EXHIBIT 10.5
VOTING AND SUPPORT SETTLEMENT AGREEMENT
This Agreement (this “Agreement”) is made and entered into as of March 28, 2016,
by and between Ambac Financial Group, Inc. (the “Company”) and Sterling Grace
Municipal Securities Corp. (the “Stockholder”) (the Company and Stockholder,
each a “Party” to this Agreement, and collectively, the “Parties”).
RECITALS
WHEREAS, Stockholder has communicated with the Company concerning the affairs of
the Company, including possible additions to the membership of its board of
directors (the “Board”);
WHEREAS, the Company and the Stockholder each desire that the Company increase
the size of the Board and add two new members (who shall also be added to the
Board of Ambac Assurance Corp. following the 2016 Annual Meeting) and desire
that such new members be nominated for election at the 2016 annual meeting of
stockholders of the Company, including any adjournment or postponement thereof
(the “2016 Annual Meeting”);
WHEREAS, the Company and the Stockholder have each determined to come to
agreement with respect to the foregoing and certain other matters, as provided
in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the Parties, intending to be legally bound hereby, agree as follows:
1.Board Matters; Board Appointments; 2016 Annual Meeting.
(a)    Effective as of the execution of this Agreement, the Stockholder on
behalf of itself and its Affiliates hereby agrees that it shall not, and that it
and any of its Affiliates shall not (and shall use reasonable best efforts to
cause its Associates not to), (i) nominate or recommend for nomination any
person for election at the 2016 Annual Meeting, directly or indirectly, (ii)
submit any proposal for consideration at, or bring any other business before,
the 2016 Annual Meeting, directly or indirectly, (iii) initiate, encourage or
participate in any “withhold” or similar campaign with respect to the 2016
Annual Meeting, directly or indirectly, or (iv) publicly or privately encourage
or support any other stockholder to take, or support in the taking of, any of
the actions or matters described in this Section 1(a).
(b)    The Board and all applicable committees of the Board shall promptly take
all necessary actions, pursuant to the Bylaws so that (i) the Board shall be
increased in size to eight members (from six), effective as of March 28, 2016
through the time that is immediately prior to the election of directors at the
2016 Annual Meeting, and then shall be reduced in size to six directors as of
the election of directors at the 2016 Annual Meeting, it being understood that
there shall be only six directors to be elected at the 2016 Annual Meeting; (ii)
Ian Haft and David Herzog (the “Independent Nominees”), who have consented to
such appointment and agreed to serve on the Board, shall be appointed to the
Board to fill the resulting vacancies from the increase of the size of the
Board, effective March 28, 2016; (iii) the Board shall nominate each of the
Independent Nominees, along with Alexander Greene, C. James Prieur, Jeffrey
Stein and Nader Tavakoli (collectively, the “2016 Board Nominees”) as directors
for election to the Board at the 2016 Annual Meeting; (iv) at the 2016 Annual
Meeting, two (2) of the directors serving on the Board on the date hereof (being
Eugene Bullis and Victor Mandel) shall not stand for re-election and (v) the
Company shall recommend, support and solicit proxies at the 2016 Annual Meeting
for each of the 2016 Board Nominees; provided that the Company will use
reasonable best efforts to recommend, support and solicit proxies in favor of
the election of the Independent Nominees to the Board at the 2016 Annual Meeting
(including recommending that the Company’s shareholders vote in favor of the
Independent Nominees for election in a manner no less rigorous and favorable
than the manner in which the Company recommends, support and solicits proxies in

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favor of the election of the other 2016 Board Nominees in the aggregate). After
the 2016 Annual Meeting and through the completion of the 2017 annual meeting of
shareholders (the “2017 Annual Meeting”), the Board shall not increase the size
of the Board to more than six directors other than by unanimous vote of the
directors then in office.
(c)    From and after the 2016 Annual Meeting, the Independent Nominees shall
serve on the board of directors of Ambac Assurance Corp., so long as such
individuals serve on the Board.
(d)     Provided the obligations in Section 1(e) are in full force and effect,
the Stockholder agrees to appear in person or by proxy at the 2016 Annual
Meeting and to vote, or cause to be voted, all shares of shares of Common Stock
beneficially owned by (x) the Stockholder or any of its Affiliates as of March
29, 2016 (the “Record Date”) and (y) all other shares over which such person has
voting power at the 2016 Annual Meeting (i) in favor of the 2016 Board Nominees,
(ii) in favor of the Company’s “say-on-pay” proposal, and (iii) in favor of the
ratification of the Company’s auditors.
(e)     From the date hereof through the close of business on the date on which
the 2016 Annual Meeting is completed (including any adjournments or
postponements thereof), the Stockholder agrees that neither it nor any of its
Affiliates will (and it shall use reasonable best efforts to cause its
Associates not to), directly or indirectly, in any manner (whether through third
parties or otherwise), other than, in each of cases (i) – (v), in support of and
in favor of the election of all of the 2016 Board Nominees and the other matters
referred to in Section 1(d):
(i)    solicit proxies or written consents of stockholders or conduct any other
type of referendum (binding or non-binding) with respect to, or from the holders
of, the Common Stock, or become a “participant” (as such term is defined in
Instruction 3 to Item 4 of Schedule 14A promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), in or assist any person
not a party to this Agreement (a “Third Party”) in any “solicitation” of any
proxy, consent or other authority (as such terms are defined under the Exchange
Act) to vote any shares of the Common Stock (other than such encouragement,
advice or influence that is consistent with Company management’s recommendation
in connection with such matter);
(ii)    advise, encourage, support or influence any person with respect to the
voting of any securities of the Company at the 2016 Annual Meeting or special
meeting of stockholders, or seek to do so (other than such encouragement, advice
or influence that is consistent with the Company’s recommendation in connection
with such matter);
(iii)    seek or encourage any person to submit nominations in furtherance of a
“contested solicitation” for the election or removal of directors with respect
to the Company or seek, encourage or take any other action with respect to the
election or removal of any directors or with respect to the submission of any
stockholder proposal;
(iv)    other than as provided in this Agreement, seek, alone or in concert with
others, representation on the Board;
(v)    seek or request permission to do any of the foregoing, make any request
to amend, waive or terminate any provision of this Section 1 (including, without
limitation, this Section 1(e)), or make or seek permission to make any public
announcement with respect to any of the foregoing;
(vi)    otherwise act, alone or in concert with others to make or cause to be
made any statement disparaging of the Company, its directors or management
including: (i) in any document or report filed with or furnished to the SEC or
any other governmental agency, (ii) in any press release or other publicly
available format, or (iii) to any analyst, journalist or member of the media
(including without limitation, in a television, radio, newspaper or magazine
interview), or otherwise (it being agreed that the prosecution in good faith of
litigation asserting that the Company has breached its obligations under this
Agreement, in and of itself, shall not constitute a

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violation of this clause (vi) to the extent it is necessary in such litigation
to describe the facts underlying the asserted breach).
The restrictions set forth above in this Section 1(e) shall not apply for the
duration of any period that the Company is not in material compliance with its
obligations under Section 1(b) and Section 1(c).
2.    Representations and Warranties of the Company.
The Company represents and warrants to the Stockholder that this Agreement has
been duly authorized, executed and delivered by the Company, and is a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
3.    Representations and Warranties of the Stockholder.
The Stockholder represents and warrants to the Company that this Agreement has
been duly authorized, executed and delivered by the Stockholder, is a valid and
binding obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms. The Stockholder further represents and warrants that,
the Stockholder, together with those of its Affiliates as to which the
Stockholder has the ability to cause compliance with the obligations of the
Stockholder’s Affiliates hereunder, (i) as of the Record Date, owned
beneficially or directly, and as of the date of this Agreement, own beneficially
or directly, 2,115,022 shares of Common Stock (the “Covered Shares”), and (ii)
as of the date of this Agreement, except for the Covered Shares and except as
set forth on Exhibit A, do not currently have, and do not currently have any
right to acquire, any interest in any other debt or equity securities of the
Company or any of its subsidiaries, including, in the case of Ambac Assurance
Corporation, obligations insured by such entity or any rights, options or other
securities convertible into or exercisable or exchangeable (whether or not
convertible, exercisable or exchangeable immediately or only after the passage
of time or the occurrence of a specified event) for such securities or any
obligations measured by the price or value of any securities of the Company or
any of its subsidiaries, including any swaps or other derivative arrangements
designed to produce economic benefits and risks that correspond to the ownership
of the Common Stock, whether or not any of the foregoing would give rise to
beneficial ownership, and whether or not to be settled by delivery of Common
Stock, payment of cash or by other consideration, and without regard to any
short position under any such contract or arrangement. The Stockholder further
represents and warrants that, as of the date of this Agreement, the Stockholder
has no current intention to transfer or dispose of, or engage in any trading in
or with respect to, and Covered Shares. The Stockholder further represents and
warrants that, as of the date of this Agreement and the Record Date, and
assuming that the Record Date is unchanged from the date specified in the
definition thereof, the Stockholder has the power to direct the voting power of
the Covered Shares with respect to the 2016 Annual Meeting.
4.    No Transfer of Record Date Voting Power. From the date of this Agreement
through the completion of the 2016 Annual Meeting (including any postponements
or adjournments thereof), Stockholder agrees not to engage in any trading in or
with respect to the Common Stock of the Company that would have the effect of
reducing the net voting power of the Stockholder and its Affiliates would have
with respect to the election of directors at the 2016 Annual Meeting (assuming
for purposes of this Section 4, that the record date for such meeting remains
March 29, 2016) below the voting power of the Covered Shares (which, for the
avoidance of doubt, is equal to the number of shares held by the Stockholder as
of the Record Date).
5.    Termination. This Agreement shall terminate on the earlier of (a) the date
on which the Independent Nominees cease to serve on the Board, or (b) the date
which is six months from the date hereof.
6.    Press Release and SEC Filing. Promptly following the execution of this
Agreement, the Company will issue a press release in the form agreed with the
Stockholder (the “Agreed Press Release”) announcing this Agreement and any other
settlement related agreement entered into with any other shareholder of the
Company. The Stockholder shall not make any public announcement or public
statement that is inconsistent with or contrary to the statements made in the
Agreed Press Release, except as required by law or the rules of any stock
exchange or with the prior written consent of the Company.

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7.    Specific Performance; Remedies.
The Parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement, in addition to any other remedy to which they are entitled at
law or in equity; provided, that notwithstanding any provision in this Agreement
to the contrary, the Stockholder shall not have the right to enforce
(specifically or otherwise) or make any claim or demand with respect to, or have
any rights against or obligations to, any other stockholder of the Company under
or in connection with any provision of this Agreement (it being acknowledged and
understood by the Stockholder and the Company that there is no agreement or
understanding as to any of the matters hereunder between the Stockholder and any
other owner of the Company’s Common Stock, and that the Stockholder’s rights and
obligations hereunder exist solely with respect to the Company and not with
respect to any other stockholder). The Company shall have the sole right in its
sole and absolute discretion to enforce or waive such breach, without requiring
the consent of or any other action by the other Party hereto. FURTHERMORE, EACH
OF THE PARTIES HERETO (A) IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY AND (B)
AGREES TO WAIVE ANY BONDING REQUIREMENT UNDER ANY APPLICABLE LAW, IN THE CASE
ANY OTHER PARTY SEEKS TO ENFORCE THE TERMS BY WAY OF EQUITABLE RELIEF. THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION
AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW PRINCIPLES OF SUCH STATE.
8.    Expenses.
Each Party shall each be responsible for its own fees and expenses incurred in
connection with the negotiation, execution and effectuation of this Agreement
and the transactions contemplated hereby, including, but not limited to, any
matters related to the 2016 Annual Meeting.
9.    Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. It is hereby stipulated and declared to be the intention of the
Parties that the Parties would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which may be hereafter
declared invalid, void or unenforceable. In addition, the Parties agree to use
their best efforts to agree upon and substitute a valid and enforceable term,
provision, covenant or restriction for any of such that is held invalid, void or
enforceable by a court of competent jurisdiction.
10.    Notices.
Any notices, consents, determinations, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending Party); or (iii) one business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
Party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Ambac Financial Group, Inc.
One State Street Plaza, 16th Floor
New York, New York
Facsimile No.: (212) 208-3384
Attention: General Counsel

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With copies (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Facsimile No.: (212) 403-2000
Attention: Mark Gordon
If to the Stockholder:
Mark A. Doyle
Sterling Grace Municipal Securities Corp.
100 Summerhill Road
Spotswood, N.J. 08884
Facsimile No.: 732-251-8
Attention: Mark Doyle
Email: Mdoyle@sterlinggrace.org
11.    Applicable Law.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware without reference to the conflict of laws
principles thereof that would result in the application of the laws of another
jurisdiction. Each of the Parties hereto irrevocably agrees that any legal
action or proceeding with respect to this Agreement and the rights and
obligations arising hereunder, or for recognition and enforcement of any
judgment in respect of this Agreement and the rights and obligations arising
hereunder brought by the other Party hereto or its successors or assigns, shall
be brought and determined exclusively in the Court of Chancery of the State of
Delaware (or, if any such court declines to accept jurisdiction over a
particular matter, any state or federal court within the State of Delaware) and
any appellate court therefrom. Each of the Parties hereto hereby irrevocably
submits with regard to any such action or proceeding for itself and in respect
of its property, generally and unconditionally, to the personal jurisdiction of
the aforesaid courts and agrees that it will not bring any action relating to
this Agreement in any court other than the aforesaid courts. Each of the Parties
hereto hereby irrevocably waives, and agrees not to assert in any action or
proceeding with respect to this Agreement, (i) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason,
(ii) any claim that it or its property is exempt or immune from jurisdiction of
any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise) and (iii) to the
fullest extent permitted by applicable legal requirements, any claim that (A)
the suit, action or proceeding in such court is brought in an inconvenient
forum, (B) the venue of such suit, action or proceeding is improper or (C) this
Agreement, or the subject matter of this Agreement, may not be enforced in or by
such courts.
12.    Affiliates and Associates. The obligations of the Stockholder herein
shall be understood to apply to each of its Affiliates. The Stockholder shall
cause its Affiliates and shall use reasonable best efforts to cause its
Associates to comply with the terms of this Agreement; provided that, the
foregoing notwithstanding, the Stockholder shall be severally responsible for
any breach or failure to comply on the part of any of its Affiliates or
Associates. As used in this Agreement, the terms “Affiliate” and “Associate”
shall have the respective meanings set forth in Rule 12b-2 promulgated by the
Securities and Exchange Commission under the Exchange Act, and shall include all
persons or entities that at any time during the term of this Agreement become
Affiliates or Associates of any person or entity referred to in this Agreement
(provided that, for purposes of this Agreement, neither “Affiliate” nor
“Associate” shall include any natural person, and, provided further, that
neither such term shall include any entity whose equity securities are
registered under the Exchange Act (or are publicly traded in a foreign
jurisdiction), solely by reason of the fact that a principal of the Stockholder
serves as a member of its board of directors or similar governing body, unless
the Stockholder otherwise controls such entity (as the term “control” is defined
in Rule 12b-2 promulgated by the SEC under the Exchange Act) and no entity shall
be an Associate solely by reason of clause (1) of the definition of Associate in
Rule 12b-2 if it is not otherwise an Affiliate). The Stockholder and the

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Company shall each be responsible for any breach of the terms of this Agreement
by such persons, as applicable. The Company shall cause its directors, officers
and controlled Affiliates to comply with the terms of this Agreement.
13.    Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the Parties and
delivered to the other Party (including by means of electronic delivery or
facsimile).
14.    Entire Agreement; Amendment and Waiver; Successors and Assigns; Third
Party Beneficiaries. This Agreement contains the entire understanding of the
Parties hereto with respect to its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
between the Parties other than those expressly set forth herein. No
modifications of this Agreement can be made except in writing signed by an
authorized representative of each the Parties. No failure on the part of either
Party to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of such right, power or remedy by such Party preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law. The terms and conditions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the Parties hereto
and their respective successors, heirs, executors, legal representatives, and
permitted assigns. No Party shall assign this Agreement or any rights or
obligations hereunder without, with respect to either Party, the prior written
consent of such Party . This Agreement is solely for the benefit of the Parties
hereto and is not enforceable by any other persons.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized signatories of the Parties as of the date first above written.
Sterling Grace Municipal Securities Corp.
 
 
 
By:
/s/ Mark A. Doyle
 
Name:
Mark A. Doyle
 
Title
President

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AMBAC FINANCIAL GROUP, INC.
 
 
 
By:
/s/ Stephen M. Ksenak
 
Name:
Stephen M. Ksenak
 
Title
Senior Managing Director and General Counsel

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EXHIBIT A
365,130 Ambac Financial Group Warrants
Surplus Notes issued from the Segregated Account with par value $14,683,336
(prior to the factor) (CUSIP 023138AA8)
Ambac Municipal Bonds insured by the General Account in various amounts

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