Deferred Compensation Plan for Outside Directors



 Exhibit 10.46 
 AMBAC FINANCIAL GROUP, INC. 
 DEFERRED COMPENSATION PLAN 
 FOR OUTSIDE DIRECTORS 
 Effective as
of December 1, 1993, 
 As Amended through October 22, 2007 
  

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 AMBAC FINANCIAL GROUP, INC. 
 DEFERRED COMPENSATION PLAN FOR 
 OUTSIDE DIRECTORS 
  

	1.	Definitions 

 “Account” and
“Deferred Compensation Account” are used interchangeably and mean the bookkeeping record established for each Participant. A Deferred Compensation Account is established only for purposes of measuring a Deferred Benefit and not to
segregate assets or to identify assets that may be used to pay a Deferred Benefit. 
 “Account Value” means the amount
reflected on the books and records of the Company as the value of a Participant’s Deferred Compensation Account at any date of determination, as determined in accordance with this Plan. 
 “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). 
 “Annual Fees” means the cash portion of (i) any annual fee payable to an Outside Director for
service on the Board, (ii) any other fee determined on an annual basis and payable for service on (as distinguished from attendance at meetings of), or for acting as chairperson of, any committee of, or as Presiding Director of the Board and
(iii) any similar annual fee payable in respect of service on the board of directors of any Subsidiary or any committee of any such board of directors. 
 “Beneficiary” or “Beneficiaries” means a person or other entity designated by a Participant on a Beneficiary Designation Form to receive Deferred Benefit payments in the event of the
Participant’s death. 
 “Beneficiary Designation Form” means a document, in form approved by the Committee, to be used
by Participants to name their respective Beneficiaries. 
 “Board” means the Board of Directors of the Company. 

“Cash Deferral Option” means a Performance Option under which the Deferred Amount credited to a Participant’s Deferred
Compensation Account is carried as a cash balance to which interest equivalents are credited from time to time as provided in Section 6(c)(i). 
 “Code” means the Internal Revenue Code of 1986, as amended, and all applicable rulings and regulations thereunder. 
  

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 “Committee” means the Compensation Committee of the Board or any successor committee
thereto. 
 “Common Stock” means the Company’s common stock, par value $0.01 per share. 
 “Company” means Ambac Financial Group, Inc., a Delaware corporation. 
 “Conversion Date” has the meaning assigned to such term in Section 6(e). 
 “Deemed Capital Gain Tax Charge” has the meaning assigned to such term in Section 6(c). 
 “Deferral Election” means the election of a Participant, made in accordance with the terms and conditions of the Plan, to defer all or a
portion of his/her Directors Fees for a Deferral Year. 
 “Deferral Election Form” means a document, in form approved by the
Committee, pursuant to which a Participant makes a Deferral Election. 
 “Deferral Year” means the calendar year, starting
with calendar year 1994. If an individual becomes eligible to participate in the Plan after the commencement of a Deferral Year, the Deferral Year for the individual shall be the remainder of such Deferral Year starting from the first day after the
individual submits a Deferral Election for such Deferral Year. (By way of illustration, if an individual first becomes eligible to participate in the Plan on May 1, 2008 and submits a Deferral Election on May 15, 2008, the initial Deferral
Year for such individual will be the period May 18, 2008 through December 31, 2008.) 
 “Deferred Amount” means
the amount of Directors Fees, deferred by a Participant pursuant to a Deferral Election. 
 “Deferred Benefit” means the
amount that will be paid on a deferred basis under the Plan to a Participant who has made a Deferral Election. A Participant’s Deferred Benefit will equal the Account Value of his or her Deferred Compensation Account, calculated as provided
herein. 
 “Director Fees” means the aggregate of a Participant’s Annual Fees and Meeting Fees. 
 “Election Date” means December 31 of the year preceding the beginning of the
Deferral Year, provided, however, that if an individual becomes an Outside Director for the first time during a Deferral Year and does not have any rights or interests under any other deferred compensation plan, program or arrangement
of the Company that are required to be aggregated with rights under this Plan for purposes of Section 409A, that Outside Director’s Election Date for such Deferral Year is the thirtieth (30th) day following the date he/she becomes an Outside Director. 
  

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 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 “Fair Market Value” of a share of Common Stock means the closing price of a share of Common Stock as reported on the composite tape for
securities listed on the New York Stock Exchange, or such other national securities exchange as may be designated by the Committee, or in the event that the Common Stock is not listed for trading on a national securities exchange but is quoted on an
automated quotation system, on such automated quotation system, in any such case on the valuation date (or if there were no sales on the valuation date, the closing price as reported on such composite tape or automated quotation system for the most
recent day during which a sale occurred). 
 “Meeting Fees” means (i) any meeting fee payable in respect of attendance
at or participation in meetings of the Board or any committee of the Board or any meeting of the stockholders of the Company and (ii) any similar meeting fee payable in respect of service on the board of directors of any Subsidiary or any
committee of any such board of directors. 
 “Outside Director” means a duly-elected member of the Board who is not an
employee of the Company or any Subsidiary. 
 “Participant” means an Outside Director who participates in the Plan pursuant
to Section 4. 
 “Performance Option” means the performance options made available from time to time for selection by
Participants to measure the return (positive or negative) to be attributed to Deferred Amounts. 
 “Phantom Stock Option”
means a Performance Option under which a Deferred Amount is credited to a Participant’s Deferred Compensation Account as a number of Phantom Stock Units. 
 “Phantom Stock Unit” means a bookkeeping unit representing one share of Common Stock. 
 “Section 409A” means Section 409A of Code and the applicable rulings and regulations promulgated thereunder. 
 “Subsidiary” means any corporation 50 percent or more of the voting stock of which is owned directly or indirectly by the Company. 
  

	2.	Purpose 

 The purpose of the Plan is to provide the
Company’s Outside Directors an opportunity to defer payment of all or part of their Directors Fees in accordance with the terms and conditions set forth herein. 
  

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	3.	Administration 

 (a) Authority. The Committee
will be responsible for administering the Plan. The Committee will have authority to adopt such rules as it may deem appropriate to carry out the purposes of the Plan, and shall have authority to interpret and construe the provisions of the Plan and
any agreements under the Plan and to make determinations pursuant to any Plan provision. Each interpretation, determination or other action made or taken by the Committee pursuant to the Plan shall be final and binding on all persons. No member of
the Committee shall be liable for any action or determination made in good faith, and the members of the Committee shall be entitled to indemnification and reimbursement in the manner provided in the Company’s Amended and Restated Certificate
of Incorporation as it may be amended from time to time. 
 (b) Delegation. The Committee may designate a committee composed of one or
more members of the Board to carry out its responsibilities under such conditions as it may set. 
  

	4.	Eligibility 

 (a) Directors. Any Outside
Director may participate in the Plan. 
 (b) Becoming a Participant. An Outside Director becomes a Participant for any Deferral Year
by filing a Deferral Election Form according to Section 5 of the Plan. 
  

	5.	Deferral Elections 

 (a) General Provisions.
A Participant may elect to defer all or a specified percentage (in multiples of 10 percent) of Directors Fees for a Deferral Year, in the manner provided in this Section 5. A Participant’s Deferred Benefit is at all times nonforfeitable.

 (b) Procedures for Making a Deferral Election. Before the Election Date applicable to a Deferral Year, each Outside Director will
be provided with a Deferral Election Form and a Beneficiary Designation Form. In order for an Outside Director to participate in the Plan for a given Deferral Year, the Outside Director must complete and deliver a Deferral Election Form to the
Secretary of the Board or the Chief Administrative Officer of the Company on or prior to the close of business on the applicable Election Date, using the procedures established by the Company (which may include or require electronic submission of
forms). An Outside Director electing to participate in the Plan for a given Deferral Year shall indicate on his/her Deferral Election Form: 
 (i) the percentage of Director Fees for the applicable Deferral Year to be deferred; 
  

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 (ii) the allocation of the Deferred Amount among the several Performance Options then
available to Participants, in accordance with the terms and conditions of Section 6(b); 
 (iii) the Participant’s
election either to have distribution of his/her Deferred Benefit commence following termination of service as a member of the Board or to have such distribution commence as of a date specified on such Form, provided, however, that any
such election concerning the commencement of distribution of a Participant’s Deferred Benefit shall be subject to the terms and conditions of Section 6(e); and 
 (iv) the Participant’s election either to have distribution of his/her Deferred Benefit paid in a single lump sum or in a series of
annual or quarterly installments, provided, however, that if the Participant elects to have his/her Deferred Benefit paid in a series of installments, the Participant shall also specify the period, not to exceed five years, over which
such installments shall be paid. 
 Deferral Elections may be amended or revoked by modifying or canceling the applicable Deferral Election Form and
delivering such modification or cancellation to the Secretary of the Board or the Chief Administrative Officer of the Company by the close of business on the applicable Election Date. As of the close of business on the applicable Election Date, all
Deferral Elections shall be irrevocable. 
 (c) Effect of No Deferral Election. An Outside Director who does not submit a completed
and signed Deferral Election Form to the Secretary of the Board or the Chief Administrative Officer of the Company before the relevant Election Date is not a Participant for the Deferral Year and may not defer his/her Directors Fee for the Deferral
Year. 
 (d) Revocation of Deferral Election. 
 (i) A Participant may revoke a Deferral Election applicable to a Deferral Year, but only pursuant to the procedure described in subsection
(ii) below. Any purported revocation that does not comply with subsection (ii) below will not be given effect. 
 (ii) To be effective, a revocation must be in writing and signed by the Participant, must express the Participant’s intention to revoke his Deferral Election applicable to that Deferral Year, and must be delivered to the Secretary of
the Board or the Chief Administrative Officer of the Company before the close of business on the Election Date applicable to such Deferral Year. For example, to revoke a Deferral Election relating to calendar year 2008, a written revocation of such
Deferral Election must be delivered before the close of business on December 31, 2007. 
  

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	6.	Deferred Compensation Accounts; Distributions 

 (a)
Deferred Compensation Accounts. 
 (i) Establishment of Accounts. A Participant’s deferrals will be
credited to a Deferred Compensation Account set up for that Participant. Each Deferred Compensation Account will be credited with Deferred Amounts, as provided in Section 6(b), and credited (or charged) with earnings (or loss) as provided in
Section 6(c). 
 (ii) Crediting of Deferred Amounts. As of the dividend payment date following the last calendar
quarter, an Outside Director’s Deferred Compensation Account will be credited with (A) 25% of Annual Fees deferred for the Deferral Year in which such quarter occurs and (B) 100% of deferred Meeting Fees earned during such quarter.

 (b) Allocations Among Performance Options. A Participant shall have the right to allocate the Deferred Amount for any Deferral
Year, in minimum allocations of at least 10%, among one or more Performance Options made available from time to time under the Plan. The Performance Options generally available to Participants shall include: 
 (i) A Cash Deferral Option; 
 (ii) A Phantom Stock Option; and 
 (iii) Such other Performance Options as the Committee may
make available to Participants from time to time. Deemed allocations among the available Performance Options shall be made exclusively for the purpose of determining the Account Value from time to time, and the Company will have no obligation to
invest amounts corresponding to Deferred Amounts in investment vehicles corresponding to the Performance Options selected by the Participant. Participants may change the deemed allocation of their Account Value among the Performance Options then
available under the Plan in accordance with procedures established by the Committee from time to time; provided, however, that, unless otherwise determined by the Committee, no such reallocation shall be made more frequently than
quarterly; and provided further that no such reallocation may result in less than 10% of the Account Value being deemed allocated to any single Performance Option. 
 (c) Determination of Account Value. 
 The Company will from time to time calculate the Account Value
based on the Participant’s Deferred Amounts and his/her then-effective elections with respect to deemed allocation of the Account among the available Performance Options. Such calculation will be based on the best information available to the
Company as of the date of determination, which information may include estimates. In addition, the following shall apply: 
 (i) Amounts allocated to the Cash Deferral Option (including amounts resulting from the conversion of Phantom Stock Units as provided in Section 6(c)(ii)), will be credited with interest equivalents as of the first business day of each
calendar quarter based upon the average daily balance credited to such Cash Option (which balance shall include any earnings on amounts so credited pursuant to this Section 6(c)(i)) during the preceding quarter). Interest equivalents will be
calculated using the 90-day commercial paper composite rate published by the Federal Reserve Bank as of the last business day of such preceding calendar quarter, or such other rate as the Committee may designate from time to time by resolution.

  

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 (ii) The number of Phantom Stock Units credited to a Participant’s Deferred
Compensation Account (including fractions of Phantom Stock Units) will be determined by dividing (A) the amount of Director Fees deferred by (B) the Fair Market Value of a share of Common Stock on the date of crediting. 
 (iii) If the Company pays any cash or other dividend or makes any other distribution in respect of the Common Stock, each Phantom Stock
Unit credited to the Deferred Compensation Account of a Participant will be credited with an additional number of Phantom Stock Units (including fractions thereof) determined by dividing (A) the amount of cash, or the value (as determined by
the Committee) of any securities or other property, paid or distributed in respect of one outstanding share of Common Stock by (B) the Fair Market Value of a share of Common Stock on the date of such payment or distribution. Such credit shall
be made effective as of the date of the dividend or other distribution in respect of the Common Stock. 
 (iv) In determining
the value attributable to that portion of a Participant’s Deferred Compensation Account allocated to Performance Options other than the Cash Deferral Option and the Phantom Share Option, the Company will track the rate of return (positive or
negative) over the relevant measurement period of the investment fund, index or other vehicle by reference to which the Performance Option is defined. 
 (v) Upon any reallocation of all or any portion of a Participant’s Deferred Compensation Account from one Performance Option to any other Performance Option, the Company may charge such Account with an amount not
to exceed 5% of the amount so reallocated. The amount of the charge shall be determined by the Company in its discretion and may vary depending on the Performance Options from which and into which the Account is being reallocated. 
 (vi) In addition, the returns attributable to a Deferred Compensation Account shall be subject to the following adjustments: 

(A) Returns attributable to any Performance Option other than the Phantom Stock Option shall be reduced to reflect the amount
that a corporate taxpayer in the highest tax bracket for federal corporate tax purposes would pay on the interests, dividends, distribution or similar items of income that it would receive if it had invested in the commercial paper, investment fund,
index or other vehicle by reference to which the Performance Option is defined for the period of time, and in the same amounts, that the relevant Deferred Compensation Account was deemed allocated to such Performance Option. 
  

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 (B) Upon any change in the deemed allocation of a Participant’s Deferred
Compensation Account among the Performance Options then available, the Account shall be charged with the amount (if any) (the “Deemed Capital Gain Tax Charge”) of capital gains tax that a corporate taxpayer in the highest bracket
for federal corporate tax purposes would pay upon the amount of gain it would recognize had it invested in the investment fund, index or other vehicle by reference to which the Performance Option is defined for the period of time, and in the same
amounts, that the relevant Deferred Compensation Account was deemed allocated to such Performance Option. No credit shall be made to an Account for any loss that would be recognized by a corporate taxpayer that had invested in such Performance
Option for such period and in such amount. 
 The amount of the adjustments described in this subparagraph (vi) shall be determined by
the Company in its discretion. The Company shall use its best efforts to apply adjustments on a consistent basis to all Participants who invest in any particular Performance Option. 
 (d) Manner of Payment of Deferred Benefit. All payments of Deferred Benefits under the Plan will be in cash. The Company shall pay a
Participant’s Deferred Benefit for a given Deferral Year either in a single lump sum or in a series of installments, as elected by the Participant pursuant to Section 5(b). If a Participant has elected installment payments, the amount of
each installment shall be determined by dividing the balance credited to the Participant’s Account in respect of the relevant Deferral Year by the number of installments remaining to be made (including the installment with respect to which the
calculation is made). The unpaid portion of a Participant’s Deferred Benefit shall continue to be credited with earnings as provided in Section 6(c) until paid. 
 (e) Commencement of Payment of Deferred Benefit. For purposes of the Plan a “Conversion Date” means the earliest to occur of: 
 (i)(A) termination of service as a member of the Board or such later date as constitutes the Participant’s separation from
service as a director or independent contractor with the Company and its Affiliates for purposes of Section 409A determined using the default provisions set forth in Treasury Regulation §1.409A(1)(h) or the successor regulation thereto;

 (ii) the date specified in the Deferral Election Form executed by the Participant; or 
 (iii) the Participant’s death. 
  

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 Notwithstanding any other term or provision of this Plan, upon the occurrence of a Conversion Date, any
portion of a Participant’s Deferred Compensation Account that is allocated either to the Phantom Unit Option or to any Performance Option other than the Cash Deferral Option will be converted into the Cash Deferral Option based upon (X) in
the case of amounts allocated to the Phantom Unit Option, the Fair Market Value of the Common Stock as of the Conversion Date and (Y) in the case of any Performance Option other than the Phantom Stock Option, the net asset value or other
relevant valuation measure of the investment fund, index or other vehicle by reference to which the Performance Option is defined, determined as of the Conversion Date or, if such net asset value or other valuation information is not available as of
the Conversion Date, as of the latest date preceding the Conversion Date for which the same is generally available. The amount credited to the Cash Deferral Option as a result of such conversion shall, in the case of conversions from any Performance
Option other than the Phantom Stock Option, be subject to the Deemed Capital Gain Tax Charge as described in Section 6(c) above. Following conversion, amounts so credited to the Cash Deferral Option will be credited with interest equivalents as
provided in Section 6(c)(i). Except as provided in Section 6(f), a Participant’s Deferred Benefit shall be paid (if payable in a lump sum), or commence to be paid (if payable in a series of installments), to the Participant as soon as
practicable (but in no event more than 60 days) after the Conversion Date; provided, however, that as of the date of the Conversion Date, the Participant is a Specified Employee (as defined below) and the Participant has elected to
have distribution of his/her Deferred Benefit commence following termination of service as a member of the Board, then the following shall apply: 
 1) No payments of the Participant’s Deferred Benefit shall be made during the period during the six months following the Conversion Date (except in the case of the Participant’s earlier death); and

 2) On the first business day of the first month following the month in which occurs the six-month anniversary of the
Conversion Date or, if earlier, the Participant’s death, the Company shall make a one-time, lump-sum cash payment to the Participant (or his/her beneficiary or estate as applicable) in an amount equal to the amounts otherwise payable to the
Participant during the period described in clause 1 above, plus interest on such amount 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 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. A Participant 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. 
  

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 (f) Death. In the event of a Participant’s death, the Participant’s entire Deferred
Benefit (including any unpaid portion thereof corresponding to installments not yet paid at the time of death), to the extent not distributed earlier pursuant to Section 6(e), will be distributed in a lump sum to the Participant’s
Beneficiary or Beneficiaries (or, in the absence of any Beneficiary, to the Participant’s estate) on a date, selected by the Committee, no more than 90 days after the Participant’s date of death. 
 (g) Statements. The Company will furnish each Participant with a statement setting forth the value of the Participant’s Deferred Compensation
Account as of the end of each calendar year and all credits to and payments from the Deferred Compensation Account during such year. Such statement will be furnished no later than 60 days after the end of each calendar year. 
  

	7.	Designation of Beneficiary 

 (a) Beneficiary
Designations. Each Participant may designate a Beneficiary to receive any Deferred Benefit due under the Plan upon the Participant’s death by executing a Beneficiary Designation Form. A Beneficiary designation is not binding on the Company
until the Secretary of the Board or the Chief Administrative Officer of the Company receives the Beneficiary Designation Form. If no designation is made or no designated Beneficiary is alive (or in the case of an entity designated as a Beneficiary,
in existence) at the time of the Participant’s death, payments due under the Plan will be made to the Participant’s estate. 
 (b)
Change of Beneficiary Designation. A Participant may change an earlier Beneficiary designation by executing a later Beneficiary Designation Form. The execution of a Beneficiary Designation Form revokes and rescinds any prior Beneficiary
Designation Form. 
  

	8.	Amendments 

 (a) General Power of Committee.
Subject to Section 8(b), the Plan may be altered, amended, suspended, or terminated at any time by the Committee in its sole discretion. 
 (b) When Participants’ Consents Required. Except for a termination of the Plan caused by the Committee’s determination that the laws upon which the Plan is based have changed in a manner that negates the Plan’s
objectives, the Committee may not alter, amend, suspend, or terminate the Plan without the consent of any Participant to the extent that such action would result in the distribution to such Participant of amounts then credited to his/her Deferred
Compensation Account in any manner other than as provided in the Plan or could reasonably be expected to result in the immediate taxation to such Participant of Deferred Benefits or to subject a Participant to interest or additional tax under
Section 409A. 
  

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	9.	Company’s Obligation 

 This Plan is unfunded. A
Deferred Compensation Account represents at all times an unfunded and unsecured contractual obligation of the Company. Each Participant or Beneficiary will be an unsecured creditor of the Company. Amounts payable under the Plan will be satisfied
solely out of the general assets of the Company subject to the claims of the Company’s creditors. No Participant, Beneficiary or any other person shall have any interest in any fund or in any specific asset of the Company by reason of any
amount credited to him/her hereunder, nor shall any Participant, Beneficiary or any other person have any right to receive any distribution under the Plan except as, and to the extent, expressly provided in the Plan. The Company will not segregate
any funds or assets for Deferred Benefits or issue any notes or security for the payment of any Deferred Benefits. Any reserve or other asset that the Company may establish or acquire to assure itself of the funds to provide benefits under the Plan
shall not serve in any way as security to any Participant, Beneficiary or other person for the performance of the Company under the Plan. 
  

	10.	No Control by Participant 

 A Participant shall have
no control over his Deferred Compensation Account except for (i) designating initial allocation among Performance Options and subsequently revising such allocation, in all cases to the extent permitted by the Plan, (ii) designating the
date and form of distribution of benefits on his Deferral Election Form (which designation shall be subject to the terms and conditions of the Plan, including without limitation Section 6) and (iii) designating his or her Beneficiary on a
Beneficiary Designation Form. 
  

	11.	Restrictions on Transfer 

 The Company shall pay all
amounts payable under the Plan only to the Participant or Beneficiary designated under the Plan to receive such amounts. Neither a Participant nor his Beneficiary shall have any right to anticipate, alienate, sell, transfer, assign, pledge, encumber
or change any benefits to which he may become entitled under the Plan, and any attempt to do so shall be void. A Deferred Benefit shall not be subject to attachment, execution by levy, garnishment, or other legal or equitable process for a
Participant’s or Beneficiary’s debts or other obligations. 
  

	13.	Waivers 

 The waiver of a breach of any provision in
the Plan shall not operate as and may not be construed as a waiver of any later breach. 
  

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	14.	Governing Law 

 The Plan shall be construed in
accordance with and governed by the laws of the State of New York. 
  

	15.	Effective Date 

 The Plan became as of
December 1, 1993 and Deferral Elections could be made beginning with Eligible Compensation earned during the year beginning January 1, 1994. 
  

	16.	Construction 

 The headings in the Plan have been
inserted for convenience of reference only and are to be ignored in any construction of the Plan’s provisions. If a provision of the Plan is not valid or enforceable, that fact shall in no way affect the validity or enforceability of any other
Provision. Use of one gender includes the other, and the singular and plural include each other. The provisions of the Plan are binding on the Company and its respective successors or assigns, and on the Participants, their Beneficiaries, heirs, and
personal representatives. 
  

	17.	Tax Withholding 

 The Company shall have the right,
in connection with any Deferral Election, (i) to require the Participant to remit to the Company an amount sufficient to satisfy any Federal, state or local tax withholding requirements, (ii) to withhold an amount necessary to satisfy such
requirements from other cash compensation owed to the Participant or (iii) to reduce the amount of Director Fees deferred pursuant to the Plan in order to ensure that all such requirements are satisfied. The Company shall also have the right to
deduct from all cash payments made pursuant to the Plan any Federal, state or local taxes required to be withheld with respect to such payments. 
  

	18.	No Right to Reelection 

 Nothing in the Plan shall
be deemed to create any obligation on the part of the Board to nominate any of its members for reelection by the Company’s stockholders, nor confer upon any Outside Director the right to remain a member of the Board for any period of time, or
at any particular rate of compensation. 
  

	19.	No Stockholder Rights 

 The crediting of Phantom
Stock Units to a Participant’s Deferred Compensation Account shall not confer on the Participant any rights as a stockholder of the Company, nor shall such Units confer on any Participant any right to receive stock of the Company in settlement
thereof. 
  

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	20.	Adjustment of and Changes in Shares 

 In the event
of any merger, consolidation, recapitalization, reclassification, stock dividend, special cash dividend or other change in corporate structure affecting the Common Stock, the Committee shall make such adjustments, if any, as it deems appropriate in
the number of Phantom Stock Units credited to a Participant’s Deferred Compensation Account. The foregoing adjustments shall be decided by the Committee in its discretion. 
  

	21.	About the Plan 

 The Deferred Compensation Plan for
Outside Directors and Senior Officers was established as of December 1, 1993 by Ambac Inc. In 1997 Ambac Inc. became Ambac Financial Group, Inc. The Plan was amended on October 28, 1998 in order to offer its participants more investment
options. 
 The Plan was amended and restated, effective October 26, 1999 to provide that this Plan be available only to Outside
Directors. Senior Officers no longer participate in this Plan as a new deferred plan has been adopted for them. 
 The Plan was amended and
restated, effective October 22, 2007 to take account of Section 409A so that participation in the Plan will not cause an Outside Director to recognize income for United States federal income tax purposes prior to the time of payment of
his/her Deferred Benefit or to incur interest or additional tax under Section 409A. 
  

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