Exhibit 10.45

AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT

AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT (this “Agreement”), made as
of [            ], 2007, by and between AMBAC FINANCIAL GROUP, INC., a Delaware
corporation (the “Company”), and the executive officer named on the signature
page of this Agreement (the “Executive”).

W I T N E S S E T H:

WHEREAS, the Executive is currently a valued key executive of the Company or one
of its Affiliates (as defined below); and

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors
of the Company (the “Board”), recognizes that in the event of a future change in
control of the Company, or any threatened change in control, uncertainty and
questions could rise among management and could result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders; and

WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel,
such as the Executive, in the event of any actual or threatened change in
control by providing for the payment of severance and other benefits in the
event of the Executive’s termination of employment following a change in
control; and

WHEREAS, the Company and the Executive have previously entered into a Management
Retention Agreement intended to achieve the purposes described in the foregoing
Whereas clauses and now wish to amend and restate such Agreement so that its
application does not subject the Executive to interest or additional tax under
Section 409A of the Internal Revenue Code of 1986, as amended (together with the
rules, regulations and guidance thereunder, the “Code”);

NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:

1. Employment and Duties.

The Company hereby agrees to employ the Executive in the capacity indicated on
the signature page of this Agreement (or such other, superior position to which
the Executive may be promoted by the Company in its discretion), and the
Executive hereby accepts such employment. During the Term, as defined in
Section 2 below, the Executive shall have such duties as may be assigned to the
Executive from time to time by the Board or the Board’s designee which are
commensurate with the duties of the Executive in the capacity indicated on the
signature page of this Agreement (or such other, superior position to which the
Executive may be promoted by the Company in its discretion). The Executive shall
devote substantially all his business time, attention, skill and efforts during
the Term to the faithful performance of his duties hereunder and shall not
accept employment elsewhere during the Term.

2. Term.

The term of the Executive’s employment under this Agreement (the “Term”) shall
commence on the date of any Change in Control (as defined in Section 8(i) of
this Agreement)

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occurring after the date hereof and shall continue in effect through the third
anniversary thereof. Anything in this Agreement to the contrary notwithstanding,
if a Change in Control occurs and if the Executive’s employment with the Company
is terminated prior to the date on which the Change in Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect a Change in Control or (ii) otherwise arose in connection
with or anticipation of a Change in Control, then for all purposes of this
Agreement the Term shall be considered to have commenced on the date immediately
prior to the date of the Executive’s termination of employment, rather than on
the date of such Change in Control. The provisions of this Agreement shall
continue in effect beyond the Term to the extent necessary to carry out the
intentions of the parties hereto.

3. Compensation.

During the Term, the Executive shall be entitled to the following compensation
for his services to the Company:

(a) Base Salary. The Company shall pay, and the Executive shall accept, a base
salary (the “Base Salary”) at a rate no less than the Executive’s base salary in
effect immediately prior to the Change in Control, subject to increase in
accordance with the immediately succeeding sentence. The Base Salary shall be
payable biweekly in equal installments (or if the Company alters its payroll
policy, in accordance with the Company’s customary payroll policies in force at
the time of payment, but no less frequently than monthly), less any required or
authorized payroll deductions. The Base Salary shall be reviewed at least
annually by the Committee and may be increased, but not decreased, to reflect
the Executive’s performance and shall be increased to provide the Executive with
such other increases as shall be consistent with increases in base salary
awarded in the ordinary course of business to other key executives of the
Company or of any Affiliate.

(b) Cash Bonus. In addition to the Base Salary, the Executive shall be paid for
each full or partial fiscal year of the Company during the Term, an annual cash
bonus (the “Bonus”) pursuant to the current bonus and incentive plans of the
Company, as may be amended or supplemented by the Company during the Term;
provided, however, that such annual Bonus shall in no event be less than 70% of
the Base Salary payable to the Executive for the relevant fiscal year. Bonuses
shall be paid in cash to the Executive no later than 30 days following the close
of each fiscal year during and immediately following the Term.

(c) Equity Awards. Upon the occurrence of a Change in Control, the Executive
shall be fully vested in all stock options, restricted stock, restricted stock
units and any other awards theretofore awarded to him under the Ambac Financial
Group, Inc.’s 1997 Equity Plan, as amended (the “1997 Equity Plan”), or any
successor thereto, on or after January 1, 1998 provided, however, that if any
Person (as defined in Section 8 hereof) commences a tender offer for shares of
the Company’s common stock, par value $0.01 per share (the “Common Stock”),
which, if successfully completed, would result in a Change in Control, then the
Executive shall be fully vested in all such stock options, restricted stock
units and any other such awards, and any such awards that by their terms are to
be paid or settled by the delivery of shares of Common Stock without the payment
of any additional consideration by the Executive shall be so paid or settled,
immediately prior to the scheduled expiration of such tender offer, and the
Company shall have instituted procedures to enable the Executive, if he so
desires, to tender the shares issued upon the exercise of such stock options or
delivered in payment or settlement of such restricted stock units or other
awards into such offer.

(d) Incentive, Savings and Retirement Plans. In addition to the Base Salary and
Bonuses payable pursuant to this Agreement, the Executive shall be entitled to
participate in incentive, savings and retirement plans and programs, whether
qualified or non-qualified, of the

 

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Company and its Affiliates applicable to other key executives (including,
without limitation, the following plans of the Company and its Affiliates: the
1997 Equity Plan, the Ambac Financial Group, Inc. Savings Incentive Plan, the
Ambac Financial Group, Inc. 1997 Equity Plan - Senior Officer Deferred
Compensation Sub-Plan of the 1997 Equity Plan, the Ambac Financial Group, Inc.
Non-Qualified Savings Incentive Plan or substantially equivalent successor or
substitute plans), providing, in each case, a level of compensation (including
target payouts, where applicable) and benefits no less favorable than in effect
immediately prior to the Change in Control. To the extent applicable, the
benefits provided to the Executive pursuant to this Section 3(d) shall be
provided and paid in compliance with the relevant requirements of Section 409A
of the Code.

(e) Welfare Benefit Plans. The Executive and/or the Executive’s family, as the
case may be, shall be eligible for participation in and shall receive all
benefits under each welfare benefit plan of the Company applicable to other
employees of the Company generally, including, without limitation, all medical,
dental, disability, group life, accidental death and travel accident insurance
plans and programs of the Company and its Affiliates, upon terms, and at a level
of participation, no less favorable than applicable to other similarly situated
employees of the Company and its Affiliates.

(f) Expenses. The Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by him in the performance of his duties for
the Company which shall be paid to him in accordance with the policies and
procedures of the Company as in effect at any time thereafter with respect to
other similarly situated employees of the Company and its Affiliates.

(g) Fringe Benefits. The Executive shall be entitled to fringe benefits on the
same terms as in effect immediately prior to the Change in Control.

(h) Office and Support Staff. The Executive shall be entitled to an office or
offices of a size and with furnishings and other amenities, and to secretarial
and other assistance, at least equal to those used by the Executive immediately
prior to the Change in Control.

(i) Vacation. The Executive shall be entitled to four weeks of paid vacation per
year, or such longer period as the Company shall institute for senior
executives, and paid holidays in accordance with the policies of the Company as
in effect at any time.

(j) Application of Severance Policies After the Term. Upon the expiration of the
Term, the Executive shall become a participant in the most favorable severance
policy applicable to similarly situated executives of the Company and its
Affiliates (other than as agreed to as part of individual employment
agreements), with all years of service with the Company and any Affiliate
counted for purposes of the calculation of such severance benefits.

4. Termination of Employment.

(a) Termination for Cause; Resignation without Good Reason. The Company may
terminate the Executive’s employment hereunder for Cause (as defined in
Section 8(a) of this Agreement). If the Executive’s employment is terminated by
the Company for Cause, or by the Executive for reasons other than Good Reason
(as defined in Section 8(b) of this Agreement) prior to the expiration of the
Term, the Company shall be obligated to make payment of any Compensation (as
defined in Section 8(h) of this Agreement) earned prior to the Date of
Termination (as defined in Section 8(d) of this Agreement) but not yet paid to
the Executive and any payment from any employee benefit plan described in
Section 3 of this Agreement which shall be paid in accordance with such plan and
the continuation of coverage under any insurance program as required under any
such benefit plan or which may be required by law. The Executive shall also be
entitled to the

 

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payment of any Bonus earned but not yet paid, including, without limitation, any
deferred Bonus, and the pro rata amount of the guaranteed minimum Bonus under
Section 3(b) of this Agreement if the Date of Termination occurs before the end
of any fiscal year. Except as provided above, the Company shall not be obligated
to make any additional payments of Compensation or benefits specified in
Section 3 of this Agreement for any periods after the Date of Termination.

(b) Resignation for Good Reason; Termination without Cause. If the Executive’s
employment is terminated by the Executive for Good Reason or by the Company
without Cause, in either case at any time prior to the expiration of the Term,
the Executive shall be entitled to the following benefits:

(i) In addition to the payment of all Base Salary and any Bonus earned but not
paid, or a pro rata portion of the guaranteed minimum Bonus under Section 3(b)
of this Agreement if the Date of Termination occurs prior to the end of any
fiscal year, on a date (the “Payment Date”) that shall be determined by the
Company and shall be within sixty (60) days following the date of the
Executive’s Separation from Service (as defined in Section 8) the Company shall
make a lump sum payment to the Executive equal to two times the sum of:

(x) his highest Base Salary, plus

(y) the highest Bonus percentage paid or payable to the Executive at any time
prior to his Date of Termination times his highest Base Salary

(the sum of the amounts described in the foregoing clauses (x) and (y) being
referred to as the “Reference Amount”). For purposes of calculating the
Reference Amount, “Bonus” shall include cash bonus, including any portion of
cash bonus that is deferred at the election of the Executive (including
deferrals in the form of restricted stock or restricted stock units or other
awards granted in lieu of cash), but shall exclude the value of any other
awards.

(ii) On the Payment Date, the Company shall make a lump sum payment to the
Executive equal to the amount that the Company would have contributed for the
Executive’s account under the Ambac Financial Group, Inc. Savings Incentive Plan
(or any successor plan) (the “SIP”) in respect of the two years following the
Termination Date, based on (A) the formula for determining employer
contributions in effect on the Termination Date and (B) the Base Salary (and, if
such formula takes account of bonus compensation, the Bonus) used for purposes
of determining the Reference Amount, and calculated without giving effect to the
limitations provided for in Sections 401(a)(17) and 415 of the Code or any
successor provisions thereto.

(iii) In accordance with the terms of the Ambac Financial Group, Inc.
Non-Qualified Savings Incentive Plan (which is a nonqualified plan maintained by
the Company and its Affiliates to provide benefits in excess of those permitted
under the Code to be provided by the SIP), on the date that is six months and
one day following the date that the Executive incurs a Separation from Service,
the Executive shall receive a lump sum payment of his account balance. The
amount of such distribution shall be based upon the Executive’s account balance
as of the date of the Executive’s Separation from Service.

(iv) For a period of two years following the Date of Termination (the
“Continuation Period”), the Executive and his dependents, if any, shall continue
to participate (at no greater expense to them than was the case for such
coverage prior to his termination) in the employee benefit arrangements
described in Section 3(e) and 3(g) above, provided, however, that the benefits
described in Section 3(e) shall cease to the extent the Executive begins
coverage under plans of a subsequent employer.

 

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(v) At the end of the Continuation Period, the Executive and his family shall be
entitled for the remainder of his life to retiree medical and dental benefits
under the applicable plans and programs of the Company as if he retired on the
last day of the Continuation Period, with such benefits to commence immediately
at the end of the Continuation Period and with the amount of contribution by the
Executive to be no greater than that of any other employee of the Company who
had retired on the last day of the Continuation Period (it being understood and
agreed that contribution rates may be changed, and the terms of such benefits
may be modified, to the extent permitted under the relevant plans, from those in
effect on the date hereof).

(vi) During the Continuation Period, the Company shall provide the Executive
with reasonable individual outplacement services and financial planning at the
Company’s expense.

(vii) To the extent not previously vested pursuant to Section 3(c) above, the
Executive shall be fully vested in all stock options, restricted stock,
restricted stock units and any other awards theretofore awarded to him under the
Company’s 1991 Stock Incentive Plan, as amended, or the 1997 Equity Plan, or any
successor thereto.

(viii) The Executive shall receive all amounts due to him under any compensatory
plan or arrangement of the Company and not specifically addressed above, in
accordance with the terms of the relevant plan or arrangement.

In the interest of clarity, it is noted that this Section 4(b) shall not apply
in the event the Executive’s employment terminates by reason of death, Permanent
Disability or Retirement, and that the consequences of such terminations of
employment shall instead be governed by Section 4(c), 4(d) or 4(e), as
applicable.

(c) Death Before End of Term. If the Executive dies prior to the expiration of
the Term, the Company shall be under no obligation to make additional payments
of the Compensation and benefits described in Section 3 of the Agreement to the
Executive’s estate after the Date of Termination except, however, for any
Compensation earned prior to the Date of Termination but not yet paid,
including, without limitation, any deferred Bonus and the pro rata amount of the
guaranteed minimum Bonus under Section 3(b) of this Agreement if the Date of
Termination occurs before the end of a fiscal year, and all benefits payable
under the various plans described in Section 3 of this Agreement, which shall be
paid in accordance with the terms of all such applicable plans. The Company
shall also continue to provide any benefits to the Executive’s survivors as
required by law.

(d) Disability. In the event of the Executive’s Permanent Disability (as defined
in Section 8(h) of this Agreement) prior to the expiration of the Term, the
Executive’s employment shall terminate on the date specified in the definition
of “Separation from Service” set forth in Section 8(j) of this Agreement. In
that event, the Executive shall be entitled to continue to receive payment in a
lump sum of the Compensation and benefits described in Section 3 of the
Agreement that the Executive would have earned through the end of the Term had
his employment not been terminated, less the amount of any payment to the
Executive on account of disability from any employer sponsored disability
insurance plan. The Company shall make such lump sum payment to the Executive on
a date that shall be determined by the Company and that shall be within sixty
(60) days following the date of the Executive’s Separation from Service. In
addition, the Executive shall receive all benefits payable under the various
plans described in Section 3 of this Agreement, which shall be paid in
accordance with the terms of all such applicable plans.

 

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(e) Retirement. The Executive may terminate his employment on account of
Retirement (as defined in Section 8(f) of this Agreement). The Executive shall
not be entitled to any further payments of Compensation or other benefits
provided under Section 3 of this Agreement after the Date of Termination, other
than any retirement benefit payments from any employer sponsored plan, any
Compensation earned prior to the date of Retirement but not yet paid, including,
without limitation, any deferred Bonus and the pro rata amount of the guaranteed
minimum Bonus under Section 3(b) of this Agreement if the Date of Termination
occurs before the end of a fiscal year, and all benefits payable under the
various plans described in Section 3 of this Agreement, which shall be paid in
accordance with the terms of all such applicable plans.

(f) Notice of Termination Required. No termination of employment by the
Executive or by the Company pursuant to this Section 4 shall be effective unless
the terminating party shall have delivered a Notice of Termination (as defined
in Section 8(c) of this Agreement) to the other party.

(g) Nature of Payments. Any amounts due under this Section 4 are in the nature
of severance payments, liquidated damages, or both, and are not in the nature of
a penalty.

5. No Obligation to Mitigate.

Following termination of the Executive’s employment, the Executive shall be
under no obligation to seek other employment or otherwise to mitigate damages
resulting from his termination of employment. In addition, there shall be no
offset against amounts due to the Executive under any provision of this
Agreement, on account of any remuneration to which the Executive becomes
entitled from any Person for whom the Executive subsequently provides services
(as an officer, director, employee, independent contractor or otherwise), other
than as provided in Section 4(b)(v) relating to continuation of benefits
coverage.

6. Certain Additional Payments by the Company.

(a) Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 6) (a “Payment”) would be subject to the excise tax imposed by the Code
or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise Tax”), then the Executive
shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.

(b) Subject to the provisions of Section 6(c), all determinations required to be
made under this Section 6, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by KPMG LLP or such
other certified public accounting firm as may be jointly designated by the
Executive and the Company (the “Accounting Firm”), which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time

 

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as is requested by the Company. All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 6, shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm’s determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 6(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprize the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:

(i) give the Company any information reasonably requested by the Company
relating to such claim,

(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,

(iii) cooperate with the Company in good faith in order effectively to contest
such claim, and

(iv) permit the Company to participate in any proceedings relating to such
claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 6(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further

 

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provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 6(c), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of Section 6(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

(e) In the event any provision of this Agreement results in the Executive
incurring additional taxes (including interest and penalties with respect
thereto) under Section 409A of the Code (such additional tax, including such
interest and penalties, being referred to as “Section 409A Tax”) on any
compensation to which the Executive is entitled pursuant to this Agreement, then
the Executive shall be entitled to receive an additional payment (a “Section
409A Gross-Up Payment”) in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) imposed upon the Section 409A Gross-Up
Payment, the Executive retains an amount of the Section 409A Gross-Up Payment
equal to the Section 409A Tax that he incurs. The Executive shall notify the
Company promptly if he believes he has incurred Section 409A Tax on any
compensation to which he is entitled under this Agreement.

(f) Notwithstanding the other provisions of this Section 6 and of Section 18(b),
all Gross-Up Payments, Underpayments and Section 409A Gross-Up Payments shall be
made to the Executive not later than the end of the calendar year following the
year in which the Executive remits the related taxes and any reimbursement of
the costs and expenses described in Section 6(c) shall be paid not later than
the end of the calendar year following the year in which there is a final and
nonappealable resolution of, or the taxes are remitted that are the subject of,
the related claim.

7. Protection of the Company’s Interests.

(a) Confidential Information. Except for actions taken in the course of his
employment hereunder or as required by law, at no time shall the Executive
divulge, furnish or make accessible to any person any information of a
confidential or proprietary nature obtained by him while in the employ of the
Company. Upon termination of his employment with the Company, the Executive
shall return to the Company all such information which exists in written or
other physical form and all copies thereof in his possession or under his
control.

(b) Remedies. The Executive acknowledges that a breach of any of the covenants
contained in this Section 7 may result in material irreparable injury to the
Company or its Affiliates for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that, in
the event of such breach or threat thereof, the Company shall be entitled, in
addition to any other rights or remedies it may have, to obtain a temporary
restraining

 

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order and/or a preliminary or permanent injunction enjoining or restraining the
Executive from engaging in activities prohibited by this Section 7. In no event,
however, shall an asserted violation of the provisions of this Section 7
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement, unless the Company shall have first obtained
a final decision, in an arbitration conducted in accordance with Section 17 of
this Agreement, finding that the Executive has materially breached the
provisions of this Section 7.

8. Definitions.

As used in this Agreement, the following terms shall have the following
meanings:

(a) Affiliate. The term “Affiliate” includes any company or other entity or
person controlling, controlled by or under common control with the Company.

(b) Cause. Each of the following shall constitute “Cause”:

(i) the willful commission by the Executive of acts that are dishonest and
demonstrably and materially injurious to the Company or any of its Affiliates,
monetarily or otherwise;

(ii) the conviction of the Executive for a felonious act resulting in material
harm to the financial condition or business reputation of the Company or any of
its Affiliates; or

(iii) a material breach of any of the covenants set forth in Section 7 of this
Agreement.

Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless there shall have been delivered to him, together
with a Notice of Termination, a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths (3/4ths) of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth above in clause (i), (ii) or (iii) above and specifying the
particulars thereof in detail.

(c) Change in Control. For purposes of this Agreement, a “Change in Control”
shall be deemed to occur on the date on which one of the following events
occurs:

(i) the acquisition by any Person of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of
20% or more of the Common Stock then outstanding, but shall not include any such
acquisition by:

(A) the Company;

(B) any Subsidiary of the Company;

(C) any employee benefit plan of the Company or of any Subsidiary of the
Company;

(D) any Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan;

 

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(E) any Person who as of January 31, 1996 was the beneficial owner of 15% or
more of the shares of Common Stock outstanding on such date unless and until
such Person, together with all affiliates and associates of such Person, becomes
the beneficial owner of 25% or more of the shares of Common Stock then
outstanding whereupon a Change in Control shall be deemed to have occurred; or

(F) any Person who becomes the Beneficial Owner of 20% or more, or, with respect
to a Person described in clause (E) above, 25% or more, of the shares of Common
Stock then outstanding as a result of a reduction in the number of shares of
Common Stock outstanding due to the repurchase of shares of Common Stock by the
Company unless and until such Person, after becoming aware that such Person has
become the beneficial owner of 20% or more, or 25% or more, as the case may be,
of the then outstanding shares of Common Stock, acquires beneficial ownership of
additional shares of Common Stock representing 1% or more of the shares of
Common Stock then outstanding, whereupon a Change in Control shall be deemed to
have occurred; or

(ii) individuals who, as of January 29, 1997, constitute the Board, and
subsequently elected members of the Board whose election is approved or
recommended by at least a majority of such current members or their successors
whose election was so approved or recommended (other than any subsequently
elected members whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board), cease for any reason to
constitute at least a majority of such Board; or

(iii) approval by the stockholders of the Company of (A) a merger or
consolidation of the Company with any other corporation, (B) the issuance of
voting securities of the Company in connection with a merger or consolidation of
the Company (or any Subsidiary) pursuant to applicable stock exchange
requirements, or (C) sale or other disposition of all or substantially all of
the assets of the Company or the acquisition of assets of another corporation
(each, a “Business Combination”), unless, in each case, immediately following
such Business Combination, all or substantially all of the individuals and
entities who were the beneficial owners of the Common Stock outstanding
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 70% of the then outstanding shares of common stock and 70%
of the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Common Stock.

As used herein, “Person” means any individual, firm, corporation, partnership or
other entity, and “Subsidiary” means (i) a corporation or other entity with
respect to which the Company, directly or indirectly, has the power, whether
through the ownership of voting securities, by contract or otherwise, to elect
at least a majority of the members of such corporation’s board of directors or
analogous governing body, or (ii) any other corporation or other entity in which
the Company, directly or indirectly, has an equity or similar interest and which
the Committee designates as a Subsidiary for purposes of this Agreement.

(d) Compensation. The term “Compensation” shall mean all amounts paid or payable
to the Executive pursuant to Sections 3(a), 3(b) and 3(c) of this Agreement.

 

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(e) Date of Termination. “Date of Termination” shall mean:

(i) in the case of Retirement or death, the date of such event;

(ii) if the Executive’s employment is terminated for Permanent Disability,
thirty (30) days after a Notice of Termination is given (provided that the
Executive shall not have returned, to the full-time performance of the
Executive’s duties during such thirty (30) day period); and

(iii) if the Executive’s employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company (whether with or without Cause) shall not be less than thirty
(30) days, and in the case of a resignation by the Executive (whether with or
without Good Reason) shall not be less than thirty (30) nor more than sixty
(60) days, from the date such Notice of Termination is given).

(f) Good Reason. For purposes of this Agreement, “Good Reason” shall mean,
without the Executive’s express written consent, any of the following:

(i) a substantial adverse alteration in the nature or status of the Executive’s
authority, duties or responsibilities;

(ii) a material diminution in the Executive’s base compensation (including as
“base compensation” any amount permitted to be so included under Treas. Reg.
§1.409A-(n)(2)(ii)(A) or any successor provision);

(iii) the relocation of the office of the Executive to a location more than 25
miles from the location where the Executive is employed immediately prior to the
Change in Control;

(iv) Any other action or inaction that constitutes a material breach by the
Company of this Agreement.

In connection with the foregoing, the Executive and the Company acknowledge and
agree that the Compensation and other benefits provided for in this Agreement,
and the obligations of the Company pursuant to Section 9, are material terms
hereof, and that the Company’s breach of any such provision (excluding for this
purpose any isolated, insubstantial and inadvertent breach not taken in bad
faith) will be considered a material breach of this Agreement. None of the
events or circumstances set forth in clauses (i) through (iv) above shall
constitute Good Reason unless the Executive has provided notice to the Company
of such event or circumstances within a period of 90 days of the initial
existence of the event or circumstance, and the Company has failed to remedy
such event or circumstances to the reasonable satisfaction of the Executive
within 30 days of its receipt of such notice. In addition, the Executive’s
Separation from Service will not be considered to have been for Good Reason
unless it occurs not more than two years following the initial existence of the
event or circumstance that constitutes Good Reason. The fact that an Executive
is eligible for Retirement shall not cause the Executive’s termination of
employment to fail to qualify as a Separation from Service for Good Reason.

(g) Notice of Termination. For purposes of this Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and, in the case of a
termination of the Executive’s employment by the Company for Cause or by the
Executive for Good Reason, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated.

 

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(h) Permanent Disability. “Permanent Disability” shall mean a disability within
the meaning of the long-term disability plan of the Company which covers the
Executive immediately prior to the Change in Control.

(i) Retirement. “Retirement” shall mean the voluntary termination of the
Executive’s employment by the Executive at age 55 or older after at least five
years of continuous service with the Company and its subsidiaries (including
service with a corporation or other entity acquired by the Company).

(j) Separation from Service. “Separation from Service” shall mean either (i) the
termination of the Executive’s employment with the Company and its affiliates,
provided that such termination of employment meets the requirements of a
separation of service determined using the default provisions set forth in
Treasury Regulation §1.409A-(1)(h) or the successor provision thereto or
(ii) such other date that constitutes a separation from service with the Company
and its affiliates meeting the requirements of the default provisions set forth
in Treasury Regulation §1.409A-(1)(h) or the successor provision thereto;
provided, however, that, in the event of the Executive’s Permanent Disability,
“Separation from Service” means the date that is 29 months after the first day
of disability. For purposes of this definition, “affiliate” means any
corporation that is in the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company and any trade or business
that is under common control with the Company (within the meaning of
Section 414(c) of the Code), determined in accordance with the default provision
set forth in Treasury Regulation §1.409A-(1)(h)(3).

9. Successors; Binding Agreement.

(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled hereunder if the Executive had
terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.

(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive’s devisee,
legatee or other designee or, if there is no such designee, to the Executive’s
estate.

10. Indemnification.

The Company will indemnify the Executive to the fullest extent permitted
(including payment of expenses in advance of final disposition of a proceeding)
by the laws of the State of Delaware, as in effect at the time of the subject
act or omission, or by the Certificate of Incorporation and By-Laws of the
Company, as in effect at such time or on the date of this Agreement, whichever
affords or afforded greatest protection to the Executive, and the Executive
shall be entitled to the protection of any insurance policies the Company may
elect to maintain generally for the benefit of its directors and officers (and
to the extent the Company maintains such

 

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an insurance policy or policies, the Executive shall be covered by such policy
or policies, in accordance with its or their terms, to the maximum extent of the
coverage provided for any Company officer or director), against all costs,
charges and expenses whatsoever incurred or sustained by him or his legal
representatives at the time such costs, charges and expenses are incurred or
sustained, in connection with any action, suit or proceeding to which he may be
made a party by reason of his being or having been a director, officer or
employee of the Company or any subsidiary thereof, or his serving or having
served any other enterprise as a director, officer or employee at the request of
the Company.

11. Notices.

Any notice hereunder by either party to the other shall be given in writing by
personal delivery, telex, telecopy or certified mail, return receipt requested,
to the address first set forth below in the case of the Company, and to the
address set forth on the signature page hereof in the case of the Executive (or,
in either case, to such other address as may from time to time be designated by
notice by any party hereto for such purpose):

Ambac Financial Group, Inc.

One State Street Plaza

New York, New York 10004

Attn: Chief Executive Officer

Notice shall be deemed given, if by personal delivery, on the date of such
delivery or, if by telex or telecopy, on the business day following receipt of
answer back or telecopy confirmation or, if by certified mail, on the date shown
on the applicable return receipt.

12. Amendment and Waiver.

No provision of this Agreement may be amended, modified, waived or discharged
unless such amendment, modification, waiver or discharge is agreed to in writing
and signed by the Executive and such officer as may be specifically designated
by the Board; provided, however, that the Company and the Executive each agrees
to execute and deliver any reasonable amendment to this Agreement as the Company
or the Executive requests, after consultation with respective counsel, to comply
with Section 409A of the Code and avoid imposition on the Executive of any
Section 409A Tax; and provided, further, that the Company agrees that any such
amendment shall maintain, to the maximum extent practicable, the original intent
and economic benefit to the Executive of the applicable provision without
violating the provisions of Section 409A of the Code. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.

13. Merger of Prior Negotiations.

This Agreement sets forth all of the promises, agreements, conditions and
understandings between the parties hereto respecting the subject matter hereof
and supersedes all prior negotiations, conversations, discussions,
correspondence, memoranda and agreements between the parties concerning such
subject matter.

 

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14. Partial Invalidity.

If the final determination of a court of competent jurisdiction or arbitrator
declares, after the expiration of the time within which judicial review (if
permitted) of such determination may be perfected, that any term or provision
hereof is invalid or unenforceable, (a) the remaining term and provisions hereof
shall be unimpaired and (b) the invalid or unenforceable term or provision shall
be deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.

15. Governing Law; Code Provisions.

(a) This Agreement is to be governed by and interpreted in accordance with the
laws of the State of New York.

(b) All references to sections of the Code shall be deemed also to refer to any
successor provisions to such sections and the applicable regulations and
guidance thereunder.

16. Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.

17. Arbitration; Legal Fees.

(a) Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in New York, New York in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to seek
specific performance of the Executive’s right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.

(b) The Company shall reimburse the Executive for all legal fees and expenses
incurred by the Executive in connection any claim to enforce his rights under
this Agreement; provided, however, that notwithstanding Section 18(b), no
reimbursement pursuant to this Section 17(b) shall be paid in respect of an
expense incurred after the last day of the sixth (6th) calendar year following
the calendar year in which the applicable statute of limitations for breach of
contract claims expires; and provided, further, that if, in an arbitration
conducted in accordance with subsection (a) above, it is determined that the
Executive has acted in bad faith in asserting one or more claims under this
Agreement, the Executive shall reimburse the Company for all legal fees and
expenses previously paid to him pursuant to this Section 17(b) in connection
therewith.

(c) In addition to the reimbursement provided for in subsection (b) above,
within five (5) business days following a Change in Control, the Company shall
make a lump-sum payment to the Executive of $15,000 intended to cover legal,
accounting and financial expenses incurred after a Change in Control in
connection with this Agreement (whether or not the Executive’s employment is
terminated), including without limitation in connection with financial planning
and the investigation of the Executive’s rights hereunder.

 

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18. Section 409A Provisions

(a) This Agreement is intended to satisfy the requirements of Section 409A of
the Code with respect to amounts subject thereto and shall be interpreted and
construed and shall be performed by the parties consistent with such intent, and
the Company shall have no right to accelerate any payment or the provision of
any benefits under this Agreement or to make or provide any such payment or
benefits if such payment or provision of such benefits would, as a result, be
subject to tax under Section 409A of the Code.

(b) Except as expressly provided otherwise herein, no reimbursement payable to
the Executive pursuant to any provisions of this Agreement or pursuant to any
plan or arrangement of the Company covered by this Agreement shall be paid later
than the last day of the calendar year following the calendar year in which the
related expense was incurred, and no such reimbursement during any calendar year
shall affect the amounts eligible for reimbursement in any other calendar year,
except, in each case, to the extent that the right to reimbursement does not
provide for a “deferral of compensation” within the meaning of Section 409A of
the Code.

(c) It is the intention of the parties that all amounts and benefits to which
the Executive becomes entitled upon a Separation from Service by virtue of this
Agreement shall qualify for exemption from Section 409A either as short-term
deferral with the meaning of Treasury Regulation §409A-1(b)(4) (in the case,
without limitation, of payment of the Reference Amount and the amount provided
for in Section 4(b)(ii) and payment of the lump sum benefit provided for in
Section 4(d) following termination of employment by reason of permanent
disability) or otherwise. Notwithstanding the other provisions of this
Agreement, if, as of the date of the Executive’s Separation from Service, the
Executive is a Specified Employee, then, to the extent that this Agreement
provides for a “deferral of compensation” within the meaning of Section 409A of
the Code, the following shall apply:

1) No payment that constitutes a deferral of compensation and that is owed to
the Executive as a result of such Separation from Service shall be made, and no
taxable benefits shall be provided to the Executive (except for any benefits for
which the Executive pays the full premium or other cost (including the Company’s
share thereof)), in each case, during the period beginning on the date the
Executive incurs a Separation from Service and ending on the six-month
anniversary of such date or, if earlier, the date of Executive’s death.

2) On the first business day of the first month following the month in which
occurs the six-month anniversary of the Executive’s Separation from Service or,
if earlier, Executive’s death, the Company shall make a one-time, lump-sum cash
payment to the Executive in an amount equal to the sum of (x) the amounts
otherwise payable to the Executive under this Agreement during the period
described in clause 1 above, (y) the amount paid by the Executive during the
period described in clause 1 above as premium or other cost for benefits and
(z) interest on the foregoing amounts at the applicable federal rate for
instruments of less than one year.

For purposes of this Agreement, “Specified Employee” shall mean each officer of
the Company and its affiliates, up to a maximum of fifty, having annual
compensation in excess of $145,000 (as adjusted), a five percent owner of the
Company and a one percent owner of the Company having annual compensation in
from the Company and its affiliates in excess of $150,000, in each case
determined pursuant to Section 416(i)(1)(A)(i), (ii) or (iii) of the Code
(applied in accordance with the regulations thereunder and disregarding
Section 416(i)(5) of the Code) any time during the 12-month period ending on
December 31st of a calendar year (based on taxable wages as reported in Box 1 of
Form W-2 for the 12-month period ending on December 31st of such calendar year
plus

 

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amounts that would be included in wages for such 12-month period but for pre-tax
deferrals to a tax-favored retirement plan or cafeteria plan or for qualified
transportation benefits) who performed services for the Company and its
affiliates at any time during the 12-month period ending on December 31st of
such calendar year. The Executive shall be treated as a “Specified Employee” for
the 12-month period beginning on March 1st of the calendar year following the
calendar year for which the determination pursuant to this definition is made.

IN WITNESS WHEREOF, the parties hereto, having entered into this Agreement as of
[            ], 2007.

 

AMBAC FINANCIAL GROUP, INC. By:    

 

EXECUTIVE

Name:     Title:     Address:            

 

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