Exhibit 10.1
PREFERRED STOCK REPURCHASE AND SUPPORT AGREEMENT
This PREFERRED STOCK REPURCHASE AND SUPPORT AGREEMENT (as amended, supplemented
or otherwise modified from time to time, and including the exhibits hereto, this
“Agreement”), dated as of June 22, 2018, is entered into by and among Ambac
Assurance Corporation (the “Company”), Ambac Financial Group, Inc. (“AFG”) and
the undersigned holders (each, a “Holder,” and such Holders together, the
“Holders”) of one or more series of the Company’s outstanding Auction Market
Preferred Shares (“AMPS”). The Company, AFG, each Holder, and any subsequent
person or entity that becomes a party hereto in accordance with the terms hereof
are referred to herein as the “Parties” and each individually as a “Party.”
RECITALS:
A.Each Holder is the beneficial owner of one or more series of AMPS as set forth
on such Holder’s signature page to this Agreement. Schedule 1 hereto sets forth
the aggregate liquidation preference of each series of AMPS held by the Holders.
B.Exhibit A hereto (the “Term Sheet”) and the provisions hereof set forth the
key terms of (a) the repurchase by the Company of AMPS owned by the Holders (the
“Repurchase”), and (b) the purchase by AFG of AMPS owned by the Holders (the
“AFG Purchase” and, together with the Repurchase, the “Purchases”), to be
conducted pursuant to transactions exempt from registration under the Securities
Act of 1933, as amended (the “Securities Act”).
C.Pursuant to and subject to the terms of this Agreement, the Holders have
agreed to approve the Purchases and the Charter Amendment at a Special Meeting
of the Company’s shareholders.
D.The Parties have agreed to the terms and conditions of the Purchases set forth
herein and in the Term Sheet.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
Section 1.Definitions. In addition to the terms defined above, as used in this
Agreement, the following terms shall have the meanings specified below:
a.“Agent’s Message” means a message, transmitted by The Depository Trust Company
to, and received by, the exchange agent and forming a part of a book-entry
confirmation, stating that The Depository Trust Company has received from the
tendering participant an express acknowledgment stating: (i) the amount of AMPS
validly tendered by such participant, (ii) that such participant has received a
copy of the offering document and letter of transmittal with respect to any
tender or exchange offer and agrees to be bound by the terms and conditions of
any tender or exchange offer as described in the offering document and letter of
transmittal with respect to any

--------------------------------------------------------------------------------

tender or exchange offer, and (iii) that the Company and AFG may enforce the
terms and conditions of the letter of transmittal with respect to any tender or
exchange offer against such participant.
b.“Articles of Incorporation” means the Company’s Restated Articles of
Incorporation, dated February 13, 2004, as amended by the Articles of Amendment,
dated December 4, 2008, June 7, 2010 and February 16, 2018, as may be further
amended from time to time.
c.“Business Day” means any day other than Saturday, Sunday, and any day that is
a legal holiday or a day on which banking institutions in New York, New York are
required or authorized by law or governmental action to close.
d.“Bylaws” means the Restated Corporate Bylaws of the Company dated May 11,
2012, as amended from time to time.
e.“Closing” means the closing of the Purchases.
f.“Charter Amendment” has the meaning given such term in the Term Sheet.
g.“Closing Date” means the date on which the Closing occurs.
h.“Definitive Documents” means (x) the final minutes or resolutions of the
Special Meeting and related amendment to the Articles of Incorporation (the
“Approval Documentation”), and (y) the offering document for the Purchase Offer
and other documentation for the Purchases (the “Purchase Documentation”), in the
case of each of clauses (x) and (y), substantially on the terms and conditions
set forth herein and in the Term Sheet, and (z) any other documents contemplated
hereby and/or ancillary or incidental to the foregoing or the Term Sheet.
i. “Holder Counsel” means a nationally recognized firm with experience in the
matters described in this Agreement reasonably acceptable to AFG and the
Company; provided that, for the avoidance of doubt, the Company and AFG hereby
acknowledge that Kramer Levin Naftalis & Frankel LLP is acceptable to the
Company and AFG as Holder Counsel.
j.“Fiscal Agency Agreement” means that certain Fiscal Agency Agreement, dated as
of June 7, 2010, as amended on October 3, 2014, between the Company, as Issuer,
and the Bank of New York Mellon, as Fiscal Agent (as amended, modified, or
otherwise supplemented from time to time prior to the date hereof) relating to
the Senior Surplus Notes.
k.“Minimum Participation Condition” has the meaning given to such term in the
Term Sheet.
l. “OCI” means the Wisconsin Office of the Commissioner of Insurance.
m.“Partial Participation Holders” means New Generation Advisors, LLC, IBS
Capital LLC, Wilfrid Investment Partners LP, USDR Investment Management,
Broadbill Partners LLC, Alimco Financial Corporation and Milfam II, L.P.
n.“Proxy” has the meaning given such term in Section 4(b)(2) of this Agreement.

2

--------------------------------------------------------------------------------

o.“Regulator” means each of (i) OCI and (ii) any other regulatory authority with
jurisdiction over the operations of a Party.
p.“Representatives” means a person’s or entity’s former and current officers,
former and current directors, former and current principals, employees, agents,
financial advisors, attorneys, accountants, investment bankers, consultants, and
other professionals, each solely in its capacity as such.
q. “SEC” means the United States Securities and Exchange Commission.
r.“Senior Surplus Notes” means the 5.1% Surplus Notes due June 7, 2020, issued
by the Company pursuant to the Fiscal Agency Agreement.
s.“Signing Date” means the date of the execution of this Agreement, on which
such date holders of at least two-thirds of the aggregate liquidation preference
of AMPS are Parties.
t.“Special Meeting” means the special meeting of the Company’s shareholders
called to vote on the Charter Amendment and, for holders of the AMPS only, the
Purchases.
u.“Transactions” means the Purchases and the Charter Amendment.
Section 2.    Term Sheet. The Term Sheet is expressly incorporated herein and
made a part of this Agreement. The key terms and conditions of the Purchases are
set forth in the Term Sheet.
Section 3.    Definitive Documents; Good Faith Cooperation.
(a)    The Company and AFG hereby covenant and agree to exercise reasonable best
efforts with respect to the pursuit, approval, implementation, and consummation
of the Transactions.
(b)    The Company will request that OCI include a statement in any approval
order provided to the Company confirming that the Senior Surplus Notes provided
as consideration in the Transactions are of the same priority as the existing
Senior Surplus Notes.
(c)    The Parties hereby covenant and agree to use commercially reasonable
efforts with respect to the negotiation, drafting, execution and delivery of the
forms of the Definitive Documents, which shall reflect the terms of this
Agreement and otherwise be in form and substance reasonably satisfactory to each
Party, on or prior to July 6, 2018.
(d)    The Parties hereby covenant and agree not to (i) object to, delay,
impede, or commence any proceeding pertaining to, or take any other action to
interfere, directly or indirectly, in any material respect with the acceptance
or implementation of, the Transactions; (ii) encourage or support any person or
entity to do any of the foregoing, or (iii) in the case of any Holder, exercise
any rights under the Articles of Incorporation, the Fiscal Agency Agreement or
any other agreement with the Company, or instruct any other person or entity to
exercise any such rights, in each case that is inconsistent with this Agreement;
provided, for the avoidance of doubt, this Agreement does not apply to any
securities or other obligations that may be owned by non-affiliated clients of a
Holder.

3

--------------------------------------------------------------------------------

(e)    The Parties hereby agree that no public announcement of the Transactions
or the signing of this Agreement shall be made prior to the fourth Business Day
following signing of this Agreement; provided that the Company and AFG may, in
its sole discretion, make such a public announcement prior to the fourth
Business Day following signing of this Agreement.
(f)    Each Holder hereby covenants and agrees that at the close of business on
the Closing Date it will own less than 5% of AFG’s common stock, par value $0.01
per share (the “Common Stock”), treating (i) all Common Stock or warrants held
by affiliates of such Holder or funds, sponsored products or accounts managed by
such Holder as owned by such Holder and (ii) all warrants that were issued to it
or received by it in the Transactions and held by it at the close of business on
the Closing Date (taking into account the preceding clause (i)) as having been
exercised for cash.
Section 4.    Support for the Transactions.
(a)    AFG and the Company. So long as this Agreement has not been terminated in
accordance with its terms, each of AFG and the Company agrees and covenants that
it will use commercially reasonable efforts to take or cause to be taken all
actions commercially reasonable, necessary and appropriate in furtherance of the
Transactions (provided that commercially reasonable efforts, as used in this
Agreement, shall not require a Party to purchase or sell any securities, incur
any material expense, give up any material rights, incur any material obligation
or support any transaction, except as expressly set forth in this Agreement),
including:
(1)    to commence an offer to all holders of AMPS with respect to the Purchases
on the terms and conditions set forth herein and in the Term Sheet (the
“Purchase Offer”) no later than July 13, 2018;
(2)    to properly notice (the “Notice”), no later than 10 calendar days prior
to expiration of the Purchase Offer (as the expiration date may be extended from
time to time in Ambac’s sole discretion) and hold, on the 10th calendar day (or
the next succeeding business day) after the date of such Notice, one or more
special meetings of holders of AMPS in accordance with the Articles of
Incorporation and Bylaws to permit the effectuation of the Transactions upon
satisfaction or waiver of the conditions thereto as provided in the Term Sheet
and herein;
(3)    to defend in good faith any suit or other legal or administrative
proceeding seeking to interfere with, impair, or impede the Transactions;
(4)    to not directly or indirectly seek, solicit, support or encourage others
to formulate any tender offer, settlement offer, exchange offer, or alternative
transaction for or involving the AMPS other than the Transactions;
(5)    to not object to, nor otherwise commence any proceeding to oppose, the
Transactions or any portion thereof; and

4

--------------------------------------------------------------------------------

(6)    subject to the satisfaction or waiver, in each of AFG’s and the Company’s
discretion, of any conditions precedent to the Transactions, to consummate the
Transactions, including delivery of all securities required to be delivered
therein.
(b)    Holders. So long as this Agreement has not been terminated in accordance
with its terms, each Holder agrees and covenants, as to itself only, that:
(1)    it shall on the Signing Date provide the proxy attached hereto as Exhibit
B (the “Proxy”) with an instruction to vote all of such Holder’s AMPS in favor
of the Purchases and the Charter Amendment, as provided in the Term Sheet;
(2)    subject to the satisfaction or waiver of any conditions precedent to the
Transaction, it shall tender into the Purchase Offer and not withdraw all AMPS
beneficially owned by it, together with properly completed and duly executed
letter(s) of transmittal or Agent’s Message(s) with respect to the AMPS it owns,
pursuant to the terms and subject to the conditions set forth in the Term Sheet
and the Purchase Documentation; provided that, each Partial Participation Holder
shall tender its pro rata portion of 55% of the AMPS beneficially owned by the
Partial Participation Holders to the Company, AFG or any of their respective
affiliates on the Closing Date. If so requested by the Partial Participation
Holders on or prior to the Closing, the Company shall, prior to the Closing,
adjust each Partial Participation Holder’s tendered amount of AMPS such that
each Partial Participation Holder only tenders the greater of (i) its pro rata
portion of AMPS beneficially owned by the Partial Participation Holders
necessary for the total amount of AMPS tendered by holders of AMPS to satisfy
the Minimum Participation Condition and (ii) 25% of AMPS beneficially owned by
the Partial Participation Holder. For the avoidance of doubt, if this Agreement
terminates prior to consummation of the Purchases, Holders shall be permitted to
withdraw AMPS tendered into the Purchase Offer (and such right shall survive
such termination of this Agreement);
(3)    it shall not vote for, consent to, provide any support for, participate
in the formulation of, or solicit or encourage others to formulate any tender
offer, settlement offer, exchange offer, or any alternative transaction for or
involving the AMPS other than the Transactions; and
(4)    it shall not object to, nor otherwise commence any proceeding to oppose,
the Transactions.
Section 5.    Representations and Warranties.
(a)    Each of the Parties, severally and not jointly, represents and warrants
to each of the other Parties that the following statements are true and correct
as of the date hereof:
(1)    Power and Authority. It has all requisite power and authority to enter
into this Agreement and to carry out the transactions contemplated by, and
perform its obligations under, this Agreement and the Term Sheet.
(2)    Authorization. The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly authorized by all
necessary action on its part.

5

--------------------------------------------------------------------------------

(3)    No Conflicts. The execution, delivery, and performance by it of this
Agreement do not and shall not, subject to satisfaction of the conditions set
forth in the Term Sheet, (i) violate any provision of law, rule, or regulation
applicable to it or its certificate of incorporation or by-laws (or other
organizational documents) or (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material contractual obligation to which it is a party.
(4)    Governmental Consents. The execution, delivery, and performance by it of
this Agreement do not and shall not require any registration or filing with,
consent or approval of, notice to, or other action to, with, or by, any federal,
state, or other governmental authority or regulatory body, except filings made,
or such consents or approvals obtained, prior to the date hereof or as may be
necessary or required (a) to comply with such Party’s disclosure obligations
under relevant securities laws or (b) for approval by OCI (including
satisfaction of the conditions set forth in the Term Sheet).
(5)    Binding Obligation. This Agreement is the legally valid and binding
obligation of it, enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or limiting creditors’ rights
generally or by equitable principles relating to enforceability.
(6)    Proceedings. No litigation or proceeding before any court, arbitrator, or
administrative or governmental body is pending against it that would adversely
affect its ability to enter into this Agreement or perform its obligations under
this Agreement and the Term Sheet.
(7)    Negotiations. The consideration that the Company and AFG are willing to
pay and the Holders are willing to accept has resulted from an arm’s-length
negotiation among the Parties.
(b)    Each Holder represents and warrants, severally and not jointly, to each
of the other Parties that the following statements are true, correct, and
complete as of the date hereof:
(1)    Ownership. It is the sole legal and beneficial owner of the AMPS as set
forth on its signature page to this Agreement, free and clear of any pledge,
lien, security interest, charge, claim, proxy, voting restriction, right of
first refusal or other limitation on disposition of any kind, and has made no
prior assignment, sale, participation, grant, conveyance, or other transfer of,
and has not entered into any other agreement to assign, sell, participate,
grant, or otherwise transfer, in whole or in part, any rights, title or
interests in (or portion thereof) such AMPS. It has full power and authority to
act on behalf of, vote and consent to matters concerning such AMPS with respect
to matters relating to the Transactions, and dispose of, exchange, assign and
transfer and accept satisfaction of such AMPS pursuant to the Transactions.
(2)    Laws. It (i) is a sophisticated investor with respect to the transactions
described herein with knowledge and experience in financial and business matters
sufficient to evaluate the merits and risks of owning and investing in
securities similar to the

6

--------------------------------------------------------------------------------

AMPS (including any securities that may be issued in connection with the
Repurchase), making an informed decision with respect thereto, and evaluating
the terms and conditions of this Agreement, and it has made its own analysis and
decision to enter in this Agreement, (ii) is either (x) an “institutional
accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) of
the Securities Act, (y) a “qualified institutional buyer” within the meaning of
Rule 144A of the Securities Act, or (z) a non-U.S. person within the meaning of
Rule 902 of the Securities Act, and (iii) has reviewed AFG’s public filings with
the SEC and other publicly available information regarding the Company and AFG
and has obtained all information it deems necessary or appropriate in order to
enter into this Agreement and make the investment decision contemplated hereby,
and, notwithstanding the potential risks involved in the Purchases, the Holders
desire to consummate the Purchases.
(3)     Solicitation. It engaged in the Transactions without any form of
solicitation being made by either AFG or the Company.
(4)     Representations. It is not relying on any representation, warranty or
covenant made by either AFG or the Company with respect to the Transactions
other than as set forth in this Agreement and acknowledges that AFG and the
Company are relying on its representations, warranties, acknowledgements,
agreements and undertakings in this Agreement in engaging in the purchase of the
AMPS from the Holders, and would not engage in such purchase in the absence of
such representations, warranties, acknowledgements, agreements and undertakings.
(5)    Information. It acknowledges that (i) either or both of the Company and
AFG may possess, whether on the date hereof, the Closing Date or at any other
time, material non-public information regarding the AMPS and/or the Company that
will not be provided to the Holders (“Excluded Information”), (ii) such Excluded
Information may be indicative of a value of the AMPS that is substantially
higher than the consideration offered or otherwise adverse to the Holders’
interest, and, therefore, such information could be material to the Holders’
decision to sell the AMPS and (iii) it has not requested and does not wish to
receive Excluded Information from the Company or from AFG and agrees that
neither the Company nor AFG shall have any liability to it with respect to the
non-disclosure of Excluded Information.
(6)    AFG and Company Purchases. It is aware that each of the Company and AFG
may at any time, and from time to time, purchase interests in the AMPS from
other parties (whether in privately negotiated transactions or otherwise) and
may purchase the AMPS at prices and on terms and conditions materially different
from those applicable to the Purchases.
(7)    Negotiations. The consideration that the Company and AFG are willing to
pay and the Holders are willing to accept has resulted from an arm’s-length
negotiation among the Parties.
(c)    Each of the Company and AFG represents and warrants, severally and not
jointly, to each of the other Parties that the following statements are true,
correct, and complete as of the date hereof:

7

--------------------------------------------------------------------------------

(1)    AFG and Company Purchases. To the extent the Company and/or AFG, or any
affiliate thereof, pays consideration to any parties in respect of AMPS that is
greater than or otherwise on terms materially more favorable to such parties
than the consideration paid in, or the other terms of, the Transactions from the
date hereof until the date that is 180 days following the Closing Date the
Holders shall be promptly notified thereof and paid an additional amount of
consideration such that the purchase price for the AMPS in the Transactions
shall be equal to the consideration paid to such parties, and the Holders shall,
if practicable, be offered any non-economic terms provided to such parties that
are materially more favorable than the terms provided to the Holders in the
Transactions.
(2)    Senior Surplus Notes. The Senior Surplus Notes to be issued in the
Repurchase will be duly authorized obligations of AAC enforceable in accordance
with their terms, and have the same seniority and priority in liquidation as the
Senior Surplus Notes that are currently outstanding and otherwise be issued
under and entitled to all the rights of the existing Senior Surplus Notes under
the Fiscal Agency Agreement. For so long as the Senior Surplus Notes are
outstanding, the Company and AFG will ensure that the information contemplated
by Rule 144A(d) under the Securities Act is publicly available or made available
upon request.
(3)    Non-Public Information. The Company shall issue a Release, as provided in
the confidentiality agreements entered into between the Company and Holders,
with the Disclosure Information, including this Agreement. Except with respect
to the Disclosure Information, which shall be subject to a Release as provided
above, each of AFG and the Company covenant and agree that neither it, nor any
other person acting on its behalf will provide a Holder with any information
that the Company believes constitutes or may constitute material nonpublic
information, unless prior thereto such Holder shall have entered into a written
agreement with the Company regarding the confidentiality and use of such
information; and understands that the Holders shall be relying on the foregoing
covenant in effecting transactions in securities of the Company. Capitalized
terms used in this Section 5(c)(3) and not defined herein shall have the
meanings assigned to such terms in the confidentiality agreements.
Section 6.    Transfer of AMPS.
(a)    Each Holder covenants and agrees that, so long as this Agreement has not
terminated in accordance with its terms, it shall not, directly or indirectly,
sell, pledge, hypothecate, or otherwise transfer any of its AMPS, or any right
or interest (voting or otherwise) in any of its AMPS (including, without
limitation, any participation therein) other than to (i) the Company or AFG or
an affiliate thereof , (ii) one of more of its affiliates, or, in the case of a
Holder that is managing AMPS on behalf of a fund, sponsored product or separate
account, to another fund, sponsored product or account managed by such Holder;
provided that such affiliate or such fund, sponsored product or account managed
by such Holder executes and delivers to the Company, concurrently or prior to
any binding commitment with respect to such transfer, assignment or other
disposition, a joinder agreement in the form attached hereto as Exhibit C,
agreeing to be bound by all the terms of this Agreement with respect to the
relevant AMPS being transferred to such affiliate, fund, sponsored product or
account managed by such Holder (which agreement shall include the
representations and warranties set forth in Section 5 hereof), (iii) another
Holder, or (iv) another party that executes and delivers to the Company,
concurrently or

8

--------------------------------------------------------------------------------

prior to any binding commitment with respect to such transfer, assignment or
other disposition, a joinder agreement in the form attached hereto as Exhibit C,
agreeing to be bound by all the terms of this Agreement with respect to the
relevant AMPS being transferred to such purchaser (which agreement shall include
the representations and warranties set forth in Section 5 hereof).
(b)    This Agreement shall in no way be construed to preclude any Holder from
acquiring additional AMPS. Any additional AMPS acquired by a Holder shall
automatically be deemed to be AMPS of such Holder and shall be subject to all of
the terms of this Agreement. In the event a Holder purchases or otherwise
acquires any AMPS, the Holder shall promptly notify the Company and AFG of such
purchase.
(c)    Notwithstanding anything to the contrary herein, (i) any acquisition or
transfer of AMPS by a Holder that does not comply with Section 6(a) of this
Agreement shall be null and void ab initio without the need for further action
and each of the Company and AFG shall have the right to enforce the voiding of
such transfer and (ii) this Agreement does not restrict the Holders from
selling, pledging, hypothecating, transferring, purchasing or otherwise
acquiring any securities or other obligations of AFG or the Company that may be
owned, acquired or disposed of by Holders, other than AMPS.
Section 7.    Termination by the Holders. This Agreement may be terminated by
Holders that, in the aggregate, beneficially own at least 66 2/3% of the
liquidation preference of the AMPS held by the Holders as a whole, subject to
the terms of this Agreement, upon the occurrence of any of the following events
(each a “Holder Termination Event”), by delivering written notice of the
occurrence of such event in accordance with Section 15 below to the other
Parties:
(a)    the Purchases or the Definitive Documents do not conform in all material
respects to the Term Sheet, except as approved by the Holders in accordance with
Section 12 hereof;
(b)    the failure of the Purchase Offer to be commenced by July 13, 2018 (the
“Commencement Date”);
(c)    the Notice of the Special Meeting has not been sent by August 28, 2018
(the “Notice Date”);
(d)    the modification of the Purchase Offer such that the Purchase Offer is
not at least as favorable to Holders as contemplated by the Term Sheet and
hereby; and
(e)    a material breach of any of the undertakings, representations,
warranties, or covenants set forth in this Agreement by the Company or AFG that
is not, by its terms, curable or that is, by its terms, curable and is not cured
by the 10th day after notice of such breach (for the avoidance of doubt, it
shall be deemed such a material breach if the representations regarding the
Senior Surplus Notes in Section 5(c)(2) above and beside the caption “Senior
Surplus Notes” in the Term Sheet are not true and correct).

9

--------------------------------------------------------------------------------

Notwithstanding anything herein to the contrary, a Holder may not seek to
terminate this Agreement based upon a Holder Termination Event arising out of
its own actions or omissions in violation of this Agreement.
Section 8.    Termination by the Company. Each of AFG and the Company shall have
the right to terminate this Agreement on the occurrence of any of the following
events (each a “Company Termination Event”) by giving written notice in
accordance with Section 15 below to the other Parties:
(a)    a material breach of any of the undertakings, representations,
warranties, or covenants set forth in this Agreement by any Holder that is not,
by its terms, curable or that is, by its terms, curable and is not cured by the
10th day after notice of such breach.
Notwithstanding anything herein to the contrary, AFG and the Company may not
seek to terminate this Agreement based upon a Company Termination Event arising
out of its own actions or omissions in violation of this Agreement.
Section 9.    Termination of Agreement. Each Party shall have the right to
terminate this Agreement on the occurrence of any of the following events by
giving written notice in accordance with Section 15 below to the other Parties:
(a)    any court of competent jurisdiction has entered a final, non-appealable
judgment or order (i) declaring this Agreement or any material portion hereof to
be illegal or unenforceable or (ii) restricting, preventing or prohibiting in
any material respect the Purchases in a way that cannot reasonably be remedied
by the Parties within the time periods set forth in Sections 7 and 8 hereof; or
(b)    the Purchase Offer has been withdrawn;
(c)    the Purchases have not been consummated by September 7, 2018 (the
“Outside Date”); or
(d)    the Parties mutually agree to do so upon the receipt of written notice
delivered in accordance with Section 15 hereof.
Notwithstanding anything to the contrary in this Agreement, the Term Sheet, or
any other agreement, this Agreement shall terminate on the earlier of (a) the
election of the Holders to terminate this Agreement upon the occurrence of a
Holder Termination Event after expiration of any cure periods and satisfaction
of any conditions set forth in Section 7 hereof; (b) the election of the Company
or AFG to terminate this Agreement upon the occurrence of a Company Termination
Event after expiration of any cure periods and satisfaction of any conditions
set forth in Section 8 hereof and (c) the consummation of the Purchases and the
effectiveness of the Amendments.
Section 10.    Effect of Termination and of Waiver of Termination Event. On the
delivery of the written notice referred to in Section 7, 8, or 9 in connection
with the valid termination of this Agreement, the obligations of each of the
Parties hereunder shall thereupon terminate and be of no further force and
effect (subject to the last sentence of this paragraph). Prior to the delivery
of such notice the Holders may waive the occurrence of a Holder Termination
Event and AFG and the Company may waive the occurrence of a Company

10

--------------------------------------------------------------------------------

Termination Event. No such waiver shall affect any subsequent termination event
or impair any right consequent thereon. Upon termination of this Agreement, no
Party shall have any continuing liability or obligation to the other Parties
hereunder except as expressly provided otherwise herein; provided, however, that
no such termination shall relieve any Party from liability for its breach or
non-performance of its obligations hereunder prior to the date of such
termination.
Section 11.    Disclosure; Publicity. Each of AFG and the Company shall submit
to Holder Counsel drafts of any press releases, public documents and the portion
of any and all filings with the SEC that constitute disclosure of the existence
or terms of this Agreement or any amendment to the terms of this Agreement or
the Purchases at least two (2) Business Days prior to making any such
disclosure. Except as required by applicable law, no Party or its
Representatives shall disclose to any person or entity (including, for the
avoidance of doubt, any other Holder), other than Representatives to AFG and the
Company, the number of shares, liquidation preference or percentage of any AMPS
held by any Holder, in each case, without such Holder’s prior written consent;
provided that (i) the Company may disclose to the Regulator, to the extent
required by law, the names of the Holders and the consideration provided in the
Purchases and (ii) any Party may disclose information requested by a Regulator
to the Regulator without limitation or notice to any Party or other person. Each
of the Company and AFG shall be permitted to disclose the number of shares,
liquidation preference or percentage of AMPS held by the Holders in the
aggregate.
Section 12.    Amendments. This Agreement may be modified, amended, or
supplemented by a written agreement executed by the Company, AFG and Holders
that (i) own, in the aggregate, 66 2/3% of the liquidation preference of AMPS
held by the Holders as a whole and (ii) represent at least 33% in number of the
Holders party to this Agreement that hold at least $5,000,000 face amount of
AMPS (any Holders that are affiliated counting as a single Holder); provided
that, without the consent of each Holder, no such modification, amendment or
supplement may have an adverse impact on such Holder that is disproportionate to
such Holder relative to the other Holders by its terms; may decrease the amount
of consideration to be paid in the Purchases; extend the Outside Date, the
Commencement Date or the Notice Date beyond 30 days; or amend Section 5(c)(2) or
the Term Sheet beside the caption “Senior Surplus Notes”; provided further that,
without the prior consent of the Holders, the Company and AFG may modify, amend
or supplement the transaction mechanics to the extent reasonably necessary to
mechanically effectuate the economic terms of this Agreement on the terms
contemplated hereby; provided that such modification, amendment or supplement
does not impact the economic terms or substantive requirements of this Agreement
or the Transactions or otherwise adversely affect the Holders and the Holders
are promptly notified thereof.
Section 13.    Further Assurances. Each of the Parties hereby further covenants
and agrees to cooperate in good faith to execute and deliver all further
documents and agreements and take all further action that may be commercially
reasonably necessary or desirable in order to enforce and effectively implement
the terms and conditions of this Agreement.
Section 14.    Governing Law; Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York. By its
execution and delivery

11

--------------------------------------------------------------------------------

of this Agreement, each of the Parties hereby irrevocably and unconditionally
agrees for itself that any legal action, suit, or proceeding against it with
respect to any matter under or arising out of or in connection with this
Agreement or for recognition or enforcement of any judgment rendered in any such
action, suit, or proceeding, shall be brought in a federal court of competent
jurisdiction in the Southern District of New York. By execution and delivery of
this Agreement, each of the Parties hereto hereby irrevocably accepts and
submits to the jurisdiction of such court, generally and unconditionally, with
respect to any such action, suit, or proceeding.
Section 15.    Notices. All demands, notices, requests, consents, and
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or by courier service, messenger, facsimile,
telecopy, or if duly deposited in the mails, by certified or registered mail,
postage prepaid-return receipt requested, and shall be deemed to have been duly
given or made (i) upon delivery, if delivered personally or by courier service,
or messenger, in each case with record of receipt, (ii) upon transmission with
confirmed delivery, if sent by facsimile or telecopy, or (iii) two (2) Business
Days after being sent by certified or registered mail, postage pre-paid, return
receipt requested, to the following addresses, or such other addresses as may be
furnished hereafter by notice in writing, to the following parties:
If to AFG or the Company, to:
Ambac Assurance Corporation
One State Street Plaza
New York, NY 10004
Facsimile: (212) 208-3384
Attn: Stephen M. Ksenak, Esq.
with a copy to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Facsimile: (212) 521-7036
Attn: Steven J. Slutzky, Esq.
If to the Holders, or any Holder, in accordance with the information set forth
on its signature page hereto:
with a copy to:
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, NY 10036
Facsimile: (212) 715-8000
Attn: Stephen Zide, Esq. and John Bessonette, Esq.
Section 16.    Entire Agreement; Survival. This Agreement together with any
confidentiality agreement entered into by Parties hereto constitutes the full
and entire understanding and agreement among the Parties with regard to the
subject matter hereof, and

12

--------------------------------------------------------------------------------

supersedes all prior agreements with respect to the subject matter hereof.
Except as expressly provided otherwise herein, none of the covenants or
agreements of the Parties contained in this Agreement shall survive consummation
of the Purchases.
Section 17.    Settlement Discussions. This Agreement and the Term Sheet are
part of a proposed settlement of matters that could otherwise be the subject of
litigation among the Parties. Pursuant to Rule 408 of the Federal Rules of
Evidence, Section 904.08 of the Wisconsin Statutes and any other applicable
state rules of evidence and any other applicable law, foreign or domestic, this
Agreement and all negotiations relating thereto shall not be admissible into
evidence in any proceeding other than a proceeding to enforce its terms.
Section 18.    Expenses. The Company shall pay the reasonable fees and expenses
of Holder Counsel (i) (x) that are accrued through the date of this Agreement
and that remain unpaid as of such date, within a reasonable time after receiving
an invoice from Holder Counsel, and (y) that are accrued from the date of this
Agreement through the Closing Date and that remain unpaid as of such date,
within a reasonable time after receiving an invoice from Holder Counsel; and in
any event such fees and expenses in (x) and (y) shall be paid within five
business days of delivery of an invoice. In connection with any litigation or
other adversarial proceeding involving the matters contemplated by this
Agreement or the Transactions to which the Holders are made a party or
threatened to be made a party, the Company shall pay the reasonable and
customary fees and expenses of Holder Counsel and one local counsel retained by
the Holders reasonably acceptable to the Company.
Section 19.    Headings. The headings of the paragraphs and subparagraphs of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
Section 20.    Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the Parties and their respective permitted successors
and assigns, provided, however, that nothing contained in this paragraph shall
be deemed to permit sales, assignments, or transfers other than in accordance
with Section 6.
Section 21.    Specific Performance. Each Party hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause other parties to sustain damages for which such
parties would not have an adequate remedy at law for money damages, and
therefore each Party hereto agrees that in the event of any such breach, such
other parties shall be entitled to the remedy of specific performance of such
covenants and agreements and injunctive and other equitable relief in addition
to any other remedy to which such parties may be entitled, at law or in equity.
Section 22.    Several, Not Joint, Obligations. The agreements, representations,
and obligations of the Parties under this Agreement are, in all respects,
several and not joint.
Section 23.    Remedies Cumulative. All rights, powers, and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any right,
power, or remedy thereof by any Party shall not preclude the simultaneous or
later exercise of any other such right, power, or remedy by such Party.

13

--------------------------------------------------------------------------------

Section 24.    No Waiver. The failure of any Party hereto to exercise any right,
power, or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other Party
hereto with its obligations hereunder, and any custom or practice of the Parties
at variance with the terms hereof, shall not constitute a waiver by such Party
of its right to exercise any such or other right, power, or remedy or to demand
such compliance.
Section 25.    Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement. Delivery of an executed signature page of
this Agreement by telecopier or email shall be as effective as delivery of a
manually executed signature page of this Agreement.
Section 26.    Severability. Any provision of this Agreement that 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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 27.    No Third-Party Beneficiaries. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the Parties, and no other
person or entity shall be a third party beneficiary hereof.
Section 28.    Additional Parties. Without in any way limiting the provisions
hereof, additional holders of AMPS may elect to become Parties by executing and
delivering to AFG and the Company a counterpart hereof. Each such additional
holder shall become a Party to this Agreement as a Holder in accordance with the
terms of this Agreement and notice thereof shall be promptly provided to the
Holders (which may be effected by provision of notice to Holder Counsel).
Section 29.    No Solicitation. This Agreement is not intended to be, and each
signatory to this Agreement acknowledges that this Agreement is not, a
solicitation with respect to the Purchases.
Section 30.    Consideration. It is hereby acknowledged by the Parties hereto
that, other than as described or permitted herein and in the Term Sheet, no
consideration shall be due or paid to the Holders for their agreement to sell
their AMPS in the Purchases or provide a proxy with an instruction to vote in
favor of the Purchases and the Charter Amendment at the Special Meeting in
accordance with the terms and conditions of this Agreement and the Definitive
Documentation.
Section 31.    Receipt of Adequate Information; Representation by Counsel. Each
Party acknowledges that it has received adequate information to enter into this
Agreement and that it has been represented by counsel in connection with this
Agreement and the transactions contemplated by this Agreement. Accordingly, any
rule of law or any legal decision that would provide any Party with a defense to
the enforcement of the terms of this Agreement against such Party shall have no
application and is expressly waived. The provisions of the Agreement shall be
interpreted in a reasonable manner to effect the intent of the Parties.

14

--------------------------------------------------------------------------------

Section 32.    Interpretation. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”. The words “hereof”, “herein” 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. The
Parties hereto have participated jointly in the negotiation and drafting of this
Agreement and, in the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as jointly drafted by the Parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any Party by virtue of the authorship of any provision of this Agreement.

[Signature Page Follows]

15

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this
Agreement as of the date first above written.
AMBAC ASSURANCE CORPORATION

By: /s/ Claude LeBlanc    ________
Name: Claude LeBlanc
Title:     President

AMBAC FINANCIAL GROUP, INC.

By: /s/ Claude LeBlanc    ________
Name: Claude LeBlanc
Title:     President

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
CVI AA Lux Securities S.à.r.l
By CarVal Investors, LLC
Its Attorney-in-Fact

By:_/s/ Jeremiah Gerhardson______
Name: Jeremiah Gerhardson
Title: Authorized Signer
Attn: GCS Operations
9320 Excelsior Boulevard, 7th Floor
Hopkins, Minnestoa 53343
E-mail: Carval_Gesadminmpls@carval.com
Fax: (952) 367-1473

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
CVI CVF Lux Securities Trading S.à.r.l
By CarVal Investors, LLC
Its Attorney-in-Fact

By:_/s/ Jeremiah Gerhardson______
Name: Jeremiah Gerhardson
Title: Authorized Signer
Attn: GCS Operations
9320 Excelsior Boulevard, 7th Floor
Hopkins, Minnestoa 55343
E-mail: Carval_Gesadminmpls@carval.com
Fax: (952) 367-1473

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
CVIC Lux Securities Trading S.à.r.l
By CarVal Investors, LLC
Its Attorney-in-Fact

By:_/s/ Jeremiah Gerhardson______
Name: Jeremiah Gerhardson
Title: Authorized Signer
Attn: GCS Operations
9320 Excelsior Boulevard, 7th Floor
Hopkins, Minnestoa 55343
E-mail: Carval_Gesadminmpls@carval.com
Fax: (952) 367-1473

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
CVIC II Lux Securities Trading S.à.r.l
By CarVal Investors, LLC
Its Attorney-in-Fact

By:_/s/ Jeremiah Gerhardson______
Name: Jeremiah Gerhardson
Title: Authorized Signer
Attn: GCS Operations
9320 Excelsior Boulevard, 7th Floor
Hopkins, Minnestoa 55343
E-mail: Carval_Gesadminmpls@carval.com
Fax: (952) 367-1473

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
CVI CHVF Lux Securities S.à.r.l
By CarVal Investors, LLC
Its Attorney-in-Fact

By:_/s/ Jeremiah Gerhardson______
Name: Jeremiah Gerhardson
Title: Authorized Signer
Attn: GCS Operations
9320 Excelsior Boulevard, 7th Floor
Hopkins, Minnestoa 55343
E-mail: Carval_Gesadminmpls@carval.com
Fax: (952) 367-1473

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
EJF CAPITAL LLC

By:_/s/ Neal Wilson______
Name: Neal Wilson
Title: COO
Address: 2107 Wilson Blvd
Suite 400
Arlington, VA 22201

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
GOLDEN TREE ASSET MANAGEMENT LP

By:_/s/ Peter Alderman______
Name: Peter Alderman
Title: Vice President
Address: 300 Park Avenue
New York, NY 10022
Facsimile No.: 212-847-3496
Attn: Peter Alderman

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
THE IBS TURNAROUND FUND (QP) (A LIMITED PARTNERSHIP)

By:_/s/ David Taft______
Name: David Taft
Title: President, IBS Capital LLC, its General Partner
Address: One International Place, Suite 3120
Boston, MA 02110
Facsimile No.: (617) 261-5373
Attn: David Taft

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
THE IBS TURNAROUND FUND, L.P.

By:_/s/ David Taft______
Name: David Taft
Title: President, IBS Capital LLC, its General Partner
Address: One International Place, Suite 3120
Boston, MA 02110
Facsimile No.: (617) 261-5373
Attn: David Taft

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
THE IBS OPPORTUNITY FUND, LTD.

By:_/s/ David Taft______
Name: David Taft
Title: President, IBS Capital LLC, its Investment Manager
Address: One International Place, Suite 3120
Boston, MA 02110
Facsimile No.: (617) 261-5373
Attn: David Taft

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
NEW GENERATION, ADVISORS, LLC

By:_/s/ Frederick Baily Dent, III______
Name: Frederick Baily Dent, III
Title: Vice President of the General Partner
Address: 13 Elm Street
Manchester, MA 01944
Facsimile No.: 978-704-6210

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
PLUSTICK MANAGEMENT LLC

By:_/s/ Thomas J. Hill______
Name: Thomas J. Hill
Title: Managing Partner
Address: 200 6th St, NE
Charlottesville, VA 22902

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
WILFRID INVESTMENT PARTNERS LP

By:_/s/ Nicholas W. Walsh______
Name: Nicholas W. Walsh
Title: Principal
Address: 4 Westchester Park Drive Suite #330
White Plains, NY 10604
Facsimile No.: nww@wilfridaubrey.com

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
ALIMCO Financial Corporation

By:_/s/ Alan B. Howe______
Name: Alan B. Howe
Title: President, ALIMCO Financial Corporation
Address: 3300 S. Dixie Highway, Suite 1-365
West Palm Beach, FL 33405
Facsimile No.: 858-815-7899
Attn: Alan B. Howe

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
MILFAM II, LP

By:_/s/ Neil S. Subin______
Name: Neil S. Subin
Title: President, Milfam LLC as Manager of
Milfam II, LP
Address: 3300 S. Dixie Highway, Suite 1-365
West Palm Beach, FL 33405
Attn: Neil S. Subin

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
BLACK RHINO, LP

By:_/s/ Jeffrey F. Magee, Jr______
Name: Jeffrey F. Magee, Jr
Title: Chief Operation Officer
Of: Broadbill Investment Partners, LLC
As: Sub-advisor to Black Rhino, LP
Address: c/o Broadbill Investment Partners, LLC
157 Columbus Avenue, 5th FL
New York, NY 10023
Facsimile No.: (646) 792-7264
Attn: Kurt Lageschulte

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

HOLDER:
UNITED STATES DEBT RECOVERY XII
UNITED STATES DEBT RECOVERY XVI
UNITED STATES DEBT RECOVERY XVII

By:_/s/ Nate E. Jones___
Name: Nate E. Jones
Title: Managing Director
Address: 190 W. Huffaker
Suite 408
Reno, NV 89511

[Signature Page – Preferred Stock Repurchase and Support Agreement]

--------------------------------------------------------------------------------

Exhibit A
Term Sheet

(see attached)

--------------------------------------------------------------------------------

Term Sheet
THIS TERM SHEET DOES NOT CONSTITUTE (NOR SHALL IT BE CONSTRUED AS) AN OFFER WITH
RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS AS TO
ANY OFFER WITH RESPECT TO ANY SECURITIES, IT BEING UNDERSTOOD THAT SUCH A
SOLICITATION, IF ANY, WILL BE MADE ONLY IN COMPLIANCE WITH APPLICABLE PROVISIONS
OF SECURITIES OR OTHER APPLICABLE LAWS. CAPITALIZED TERMS USED HEREIN AND NOT
OTHERWISE DEFINED SHALL HAVE THE MEANINGS GIVEN THERETO IN THE PREFERRED STOCK
REPURCHASE AND SUPPORT AGREEMENT TO WHICH THIS TERM SHEET IS ATTACHED.
 
 
The Purchases
Subject to the satisfaction of the conditions precedent set out below (a) the
Company will repurchase AMPS from the Holders of the AMPS (the “Repurchase”) by
exchanging Senior Surplus Notes with a total outstanding amount (including
accrued and unpaid interest thereon through the Signing Date) equal to $555 for
each $1,000 of liquidation preference of AMPS subject to the Purchases (as
defined below), plus accrued interest thereon from the day following the Signing
Date through the day immediately prior to the Closing Date, and (b) AFG will
purchase AMPS from such Holders of the AMPS (the “AFG Purchase” and, together
with the Repurchase, the “Purchases”) in exchange for (i) $20 in cash for each
$1,000 of liquidation preference of AMPS subject to the Purchases and (ii)
1.49230 warrants (1) (rounded down to the nearest whole warrant) to purchase an
equivalent number of shares of common stock of AFG at a strike price of $16.67
for each $1,000 of liquidation preference of AMPS subject to the
Purchases.(2)  For each share of each series of AMPS repurchased with a
liquidation preference of $25,000, each Holder will receive Senior Surplus Notes
with a total outstanding amount (including accrued and unpaid interest thereon
through the Signing Date) equal to $13,875, plus accrued interest thereon from
the day following the Signing Date through the day immediately prior to the
Closing Date, from AAC and $500 in cash from AFG and 37.308 warrants ($354.42
(3) in value in warrants) to purchase an equivalent number of shares of common
stock of AFG at a strike price of $16.67. The Purchases shall be effectuated
through an exchange offer open to all holders of AMPS, subject to the
eligibility requirements set forth in the column opposite the heading “Holders
Eligible to Participate in the Repurchase.” The Purchases may be structured so
that the consideration described above is available only to holders of AMPS that
tender within a specified time period, as determined by the Company in its sole
discretion; provided that any decrease in the consideration described above
shall not occur prior to the 9th business day following commencement of the
Purchase Offer. Any AMPS purchased by the Company pursuant to the Repurchase
shall be cancelled.
1     Equivalent to $14.177 in value in warrants based on assumed value of $9.50
and a maximum number of warrants to be issued of 985,331 assuming 100%
participation.
2     The Purchases shall be consummated simultaneously and, for the avoidance
of doubt, approximately $0.4108 of each dollar of AMPS purchased in the
Purchases (taken together) will be surrendered as discount by the Holder of such
AMPS.
3.    Based on assumed value of $9.50.

--------------------------------------------------------------------------------

Special Meeting
The Company shall call a special meeting of the Company’s shareholders (the
“Special Meeting”), and each Holder shall cast all votes held by the Holder in
favor of the Purchases and the Charter Amendments, as defined below, at the
Special Meeting.
Amendments
Each Holder shall support and cast all votes held by the Holder in favor of the
following amendment (the “Charter Amendment”) to the Company’s Restated Articles
of Incorporation, dated February 13, 2004, as amended by the Articles of
Amendment, dated December 4, 2008, June 7, 2010 and February 16, 2018, as may be
further amended from time to time (the “Articles of Incorporation”): deleting
Section 7(c) of the Articles of Incorporation (the Charter Amendment together
with the Purchases, the “Transactions”).
Transaction Sequencing
Following approval at the Special Meeting, the Charter Amendment will become
effective upon filing with the Wisconsin Office of the Commissioner of Insurance
on the Closing Date and will become operative immediately following the
Purchases on the terms specified herein and in the Agreement and the Purchase
Documentation (as such terms are defined in the Agreement to which this Term
Sheet is attached).
Conditions Precedent to the Purchases
Consummation of the Purchases is subject to the following conditions precedent
being satisfied or, in the Company’s sole discretion, in the case of (i) or (iv)
below, waived:
i.    An aggregate of 80% participation by liquidation preference outstanding
from holders of AMPS in both Purchases (the “Minimum Participation Condition”);
ii.    The affirmative vote of holders of at least two-thirds in aggregate
liquidation preference of AMPS in favor of the Transactions at the Special
Meeting;
iii.    Receipt of approval of Wisconsin Office of the Commissioner of Insurance
pursuant to applicable law and operative documents;
iv.    Receipt by the Company of a satisfactory opinion of Sidley Austin LLP as
to certain tax matters;
v.    The Preferred Stock Repurchase and Support Agreement, dated as of June 22,
2018, among the Company, AFG, and the Holders party thereto, has not been
terminated;
vi.    Neither Purchase has been determined to violate any applicable law or
interpretation of the staff of the Securities and Exchange Commission;
vii.    The absence of any statute, law, rule, regulation, judgment, order,
decree or injunction which prohibits or prevents the closing of either Purchase
or any other transactions to be effected on the Closing Date; and
viii.    The existing fiscal agent of the Senior Surplus Notes shall not have
taken any action that would reasonably be expected to prevent the consummation
of either Purchase.

--------------------------------------------------------------------------------

Holders Eligible to Participate in the Repurchase
The Purchases are being made in reliance on the exemption provided by Section
4(a)(2) of the Securities Act of 1933, as amended, and only to holders of AMPS
who are either (x) institutional “accredited investors” within the meaning of
subsection (1), (2), (3) or (7) of Rule 501(a) under the Securities Act of 1933,
as amended, (y) a “qualified institutional buyer” within the meaning of Rule
144A of the Securities Act, or (z) a non-U.S. person within the meaning of Rule
902 of the Securities Act. Additionally, to be eligible for either Purchase, a
Holder must participate in both Purchases.
Senior Surplus Notes
The Company’s outstanding 5.1% surplus notes due 2020 (the “Senior Surplus
Notes”) (CUSIP 023138AA8). All of the Senior Surplus Notes to be issued in the
Purchases are held in and will be issued from Treasury, will be issued through
DTC, will have the same CUSIP and seniority as the existing outstanding Senior
Surplus Notes, and will be able to be resold pursuant to Rule 144A.
Closing Date
The closing date for the Purchases (the “Closing Date”) will be promptly after
the waiver by the Company and AFG or satisfaction of all conditions precedent.
It is expected that the Closing Date will be the [business day] immediately
following such satisfaction or waiver of all conditions precedent. The
Amendments will become automatically operative immediately following the
Purchases.

--------------------------------------------------------------------------------

Exhibit B
Proxy

(see attached)

--------------------------------------------------------------------------------

PROXY
THIS PROXY IS GIVEN TO AMBAC ASSURANCE CORPORATION (THE “COMPANY”) TO BE VOTED
AT THE SPECIAL MEETING OF HOLDERS OF AUCTION MARKET PREFERRED SHARES (THE
“AMPS”) AND HOLDERS OF COMMON STOCK TO BE HELD PURSUANT TO THE AGREEMENT, AS
DEFINED BELOW, AND ANY ADJOURNMENTS THEREOF.
The undersigned, as a holder of AMPS, hereby appoints [Claude LeBlanc, David
Trick. Stephen Ksenak and William White] and each of them, as proxies for the
undersigned, with full power of substitution in each of them, to attend the
Special Meeting of holders of AMPS and common stock to be held pursuant to the
Agreement and any adjournments thereof (the “Special Meeting”), to cast on
behalf of the undersigned all votes that the undersigned is entitled to cast at
the Special Meeting with all powers possessed by the undersigned if the
undersigned was personally present at the Special Meeting. The undersigned
hereby revokes any proxy heretofore given with respect to the matters to be
voted on at the Special Meeting. Any capitalized terms used, but not defined,
herein have the meaning assigned to such terms in the Preferred Stock Repurchase
and Support Agreement, dated as of June 22, 2018 (the “Agreement”), among the
Company, Ambac Financial Group, Inc. (“AFG”) and the undersigned and certain
other holders party thereto (collectively with the undersigned, the “Holders”).
The purposes of the meeting shall be to vote on the following matters (as more
thoroughly described in the shareholder resolution substantially in the form
attached hereto as Exhibit A):
•
The proposal for (i) the Company to repurchase AMPS from the Holders of the AMPS
(the “Repurchase”) by exchanging Senior Surplus Notes with a total outstanding
amount (including accrued and unpaid interest thereon through the date of the
Agreement) equal to $555 for each $1,000 of liquidation preference of AMPS
subject to the Purchases (as defined below), plus accrued interest thereon from
the day following the date of the Agreement through the day immediately prior to
the closing date, and (ii) AFG to purchase AMPS from the Holders of the AMPS
(the “AFG Purchase” and, together with the Repurchase, the “Purchases”) in
exchange for $20 in cash for each $1,000 of liquidation preference subject to
the Purchases and 1.49230 (4) warrants to purchase an equivalent number of
shares of common stock of AFG at a strike price of $16.67 for each $1,000 of
liquidation preference of AMPS subject to the Purchases;

•
The proposal for the Company’s Restated Articles of Incorporation, dated
February 13, 2004, as amended by the Articles of Amendment, dated December 4,
2008, June 7, 2010 and February 16, 2018, as may be further amended from time to
time (the “Articles of Incorporation”) to be amended as follows: deleting
Section 7(c) of the Articles of Incorporation (together, the “Charter Amendment”
and together with the Purchases, the “Transactions”); and

•
The proposal for the adjournment, postponement or continuation of the Special
Meeting to a later date to solicit additional proxies in favor of the
Transactions in the event that there are not sufficient votes to approve and
adopt the Transactions at the Special Meeting.

Any holder of AMPS giving a proxy has the power to revoke it prior to the
Special Meeting by: (1) giving notice of such revocation in writing to the
Secretary of the Company at Ambac Assurance Corporation, One State Street Plaza,
New York, NY 10004; (2) by executing a subsequent proxy, provided that any such
action is taken prior to the Special Meeting; or (3) by attending and voting in
person at the Special Meeting. Attendance at the Special Meeting by a holder of
AMPS who has executed and delivered a proxy to the Company shall not in and of
itself constitute a revocation of such proxy. If a holder of AMPS holds such
shares in “street name” by a broker and has directed their broker to vote their
AMPS, they should instruct their broker to change the holder’s vote or obtain a
proxy to vote their AMPS if they wish to cast their vote in person at the
Special Meeting. In the event the Agreement is terminated in accordance with its
terms, this proxy shall automatically terminate.
The votes entitled to be cast by the undersigned will be cast as instructed
below. If this Proxy is executed but no instruction is given, the votes entitled
to be cast by the undersigned will be cast “FOR” the proposals. Please mark your
choice like this: x
    
4.
Equivalent to $14.177 in value in warrants based on assumed value of $9.50 and a
maximum number of warrants to be issued of 985,331 assuming 100% participation.

--------------------------------------------------------------------------------

Proposals
Holders of AMPS are asked to vote on the Purchases and Charter Amendments
substantially in such form as in the resolutions attached hereto as Exhibit A.
1.    The proposal to approve the Purchases.
£    FOR
£    AGAINST
£    ABSTAIN
2.    The proposal to approve the Charter Amendment.
£    FOR
£    AGAINST
£    ABSTAIN
3.    The proposal to approve the adjournment, postponement or continuation of
the Special Meeting, if necessary.
£    FOR
£    AGAINST
£    ABSTAIN
Print and sign your name below exactly as it appears [above/below] and date this
proxy card. When signing as attorney, executor, administrator, trustee, guardian
or in another representative capacity, please give full title, as such. Joint
owners should each sign. If a corporation, please sign in full corporate name by
president or authorized officer. If a partnership, please sign in partnership
name by an authorized person.
£    CHECK HERE ONLY IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON
Date:
 
, 2018
 
 
 
 
Signature
 
 
 
 
 
 
 
 
Signature, if held jointly
 
 
 
 
 
Name of Shareholder
 
 
 
 
 
Address
 

--------------------------------------------------------------------------------

On the date hereof, the above signing shareholder owns the following:
(a)
__________________    Series A AMPS

(b)
__________________    Series B AMPS

(c)
__________________    Series C AMPS

(d)
__________________    Series D AMPS

(e)
__________________    Series E AMPS

(f)
__________________    Series F AMPS

(g)
__________________    Series G AMPS

(h)
__________________    Series H AMPS

--------------------------------------------------------------------------------

PLEASE MARK, SIGN, AND DATE AND PROMPTLY RETURN THIS PROXY TO

Ambac Assurance Corporation
Attn: General Counsel
One State Street Plaza
New York, New York 10004
email:
fax:

--------------------------------------------------------------------------------

Exhibit C
Joinder
This Joinder Agreement to the Preferred Stock Repurchase and Support Agreement,
dated as of June [___], 2018 (as amended, supplemented or otherwise modified
from time to time, the “Agreement”), entered into by and among Ambac Assurance
Corporation (the “Company”), Ambac Financial Group, Inc. (“AFG”), and the
holders (each, a “Holder”) of a material portion of outstanding Auction Market
Preferred Shares, is executed and delivered by ________________________________
(the “Joining Party”) as of ______________, 2018. Each capitalized term used
herein but not otherwise defined shall have the meaning set forth in the
Agreement.
1.Agreement to be Bound. The Joining Party hereby agrees to be bound by all of
the terms of the Agreement, a copy of which is attached to this Joinder
Agreement as Annex I (as the same has been or may be hereafter amended,
restated, or otherwise modified from time to time in accordance with the
provisions hereof). The Joining Party shall hereafter be a “Holder” and “Party”
for all purposes under the Agreement and with respect to any and all AMPS held
by such Joining Party following the transfer.
2.Representations and Warranties. With respect to the aggregate amount of the
AMPS set forth below its name on the signature page hereto, the Joining Party
hereby makes the representations and warranties of a Holder as set forth in
Section 5 of the Agreement to each other Party to the Agreement.
3.Governing Law. This Joinder Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
[Signature page follows.]

--------------------------------------------------------------------------------

[NAME OF JOINING PARTY]

By:    
Name:
Title:
Address:    
        
        
    Facsimile No.:
    Attn.:
Liquidation Preference of Series A AMPS Owned:
$[●]
Liquidation Preference of Series B AMPS Owned:
$[●]
Liquidation Preference of Series C AMPS Owned:
$[●]
Liquidation Preference of Series D AMPS Owned:
$[●]
Liquidation Preference of Series E AMPS Owned:
$[●]
Liquidation Preference of Series F AMPS Owned:
$[●]
Liquidation Preference of Series G AMPS Owned:
$[●]
Liquidation Preference of Series H AMPS Owned:
$[●]