EXHIBIT 10.38
 
 
 
 
 
STATE OF WISCONSIN
:
CIRCUIT COURT
:
DANE COUNTY

                                                    

In the Matter of the Rehabilitation of:

SEGREGATED ACCOUNT OF                 Case No. 10 CV 1576
AMBAC ASSURANCE CORPORATION        Hon. Richard G. Niess

                                                    

SECOND AMENDED PLAN OF REHABILITATION
                                                    

September 22, 2017

MICHAEL BEST & FRIEDRICH LLP

Ann Ustad Smith, Bar No. 1003243
John D. Finerty, Jr., Bar No. 1018183
Justin M. Mertz, Bar No. 1056938 
Kimberly A. Streff, Bar No. 1106358
100 East Wisconsin Ave. Suite 3300
Milwaukee, Wisconsin 53202 
Telephone: (414) 271-6560
Facsimile: (414) 277-0656
Email: jdfinerty@michaelbest.com

Attorneys for the Commissioner of Insurance of the State of Wisconsin, as the
Court Appointed Rehabilitator of the Segregated Account of Ambac Assurance
Corporation

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TABLE OF CONTENTS
Page

Article 1DEFINITIONS    1
Article 2TREATMENT OF CLAIMS    28
2.1Administrative Claims    28
2.2Policy Claims    28
2.3SA SSNs and SA JSNs    33
2.4Junior Deferred Amounts    34
2.5General Claims    34
Article 3MEANS FOR IMPLEMENTATION OF PLAN    34
3.1Administration of this Plan    34
3.2Merger of the Segregated Account    34
3.3Initial Exchange    35
3.4Funding of Cash Distributions    37
3.5Transfer Provisions    37
3.6Transfers by Trustees    38
3.7Deemed Distribution Dates    38
3.8Post-Effective Date Policy Claim    39
3.9No Fractional Amounts    39
ticle 4
PROCEDURES GOVERNING DISTRIBUTIONS AND CLAIM RESOLUTION    40

4.1Claims Administration    40
4.2Administrative Claims    40
4.3Post-Effective Date Policy Claims and Pending Policy Claims    41
4.4Disputed Claims Process    41
4.5Alternative Resolutions of Claims    42
4.6Discharge of ACP Obligations    42
4.7No Duplicative Recovery    42
4.8Setoffs and Recoupment    43
4.9Recoveries on Policy Claims    43
4.10Reimbursements on Policy Claims    43
4.11Assignment of Rights    44
4.12Subsequent Adjustments    45
Article 5EFFECTIVENESS    45
5.1Notification of Effective Date    45
5.2Conditions Precedent to the Effective Date    45
5.3Waiver of Conditions Precedent    46
5.4Effect of Failure of Conditions to Effective Date    47
Article 6EFFECTS OF THIS SECOND AMENDED PLAN    47
6.1Prior Orders Remain in Effect    47
6.2Termination of Rehabilitation Proceeding    48

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TABLE OF CONTENTS
(cont.)
Page

6.3Termination of Duties of the Rehabilitator and the Management Services
Provider    48
6.4Segregated Account Operational Documents    48
6.5Discharge    49
6.6Releases    49
6.7Exculpation    50
6.8Discharge and Release Injunction    51
6.9Indemnification and Injunction With Regard to Holders and Sub-
Trustee/Agents    52
6.10Preservation of Causes of Action    54
6.11Beneficiaries of Immunity and Indemnification    55
6.12Immunity and Indemnification    55
6.13No Defaults    56
6.14Actions Self-Effectuating    57
Article 7RETENTION OF JURISDICTION    57
7.1Retention of Jurisdiction    57
Article 8GENERAL PROVISIONS    59
8.1Governing Law    59
8.2Revocation or Withdrawal of this Plan    59
8.3Amendment and Modification of this Plan    59
8.4Limitation of Recovery    60
8.5Binding Effect    60
8.6Rules of Interpretation    60
8.7Implementation    61
8.8Inconsistency    61
8.9No Admissions    61
8.10Filing of Additional Documents    62
8.11Returned Distributions    62

Exhibit 1    Payment Guidelines, as Amended
Exhibit 2    LVM Payment Guidelines, as Amended

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The Commissioner of Insurance of the State of Wisconsin, as the court-appointed
Rehabilitator in this case, proposes the following Second Amended Plan of
Rehabilitation for the Segregated Account of Ambac Assurance Corporation
pursuant to Wis. Stat. § 645.33(5).
INTRODUCTION TO PLAN
This Second Amended Plan of Rehabilitation (the “Plan”) provides for the (i)
satisfaction and discharge of all Deferred Amounts and related Claims, (ii)
payment in full in cash of all Post-Effective Date Policy Claims, (iii)
termination of the Operational Documents, (iv) termination of the Rehabilitation
Proceeding of the Segregated Account, (v) merger of the Segregated Account back
into the General Account and (vi) discharge and termination of the duties of the
Rehabilitator and the Management Services Provider. Except as set forth herein,
this Plan pertains solely to the Segregated Account, which acts through the
Rehabilitator and the Management Services Provider. Pursuant to Wis. Stat. §
611.24(3)(e), the Segregated Account is deemed to be a separate insurer for
purposes of the rehabilitation. Except as may be specifically stated herein, in
the Payment Guidelines, the Amended Payment Guidelines, or in the Operational
Documents, this Plan does not pertain to the assets or liabilities in the
General Account.

ARTICLE I
DEFINITIONS
The following terms used in this Plan shall have the meanings specified below,
and such meanings shall be equally applicable to both the singular and plural
forms of such terms, unless the context otherwise requires. Any term used in
this Plan, whether or not capitalized, that is not defined in this Plan, but
that is defined in the Act, shall have the meaning set forth in the Act.

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1.1    2011 Confirmation Order. The Decision and Final Order Confirming the
Rehabilitator’s Plan of Rehabilitation, with Findings`    of Fact and
Conclusions of Law, entered by the Court on January 24, 2011.
1.2    2014 Amendments. The amendments contained in the First Amended Plan dated
June 12, 2014.
1.3    2014 Approval Order. The Final Order, dated June 11, 2014, approving the
2014 Amendments to the Original Plan.
1.4    AAC. Ambac Assurance Corporation.
1.5    Accretion Amounts. In respect of any Insured Obligation or any Permitted
Claim which has a related Pre-Record Date Deferred Amount or Junior Deferred
Amount outstanding, on any Bond Distribution Date on which such Pre-Record Date
Deferred Amount or Junior Deferred Amount is to be calculated, accretion on such
outstanding Pre-Record Date Deferred Amount or Junior Deferred Amount at the
Accretion Rate to the Effective Date.
1.6    Accretion Rate. In respect of any Pre-Record Date Deferred Amount or
Junior Deferred Amount, a rate compounded monthly (using 30/360 day count
convention) to produce an effective annual rate of 5.1%, except that in
Undercollateralized transactions, the portion of any Pre-Record Date Deferred
Loss Amount attributable to the unpaid principal loss or balance of an Insured
Obligation shall accrete at an effective annual rate, as determined by the
Rehabilitator on a periodic basis, equal to the greater of (i) the monthly
Accretion Rate, as calculated above, less the applicable Bond Interest Rate (as
adjusted from time to time), and (ii) zero.

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1.7    ACP. Ambac Credit Products, LLC.
1.8    Act. The Wisconsin Insurers Rehabilitation and Liquidation Act, Wis.
Stat. § 645.01 et seq.
1.9    Administrative Claims. Claims for fees, costs and expenses of the
administration of the Segregated Account incurred after the Petition Date,
including, but not limited to, fees, costs and expenses associated with (i)
management services, including all fees and payments pursuant to the Management
Services Agreement, (ii) financial advisor, consulting and legal services,
including services for OCI and the Rehabilitator, (iii) indemnification under
commercially reasonable indemnification agreements of the Segregated Account (as
determined by the Rehabilitator prior to the Effective Date, or OCI thereafter,
in their sole and absolute discretion) with providers of financial, banking,
trustee, consulting, legal or other services, (iv) the costs and expenses of
preserving or recovering property, or enforcing rights and remedies, in respect
of Policies and other liabilities allocated to the Segregated Account (as
determined by the Rehabilitator prior to the Effective Date, or OCI thereafter,
in their sole and absolute discretion), (v) any other fees, costs or expenses
that are expressly approved by the Rehabilitator or the Special Deputy
Commissioner, and (vi) any other indebtedness or obligations of the Segregated
Account entitled to such priority in a liquidation proceeding under Wis. Stat. §
645.68(1).
1.10    AFG. Ambac Financial Group, Inc.
1.11    Alternative Resolution. The resolution of any Claim by the Claims
Administrator through the arrangement, negotiation, effectuation and execution
of an

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amendment, restructuring, refinancing, purchase, repurchase, termination,
settlement, commutation, tender, Synthetic Commutation or tear-up, or any
similar transaction that results in the extinguishment or reduction of liability
or agreement on alternative treatment, in respect of, as applicable, (i) all or
part of the Policy or Policies, (ii) all or part of the underlying Insured
Obligation or (iii) the underlying instrument, contract or arrangement, if any,
giving rise to such Claim.
1.12    Ambac Parties. Ambac Assurance Corporation, Ambac Financial Group, Inc.,
and the Segregated Account.
1.13    Amended Payment Guidelines. The Amended Payment Guidelines (including
any Amended LVM Payment Guidelines) to be issued by the Rehabilitator no later
than October 1, 2017, which guidelines will be immediately effective and will
apply to all Claims.
1.14    Amended Proof of Policy Claim Form. The form attached as an exhibit to
the Amended Payment Guidelines, as such form may be amended and/or supplemented
from time to time in the sole and absolute discretion of the Claims
Administrator, to be used by the Holders of Policy Claims and Post-Effective
Date Policy Claims to submit such claims to the Claims Administrator, whether
prior to, or after, the Effective Date, and irrespective of any contrary
requirement in any Policy.
1.15    Approval Order. The Decision approving this Plan, including any Findings
of Fact and Conclusions of Law that may be required by the Rehabilitator in his
sole and absolute discretion.

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1.16    Approval Order Date. The date of the Approval Order.
1.17    Beneficial Holder. In respect of any Insured Obligation, the beneficial
holder(s) of such Insured Obligation.
1.18    Bond Distribution Date. In respect of an Insured Obligation, the monthly
date on which scheduled interest and/or principal payments are due, or would be
due (absent any acceleration, termination, extinguishment or legal final
maturity of such Insured Obligation), from the issuer of the relevant Insured
Obligation to the Beneficial Holders of such Insured Obligation, or, if payment
of scheduled interest and/or principal in relation to any such Insured
Obligation is not or would not have been due on a monthly basis, each
Distribution Date.
1.19    Bond Interest Rate. In respect of any Insured Obligation subject to
Undercollateralization, on any Bond Distribution Date on which Accretion Amounts
are to be calculated, the applicable annualized interest rate that a Holder
would be entitled to receive on such Bond Distribution Date for the relevant
Insured Obligations in accordance with, and subject to, the terms and conditions
of the relevant Transaction Documents relating to such Insured Obligations.
1.20    Business Day. A day other than a Saturday, Sunday or any other day on
which commercial banks in New York, New York are authorized or required by law
to close.
1.21    Cash. Legal tender of the United States of America payable in
immediately available funds, such as a wire transfer, bank or cashier’s check,
or its equivalent in foreign currency for any transactions denominated in such
foreign currency.

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1.22    Causes of Action. Without limitation, any and all claims, rights,
actions, demands, proceedings, causes of action, liabilities, obligations,
suits, debts, remedies, dues, sums of money, accounts, defenses, affirmative
defenses, rights of setoff, offset, powers, privileges, licenses, franchises,
third-party claims, counterclaims, cross-claims, actions for declaratory or
injunctive relief, suits and other rights of recovery, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages or judgments against or with respect to any
Entity or property, wherever located, of any nature whatsoever, whether known or
unknown, suspected or unsuspected, liquidated or unliquidated, fixed or
contingent, matured or unmatured, disputed or undisputed, secured or unsecured,
foreseen or unforeseen, asserted or unasserted or pending as of the Effective
Date, whether direct, indirect, derivative or on any other basis, whether
existing or hereafter arising, whether arising in whole or in part from the
terms of the Plan or the Original Plan, whether arising in whole or in part
prior to, on or after the Petition Date, based in whole or in part upon any act
or omission or other event occurring prior to the date of the Petition Date or
during the course of the Proceeding or thereafter, in contract or in tort, at
law or in equity, whether pursuant to any federal, state, local, statutory or
common law or any other law, rule or regulation, or under any theory of law or
equity, including any available: (i) rights of setoff, counterclaim, recoupment,
replevin or reclamation, or claims on contracts or for breaches of duties
imposed by law, and (ii) claims, causes of action or defenses against any Entity
including for intentional or negligent misrepresentation, fraud, mistake, duress
and usury, breach of fiduciary duty, malpractice, negligence, breach of
contract, wrongful distribution, aiding and abetting or inducement.

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1.23    Claim. Any right to payment from the Segregated Account, whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, equitable, legal, secured, or
unsecured, that arises prior to the Effective Date.
1.24    Claim Requirements. The requirements applicable to the filing and
validity of Claims as set forth in the First Amended Plan, the Payment
Guidelines, this Plan, and the Amended Payment Guidelines, as applicable. For
the avoidance of doubt, all Claims not otherwise adjudicated, resolved, settled,
Permitted, or Disallowed pursuant to the Payment Guidelines by the Rehabilitator
or the Management Services Provider prior to the issuance of the Amended Payment
Guidelines, shall be adjudicated, resolved, settled, Permitted, or Disallowed
pursuant to the Amended Payment Guidelines.
1.25    Claim Schedule. The Schedule attached to the Proof of Policy Claim Form
or the Amended Proof of Policy Claim Form, as applicable, which shall include
detailed information about the relevant Policy Claim and Post-Effective Date
Policy Claim.
1.26    Claims Administrator. Prior to the Effective Date: The Management
Services Provider, as may be provided by the First Amended Plan, the Payment
Guidelines, and the Amended Payment Guidelines. From and after the Effective
Date: AAC.
1.27    Commissioner. The Commissioner of Insurance of the State of Wisconsin.
1.28    Consensual Transaction. The Transaction.

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1.29    Cooperation Agreement. The Cooperation Agreement, by and between the
Segregated Account, the Rehabilitator, AAC and Ambac Financial Group, Inc.,
effective March 24, 2010, as amended, supplemented or modified from time to
time.
1.30    Court. The Circuit Court for Dane County, State of Wisconsin.
1.31    CUSIP. In respect of any security, the security as identified by the
number allocated to such security pursuant to the Committee on Uniform
Securities Identification Procedures.
1.32    Deferred Amount. Pre-Record Date Deferred Amounts and Post-Record Date
Deferred Amounts.
1.33    Definitive Documents. The Rehabilitation Exit Support Agreement dated
July 19, 2017, attached to the Disclosure Statement as Exhibit C, the Secured
Note Indenture, attached to the RESA, and the Waiver and Amendment to Settlement
Agreement, attached to the RESA.
1.34    Determination Date. The fifteenth (15th) day of each month (or, if any
such day is not a Business Day, the immediately following Business Day), subject
to change in the sole and absolute discretion of the Claims Administrator, or as
may otherwise be defined in the Amended Payment Guidelines.
1.35    Disallowed Claim. A Claim that has been determined by the Claims
Administrator to constitute a Duplicate Claim or a Late Claim, or that the
Claims Administrator has otherwise determined should not be Permitted, in each
case in accordance with the

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provisions of the Payment Guidelines or the Amended Payment Guidelines, as the
case may be.
1.36    Disclosure Statement. The joint Disclosure Statement Accompanying this
Plan filed with the Court and dated September 22, 2017, as amended, modified or
supplemented from time to time.
1.37    Disputed Claim. A Claim as to which an Objection has been raised by the
Claims Administrator pursuant to the terms hereof, the Payment Guidelines, or
the Amended Payment Guidelines, that has not been released, satisfied, resolved,
terminated, commuted or otherwise extinguished or become a Permitted Claim or a
Disallowed Claim.
1.38    Distribution. A payment made by or on behalf of the Segregated Account,
in accordance with this Plan, the First Amended Plan, the Payment Guidelines,
the Amended Payment Guidelines, an order of the Court, or pursuant to the
direction of the Special Deputy Commissioner, on account of Deferred Amounts or
Permitted Claims, including, but not limited to, Cash, Senior Secured Notes, SA
SSNs, SA JSNs, Interim Payments, Supplemental Payments, Deferred Payments (as
defined in the Payment Guidelines), Junior Deferred Payments (as defined in the
Payment Guidelines), Special Policy Payments and/or payments made (as
applicable) in conjunction with an Alternative Resolution, as well as any
transfer of Pre-Record Date Deferred Amount Consideration by AAC or the
Segregated Account in respect of a Pre-Record Date Deferred Amount received by
AFG or a Sponsoring Holder in the Initial Exchange pursuant to Section 3.3(c)
herein. For the avoidance of doubt, the term

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Distribution does not include securities transferred by AFG or a Sponsoring
Holder pursuant to the Initial Exchange. 
1.39    Distribution Date. The date during each month on which Policy Claims,
arising before the Effective Date, and which have been Permitted by the Claims
Administrator on the immediately preceding Determination Date, are scheduled to
be paid in accordance with the Payment Guidelines or the Amended Payment
Guidelines, as applicable. The Distribution Date shall be the twentieth (20th)
day of each such month (or, if any such day is not a Business Day, the
immediately following Business Day), or such other date as may be defined in the
Amended Payment Guidelines; provided that all Distributions of the Pre-Record
Date Deferred Amount Consideration to be distributed pursuant to this Plan and
the Amended Payment Guidelines shall be completed on the Effective Date or as
soon as reasonably practicable following the Effective Date.
1.40    DTC. The Depository Trust Company, a clearing agency registered with the
Securities and Exchange Commission or any successor entity thereto.
1.41    Duplicate Claim. Any Claim with respect to which the Claims
Administrator, has determined, in its sole and absolute discretion, that (i) the
payment obligation of the Segregated Account under the provisions of the
underlying instrument or contract giving rise to such Claim or (ii) the
underlying risk of loss insured pursuant to the provisions of the Policy or
other Transaction Documents giving rise to such Claim is the subject of, or is,
a Pending Claim, Disputed Claim, Late Claim, Disallowed Claim or a Permitted
Claim.

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1.42    Effective Date. The date on which this Plan shall be effective, as
determined and announced by the Rehabilitator, in accordance with Article 5 of
this Plan.
1.43    Entity. An individual, person, corporation, partnership, limited
liability company, association, joint stock company, estate, trust,
unincorporated organization, government or any political subdivision thereof, or
any other entity.
1.44    Exchange Offers. Those certain voluntary exchange offers to be
effectuated concurrently with the effectiveness of this Plan whereby (i) AAC
shall offer to the Sponsoring Holders securities entitling the beneficial
holders of such securities to Pre-Record Date Deferred Amounts in exchange for
an equal amount of GA SSNs (including principal amount and accrued and unpaid
interest), (ii) AAC shall offer to purchase 65.7% of all GA SSNs (including
principal amount and accrued and unpaid interest) held by the Sponsoring Holders
in exchange for consideration comprised of (x) 45.7% Cash and (y) 46.9 % in
principal amount of Senior Secured Notes representing a discount of 7.4% to the
total amount of all such GA SSNs (including principal amount and accrued and
unpaid interest); and (iii) AAC shall offer to purchase 87.5% of all GA SSNs
(including principal amount and accrued and unpaid interest) held by Entities
other than the Sponsoring Holders in exchange for consideration comprised of (x)
45.7% Cash and (y) 46.9% in principal amount of Senior Secured Notes
representing a discount of 7.4% to the total amount of all such GA SSNs
(including principal amount and accrued and unpaid interest).
1.45    Exculpated Parties. (i) The Ambac Parties, (ii) the Rehabilitator, (iii)
the Management Services Provider, (iv) the Special Deputy Commissioner, (vi)
OCI, (vii) the

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Sponsoring Holders, and each of their respective current and former members,
shareholders, affiliates, officers, directors, employees, attorneys, agents,
advisors and representatives.
1.46    Final Order. An order or judgment entered by a court, which has not been
reversed, vacated, or stayed, that may no longer be appealed from or otherwise
reviewed or reconsidered, as a result of which such order or judgment shall have
become final and non- appealable.
1.47    Final Post-Record Date Payment. With respect to any Permitted
Post-Record Date Policy Claim, payment of Cash in the amount of the Post-Record
Date Deferred Amount, less any Recovery Amounts received in respect of the
Insured Obligation to which such Post-Record Date Policy Claim relates and which
have not otherwise reduced the Post-Record Date Deferred Amount in respect of
such Insured Obligation.
1.48    First Amended Plan. The Original Plan and all supplements and Exhibits
thereto, as amended by the 2014 Amendments.
1.49    GA Surplus Notes or GA SSNs. The 5.1% surplus notes issued by the
General Account on June 7, 2010 and scheduled to mature on June 7, 2020.
1.50    General Account. The general account of AAC.
1.51    General Claims. All Claims which are not Administrative Claims or Policy
Claims, and are not otherwise entitled to priority under the Act or an order of
the Court, including, but not limited to, any Claim submitted under a
reinsurance agreement allocated to the Segregated Account, as identified in
Exhibit F to the Plan of Operation.

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1.52    Holder. Any Entity (other than a Beneficial Holder) holding (i) a Claim,
including, in the case of a Policy Claim, the named beneficiary of the related
Policy, and including any trustee submitting claims in accordance with the
Amended Payment Guidelines or the Payment Guidelines, (ii) a Deferred Amount,
(iii) a Junior Deferred Amount, or (iv) a SA SSN.
1.53    Indemnified Party. Any Holder acting in its capacity as Trustee or
Sub-Trustee/Agent and any Paying Agent retained by AAC.
1.54    Initial Exchange. The transfer required by this Plan of beneficial
interests in Pre-Record Date Deferred Amounts estimated in the aggregated amount
of $282 million representing 12.5% of all Pre-Record Date Deferred Amounts from
Non-Ambac Holders, on a pro rata basis, (i) to AFG in exchange for the transfer
by AFG to such Non-Ambac Holders (on a pro rata basis) of GA SSNs in an
estimated aggregated amount of $129 million equal to (x) all GA SSNs and SA SSNs
held by AFG as of the Record Date less (y) $100 million, and less (z) unpaid
interest on $100 million of GA SSNs and SA SSNs accrued between June 30, 2017
and the Effective Date and (ii) to the Sponsoring Holders in exchange for the
transfer by the Sponsoring Holders to such Non-Ambac Holders (on a pro rata
basis) of GA SSNs in an estimated aggregate amount, as of the Effective Date, of
$153 million equal to 12.5% of all Pre-Record Date Deferred Amounts held by
Non-Ambac Holders of Pre-Record Date Deferred Amounts, less the amount specified
in (i) above.
1.55    Injunction. The Order for Temporary Injunctive Relief entered by the
Court on March 24, 2010, made permanent by the 2011 Confirmation Order, and the
related Order

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Granting Rehabilitator’s Motion to Confirm and Declare the Scope of the Relief
Issued Under this Court’s Prior Order for Injunctive Relief, dated September 12,
2012.
1.56    Insured Obligation. In respect of any Policy Claim, an obligation
guaranteed by the Segregated Account under or pursuant to the relevant Policy or
Policies. A Policy may provide financial guaranty insurance in respect of more
than one Insured Obligation, each Insured Obligation as identified by its CUSIP,
if any.
1.57    Interim Cash Payment Rules. The rules governing the submission,
processing and payment of Policy Claims of the Segregated Account in accordance
with the June 4, 2012 Interim Cash Payment Order, filed with the Court and
effective August 1, 2012, together with any amendments or supplements thereto.
1.58    Interim Payment. With respect to each Policy Claim determined to be a
Permitted Policy Claim, and which is based on events, occurrences, and
circumstances, occurring or existing prior to the Effective Date, the payment of
the amount equal to the then applicable Interim Payment Percentage (as defined
in the Payment Guidelines or the Amended Payment Guidelines, as applicable) of
the amount of a Permitted Policy Claim, made in accordance with the Payment
Guidelines or the Amended Payment Guidelines, as applicable.
1.59    Junior Deferred Amount. With respect to each Permitted General Claim,
the amount established as a Junior Deferred Amount by the Segregated Account
pursuant to the procedure set forth in the Payment Guidelines.
1.60    Late Claim. Any Claim determined pursuant to the procedure set forth in
the Payment Guidelines or the Amended Payment Guidelines, as applicable, to not
have been

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submitted in compliance with the Claim Requirements (i) with respect to
Pre-Record Date Policy Claims, by the earlier of (x) November 30, 2017 or (y)
the date that such Claim would be a “Late Claim” pursuant to the First Amended
Plan and the Payment Guidelines, or (ii) with respect to Post-Record Date Policy
Claims, 120 days following the earliest date on which such Claim, if it had been
submitted, would have satisfied all of the requirements to be considered a
Permitted Claim. Any Claim that, on or before the date of the issuance of the
Amended Payment Guidelines would be a “Late Claim” pursuant to the terms of the
Payment Guidelines, shall be a Late Claim under this Plan and the Amended
Payment Guidelines. For the avoidance of doubt, the earliest date on which a
Claim may be submitted to the Claims Administrator for consideration as a
Permitted Claim is the earlier of (x) the Bond Distribution Date and (y) the
date that the right to payment arises under the Insured Obligation that gives
rise to a Claim.
1.61    Lien. A charge against or interest in property to secure payment of a
debt or performance of an obligation.
1.62    Management Services Agreement. The Management Services Agreement between
the Segregated Account and AAC, as Management Services Provider, effective March
24, 2010, as amended, modified or supplemented from time to time.
1.63    Management Services Provider. AAC or any successor Management Services
Provider under the Management Services Agreement.
1.64    Merger. The merger of the Segregated Account and AAC provided by
Section 3.2 hereof.

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1.65    Non-Ambac Holders. Beneficial Holders of Pre-Record Date Deferred
Amounts or GA SSNs, as applicable, other than AAC or AFG.
1.66    Objection. Any dispute or objection with respect to a Claim, as
contemplated by the Payment Guidelines or the Amended Payment Guidelines.
1.67    OCI. The Office of the Commissioner of Insurance of the State of
Wisconsin.
1.68    Operational Documents. The documents and agreements pertaining to the
establishment and operation of the Segregated Account, including, but not
limited to, the Plan of Operation, the Secured Note, the Reinsurance Agreement,
the Management Services Agreement and the Cooperation Agreement, each as
amended, modified or supplemented from time to time, but excluding any tax
sharing agreements or cost-allocation agreements.
1.69    Original Plan. The Plan of Rehabilitation for the Segregated Account
dated October 8, 2010, and all supplements and Exhibits thereto.
1.70    Paying Agent. Any paying agent retained by the Claims Administrator on
or after the Effective Date, in the sole and absolute discretion of the Claims
Administrator for the purpose of making any Distributions in accordance with the
Amended Payment Guidelines.
1.71    Payment Guidelines. The Payment Guidelines issued by the Rehabilitator
dated June 12, 2014 and the LVM Payment Guidelines issued by the Rehabilitator
dated June 12, 2014.
1.72    Pending / Pending Claim. Claims submitted prior to the Effective Date in
accordance with all of the requirements of the First Amended Plan and the
Payment Guidelines,

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or in accordance with this Plan and the Amended Payment Guidelines, as
applicable, which are under evaluation by the Claims Administrator and have not
yet become a Permitted Claim, a Disputed Claim, or a Disallowed Claim.
1.73    Permitted / Permitted Claim. A Claim (other than a Late Claim, a
Disputed Claim, a Pending Claim, a Duplicate Claim or a Disallowed Claim)
submitted in compliance with the provisions of the First Amended Plan and the
Payment Guidelines, or this Plan and the Amended Payment Guidelines, to the
extent determined by the Claims Administrator to be a matured, non-contingent,
due and payable obligation according to the provisions of the applicable Policy
and/or any other underlying instrument(s) or contract(s) giving rise to or
governing such Claim. Permitted Claims shall not include any Claim in respect of
(i) any interest on such Claim to the extent accruing or maturing on or after
the Petition Date other than Accretion Amounts, (ii) punitive, consequential,
special or exemplary damages, (iii) any fine, penalty, tax or forfeiture,
including, but not limited to, default or penalty interest purported to be
imposed on the Claim or on the related Insured Obligation, if any, that would
violate the Injunction, or (iv) in the sole and absolute discretion of the
Claims Administrator, as applicable, that portion of any loss for which
indemnification is provided by other benefits or advantages recovered or
recoverable by the Holder or any Beneficial Holder, including without
limitation, any cash deposits, reserves or other defeasance or reinsurance
instruments made available to such Holder or Beneficial Holder. In addition, a
Permitted Claim shall not include any Claim in respect of which the Holder, or
any party to the transaction relating thereto, is in violation of the Plan, the
Injunction, the Payment Guidelines, the Amended Payment Guidelines, or any other
order of the Court relating to the Segregated Account.

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1.74    Petition Date. March 24, 2010, the date on which OCI commenced the
Proceeding.
1.75    Plan. This Second Amended Plan of Rehabilitation for the Segregated
Account dated September 22, 2017 and all supplements and Exhibits hereto, and as
the same may be further amended or modified as set forth herein and in
accordance with the Act. All references to the “Plan” used herein are to this
Second Amended Plan.
1.76    Plan of Operation. The Plan of Operation of the Segregated Account, as
amended, modified and/or supplemented from time to time.
1.77    Policy. Any financial guaranty insurance policy, surety bond or other
similar guarantee which was allocated to the Segregated Account pursuant to the
Plan of Operation.
1.78    Policy Claim. A Claim under a Policy or Policies in respect of an
Insured Obligation (as identified by CUSIP, if any).
1.79    Post-Effective Date Policy Claims. Any Policy Claims based on events,
occurrences, and circumstances occurring or existing, on or after the Effective
Date.
1.80    Post-Record Date Deferred Amount. With respect to each Insured
Obligation (identified by its CUSIP, if any) in respect of which a Post-Record
Date Policy Claim has been Permitted, and an Interim Payment made, the amount
calculated as a Deferred Amount pursuant to the procedure set forth in the
Amended Payment Guidelines. Post-Record Date Deferred Amounts are not entitled
to any accretion during the Post-Record Date Period.

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1.81    Post-Record Date Period. The period of time from and after the Record
Date through and including one business day immediately preceding the Effective
Date.
1.82    Post-Record Date Policy Claims. Any Policy Claims based on events,
occurrences, and circumstances occurring or existing during the Post-Record Date
Period.
1.83    Pre-Record Date Deferred Amount. With respect to each Insured Obligation
(identified by its CUSIP, if any) in respect of which a Pre-Record Date Policy
Claim has been Permitted and/or established by the Segregated Account, and an
Interim Payment made, the amount calculated as a Deferred Amount pursuant to the
procedures set forth in the Payment Guidelines or the Amended Payment
Guidelines, as applicable, in respect of Permitted Policy Claims based on
events, occurrences and circumstances occurring or existing prior to the Record
Date (x) including any and all Accretion Amounts and (y) less any Recovery
Amounts received up to and including the Effective Date in respect of such
Insured Obligation and which have not otherwise previously reduced the
Pre-Record Date Deferred Amount in respect of such Insured Obligation.
1.84    Pre-Record Date Deferred Amount Consideration. The Cash and Senior
Secured Notes to be distributed to Holders of Pre-Record Date Deferred Amounts
pursuant to Section 2.2 of this Plan.
1.85    Eligibility Distribution Record Date. A date to be set by the
Rehabilitator in his sole discretion; provided that that such date is intended
to be as close as reasonably practicable to the Effective Date, but shall be no
later than one business day prior to the Effective Date.

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1.86    Pre-Record Date Deferred Amount Discount. This term has the meaning
given it in Section 2.2(a)(iii) of this Plan.
1.87    Pre-Record Date Deferred Loss Amount. With respect to each Insured
Obligation in respect of which a Pre-Record Date Policy Claim has been Permitted
and an Interim Payment made or deemed to be made, the Pre-Record Date Deferred
Amount excluding the aggregate of all Accretion Amounts relating to such Insured
Obligation.
1.88    Pre-Record Date Policy Claims. Any Policy Claims based on events,
occurrences, and circumstances, occurring, or existing, before the Record Date.
1.89    Proceeding. The legal proceeding, currently styled as In the Matter of
the Rehabilitation of: Segregated Account of Ambac Assurance Corporation, Case
No. 10 CV 1576, pending in the Court.
1.90    Proceeding Circumstances. The circumstances and events, whenever
arising, giving rise to the Proceeding or in existence from and after, or giving
rise to or at any time resulting from, issuance of the Rehabilitation Order,
including, without limitation, (i) the financial condition of the Ambac Parties,
(ii) the grounds for the Proceeding, (iii) actions taken or statements made by
the Ambac Parties, the Rehabilitator, the Management Services Provider, the
Special Deputy Commissioner, OCI, or any other Person, in connection with or in
contemplation of the Rehabilitation Order or the Proceeding, (iv) any ratings
downgrade of the Ambac Parties, (v) any failure by the Ambac Parties to pay any
amount (whether due prior to the Rehabilitation Order, the injunctive relief in
the 2011 Confirmation Order, the

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2014 Approval Order, this Plan, or otherwise) and (vi) the issuance and
existence of the Rehabilitation Order.
1.91    Record Date. September 30, 2017.
1.92    Recovery Amount. Shall have the meaning set forth in the Payment
Guidelines or the Amended Payment Guidelines, as applicable.
1.93    Rehabilitation Exit Support Agreement (“RESA”). The agreement dated July
19, 2017 between each of the Ambac Parties and the Sponsoring Holders (including
any other “Joining Parties” (as defined in the Rehabilitation Exit Support
Agreement) that have become parties to the Rehabilitation Exit Support Agreement
after July 19, 2017), as amended, that sets forth the terms and conditions of
the Sponsoring Holders’ agreement to support this Plan and the Segregated
Account’s exit from the Proceeding.
1.94    Rehabilitation Order. The Order for Rehabilitation entered in the
Proceeding, dated March 24, 2010.
1.95    Rehabilitator. The Commissioner, as the Court-appointed rehabilitator of
the Segregated Account.
1.96    Reimbursement Amount. Shall have the meaning set forth in the Payment
Guidelines or the Amended Payment Guidelines, as applicable.
1.97    Reinsurance Agreement. The Aggregate Excess of Loss Reinsurance
Agreement between the Segregated Account and AAC, entered into as of the
Petition Date, as amended, modified or supplemented from time to time.

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1.98    Released Parties. (i) AAC, (ii) the Segregated Account, (iii) the
Rehabilitator, (iv) the Management Services Provider, (v) the Special Deputy
Commissioner, (vi) OCI, (vii) the General Account, (viii) any Paying Agent
retained by the Rehabilitator pursuant to the Plan, and each of their respective
current and former members, shareholders, affiliates, officers, directors,
employees, agents (including any attorneys, financial advisors, investment
bankers, consultants and other professionals retained by such Persons, and any
other advisors or experts with whom OCI, the Rehabilitator or the Special Deputy
Commissioner consults, as contemplated by Wis. Stat. § 645.33(3)).
1.99    Releasing Parties. All Holders of, and Beneficial Holders of Insured
Obligations in respect of, Deferred Amounts.
1.100    Remaining Senior Surplus Notes. Any and all GA SSNs or SA SSNs that
remain outstanding after the Effective Date.
1.101    REMIC Matters. Matters related to the federal income tax treatment of a
REMIC, as defined in Section 860D of the Internal Revenue Code of 1986, as
amended.
1.102    RMBS Litigation. Those certain lawsuits to which AAC and/or the
Segregated Account are parties involving residential mortgage backed securities
transactions insured by policies allocated to the Segregated Account, captioned:
Ambac Assurance Corp. v. Countrywide Home Loans, Inc., Index No. 651612/2010 (
N.Y. Sup. Ct. N.Y. Cty.) (Bransten, J.); Ambac Assurance Corp. v. First Franklin
Fin. Corp., Index No. 651217/2012 (N.Y. Sup. Ct. N.Y. Cty.) (Sherwood, J.);
Ambac Assurance Corp. v. Nomura Credit & Capital, Inc., Index No. 651359/2013
(N.Y. Sup. Ct. N.Y. Cty.) (Friedman, J.); Ambac Assurance Corp. v.

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Countrywide Home Loans, Inc., Index No. 653979/2014 (N.Y. Sup. Ct. N.Y. Cty.)
(Friedman, J.); Segregated Account of Ambac Assurance Corp. v. Countrywide Home
Loans, Inc., No. 14 CV 3511 (Wis. Cir. Ct. Dane Cty.) (Anderson, J.); and Ambac
Assurance Corp. v. Countrywide Home Loans, Inc., Index No. 652321/2015 (N.Y.
Sup. Ct. N.Y. Cty.) (Friedman, J.); and any successor proceeding against the
same parties (or any of their successors) with respect to substantially the same
claims.
1.103    SA JSNs. The 5.1% junior surplus notes due June 7, 2020, originally
issued by the Segregated Account to holders of Permitted General Claims and AFG.
1.104    SA Surplus Notes or SA SSNs. The 5.1% senior surplus notes due June 7,
2020, issued by the Segregated Account to holders of Permitted Policy Claims.
1.105    Secured Note. The Secured Note issued by AAC to the Segregated Account
on the Petition Date, as amended, modified or supplemented from time to time.
1.106    Securities Act. The Securities Act of 1933, 15 U.S.C. §§ 77a-77aa (as
amended from time to time).
1.107    Segregated Account. The Segregated Account of Ambac Assurance
Corporation, established pursuant to the Plan of Operation in accordance with
Wis. Stat. § 611.24(2).
1.108    Senior Secured Notes. The Senior Secured Notes, due on the fifth
anniversary of the Effective Date, to be issued by a newly formed special
purpose entity which is expected to be a liquidating entity and wholly owned by
an affiliate of AFG, at the request

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of, and in satisfaction of certain Reinsurance Agreement obligations owed to the
Segregated Account, to Beneficial Holders in respect of Pre-Record Date Deferred
Amounts and Accretion Amounts as a component of the Pre-Record Date Deferred
Amount Consideration, and to holders of GA SSNs in connection with the Exchange
Offers. Ambac shall issue a financial guarantee policy for the benefit of the
trustee of the Senior Secured Notes, irrevocably guaranteeing all regularly
scheduled principal and interest and principal and interest payable in
connection with mandatory redemptions.
1.109    Special Deputy Commissioner. The Special Deputy Commissioner of the
Segregated Account.
1.110    Special Policy Payment. This term shall have the meaning given to such
term in the Payment Guidelines.
1.111    Sponsoring Holders. The parties who are signatories to the
Rehabilitation Exit Support Agreement (including any other “Joining Parties” (as
defined in the Rehabilitation Exit Support Agreement) that have become parties
to the Rehabilitation Exit Support Agreement after July 19, 2017) other than AAC
and AFG.
1.112    Sub-Trustee/Agent. Any Holder acting on its own behalf or acting in its
capacity as Trustee, and any party to the Transaction Documents assigned or
delegated in whole or in part duties relating to submitting or processing
payment of Policy Claims under the related Transaction Documents.
1.113    Subsequent Adjustments. Means (i) a recoupment from the Holder of a
Permitted Claim of all or a portion of the amount of a Distribution; or (ii)
reduction of such

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Holder’s applicable Deferred Amount, in each case, to the extent the Claims
Administrator may make Subsequent Adjustments if it determines, in its sole
discretion, that any Distribution received by such Holder was incorrect.
1.114    Supplemental Payment. This term shall have the meaning given to such
term in the Payment Guidelines and the Amended Payment Guidelines, as
applicable.
1.115    Synthetic Commutation. A type of Alternative Resolution concerning
Policy Claims arising out of Policies insuring securities that are held by
multiple Beneficial Holders whereby the Rehabilitator or AAC is unable to reach
a universal settlement with all Beneficial Holders of such securities and,
instead, settles Policy Claims held by certain (rather than all) Beneficial
Holders of such securities, as further described in that certain Order
Confirming Procedures for Resolving Alternative Resolutions Including Synthetic
Commutations, dated August 31, 2011.
1.116    Third Party Liability. Any reasonable and documented out-of-pocket
losses and costs, including reasonable attorney fees, incurred in defending any
lawsuit, action, or similar formal legal proceeding arising out of an
Indemnified Party’s compliance with this Plan, the Approval Order, the First
Amended Plan, the 2014 Approval Order, the Original Plan, the 2011 Confirmation
Order, and the Payment Guidelines and the Amended Payment Guidelines (excluding
losses and costs resulting from the fraud, gross negligence or other willful
misconduct of such Indemnified Party, provided, however, that for purposes of
any indemnity under this Plan, compliance with this Plan and the Payment
Guidelines shall not be deemed to constitute fraud, gross negligence, or willful
misconduct).

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1.117    Transaction. The Exchange Offers, together with the Initial Exchange.
1.118    Transaction Documents. Any agreements relating to Policies, including
any credit derivative transaction agreements (including credit default swaps),
interest rate or currency rate swap agreements, basis swap agreements, total
return swap agreements, indentures, trust deeds, collateral management or
administration agreements, credit or loan agreements, residential
mortgage-backed security transaction documents, guarantee investment
certificates, custodial account agreements, note purchase agreements, or other
financing or transaction documents of any kind. Transaction Documents shall also
include any contracts with ACP, Ambac Conduit Funding, LLC, and Juneau
Investments.
1.119    Transaction Mechanics. The various steps and transactions that
constitute the Initial Exchange and the Exchange Offers detailed in the
transaction mechanics presentation annexed to the Rehabilitation Exit Support
Agreement as Exhibit B.
1.120    Trustee. A Holder acting in its capacity as trustee and/or agent on
behalf of and for the benefit of Beneficial Holders.
1.121    Undercollateralization/Undercollateralized. With respect to any
transaction, the amount by which the outstanding principal balance of all
Insured Obligations relating to such transaction exceeds the outstanding
principal balance of the collateral securing all such Insured Obligations.
1.122    Waiver and Amendment to Settlement Agreement. That certain waiver and
amendment to be dated the Effective Date to that certain bank settlement
agreement dated

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June 7, 2010 by and between AAC, ACP, Ambac Financial Group, Inc., and the other
parties thereto.
1.123    Website. The website established by the Rehabilitator for policyholders
at www.ambacpolicyholders.com, which makes available for viewing and download
the key documents described herein and in the Disclosure Statement, including,
but not limited to, this Plan, the First Amended Plan, and the Segregated
Account Operational Documents.
1.124    Wis. Stat. The Wisconsin Statutes (2015-16), as amended.

ARTICLE 2
TREATMENT OF CLAIMS

2.1    Administrative Claims. Each Holder of a Permitted Administrative Claim
outstanding on the Effective Date and not previously the subject of an
Alternative Resolution, shall receive, in full satisfaction of such Permitted
Administrative Claim, on the Effective Date, Cash equal to the amount of such
Permitted Administrative Claim, in accordance with the procedures set forth in
Section 4.2 below and, as applicable, the Amended Payment Guidelines.

2.2    Policy Claims.
(a)    Satisfaction in Full of Pre-Record Date Deferred Amounts with Pre-Record
Date Deferred Amount Consideration.
(i)    Treatment of Holders Other than AFG. Each Holder of a Pre-Record Date
Deferred Amount (other than AFG) after consummation of the Initial Exchange and
the Exchange Offers, shall be entitled to receive, in full and final
satisfaction of such Pre-Record Date Deferred Amount (x) Cash equal to 45.7% of
such Pre-Record Date

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Deferred Amount, and (y) Senior Secured Notes in an amount equal to 46.9% of
such Pre-Record Date Deferred Amount, ((x) and (y), collectively, being referred
to herein as “Pre-Record Date Deferred Amount Consideration”). Subject to
Section 3.3(c) of this Plan, such payment of Pre-Record Date Deferred Amount
Consideration, as provided herein, shall constitute full and complete payment
and settlement of such Pre-Record Date Deferred Amount and any related Accretion
Amount. Each Holder of a Pre-Record Date Deferred Amount (other than AFG) and
each Beneficial Holder of any Insured Obligation related to a Pre-Record Date
Deferred Amount shall, after consummation of the Initial Exchange and the
Exchange Offers, be required to accept the Pre-Record Date Deferred Amount
Consideration issued to such Holder in accordance with this Plan, in lieu of any
cash payments required to be made to such holders, in full and complete
satisfaction of such cash payment obligation of the Segregated Account in
respect of the Permitted Policy Claim allowed to such holders (which relates to
the relevant Pre-Record Date Deferred Amount), regardless of the existence of
any provision in any Policy, the 2011 Plan, the First Amended Plan, or any other
underlying instrument(s) or contract(s) that would require, or that
contemplates, the discharge of the obligations of the Segregated Account through
the payment of Cash. AAC may, subject to the Rehabilitator’s approval, in lieu
of the Pre-Record Date Deferred Amount Consideration allocated to a Holder,
provide an alternative consideration package to such Pre-Record Date Deferred
Amount Consideration, in an amount equal to such Pre-Record Date Deferred Amount
Consideration, to the extent that AAC determines, in its sole discretion, that
doing so is necessary or advisable to maintain compliance with any legal or
regulatory requirements applicable to AAC or the Segregated Account.

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(ii)    Treatment of AFG. AFG, shall be entitled to receive, in full and final
satisfaction of any Pre-Record Date Deferred Amounts that it holds or to which
it is beneficially entitled (including any Pre-Record Date Deferred Amounts
received by AFG pursuant to the Initial Exchange) after consummation of the
Initial Exchange and the Exchange Offers, Senior Secured Notes in an amount
equal to 91.3% of such Pre-Record Date Deferred Amounts. Subject to Section
3.3(c) of this Plan, such payment of Senior Secured Notes to AFG shall
constitute full and complete payment, discharge and settlement of such
Pre-Record Date Deferred Amount and Accretion Amounts held by AFG (or beneficial
interests to which it is entitled) and AFG shall be required to accept such
payment of Senior Secured Notes in accordance with this Plan in lieu of any cash
payments required to be made to AFG in full and complete satisfaction of any
cash payment obligation relating to any Pre-Record Date Deferred Amounts and
Accretion Amounts owed to AFG by the Segregated Account.
(iii)    Application of Pre-Record Date Deferred Amount Discount. The remaining
7.4% of all Pre-Record Date Deferred Amounts and Accretion Amounts not held by
AFG and 8.7% of Pre-Record Date Deferred Amounts and Accretion Amounts held by
AFG shall be deemed satisfied and shall be discharged in full without further
consideration (the “Pre-Record Date Deferred Amount Discount”). With respect to
each Pre-Record Date Deferred Amount, the Pre-Record Date Deferred Amount
Discount shall be applied against any Accretion Amounts related to such
Pre-Record Date Deferred Amount-and, to the extent such Accretion Amounts are
insufficient to satisfy the Pre-Record Date Deferred Amount Discount on such
Pre-Record Date Deferred Amount, (a) if such Pre-Record Date

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Deferred Amount relates to an Insured Obligation that is Undercollateralized,
the remainder of such Pre-Record Date Deferred Amount Discount shall be applied
against the Pre-Record Date Deferred Loss Amount portion of such Pre-Record Date
Deferred Amount, and (b) if such Pre-Record Date Deferred Amount relates to an
Insured Obligation that is not Undercollateralized, the remainder of such
Pre-Record Date Deferred Amount Discount shall not be applied against the
Pre-Record Date Deferred Loss Amount portion of such Pre-Record Date Deferred
Amount and instead shall be waived. To the extent such waiver of the Pre-Record
Date Deferred Amount Discount results in an adjustment to the total amount of
Pre-Record Date Deferred Amount Consideration to be distributed to Holders, such
adjustment shall be paid in Cash.
(iv)    Eligibility Distribution Record Date. To be eligible to receive the
Pre-Record Date Deferred Amount Consideration, Beneficial Holders of Insured
Obligations in respect of Pre-Record Date Deferred Amounts calculated pursuant
to the procedures set forth in the Payment Guidelines or the Amended Payment
Guidelines, as the case may be, must be the Beneficial Holders of record as of
the Eligibility Distribution Record Date.
(v)    Total Effective Consideration. Except as otherwise provided this Plan,
after consummation of the Initial Exchange and the Exchange Offers, the
Distribution of the Pre-Record Date Deferred Amount Consideration shall not
cause any Holder of Pre-Record Date Deferred Amounts to receive an effective
consideration package of more than (a) 40% Cash, (b) 41% Senior Secured Notes,
(c) 12.5% GA SSNs, and (d) a 6.5% discount. Except as otherwise provided by this
Plan, after consummation of the Initial Exchange and

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the Exchange Offers, the Distribution of the Pre-Record Date Deferred Amount
Consideration shall not cause any Holder of Pre-Record Date Deferred Amounts
that is an Ambac Party to receive an effective consideration package of more
than 91.3% Senior Secured Notes and an 8.7% discount.
(b)    Payment in Full in Cash of Permitted Post-Record Date Policy Claims. Each
Holder of a Permitted Post-Record Date Policy Claim shall be entitled to
receive, in full and final satisfaction of such Post-Record Date Policy Claim,
Cash equal to the amount of such Permitted Post-Record Date Policy Claim. Such
payment of Cash, as provided herein, shall constitute full and complete payment
and settlement of such Permitted Post-Record Date Policy Claim. Payments made on
account of Permitted Post-Record Date Policy Claims will be paid in accordance
with the Amended Payment Guidelines, and as set forth below, and any disputes
with respect to Post-Record Date Claims will be administered according to the
procedures set forth in the Amended Payment Guidelines.
(i)    Interim Payments. Pursuant to the Amended Payment Guidelines, the Claims
Administrator shall pay to the Holder of a Permitted Post-Record Date Policy
Claim an Interim Payment on the first Distribution Date occurring after the
Determination Date by which such Post-Record Date Policy Claim has been
determined to be a Permitted Policy Claim and shall establish a Post-Record Date
Deferred Amount.
(ii)    Final Post-Record Date Payment. Pursuant to the Amended Payment
Guidelines, the Claims Administrator shall pay to the Holder of a Permitted
Post-Record Date Deferred Amount a Final Post-Record Date Payment on the earlier
of (x) the close of any Opposition Period or (y) the date that the amount of the
Permitted Post-Record

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Date Policy Claim has been fixed, whether by agreement between the Claims
Administrator and the Holder, or pursuant to a Final Order, but in no event
shall such Final Post-Record Date Payment be made prior to the Effective Date.
(c)    Effect of Settlement of RMBS Litigation on Pre-Record Date Deferred
Amount Consideration. If, before the Effective Date, AAC or the Segregated
Account receives, in full or partial satisfaction of one or more of their claims
in the RMBS Litigation, proceeds on account of such claims (net of all amounts
paid or payable to reimburse reinsurers for the amounts paid by reinsurers in
connection with the receipt of such proceeds, but not the amount of any cost or
fee (including legal fees) incurred in connection with the RMBS Litigation), or
AAC provides the benefit of such proceeds to the Segregated Account through
operation of the Reinsurance Agreement, such proceeds (in an amount not
exceeding $1.4 billion) shall replace Senior Secured Notes (having a face amount
equal to the amount of such proceeds) that would otherwise be issued to Holders
of Pre-Record Date Deferred Amounts as Pre-Record Date Deferred Amount
Consideration, in each case to the extent such proceeds would have been payable
to Holders had such settlement proceeds instead been received immediately after
issuance of the Senior Secured Notes. Any issuance of the Senior Secured Notes
shall be reduced by an amount equal to the aforementioned net proceeds and such
amount of net proceeds as would be received by AAC hereunder shall instead be
paid in Cash to such Holders of Pre-Record Date Deferred Amounts (other than
AAC) as if AAC had pledged such proceeds and such proceeds were used to prepay
the Senior Secured Notes, thereby further reducing the issuance of the Senior
Secured Notes to such Holders and AAC.

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2.3    SA SSNs and SA JSNs. Holders of SA SSNs, and SA JSNs, shall not be
entitled to receive any payment or other consideration directly or indirectly as
a result of (i) the occurrence of the Effective Date or the transactions
contemplated by this Plan to occur on the Effective Date, (ii) the existence,
approval or effectiveness of this Plan, or (iii) the payment and issuance of the
Pre-Record Date Deferred Amount Consideration; provided that the SA SSNs and SA
JSNs will continue to remain outstanding as of the Effective Date, with AAC as
the obligor thereunder as a result of the Merger. For the avoidance of doubt,
while Section 2.05 of the First Amended Plan shall have no further force or
effect on and after the Effective Date, the foregoing shall not affect any
rights arising under Section 2.05 of the First Amended Plan in connection with
Distributions, if any, paid or payable to Holders of SA SSNs and SA JSNs prior
to the Effective Date.

2.4    Junior Deferred Amounts. Holders of Junior Deferred Amounts, if any,
existing as of the Effective Date shall receive no distribution pursuant to this
Plan, and any and all obligations of the Segregated Account on account of Junior
Deferred Amounts shall be discharged in full on the Effective Date.

2.5    General Claims. Holders of General Claims shall receive no distribution
pursuant to this Plan, and any and all obligations of the Segregated Account on
account of General Claims shall be discharged in full on the Effective Date.

ARTICLE 3
MEANS FOR IMPLEMENTATION OF PLAN

3.1    Administration of this Plan. From and after the Effective Date, neither
the Management Services Provider nor the Rehabilitator shall have any continuing
responsibility, obligation, or role with respect to this Plan or any matter
governed thereby, and AAC in its capacity

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as Claims Administrator shall perform all responsibilities, duties and
obligations ascribed to it in this Plan and the Amended Payment Guidelines.

3.2    Merger of the Segregated Account. On the Effective Date, the Segregated
Account shall merge with and into AAC, such that (on such date): (i) full
ownership and control over all assets and liabilities of the Segregated Account
shall transfer by operation of law to AAC, (ii) without limiting the generality
of the foregoing, all Policies, contracts, other assets (including the
Segregated Account’s equity ownership interests in ACP, Ambac Conduit Funding,
LLC, and Juneau Investments, LLC) and liabilities that were previously allocated
to the Segregated Account in accordance with Wis. Stat. § 611.24, shall be
reallocated/returned to AAC pursuant to Wis. Stat. § 645.35(2), (iii) all liens
and security interests arising under the Operative Documents shall be terminated
and the Ambac Parties shall be released from any and all obligations, including
liens and security interests, except as may otherwise be provided in the Plan,
(iv) the Rehabilitator shall no longer be in possession of any assets of the
Segregated Account under Wis. Stat. § 634.33(2), and (v) the separate existence
of the Segregated Account shall cease. From and after the Effective Date, any
references to either the Segregated Account or the General Account shall instead
be deemed to refer to AAC.

3.3    Initial Exchange.
(a)    On the Effective Date, immediately prior to the consummation of the
Exchange Offers and the Distributions described in the Plan, the Initial
Exchange shall be consummated specifically by means of the following steps:

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(i)    The Pre-Record Date Deferred Amounts of Non-Ambac Holders shall be
reduced by an estimated aggregate amount of $282 million representing 12.5% of
all Pre-Record Date Deferred Amounts held by Non-Ambac Holders, such reduction
to be effected on a pro rata basis among such Non-Ambac Holders based on their
Pre-Record Date Deferred Amounts;
(ii)    The Pre-Record Date Deferred Amounts of AFG shall be increased by an
estimated aggregate amount of $129 million equal to (a) all GA SSNs and SA SSNs
held by AFG as of the Record Date, less (b) $100 million, and less (c) unpaid
interest on $100 million of SSNs accrued between June 30, 2017 and the Effective
Date;
(iii)    The Pre-Record Date Deferred Amounts of the Sponsoring Holders shall be
increased by an estimated aggregate amount of $153 million equal to 12.5% of all
Pre-Record Date Deferred Amounts held by Non-Ambac Holders, less the amount set
forth in Section 3.3(a)(ii) above, on a pro-rata basis;
(iv)    AFG shall transfer GA SSNs having an aggregate principal amount and
accrued and unpaid interest equal to approximately $129 million, or the amount
set forth in Section 3.3(a)(ii) above, to Non-Ambac Holders on the same pro rata
basis used in determining the relative reduction of Pre-Record Date Deferred
Amounts of such Non-Ambac Holders effected in clause (i) above; and
(v)    The Sponsoring Holders shall transfer GA SSNs having an aggregate
principal amount and accrued and unpaid interest as of the Effective Date equal
to approximately $153 million, or the amount set forth in Section 3.3(a)(iii)
above, to Non-Ambac Holders on the same pro rata basis used in determining the
relative reduction of Pre-Record Date Deferred Amounts of such Non-Ambac Holders
effected in clause (i) above.

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(b)    In the event that one or more Sponsoring Holders fails to deposit its pro
rata share of the GA SSNs pursuant to Section 3.3(a)(v) of this Plan in the
applicable escrow account, AAC and AFG may adjust the Initial Exchange such that
any shortfall may be contributed by one or more other holders of GA SSNs or make
any other appropriate adjustments to preserve the economic terms of the Initial
Exchange.
(c)    To avoid the potential for duplicative Policy Claims, among other things,
any Distribution of the Pre-Record Date Deferred Amount Consideration paid by
AAC or the Segregated Account in respect of a Pre-Record Date Deferred Amount
received by AFG or a Sponsoring Holder in the Initial Exchange shall be treated
as if the Holder of the applicable Policy directed AAC or the Segregated Account
to make such payment on the Holder’s behalf to AFG or the Sponsoring Holders, as
the case may be. Accordingly, for all purposes under this Plan, AAC, AFG, the
Holders (including any Holder acting in its capacity as a Trustee), and the
Sponsoring Holders, shall treat such payment of Pre-Record Date Deferred Amount
Consideration as if (i) it had been made by AAC or the Segregated Account under
the relevant Policy to the Holder of such Policy and (ii) the Holder of such
Policy then paid such Pre-Record Date Deferred Amount Consideration to AFG or
the Sponsoring Holder, as the case may be.

3.4    Funding of Cash Distributions. On the Effective Date and following the
consummation of the Initial Exchange and the Exchange Offers, the Cash portion
of the Pre-Record Date Deferred Amount Consideration, and any Distributions of
Cash made on account of Permitted Post-Record Date Policy Claims, will be fully
funded through a draw by the Segregated Account against the Reinsurance
Agreement.

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3.5    Transfer Provisions. On the Effective Date, and after the consummation of
the Initial Exchange and the Exchange Offers the Pre-Record Date Deferred Amount
Consideration shall be transferred by AAC, at the request of the Segregated
Account and in satisfaction of its obligations under the Reinsurance Agreement,
to the Beneficial Holders of the Insured Obligations related to the Pre-Record
Date Deferred Amounts, as of the Eligibility Distribution Record Date, and
pursuant to the procedures set forth in the Amended Payment Guidelines. Where
such underlying securities related to such Pre-Record Date Deferred Amounts are
held through DTC, AAC shall transfer the Pre-Record Date Deferred Amount
Consideration to DTC for further transfer by DTC to its participants. AAC, in
its capacity as Claims Administrator, and/or its agents, and after
reconciliation with the Holders shall provide to DTC the rates and other
information required by DTC to effect such transfers, and DTC shall be
authorized to take instructions solely from AAC with respect to such transfers.
Trustees shall permit, and provide any authorization or direction (but not
indemnification) needed for AAC, any Paying Agent and/or DTC to make, process
and/or accept any Distributions as contemplated by this Plan and the Amended
Payment Guidelines. For the avoidance of doubt, all Pre-Record Date Deferred
Amount Consideration to be distributed pursuant to Section 2.2(a) of this Plan
shall not be transferred to the applicable Trustees but shall be deemed to be
transferred to such Trustees. With respect to any transfers of GA SSNs to be
effected under the Initial Exchange, AFG and the Sponsoring Holders will effect
such transfers pursuant to an applicable escrow agreement.

3.6    Transfers by Trustees. Notwithstanding Section 3.5 of this Plan, to the
extent received by a Trustee, any Pre-Record Date Deferred Amount Consideration
shall promptly be transferred by such Trustee to the Beneficial Holders for whom
it is acting as trustee.

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Notwithstanding the generality of the foregoing, any such Trustee may allocate,
distribute or disburse the Pre-Record Date Deferred Amount Consideration issued
in accordance with this Plan by allocating, distributing or disbursing such
Pre-Record Date Deferred Amount Consideration (or any beneficial interest
therein) to the Beneficial Holders of such underlying financial instrument(s)
through the relevant custodians holding the positions on behalf of the
Beneficial Holders, and such custodians shall be required to accept and
distribute such Pre-Record Date Deferred Amount Consideration to the Beneficial
Holders.

3.7    Deemed Distribution Dates. Any Distribution on the Effective Date,
pursuant to this Plan and the Amended Payment Guidelines, will be deemed to have
been received by Beneficial Holders on the next scheduled Bond Distribution Date
applicable to the relevant Insured Obligation or underlying Transaction
Documents that give rise to such Claims, notwithstanding the date when the Cash
or Pre-Record Date Deferred Amount Consideration was actually received by such
Beneficial Holders.

3.8    Post-Effective Date Policy Claim. With respect to Post-Effective Date
Policy Claims based on events, occurrences, and circumstances occurring or
existing after the Effective Date, nothing in this Plan shall (x) cause to inure
to any Holder of such claims any right or claim which would not have existed in
the absence of the Proceeding or (y) in any manner, relieve or limit any
obligation of any Holder of such Post-Effective Date Policy Claim to AAC,
including with respect to payment of premiums, recoveries, reimbursements,
settlements and/or other amounts that are due and owing to AAC under any Policy,
Transaction Document, or other agreement; provided that, as set forth in Section
6.13 of this Plan, any default, event of default, or other event or circumstance
occurring before or on the Effective Date or in connection with this Plan that
may

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have given rise to or gives rise to a default or event of default, under any
Policy or Transaction Document, will be deemed to be cured and not to have
occurred.

3.9    No Fractional Amounts. Any Distributions of Senior Secured Notes and/or
transfers of GA SSNs pursuant to the Initial Exchange, transferred to DTC for
further transfer by DTC to its participants, shall be (i) in denominations of no
less than $1.00 and (ii) made in accordance with Section 3.5 of this Plan. When
any Distribution pursuant to this Plan or transfer pursuant to the Initial
Exchange would otherwise result in the issuance of an amount of the Senior
Secured Notes or the transfer of an amount of GA SSNs that is less than $1.00,
the actual Distribution of such Senior Secured Notes or transfer of the GA SSNs,
shall be rounded down to the next dollar amount with no further payment
therefor. Any Distributions of Cash with respect to Pre-Record Date Deferred
Amount Consideration shall be (i) in denominations of no less than $.01 and (ii)
made in accordance with Section 3.5 of this Plan. When any Distribution of Cash
pursuant to this Plan would otherwise result in a Cash amount of less than $.01,
the actual Distribution of such Cash shall be rounded down to the next hundredth
of a dollar with no further payment therefor.

ARTICLE 4
PROCEDURES GOVERNING DISTRIBUTIONS AND CLAIM RESOLUTION

4.1    Claims Administration. From and after the Effective Date all Pending
Claims, Administrative Claims, and Post-Record Date Policy Claims shall be
governed by this Plan and the Amended Payment Guidelines, and except with
respect to Administrative Claims, AAC shall be responsible for administering,
evaluating, disputing, objecting to, compromising or otherwise resolving all
such claims in accordance with this Plan and the Amended Payment Guidelines.

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4.2    Administrative Claims.
(a)    Submission of Administrative Claims. After the Effective Date, each
Holder of an Administrative Claim that remain eligible for submission under the
terms of the Amended Payment Guidelines and has not been submitted to the Claims
Administrator before the Effective Date shall submit such Administrative Claim
to OCI in accordance with the Amended Payment Guidelines and in accordance with,
and including such information as is required by, the provisions of the
underlying instrument(s), contract(s) or arrangement(s) giving rise to such
Administrative Claim, if any.
(b)    Administration and Payment of Pending Administrative Claims. The
Rehabilitator or OCI in their sole and absolute discretion shall evaluate each
Pending Administrative Claim to determine whether such Pending Administrative
Claim is a Permitted Claim or whether an Objection should be raised against such
Administrative Claim in accordance with the Amended Payment Guidelines. AAC
shall make a Distribution to each Holder of a Permitted Administrative Claim, in
accordance with normal business practices and in complete satisfaction of such
Permitted Administrative Claim, in Cash in an amount equal to the dollar amount
of such Permitted Administrative Claim.

4.3    Post-Effective Date Policy Claims and Pending Policy Claims
(a)    Post-Effective Date Policy Claims. Each Holder of a Post-Effective Date
Policy Claim shall submit such Post-Effective Date Policy Claim to AAC in
accordance with the applicable Transaction Documents; provided that if the
applicable Transaction Documents contain provisions requiring Holders of a
Post-Effective Date Policy Claim to use forms other than the

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Amended Proof of Policy Claim Form, this Plan and the Approval Order will
control, and such Holder shall be required to submit such Post-Effective Date
Policy Claim using the Amended Proof of Policy Claim Form and any related Claim
Schedule.
(b)    Administration of Pending Policy Claims. The Claims Administrator shall
be responsible for administering, evaluating, disputing, objecting to,
compromising or otherwise resolving all Pending Policy Claims in accordance with
this Plan and the Amended Payment Guidelines.

4.4    Disputed Claims Process. As more fully described in the Amended Payment
Guidelines, the Rehabilitator, the Management Services Provider, or the Claims
Administrator, as applicable, may raise an Objection to any Pending Claim on any
ground, including, but not limited to, the ground that the Management Services
Provider or the Claims Administrator lacks sufficient information to evaluate
such Pending Claim, that the amount submitted as a Claim is not valid, or that
such Claim is a Duplicate Claim or a Late Claim, by providing the Holder of the
Claim or the Holder’s representative (as applicable) with written notice of the
substance of the Objection. The Holder, if it wishes to dispute such Objection,
shall send to the Rehabilitator, the Management Services Provider, or the Claims
Administrator, a written response to the Objection, in accordance with the terms
of the Amended Payment Guidelines.

4.5    Alternative Resolutions of Claims. Nothing in this Plan or the Amended
Payment Guidelines shall limit the ability of the Management Services Provider,
the Rehabilitator, or the Claims Administrator to effectuate an Alternative
Resolution to resolve any Claim, including through the arrangement, negotiation,
effectuation and execution of an amendment, restructuring,

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refinancing, purchase, repurchase, termination, settlement, commutation, tender,
Synthetic Commutation or tear-up, or any similar transaction that results in the
extinguishment or reduction of the Segregated Account’s or AAC’s liability or
agreement on alternative treatment, in respect of, as applicable, (i) all or
part of the relevant Policy or Policies, (ii) all or part of the underlying
Insured Obligation or (iii) the underlying instrument, contract or arrangement,
if any, giving rise to such Claim; provided that such Alternative Resolution
must not violate the law.

4.6    Discharge of ACP Obligations. As of the Effective Date, all obligations
of ACP under or with respect to contracts as to which a Policy Claim was or
could have been made against the Segregated Account prior to the Effective Date
shall be discharged and deemed satisfied in full.

4.7    No Duplicative Recovery. No Holder or Beneficial Holder of any Permitted
Policy Claim or Insured Obligation shall be entitled to receive consideration on
account of such Permitted Policy Claim or Insured Obligation in excess of 100%
of the amount of such Permitted Policy Claim or Insured Obligation other than
Accretion Amounts.

4.8    Setoffs and Recoupment. The Segregated Account or AAC (individually or in
its capacity as successor to the Segregated Account) may set off or recoup in
whole or in part against any Permitted Claim and the Distribution to be made
pursuant to this Plan on account of such Permitted Claim, any and all claims,
rights and Causes of Action that the Segregated Account or AAC may hold against
the Holder of such Permitted Claim, to the extent such setoff or recoupment is
permitted under applicable law; provided that, (a) neither the failure to effect
a set-off or recoupment, nor (b) the permission of any Claim hereunder, will
constitute a waiver or release by

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the Segregated Account or AAC with respect to claims, rights, or Causes of
Action that AAC may possess against such Holder.

4.9    Recoveries on Policy Claims. Notwithstanding the Proceeding, the
Proceeding Circumstances, any provisions of the Interim Cash Payment Rules, the
Payment Guidelines, the Amended Payment Guidelines, this Plan, the First Amended
Plan, the Disclosure Statement and/or any amendments and/or or supplements
thereto, the Segregated Account, or AAC as its successor, shall be entitled, in
its sole and absolute discretion, to reduce its obligations to the Holders of
Permitted Claims and Beneficial Holders of Deferred Amounts by any Recovery
Amounts attributable to such Holders or Beneficial Holders or the relevant
Insured Obligations, by reducing the amount of the Deferred Amount due to such
Holders or Beneficial Holders to the extent such Deferred Amounts have not
already been reduced by any applicable Recovery Amounts. No Holder, Trustee or
Beneficial Holder may apply a Recovery Amount in a manner inconsistent with the
determination by the Claims Administrator pursuant to this Section 4.09, the
Payment Guidelines, or the Amended Payment Guidelines.

4.10    Reimbursements on Policy Claims. Notwithstanding the Proceeding, the
Proceeding Circumstances, any provisions of the Interim Cash Payment Rules, the
Payment Guidelines, the Amended Payment Guidelines, this Plan, the First Amended
Plan, the Disclosure Statement and/or any amendments and/or supplements thereto,
the Claims Administrator shall be entitled to collect any Reimbursement Amounts
that AAC or the Segregated Account becomes, or is, entitled to receive under the
Transaction Documents in relation to any: (i) Distributions or payments made
prior to, on, or after the Effective Date (including any distributions of the
Pre-Record Date Deferred Amount Consideration and the application of the
Pre-Record Date Deferred

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Amount Discount if applied to Pre-Record Date Deferred Loss Amounts) hereunder,
under the Payment Guidelines and the Amended Payment Guidelines, pursuant to,
and in accordance with, the applicable Policy and any related Transaction
Documents; (ii) payments made according to the Interim Cash Payment Rules; and
(iii) other amounts paid by or on behalf of the Segregated Account in respect of
an Insured Obligation, and in each case where a payment was made by AAC in
respect of a Pre-Record Date Deferred Amount received by AFG or a Sponsoring
Holder from a Holder in the Initial Exchange, it shall be treated as if AAC had
paid such amount under the relevant Policy to the Holder directly and then the
Holder paid such amount to AFG or the Sponsoring Holder, in each such case as if
AAC had paid 100% of such Policy Claims under the relevant Policy in Cash,
notwithstanding the Pre-Record Date Deferred Amount Discount, to the Holder
directly.

4.11    Assignment of Rights. Without prejudice to (i) the terms and provisions
of the applicable Policy and any related Transaction Document and (ii) any
assignment previously executed, whether pursuant to an Amended Proof of Policy
Claim Form, or otherwise, upon receipt of any Distribution, including the
Pre-Record Date Deferred Amount Consideration and the Final Post-Record Date
Payment from AAC or the Segregated Account, or the type of Distributions
described in Section 3.3(c) of this Plan, each Holder (for and on behalf of its
Beneficial Holders, if such Holder is a Trustee) of such Permitted Policy Claim
shall be deemed to have assigned its rights with respect to the full amount of
its Policy Claim relating to the amount of such Distribution or transfer,
including any Pre-Record Date Deferred Amount Discount in respect of any
Pre-Record Date Deferred Amount, under the Transaction Document(s) to AAC.

4.12    Subsequent Adjustments. If AAC determines that any Distribution received
by the Holder of a Deferred Amount or Permitted Claim was incorrect, AAC may, to
the extent necessary

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to account for such error: (i) recoup from the Holder all or a portion of the
amount of such Distributions or (ii) adjust the amount of any future
Distributions to be paid to such Holder. Any disputes regarding Subsequent
Adjustments are subject to the dispute resolution procedures set forth in the
Amended Payment Guidelines.

ARTICLE 5
EFFECTIVENESS

5.1    Notification of Effective Date. On the Effective Date, or as soon as
reasonably practicable thereafter, the Rehabilitator shall post a notice to the
Website advising of the Effective Date of this Plan.

5.2    Conditions Precedent to the Effective Date. Unless otherwise specified
herein, the occurrence of the Effective Date of this Plan is subject to
satisfaction or waiver (in accordance with Section 5.3 below) of the following
conditions precedent:
(a)    This Court will have entered the Approval Order;
(b)    After giving effect to the transactions contemplated by this Plan, AAC
will have sufficient capital and claims-paying resources for AAC to effectuate
the terms of this Plan, as determined by the Rehabilitator in his sole and
absolute discretion;
(c)    All conditions (other than the occurrence of the Effective Date) to
consummation of the Initial Exchange and the Exchange Offers shall have been
satisfied or waived in accordance with the terms thereof;
(d)    The Rehabilitator, AAC, and AFG will have received from the Internal
Revenue Service a ruling, in form and substance reasonably satisfactory to the
Rehabilitator, AAC,

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and AFG, that neither (i) the satisfaction of the Deferred Amounts pursuant to
this Plan nor (ii) any exchange by AAC for Senior Surplus Notes contemplated by
the Definitive Documents will be a “designated event” for purposes of Internal
Revenue Service Notice 2004-37; and
(e)    AAC will have received opinions from Sidley Austin LLP regarding the tax
treatment of those aspects of the Transaction Mechanics, this Plan, the Exchange
Offers, the Waiver and Amendment to Settlement Agreement, and certain
transactions entered into to satisfy the condition regarding capital and
claims-paying resources that are relevant to the continued affiliation of AAC
with AFG for federal income tax purposes, to the continued availability of AAC’s
net operating losses, and to REMIC Matters. Any such opinion shall be, in form
and substance, satisfactory to the Rehabilitator and reasonably satisfactory to
AAC.

5.3    Waiver of Conditions Precedent. Each of the conditions precedent in
Section 5.2, other than the condition precedent set forth in section 5.2(e)
above which may be waived by mutual consent of AAC and the Rehabilitator, may be
waived in writing by the Rehabilitator in its sole discretion. The condition
precedent set forth in Section 5.2(e) may only be waived by AAC in its sole
discretion.

5.4    Effect of Failure of Conditions to Effective Date. If the Effective Date
does not occur before the termination of the Rehabilitation Exit Support
Agreement, save as set forth in Article 5 hereof, this Plan will not become
effective and (a) no Distributions shall be made pursuant to this Plan, (b) the
Segregated Account and all holders of Claims shall be restored to the status quo
ante as of the day immediately preceding the Approval Order Date as though the
Approval Order Date never occurred, (c) all of the Segregated Account’s
obligations with respect to Claims and

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Deferred Amounts shall remain unchanged and nothing contained herein shall be
deemed to constitute a waiver or release of any Claims by or against the
Segregated Account or any other Entity or to prejudice in any manner the rights
of the Segregated Account or any other Entity in any further proceedings
involving the Segregated Account or otherwise, (d) the Initial Exchange shall
not be consummated, and (e) nothing contained in the Plan shall: (i) constitute
a waiver or release of any Claims; (ii) prejudice in any manner the rights of
the Ambac Parties, the Rehabilitator, the Management Services Provider, the
Sponsoring Holders, or any other Entity; or (iii) constitute an admission,
acknowledgment, offer, or undertaking of any sort by the Ambac Parties, the
Rehabilitator, the Management Services Provider, the Sponsoring Holders, or any
other Entity.

ARTICLE 6
EFFECTS OF THIS SECOND AMENDED PLAN

6.1    Prior Orders Remain in Effect. To the extent not explicitly superseded or
amended by this Plan, the Payment Guidelines, or the Approval Order, all (x)
prior orders of this Court and (y) documents or agreements approved by this
Court, shall remain in full and effect in all respects. For the avoidance of
doubt, such orders or documents approved by this Court shall include the Plan,
the First Amended Plan, the 2011 Confirmation Order, the Payment Guidelines, the
2014 Approval Order, the Injunction, and any orders pertaining to the allowance,
determination, payment and dispute of Claims and Deferred Amounts, settlements,
Synthetic Commutations, and utilization of Alternative Resolutions to resolve
Claims and Deferred Amounts.

6.2    Termination of Rehabilitation Proceeding. Pursuant to § 645.35(2), on the
Effective Date, the Proceeding shall be terminated and the Rehabilitator shall
no longer be in possession of, and will be deemed to have fully relinquished any
and all ownership of or control over, all assets and liabilities of the
Segregated Account.

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6.3    Termination of Duties of the Rehabilitator and the Management Services
Provider. On the Effective Date, after completion of the Distributions required
to be made hereunder, the Rehabilitator and the Management Services Provider
shall be discharged of all duties, and their respective employees and appointed
agents shall be discharged of their duties, if any, with respect to all matters
related to this Proceeding and rehabilitation of the Segregated Account, except
as otherwise ordered by the Court. The Rehabilitator, the Management Services
Provider, and each of their respective employees and representatives shall have
no liability for actions taken by AAC after the Effective Date, except as
ordered otherwise by the Court.

6.4    Segregated Account Operational Documents. As of the Effective Date, the
Segregated Account Operational Documents will terminate and no longer be of any
force or effect, including any liens or security interests, and where
applicable, all of AAC’s obligations thereunder will be deemed to have been
satisfied in full and AAC will have no further obligations thereunder.

6.5    Discharge. All Distributions made pursuant to this Plan and the First
Amended Plan in the form of Cash, the Pre-Record Date Deferred Amount
Consideration (including any Pre-Record Date Deferred Amount Discount in respect
of any Pre-Record Date Deferred Amount Consideration), the Final Post-Record
Date Payment, or any other form of consideration, shall serve to effect a full
and complete payment, satisfaction, release, discharge and termination of any
and all liens, Claims, Causes of Action, interests, or encumbrances upon or
against the Ambac Parties and any matters relating to the Segregated Account,
and any and all such liens, Claims, Causes of Action, interests, or encumbrances
shall be deemed discharged and satisfied in full and shall be of no further
force and effect.

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6.6    Releases. As of the Effective Date, the Releasing Parties shall
unconditionally and forever release each of the Released Parties from any and
all Causes of Action based in whole or in part on any act, omission,
transaction, event or other occurrence taking place on or prior to the Effective
Date to the extent that it directly or indirectly arises from, or relates to,
the Segregated Account or the Proceeding (including the commencement of the
Proceeding, the preparations therefor, negotiations relating thereto, any
restructuring work relating thereto, any Court orders sought or obtained, and
the administration, conduct and termination of the Proceeding); the Disclosure
Statement (as amended) (including the Disclosure Statement’s formulation,
negotiation, preparation and dissemination); this Plan and the First Amended
Plan (including the formulation, negotiation, preparation, dissemination and
approval of each); or any contract, instrument, document or other agreement
entered into as part of or pursuant to this Plan or the First Amended Plan;
provided that the foregoing shall not affect the liability of any such Entity
that otherwise would result from any act or omission that is determined by a
Final Order to constitute willful misconduct, gross negligence, intentional
fraud, criminal conduct, intentional unauthorized misuse of confidential
information that causes damages or ultra vires acts; provided further that the
foregoing shall not release the Released Parties from any of their respective
obligations under the Plan. Nothing contained in or implied by this part of this
Plan shall operate, or be construed or applied to deprive any Released Party any
immunity, indemnity, benefits of law, rights or any defense otherwise available.

6.7    Exculpation. As of the Effective Date, each of the Exculpated Parties is
unconditionally and forever exculpated from Causes of Action based in whole or
in part on any act, omission, transaction, event or other occurrence taking
place on or prior to the Effective Date to

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the extent that it directly or indirectly arises from, or relates to, the
Segregated Account or the Proceeding (including the commencement of the
Proceeding, the preparations therefor, negotiations relating thereto, any
restructuring work relating thereto, any Court orders sought or obtained, and
the administration, conduct and termination of the Proceeding); the Disclosure
Statement (as amended) (including the Disclosure Statement’s formulation,
negotiation, preparation and dissemination); this Plan and the First Amended
Plan (including the formulation, negotiation, preparation, dissemination and
approval of each); or any contract, instrument, document or other agreement
entered into as part of or pursuant to this Plan or the First Amended Plan;
provided that the foregoing shall not affect the liability of any such Entity
that otherwise would result from any act or omission that is determined by a
Final Order to constitute willful misconduct, gross negligence, intentional
fraud, criminal conduct, intentional unauthorized misuse of confidential
information that causes damages or ultra vires acts; provided further that the
foregoing shall not release the Exculpated Parties from any of their respective
obligations under the Plan. Nothing contained in or implied by this part of this
Plan shall operate, or be construed or applied to deprive any Exculpated Party
any immunity, indemnity, benefits of law, rights or any defense otherwise
available.

6.8    Discharge and Release Injunction. Except as may otherwise be provided
herein or in the Definitive Documents, the Distributions (including any
Pre-Record Date Deferred Amount Discount in respect of any Pre-Record Date
Deferred Amount Consideration) made under this Plan shall be in complete
exchange for, and in full and unconditional settlement, satisfaction, discharge
and release of all Claims, Deferred Amounts, obligations, rights, Causes of
Action or liabilities of the Segregated Account and AAC, and shall effect a full
and complete release, discharge, and termination of any and all Liens, or other
claims, interests, or encumbrances upon the Segregated

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Account and AAC with respect to such Claims, Deferred Amounts, obligations,
rights, Causes of Action or liabilities. All Entities will be permanently barred
and enjoined from asserting against the Ambac Parties, or their respective
successors or property or any of their respective current or former members,
shareholders, affiliates, officers, directors, employees, advisors or agents,
any and all Claims, Deferred Amounts, obligations, rights, Causes of Action or
liabilities, based upon any act, omission, transaction, or other activity of any
kind or nature in connection with the Segregated Account, the Proceeding, and
the Proceeding Circumstances, other than as expressly provided for in this Plan.
Without limiting the foregoing, the following actions with will be enjoined:
•
commencing or continuing in any manner any action or other proceeding, including
the assertion of any counterclaims or defenses, on account of Policy Claims that
arose prior to the Effective Date, whether such Claims, counterclaims, or
defenses were predicated on the Proceeding Circumstances or otherwise, or the
property to be distributed under the terms of this Plan, other than (i) to
enforce any right to the Pre-Record Date Deferred Amount Consideration and the
Final Post-Record Date Payment and (ii) to administer or otherwise resolve any
Disputed Claims pursuant to the Amended Payment Guidelines;

•
enforcing, attaching, collecting, or recovering in any manner any judgment,
award, decree, or order against the Ambac Parties with respect to Claims that
arose before the Effective Date, other than to enforce any right to the
Pre-Record Date Deferred Amount Consideration and the Final Post-Record Date
Payment;

•
creating, perfecting, or enforcing any Lien or other encumbrance against
property of the Ambac Parties, or any property to be distributed under the terms
of this Plan or the First Amended Plan;

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•
with respect to Claims that arose before the Effective Date, asserting any right
of setoff, subrogation, or recoupment of any kind, directly or indirectly,
against any obligation due to the Ambac Parties or any direct or indirect
transferee of any property of, or successor in interest to, the Ambac Parties as
prohibited by Wis. Stat. § 645.56; and

•
acting or proceeding in any manner, in any place whatsoever, that does not
comply with, the provisions of this Plan.

6.9    Indemnification and Injunction With Regard to Holders and Sub-
Trustee/Agents. Each Sub-Trustee/Agent shall submit any Policy Claim for payment
in accordance with the provisions of this Plan, the Payment Guidelines, and the
Amended Payment Guidelines. Actions taken in compliance with this Plan and the
Amended Payment Guidelines, or, to the extent applicable, in compliance with the
First Amended Plan and the Payment Guidelines, by any Holder or
Sub-Trustee/Agent shall not be deemed to be a violation of any provision in, or
duty arising out of, the applicable Policy or related Transaction Documents. AAC
shall indemnify any Indemnified Party for any Third Party Liability provided (a)
no amounts shall be payable by AAC to any Indemnified Party to the extent that
the same shall be reimbursable to them under or pursuant to the Transaction
Documents and (b) any Indemnified Party making a claim for indemnification shall
have used its best efforts to cause any such lawsuit, action or similar formal
legal proceeding to be brought before the Court before the Effective Date;
provided that the foregoing shall not decrease the Pre-Record Date Deferred
Amount Consideration to be distributed to each Holder under this Plan.
Any indemnification obligation of AAC under this provision shall further be
subject to and conditioned upon the following: promptly upon receipt by any
Indemnified Party of notice of any claim or of the commencement or threatened
commencement of any action against the Indemnified

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Party which may constitute a Third-Party Liability, such Indemnified Party will
cause notice to be given to AAC in writing of such claim or such commencement or
threatened commencement of action or proceeding, together with a copy of any
documents received by the Indemnified Party in connection therewith. In the
event that any such claim or action shall be asserted against an Indemnified
Party, the Indemnified Party shall consent to the intervention by AAC in any
such suit in order to defend against said claim and/or shall tender to AAC
control of the defense and settlement of such claim or action, and shall
cooperate with AAC in such defense and settlement. AAC shall at all times have
the right to employ counsel to represent both the Indemnified Party and AAC in
any claim or action or proceeding, whether or not AAC has requested intervention
or tender of control; provided that in the event AAC’s counsel or the
Indemnified Party’s counsel determines that there is a legal conflict of
interest between AAC and such Indemnified Party, and neither AAC nor such
Indemnified Party is willing to waive such conflict, then such Indemnified Party
shall be entitled to retain one separate counsel, acceptable to AAC. Until AAC
requests the control of the defense and settlement of such claim or action or
unless AAC has otherwise employed counsel to represent both AAC and such
Indemnified Party, such Indemnified Party shall have the right to employ its own
counsel with respect to such lawsuit, action or similar formal legal proceeding,
whose reasonable fees and documented expenses shall be Third-Party Liabilities
(provided that AAC shall in no event be liable for the legal fees and expenses
of more than one firm). Further, AAC shall have no liability for any settlement
of any lawsuit or action for which AAC otherwise agrees herein to indemnify an
Indemnified Party unless written notice of such proposed settlement shall have
been furnished to AAC, and AAC in its sole and absolute discretion shall have
consented in writing to such settlement.

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All Entities are enjoined and restrained from commencing or prosecuting any
actions, claims, lawsuits or other formal legal proceedings in any state,
federal or foreign court, administrative body or other tribunal other than the
Court against: (i) any Trustee in respect of such Trustee’s compliance with this
Plan or the Payment Guidelines; (ii) any Sub-Trustee/Agent, in respect of such
Sub-Trustee Agent’s compliance with this Plan or the Payment Guidelines; and/or
(iii) any Paying Agent, in respect of such Paying Agent’s compliance with this
Plan or the Payment Guidelines. The Court shall have exclusive jurisdiction over
such actions, claims, or lawsuits, which must be raised by motion or other
filing.

6.10    Preservation of Causes of Action. Other than Causes of Action against an
Entity that are waived, relinquished, exculpated, released, compromised, or
settled in this Plan or by a Court order, any and all Causes of Action of the
Ambac Parties are preserved. On and after the Effective Date, AAC may pursue
such Causes of Action in its sole and absolute discretion. No Entity may rely on
the absence of a specific reference in this Plan or the Disclosure Statement to
any Cause of Action against them as any indication that AAC will not pursue any
and all available Causes of Action against them. No preclusion doctrine,
including the doctrines of res judicata, collateral estoppel, issue preclusion,
claim preclusion (judicial, equitable, or otherwise), or laches, shall apply to
such Causes of Action upon, after, or as a consequence of the entry of Approval
Order. On and after the Effective Date, AAC shall retain and shall have,
including through its authorized agents or representatives, the exclusive right,
authority, and discretion to determine and to initiate, file, prosecute,
enforce, abandon, settle, compromise, release, withdraw, or litigate to judgment
any such Causes of Action and to decline to do any of the foregoing without the
consent or approval of any third party or further notice to or action, order, or
approval of the Court. Notwithstanding

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anything contained herein to the contrary, AAC shall not retain any claims or
Causes of Action released pursuant to section 6.6 of this Plan against the
Released Parties.

6.11    Beneficiaries of Immunity and Indemnification. The Released Parties are
entitled to protection under this part of this Plan for any actions taken
pursuant to, or in furtherance of, this Plan or the First Amended Plan.

6.12    Immunity and Indemnification. The Released Parties shall have official
immunity and shall be immune from suit and liability, both personally and in
their official capacities, for any act or omission made in connection with, or
arising out of, the Segregated Account, AAC or the General Account with respect
to the Segregated Account, the Proceeding, this Plan (and the Approval Order
related hereto), the First Amended Plan (and the 2014 Approval Order related
thereto), the Interim Cash Payment Rules, the Payment Guidelines, the
consummation of this Plan, or the administration of this Plan or the property to
be distributed under this Plan, whether prior to or following the commencement
of the Proceeding, with the sole exception of acts or omissions resulting from
intentional fraud, gross negligence, or willful misconduct as determined by a
Final Order and, in all respects, such Entities shall be entitled to rely upon
the advice of counsel with respect to their duties and responsibilities, if any,
under this Plan. If any legal action is commenced against any Released Party,
whether against that Entity personally or in an official capacity, alleging
property damage, property loss, personal injury or other civil liability caused
by or resulting from any act or omission made in connection with, or arising out
of, the Segregated Account, AAC or the General Account with respect to the
Segregated Account, the Proceeding, this Plan (and the Approval Order related
hereto), the First Amended Plan (and the 2014 Approval Order related thereto),
the Interim Cash Payment Rules, the Payment Guidelines, the consummation of this
Plan,

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or the administration of this Plan or the property to be distributed under this
Plan, that Entity shall be indemnified by AAC for all reasonable and documented
expenses, attorney’s fees, judgments, settlements, decrees or amounts due and
owing or paid in satisfaction of or incurred in the defense of such legal
action, unless it is determined by a Final Order that the alleged act or
omission was caused by intentional fraud, gross negligence, or willful
misconduct. Any such indemnification shall be considered a Permitted
Administrative Claim. Nothing contained in or implied by this part of this Plan
shall operate, or be construed or applied to deprive any Released Party any
immunity, indemnity, benefits of law, rights or any defense otherwise available.

6.13    No Defaults. As of the Effective Date, any default, event of default, or
other event or circumstance relating to AAC, the Segregated Account, or any
subsidiary thereof, then existing or alleged to exist (or that would exist with
the passing of time or the giving of notice or both), under any agreement will
be deemed to be cured and not to have occurred or existed, now, in the past or
in the future, to the extent such default, event of default, or other event or
circumstance is, or is alleged to be, due or relating to, or arising under or as
a result of, the terms, existence, execution, delivery, performance in
accordance with the terms thereof or the creation or consummation (in each case
as applicable) of: (i) this Plan or any variation thereof; (ii) the First
Amended Plan; (iii) the Original Plan; (iv) the Segregated Account; (v) the
Merger; (vi) the Exchange Offers; (vii) the Definitive Documents; (viii) the
Proceeding and all orders of the Court entered therein; (ix) the grounds for the
Proceeding; (x) the failure of AAC or the Segregated Account to pay any amount
prior to the Effective Date under any Policy or Transaction Document; (xi) the
financial condition of AAC prior to the Effective Date resulting from the
Proceeding or the grounds for the Proceeding;

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or (xii) noncompliance by AAC or the Segregated Account with any provision of
any Policy or Transaction Document prior to the Effective Date; or (xiii) the
Proceeding Circumstances.

6.14    Actions Self-Effectuating. All matters and actions provided in this Plan
to occur as of the Effective Date shall occur automatically and without the need
for further action by any Entity on the Effective Date, other than declaration
by the Rehabilitator of the occurrence of the Effective Date as provided by
Section 5.1 of this Plan.

ARTICLE 7
RETENTION OF JURISDICTION

7.1    Retention of Jurisdiction. Following the Effective Date, the Court shall
retain exclusive jurisdiction over this Proceeding in accordance with the Act to
ensure that the terms, purposes and intent of this Plan are carried out. Without
limiting the generality of the foregoing, and except as otherwise provided in
this Plan, the Court shall also expressly retain exclusive jurisdiction:
(a)    to hear and determine Objections to Disputed Claims and disputes relating
to Subsequent Adjustments;
(b)    to hear, determine and enforce Causes of Action that may exist by or
against the Segregated Account or by or against the General Account or AAC or
the Management Services Provider in regards to the Segregated Account;
(c)    to enter such orders and injunctions as are necessary to enforce the
terms of this Plan, and to impose such limitations, restrictions, terms, and
conditions as the Court may deem necessary;

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(d)    to enter an order reopening the Proceeding;
(e)    to correct any defect, cure any omission, or reconcile any inconsistency
in this Plan and the Amended Payment Guidelines, or in any order of the Court as
may be necessary to implement the purposes and intent of this Plan;
(f)    to determine any motions, applications, and other contested matters that
may be pending on the Effective Date;
(g)    to consider any amendment or modification of this Plan or any related
documents;
(h)    to determine controversies, suits, and disputes that may arise in
connection with the interpretation, enforcement, or consummation of this Plan,
the Payment Guidelines, or the Amended Payment Guidelines;
(i)    to determine such other matters or proceedings as may be provided for
under the Act, including, but not limited to, this Plan, any prior order or
orders of this Court, the Approval Order or any order that may arise in
connection with this Plan or the Proceeding; and
(j)    to interpret and enforce, and determine questions and disputes regarding,
the injunctions, releases, exculpations, and indemnifications provided for or
set forth in this Plan or the Approval Order.

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ARTICLE 8
GENERAL PROVISIONS

8.1    Governing Law. The rights and obligations arising under this Plan shall
be governed by, and construed and enforced in accordance with, the laws of the
State of Wisconsin, without giving effect to the principles of conflicts of law
thereof.

8.2    Revocation or Withdrawal of this Plan. The Rehabilitator reserves the
right to revoke or withdraw this Plan prior to the Effective Date. If the
Rehabilitator so revokes or withdraws this Plan, then this Plan shall be null
and void and, in such event, nothing contained herein shall be deemed to
constitute a waiver or release of any Claims by or against the Segregated
Account or any other Entity, or to prejudice in any manner the rights of the
Segregated Account or any other Entity in any further proceedings involving the
Segregated Account.

8.3    Amendment and Modification of this Plan. The Rehabilitator may seek the
approval of the Court to alter, amend, or modify this Plan with such notice and
hearing as the Court prescribes pursuant to Wis. Stat. § 645.33(5); provided
however, that the Rehabilitator shall not seek to alter, amend or modify the
Pre-Record Date Deferred Amount Consideration received hereunder. 

8.4    Limitation of Recovery. Nothing in this Plan, the First Amended Plan, the
Payment Guidelines, or the Amended Payment Guidelines shall cause to inure to
the benefit of any Holder of a Policy Claim any greater right than that which
would have existed were the Segregated Account not in rehabilitation.

8.5    Binding Effect. This Plan shall be binding on any Entity named or
referred to in this Plan, and the rights benefits, and obligations of any Entity
named or referred to in this Plan shall be binding upon, and shall inure to the
benefit of, the heirs, executors, administrators, successors, or assigns of such
Entity.

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8.6    Rules of Interpretation. For purposes of this Plan: (i) whenever from the
context it is appropriate, each term, whether stated in the singular or the
plural, shall include both the singular and the plural, and pronouns stated in
the masculine, feminine, or neuter gender shall include the masculine, feminine,
and the neuter gender; (ii) any reference in this Plan to a contract,
instrument, release, indenture, or other agreement or document being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions; (iii) any reference in this Plan to an existing document or Exhibit
filed, or to be filed, shall mean such document or Exhibit, as it may have been
or may be amended, modified, or supplemented in accordance with its terms; (iv)
unless otherwise specified, all references in this Plan to Sections and Articles
are references to Sections and Articles of this Plan; (v) the words “herein” and
“hereto” refer to this Plan in its entirety rather than to a particular portion
of this Plan; and (vi) captions and headings to Articles and Sections are
inserted for convenience of reference only and are not intended to be a part of
or to affect the interpretation of this Plan.

8.7    Implementation. The Rehabilitator, Management Services Provider, Claims
Administrator, and AAC shall take all steps, and execute all documents including
appropriate releases, necessary to effectuate the provisions contained in this
Plan.

8.8    Inconsistency. As of the Effective Date, this Plan and the Approval Order
shall supersede the First Amended Plan and the 2014 Approval Order as of the
Effective Date. In the event of any inconsistency between this Plan and the
Disclosure Statement (and/or any amendments and/or or supplements thereto), the
provisions of this Plan shall govern. As of the Effective Date, with respect to
making Distributions on account of Deferred Amounts or Permitted Claims or any
transfer of GA SSNs pursuant to the Initial Exchange, this Plan shall supersede
any inconsistent

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provisions of the First Amended Plan, the Payment Guidelines, the Interim Cash
Payment Rules or the Disclosure Statement (and/or any amendments and/or or
supplements thereto) that provide or impose rules, procedures, guidelines and/or
obligations for, or on, any Entity for the submission to and the evaluation,
processing and payment of Claims by the Segregated Account.

8.9    No Admissions. Notwithstanding anything herein to the contrary, nothing
contained in this Plan shall be deemed an admission by any Entity with respect
to any matter set forth herein.

8.10    Filing of Additional Documents. On or before the Effective Date, the
Rehabilitator may file with the Court such agreements and other documents as may
be necessary or appropriate to effectuate and further evidence the terms and
conditions of this Plan.

8.11    Returned Distributions. In the event that a Holder (including any Holder
acting in its capacity as Trustee) rejects or returns a Distribution to the
Management Services Provider (other than for clerical or administrative error),
the Segregated Account, AAC or the Rehabilitator for any reason, the amount
thereof shall revert to AAC, notwithstanding any applicable federal or state
escheat, abandoned, or unclaimed property laws, and the corresponding Claim of
any such Distribution or Policy Claim or Deferred Amount shall be released and
forever barred, except in the sole and absolute discretion of AAC.

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Dated at Madison, Wisconsin this 22nd day of September, 2017.

    
By:         
Daniel J. Schwartzer,
Special Deputy Commissioner
on behalf of the Rehabilitator

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EXHIBIT 1
PAYMENT GUIDELINES, AS AMENDED

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EXHIBIT 2
LVM PAYMENT GUIDELINES AS AMENDED