itself) as to the validity or sufficiency of this Agreement or the Notes, except for the Fiscal Agent’s due authorization, execution and delivery of this Agreement. The Fiscal Agent shall not be accountable for the use or application by the Issuer of any of the Notes or the proceeds thereof.

(m) Occurrences Beyond Reasonable Control . In no event shall the Fiscal Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services; it being understood that the Fiscal Agent shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

(n) Default of the Issuer . Except as specifically set forth in this Agreement, the Fiscal Agent shall not have any duty or responsibility in case of any default by the Issuer in the performance of its obligations (including, without limiting the generality of the foregoing, any duty or responsibility to accelerate all or any of the Notes or to initiate or to attempt to initiate any proceedings at law or otherwise or to make any demand for the payment thereof upon the Issuer).

10. Resignation, Removal and Appointment of Successor .

(a) Fiscal Agent and Paying Agent . The Issuer agrees, for the benefit of the holders from time to time of the Notes, that there shall at all times be a Fiscal Agent hereunder which shall be a bank or trust company organized and doing business under the laws of the United States of America or the State of New York, in good standing and having an established place of business in the Borough of Manhattan, The City of New York, and authorized under such laws to exercise corporate trust powers, until all the Notes authenticated and delivered hereunder ( i ) shall have been delivered to the Fiscal Agent for cancellation or ( ii ) have become payable, with the approval of the Commissioner, and monies sufficient to pay the full principal of and any interest remaining unpaid on the Notes shall have been made available for payment and either paid or returned to the Issuer as provided herein and in such Notes.

(b) Resignation and Removal . The Fiscal Agent may at any time resign by giving written notice to the Issuer of such intention on its part, specifying the date on which its desired resignation shall become effective; provided that such date shall not be less than 60 days from the date on which such notice is given, unless the Issuer agrees to accept shorter notice. The Fiscal Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed on behalf of the Issuer and specifying such removal and the date when it shall become effective. Notwithstanding the dates of

effectiveness of resignation or removal, as the case may be, to be specified in accordance with the preceding sentences, such resignation or removal shall take effect only upon the appointment by the Issuer, as hereinafter provided, of a successor Fiscal Agent (which, to qualify as such, shall for all purposes hereunder be a bank or trust company organized and doing business under the laws of the United States of America or of the State of New York, in good standing and having and acting through an established place of business in the Borough of Manhattan, The City of New York, authorized under such laws to exercise corporate trust powers and having a combined capital and surplus in excess of $50,000,000) and the acceptance of such appointment by such successor Fiscal Agent. Upon its resignation or removal, the Fiscal Agent shall be entitled to payment by the Issuer pursuant to Section 9 hereof of compensation for services rendered and to reimbursement of reasonable out-of-pocket expenses incurred hereunder. If a successor Fiscal Agent does not take office within 60 days after the retiring Fiscal Agent provides written notice of its intent to resign or is removed, the retiring Fiscal Agent at the expense of the Issuer, the Issuer or the holders of at least 10% in aggregate principal amount of the Notes then Outstanding (as defined in Section 11(d) herein) may petition any court of competent jurisdiction for the appointment of a successor Fiscal Agent.

(c) Successors . In case at any time the Fiscal Agent (or any Paying Agent if such Paying Agent is the only Paying Agent located in a place where, by the terms of the Notes or this Agreement, the Issuer is required to maintain a Paying Agent) shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or shall file a voluntary petition in bankruptcy or make an assignment for the benefit of its creditors or consent to the appointment of a receiver of all or any substantial part of its property, or shall admit in writing its inability to pay or meet its debts as they severally mature, or if a receiver of it or of all or any substantial part of its property shall be appointed, or if an order of any court shall be entered approving any petition filed by or against it under the provisions of applicable receivership, bankruptcy, insolvency or other similar legislation, or if any public officer shall take charge or control of it or of its property or affairs, for the purpose of rehabilitation, liquidation, conservation or dissolution, a successor Fiscal Agent or Paying Agent, as the case may be, qualified as aforesaid (in the case of the Fiscal Agent), shall be appointed by the Issuer by an instrument in writing, filed with the successor Fiscal Agent or Paying Agent, as the case may be, and the predecessor Fiscal Agent or Paying Agent, as the case may be. Upon the appointment as aforesaid of a successor Fiscal Agent or Paying Agent, as the case may be, and acceptance by such successor of such appointment, the Fiscal Agent or Paying Agent, as the case may be, so succeeded shall cease to be Fiscal Agent or Paying Agent, as the case may be, hereunder. If no successor Fiscal Agent or other Paying Agent, as the case may be, shall have been so appointed by the Issuer and shall have accepted appointment as hereinafter provided, and, in the case of such other Paying Agent, if such other Paying Agent is the only Paying Agent located in a place where, by the terms of the Notes or this Agreement, the Issuer is required to maintain a Paying Agent, then any holder of a Note who has been a bona fide holder of a Note for at least six months (which

Note, in the case of such other Paying Agent, is referred to in this sentence), on behalf of such holder and all others similarly situated, or the Fiscal Agent, may petition any court of competent jurisdiction for the appointment of a successor fiscal or paying agent, as the case may be. The Issuer shall give prompt written notice to each other Paying Agent of the appointment of a successor Fiscal Agent.

(d) Acknowledgement . Any successor Fiscal Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Issuer an instrument accepting such appointment hereunder. Upon delivery of such instrument, such successor Fiscal Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Fiscal Agent hereunder and all provisions hereof shall be binding on such successor Fiscal Agent. Furthermore, upon delivery of such instrument, such predecessor, upon payment of its compensation and reimbursement of its disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Fiscal Agent shall be entitled to receive, all monies, securities, books, records or other property on deposit with or held by such predecessor as Fiscal Agent hereunder. Upon delivery of such property, such predecessor Fiscal Agent shall become entitled to payment by the Issuer of its compensation and reimbursement of its disbursements then unpaid from such successor Fiscal Agent.

(e) Merger, Consolidation, etc . Any bank or trust company into which the Fiscal Agent hereunder may be merged, or resulting from any merger or consolidation to which the Fiscal Agent shall be a party, or to which the Fiscal Agent shall sell or otherwise transfer all or substantially all the agency and trust business of the Fiscal Agent; provided that it shall be qualified as aforesaid, shall be the successor Fiscal Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto.

11. Meetings and Amendments .

(a) Calling of Meeting, Notice and Quorum . A meeting of holders of Notes may be called at any time and from time to time to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement or the Notes to be made, given or taken by holders of Notes or to modify, amend or supplement the terms of the Notes or this Agreement as hereinafter provided, and subject to the requirement hereinafter set forth that the Issuer and the Fiscal Agent may, only with the prior approval of the Commissioner, modify, amend or supplement this Agreement or the terms of the Notes or give consents or waivers or take other actions with respect thereto. The Fiscal Agent may at any time call a meeting of holders of Notes for any such purpose to be held at such time and at such place in the Borough of Manhattan, The City of New York as the Fiscal Agent shall determine. Notice of every

meeting of holders of Notes, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given as provided in the terms of the Notes, not less than 30 nor more than 60 days prior to the date fixed for the meeting ( provided that, in the case of any meeting to be reconvened after adjournment for lack of a quorum, such notice shall be so given not less then 15 nor more than 60 days prior to the date fixed for such meeting). In case at any time the Issuer or the holders of at least 10% in aggregate principal amount of the Outstanding Notes (as defined in subsection (d) of this Section) shall have requested the Fiscal Agent to call a meeting of the holders of Notes for any such purpose, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, the Fiscal Agent shall call such meeting for such purposes by giving notice thereof.

To be entitled to vote at any meeting of holders of Notes, a person shall be a holder of Outstanding Notes or a person duly appointed by an instrument in writing as proxy for such a holder. The persons entitled to vote a majority in principal amount of the Outstanding Notes shall constitute a quorum. The Fiscal Agent may make such reasonable and customary regulations consistent herewith as it shall deem advisable for any meeting of holders of Notes with respect to the proof of the appointment of proxies in respect of holders of Notes, the record date for determining the registered holders of Notes who are entitled to vote at such meeting (which date shall be designated by the Fiscal Agent and set forth in the notice calling such meeting hereinabove referred to and which shall be not less than 15 nor more than 60 days prior to such meeting; provided that nothing in this paragraph shall be construed to render ineffective any action taken by holders of the requisite principal amount of Outstanding Notes on the date such action is taken), the adjournment and chairmanship of such meeting, the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.

(b) Approval .

( i ) At any meeting of holders of Notes duly called and held as specified above, upon the affirmative vote, in person or by proxy thereunto duly authorized in writing, of the holders of not less than a majority in aggregate principal amount of the Notes then Outstanding, or ( ii ) with the written consent of the holders of not less than a majority in aggregate principal amount of the Notes then Outstanding, in each case (i) or (ii) the Issuer and the Fiscal Agent may, with the prior approval of the Commissioner, modify, amend or supplement the terms of the Notes or this Agreement in any way, and the holders of Notes may make, take or give any request, demand, authorization, direction, notice, consent, waiver (including waiver of future compliance or past failure to perform) or other action provided by this Agreement or the Notes to be made, given or taken by holders of Notes; provided that no such action, modification, amendment or supplement,

however effected, may, without the consent of the holder of each Note affected thereby, (A) change the Scheduled Interest Payment Date (as defined in the Notes) or Scheduled Maturity Date of the principal of or any installment of interest on any Note, (B) reduce the principal amount of any Note or the interest rate thereon, (C) change the currency in which, or the required place at which, payment with respect to interest or principal in respect of the Notes is payable, (D) change the Issuer’s obligations under Section 8 hereof in any manner adverse to the interests of the holder of a Note, (E) impair the right of a holder of a Note to institute suit for the enforcement of any payment, if such payment is permitted under the Payment Restrictions, on or with respect to any Note, (F) modify the provisions of paragraph 10 of the Notes in a manner adverse to the holders of the Notes, (G) reduce the above-stated percentage of the principal amount of Outstanding Notes, the vote or consent of the holders of which is necessary to modify, amend or supplement this Agreement or the terms and conditions of the Notes or to make, take or give any request, demand, authorization, direction, notice, consent, waiver (including waiver of any future compliance or past failure to perform) or other action provided hereby or thereby to be made, taken or given, (H) reduce the percentage of aggregate principal amount of Outstanding Notes necessary to constitute a quorum at any meeting of holders of Notes at which a resolution is adopted, or (I) change the restrictions on payment of principal of or interest on or redemption payment with respect to the Notes in a manner adverse to the holders of the Notes.

The Issuer and the Fiscal Agent may, with the prior approval of the Commissioner, without the vote or consent of any holder of Notes, amend this Agreement or the Notes for the purpose of (a) adding to the covenants of the Issuer for the benefit of the holders of Notes, (b) surrendering any right or power conferred upon the Issuer, (c) securing the Notes, (d) evidencing the succession of another entity to the Issuer and the assumption by such successor of the covenants and obligations of the Issuer herein and in the Notes as permitted by this Agreement and the Notes, (e) modifying the restrictions on, and procedures for, resale and other transfers of the Notes to the extent required by any change in applicable law or regulation, or the interpretation thereof, or in practices relating to the resale or transfer of restricted securities generally, (f) accommodating the issuance, if any, of Notes in book-entry or certificated form and matters related thereto which do not adversely affect the interest of any Note holder in any material respect, (g) curing any ambiguity or correcting or supplementing any defective provision contained herein or in the Notes in a manner which does not adversely affect the interest of any Note holder in any material respect, or (h) effecting any amendment which the Issuer and the Fiscal Agent may determine is necessary or desirable and which shall not adversely affect the interest of any Note holder.

It shall not be necessary for the vote or consent of the holders of Notes to approve the particular form of any proposed modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action, but it shall be sufficient if such vote or consent shall approve the substance thereof.

The Fiscal Agent shall receive an opinion of counsel in connection with any amendment or supplement entered into hereunder stating that all conditions precedent to such amendment or supplement have been fulfilled and that the Fiscal Agent’s entering into such amendment or supplement is authorized and permitted under this Agreement.

(c) Binding Nature of Amendments, Notices, Notations, etc . Any instrument given by or on behalf of any holder of a Note in connection with any consent to or vote for any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action shall be irrevocable once given and shall be conclusive and binding on all subsequent holders of such Note or any Note issued directly or indirectly in exchange or substitution therefor or in lieu thereof. Any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action taken, made or given in accordance with Section 11(b) hereof shall be conclusive and binding on all holders of Notes, whether or not they have given such consent or cast such vote or were present at any meeting, and whether or not notation of such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action is made upon the Notes. Notice of any modification or amendment of, supplement to, or request, demand, authorization, direction, notice, consent, waiver or other action with respect to the Notes or this Agreement (other than for purposes of curing any ambiguity or of curing, correcting or supplementing any defective provision hereof or thereof) shall be given to each holder of Notes affected thereby, in all cases as provided in the Notes.

Notes authenticated and delivered after the effectiveness of any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action may bear a notation in the form approved by the Fiscal Agent and the Issuer as to any matter provided for in such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action. New Notes modified to conform, in the opinion of the Fiscal Agent and the Issuer, to any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action taken, made or given in accordance with Section 11(b) hereof may be prepared and executed by the Issuer, authenticated by the Fiscal Agent and delivered in exchange for Outstanding Notes.

(d) “ Outstanding” Defined . For purposes of the provisions of this Agreement and the Notes, any Note authenticated and delivered pursuant to this Agreement shall, as of any date of determination, be deemed to be “ Outstanding ,” except:

(i) Notes theretofore cancelled by the Fiscal Agent or delivered to the Fiscal Agent for cancellation;

(ii) Notes which have been called for redemption in accordance with their terms or which have become payable, to the extent permitted under the Payment Restrictions, at the Scheduled Maturity Date or otherwise, and with respect to which, in each case, monies sufficient to pay the principal thereof and any interest thereon shall have been paid; and

(iii) Notes paid under Section 12 of the Notes or in lieu of or in substitution for which other Notes shall have been authenticated and delivered pursuant to this Agreement;

provided , however , that in determining whether the holders of the requisite principal amount of Outstanding Notes are present at a meeting of holders of Notes for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment, modification or supplement hereunder, the principal amount of any Notes that are beneficially owned by the Issuer or any of its Affiliates, or the voting of which the Issuer or any of its Affiliates has the right to direct with respect to such request, demand, authorization, direction, notice, consent, waiver, amendment, modification or supplement, shall be disregarded in such calculation (in both the numerator and the denominator). The Fiscal Agent shall incur no liability for failing to disregard any Note owned directly or indirectly by the Issuer or any Affiliate of the Issuer in the absence of actual knowledge of that circumstance by a corporate trust officer of the Fiscal Agent responsible for the administration of this Agreement.

As used herein, an “ Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

As used herein, “ Person ” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity of any kind.

12. Remedies . Holders of Notes may enforce this Agreement or the Notes only in the manner set forth below.

(a) Acceleration of Maturity . In the event that any state or federal agency shall obtain an order or grant approval for the rehabilitation, liquidation, conservation, dissolution, receivership or any similar action of the Issuer (including, without limitation, under Chapter 645 of the Wisconsin Statutes), the Notes will upon the obtaining of such

an order or the granting of such approval immediately mature in full without any action on the part of the Fiscal Agent or any holder of the Notes, with payment thereon being subject to the Payment Restrictions, and any restrictions imposed as a consequence of, or pursuant to, such proceedings. Notwithstanding any other provision of this Agreement or the Notes, in no event shall the Fiscal Agent or any holder of the Notes be entitled to declare the Notes to immediately mature or otherwise be immediately payable, except that payments approved by the Commissioner but unpaid may become immediately payable in accordance with clause (b) below.

(b) Failure to Pay or Perform Other Obligations . In the event that the Commissioner approves in whole or in part a payment of any interest on or principal of, or any redemption payment with respect to, any Notes and the Issuer fails to pay the full amount of such approved payment on the date such amount is scheduled to be paid, such approved amount will be immediately payable on such date without any action on the part of the Fiscal Agent or any holder of Notes. In the event that the Issuer fails to perform any of its other obligations hereunder or under the Notes (or otherwise abide by any of the other terms hereof or of the Notes), each holder of the Notes may pursue any available remedy to enforce the performance of any provision of such Notes or this Agreement; provided , however , that such remedy shall in no event include the right to declare the Notes immediately payable, except for payments approved by the Commissioner, and shall in no circumstances be inconsistent with the provisions of applicable law. A delay or omission by any Note holder in exercising any right or remedy accruing as a result of the Issuer’s failure to perform its obligations hereunder or under the Notes (or otherwise abide by any of the other terms hereof or of the Notes) and the continuation thereof shall not impair such right or remedy or constitute a waiver of or acquiescence in such non-performance by the Issuer. To the extent permitted by law, no remedy is exclusive of any other remedy and all remedies are cumulative.

(c) Rights of Holders . Notwithstanding any other provision of this Agreement or the Notes, the right of any holder of Notes to receive payment of the principal of and interest on such holder’s Notes on or after the respective scheduled payment or scheduled maturity dates expressed in such Notes, or to bring suit for the enforcement of any such payment on or after such respective scheduled payment or scheduled maturity dates, in each case subject to such payment on such dates having received the approval of the Commissioner pursuant to the Payment Restrictions, is absolute and unconditional and shall not be impaired or affected without the consent of such holder.

13. Governing Law . THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF SUCH STATE (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). THE

COMMISSIONER’S EXERCISE OF REGULATORY AUTHORITY, INCLUDING APPROVAL OF PAYMENTS ON THE NOTES, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF WISCONSIN (OR, IF THE COMMISSIONER IS NO LONGER THE PRIMARY REGULATOR OF THE FINANCIAL CONDITION OF THE ISSUER, THE LAW OF SUCH JURISDICTION OF THE PRIMARY REGULATOR OF THE FINANCIAL CONDITION OF THE ISSUER), AND THE PARTIES TO THIS AGREEMENT AND HOLDERS OF NOTES SHALL SUBMIT ANY DISPUTES RELATED TO THE EXERCISE OF SUCH REGULATORY AUTHORITY TO A COURT OF COMPETENT JURISDICTION IN SUCH JURISDICTION.

14. Notices . All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing, including by email, shall specify this Agreement by name and date and shall identify the Notes, and if sent to the Fiscal Agent shall be delivered or transmitted by facsimile to it at The Bank of New York Mellon, 101 Barclay Street, Floor 7W, New York, New York 10286, Attention: Dealing & Trading Unit, fax: 212-815-2830, and if sent to the Issuer, with respect to notices of payments and written confirmations of wire transfers, shall be delivered or transmitted by facsimile to it at Ambac Assurance Corporation, One State Street Plaza, New York, New York 10004, Attention: First Vice President—Cash Management, fax: 212-208-3507, and if sent to the Issuer, with respect to all other communications, shall be delivered or transmitted by facsimile to it at Ambac Assurance Corporation, One State Street Plaza, New York, New York 10004, Attention: Chief Financial Officer, fax: 212-208-3416. The foregoing addresses for notices or communications may be changed by written notice given by the addressee to each party hereto, and the addressee’s address shall be deemed changed for all purposes from and after the giving of such notice.

Notices shall be deemed received by the Fiscal Agent only upon actual receipt by the Fiscal Agent. If the Fiscal Agent shall receive any notice or demand addressed to the Issuer by the holder of a Note, the Fiscal Agent shall promptly forward such notice or demand to the Issuer.

15. Severability . In case any provision in this Agreement or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

16. Headings . The section headings herein are for convenience of reference only and shall not affect the construction hereof.

17. Counterparts . This Agreement may be executed in one or more counterparts, and by each party separately on a separate counterpart, and each such counterpart when executed and delivered shall be deemed to be an original. Such counterparts shall together constitute one and the same instrument.

18. Interpretation . The provisions of this Agreement shall be construed to the greatest extent possible as consistent with the provisions of the Notes, and, to the extent the terms of this Agreement conflict with the terms of the Notes, the terms of the Notes shall govern.

19. Waiver of Jury Trial . EACH OF THE FISCAL AGENT AND THE ISSUER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

20. USA Patriot Act . The parties hereto acknowledge that, in accordance with Section 326 of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended, modified or supplemented from time to time, the “ USA Patriot Act ”), the Fiscal Agent, like all financial institutions, is required to obtain, verify, and record information that identifies each person or legal entity that opens an account. The parties to this Agreement agree that they will provide the Fiscal Agent with such information as the Fiscal Agent may request in order for the Fiscal Agent to satisfy the requirements of the USA Patriot Act.

IN WITNESS WHEREOF, the parties hereto have executed this Fiscal Agency Agreement as of the date first above written.


AMBAC ASSURANCE CORPORATION

By:		/s/ Kevin J. Doyle
		Name: Kevin J. Doyle
		Title: Senior Vice President and General Counsel

THE BANK OF NEW YORK MELLON as Fiscal Agent

By:		/s/ Stacey B. Poindexter
		Name: Stacey B. Poindexter
		Title: Vice President

EXHIBIT A

FORM OF CERTIFICATED NOTE

THIS 5.1% SURPLUS NOTE SCHEDULED TO MATURE ON JUNE 7, 2020 (THIS “ NOTE ”) (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM AND IN ACCORDANCE WITH THAT CERTAIN FISCAL AGENCY AGREEMENT BY AND BETWEEN AMBAC ASSURANCE CORPORATION AND THE BANK OF NEW YORK MELLON (TOGETHER WITH ITS PERMITTED SUCCESSORS AND ASSIGNS, THE “ FISCAL AGENT ”), DATED AS OF JUNE 7, 2010 (AS IT MAY BE DULY AMENDED FROM TIME TO TIME, THE “ FISCAL AGENCY AGREEMENT ”), COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE OFFICE OF THE FISCAL AGENT. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT (TOGETHER WITH ANY SUCCESSOR PROVISION AND AS SUCH MAY BE HEREAFTER AMENDED FROM TIME TO TIME, “ RULE 144A ”) OR REGULATION S UNDER THE SECURITIES ACT (TOGETHER WITH ANY SUCCESSOR PROVISION THERETO, AND AS SUCH MAY BE HEREAFTER AMENDED FROM TIME TO TIME, “ REGULATION S ”).

[INCLUDE IF NOTE IS A RESTRICTED CERTIFICATED NOTE OR NOTE ISSUED IN EXCHANGE THEREFOR (UNLESS, PURSUANT TO SECTION 6(g) OF THE FISCAL AGENCY AGREEMENT, THE ISSUER DETERMINES THAT THE LEGEND MAY BE REMOVED) — THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (“ QUALIFIED INSTITUTIONAL BUYER ”) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, SUBJECT TO THE DELIVERY OF REASONABLY SATISFACTORY EVIDENCE TO THE

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ISSUER ESTABLISHING SUCH EXEMPTION, WHICH MAY INCLUDE AN OPINION OF COUNSEL, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND ALL OTHER APPLICABLE JURISDICTIONS.]

ANY PERSON ACQUIRING THIS NOTE IS DEEMED TO MAKE A REPRESENTATION TO THE ISSUER AND THE FISCAL AGENT AS SET FORTH IN PARAGRAPH 9 HEREOF.

ALL PAYMENTS OF PRINCIPAL AND INTEREST ON THIS NOTE MAY ONLY BE MADE WITH THE PRIOR APPROVAL OF THE COMMISSIONER OF INSURANCE OF THE STATE OF WISCONSIN OR ANY SUCCESSOR THERETO (THE “ COMMISSIONER ”).

NEITHER THE ISSUER NOR ANY OF ITS AFFILIATES (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) THAT ACQUIRES NOTES ARE PERMITTED TO SELL SUCH NOTES.

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AMBAC ASSURANCE CORPORATION

5.1% Surplus Note scheduled to mature on June 7, 2020


No. R-		$

AMBAC ASSURANCE CORPORATION, a Wisconsin domiciled financial guaranty insurance corporation (and any successor in interest thereto, the “ Issuer ”), for value received, hereby promises to pay, subject to the Payment Restrictions (as defined in paragraph 1 of the reverse side of this Note), to , or registered assigns, the principal sum of United States dollars ($ ) on June 7, 2020 (the “ Scheduled Maturity Date ”), and to pay interest thereon, subject to the Payment Restrictions, including the approval of the Commissioner, from June 7, 2010 or from the most recent Scheduled Interest Payment Date to which interest has been paid or duly provided for, annually in arrears on June 7 in each year and on the date the Notes are scheduled to mature, commencing June 7, 2011 (each, a “ Scheduled Interest Payment Date ”), at the rate of 5.1% per annum, until the principal hereof is paid or duly provided for. Any reference herein to the term “scheduled maturity date” or other date for the payment of principal of the Notes shall include ( i ) the date, if any, fixed for redemption thereof in accordance with paragraph 15 hereof and ( ii ) the date upon which any state or federal agency obtains an order or grants approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer. As specified on the reverse hereof, all payments of principal of or interest on this Note may be made only with the prior approval of the Commissioner. The interest so payable, and punctually paid or duly provided for, on any Scheduled Interest Payment Date shall be paid, in accordance with the terms of the Fiscal Agency Agreement hereinafter referred to, to the person (the “ registered holder ”) in whose name this Note (or one or more predecessor Notes) is registered at the close of business on May 20 (whether or not a Business Day, as defined herein), as the case may be (each, a “ Regular Record Date ”), next preceding such Scheduled Interest Payment Date. Interest on the Notes shall be calculated on the basis of a 360-day year of twelve months of 30 days each. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the registered holder on such Regular Record Date and shall be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Issuer, notice whereof shall be given to registered holders of the Notes not less than 15 days prior to such special record date.

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Agreement. Payments of principal of the Notes shall be made only against surrender of the Notes; provided that in the case of payment of only a portion of principal, the Issuer shall execute a new registered Note or Notes in aggregate principal amount equal to and in exchange for the remaining portion of the principal of the Note so surrendered. Payments of interest on this Note will be made, in accordance with the foregoing and subject to applicable laws and regulations, ( i ) by wire transfer of immediately available funds to an account maintained by the person entitled thereto with a bank if such registered holder gives notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the applicable scheduled payment date or scheduled maturity date hereof, of the payee’s account to which payment is to be made or ( ii ) if no such notice is given, by mailing a check on or before the scheduled payment date of such payment to the person entitled thereto at such person’s address appearing on the aforementioned register. Unless the designation of the payee’s account to which payment is to be made is revoked, any such designation made by such holder with respect to such Notes of the payee’s account to which payment is to be made shall remain in effect with respect to any future payments with respect to such Notes payable to such holder. The Issuer agrees that until this Note has been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the full principal of and interest remaining unpaid on this Note have been made available for payment and either paid or returned to the Issuer as provided herein, it will at all times maintain offices or agencies in the Borough of Manhattan, The City of New York for the payment of the principal of and interest on the Notes as herein provided.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

This Note may be executed by the Issuer by manual, facsimile or portable document format signatures, and such signatures may be executed on separate counterparts.

Unless the certificate of authentication hereon has been executed by the Fiscal Agent by manual signature, this Note shall not be valid or obligatory for any purpose.

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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

Dated:


AMBAC ASSURANCE CORPORATION

By:
		Name:
		Title:

This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement.


THE BANK OF NEW YORK MELLON as Fiscal Agent

By:
		Authorized Officer

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FORM OF REVERSE

1. General . This Note is one of a duly authorized issue of 5.1% Surplus Notes scheduled to mature on June 7, 2020 of the Issuer (herein called the “ Notes ”), limited in aggregate principal amount to $2,000,000,000.00. The Issuer and The Bank of New York Mellon have entered into a Fiscal Agency Agreement, dated as of June 7, 2010 (such instrument, as it may be duly amended from time to time, is herein called the “ Fiscal Agency Agreement ”), which provides for the mechanism for issuing the Notes and, inter alia , sets forth certain duties of the Fiscal Agent in connection therewith. As used herein, the term “ Fiscal Agent ” includes any successor fiscal agent under the Fiscal Agency Agreement. Copies of the Fiscal Agency Agreement are on file and available for inspection at the Corporate Trust Office of the Fiscal Agent in the Borough of Manhattan, The City of New York. Holders of Notes are referred to the Fiscal Agency Agreement for a statement of the terms thereof, including those relating to transfer, payment, exchanges and certain other matters. The Fiscal Agent or any Paying Agent shall also act as Transfer Agent and securities registrar.

Capitalized definitional terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Fiscal Agency Agreement. The terms of the Notes include those stated in the Fiscal Agency Agreement. The Notes are subject to all such terms, and holders of the Notes are referred to the Fiscal Agency Agreement for a statement of such terms. Holders of Notes may enforce the Notes only in accordance with the Fiscal Agency Agreement.

The Notes are direct and unsecured obligations of the Issuer and, subject to the payment restrictions contained in paragraphs 4 and 10 hereof (the “ Payment Restrictions ”), are scheduled to mature on June 7, 2020.

Any reference herein to the term “scheduled maturity date” or other date for the payment of principal of the Notes shall include ( i ) the date, if any, fixed for redemption thereof in accordance with paragraph 15 hereof and ( ii ) the date upon which any state or federal agency obtains an order or grants approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer.

2. Form of Notes . The Notes are issuable only in fully registered form without coupons.

3. Registration, Transfer and Exchange . The Issuer shall maintain, in the Borough of Manhattan, The City of New York, a Transfer Agent where Notes may be registered or surrendered for registration of transfer or exchange. The Issuer has initially appointed the Fiscal Agent at its Corporate Trust Office as its Transfer Agent. The Issuer

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shall cause the Transfer Agent to act as a securities registrar and shall cause to be kept at the office of the Transfer Agent a register in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and registration of transfers and exchanges of Notes. The Issuer reserves the right to vary or terminate the appointment of the Transfer Agent or to appoint additional or other Transfer Agents or to approve any change in the office through which any Transfer Agent acts; provided that there shall at all times be a Transfer Agent in the Borough of Manhattan, The City of New York. The Issuer shall cause written notice of any resignation, termination or appointment of the Fiscal Agent or any Paying Agent or Transfer Agent and of any change in the office through which any such Agent shall act to be provided to holders of Notes.

Subject to the restrictions set forth herein and in the Fiscal Agency Agreement, the transfer of a Note is registrable on the aforementioned register upon surrender of such Note at any Transfer Agent duly endorsed by, or accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuer duly executed by, the registered holder thereof or such holder’s attorney duly authorized in writing. Upon such surrender of this Note for registration of transfer, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes, dated the date of authentication thereof, of any authorized denominations and of a like aggregate principal amount.

Subject to the restrictions set forth herein and in the Fiscal Agency Agreement, at the option of the registered holder upon request confirmed in writing, Notes may be exchanged for Notes of any authorized denominations and aggregate principal amount upon surrender of the Notes to be exchanged at the office of any Transfer Agent. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, the Notes which the registered holder making the exchange is entitled to receive. Any registration of transfer or exchange shall be effected upon the Issuer being reasonably satisfied with the documents of title and identity of the person making the request and subject to the restrictions set forth in this Note and/or the Fiscal Agency Agreement and such reasonable regulations as the Issuer may from time to time agree with the Fiscal Agent.

Notes may be redeemed by the Issuer, in whole or in part, but only to the extent permitted by the Payment Restrictions, including the prior approval of the Commissioner, and in accordance with paragraph 15 hereof. In the event of a partial redemption, the Issuer shall not be required ( i ) to register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the date notice is given identifying the Notes to be redeemed, or ( ii ) to register the transfer or exchange of any Note, or portion thereof, called for redemption.

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All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits, as the Notes surrendered upon such registration of transfer or exchange. No service charge shall be made for any registration of transfer or exchange, but the Issuer and the Fiscal Agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith, other than an exchange in connection with the partial redemption of a Note not involving any registration of a transfer.

Prior to due presentment of this Note for registration of transfer, the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent may treat the person in whose name this Note is registered as the absolute owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer nor the Fiscal Agent nor any such agent shall be affected by notice to the contrary.

4. Restrictions on Payment . (a) Notwithstanding anything to the contrary set forth herein or in the Fiscal Agency Agreement, any payment of principal of, interest on or any monies owing with respect to this Note, whether at the scheduled payment date or scheduled maturity date specified herein or otherwise, may be made only with the prior approval of the Commissioner. If the Commissioner does not approve the making of any payment of principal of or interest on this Note on the scheduled payment date or scheduled maturity date thereof, as specified herein, the scheduled payment date or scheduled maturity date, as the case may be, shall be extended and such payment, together with interest accrued with respect thereto as contemplated by the immediately following two sentences, shall be made by the Issuer on the next following Business Day (as defined below) on which the Issuer shall have the approval of the Commissioner to make such payment together with such interest. Interest will continue to accrue, compounded on each anniversary of the original scheduled payment date or scheduled maturity date, on any such unpaid principal through the actual date of payment at the rate of interest stated on the face hereof. Interest will accrue, compounded on each anniversary of the original scheduled payment date, on interest (or any portion thereof) with respect to which the scheduled payment date has been extended, during the period of such extension, at the rate of interest per annum applicable to principal hereunder. If the Commissioner approves a payment of principal of or interest on the Notes in an amount that is less than the full amount of principal of and interest on the Notes then scheduled to be paid in respect of the Notes, payment of such partial amount shall be made pro rata among Note holders.

(b) Any payment of principal of or interest on any Note as to which the approval of the Commissioner has been obtained and which is not punctually paid or duly provided for on the scheduled payment date or scheduled maturity date thereof, as set forth herein (such payment being referred to as an “ Unpaid Amount ”), subject to the provisions of section 14(b), will forthwith cease to be payable to the registered holder of

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this Note on the relevant record date designated herein, and such Unpaid Amount, together with interest thereon accrued at the rate of interest per annum applicable to principal hereunder, compounded on each anniversary of the original scheduled payment date or scheduled maturity date, will instead be payable to the registered holder of this Note on a subsequent special record date. The Issuer shall fix the special record date and payment date for the payment of any Unpaid Amount. At least 15 days before the special record date, the Issuer shall mail to each holder of the Notes and the Fiscal Agent a notice that states the special record date, payment date and amount of interest or principal to be paid. On the payment date set forth in such notice, the Paying Agent shall pay the amount of interest or principal to be so paid to each holder of the Notes in the manner set forth in Section 4(a) of the Fiscal Agency Agreement.

5. Payment . (a) For so long as the Fiscal Agent is acting as a Paying Agent hereunder, the Issuer, subject to the Payment Restrictions, shall provide to the Fiscal Agent, or such other Paying Agent if the Fiscal Agent is no longer acting as a Paying Agent, in immediately available funds on or prior to 11:00 a.m., New York time, on each date on which a payment of principal of or any interest on this Note is payable, as set forth herein, such amounts, in U.S. dollars, as are necessary (with any amounts then held by the Fiscal Agent and available for the purpose) to make such payment, and the Issuer hereby authorizes and directs the Fiscal Agent from funds so provided to it to make or cause to be made payment of the principal of and any interest, as the case may be, on this Note as set forth herein and in the Fiscal Agency Agreement. Payments of principal of or any interest on the Notes will be made ( i ) by wire transfer of immediately available funds to an account maintained by the payee with a bank if such registered holder gives notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the date on which such payments are scheduled to be made, of the account to which payment is to be made or ( ii ) if no such notice is given, by mailing a check to the payee at the address reflected in the securities register maintained pursuant to Section 6 of the Fiscal Agency Agreement. Unless the designation of the payee’s account to which payment is to be made is revoked, any such designation made by such holder with respect to such Notes shall remain in effect with respect to any future payments with respect to such Notes payable to such holder. The Issuer shall pay any reasonable administrative costs in connection with making any such payments. The Fiscal Agent shall arrange directly with any other Paying Agent who may have been appointed by the Issuer pursuant to the provisions of Section 2 of the Fiscal Agency Agreement for the payment, subject to the Payment Restrictions, from funds so paid by the Issuer of the principal of and any interest on this Note. Any monies held in respect of this Note remaining unclaimed at the end of two years after such principal and such interest shall have become payable in accordance with the Payment Restrictions (whether at the Scheduled Maturity Date or otherwise) and monies sufficient therefor shall have been duly made available for payment shall, together with any interest made available for payment thereon, be repaid to the Issuer and upon such repayment all liability of the Fiscal Agent with respect thereto shall cease, without, however, limiting in any way any

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obligation the Issuer may have to pay the principal of and interest on this Note, subject to the Payment Restrictions. To the extent that the Fiscal Agent is not acting as Paying Agent, references to the Fiscal Agent in this Section 5(a) shall include the Paying Agent in such capacity.

(b) In any case where the scheduled payment date or scheduled maturity date of any Note shall be at any place of payment a day on which banking institutions are not carrying out transactions in U.S. dollars or are authorized or obligated by law or executive order to close, then payment of principal or interest need not be made on such date at such place but may be made on the next succeeding day at such place which is not a day on which banking institutions in the applicable jurisdiction are not carrying out transactions in U.S. dollars or are authorized or obligated by law or executive order to close (a “ Business Day ”), with the same force and effect as if made on the scheduled payment date or scheduled maturity date thereof, and no interest shall accrue on the amount of such payment for the period after such date, if such payment is so made.

6. Duties and Taxes . The Issuer shall pay all stamp and other duties, if any, which may be imposed by the United States of America or any governmental entity or any political subdivision thereof or taxing authority of or in the foregoing with respect to the Fiscal Agency Agreement or the initial issuance of this Note. All payments will be made by the Issuer without withholding or deduction for or on account for any present or future tax, duty, assessment or other governmental charge of whatever nature imposed or levied by any government or any political subdivision or taxing authority thereof or therein, unless such withholding or deduction is required by law. The Issuer shall not be required to make any additional payment with respect to any withholding or deduction so required.

7. Covenants . For so long as any of the Notes remain Outstanding or any amount remains unpaid on any of the Notes,

(a) Except with respect to transactions covered by paragraph 8 hereof, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, material rights (charter and statutory) and material franchises; provided , however , that the Issuer shall not be required to preserve any such right or franchise if the Issuer’s Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and that the Issuer has used its reasonable best efforts to not disadvantage in any material respect the holders of the Notes.

(b) The Issuer will not be or become an open-end investment company, unit investment trust, face-amount certificate company or any other entity that is or is required to be registered under Section 8 of the Investment Company Act of 1940, as amended (the “ Investment Company Act ”).

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(c) The Issuer shall use its best efforts ( provided that such best efforts do not require the Issuer to raise additional capital or indebtedness) to obtain the approval of the Commissioner for the payment by the Issuer of interest on and principal of the Notes on the scheduled payment dates or scheduled maturity dates thereof, and, in the event any such approval has not been obtained for any such payment at or prior to the scheduled payment date or scheduled maturity date thereof, as the case may be, to continue to use its best efforts (provided that such best efforts do not require the Issuer to raise additional capital or indebtedness) to obtain such approval promptly thereafter. Not less than 45 days prior to the scheduled payment date or scheduled maturity date thereof (excluding any such scheduled maturity date which arises as a result of the obtaining of an order or the granting of approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer), the Issuer will seek the approval of the Commissioner to make each payment of interest on and principal of the Notes. In addition, the Issuer shall notify in writing or cause to be notified in writing each holder of the Notes and the Fiscal Agent no later than five Business Days prior to the scheduled payment date for interest on or the scheduled maturity date for principal of any Note (excluding any such scheduled maturity date which arises as a result of the obtaining of an order or the granting of approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer) in the event that the Commissioner has not then approved the making of any such payment on such scheduled payment date or such scheduled maturity date, and thereafter, if such payment has been approved by the Commissioner, shall promptly notify in writing or cause to be notified in writing each holder of the Notes and the Fiscal Agent of such approval and of the fact that, notwithstanding such approval, the Issuer shall have failed to make any such payment on any such scheduled payment date or such scheduled maturity date.

8. Merger or Consolidation . For so long as any of the Notes remain Outstanding or any amounts remain unpaid on any of the Notes, the Issuer may merge or consolidate with or into any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of its assets to any person, firm or corporation, if ( i ) (A) in the case of a merger or consolidation, the Issuer is the surviving corporation or (B) in the case of a merger or consolidation where the Issuer is not the surviving corporation and in the case of any such sale, conveyance, transfer or other disposition, the successor corporation is a corporation organized and existing under the laws of the United States of America or a state thereof and such corporation expressly assumes by supplemental fiscal agency agreement all the obligations of the Issuer under the Notes and the Fiscal Agency Agreement, ( ii ) at the time of any such merger or consolidation, or such sale, conveyance, transfer or other disposition, the Issuer shall not have failed to make payment of interest on or principal of, or any redemption payment with respect to, the Notes after having received the Commissioner’s prior approval to make such payment and ( iii ) the Issuer has delivered to the Fiscal Agent an officer’s certificate stating that such merger, consolidation, sale, conveyance, transfer or other disposition complies with this paragraph and that all conditions precedent herein provided for relating to such transaction have been complied with. In the event of the assumption by a successor

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corporation of the obligations of the Issuer as provided in clause (i)(B) of the immediately preceding sentence, such successor corporation shall succeed to and be substituted for the Issuer hereunder and under the Fiscal Agency Agreement and all such obligations of the Issuer shall terminate.

9. ERISA . No employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), or plan or other arrangement that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “ Code ”), or any entity whose underlying assets are considered to include “plan assets” of such employee benefit plans or arrangements (each, a “ Plan ”), or governmental, church or foreign plan subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (“ Similar Law ”), and no person acting on behalf of or investing “plan assets” of a Plan or a plan subject to a Similar Law, may acquire this Note, unless the acquisition and holding of the Note is exempt under one or more of Prohibited Transaction Class Exemptions 96-23, 95-60, 91-38, 90-1 or 84-14 (or any amendment thereof) or Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code or another applicable exemption from the prohibitions under Section 406 of ERISA and Section 4975 of the Code or, in the case of a governmental, church or foreign plan subject to Similar Law, such acquisition and holding do not violate any Similar Law. The acquisition by any person of this Note shall constitute a representation by such person to the Issuer and the Fiscal Agent that either ( i ) such person is not a Plan or a plan subject to Similar Law and is not acquiring the Note on behalf of or with “plan assets” of any Plan or any plan subject to Similar Law or ( ii ) its acquisition and holding of the Note or any interest therein are covered under an applicable exemption from the prohibitions under Section 406 of ERISA and Section 4975 of the Code. The restrictions on acquisitions of the Notes set forth in this paragraph 9 are in addition to those otherwise set forth in Section 6 of the Fiscal Agency Agreement and under applicable law or, in the case of a plan subject to Similar Law, do not violate such Similar Law.

10. Subordination . (a) The Issuer agrees, and each Note holder by accepting a Note agrees, that the indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this paragraph, to the prior payment in full of all Indebtedness, Policy Claims and Prior Claims (each as hereinafter defined).

(b) Upon any distribution to creditors of the Issuer in any rehabilitation, liquidation, conservation or dissolution or similar proceeding relating to the Issuer or its property, the priority of claims of Note holders shall be determined in accordance with Section 645.68 of the Wisconsin Statutes (together with any successor provision, and as may be hereafter amended from time to time, “ Section 645.68 ”). In a proceeding commenced under Chapter 645 of the Wisconsin Statutes, claims for interest on, principal of, or any redemption payment with respect to, the Notes constitute Class 10 claims under

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Section 645.68, as currently in effect. If the Commissioner approves a payment of principal of or interest on the Notes in an amount that is less than the full amount of principal of and interest on the Notes then scheduled to be paid in respect of the Notes, payment of such partial amount shall be made pro rata among Note holders as their interests may appear.

(c) If a distribution is made to Note holders that, because of this paragraph, should not have been made to them, the Note holders who receive the distribution shall pay it over to the Issuer.

(d) The Issuer shall promptly notify the Fiscal Agent and the Paying Agent of any facts known to the Issuer that would cause a payment of principal of or interest on the Notes to violate this paragraph.

(e) This paragraph defines the relative rights of Note holders, on the one hand, and holders of any other claims, on the other hand. Nothing in this Note or the Fiscal Agency Agreement shall ( i ) impair, as between the Issuer and Note holders, the obligation of the Issuer which is, subject to the Payment Restrictions, absolute and unconditional to pay principal of and interest on the Notes in accordance with their terms; ( ii ) affect the relative rights of Note holders and creditors of the Issuer, other than holders of Policy Claims, Indebtedness or Prior Claims; or ( iii ) prevent the Fiscal Agent or any Note holder from exercising any available remedies upon a breach by the Issuer of its obligations hereunder, subject to the rights of holders of Policy Claims, Indebtedness or Prior Claims to receive distributions otherwise payable to Note holders.

(f) No right of any holder of Policy Claims, Indebtedness or Prior Claims to enforce the subordination of the indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Issuer or by its failure to comply with the terms of this Fiscal Agency Agreement.

(g) Each holder of Notes, by acceptance thereof, authorizes and directs the Fiscal Agent on its behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in paragraph 10(b) and appoints the Fiscal Agent its attorney-in-fact for any and all such purposes.

As used herein, “ Indebtedness ” of the Issuer shall mean ( i ) all existing or future indebtedness of the Issuer for borrowed money; ( ii ) all existing or future indebtedness for borrowed money of other persons, the payment of which is guaranteed by the Issuer; ( iii ) all existing or future obligations of the Issuer under any agreement obligating the Issuer to cause another person to maintain a minimum level of net worth, or otherwise to ensure the solvency of such person; and ( iv ) all other claims or amounts owed, to the extent that the payment of principal of and interest on, or any redemption payment with respect to, the Notes would be required by law to be subordinated to the prior payment of

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any such claim or amount in the event of a distribution of claims pursuant to Section 645.68. Any indebtedness of the Issuer, which, by its express terms or other contract, is subordinated in right of payment to, or ranks equally with, the Notes shall not constitute Indebtedness. Any other surplus or contribution notes or similar obligations of the Issuer shall not constitute Indebtedness and will rank pari passu with, or subordinated to, the Notes.

As used herein, “ Policy Claims ” shall mean all existing or future claims of policyowners, beneficiaries and insureds arising from and within the coverage of, and not in excess of the applicable limits of, any and all existing or future policies, endorsements, riders and other contracts of insurance, annuity contracts (including, without limitation, guaranteed investment contracts and funding agreements) issued, assumed or renewed by the Issuer on or prior to the date hereof or hereafter created, all claims under separate account agreements to the extent such claims are not fully discharged by the assets held by the Issuer in the applicable separate accounts and all claims of any guaranty corporation or association of the State of Wisconsin or any other jurisdiction against the Issuer.

As used herein, “ Prior Claims ” shall mean all other claims against the Issuer, which, in the event of a rehabilitation, liquidation, conservation, dissolution or similar proceeding relating to the Issuer pursuant to Section 645.68, would have priority over claims with respect to the Notes. Under Section 645.68 as currently in effect, such other claims include: ( i ) costs and expenses of administration during conservation, rehabilitation, liquidation or similar proceedings, including but not limited to actual and necessary costs of preserving or recovering the assets of the insurer, compensation for all services rendered in the liquidation; necessary filing fees, fees and mileage payable to witnesses, and reasonable attorney fees; ( ii ) all claims under policies for losses incurred, including third party claims and federal, state and local government claims, except the first $200 of losses otherwise payable to any claimant under this clause (ii) other than the federal government; ( iii ) claims of the federal government not included under clause (ii) , interest at the legal rate compounded annually on all claims in the class under this clause (iii) , and on all claims of the federal government in the class under clause (ii) , from the date of the petition for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the dividend is declared; ( iv ) claims against the Issuer that are not under policies and that are for liability for bodily injury or for injury to or destruction of tangible property; ( v ) debts due to employees (with the exception of officers) for services performed, not to exceed $1,000 to each employee which have been earned within one year before the filing of the petition for liquidation, which shall be in lieu of any other similar priority authorized by law as to wages or compensation of employees, provided, however, that if there are no claims of the federal government, the claims in clause (v) have priority over all claims under clauses (ii) to (xi) ; ( vi ) claims under non-assessable policies for unearned premiums and other premium refunds and the first $200 of loss excepted by the deductible provision under clause (ii) ; ( vii ) all other

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claims, including claims of any state or local government, not falling within other clauses and claims, including those of any state or local governmental body, for a penalty or forfeiture, but only to the extent of the pecuniary loss sustained from the act, transaction or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby; ( viii ) claims based solely on judgments; ( ix ) interest at the legal rate compounded annually on all claims in the classes under clauses (i) to (viii) , except for claims of the federal government in the classes under clauses (ii) and (iii) , from the date of the petition for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the dividend is declared; and ( x ) pursuant to subdivision (8) of Section 645.68, the remaining claims or portions of claims not already paid, with interest calculated in accordance with clause (viii) .

11. Delivery of Certain Information . For so long as any of the Notes remain Outstanding or any amount remains unpaid on any of the Notes, the Issuer shall, in accordance with Rule 144A, comply with the terms of the agreements set forth in Section 8 of the Fiscal Agency Agreement.

12. Mutilation, Destruction, Loss, etc . In case this Note shall become mutilated, defaced, destroyed, lost or stolen, the Issuer will execute and upon the Issuer’s request the Fiscal Agent shall authenticate and deliver a new Note, having a number not contemporaneously outstanding, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, bearing interest from the date to which interest has been paid on this Note, in exchange and substitution for this Note (upon surrender and cancellation thereof if mutilated or defaced) or in lieu of and substitution for this Note. In the case where this Note is destroyed, lost or stolen, the applicant for a substituted Note shall furnish to the Issuer such security or indemnity as may be reasonably required by it to save it harmless, and, in every case of destruction, loss or theft of this Note, the applicant shall also furnish to the Issuer reasonable satisfactory evidence of the destruction, loss or theft of this Note and of the ownership thereof; provided , however , that if the registered holder hereof is, in the reasonable judgment of the Issuer, an institution of recognized responsibility, such holder’s written agreement of indemnity shall be deemed to be satisfactory for the issuance of a new Note in lieu of and substitution for this Note. The Fiscal Agent shall authenticate any such substituted Note and deliver the same only upon written request or authorization of the Issuer. Upon the issuance of any substituted Note, the Issuer and the Fiscal Agent may require the payment by the registered holder thereof of a sum sufficient to cover fees and expenses connected therewith. In case this Note has matured or is about to mature and shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may, subject to the Payment Restrictions, instead of issuing a substitute Note, pay or authorize the payment of the same (without surrender thereof except if this Note is mutilated or defaced) upon compliance by the registered holder with the provisions of this paragraph 12 as hereinabove set forth.

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13. Amendments . Section 11 of the Fiscal Agency Agreement, which Section is hereby incorporated mutatis mutandis by reference herein, provides that, with certain exceptions as therein provided and with the consent of the holders of not less than a majority in aggregate principal amount of the Notes then Outstanding or by written consent of such percentage in aggregate principal amount of the Notes then Outstanding, the Issuer and the Fiscal Agent may, with the prior approval of the Commissioner, modify, amend or supplement the Fiscal Agency Agreement or the terms of the Notes or may give consents or waivers or take other actions with respect thereto. Any such modification, amendment, supplement, consent, waiver or other action shall be conclusive and binding on the holder of this Note and on all future holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof, whether or not notation thereof is made upon this Note. The Fiscal Agency Agreement and the terms of the Notes may, with the prior approval of the Commissioner, be modified or amended by the Issuer and the Fiscal Agent, without the consent of any holders of Notes, for the purpose of ( a ) adding to the covenants of the Issuer for the benefit of the holders of Notes, or ( b ) surrendering any right or power conferred upon the Issuer, or ( c ) securing the Notes, or ( d ) evidencing the succession of another corporation to the Issuer and the assumption by such successor of the covenants and obligations of the Issuer herein and in the Fiscal Agency Agreement as permitted by the Notes and the Fiscal Agency Agreement, or ( e ) modifying the restrictions on, and procedures for, resale and other transfers of the Notes to the extent required by any change in applicable law or regulation (or the interpretation thereof) or in practices relating to the resale or transfer of restricted securities generally, or ( f ) accommodating the issuance, if any, of Notes in book-entry or certificated form and matters related thereto which do not adversely affect the interest of any Note holder in any material respect, or ( g ) curing any ambiguity or correcting or supplementing any defective provision contained herein or in the Fiscal Agency Agreement in a manner which does not adversely affect the interest of any Note holder in any material respect, or ( h ) effecting any amendment which the Issuer and the Fiscal Agent may determine is necessary or desirable and which shall not adversely affect the interest of any Note holder, to all of which each holder of any Note, by acceptance thereof, consents.

14. Remedies . Holders of Notes may enforce the Fiscal Agency Agreement or the Notes only in the manner set forth below.

(a) In the event that any state or federal agency shall obtain an order or grant approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer, the Notes will upon the obtaining of such an order or the granting of such approval immediately mature in full without any action on the part of the Fiscal Agent or any holder of the Notes, with payment thereon being subject to the Payment Restrictions, and any restrictions imposed as a consequence of, or pursuant to, such proceedings. Notwithstanding any other provision of this Note or the Fiscal Agency Agreement, in no event shall the Fiscal Agent or any holder of the Notes be entitled to declare the Notes to immediately mature or otherwise be immediately payable.

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(b) In the event that the Commissioner approves in whole or in part a payment of any interest on or principal of, or any redemption payment with respect to, any Notes and the Issuer fails to pay the full amount of such approved payment on the date such amount is scheduled to be paid, such approved amount will be immediately payable on such date without any action on the part of the Fiscal Agent or any holder of Notes. In the event that the Issuer fails to perform any of its other obligations hereunder or under the Fiscal Agency Agreement, each holder of the Notes may pursue any available remedy to enforce the performance of any provision of such Notes or the Fiscal Agency Agreement; provided , however , that such remedy shall in no event include the right to declare the Notes immediately payable, and shall in no circumstances be inconsistent with the provisions of applicable law. A delay or omission by any Note holder in exercising any right or remedy accruing as a result of the Issuer’s failure to perform its obligations hereunder or under the Fiscal Agency Agreement and the continuation thereof shall not impair such right or remedy or constitute a waiver of or acquiescence in such non-performance by the Issuer. To the extent permitted by law, no remedy is exclusive of any other remedy and all remedies are cumulative.

(c) Notwithstanding any other provision of this Note or the Fiscal Agency Agreement, the right of any holder of Notes to receive payment of the principal of and interest on such holder’s Notes on or after the respective scheduled payment or scheduled maturity dates expressed in such Notes, or to bring suit for the enforcement of any such payment on or after such respective scheduled payment or scheduled maturity dates, in each case subject to such payment on such dates having received the approval of the Commissioner pursuant to the Payment Restrictions, including the approval of the Commissioner, is absolute and unconditional and shall not be impaired or affected without the consent of the holder.

15. Optional Redemption . (a) Subject to the Payment Restrictions, including the prior approval of the Commissioner, the Notes are subject to redemption, as a whole or in part, at the option of the Issuer at any time and from time to time, with no less than 30 and no more than 60 days’ prior written notice to the holder of the Note, at a redemption price (the “ Redemption Price ”) equal to 100% of the aggregate principal amount of the Notes to be redeemed plus any accrued but unpaid interest (including interest on interest); provided , that the Issuer shall not redeem any Notes unless it also redeems a pro rata amount of any other surplus notes of the Issuer outstanding at the time of such redemption. The Notes may not be redeemed at the option of any Note holder. Notice of any redemption pursuant to this paragraph 15(a) will be given to holders of the Notes as set forth below. Interest installments due on this Note on or prior to a redemption date will be payable to the holder of this Note of record at the close of business on the relevant record date, all as provided in the Fiscal Agency Agreement.

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(b) In the case of any partial redemption of Notes, each Outstanding Note shall be redeemed pro rata ; provided that if at the time of redemption such Notes are registered as a Global Note, the U.S. Depositary for such Global Note shall determine, in accordance with its procedures, the principal amount of such Notes to be redeemed held by each holder of a beneficial interest in such Global Note.

(c) Notices to redeem Notes shall be given to holders of Notes in writing mailed, first-class postage prepaid, to each holder of registered Notes, or portions thereof, so to be redeemed, at such holder’s address as it appears in the securities register. Such notice will be given once not more than 60 days nor less than 30 days prior to the date fixed for redemption. If by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impracticable to give notice to the holders of Notes in the manner prescribed herein, then such notification in lieu thereof as shall be made by the Issuer or by the Fiscal Agent on behalf of and at the instruction of the Issuer shall constitute sufficient provision of such notice, if such notification shall, so far as may be practicable, approximate the terms and conditions of the mailed notice in lieu of which it is given. Neither the failure to give notice nor any defect in any notice given to any particular holder of a Note shall affect the sufficiency of any notice with respect to other Notes. Notices to redeem Notes shall specify the date fixed for redemption, the Redemption Price or the manner of calculation thereof, the place or places of payment, that payment will be made upon presentation and surrender of the Notes to be redeemed (or portion thereof in the case of a partial redemption), that interest accrued to the date fixed for redemption (unless the date of redemption is a Scheduled Interest Payment Date) will be paid as specified in said notice, and that on and after said date interest thereon will cease to accrue if the Notes are so redeemed. In addition, in the case of a partial redemption, such notice shall specify the Notes called for redemption and the aggregate principal amount of the Notes to remain Outstanding after the redemption.

(d) If notice of redemption has been given in the manner set forth in paragraph 15(c) hereof, the Notes so to be redeemed shall be payable in full on the date specified in such notice and upon presentation and surrender of the Notes at the place or places specified in such notice, the Notes shall be paid and redeemed by the Issuer at the places and in the manner and currency herein specified and at the Redemption Price. From and after the redemption date, if monies for the redemption of Notes called for redemption shall have been made available at the Corporate Trust Office of the Fiscal Agent for redemption on the redemption date, the Notes called for redemption shall cease to bear interest, and the only right of the holders with respect to such Notes or portion thereof being redeemed shall be to receive payment of the Redemption Price. If monies for the redemption of the Notes are not made available for payment until after the redemption date, the Notes called for redemption shall not cease to bear interest until such monies have been so made available.

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(e) Any Note which is to be redeemed only in part shall be surrendered with, if the Issuer or the Fiscal Agent so requires, due endorsement by, or a written instrument of transfer in form reasonably satisfactory to the Issuer and the Fiscal Agent duly executed by, the holder thereof or such holder’s attorney duly authorized in writing, and the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver to the holder of such Note without service charge, a new registered Note or Notes, of any authorized denomination as requested by such holder, and as permitted by Section 1(d) of the Fiscal Agency Agreement, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered.

16. Obligations Not Impaired . No reference herein to the Fiscal Agency Agreement and no provision of this Note or of the Fiscal Agency Agreement shall alter or impair the obligation of the Issuer, subject to the Payment Restrictions, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.

17. GOVERNING LAW . THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF SUCH STATE (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW). THE COMMISSIONER’S EXERCISE OF REGULATORY AUTHORITY, INCLUDING APPROVAL OF PAYMENTS ON THE NOTES, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF WISCONSIN (OR, IF THE COMMISSIONER IS NO LONGER THE PRIMARY REGULATOR OF THE FINANCIAL CONDITION OF THE ISSUER, THE LAW OF SUCH JURISDICTION OF THE PRIMARY REGULATOR OF THE FINANCIAL CONDITION OF THE ISSUER), AND THE PARTIES TO THE FISCAL AGENCY AGREEMENT AND HOLDERS OF NOTES SHALL SUBMIT ANY DISPUTES RELATED TO THE EXERCISE OF SUCH REGULATORY AUTHORITY TO A COURT OF COMPETENT JURISDICTION IN SUCH JURISDICTION.

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EXHIBIT B

FORM OF GLOBAL NOTE

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“ DTC ”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A NOTE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH

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IN SECTION 5 OF THE FISCAL AGENCY AGREEMENT, AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 6(C) OF THE FISCAL AGENCY AGREEMENT. BENEFICIAL INTERESTS IN THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 6(C) OF THE FISCAL AGENCY AGREEMENT.

[INCLUDE IF NOTE IS A TEMPORARY REGULATION S GLOBAL NOTE — THIS NOTE IS A TEMPORARY REGULATION S (TOGETHER WITH ANY SUCCESSOR PROVISION, AND AS SUCH MAY BE HEREAFTER AMENDED FROM TIME TO TIME, “ REGULATION S ”) GLOBAL NOTE WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT REFERRED TO HEREINAFTER. INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE 40-DAY RESTRICTED PERIOD REFERRED TO IN SECTION l(b)(iii) OF THE FISCAL AGENCY AGREEMENT, AND NO TRANSFER OR EXCHANGE OF AN INTEREST IN THIS TEMPORARY REGULATION S GLOBAL NOTE MAY BE MADE FOR AN INTEREST IN THE PERMANENT REGULATION S GLOBAL NOTE EXCEPT AFTER THE DATE OF TERMINATION OF THE RESTRICTED PERIOD. ]

[INCLUDE IF NOTE IS A RESTRICTED GLOBAL NOTE OR NOTE ISSUED IN EXCHANGE THEREFOR (UNLESS, PURSUANT TO SECTION 6(g) OF THE FISCAL AGENCY AGREEMENT, THE ISSUER DETERMINES THAT THE LEGEND MAY BE REMOVED) — THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (“ QUALIFIED INSTITUTIONAL BUYER ”) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO ANY OTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, SUBJECT TO THE DELIVERY OF REASONABLY SATISFACTORY EVIDENCE TO THE ISSUER ESTABLISHING SUCH EXEMPTION, WHICH MAY INCLUDE AN OPINION OF COUNSEL, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND ALL OTHER APPLICABLE JURISDICTIONS.]

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IF THIS NOTE WAS SOLD IN AN “OFFSHORE TRANSACTION” IN ACCORDANCE WITH RULE 904 OF REGULATION S, BY ITS ACCEPTANCE OF THE NOTES, EACH HOLDER OF THE NOTES SHALL BE DEEMED TO HAVE REPRESENTED TO THE ISSUER THAT SUCH HOLDER IS NOT A “U.S. PERSON” AND IS NOT PURCHASING THE NOTES IN THE UNITED STATES OR ANY OF ITS TERRITORIES OR POSSESSIONS; OR IS A QUALIFIED INSTITUTIONAL BUYER.

ANY PERSON ACQUIRING THIS NOTE IS DEEMED TO MAKE A REPRESENTATION TO THE ISSUER AND THE FISCAL AGENT AS SET FORTH IN PARAGRAPH 9 HEREOF.

NEITHER THE ISSUER NOR ANY OF ITS AFFILIATES (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) THAT ACQUIRES NOTES ARE PERMITTED TO SELL SUCH NOTES.

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AMBAC ASSURANCE CORPORATION

5.1% Surplus Note scheduled to mature on June 7, 2020

CUSIP NO.: ISIN NO.: COMMON CODE:


No. R		$

AMBAC ASSURANCE CORPORATION, a Wisconsin domiciled financial guaranty insurance corporation (and any successor in interest thereto, the “ Issuer ”), for value received, hereby promises to pay, subject to the Payment Restrictions (as defined in paragraph 1 of the reverse side of this Note), to Cede & Co., or registered assigns, the principal sum of United States dollars ($ ), or such other amount (not to exceed [ — ] dollars ($[ — ]) when taken together with all of the Issuer’s Notes issued and outstanding in definitive certificated form or in the form of another Global Note) as may from time to time represent the principal amount of the Issuer’s Notes in respect of which beneficial interests are held through the U.S. Depositary in the form of a [Restricted] [Temporary] [Permanent] [Regulation S] Global Note, on June 7, 2020 (the “ Scheduled Maturity Date ”), and to pay interest thereon, subject to the Payment Restrictions, including the approval of the Commissioner, from June 7, 2010 or from the most recent Scheduled Interest Payment Date to which interest has been paid or duly provided for, annually in arrears on June 7 in each year and on the date the Notes are scheduled to mature, commencing June 7, 2011 (each, a “ Scheduled Interest Payment Date ”), at the rate of 5.1% per annum, until the principal hereof is paid or duly provided for. Any reference herein to the term “scheduled maturity date” or other date for the payment of principal of the Notes shall include ( i ) the date, if any, fixed for redemption thereof in accordance with paragraph 15 hereof and ( ii ) the date upon which any state or federal agency obtains an order or grants approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer. As specified on the reverse hereof, all payments of principal of or interest on this Note may be made only with the prior approval of the Commissioner. The interest so payable, and punctually paid or duly provided for, on any Scheduled Interest Payment Date shall be paid, in accordance with the terms of the Fiscal Agency Agreement hereinafter referred to, to the person (the “ registered holder ”) in whose name this Note (or one or more predecessor Notes) is registered at the close of business on May 20 (whether or not a Business Day, as defined herein), as the case may be (each, a “ Regular Record Date ”), next preceding such Scheduled Interest Payment Date. Interest on the Notes shall be calculated on the basis of a 360-day year of twelve months of 30 days each. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the registered holder on such Regular Record Date and shall be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Issuer, notice whereof shall be given to registered holders of the Notes not less than 15 days prior to such special record date.

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Principal of this Note shall be payable against surrender hereof at the Corporate Trust Office of the Fiscal Agent hereinafter referred to and at the offices of such other Paying Agents as the Issuer shall have appointed pursuant to the Fiscal Agency Agreement. Payments of principal of the Notes shall be made only against surrender of the Notes; provided that in the case of payment of only a portion of principal, the Issuer shall execute a new registered Note or Notes in aggregate principal amount equal to and in exchange for the remaining portion of the principal of the Note so surrendered. Payments of interest on this Note will be made, in accordance with the foregoing and subject to applicable laws and regulations, ( i ) by wire transfer of immediately available funds to an account maintained by the person entitled thereto with a bank if such registered holder gives notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the applicable scheduled payment date or scheduled maturity date hereof, of the payee’s account to which payment is to be made or ( ii ) if no such notice is given, by mailing a check on or before the scheduled payment date of such payment to the person entitled thereto at such person’s address appearing on the aforementioned register. Unless the designation of the payee’s account to which payment is to be made is revoked, any such designation made by such holder with respect to such Notes of the payee’s account to which payment is to be made shall remain in effect with respect to any future payments with respect to such Notes payable to such holder. The Issuer agrees that until this Note has been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the full principal of and interest remaining unpaid on this Note have been made available for payment and either paid or returned to the Issuer as provided herein, it will at all times maintain offices or agencies in the Borough of Manhattan, The City of New York for the payment of the principal of and interest on the Notes as herein provided.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

This Note may be executed by the Issuer by manual, facsimile or portable document format signatures, and such signatures may be executed on separate counterparts.

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Unless the certificate of authentication hereon has been executed by the Fiscal Agent by manual signature, this Note shall not be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

Dated:


AMBAC ASSURANCE CORPORATION

By:
		Name:
		Title:

This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement.


THE BANK OF NEW YORK MELLON as Fiscal Agent
THE BANK OF NEW YORK MELLON as Fiscal Agent

By:
		Authorized Officer

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FORM OF REVERSE

2. Form of Notes . The Notes are issuable only in fully registered form without coupons.

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7. Covenants . For so long as any of the Notes remain Outstanding or any amount remains unpaid on any of the Notes,

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(c) The Issuer shall use its best efforts ( provided that such best efforts do not require the Issuer to raise additional capital or indebtedness) to obtain the approval of the Commissioner for the payment by the Issuer of interest on and principal of the Notes on the scheduled payment dates or scheduled maturity dates thereof, and, in the event any such approval has not been obtained for any such payment at or prior to the scheduled payment date or scheduled maturity date thereof, as the case may be, to continue to use its best efforts ( provided that such best efforts do not require the Issuer to raise additional capital or indebtedness) to obtain such approval promptly thereafter. Not less than 45 days prior to the scheduled payment date or scheduled maturity date thereof (excluding any such scheduled maturity date which arises as a result of the obtaining of an order or the granting of approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer), the Issuer will seek the approval of the Commissioner to make each payment of interest on and principal of the Notes. In addition, the Issuer shall notify in writing or cause to be notified in writing each holder of the Notes and the Fiscal Agent no later than five Business Days prior to the scheduled payment date for interest on or the scheduled maturity date for principal of any Note (excluding any such scheduled maturity date which arises as a result of the obtaining of an order or the granting of approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer) in the event that the Commissioner has not then approved the making of any such payment on such scheduled payment date or such scheduled maturity date, and thereafter, if such payment has been approved by the Commissioner, shall promptly notify in writing or cause to be notified in writing each holder of the Notes and the Fiscal Agent of such approval and of the fact that, notwithstanding such approval, the Issuer shall have failed to make any such payment on any such scheduled payment date or such scheduled maturity date.

8. Merger or Consolidation . For so long as any of the Notes remain Outstanding or any amounts remain unpaid on any of the Notes, the Issuer may merge or consolidate with or into any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of its assets to any person, firm or corporation, if ( i ) ( A ) in the case of a merger or consolidation, the Issuer is the surviving corporation or ( B ) in the case of a merger or consolidation where the Issuer is not the surviving corporation and in the case of any such sale, conveyance, transfer or other disposition, the successor corporation is a corporation organized and existing under the laws of the United States of America or a state thereof and such corporation expressly assumes by supplemental fiscal agency agreement all the obligations of the Issuer under the Notes and the Fiscal Agency Agreement, ( ii ) at the time of any such merger or consolidation, or such sale, conveyance, transfer or other disposition, the Issuer shall not have failed to make payment of interest on or principal of, or any redemption payment with respect to, the Notes after having received the Commissioner’s prior approval to make such payment and ( iii ) the Issuer has delivered to the Fiscal Agent an officer’s certificate stating that such merger, consolidation, sale, conveyance, transfer or other disposition complies with this paragraph and that all conditions precedent herein provided for relating to such transaction have been complied with. In the event of the assumption by a successor

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principal of or interest on the Notes in an amount that is less than the full amount of principal of and interest on the Notes then scheduled to be paid in respect of the Notes, payment of such partial amount shall be made pro rata among Note holders as their interests may appear.

(c) If a distribution is made to Note holders that, because of this paragraph, should not have been made to them, the Note holders who receive the distribution shall pay it over to the Issuer.

(g) Each holder of Notes, by acceptance thereof, authorizes and directs the Fiscal Agent on its behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this paragraph and appoints the Fiscal Agent its attorney-in-fact for any and all such purposes.

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Section 645.68. Any indebtedness of the Issuer, which, by its express terms or other contract, is subordinated in right of payment to, or ranks equally with, the Notes shall not constitute Indebtedness. Any other surplus or contribution notes or similar obligations of the Issuer shall not constitute Indebtedness and will rank pari passu with, or be subordinated to, the Notes.

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and claims, including those of any state or local governmental body, for a penalty or forfeiture, but only to the extent of the pecuniary loss sustained from the act, transaction or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby; ( viii ) claims based solely on judgments; ( ix ) interest at the legal rate compounded annually on all claims in the classes under clauses (i) to (viii) , except for claims of the federal government in the classes under clauses (ii) and (iii) , from the date of the petition for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the dividend is declared; and ( x ) pursuant to subdivision (8) of Section 645.68, the remaining claims or portions of claims not already paid, with interest calculated in accordance with clause (viii) .

12. Mutilation, Destruction, Loss, etc. In case this Note shall become mutilated, defaced, destroyed, lost or stolen, the Issuer will execute and upon the Issuer’s request the Fiscal Agent shall authenticate and deliver a new Note, having a number not contemporaneously outstanding, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, bearing interest from the date to which interest has been paid on this Note, in exchange and substitution for this Note (upon surrender and cancellation thereof if mutilated or defaced) or in lieu of and substitution for this Note. In the case where this Note is destroyed, lost or stolen, the applicant for a substituted Note shall furnish to the Issuer such security or indemnity as may be reasonably required by it to save it harmless, and, in every case of destruction, loss or theft of this Note, the applicant shall also furnish to the Issuer reasonable satisfactory evidence of the destruction, loss or theft of this Note and of the ownership thereof; provided , however , that if the registered holder hereof is, in the reasonable judgment of the Issuer, an institution of recognized responsibility, such holder’s written agreement of indemnity shall be deemed to be satisfactory for the issuance of a new Note in lieu of and substitution for this Note. The Fiscal Agent shall authenticate any such substituted Note and deliver the same only upon written request or authorization of the Issuer. Upon the issuance of any substituted Note, the Issuer and the Fiscal Agent may require the payment by the registered holder thereof of a sum sufficient to cover fees and expenses connected therewith. In case this Note has matured or is about to mature and shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may, subject to the Payment Restrictions, instead of issuing a substitute Note, pay or authorize the payment of the same (without surrender thereof except if this Note is mutilated or defaced) upon compliance by the registered holder with the provisions of this paragraph 12 as hereinabove set forth.

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14. Remedies . Holders of Notes may enforce the Fiscal Agency Agreement or the Notes only in the manner set forth below.

(a) In the event that any state or federal agency shall obtain, or initiate a proceeding to obtain, an order or grant approval for the rehabilitation, liquidation, conservation or dissolution of the Issuer, the Notes will upon the obtaining of such an order or the granting of such approval immediately mature in full without any action on the part of the Fiscal Agent or any holder of the Notes, with payment thereon being subject to the Payment Restrictions, and any restrictions imposed as a consequence of, or pursuant to, such proceedings. Notwithstanding any other provision of this Note or the Fiscal Agency Agreement, in no event shall the Fiscal Agent or any holder of the Notes be entitled to declare the Notes to immediately mature or otherwise be immediately payable.

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B-18

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EXHIBIT C-1

FORM OF CERTIFICATE

FOR EXCHANGE OF RESTRICTED

CERTIFICATED NOTE

(Exchanges pursuant to § 6(b)(i)

of the Fiscal Agency Agreement)

The Bank of New York Mellon

as Fiscal Agent

101 Barclay Street, Floor 8W,

New York, New York 10286

Re:

Ambac Assurance Corporation, 5.1%

Surplus Notes scheduled to mature on June 7, 2020 (the “Notes”)

Reference is hereby made to the Fiscal Agency Agreement, dated as of June 7, 2010 (as it may be duly amended from time to time, the “ Fiscal Agency Agreement ”), between Ambac Assurance Corporation, as Issuer, and The Bank of New York Mellon, as Fiscal Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Fiscal Agency Agreement.

This letter relates to $ principal amount of Restricted Certificated Notes held in definitive form by [insert name of holder] (the “ Holder ”). The Holder has requested an exchange of such Notes.

In connection with such request and in respect of such Notes, the Holder does hereby certify that such Notes are owned by the Holder and are being exchanged without transfer.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.

C-1-1

The following signature must be guaranteed by an “eligible guarantor institution” meeting the reasonable requirements of the Fiscal Agent and Paying Agent, which reasonable requirements include membership or participation in STAMP or such other “signature guarantee program” as may be determined by the Fiscal Agent and Paying Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.


[Insert Name of Holder]

By:
		Name:
		Title:

Dated: ,

cc:	Ambac Assurance Corporation

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EXHIBIT C-2

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER FROM RESTRICTED CERTIFICATED

NOTE TO PERMANENT REGULATION S GLOBAL NOTE

(Transfers Pursuant to § 6(b)(ii)

of the Fiscal Agency Agreement)

The Bank of New York Mellon

as Fiscal Agent

101 Barclay Street, Floor 8W,

New York, New York 10286

Re:

Ambac Assurance Corporation, 5.1%

Surplus Notes scheduled to mature on June 7, 2020 (the “Notes”)

The undersigned (the “ Transferor ”) has requested a transfer of $ principal amount of Restricted Certificated Notes to a person who will take delivery thereof in the form of an equal principal amount of Notes evidenced by the Permanent Regulation S Global Note (CUSIP No. ).

In connection with such request and in respect of such Notes, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with Rule 904 or Rule 144 under the United States Securities Act of 1933, as amended (the “ Act ”), and accordingly the Transferor does hereby further certify that:

(1) if the transfer has been effected pursuant to Rule 904:

(A) the offer of the Notes was not made to a person in the United States;

C-2-1

(B) either:

(i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States, or

(ii) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;

(D) the transaction is not part of a plan or scheme to evade the registration requirements of the Act.

(2) if the transfer has been effected pursuant to Rule 144, the Notes have been transferred in a transaction permitted by Rule 144.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer. Terms used in this certificate and not otherwise defined in the Fiscal Agency Agreement have the meanings set forth in Regulation S under the Act.

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[Insert Name of Transferor]

By:
		Name:
		Title:

Dated: ,

cc:	Ambac Assurance Corporation

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EXHIBIT C-3

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER FROM RESTRICTED CERTIFICATED

NOTE TO RESTRICTED GLOBAL SECURITY

(Transfers Pursuant to § 6(b)(ii)

of the Fiscal Agency Agreement)

The Bank of New York Mellon

as Fiscal Agent

101 Barclay Street, Floor 8W,

New York, New York 10286

Re:

Ambac Assurance Corporation, 5.1%

Surplus Notes scheduled to mature on June 7, 2020 (the “Notes”)

The undersigned (the “ Transferor ”) has requested a transfer of $ principal amount of Restricted Certificated Notes to a person that will take delivery thereof in the form of an equal principal amount of Notes evidenced by the Restricted Global Note (CUSIP No. ).

In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended, and, accordingly, the Transferor does hereby further certify that the Notes are being transferred to a person that the Transferor reasonably believes is purchasing the Notes for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.

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[Insert Name of Transferor]

By:
		Name:
		Title:

Dated: ,

cc:	Ambac Assurance Corporation

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EXHIBIT D

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER FROM RESTRICTED GLOBAL

NOTE TO TEMPORARY REGULATION S GLOBAL NOTE

(Transfers Pursuant to § 6(c)(ii)

of the Fiscal Agency Agreement)

The Bank of New York Mellon

as Fiscal Agent

101 Barclay Street, Floor 8W,

New York, New York 10286

Re:

Ambac Assurance Corporation, 5.1% Surplus

Notes scheduled to mature on June 7, 2020 (the “Notes”)

This letter relates to $ principal amount of Notes which are evidenced by the Restricted Global Note (CUSIP No. ) and held with the U.S. Depositary in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Notes to a person who will take delivery thereof in the form of an equal principal amount of Notes evidenced by the Temporary Regulation S Global Note (CUSIP No. ), which amount, immediately after such transfer, is to be held with the U.S. Depositary through Euroclear or Clearstream Banking or both (Common Code ).

In connection with such request and in respect of such Notes, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with Rule 904 under the United States Securities Act of 1933, as amended (the “ Act ”), and accordingly the Transferor does hereby further certify that:

(1) the offer of the Notes was not made to a person in the United States;

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(2) either:

(A) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States, or

(B) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;

(3) no directed selling efforts have been made in contravention of the requirements of Rule 904 of Regulation S;

(4) the transaction is not part of a plan or scheme to evade the registration requirements of the Act; and

(5) upon completion of the transaction, the beneficial interest being transferred as described above was held with the U.S. Depositary through Euroclear or Clearstream Banking or both (Common Code ).

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[Insert Name of Transferor]

By:
		Name:
		Title:

Dated: ,

cc:	Ambac Assurance Corporation

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EXHIBIT E

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER FROM RESTRICTED GLOBAL

NOTE TO PERMANENT REGULATION S GLOBAL NOTE

(Transfers Pursuant to § 6(c)(iii)

of the Fiscal Agency Agreement)

The Bank of New York Mellon

as Fiscal Agent

101 Barclay Street, Floor 8W,

New York, New York 10286

Re: Ambac Assurance Corporation, 5.1%

Surplus Notes scheduled to mature on June 7, 2020 (the “Notes”)

This letter relates to $ principal amount of Notes which are evidenced by the Restricted Global Note (CUSIP No. ) and held with the U.S. Depositary in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Notes to a person that will take delivery thereof in the form of an equal principal amount of Notes evidenced by the Permanent Regulation S Global Note (CUSIP No. ).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with Rule 904 or Rule 144 under the United States Securities Act of 1933, as amended (the “ Act ”), or any other exemption from registration under the Act, and accordingly the Transferor does hereby further certify that:

(1) if the transfer has been effected pursuant to Rule 904:

(A) the offer of the Notes was not made to a person in the United States;

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(B) either:

(D) the transaction is not part of a plan or scheme to evade the registration requirements of the Act;

(2) if the transfer has been effected pursuant to Rule 144, the Notes have been transferred in a transaction permitted by Rule 144; or

(3) if such transfer has been effected pursuant to any other exemption under the Act, the Notes have been transferred in a transaction permitted by such exemption (and the Transferor has provided a certification to that effect and if the Fiscal Agent or the Issuer so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to compliance with the restrictions contained in the legend set forth on the security).

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[Insert Name of Transferor]

By:
		Name:
		Title:

Dated: ,

cc: Ambac Assurance Corporation

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EXHIBIT F

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER FROM TEMPORARY REGULATION S GLOBAL NOTE TO

RESTRICTED GLOBAL NOTE

(Transfers Pursuant to § 6(c)(iv)

of the Fiscal Agency Agreement)

The Bank of New York Mellon

as Fiscal Agent

101 Barclay Street, Floor 8W,

New York, New York 10286

Re:

Ambac Assurance Corporation, 5.1%

Surplus

Notes scheduled to mature on June 7, 2020 (the “Notes”)

This letter relates to $ principal amount of Notes which are evidenced by the Temporary Regulation S Global Note (CUSIP No. ) and held with the U.S. Depositary through Euroclear or Clearstream Banking or both (Common Code ) in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in Notes to a person that will take delivery thereof in the form of an equal principal amount of Notes evidenced by the Restricted Global Note (CUSIP No. ).

In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such transfer is being effected pursuant to and in accordance with Rule 144A under the Act and, accordingly, the Transferor does hereby further certify that the Notes are being transferred to a person that the Transferor reasonably believes is purchasing the Notes for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.

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This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.


[Insert Name of Transferor]

By:
		Name:
		Title:

Dated: ,

cc: Ambac Assurance Corporation

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EXHIBIT G

FORM OF CERTIFICATE OF BENEFICIAL OWNERSHIP

To:	[Euroclear Bank S.A./N.V., as operator of the Euroclear System] OR

[Clearstream Banking, société anonyme ]

Re:

Ambac Assurance Corporation, 5.1%

Surplus Notes scheduled to mature on June 7, 2020 (the “Notes”)

Ladies and Gentlemen:

Reference is hereby made to the Fiscal Agency Agreement, dated as of June 7, 2010 (as it may be amended from time to time, the “ Fiscal Agency Agreement ”), between Ambac Assurance Corporation, as Issuer, and The Bank of New York Mellon, as Fiscal Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Fiscal Agency Agreement. We are the beneficial owner of $ principal amount of Notes issued under the Fiscal Agency Agreement and represented by a Regulation S Temporary Global Note (as defined in the Fiscal Agency Agreement).

We hereby certify as follows:

[ CHECK A OR B AS APPLICABLE .]


¨	A.	We are a non-U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended).

¨	B.	We are a U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended) that purchased the Notes in a transaction that did not require registration under the Securities Act of 1933, as amended.

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You, the Issuer and the Fiscal Agent are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.


Very truly yours,

[NAME OF BENEFICIAL OWNER]

By:
		Name:
		Title:
		Address:

Date: ,

cc: Ambac Assurance Corporation

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EXHIBIT H

FORM OF RULE 144 CERTIFICATE

The Bank of New York Mellon

as Fiscal Agent

101 Barclay Street, Floor 8W,

New York, New York 10286

Re:

Ambac Assurance Corporation, 5.1%

Surplus Notes scheduled to mature on June 7, 2020 (the “Notes”)

The undersigned (the “ Transferor ”) has requested a transfer of Restricted Notes to a person who will take delivery thereof without the Legend on such Restricted Notes. The Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with Rule 144 under the United States Securities Act of 1933, as amended (the “ Act ”), and accordingly the Transferor does hereby further certify that the Notes have been transferred in a transaction permitted by Rule 144.


Very truly yours,

[NAME OF BENEFICIAL OWNER]

By:
		Name:
		Title:
		Address:

Date: ,

cc: Ambac Assurance Corporation

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Exhibit 10.4

AMENDMENT NO. 3 TO TAX SHARING AGREEMENT

This Amendment No. 3 to the Tax Sharing Agreement (“Amendment No. 3”) is executed on June 7, 2010 by and among Ambac Financial Group, Inc. (formerly known as AMBAC Inc.) (“Ambac” or “Parent”) and each of the other corporations that are parties to the Prior Agreement, as defined below (each of such other corporations, individually, a “Subsidiary” and, collectively, the “Subsidiaries”).

WHEREAS, the Subsidiaries include Ambac Assurance Corporation (formerly known as AMBAC Indemnity Corporation) (“AAC”).

WHEREAS, Ambac and the Subsidiaries are parties to a Tax Sharing Agreement as of July 18, 1991, as amended by Amendment No. 1, effective as of October 1, 1997, and as amended by Amendment No. 2, effective November 19, 2009 (as so amended, the “Prior Agreement”) which sets forth a method to allocate and settle among them the consolidated Federal income tax liability of the consolidated return group of which Ambac is the common parent.

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

1. Effective Date . This Amendment No. 3 shall have effect for all Taxable Periods, beginning on or after January 1, 2010.

2. Additions to Defined Terms . The following definitions are hereby added to paragraph 2 of the Prior Agreement:

“ AAC ” shall mean Ambac Assurance Corporation.

“ AAC Subgroup ” shall mean AAC and its subsidiaries including Everspan.

“ AAC Subgroup Loss ” shall mean any current loss or net operating loss carryover or carryback, or capital loss carryover or carryback attributable to any Member included in the AAC Subgroup.

“ AFGI Subgroup ” shall mean the Members of the Group other than the Members of the AAC Subgroup.

“ AFGI Subgroup CODI ” shall mean any income (including any increase in income resulting from a disallowance of any deduction, loss or credit) recognized by any Member included in the AFGI Subgroup related to the restructuring, modification, cancellation, settlement or any other similar transaction related to any debt, liability or other obligation (i) owed by a Member included in the AFGI Subgroup to a person that is not a member of the AFGI Subgroup and (ii) outstanding, due or otherwise accrued as of March 15, 2010.

“ Everspan ” shall mean Everspan Financial Guarantee Corp.

“ Parent Separate Tax ” for a Taxable Period shall mean, with respect to Parent, the Federal income tax liability that Parent would have for such Taxable Period (including interest and penalties related to items attributable to Parent) determined as if Parent had filed its own Federal income tax return for such Taxable Period (or portion thereof) and all prior periods beginning on or after the Effective Time. Such Federal income tax liability for such Taxable Period (or portion thereof) shall be computed by employing the methods and principles of accounting, elections and conventions (the “Methods”) actually used in the determination of the Federal income tax liability of the Group.

3. Changes to Defined Terms . The definition of “Group” in paragraph 2 of the Prior Agreement is hereby amended to read as follows:

“ Group ” shall mean (i) Parent and (ii) all corporations (whether now existing or hereafter formed or acquired) which are includible in an affiliated group, as defined in Section 1504(a) of the Code, that includes Parent.

4. Provisions Relating to Payments . Paragraph 3 of the Prior Agreement is hereby amended, replaced and restated to add the following paragraph (c):

(c)

AAC Subroup Loss . In the event that Parent reasonably determines that the Federal income tax liability of the Group attributable to the AFGI Subgroup for any Taxable Period beginning on or after January 1, 2010 has been reduced as a result of offsetting any portion of an AAC Subgroup Loss against items of income or gain of the AFGI Subgroup, Parent shall pay to AAC an amount equal to the amount of such reduction in the Group’s Federal income tax liability; provided however, that Parent shall have no obligation to pay to the AAC Subgroup any amount in respect of any AAC Subgroup Loss used by Parent to offset AFGI Subgroup CODI. For purposes of determining the portion of an AAC Subgroup Loss used by the Group pursuant to the previous sentence, the Group net operating loss deduction in any Taxable Period shall be deemed to consist of (1) those net operating losses expiring in the earliest Taxable Periods and (2) as among any net operating losses expiring in the same Taxable Period, a pro rata portion of such net operating losses generated by each corporation in the Group.

5. Provisions Relating to Redeterminations of Tax Liabilities. Paragraph 5(a) of the Prior Agreement is hereby amended, replaced and restated in its entirety to read as follows:

(a)

In General . In the event of any redetermination of any item of income, gain, loss, deduction or credit of any party to this Agreement of the Group for any Taxable

Period as a result of (i) an examination by the Internal Revenue Service (the “IRS”) or (ii) any final action by the IRS on an amended return or a claim for refund, the execution of a closing agreement with the IRS or a judicial decision which has become final (a “Final Determination”), including in each case, any determination relating to whether any party to this Agreement is properly characterized as being includible in the Group, the Subsidiary Separate Tax or the Parent Separate Tax, as the case may be with respect to such Member, shall be recomputed for such Taxable Period in a manner consistent with this Agreement to take into account such redetermination (including any penalties or additions to tax or other required payments) in a manner consistent with such revised treatment, and the payments pursuant to this Agreement, including paragraphs 2 and 3 hereof, shall be appropriately adjusted (including the return or repayment of any amounts, with interest, related to payments for the use of any deduction, credit, loss or net operating loss of any Member that is (i) determined to not have been a member of the Group for all or any portion of any Taxable Period or (ii) reduced or otherwise adjusted); provided, further, that in the event of any redetermination of any item of income, gain, loss, deduction or credit of any party to this Agreement of the Group for any Taxable Period that is reflected in an application filed with the IRS after the effective date of Amendment Number 3 for a tentative carryback adjustment pursuant to Section 6411 of the Code and that results in a payment by the IRS (a “Carryback Payment”), such Carryback Payment shall be treated as a reduction of Group Federal income tax liability pursuant to Section 3(c) of this Agreement and that Section will apply to compensate the AAC Subgroup to the extent such Carryback Payment is attributable to the use of the AAC Subgroup Loss. For the avoidance of doubt, (x) the portion of any AAC Subgroup Loss used shall be computed pursuant to Section 3(c) of this Agreement and (y) any redetermination that occurs in connection with an application filed with the IRS for a tentative carryback adjustment pursuant to Section 6411 of the Code shall not be treated as being a result of a Final Determination.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be executed as of the date first above written.


AMBAC FINANCIAL GROUP, INC.

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel

AMBAC ASSURANCE CORPORATION

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel

AMBAC CAPITAL CORPORATION

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel

AMBAC BERMUDA (LTD.)

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel

RANGEMARK CAPITAL MARKETS, INC.

By:		/s/ Gregg Bienstock
Name:		Gregg Bienstock
Title:		Chief Operating Officer and General Counsel

RANGEMARK FINANCIAL SERVICES, INC.

By:		/s/ Gregg Bienstock
Name:		Gregg Bienstock
Title:		Chief Operating Officer and General Counsel


RANGEMARK CREDIT MANAGEMENT, INC.

By:		/s/ Gregg Bienstock
Name:		Gregg Bienstock
Title:		Chief Operating Officer and General Counsel

RANGEMARK SOLUTIONS, INC.

By:		/s/ Gregg Bienstock
Name:		Gregg Bienstock
Title:		Chief Operating Officer and General Counsel

RANGEMARK INVESTMENT MANAGEMENT, INC.

By:		/s/ Gregg Bienstock
Name:		Gregg Bienstock
Title:		Chief Operating Officer and General Counsel

AMBAC INVESTMENTS INC.

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel

AMBAC ASSET FUNDING CORPORATION

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel

AMBAC AII CORP.

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		General Counsel


CONNIE LEE HOLDINGS, INC.

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel

EVERSPAN FINANCIAL GUARANTEE CORP.

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Chairman, President and Chief Executive Officer

AMBAC CAPITAL FUNDING, INC.

By:		/s/ Kevin J. Doyle
Name:		Kevin J. Doyle
Title:		Senior Vice President and General Counsel