EXHIBIT 10.4

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COLLATERAL AGREEMENT
made by
AMBAC ASSURANCE CORPORATION

in favor of
THE BANK OF NEW YORK MELLON
as Note Collateral Agent, Trustee and Paying Agent
Dated as of February 12, 2018

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TABLE OF CONTENTS
Page
ARTICLE I

DEFINED TERMS
Section 1.1    Definitions    1
Section 1.2    Other Definitional Provisions    3
ARTICLE II

GRANT OF SECURITY INTEREST
Section 2.1    Grant    4
Section 2.2    Establishment of the Collateral Account    4
ARTICLE III

REPRESENTATIONS AND WARRANTIES
Section 3.1    Representations and Warranties of the Company    4
ARTICLE IV

COVENANTS
Section 4.1    Covenants of the Company    7
ARTICLE V

REMEDIAL PROVISIONS
Section 5.1    Application of Proceeds    9
Section 5.2    Code and Other Remedies    9
Section 5.3     Waiver; Deficiency    10
Section 5.4    Control of the RMBS Litigation    10
ARTICLE VI

THE NOTE COLLATERAL AGENT
Section 6.1    Duty of the Note Collateral Agent    11
Section 6.2    Financing Statements    11
Section 6.3    Custody and Related Services    12
Section 6.4    Authority of the Note Collateral Agent    13

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Section 6.5    Rights of the Note Collateral Agent    13
ARTICLE VII
MISCELLANEOUS
Section 7.1    Amendments in Writing    13
Section 7.2    Notices    13
Section 7.3    No Waiver by Course of Conduct; Cumulative Remedies    14
Section 7.4    Successors and Assigns    14
Section 7.5    Counterparts    14
Section 7.6    Severability    14
Section 7.7    Section Headings    14
Section 7.8    Integration    14
Section 7.9    GOVERNING LAW    15
Section 7.10    Submission to Jurisdiction; Waivers    15
Section 7.11    Acknowledgments    16
Section 7.12    WAIVER OF JURY TRIAL    16
Section 7.13    Releases    16

SCHEDULES
1
Notice Address of the Company

2
Perfection Matters

3
Financing Statements from Permitted Collateral Liens or Liens to be Terminated
on Issue Date

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COLLATERAL AGREEMENT
COLLATERAL AGREEMENT, dated as of February 12, 2018, (as amended, supplemented
or otherwise modified from time to time, this “Agreement”) made between Ambac
Assurance Corporation, a Wisconsin-domiciled insurance company (the “Company”),
as issuer, and The Bank of New York Mellon, as Trustee, Paying Agent and Note
Collateral Agent (in such capacity, and together with its successors and assigns
in such capacity, the “Note Collateral Agent”) for the Secured Parties (as such
term is defined herein).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Indenture, dated as of February 12, 2018, (as
amended, amended and restated, waived, supplemented or otherwise modified from
time to time, together with any agreement extending the maturity of, or
restructuring, refunding, refinancing or increasing the Indebtedness under such
agreement or successor agreements, the “Indenture”), between the Company and The
Bank of New York Mellon, as trustee and note collateral agent on behalf of the
Holders, the Company has issued 8.5% Senior PIK Notes Secured by Junior
Interests in RMBS Litigation Due 2055 issued on the Issue Date in an initial
aggregate principal amount of $240 million (collectively, with any notes issued
in respect thereof pursuant to Sections 304, 305, 306, 312(c), 312(d) or 1008 of
the Indenture, the “Notes”) upon the terms and subject to the conditions set
forth therein;
WHEREAS, in accordance with the terms of the Indenture, the Company shall
execute and deliver this Agreement to the Note Collateral Agent for the benefit
of the Secured Parties.
NOW, THEREFORE, in consideration of the premises and to induce the Trustee and
Note Collateral Agent to enter into the Indenture on the Issue Date and to
induce the Holders to purchase the Notes issued on the Issue Date, and in
consideration of other valuable consideration (which receipt is hereby
acknowledged), the Company hereby agrees with the Note Collateral Agent, for the
benefit of the Secured Parties, as follows:
ARTICLE I
DEFINED TERMS
Section 1.1    Definitions.
(a)    Unless otherwise defined herein, terms defined in the Indenture and used
herein shall have the meanings given to them in the Indenture.
(b)    The following terms shall have the following meanings:
“Agreement”: this Collateral Agreement, as the same may be amended, restated,
supplemented, waived or otherwise modified from time to time.
“Code”: the Uniform Commercial Code as from time to time in effect in the State
of New York.

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“Collateral”: as defined in Section 2.1
“Collateral Account”: as defined in Section 2.2.
“Company”: as defined in the Preamble hereto.
“Default”: as defined in the Indenture.
“Event of Default”: as defined in the Indenture.
“Foreign Jurisdiction”: a jurisdiction other than the United States of America
or a jurisdiction in which the Company is organized, incorporated, formed,
registered or domiciled.
“Governmental Authority”: the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supranational bodies such as the European Union or the European Central Bank).
“Holder” or “Noteholder”: as defined in the Indenture.
“Indebtedness”: as defined in the Indenture.
“Indenture”: as defined in the recitals hereto.
“Lien”: as defined in the Indenture.
“Note Collateral Agent”: as defined in the Preamble hereto.
“Note Documents”: the collective reference to the Indenture, the Notes, this
Agreement, and the other Note Security Documents, as the same may be amended,
supplemented, waived, modified, replaced and/or refinanced from time to time in
accordance with the terms hereof and Article IX of the Indenture.
“Note Security Documents”: as defined in the Indenture.
“Notes”: as defined in the recitals hereto.
“Obligations”: the collective reference to: all obligations and liabilities of
the Company in respect of the unpaid principal of and interest on (including
interest and fees (if any) accruing after the maturity of the Notes and interest
and fees (if any) accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Company, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Notes and all other obligations and
liabilities of the Company to the Secured Parties, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in

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connection with, the Indenture, the Notes or the other Note Documents entered
into or any other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, reimbursement obligations,
amounts payable in connection with any such agreement or a termination of any
transaction entered into pursuant to any such agreement, fees, indemnities,
costs, expenses or otherwise (including all reasonable and documented
out-of-pocket fees, expenses and disbursements of counsel to the Trustee or Note
Collateral Agent that are required to be paid by the Company pursuant to the
terms of the Indenture or any other Note Document).
“Permitted Collateral Liens”: means Permitted Liens (as defined in the
Indenture) set forth in clauses (a), (b), (c), (d) and (n) of the definition
thereof (and for clause (n) of the definition thereof, only to the extent that
such Permitted Liens secure Permitted Indebtedness incurred pursuant to clause
(a) of the definition of “Permitted Indebtedness” (as defined in the
Indenture)).
“Person”: any individual, corporation, partnership, joint venture, association,
joint stock company, limited liability company, trust, unincorporated
organization, Governmental Authority or any other entity.
“Proceeds”: all “proceeds” as such term is defined in the Code.
“RMBS Litigation”: as defined in the Indenture.
“Secured Parties”: the collective reference to the Trustee, the Note Collateral
Agent, the Paying Agent, the Holders, and each of their respective successors
and assigns and their permitted transferees and endorsees.
“Segregated Account”: as defined in the Indenture.
“Tier II Net Proceeds”: as defined in the Indenture.
Section 1.2    Other Definitional Provisions.
(a)    The words “hereof”, “herein”, “hereto” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Annex references are to this Agreement unless otherwise
specified. The words “include”, “includes”, and “including” shall be deemed to
be followed by the phrase “without limitation”. Unless otherwise expressly
provided herein, any definition of or reference to any agreement (including this
Agreement and the other Note Documents), instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as amended, supplemented, waived or otherwise modified from time to time
(subject to any restrictions on such amendments, supplements, waivers or
modifications set forth herein).
(b)    The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.

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(c)    All references in this Agreement to any of the property described in the
definition of the term “Collateral”, or to any Proceeds thereof, shall be deemed
to be references thereto only to the extent the same constitute Collateral.
ARTICLE II

GRANT OF SECURITY INTEREST
Section 2.1    Grant. The Company hereby grants to the Note Collateral Agent,
for the benefit of the Secured Parties, as collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations of the Company a security
interest in all right, title and interest of the Company in the following
property (wherever located) whether now owned or at any time hereafter acquired
by the Company or in which the Company now has or at any time in the future may
acquire any right, title or interest:
(a)    the Collateral Account;
(b)    the right to receive Tier II Net Proceeds; and
(c)    to the extent not otherwise included, all Proceeds and products of any of
the foregoing (collectively, the “Collateral”).
Section 2.2    Establishment of the Collateral Account. The Note Collateral
Agent shall establish a single, segregated securities account in its records as
securities intermediary and in the name of the Company which shall be designated
as the “Collateral Account”. For purposes of Articles 8 and 9 of the Code, the
“securities intermediary’s jurisdiction” of the Note Collateral Agent shall be
the State of New York and the law in force in the State of New York shall be
applicable to all issues specified in Article 2(1) of the Hague Convention on
the Law Applicable to Certain Rights in Respect of Securities Held with an
Intermediary. The Note Collateral Agent in its capacity as securities
intermediary and the Company acknowledge that there are no other account
agreements governing the Collateral Account or if there are, the parties agree
that such agreements are amended to provide that their governing law is
consistent with the preceding sentence. The Note Collateral Agent also
represents that it has a physical office in the State of New York which is
engaged in a business or other regular activity of maintaining securities
accounts.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1    Representations and Warranties of the Company. The Company hereby
represents and warrants to the Note Collateral Agent on the date hereof that:
3.1.1    Title; No Other Liens. Except for the security interests granted to the
Note Collateral Agent for the benefit of the Secured Parties pursuant to this
Agreement and Permitted Collateral Liens, the Company owns each item of the
Collateral free and clear of any and all Liens securing Indebtedness. To the
knowledge of the Company, no

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currently effective financing statement or other similar public notice with
respect to any Lien securing Indebtedness on all or any part of the Collateral
is on file or of record in any public office in the United States of America,
any state, territory or dependency thereof or the District of Columbia, except,
in each case, such as have been filed in favor of the Note Collateral Agent for
the benefit of the Secured Parties pursuant to this Agreement or other than as
listed on Schedule 3 hereto.
3.1.2    Perfected First Priority Liens.
(a)    This Agreement is effective to create, as collateral security for the
Obligations of the Company, valid and enforceable Liens on the Collateral in
favor of the Note Collateral Agent for the benefit of the Secured Parties,
except as to enforcement, as may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, rehabilitation, moratorium
and other similar laws relating to or affecting creditors’ rights generally,
general equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(b)    Except with regard to any rights in favor of the United States government
as required by law (if any), upon the completion of the Filings, the Liens
created pursuant to this Agreement will constitute valid Liens on and (to the
extent provided herein) perfected security interests in the Collateral in favor
of the Note Collateral Agent for the benefit of the Secured Parties, and will be
prior to all other Liens on the Collateral of all other Persons securing
Indebtedness, in each case other than Permitted Collateral Liens, and
enforceable as such as against all other Persons, except as to enforcement, as
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, rehabilitation, moratorium and other similar laws relating to or
affecting creditors’ rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing. As used in this Section 3.1.2(b), the following terms
shall have the following meanings:
“Filings”: the filing or recording of the Financing Statements as set forth in
Schedule 2.
“Financing Statements”: the financing statements filed or authorized for filing
by the Company in the jurisdictions listed in Schedule 2.
3.1.3    Jurisdiction of Organization. On the date hereof, the Company’s
jurisdiction of organization is Wisconsin.
3.1.4    Good Standing of the Company. The Company has been duly incorporated
and is validly existing and in good standing under the laws of the State of
Wisconsin, with power and authority (corporate or otherwise) to own, lease and
operate its properties and conduct its business and to enter into and perform
its obligations under the Note Documents; and the Company is duly qualified to
do business as a foreign corporation in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to so qualify

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or be in good standing would not, individually or in the aggregate, be
reasonably likely to materially and adversely affect the ability of the Company
to perform its obligations under the Note Documents.
3.1.5    Note Documents. Each of the Note Documents has been duly authorized by
the Company, and when executed and delivered by the Company (assuming due
authorization, execution and delivery by the counterparties thereto, as
applicable), will be duly executed and delivered by the Company and will
constitute a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors’ rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
3.1.6    Absence of Existing Defaults and Conflicts. The Company is not in
violation of its charter or by-laws or in default (or with the giving of notice
or lapse of time would be in default) under any existing obligation, agreement,
covenant or condition contained in any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties is subject, except such defaults that
would not, individually or in the aggregate, be reasonably likely to materially
and adversely affect the ability of the Company to perform its obligations under
the Note Documents to which it is a party.
3.1.7    Absence of Defaults and Conflicts Resulting from Transaction. The
execution, delivery and performance of the Note Documents, and compliance with
the terms and provisions hereof and thereof, will not violate, conflict with,
result in a breach of, or constitute a default (or an event which with the
giving of notice or the lapse of time or both would be reasonably likely to
constitute a default) under (a) the charter or by-laws of the Company (other
than any violation of or conflict with any such charter or by-laws that would
not, individually or in the aggregate with all such other violations or
conflicts, be reasonably likely to materially and adversely affect the ability
of the Company to perform its obligations under the Note Documents), (b) any
order, law, treaty, rule, regulation, judgment or determination applicable to
the Company of any court, governmental agency or body (including, without
limitation, any insurance regulatory agency or body) or arbitrator having
jurisdiction over the Company (other than any violation of or conflict with any
such order, law, treaty, rule, regulation, judgment or determination that would
not, individually or in the aggregate with all such other violations or
conflicts, be reasonably likely to materially and adversely affect the ability
of the Company to perform its obligations under the Note Documents) or (c) the
terms of any bond, debenture, note, other evidence of indebtedness, agreement,
indenture, lease or other instrument to which the Company is a party or by which
it is bound or by which any of its properties is subject, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the assets
of the Company pursuant to the terms of any such bond, debenture, note, other
evidence of indebtedness, agreement, indenture, lease or other instrument (other
than any conflict, breach or default or lien, charge or

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encumbrance that would not, individually or in the aggregate, be reasonably
likely to materially and adversely affect the performance by the Company of its
obligations under the Note Documents.
3.1.8    Absence of Further Requirements. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
court or governmental agency or body (including, without limitation, any
insurance regulatory agency or body) is required for the execution by the
Company of the Note Documents, or the consummation of the transactions
contemplated hereby or thereby, or for the performance by the Company of its
obligations under the Note Documents, except those that have been already
obtained.
ARTICLE IV
COVENANTS
Section 4.1    Covenants of the Company. The Company covenants and agrees with
the Note Collateral Agent and the other Secured Parties that, from and after the
date of this Agreement until the release of all of the Collateral or the
termination of this Agreement in accordance with the terms of the Indenture:
4.1.1    Maintenance of Perfected Security Interest; Further Documentation.
(a)    The Company shall use commercially reasonable efforts to maintain the
security interest created by this Agreement in the Collateral as a perfected
security interest as and to the extent described in Section 3.1.2 and to defend
the security interest created by this Agreement in the Collateral against the
claims and demands of all Persons whomsoever (subject to the other provisions
hereof) for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted by the Company.
(b)    Except as otherwise permitted by the Indenture, the Company will not
impair the rights of the Note Collateral Agent in the Collateral.
(c)    The Company shall use commercially reasonable efforts to take any and all
actions reasonably necessary or required or reasonably requested by the Note
Collateral Agent (acting at the direction of the requisite Holders pursuant to
the terms of the Indenture and in each case at the sole expense of the Company),
so as at all times to maintain the validity, perfection, enforceability and
priority of the security interest in and Lien on the Collateral granted to the
Note Collateral Agent in this Agreement or to enable the Note Collateral Agent
to protect, exercise or enforce its rights hereunder and in the Collateral,
including (i) immediately discharging all Liens on the Collateral other than
Permitted Collateral Liens, (ii) filing any financing and continuation
statements or similar documents, and (iii) promptly executing and delivering
control agreements, and, during the continuance of an Event of Default pursuant
to Section 601(i) of the Indenture, instruments of pledge, notices and
assignments and other documents, in each case solely

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relating to the creation, validity, perfection, maintenance or continuation of
the Note Collateral Agent’s security interest in and Lien on the Collateral;
provided that, notwithstanding any other provision of this Agreement or any
other Note Document, the Company will not be required (x) to take any action in
any Foreign Jurisdiction, or required by the laws of any such Foreign
Jurisdiction, or to enter into any security agreement or pledge agreement
governed by the laws of any such Foreign Jurisdiction, in order to create any
security interests (or other Liens) in Collateral located or titled in any
Foreign Jurisdiction, or in order to perfect any security interests (or other
Liens) in any such Collateral, other than in each case, Collateral consisting of
the Collateral Account or the Eligible Investments on deposit therein, if such
Collateral consisting of the Collateral Account is located in a Foreign
Jurisdiction or (y) to deliver control agreements with respect to, or confer
perfection by “control” over, any deposit, bank or securities account or other
Collateral, other than with respect to the Collateral Account or any other
deposit, bank or securities account into which the Tier II Net Proceeds or
Eligible Investments may be deposited.
(d)    Upon the occurrence and during the continuance of an Event of Default
pursuant to Section 601(i) of the Indenture, the Note Collateral Agent may
liquidate, or notify any bank or securities intermediary in control of any
deposit account or securities account or any related investment property to
liquidate, such Collateral and remit the proceeds thereof to the Note Collateral
Agent.
4.1.2    Changes in Name, Jurisdiction of Organization, etc. The Company will
give prompt written notice to the Note Collateral Agent of any change in its
name or location (as determined by Section 9-307 of the Code) (whether by merger
or otherwise) (and in any event within 30 days of such change); and within 10
days after such notice, the Company shall deliver to the Note Collateral Agent
copies (or other evidence of filing) of all additional filed financing
statements and other documents reasonably necessary to maintain the validity,
perfection and priority of the security interests created hereunder and other
documents reasonably requested by the Note Collateral Agent to maintain the
validity, perfection and priority of the security interests as and to the extent
provided for herein.
4.1.3    Maintenance of Records. The Company will keep and maintain at its own
cost and expense reasonably satisfactory and complete records of its Collateral,
including a record of all payments received and all credits granted with respect
to such Collateral, and shall mark such records to evidence this Agreement and
the Liens and the security interests created hereby.
4.1.4    Delivery of Collateral Account Statement. The Note Collateral Agent
agrees to allow the Noteholders access (including electronic access) to copies
of all monthly account statements it delivers to the Company in respect of the
Collateral Account.
4.1.5    Payment Direction for Tier II Net Proceeds. The Company shall direct
any defendant in the RMBS Litigation to pay any cash Tier II Net Proceeds
directly into the

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Collateral Account; provided that the failure on the part of any such defendant
to so pay shall not constitute a Default hereunder.
ARTICLE V

REMEDIAL PROVISIONS
Section 5.1    Application of Proceeds. It is agreed that if an Event of Default
pursuant to Section 601(i) of the Indenture shall occur and be continuing, any
and all Proceeds of the Collateral (as defined in the Indenture) received by the
Note Collateral Agent (whether from the Company or otherwise) shall be held by
the Note Collateral Agent for the benefit of the Secured Parties as collateral
security for the Obligations of the Company (whether matured or unmatured),
and/or then or at any time thereafter may, in the sole discretion of the Note
Collateral Agent, be applied by the Note Collateral Agent against the
Obligations of the Company then due and owing in the following order of
priority:
First: to the payment of all amounts due the Trustee under Section 707 of the
Indenture;
Second: to the payment of all amounts due the Note Collateral Agent under
Section 1210 of the Indenture; and
Third: to the payment of the amounts then due and unpaid upon the other
Obligations of the Company ratably, without preference or priority of any kind,
according to the amounts due and payable on such Obligations; provided that any
such application of Proceeds shall be made on a pro rata basis as between and
among the Holders and their respective successors and assigns and their
permitted transferees and endorsees;
Fourth: to be held as Collateral in the Collateral Account to secure all
Obligations under or in respect of the Notes until the payment in full in cash
of all Obligations (other than contingent indemnification obligations) on the
Notes; and
Fifth: to the Company.
Section 5.2    Code and Other Remedies. If an Event of Default pursuant to
Section 601(i) of the Indenture shall occur and be continuing, the Note
Collateral Agent, on behalf of the Secured Parties, may (but shall not be
obligated to) exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations to the extent permitted by applicable
law, all rights and remedies of a secured party under the Code (whether or not
the Code applies to the affected Collateral) and under any other applicable law
and in equity. Without limiting the generality of the foregoing, to the extent
permitted by applicable law, the Note Collateral Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances (but
shall not be obligated to), forthwith collect, receive,

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appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith, subject to any existing reserved rights or licenses, sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker’s board or office of the Note Collateral Agent or any other Secured Party
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. To the extent permitted by law, the Note
Collateral Agent or any other Secured Party shall have the right, upon any such
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in the Company, which right or equity is
hereby waived and released. The Note Collateral Agent shall apply the net
proceeds of any action taken by it pursuant to this Section 5.2, after deducting
all reasonable and documented out-of-pocket costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the rights of the
Note Collateral Agent and the other Secured Parties hereunder, including
reasonable and documented attorneys’ fees and disbursements, to the payment in
whole or in part of the Obligations of the Company then due and owing, in the
order of priority specified in Section 5.2. To the extent permitted by
applicable law, (i) the Company waives all claims, damages and demands it may
acquire against the Note Collateral Agent or any other Secured Party arising out
of the repossession, retention or sale of the Collateral, other than any such
claims, damages and demands that may arise from the gross negligence or willful
misconduct of any of the Note Collateral Agent or such other Secured Party, and
(ii) if any notice of a proposed sale or other disposition of Collateral shall
be required by law, such notice shall be deemed reasonable and proper if given
at least 10 days before such sale or other disposition. Notwithstanding the
foregoing, unless an Event of Default pursuant to Section 601(i) of the
Indenture has occurred and continues, the Note Collateral Agent shall not take
any action without the prior written consent of the Company (A) to collect and
receive payments in respect of Obligations or (B) to foreclose on the Collateral
or apply Collateral or proceeds thereof to payments of Obligations or any other
obligations; provided that the mere exercise of control over the Collateral
Account (without the application of any assets in such Collateral Account to the
Obligations or to any other obligations) shall not constitute a foreclosure
hereunder.
Section 5.3    Waiver; Deficiency. The Company shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay in full, the Notes, reimbursement obligations
constituting Obligations of the Company and, to the extent then due and owing,
all other Obligations of the Company and the reasonable fees and disbursements
of any attorneys employed by the Note Collateral Agent or any other Secured
Party to collect such deficiency.
Section 5.4    Control of the RMBS Litigation. Notwithstanding any of the
foregoing, or anything else in this Agreement, the Indenture or the other Note
Documents to the contrary, at all times, the Company and the Segregated Account
(if not merged with and into the Company) will control the RMBS Litigation in
all respects (including, without limitation, all decisions as to strategy,
settlement, pursuit and abandonment), and none of (x) the Trustee, (y) any
holder of the

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Notes or of any beneficial interest, or (z) the Note Collateral Agent shall have
any right to join or participate in the RMBS Litigation in any way.
ARTICLE VI
THE NOTE COLLATERAL AGENT
Section 6.1    Duty of the Note Collateral Agent. The Note Collateral Agent’s
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Note Collateral Agent deals
with similar property for its own account. None of the Note Collateral Agent or
any other Secured Party nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Company or any other Person or, except as otherwise provided herein, to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Note Collateral Agent and the other Secured Parties
hereunder are solely to protect the Note Collateral Agent’s and the other
Secured Parties’ interests in the Collateral and shall not impose any duty upon
the Note Collateral Agent or any other Secured Party to exercise any such
powers. The Note Collateral Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and to the maximum extent permitted by applicable law,
neither they nor any of their officers, directors, employees or agents shall be
responsible to the Company for any act or failure to act hereunder, except as
otherwise provided herein or for their own gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final and
nonappealable decision).
Section 6.2    Financing Statements. Pursuant to any applicable law, the Company
authorizes the Note Collateral Agent to file or record financing statements and
other filing or recording documents or instruments with respect to the
Collateral in such form and in such filing offices at the Note Collateral
Agent’s sole discretion and as the Note Collateral Agent reasonably determines
appropriate to perfect or continue the perfection of the security interests of
the Note Collateral Agent under this Agreement, provided, however, such
authorization shall not relieve the Company from its obligation to take all
actions necessary to perfect and maintain the perfection of the Note Collateral
Agent’s Lien on the Collateral as provided for herein, which includes the filing
of any financing statements or continuation statements. All charges, expenses
and fees that the Note Collateral Agent may incur in doing any of the foregoing,
and any local taxes relating thereto, shall be paid by the Company to the Note
Collateral Agent immediately upon demand. Notwithstanding the foregoing, nothing
in this Section 6.2 obligates the Note Collateral Agent to file or record
financing statements or other filing or recording documents or instruments with
respect to the Collateral. The Note Collateral Agent agrees to notify the
Company of any financing or continuation statement filed by it, provided that
any failure to give such notice shall not affect the validity or effectiveness
of any such filing.
Section 6.3    Custody and Related Services .

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(a)    With respect to any action taken by the Note Collateral Agent or the
exercise or non-exercise by the Note Collateral Agent of any option, voting
right, request, judgment or other right or remedy provided for herein, the Note
Collateral Agent shall notify the Company of the date or dates by when such
rights must be exercised or such action must be taken provided that the Note
Collateral Agent has received, from the Issuer or the relevant depository,
timely notice of such rights or discretionary corporate action or of the date or
dates such rights must be exercised or such action must be taken. Absent actual
receipt of such notice, the Note Collateral Agent shall have no liability for
failing to so notify the Company.
(b)    The Company shall be liable for all taxes, assessments, duties and other
governmental charges, including any interest or penalty with respect thereto
(“Taxes”), with respect to any cash or Collateral held on behalf of the Company
or any transaction related thereto. The Company shall indemnify the Note
Collateral Agent for the amount of any Tax that the Note Collateral Agent or any
withholding agent is required under applicable laws (whether by assessment or
otherwise) to pay on behalf of, or in respect of income earned by or payments or
distributions made to or for the account of the Company (including any payment
of Tax required by reason of an earlier failure to withhold). Notwithstanding
the foregoing sentence, the Note Collateral Agent acknowledges that the Company
is a U.S. corporation for U.S. federal income tax purposes and, therefore,
agrees that no U.S. withholding Tax is required to be withheld on any payment
made to the Company. The Note Collateral Agent shall, or shall instruct the
applicable withholding agent to, withhold the amount of any Tax which is
required to be withheld under applicable law upon collection of any dividend,
interest or other distribution made with respect to any Collateral and any
proceeds or income from the sale, loan or other transfer of any Collateral. In
the event that the Note Collateral Agent is required under applicable law to pay
any Tax on behalf of the Company, the Note Collateral Agent is hereby authorized
to withdraw cash from any cash account in the amount required to pay such Tax
and to use such cash for the timely payment of such Tax in the manner required
by applicable law. If the aggregate amount of cash in all cash accounts is not
sufficient to pay such Tax, the Note Collateral Agent shall promptly notify the
Company of the additional amount of cash required, and the Company shall
directly deposit such additional amount in the appropriate cash account promptly
after receipt of such notice, for use by the Note Collateral Agent as specified
herein. In the event that the Note Collateral Agent or the Company reasonably
believes that the Company is eligible, pursuant to applicable law or to the
provisions of any tax treaty, for a reduced rate of, or exemption from, any Tax
which is otherwise required to be withheld or paid on behalf of the Company
under any applicable law, the Note Collateral Agent shall, or shall instruct the
applicable withholding agent to, either withhold or pay such Tax at such reduced
rate or refrain from withholding or paying such Tax, as appropriate; provided
that the Note Collateral Agent shall have received from the Company all
documentary evidence of residence or other qualification for such reduced rate
or exemption required to be received under such applicable law or treaty. In the
event that the Note Collateral Agent reasonably believes that a reduced rate of,
or exemption from, any Tax is obtainable only by means of an application for
refund, the Note Collateral Agent shall have no responsibility for the accuracy
or validity of any forms or documentation provided by the Company to the Note
Collateral Agent hereunder. The Company hereby agrees to indemnify and hold
harmless the Note Collateral Agent in respect of any liability arising from any
under withholding or underpayment of any Tax which results from the

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inaccuracy or invalidity of any such forms or other documentation, and such
obligation to indemnify shall be a continuing obligation of the Company, its
successors and assigns, notwithstanding the termination of this Agreement.
Section 6.4    Authority of the Note Collateral Agent. The Company acknowledges
that the rights and responsibilities of the Note Collateral Agent under this
Agreement with respect to any action taken by the Note Collateral Agent or the
exercise or non-exercise by the Note Collateral Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement or any amendment, supplement or other
modification of this Agreement shall, as between the Note Collateral Agent and
the Secured Parties, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Note Collateral Agent and the Company, the Note Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and the Company shall not
be under any obligation, or entitlement, to make any inquiry respecting such
authority. The Note Collateral Agent shall have the benefit of the rights,
privileges and immunities contained in Section 1209 of the Indenture.
Section 6.5    Rights of the Note Collateral Agent. The Bank of New York Mellon
is acting under this Agreement solely in its capacity as Note Collateral Agent
under the Indenture and not in its individual capacity. In acting hereunder, the
Note Collateral Agent shall be entitled to all of the rights, privileges and
immunities granted to it under the Indenture, as if such rights, privileges and
immunities were fully set forth herein.
ARTICLE VII
MISCELLANEOUS
Section 7.1    Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Company and the Note Collateral Agent,
subject to Article IX of the Indenture; provided that any provision of this
Agreement imposing obligations on the Company may be waived by the Note
Collateral Agent in a written instrument executed by the Note Collateral Agent.
In addition, the Indenture and any of the other Note Documents may be amended in
accordance with the terms thereof.
Section 7.2    Notices. All notices, requests and demands to or upon the Note
Collateral Agent or the Company hereunder shall be effected in the manner
provided for in Section 109 of the Indenture; provided that any such notice,
request or demand to or upon the Company shall be addressed to the Company at
its notice address set forth on Schedule 1, unless and until the Company shall
change such address by notice to the Note Collateral Agent given in accordance
with Section 109 of the Indenture.
Section 7.3    No Waiver by Course of Conduct; Cumulative Remedies. None of the
Note Collateral Agent or any other Secured Party shall by any act (except by a
written instrument pursuant to Section 7.1 hereof or Article IX of the
Indenture), delay, indulgence, omission or

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otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Note Collateral Agent or any other Secured Party,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Note Collateral Agent or any other
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy that the Note Collateral Agent or such
other Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
Section 7.4    Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Company, the Note Collateral Agent and the
Secured Parties and their respective successors and assigns; provided that the
Company may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of the Note Collateral Agent,
except as permitted hereby or by the Indenture.
Section 7.5    Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. The exchange of copies of this Agreement and of signature pages by
facsimile or PDF transmission shall constitute effective execution and delivery
of this Agreement as to the parties hereto and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties hereto
transmitted by facsimile or PDF shall be deemed to be their original signatures
for all purposes.
Section 7.6    Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 7.7    Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
Section 7.8    Integration. This Agreement and the other Note Documents
represent the entire agreement of the Company, the Note Collateral Agent and the
other Secured Parties with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by the Company, the
Note Collateral Agent or any other Secured Party relative to subject matter
hereof not expressly set forth or referred to herein or in the other Note
Documents.
Section 7.9    GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
ARE NOT

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MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
Section 7.10    Submission to Jurisdiction; Waivers. Each party hereto hereby
irrevocably and unconditionally:
(a)    submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Note Documents to which it is a party
to the exclusive general jurisdiction of the Supreme Court of the State of New
York for the County of New York (the “New York Supreme Court”), and the United
States District Court for the Southern District of New York (the “Federal
District Court,” and together with the New York Supreme Court, the “New York
Courts”) and appellate courts from either of them; provided that nothing in this
Agreement shall be deemed or operate to preclude (i) the Note Collateral Agent
from bringing suit or taking other legal action in any other jurisdiction to
realize on the Collateral or any other security for the Obligations (in which
case any party shall be entitled to assert any claim or defense, including any
claim or defense that this Section 7.10 (a) would otherwise require to be
asserted in a legal action or proceeding in a New York Court), or to enforce a
judgment or other court order in favor of the Trustee or the Note Collateral
Agent, (ii) any party from bringing any legal action or proceeding in any
jurisdiction for the recognition and enforcement of any judgment, (iii) if all
such New York Courts decline jurisdiction over any Person, or decline (or in the
case of the Federal District Court, lack) jurisdiction over any subject matter
of such action or proceeding, a legal action or proceeding may be brought with
respect thereto in another court having jurisdiction and (iv) in the event a
legal action or proceeding is brought against any party hereto or involving any
of its assets or property in another court (without any collusive assistance by
such party or any of its Subsidiaries or Affiliates), such party from asserting
a claim or defense (including any claim or defense that this Section 7.10(a)
would otherwise require to be asserted in a legal proceeding in a New York
Court) in any such action or proceeding;
(b)    consents that any such action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;
(c)    agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address referred to in Section 7.2 or at such other address of which the Note
Collateral Agent (in the case of any other party hereto) or the Company (in the
case of the Note Collateral Agent) shall have been notified pursuant thereto;
(d)    agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and

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(e)    waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 7.10 any punitive damages.
Section 7.11    Acknowledgments. The Company hereby acknowledges that:
(a)    it has been advised by counsel in the negotiation, execution and delivery
of this Agreement and the other Note Documents to which it is a party;
(b)    none of the Note Collateral Agent or any other Secured Party has any
fiduciary relationship with or duty to the Company arising out of or in
connection with this Agreement or any of the other Note Documents, and the
relationship between the Company, on the one hand, and the Note Collateral Agent
and the other Secured Parties, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c)    no joint venture is created hereby or by the other Note Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties or among the Company and the Secured Parties.
Section 7.12    WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
Section 7.13    Releases.
(a)    Subject to Section 106 of the Indenture, the Collateral shall be released
from the Lien and security interest created by this Agreement, all without
delivery of any instrument or performance of any act by any party, at any time
or from time to time in accordance with the provisions of Section 1202 of the
Indenture. Upon such release, all rights in the Collateral so released shall
revert to the Company.
(b)    The Note Collateral Agent and, if necessary, the Trustee shall, at the
Company’s expense, execute, deliver or acknowledge such instruments or releases
to evidence and shall do or cause to be done all other acts reasonably requested
by the Company to effect, in each case as soon as is reasonably practicable, the
release of any Collateral permitted to be released pursuant to the Indenture.
[Remainder of page left blank intentionally; signature page to follow.]

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IN WITNESS WHEREOF, each of the undersigned has caused this Collateral Agreement
to be duly executed and delivered as of the date first above written.
AMBAC ASSURANCE CORPORATION
By:     /s/ David Trick    
Name:    David Trick
Title:    Executive Vice President, Chief
        Financial Officer & Treasurer

[Signature Page to Tier 2 Collateral Agreement]

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Acknowledged and Agreed to as
of the date hereof by:
The Bank of New York Mellon,
in its capacity as Note Collateral Agent
By: /s/ Stacey B. Poindexter            
Name:    Stacey B. Poindexter
Title:    Vice President

[Signature Page to Tier 2 Collateral Agreement]

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SCHEDULE 1
NOTICE ADDRESS OF THE COMPANY
Ambac Assurance Corporation
1 State Street Plaza
New York, NY 10004
Attention: General Counsel
with copies to:
Debevoise & Plimpton
919 Third Avenue
New York, New York 10022
Attention: Steven J. Slutzky and Scott B. Selinger
Facsimile: 212-909-6836
Telephone: 212-909-6000

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SCHEDULE 2
PERFECTION MATTERS

UCC Filings

State
Filing Office
Document Filed
Wisconsin
Wisconsin Department of Financial Institutions
Form UCC-1

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SCHEDULE 3
FINANCING STATEMENTS FROM PERMITTED COLLATERAL LIENS OR LIENS TO BE TERMINATED
ON ISSUE DATE