Document:

Settlement Agreement, dated as of June 7, 2010, by and among Ambac Assurance

 Exhibit 10.1 

EXECUTION COPY 

SETTLEMENT AGREEMENT 

SETTLEMENT AGREEMENT (this “Agreement”), dated as of June 7, 2010 is entered into by and among: 

(a) Ambac Assurance Corporation, a Wisconsin-domiciled insurance company (“AAC”); 

(b) Ambac Credit Products, LLC, a Delaware limited liability company (“ACP”); 

(c) Ambac Financial Group, Inc., a Delaware corporation (“AFGI”); and 

(d) The Persons listed on Schedule A hereto, each of which has become a Party to this Agreement on the date hereof pursuant to the
execution of a joinder agreement in the form attached hereto as Exhibit A (each, a “Joinder Agreement”) and delivery of such joinder agreement to AAC (each individually, a “Policy Beneficiary” and collectively, the
“Policy Beneficiaries”). 
 Capitalized terms used in this Agreement shall have the meanings set forth in
Section 1.01 hereof. 
 RECITALS 

WHEREAS, the Policy Beneficiaries are beneficiaries of financial guaranty insurance policies issued by AAC; and 

WHEREAS, the parties hereto have been in ongoing negotiations regarding a comprehensive settlement with respect to certain obligations
under such policies and related matters. 
 NOW, THEREFORE, in consideration of the premises and the covenants, conditions and
agreements contained herein, and for other fair and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: 

ARTICLE 1 

DEFINITIONS 

Section 1.01. Certain Defined Terms. For purposes of this Agreement: 

“AAC” has the meaning set forth in the Preamble. 

 “AAC Surplus Notes” means the 5.1% Surplus Notes scheduled to mature on the
10th anniversary of the Closing Date, issued at the Closing to certain of the Commuting Policy Beneficiaries solely as set forth on the ABS CDO Consideration Schedule, in the form attached hereto as Exhibit B. 

“ABS CDO CDSs” means each of the CDSs between a Policy Beneficiary and ACP that are guaranteed by AAC and reference
asset backed securities collateralized debt obligations and are listed as a “Commuted Transaction” on the ABS CDO Consideration Schedule. 

“ABS CDO Consideration Schedule” means that certain Schedule dated as of June 3, 2010 and delivered by FTI
Consulting, Inc. to AAC and each of the Commuting Policy Beneficiaries that signs a Commutation Agreement pertaining to ABS CDO CDSs, which sets forth on an anonymous, transaction-by-transaction basis (with such transactions not grouped together,
even on an anonymous basis, on a Policy Beneficiary-by-Policy Beneficiary basis), the Liability Appraiser Base Case, the Liability Appraiser Stress Case and the Liability Appraiser Market Value, and the related Commutation Consideration (and
calculation thereof) for each of the ABS CDO CDSs. The information on the ABS CDO Consideration Schedule has been provided by FTI Consulting, Inc., confirmed by AAC and, with respect to each ABS CDO CDS to which a Commuting Policy Beneficiary is a
party, confirmed by such Commuting Policy Beneficiary. 
 “ACP” has the meaning set forth in the Preamble.

 “Action” means any judicial, administrative or arbitral action, suit, or proceeding by or before any
Governmental Authority. 
 “Affiliate” means, with respect to any specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the specified Person. For the purposes of this definition, “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “controlled”
have meanings correlative thereto. For the avoidance of doubt, no Person will be deemed to control another Person by virtue of acting in an agency, advisory, asset management, investment management, fiduciary or similar capacity. 

“AFGI” has the meaning set forth in the Preamble. 

“Allocated Share” means, with respect to a Commuting Policy Beneficiary, the arithmetic average of the percentage of
total losses (out to three decimal places) under each of the Liability Appraiser Base Case, the Liability Appraiser Stress Case and the Liability Appraiser Market Value attributable to such Commuting Policy Beneficiary’s ABS CDO CDSs, in each
case as set forth on the ABS CDO Consideration Schedule. 
  

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 “Ambac Parties” means AAC, ACP and AFGI. 

“Ambac UK” means Ambac Assurance UK Limited, a United Kingdom-domiciled insurance company. 

“Ambac UK Reinsurance Agreement” means that certain Amended and Restated 1997 Reinsurance Agreement between Ambac UK
(f/k/a Ambac Insurance UK Ltd.) and AAC (f/k/a Ambac Indemnity Corp.) dated November 17, 2009. 
 “Amended
CDSs” has the meaning set forth in Section 3.06. 
 “Ancillary Agreements” means (i) the
Commutation Agreements, (ii) the AAC Surplus Notes and the related Fiscal Agency Agreement, (iii) the Tax Sharing Agreement, (iv) the SL Agreement, (v) the Charter Amendment, (vi) all other documents, instruments and other
agreements executed (or, when referred to prior to the Closing, to be executed at the Closing) in connection with this Agreement as contemplated hereby (other than the agreement between AAC and OCI contemplated by Section 2.03(c)(ix) or any
agreement with a Policy Beneficiary relating to the purchase, repurchase or call of AAC Surplus Notes, as contemplated by Section 3.04(l)). 

“Business Day” means any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized
by Law to be closed in New York. 
 “CDS” means a credit default swap. 

“Charter Amendment” means the amended and restated articles of incorporation of AAC in the form attached hereto as
Exhibit C. 
 “Closing” has the meaning set forth in Section 2.02. 

“Closing Date” means the date of the Closing. 

“Common Advisors” mean Davis Polk & Wardwell LLP, Godfrey & Kahn, SC and FTI Consulting, Inc.

 “Commutation Agreement” means each Commutation Agreement by and among the Ambac Parties and each Commuting
Policy Beneficiary in the form attached hereto as Exhibit D (with variations as provided in such form), executed and delivered (or, when referred to prior to the Closing, contemplated hereby to be executed and delivered) at the Closing. 

“Commutation Consideration” means, with respect to any Commuting Policy Beneficiary: 

(a) with respect to the ABS CDO CDSs (and related financial guaranty insurance policies), such Commuting Policy Beneficiary’s
Allocated Share of cash in the aggregate amount of $2.6 billion; plus 
  

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 (b) with respect to the ABS CDO CDSs (and related financial guaranty insurance policies),
such Commuting Policy Beneficiary’s Allocated Share of $2.0 billion in original principal amount of AAC Surplus Notes; plus 

(c) if such Commuting Policy Beneficiary is commuting a policy referred to on Schedule B hereto on the Closing Date (it being understood
that such policies cover certain non-ABS CDO transactions), an amount equal to the amount set forth opposite such policy on Schedule B hereto. 

“Commuting Policy Beneficiary” means each Policy Beneficiary listed on the schedule marked “Commuting Policy
Beneficiary Schedule – Execution Copy” dated as of June 3, 2010 and delivered by FTI Consulting, Inc. to AAC, Davis Polk & Wardwell LLP and Godfrey & Kahn, SC. 

“Cooperation Agreement” means that certain Cooperation Agreement dated as of March 24, 2010 by and between the
Segregated Account and AAC. 
 “Everspan” means Everspan Financial Guarantee Corp., a Wisconsin-domiciled
insurance company. 
 “Financial Reporting Package” means the financial reports and other information set forth
in Schedule C hereto. 
 “Fiscal Agency Agreement” means the fiscal agency agreement in the form attached
hereto as Exhibit E, relating to the AAC Surplus Notes. 
 “Forbearance Agreement” means that certain
Forbearance and Standstill Agreement dated as of March 24, 2010 among AAC, ACP, OCI and the Policy Beneficiaries signatory thereto, as amended prior to the date hereof. 

“GA Remediation Action” means any remediation, commutation, synthetic commutation, settlement, release or termination,
any amendment or restructuring as a loss mitigation or value preservation effort or transaction, or any other similar loss mitigation or value preservation effort or transaction by AAC or its Affiliates with respect to an obligation of the General
Account that either (A) involves the issuance, incurrence or assumption by AAC or any of its Subsidiaries of less than or equal to $10,000,000 in face amount of Surplus Notes, policies or other obligations (measured on an individual or, in the
case of related series of transactions, on an aggregate basis) or (B) satisfies the OCI Approval Standard. 
  

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 “GAAP” means United States generally accepted accounting principles in
effect from time to time. 
 “General Account” means the general account of AAC. 

“Governmental Authority” means any federal, national, supranational, state, provincial, local, or similar government,
governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body. 

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award issued or
entered by or with any Governmental Authority. 
 “Intercompany Agreements” means (i) all of the
agreements or other arrangements between or among any of AAC or its Subsidiaries and their respective Affiliates in existence on the date hereof and (ii) such other agreements and arrangements between or among any of AAC or its Subsidiaries and
their respective Affiliates entered into after the date hereof that satisfies the OCI Approval Standard. 
 “Joinder
Agreement” has the meaning set forth in the Preamble. 
 “Law” means any federal, national,
supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule (including any rules regarding discovery), code, order, requirement or rule of law (including common law). 

“Legal Opinion” means a written opinion by Dewey & LeBoeuf LLP, in the form attached hereto as Exhibit F1.

 “Liability Appraiser” means that firm engaged by Davis Polk & Wardwell LLP (in its capacity as
counsel to the Policy Beneficiaries) and AAC (on behalf of itself and its Affiliates) pursuant to that certain Advisory Services Agreement dated as of January 8, 2010. 

“Liability Appraiser Base Case” means the “Base Case Losses” with respect to the insured tranches of
collateralized debt obligations underlying all ABS CDO CDSs as determined by the Liability Appraiser as of October 31, 2009 and set forth on the ABS CDO Consideration Schedule. 

“Liability Appraiser Stress Case” means the “Stress Case Losses” with respect to the insured tranches of
collateralized debt obligations underlying all ABS CDO CDSs as determined by the Liability Appraiser as of October 31, 2009 and set forth on the ABS CDO Consideration Schedule. 

“Liability Appraiser Market Value” means the “Market Value Losses” as determined by the Liability Appraiser by
subtracting the “Market Value” (as determined 
  

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by the Liability Appraiser) of the insured tranches of the collateralized debt obligations underlying all ABS CDO CDSs from the current notional exposure thereof, calculated as of
October 31, 2009 and set forth on the ABS CDO Consideration Schedule. 
 “Lien” means any lien, pledge,
mortgage, deed of trust, security interest, claim, lease or similar encumbrance. 
 “Material Intercompany
Agreement” means each Intercompany Agreement (or group or series of related Intercompany Agreements as contemplated by Wis. Admin. Code Ins. § 40.04(4)) (i) entered into other than in the ordinary course of business (where the
ordinary course of business, for the avoidance of doubt, shall include policies, indemnitees, guarantees or other contractual arrangements entered into in connection with the issuance of policies) that requires cash payments or asset transfers by
AAC of amounts in excess of $15,000,000 in any twelve-month period or (ii) pursuant to which either AAC or any Subsidiary is obligated to make payments or transfer assets to an Affiliate (other than to AAC or any wholly-owned Subsidiary (other
than Ambac UK)). 
 “Moody’s” means Moody’s Investors Services, Inc. 

“Note Amendment” has the meaning set forth in Section 3.07. 

“OCI” means the Office of the Commissioner of Insurance of the State of Wisconsin. 

“OCI Approval Standard” shall be satisfied with respect to any matter, action or transaction if OCI has determined in
its sole and absolute discretion that such matter, action or transaction does not violate the law, is reasonable and fair to the interests of AAC, and protects and is equitable to the interests of AAC policyholders generally. Matters, actions or
transactions that require cash payments or asset transfers by AAC or one of its Subsidiaries of amounts less than $15,000,000 in any twelve-month period and involve the incurrence of obligations or commitments of less than $15,000,000 (in each case,
measured per matter, action or transaction or, in the case of related matters, actions or transactions, in the aggregate) and, in the case of Section 3.04(e)(iii), less than $50,000,000 in any twelve-month period, shall be deemed to have
satisfied such standard. 
 “Other Seg Account Policy Notes” means Surplus Notes (other than the AAC Surplus
Notes, the RMBS Surplus Notes and the SL Surplus Notes), issued to satisfy claims made under policies in the Segregated Account on a pay as you go basis in accordance with the Segregated Account Rehabilitation Plan approved by the Rehabilitator or
the Rehabilitation Court pursuant to Wis. Stat. § 645.33(5). 
 “Party” or “Parties”
means any party or all parties, as applicable, to this Agreement. 
  

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 “Permitted Liens” means (a) Liens for taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the financial statements of AAC or the Segregated Account in accordance with GAAP or SAP, as applicable, (b) statutory
Liens of landlords, (c) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the ordinary course of business consistent with past practice, (d) in the case of real property, zoning, building, or other
restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title, none of which, individually or in the aggregate, (i) interfere in any material respect with the present use of or occupancy of
the affected parcel by the Ambac Parties, (ii) have more than an immaterial effect on the value thereof or its use, or (iii) would impair the ability of such parcel to be sold for its present use, (e) Liens securing obligations
arising as a result of any actions under or pursuant to the RMBS Remediation Plan, the SL Remediation Plan, the SA Remediation Plan or any GA Remediation Action, (f) Liens incurred directly in connection with AAC’s and Ambac Capital
Funding, Inc.’s obligations under the guaranteed investment contracts entered into by Ambac Capital Funding, Inc. and in connection with futures contracts and swap agreements entered into by Ambac Financial Services, LLC, (g) Liens
incurred pursuant to the Secured Note, (h) Liens existing on the date hereof, (i) other Liens (X) incurred in the ordinary course of business, (Y) securing obligations (other than Surplus Notes) not prohibited under this
Agreement and (Z) on property posted as collateral having an aggregate fair market value of not more than $50,000,000 (disregarding any property posted as collateral on the date hereof (so long as the relevant collateral arrangement continues
to exist)), (j) Liens in favor of wholly-owned Subsidiaries granted in the ordinary course of business, (k) Liens that satisfy the OCI Approval Standard and (l) Liens by Affiliates in favor of AAC. 

“Person” means an individual, corporation, partnership, limited partnership, limited liability company, association,
trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. 

“Plan of Operation” means the Plan of Operation for the Segregated Account of Ambac Assurance Corporation attached as
Tab 1 to the Verified Petition for Order of Rehabilitation filed on March 24, 2010 in the Rehabilitation Court as part of the Rehabilitation Proceeding, as amended from time to time. 

“Policy Beneficiary” has the meaning set forth in the Preamble. 

“Qualified” means a person, as reasonably determined by AAC, who has the personal characteristics of independence,
integrity, high personal and professional ethics, sound business judgment, and the relevant experience and ability and willingness to commit sufficient time to serving on the board of directors of AAC. 

“Rehabilitation Court” means the Dane County Circuit Court in the State of Wisconsin. 

 

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 “Rehabilitation Proceeding” means the proceeding commenced in the
Rehabilitation Court with the caption “In the Matter of the Rehabilitation of: Segregated Account of Ambac Assurance Corporation,” Case No. 10-CV-1576. 

“Rehabilitator” means the rehabilitator of the Segregated Account, appointed by the Rehabilitation Court, and such
rehabilitator’s successors. 
 “Reinsurance Agreement” means that certain Aggregate Excess of Loss
Reinsurance Agreement, dated as of March 24, 2010, by and between the Segregated Account and AAC. 
 “Released
Matters” has the meaning set forth in Section 6.09(c). 
 “Released Party” has the meaning set forth
in Section 6.09(c). 
 “Representatives” means, with respect to any Party, such Party’s directors,
officers, partners, principals, members, employees, attorneys, agents, accountants, auditors, advisors, sub-contractors and each Person, if any, who controls such Party or any such other Person or entity. 

“Restricted Payment” means (a) any dividend or other distribution, direct or indirect, on account of any shares of
any class of stock or other equity interest of AAC or any Subsidiary of AAC (other than those payable or distributable solely to AAC or any wholly-owned Subsidiary of AAC (other than Ambac UK)) now or hereafter outstanding, except a dividend payable
solely in shares of a class of stock or other equity interest to the holders of that class, (b) any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for value (whether for cash, assets or other
consideration, other than payments made with common equity or non-redeemable preferred stock issued by AAC), direct or indirect, of any shares of any class of stock or other equity interests of AAC or any of its Subsidiaries (other than those
payable or distributable solely to AAC or any wholly-owned Subsidiary of AAC (other than Ambac UK)) now or hereafter outstanding, (c) investments by AAC or its Subsidiaries in any other Person (including loans to, or guarantees of obligations
of, such Person), including any such investment by AAC or any Subsidiary of AAC in any Subsidiary of AAC, (d) any management or service fee to, or payment to reimburse expenses of, any Affiliate of AAC except pursuant to any Intercompany
Agreement permitted hereby or any Ancillary Agreement and except for reimbursement of legal or administrative expenses of wholly-owned Subsidiaries and (e) any payment by AAC or its Subsidiaries on any other Surplus Notes or any class of
obligations of AAC that, in each case, ranks junior to the AAC Surplus Notes but senior to the stock or other equity interests issued by AAC or any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for
value (whether for cash, assets or other consideration other than payments made with common equity or non-redeemable preferred stock issued by AAC), direct or indirect, of any such Surplus Note or class of obligations. 

 

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 “Restructuring” means: (a) the commutation of CDSs and other
transactions and financial guaranty insurance policies and mutual releases and other agreements pursuant to the Commutation Agreements as provided in Section 2.01 hereof, including the payment of the cash commutation payments and the issuance of AAC
Surplus Notes in connection therewith, (b) the Plan of Operation and the consummation of the transactions contemplated thereby, (c) the adoption of the Charter Amendment and (d) the other transactions expressly contemplated by this
Agreement and the Ancillary Agreements, including the restructuring of the SL Obligations. 
 “RMBS” means
residential mortgage backed securities. 
 “RMBS Obligations” means the Segregated Account’s payment
obligations under the financial guaranty insurance policies issued by it on bonds, certificates, notes or other securities payable solely from RMBS assets. 

“RMBS Remediation Plan” means (a) the payment of RMBS Obligations on a pay as you go basis in accordance with the
Segregated Account Rehabilitation Plan approved by the Rehabilitation Court pursuant to Wis. Stat. § 645.33(5) and (b) other remediation, commutation, synthetic commutation, settlement, release or termination, any amendment or
restructuring as a loss mitigation or value preservation effort or transaction or any other similar loss mitigation or value preservation efforts or transactions by AAC or its Affiliates with respect to RMBS Obligations, including litigation related
to any alleged breaches of representations and warranties, commutations and restructurings, and purchases of RMBS Obligations, including a possible tender offer for the RMBS Obligations but not the underlying RMBS (other than through a synthetic
commutation pursuant to which AAC does not directly acquire such RMBS)), in each case if and to the extent such actions or transactions are approved by the Rehabilitator or the Rehabilitation Court, or satisfy the OCI Approval Standard. 

“RMBS Surplus Notes” means Surplus Notes issued pursuant to the RMBS Remediation Plan. 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

 “SA Remediation Plan” means remediation, commutation, synthetic commutation, settlement, release or
termination, any amendment or restructuring as a loss mitigation or value preservation effort or transaction, or any other similar loss mitigation or value preservation efforts or transactions by AAC or its Affiliates with respect to Segregated
Account payment obligations (other than (i) the RMBS Obligations or (ii) the SL Obligations (to the extent in the Segregated Account)) if and to the extent such actions or transactions are approved by the Rehabilitator or the
Rehabilitation Court, or satisfy the OCI Approval Standard. 
  

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 “SAP” means statutory accounting principles for insurance companies in the
State of Wisconsin. 
 “Section 3.04 Benefited Parties” has the meaning set forth in Section 3.04. 

“Secured Note” means that certain Secured Note, dated as of March 24, 2010, from AAC to the Segregated Account.

 “Securities Act” means the Securities Act of 1933, as amended. 

“Segregated Account” means the segregated account of AAC established under Wis. Stat. § 611.24(2) by AAC on
March 24, 2010. 
 “Segregated Account Rehabilitation Plan” means a plan of rehabilitation for the
Segregated Account submitted or to be submitted by the Rehabilitator for approval by the Rehabilitation Court pursuant to Wis. Stat. § 645.33(5). 

“SL Agreement” means that certain agreement to be executed and delivered at the Closing by AAC and the Policy
Beneficiary identified therein with respect to the potential commutation or synthetic commutation, amendment, restructuring or other treatment of certain bonds, certificates, notes or other securities that are the subject of SL Obligations.

 “SL Obligations” means AAC’s payment obligations under financial guaranty insurance policies and surety
bonds issued by AAC on, or in connection with, bonds, certificates, notes or other securities payable principally from assets consisting of student loans and the proceeds thereof. 

“SL Remediation Plan” means (a) the payment of certain SL Obligations on a pay as you go basis in accordance with
the Segregated Account Rehabilitation Plan and (b) the remediation, commutation, synthetic commutation, settlement, release or termination, amendment or restructuring as a loss mitigation or value preservation effort or transaction, or any
other similar loss mitigation or value preservation treatment of certain SL Obligations (i) as provided in the SL Agreement (or any other post-Closing agreement or arrangement) with respect to SL Obligations that are not in the Segregated
Account or (ii) with respect to SL Obligations that are in the Segregated Account, which in each case may include purchases of SL Obligations or related insured obligations, including a possible tender offer, in each case, if and to the extent
such actions or transactions are approved by the Rehabilitator or the Rehabilitation Court, or satisfy the OCI Approval Standard. 

“SL Surplus Notes” means Surplus Notes issued pursuant to the SL Remediation Plan. 

 

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 “Statement of Intent” means that Statement of Intent executed by OCI and
AAC (on behalf of itself and its Affiliates) on March 24, 2010. 
 “Subsidiary” or
“Subsidiaries” means, with respect to a specified Person, any corporation, partnership, limited partnership, limited liability company or other entity as to which the specified Person, directly or indirectly (including through one
or more Subsidiaries), owns a majority of the outstanding shares of stock or other ownership interests having voting power under ordinary circumstances to elect directors of such corporation or other Persons performing similar functions for such
entity. 
 “Surplus Notes” means surplus or contribution notes (or other similar securities that are preferred
to common or preferred equity but junior in right of payment to indebtedness (other than surplus notes) and policy obligations), issued by AAC out of the General Account in the case of the AAC Surplus Notes or out of the General Account or the
Segregated Account in the case of any other such surplus or contribution notes (or other such similar securities), including the Other Seg Account Policy Notes, the SL Surplus Notes and the RMBS Surplus Notes. 

“Tax Sharing Agreement” means the tax sharing agreement among AFGI and certain of its Affiliates, dated as of the
Closing Date in the form attached hereto as Exhibit G. 
 “Transactions” means all transactions contemplated by
this Agreement and the Ancillary Agreements. 
 “Unaffiliated” means a person, as reasonably determined by AAC,
who (i) qualifies as an independent director on the board of directors of AAC under the listing standards of the New York Stock Exchange, (ii) is not an officer or employee of AAC, or a director, officer or employee of any Affiliate of AAC
and (iii) immediately prior to his appointment is not a director of AAC. 
 “Unaffiliated Qualified
Director” means a director of AAC who is Unaffiliated and Qualified. Unaffiliated Qualified Directors for this purpose shall not include any director appointed solely by the vote of AAC’s preferred shareholders. 

“Wisconsin Legal Opinion” means a written opinion by DeWitt Ross & Stevens S.C., in the form attached hereto as
Exhibit F2. 
 Section 1.02. Interpretation and Rules of Construction. In this Agreement, except to the extent
otherwise provided or that the context otherwise requires: 
 (a) when a reference is made in this Agreement to an Article,
Section, Exhibit or Schedule, such reference is to an Article or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated; 
  

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 (b) the table of contents and headings for this Agreement are for reference purposes only
and do not affect in any way the meaning or interpretation of this Agreement; 
 (c) whenever the words
“include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”; 

(d) the words “hereof,” “herein” and “hereunder” and words of similar import, when
used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement; 
 (e) all
terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein; 

(f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; 

(g) any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from
time to time amended, modified or supplemented, including by succession of comparable successor Laws; 
 (h) references to a
Person are also to its successors and permitted assigns; 
 (i) the use of “or” is not intended to be exclusive
unless expressly indicated otherwise; and 
 (j) references to “agreements” and words of similar import refer
to those agreements as they are amended from time to time in accordance with their respective terms. 
 ARTICLE 2 

CLOSING TRANSACTIONS 

Section 2.01. Commutation of Certain Swaps and Policies and Mutual Releases. At the time of the Closing, the Ambac Parties
and each Commuting Policy Beneficiary shall enter into a Commutation Agreement providing for (a) the termination of certain CDSs and other transactions between such Policy Beneficiary and ACP as specified in such Commutation Agreement and
(b) to the extent specified in the relevant Commutation Agreement, the termination or modification of certain insurance policies issued by AAC to or for the benefit of such Commuting Policy Beneficiary, in exchange for (x) the delivery to
such Commuting Policy Beneficiary at the Closing of such Commuting Policy Beneficiary’s Commutation Consideration and (y) the mutual releases and other agreements, as therein provided. 

 

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 Section 2.02. Closing. The closing of the transactions that are the subject of
this Agreement (the “Closing”) will be held at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, NY 10017, immediately upon the satisfaction or waiver of all conditions to the obligations of the
Parties set forth in Article 4 (other than those conditions anticipated to occur at the Closing). All of the actions to be taken at the Closing will be deemed to occur simultaneously. 

Section 2.03. Closing Deliveries by the Ambac Parties.  

(a) At the Closing, the Ambac Parties shall deliver or cause to be delivered to each Policy Beneficiary the related Commutation Agreement
(if applicable) with such Policy Beneficiary executed by the Ambac Parties together with (i) the Commutation Consideration (if applicable) required to be delivered thereunder at the Closing and (ii) the premiums and other payments
contemplated to be returned to such Policy Beneficiary by Section 3(b) of the Forbearance Agreement. 
 (b) At the Closing,
the Ambac Parties shall deliver or cause to be delivered to each Policy Beneficiary payment in full of all reasonable fees and expenses of such Policy Beneficiary’s external legal counsel and other professionals incurred in connection with
matters relating to the Restructuring for which invoices (including hours and rates used in calculating fee amounts) have been delivered to the Ambac Parties prior to the Closing, subject to an aggregate cap for all Policy Beneficiaries of $15
million; provided that, to the extent such fees and expenses are in excess of $15 million, the Policy Beneficiaries shall determine how the $15 million payment by the Ambac Parties shall be allocated; provided, further, that the
reasonable fees and expenses of Davis Polk & Wardwell LLP, FTI Consulting, Inc. and Godfrey & Kahn, SC shall be paid in full at the Closing and shall not be counted against such cap; provided, further, that, for the
avoidance of doubt, and notwithstanding the definition of Restructuring, the costs, fees and expenses that the Ambac Parties agree to pay in connection with the potential commutation or restructuring of SL Obligations pursuant to any SL Agreement
shall not be counted against such cap. 
 (c) At the Closing, the Ambac Parties shall deliver or cause to be delivered to the
Policy Beneficiaries: 
 (i) a true and complete copy, certified by the Secretary or Director of each of the
Ambac Parties, of the resolutions duly and validly adopted by the board of directors of each of the Ambac Parties evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and
the consummation of the Transactions; 
 (ii) a certificate signed by the chief financial officer of AAC
(A) to the effect set forth in Section 4.02(a) hereof and (B) stating that, as of the Closing after giving effect to the Transactions, the pro forma assets, liabilities and policy obligations of AAC, restated as of December 31, 2009,
are substantially as set forth in Schedule E hereto; 
  

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 (iii) the Legal Opinion; 

(iv) the Wisconsin Legal Opinion; 

(v) the Charter Amendment (which shall have become effective and shall remain in full force and effect as of the Closing);

 (vi) the executed Tax Sharing Agreement; 

(vii) the executed Fiscal Agency Agreement; 

(viii) the executed SL Agreement; 

(ix) a copy of an executed agreement between AAC and OCI pursuant to which AAC agrees to make publicly available the
Financial Reporting Package as contemplated by Section 3.10 hereof; and 
 (x) evidence of receipt and
effectiveness of all consents, licenses, approvals, non-disapprovals and other authorizations, and the filings, set forth in Schedule F hereto, including a copy of OCI’s approval or non-disapproval of those of the Transactions scheduled to
occur on or before the Closing. 
 Section 2.04. Closing Deliveries by the Policy Beneficiaries. At the Closing,
each Commuting Policy Beneficiary shall deliver to the Ambac Parties the Commutation Agreement to which such Commuting Policy Beneficiary is a party, executed by such Policy Beneficiary. 

ARTICLE 3 

ADDITIONAL AGREEMENTS 

Section 3.01. Confidentiality. Each Ambac Party covenants to each Policy Beneficiary that, notwithstanding anything to the
contrary herein, the identity of such Policy Beneficiary shall not be disclosed (other than as disclosed (i) prior to the date hereof to a reinsurer of AAC, or (ii) to a reinsurer of AAC on or after the date hereof, to the extent such
disclosure is necessary for AAC to obtain payment (with respect to the Commutation Consideration or amounts due under the Ancillary Agreements) under its existing reinsurance agreements and such reinsurer is subject to confidentiality restrictions
prohibiting it from disclosing such information to third parties, subject to customary exceptions) as a participant in the Restructuring, in relation to the terms of the Restructuring as they apply individually and particularly to such Policy
Beneficiary or in relation to any particular transaction (including swap transactions), policies or other 
  

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agreements to which an Ambac Party is (or was) a party or any of the terms thereof, except (x) with such Policy Beneficiary’s prior written consent, which consent may be withheld for
any reason, or (y) to the extent such information becomes public other than due to a breach by any Ambac Party of this Section 3.01 or any other confidentiality agreement or obligation to which such party is subject. Each of the Ambac
Parties acknowledges that such information consists of trade secrets and/or confidential commercial information, in each case that, if disclosed, would cause substantial injury to the competitive position of the relevant Policy Beneficiary.
Notwithstanding the foregoing, an Ambac Party may disclose the identity of a Policy Beneficiary if it is requested or required by any Governmental Authority or by Law, including by order or any other determination of any court or administrative
authority or any other legal proceeding or by Law, to disclose such information (after requesting any exemption or confidential treatment to the fullest extent permitted by applicable Law, including but not limited to the exceptions to
Wisconsin’s Open Records Law and the Securities and Exchange Commission’s procedures for requesting confidential treatment under 17 CFR § 240.24b-2). Prior to making such disclosure, the relevant Ambac Party or Ambac Parties shall, to
the extent lawfully permitted to do so, provide reasonable advance notice to the affected Policy Beneficiary prior to such disclosure, and shall, at such Policy Beneficiary’s expense, reasonably cooperate with the relevant Policy Beneficiary if
such Policy Beneficiary determines to seek (in addition to the steps that the Ambac Parties themselves are required to take pursuant to the preceding sentence) to obtain confidential treatment or a protective order concerning such identification of
such Policy Beneficiary. 
 Section 3.02. Regulatory and Other Authorizations; Notices and Consents. The Ambac
Parties and each Policy Beneficiary, respectively, shall use their or its commercially reasonable efforts to obtain and maintain all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become
necessary to be made or secured by them or it for the execution and delivery of, and the performance of their or its respective obligations pursuant to this Agreement and the Ancillary Agreements, and will reasonably cooperate with the other Party
in promptly seeking to obtain all such authorizations, consents, orders and approvals. The Ambac Parties and each Policy Beneficiary shall reasonably cooperate with one another to resolve objections, if any, as may be asserted by any Governmental
Authority with respect to the Transactions under any Law. In connection therewith, if any Action is instituted (or threatened to be instituted) challenging any of the transactions contemplated hereby as violative of any Law, the Ambac Parties and
each Policy Beneficiary that is party to such Action will reasonably cooperate with one another to contest and resist any such Action and to have vacated, lifted, reversed, or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits, prevents, or restricts consummation of the transactions contemplated hereby, including by pursuing all available avenues of administrative and judicial appeal, unless, by
mutual agreement, the Ambac Parties and each Policy Beneficiary that is party to such Action decide that litigation is not in their respective best interests. Nothing in this Agreement shall require any Party not otherwise party to such action to
commence or 
  

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join in any litigation (including any regulatory or administrative proceeding). Nothing contained in this Section 3.02 shall require any Party to waive or release any material benefit, right or
remedy of such Party hereunder or under any Ancillary Agreement or otherwise. 
 Section 3.03. Further Action.
Subject to the terms and conditions of this Agreement and the Ancillary Agreements, each of the Parties will use its respective commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things
necessary under applicable Law to be taken or done by it in order for it to consummate and maintain the enforceability of the transactions contemplated by this Agreement and the Ancillary Agreements to which it is (or is contemplated hereby to
become) a party, including (i) preparing and filing as promptly as practicable with any Governmental Authority or other third party all documentation to effect all filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents necessary to be effected by it and (ii) obtaining and maintaining all approvals, non-disapprovals, consents, registrations, permits, authorizations and other confirmations required to be obtained
from any Governmental Authority or other third party that are necessary, proper or advisable in order for it to consummate the transactions contemplated by this Agreement and the Ancillary Agreements to which it is (or is contemplated hereby to
become) a party. Notwithstanding any provision herein to the contrary, it shall be the sole responsibility of the Ambac Parties to obtain and maintain, and the Ambac Parties shall use their respective commercially reasonable efforts to obtain and
maintain as promptly as practicable, each of the approvals, non-disapprovals, consents, registrations, permits, authorizations and other confirmations set forth on Schedule F hereto. Each Party agrees to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as may be necessary, or as another Party may request and is commercially reasonable, in each case solely to the extent consistent with the terms and conditions hereof, in
order for such first Party to consummate or effectuate expeditiously the transactions contemplated by this Agreement and the Ancillary Agreements to which it is (or is contemplated hereby to become) a party to be consummated by it (including, if
requested by the Ambac Parties or any Policy Beneficiary, formal revisions or supplements to the documentation relating to any Amended CDSs held by such Policy Beneficiary to reflect the amendments thereto set forth in Section 3.05). 

 

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 Section 3.04. Further Agreements of the Ambac Parties. From the Closing
until all of the AAC Surplus Notes have been paid in full, redeemed or repurchased (whether as scheduled or pursuant to a call or other early redemption), the Ambac Parties agree, for the benefit of the Policy Beneficiaries that hold or (directly or
indirectly) beneficially own AAC Surplus Notes and each other holder of AAC Surplus Notes from time to time (other than any Ambac Party or an Affiliate thereof) (collectively, the “Section 3.04 Benefited Parties”), as follows:

 (a) At all times after the 120th day after the Closing, at least two members of the board of directors of AAC shall be
Unaffiliated Qualified Directors. At all times after the 180th day after the Closing, at least one-third (and, in any event not less than three members) of the board of directors of AAC shall be Unaffiliated Qualified Directors. At the time a
statement of qualifications for any nominee for Unaffiliated Qualified Director is delivered to OCI pursuant to the Charter Amendment, the Ambac Parties shall deliver a copy of such statement to each of the Section 3.04 Benefited Parties that has
requested such information to provide such Section 3.04 Benefited Parties with an opportunity to provide comments to OCI regarding the qualifications, independence and unaffiliated status of such proposed Unaffiliated Qualified Director.
Notwithstanding the foregoing, if at any time at least two members of the board of directors of AAC are Unaffiliated Qualified Directors, those actions specified in this Agreement as requiring the approval of the Unaffiliated Qualified Directors may
be taken upon the unanimous approval of such Unaffiliated Qualified Directors. In addition, if at any time fewer than two members of the board of directors of AAC are Unaffiliated Qualified Directors, those actions specified in this Agreement as
requiring the approval of the Unaffiliated Qualified Directors may be taken (i) upon the approval of the remaining Unaffiliated Qualified Director (if any) and (ii) if they satisfy the OCI Approval Standard. If at any time AAC has fewer
Unaffiliated Qualified Directors than is required by the provisions of this Section 3.04(a), AAC shall use its commercially reasonable efforts to find additional Unaffiliated Qualified Directors, which efforts shall include considering in its
sole discretion any potential directors recommended by any Section 3.04 Benefitted Party. Without limiting the foregoing, if at any time the board of directors of AAC does not include the minimum number of Unaffiliated Qualified Directors
required by this Section 3.04(a), the sole consequence shall be as set forth in this Section 3.04(a). 
 (b) The provisions
in the Charter Amendment relating to Unaffiliated Qualified Directors shall not be amended in a manner adverse to the Policy Beneficiaries. 

(c) Intentionally Omitted 

(d) Other than as permitted pursuant to the provisions of Section 3.04(e) or Section 3.04(h), AAC and its Subsidiaries shall
not write new business (including through any reinsurance or guarantee arrangement or under existing treaties), unless (A) approved by OCI and (B) AAC has a financial strength rating of at least A by S&P and A2 by Moody’s
(provided, that if at such time only one such rating organization is in the business of rating financial guarantors, then by such organization), or, if neither S&P nor Moody’s is in the business of rating financial guarantors, then the
equivalent rating by any other nationally recognized statistical rating organization (and, in each case, is not on negative watch for downgrade while it has a financial strength rating of A or A2 (or, if applicable, such equivalent thereof)), and
except that new business may be undertaken solely by Everspan (for the avoidance of doubt, without any reinsurance or other guarantee by AAC or any other Subsidiary of AAC) using the proceeds of outside capital received by AAC or any of its
Affiliates after the Closing and invested in Everspan, if 
  

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approved by the board of directors of AAC, including a majority of the Unaffiliated Qualified Directors. For the avoidance of doubt, the provisions of this Section 3.04(d) shall not apply to
(X) any recaptures of policies ceded to reinsurers if such recapture is specifically approved by OCI at or about the time of such recapture, (Y) the issuance of a financial guaranty insurance policy or surety bond (A) pursuant to a
contractual commitment in effect on the date hereof or (B) pursuant to or in connection with the RMBS Remediation Plan, the SL Remediation Plan, the SA Remediation Plan or any GA Remediation Action, or (Z) any hedging activity that
satisfies the OCI Approval Standard. 
 (e) AAC will not, and will cause each of its Subsidiaries not to, issue, incur or assume
any Surplus Notes, policies or other material obligations that are pari passu with or senior to the AAC Surplus Notes (including, without limitation, debt instruments of Affiliates that are structurally senior to the AAC Surplus Notes), other than
(subject to Section 3.04(f)) (i) the RMBS Surplus Notes, the SL Surplus Notes and the Other Seg Account Policy Notes, (ii) any other Surplus Notes or policies that satisfy the OCI Approval Standard or are approved by the Rehabilitator
or the Rehabilitation Court in satisfaction or partial satisfaction of any liabilities of the Segregated Account, (iii) Surplus Notes, policies or other material obligations in connection with the RMBS Remediation Plan, the SA Remediation Plan,
the SL Remediation Plan or any GA Remediation Action, (iv) Surplus Notes, policies or other material obligations issued to AAC or any of its wholly-owned Subsidiaries (other than Ambac UK) that satisfy the OCI Approval Standard, or (v) as
permitted pursuant to the provisions of Section 3.04(d) or Section 3.04(h). In addition, the provisions of this Section 3.04(e) shall not apply to the issuance of a financial guaranty insurance policy or surety bond pursuant to a
contractual commitment in effect on the Closing Date. 
 (f) All Surplus Notes shall rank pari passu with or junior to the AAC
Surplus Notes. No Surplus Note issued by AAC shall have a scheduled maturity or scheduled principal payment prior to the 10th anniversary of the Closing Date, have an interest rate in excess of 5.1% per annum, or otherwise be on terms
materially more favorable to the holders of such Surplus Notes than the AAC Surplus Notes; provided that the existence or absence of transfer restrictions pursuant to section 3(a)(10) or section 4(2) of the Securities Act shall not be considered a
more or less favorable term for the purpose of this subsection. No principal or interest payment (other than PIK interest) on any indebtedness ranking junior to the Surplus Notes shall be made until all of the Surplus Notes have been paid in full,
repurchased or redeemed or otherwise provided for to the satisfaction of OCI. Notwithstanding anything in this Agreement to the contrary, all Surplus Notes shall be approved by OCI. 

(g) Intentionally Omitted 

(h) AAC will not, and will cause each of its Subsidiaries not to: 

(i) solely with respect to AAC, dissolve or liquidate; 

 

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 (ii) merge, consolidate or amalgamate with any other Person (other than
mergers, consolidations or amalgamations between wholly-owned Subsidiaries (other than Ambac UK) of AAC or, where AAC is the surviving entity, between AAC and its wholly-owned Subsidiaries (other than Ambac UK)); 

(iii) solely with respect to AAC, sell, lease, assign, or otherwise dispose or transfer all or substantially all of its
assets in a single transaction or series of related transactions; 
 (iv) sell, lease, assign, or otherwise
dispose of or transfer assets, or cede any material business to third parties, with an aggregate (for all such transactions by all of AAC and all of its Subsidiaries, including transactions among AAC and its Subsidiaries) fair value exceeding,
during any six month-period (whether (A) in one transaction or any number of related transactions or (B) any number of unrelated transactions occurring (in the case of this subclause (B)) within any six month time period), 10% of
AAC’s admitted assets, determined in accordance with statutory accounting principles; 
 (v) make any
Restricted Payment in excess of $5,000,000 in the aggregate (for all Restricted Payments by AAC and/or any of its Subsidiaries) per annum; or 

(vi) create or suffer to exist any Lien on or over its assets (other than Permitted Liens), 

in each case, whether such transaction is with an Affiliate or a non-Affiliate third party; provided that the transactions set forth below shall
not be prohibited pursuant to this clause (h): 
 (A) transactions or payments pursuant to Intercompany
Agreements; 
 (B) recaptures of policies ceded to reinsurers that satisfy the OCI Approval Standard; 

(C) Restricted Payments from AAC to AFGI in an amount (1) up to $52 million per annum solely to pay interest on
indebtedness of AFGI outstanding as of March 15, 2010, or any indebtedness issued as a result of a restructuring or refinancing thereof and (2) up to $7.5 million per annum solely to pay operating expenses of AFGI; provided that,
(x) concurrently with any such Restricted Payment, the total principal amount, including any capitalized interest thereon, of all outstanding Surplus Notes shall be prepaid on a pro rata basis by an amount equal to the amount of such Restricted
Payment and (y) such Restricted Payment satisfies the OCI Approval Standard; 
  

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 (D) for the avoidance of doubt, (i) payment of claims and expenses on
or in connection with insurance policies or other insured obligations existing on the Closing Date in the General Account or thereafter issued as permitted by this Agreement, (ii) the Secured Note, including payments thereunder, (iii) the
Reinsurance Agreement, including payments thereunder, and (iv) the Cooperation Agreement, including payments thereunder; 

(E) (i) obligations under financial guarantees and related policies and obligations existing on the Closing Date in the
General Account or thereafter issued as permitted by this Agreement, (ii) investments in accordance with investment guidelines as required by statutory accounting principles and as approved by OCI; provided that AAC’s and each of
its Subsidiary’s investment plan and performance shall be reviewed at least annually by the board of directors of AAC and modified as necessary and approved by the board of directors of AAC including a majority of the Unaffiliated Qualified
Directors; (iii) dividends or other payments by any Subsidiary of AAC to AAC and (iv) other investments in AAC or any wholly-owned Subsidiary of AAC (other than Ambac UK) pursuant to Intercompany Agreements permitted hereby; 

(F) transactions related to and arising from the RMBS Remediation Plan, the SL Remediation Plan, the SA Remediation Plan
or any GA Remediation Actions; 
 (G) bulk cession(s) of liabilities to direct or indirect Subsidiaries together
with a transfer of corresponding assets and necessary capital to such Subsidiaries that satisfy the OCI Approval Standard; 

(H) transactions not permitted by Section 3.04(h)(iv), (v) or (vi) and not expressly prohibited by, or
otherwise contemplated by, subparts (A) through (G) of this Section 3.04(h) if approved by (i) a majority of the Unaffiliated Qualified Directors and (ii) that satisfy the OCI Approval Standard; and 

(I) transactions otherwise not permitted by this Section 3.04(h) that satisfy the OCI Approval Standard and, if,
after giving effect thereto, AAC has a financial strength rating of at least A by S&P and A2 by Moody’s (provided, that if at such time only one such rating organization is in the business of rating financial guarantors, then by such
organization), or, if neither S&P nor Moody’s is in the business of rating financial guarantors, then the equivalent rating by any other nationally recognized statistical rating organization (and, in each case, is not on negative watch for
downgrade while it has a financial strength rating of A or A2 (or, if applicable, such equivalent thereof)). 
  

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 (i) With respect to any financial guaranty insurance policy obligation commuted or CDS
terminated pursuant to a Commutation Agreement in respect of which AAC and ACP have been released from all of their respective obligations, the Ambac Parties shall cooperate (without having to incur any material obligation or expenses) with any
reasonable requests of any Policy Beneficiary to assist in the restructuring of the underlying insured transactions, including, without limitation, by transferring any voting or consent rights held by any Ambac Party, but only with respect to that
portion of the insured obligations that have been commuted or terminated by such Policy Beneficiary, but only to the extent permitted by the applicable transaction documents or, if not permitted and if an Ambac Party is defined as a controlling
party, such Ambac Party shall, at such Policy Beneficiary’s expense and at its reasonable request, cooperate to use reasonable endeavors to amend the documents to permit such transfer and shall use reasonable efforts to follow such Policy
Beneficiary’s directions. 
 (j) Other than as set forth on Schedule D-2, no transaction by AAC or any of its Subsidiaries
with Affiliates (including any transaction by AAC with any of its Subsidiaries) shall be entered into unless such transaction is (i) pursuant to an Intercompany Agreement and (ii) in accordance with Wis. Stat. §§ 611.61 and
617.21 and Wis. Admin. Code INS § 40.04 (other than with respect to transactions solely among non-insurance Subsidiaries of AAC) and no Material Intercompany Agreement (other than as relates to the RMBS Remediation Plan, the SL Remediation
Plan, the SA Remediation Plan or any GA Remediation Action) shall be entered into or amended in any material respect unless approved by a majority of the Unaffiliated Qualified Directors. 

(k) The Ambac Parties and their respective Affiliates shall not create any new tax-sharing agreements between or among any of the Ambac
Parties, other than the Tax Sharing Agreement, or amend the Tax Sharing Agreement, in each case other than as approved by OCI and a majority of the Unaffiliated Qualified Directors. 

(l) With the prior consent of OCI, AAC may purchase, repurchase or call AAC Surplus Notes on a non-pro rata basis pursuant to separate
agreements or arrangements between AAC and any holder thereof. 
 (m) AAC shall not make any distribution, whether in cash,
property, securities or a combination thereof (other than payments made with common equity or non-redeemable preferred stock issued by AAC), to the holders of any Surplus Notes (in their capacities as such) or pay, or commit to pay, or directly or
indirectly redeem, repurchase, retire, prepay, convert, exchange or otherwise acquire for consideration, or set apart any sum for the aforesaid purpose, any Surplus Note except with respect to all Surplus Notes on a pro rata basis and on the same
terms, except as permitted by Section 3.04(l). 
  

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 Any failure of Ambac UK to comply with the terms of Sections 3.04(d), (e) or (h) of this Agreement
shall not constitute a breach of this Agreement to the extent such noncompliance was not directed or caused by AAC or its Affiliates (other than Ambac UK). 

Any action expressly permitted by any subsection of this Section 3.04 shall be permitted notwithstanding the terms of any other subsection of this
Section 3.04, unless such other subsection expressly prohibits such action. 
 Section 3.05. Treatment of Policies
and Transactions. AAC will not transfer or allocate or seek to have transferred or allocated to the Segregated Account (or any other segregated account) any policy or contract in the General Account except (i) as set forth in Section IV of
the Plan of Operation or (ii) for policies or contracts (a) with actual or expected losses that (taken in the aggregate) are material to the General Account or (b) that threaten the financial viability of the General Account, in each
case as determined by OCI in its sole and absolute discretion; provided that no such policies or contracts may be so transferred or allocated to a segregated account unless such transfer or allocation (i) satisfies the OCI Approval Standards
and (ii) otherwise meets the standards of Wis. Stat. § 611.24. Notwithstanding this Section 3.05 or any other provision of this Agreement, the right, if any, of a holder or beneficiary of a policy or contract to contest the transfer
or allocation of such policy or contract to a segregated account on any ground shall not be deemed waived. 

Section 3.06. Modifications to Amended CDSs. Effective at the time of the Closing, all of the CDSs issued by ACP benefitting
from policies in the General Account that are held by the Policy Beneficiaries (the “Amended CDSs”), including those identified on Schedule I to each applicable Joinder Agreement, are hereby amended pursuant to Section 9(b) of the
ISDA Master Agreement for each such CDS (prior to giving effect to the amendment below) to delete, solely for so long as such policies remain in the General Account, the following “Events of Default,” “Termination Events” or
“Additional Termination Events” with respect to ACP or AAC as the “Defaulting” or “Affected Party” if specified in the relevant Amended CDS as applicable, it being understood that such amendment shall cease to be
effective, and the Amended CDS shall be deemed further modified to reinstate such deleted “Events of Default” “Termination Events” and “Additional Termination Events” in the event the policy related to such Amended CDS
has been transferred or allocated to the Segregated Account (or any other segregated account): 
 (a) Misrepresentation (as
specified in Section 5(a)(iv) of the 1992 ISDA Master Agreement); 
 (b) AAC becoming insolvent in the absence of formal
insolvency proceedings (as specified in Section 5(a)(vii) of the 1992 ISDA Master Agreement); 
  

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 (c) ACP becomes subject to any of the conditions specified in Section 5(a)(vii) of the
1992 ISDA Master Agreement; 
 (d) Cross Default (as specified in Section 5(a)(vi) of the 1992 ISDA Master Agreement); and

 (e) Any “Termination Event,” “Additional Termination Event” or “Event of Default” arising as a
result of the commencement or continuation of the rehabilitation of the Segregated Account. 
 Nothing in this Section 3.06 shall be deemed
to limit or impair in any respect OCI’s rights or positions in regards to the Segregated Account or any new segregated account under Chapter 645 of the Wisconsin Statutes. 

Section 3.07. No Additional Consideration. AAC has not and will not directly or indirectly pay or cause to be paid any
remuneration in the form of cash payments, securities or other property (including supplemental or additional interest, fees, collateral or other credit support or otherwise, but excluding the application of posted collateral in connection with a
single CDS transaction that is not a “Commuted Transaction” on the ABS CDO Consideration Schedule or the return of posted collateral to the party having posted such collateral), to any Policy Beneficiary or Affiliate thereof as
consideration for or as an inducement to the entering into by such Policy Beneficiary of this Agreement or any Ancillary Agreement, other than (a) the consideration specifically contemplated by this Agreement and/or by the forms of Ancillary
Agreements attached hereto and (b) payments to purchase AAC Surplus Notes under separate agreements permitted by Section 3.04(l) and payments of fees and expenses and granting of releases pursuant to agreements granting AAC an option to
purchase AAC Surplus Notes. AAC shall not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any
holder of AAC Surplus Notes as consideration for or as an inducement to the entering into, or consent to, by any holder of AAC Surplus Notes of any amendment, waiver, consent, modification, refunding or refinancing of the AAC Surplus Notes (each, a
“Note Amendment”), unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder of AAC Surplus Notes then outstanding that
agrees to such Note Amendment. 
 Section 3.08. Amendment to Forbearance Agreement. The parties agree that the
Forbearance Agreement shall remain in effect, except that clause (a) of the definition of “Termination Event” set forth therein is hereby amended to read as follows: 

“(a) The earlier of (i) the date that the Settlement Agreement dated as of June 7, 2010 among the Policy Beneficiaries,
AAC, ACP and OCI terminates in accordance with its terms and (ii) immediately following the “Closing” as defined in such Settlement Agreement.” 

 

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 The foregoing amendment shall become effective upon the occurrence of both (x) the effectiveness of
this Agreement and (y) written consent to such amendment by OCI. In addition, immediately following the Closing, the Forbearance Agreement shall be of no further force or effect. 

Section 3.09. Reinstatement. If the Commutation Consideration paid to any Policy Beneficiary has been returned to any of the
Ambac Parties because it is determined that such Commutation Consideration constituted a voidable preference or fraudulent transfer or conveyance (or otherwise by reason of or in connection with the insolvency, bankruptcy, rehabilitation or
reorganization of any Ambac Party), the Commutation Agreement executed by such Policy Beneficiary shall be voided and all rights and remedies of the Ambac Parties and such Policy Beneficiary as they existed immediately prior to the execution of this
Agreement and the Ancillary Agreements shall be reinstated in full. 
 Section 3.10. Informational Agreements. AAC
shall provide (which shall include posting information on its website) the Policy Beneficiaries with the Financial Reporting Packages on a periodic basis as specified in Schedule C. The Ambac Parties shall make each Financial Reporting Package
publicly available when delivered (or required to be delivered) pursuant to the immediately preceding sentence (as in effect on the date hereof), except for information set forth in Part II of Schedule C. The information set forth in Part II of
Schedule C shall only be provided to a Policy Beneficiary to the extent it enters into (and is not in breach of) a confidentiality agreement in the form of Exhibit H hereto. 

Section 3.11. Material Intercompany Agreements. The Ambac Parties represent and warrant that, as of the Closing Date, all
Material Intercompany Agreements have been disclosed on Schedule D-1 hereto. 
 ARTICLE 4 

CONDITIONS TO CLOSING 

Section 4.01. Conditions to Obligations of the Ambac Parties. The obligations of the Ambac Parties to consummate the
Transactions are subject to the fulfillment or written waiver (by all of the Ambac Parties), at or prior to the Closing, of each of the following conditions: 

(a) Representations, Warranties and Covenants. (i) The representations and warranties of each Policy Beneficiary contained in
this Agreement or any Ancillary Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the
same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and 

 

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correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date, in
which case such representations and warranties will be true and correct as of that date, and (ii) the covenants and agreements contained in this Agreement and each of the Ancillary Agreements to be complied with by such Policy Beneficiary on or
before the Closing will have been complied with in all material respects; 
 (b) No Proceeding or Litigation. No
Governmental Authority shall have issued an order, decree or ruling or taken any other Action restraining, rescinding, enjoining or otherwise prohibiting the Transactions or materially and adversely altering any component of the Restructuring or any
of the Transactions or otherwise rendering it impossible or unlawful for the Ambac Parties to consummate the Transactions; 

(c) Closing Deliveries. All closing documents required to be delivered under Section 2.04 hereof shall have been delivered;

 (d) Regulatory Approvals. The consents, licenses, approvals, non-disapprovals and other authorizations, and the
filings, set forth in Schedule F hereto shall have been received; and 
 (e) No Termination Event. No Termination Event
(as defined in the Forbearance Agreement) shall have occurred, other than the occurrence of the Closing Date. 

Section 4.02. Conditions to Obligations of the Policy Beneficiaries. The obligations of each Policy Beneficiary to consummate
the Transactions are subject to the fulfillment or written waiver (by such Policy Beneficiary), at or prior to the Closing, of each of the following conditions: 

(a) Representations, Warranties and Covenants. (i) The representations and warranties of each Ambac Party contained in this
Agreement or any Ancillary Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same
force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the
Closing, except to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties will be true and correct as of that date, and (ii) the covenants and agreements
contained in this Agreement and each of the Ancillary Agreements to be complied with by any Ambac Party on or before the Closing will have been complied with in all material respects; 

(b) No Proceeding or Litigation. No Governmental Authority shall have issued an order, decree or ruling or taken any other Action
restraining, rescinding, enjoining or otherwise prohibiting the Transactions or materially and adversely altering any component of the Restructuring or any of the Transactions or otherwise rendering it impossible or unlawful for any Policy
Beneficiary to consummate the Transactions; 
  

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 (c) Closing Deliveries. The closing documents required to be delivered under Section
2.03 hereof shall have been delivered; 
 (d) Regulatory Approvals. The consents, licenses, approvals, non-disapprovals
and other authorizations set forth in Schedule F hereto shall have been received (and shall remain in full force and effect); 

(e) Segregated Account Rehabilitation Plan. Any Segregated Account Rehabilitation Plan submitted or approved prior to the Closing
shall not be inconsistent with the terms of the Statement of Intent; 
 (f) Charter Amendment. The Charter Amendment
shall have been adopted and become effective (and shall remain in full force and effect as of the Closing); 
 (g) Fees and
Expenses Paid. The Ambac Parties shall have paid the fees and expenses of each of the Policy Beneficiaries in accordance with Section 2.03(b); 

(h) Delivery of Portfolio Information. Prior to the Closing, AAC shall have delivered to the Policy Beneficiaries (i) a
substantially complete list of the CUSIPs and Single Risks comprising AAC’s insured portfolio and AAC’s investment portfolio (which, for the avoidance of doubt, shall include the insured portfolios of AAC and Ambac UK); provided
that AAC will deliver a complete list within 120 days following the Closing; provided, further, that, to the extent practicable, any charts, lists, spreadsheets or similar tables shall be provided in Microsoft Excel format. 

(i) Return of Premiums. Such Commuting Policy Beneficiary shall have received from AAC the premiums and/or other payments
contemplated to be returned to it by Section 3(b) of the Forbearance Agreement; and 
 (j) No Termination Event. No
Termination Event (as defined in the Forbearance Agreement) shall have occurred, other than the occurrence of the Closing Date. 

(k) Ambac UK Obligations. The Ambac UK Reinsurance Agreement has been allocated to and remains in the Segregated Account and the
obligations pertaining to it are treated consistently with the junior priority of such obligations in a liquidation proceeding in any Segregated Account Rehabilitation Plan filed or approved prior to the Closing. 

Section 4.03. Frustration of Closing Conditions. Neither the Ambac Parties nor any Policy Beneficiary may rely on the failure
of any condition set forth in Section 4.01 or Section 4.02, as the case may be, to be satisfied if such failure was primarily caused by such Party’s or Parties’ breach of any provision of this Agreement or any Ancillary Agreement.

  

 26 

 ARTICLE 5 

TERMINATION AND WITHDRAWAL 

Section 5.01. Termination. This Agreement may be terminated at any time prior to the Closing: 

(a) by any Party, in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other Action
restraining, rescinding, enjoining or otherwise prohibiting the Transactions or materially and adversely altering any component of the Restructuring or any of the Transactions, and such order, decree, ruling or other Action shall have become final
and non-appealable; 
 (b) by the mutual written consent at any time of the Ambac Parties and the Policy Beneficiaries; or

 (c) as to any Policy Beneficiary, by written notice from such Policy Beneficiary to the Ambac Parties and the other Policy
Beneficiaries any time after July 31, 2010. 
 Section 5.02. Effect of Termination. In the event of termination
of this Agreement as provided in Section 5.01 (other than pursuant to Section 5.01(c), which shall only void this Agreement insofar as it pertains to such Policy Beneficiary), this Agreement and the Ancillary Agreements shall forthwith become void
and there shall be no continuing obligations on the part of any Party hereto except (a) as set forth in Section 3.01, Section 6.01, Section 6.09 and Section 6.10 and (b) that nothing herein shall relieve any Party from liability for any
breach of this Agreement and the Ancillary Agreements prior to their termination. 
 ARTICLE 6 

GENERAL PROVISIONS 

Section 6.01. Expenses. Except as otherwise specified in this Agreement (including, without limitation, Section
2.03(b) and Section 4.02(g) herein) or any other written agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the Transactions, shall be
paid by the Party incurring such costs and expenses, whether or not the Closing shall have occurred. 
 Section 6.02.
Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be 

 

 27 

 
deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or electronic mail (upon electronic
confirmation of delivery), or by registered or certified mail (postage prepaid, return receipt requested), to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in
accordance with this Section 6.02; 
 (a) if to any of the Ambac Parties: 

 

			
	Address:	  	One State Street Plaza
		  	New York, NY 10004
	Facsimile:	  	(212) 208-3558
	Electronic Mail:	  	kdoyle@ambac.com
	Attention:	  	Kevin Doyle, General Counsel
	
	with a copy to:
		
	Address:	  	Barbara Goodstein
		  	Michael Groll
		  	Dewey & LeBoeuf LLP
		  	1301 Avenue of the Americas
		  	New York, NY 10019
	Facsimile:	  	(212) 259-8000
	Electronic Mail:	  	 bgoodstein@dl.com and

mgroll@dl.com

(b) if to any Policy Beneficiary, to the address, facsimile or electronic mail address of such Policy Beneficiary listed on Schedule H
hereto, with copy to: 
  

			
	Address:	  	Donald Bernstein
		  	Joseph Hadley
		  	Davis Polk & Wardwell LLP
		  	450 Lexington Ave.
		  	New York, NY 10017
	Facsimile:	  	(212) 701-5092
	Electronic Mail:	  	 donald.bernstein@davispolk.com and

joseph.hadley@davispolk.com

provided, however, that any notice of the termination of this Agreement pursuant to Section 5.01 must be delivered to the respective
Parties shall be given or made (and shall be deemed to have been duly given or made upon receipt) only by delivery in person, by an internationally recognized overnight courier service, or by registered or certified mail (postage prepaid, return
receipt requested). 
  

 28 

 Section 6.03. [Reserved]. 

Section 6.04. Entire Agreement. This Agreement and the Ancillary Agreements and any other agreements expressly contemplated
by this Agreement or any Ancillary Agreement (which, for the avoidance of doubt, shall not include the Statement of Intent), constitute the entire agreement among all of the Parties with respect to the Transactions and supersede all prior agreements
and undertakings, both written and oral, between any Ambac Party on the one hand and any Policy Beneficiary on the other hand with respect to the Transactions. Notwithstanding the foregoing, the Confidentiality Agreement dated as of
September 30, 2009, between AAC and its affiliates and the Policy Beneficiaries shall remain in full force and effect according to its terms. 

Section 6.05. Assignment. This Agreement may not be assigned by operation of Law or otherwise without the express written
consent of all Parties (which consent may be granted or withheld in the sole discretion of each of the Parties) and any such assignment or attempted assignment without such consent shall be void; provided that this Agreement may be assigned
by a Policy Beneficiary without such consent in connection with or as part of a merger, consolidation or sale of substantially all of such Policy Beneficiary’s assets to the Person(s) with whom the Policy Beneficiary is merging or to whom
substantially all of such Policy Beneficiary’s assets are being transferred and that (by operation of Law or written instrument of assumption) assumes all obligations of the assignor under this Agreement. For the avoidance of doubt, any
transfer that consists solely of Surplus Notes shall not be considered an assignment of this Agreement. 
 Section 6.06.
Amendment and Waiver. This Agreement may not be amended, altered, supplemented, waived or modified except by an instrument in writing signed by, or on behalf of, the Ambac Parties and all of the Policy Beneficiaries; provided that from
and after the Closing, Section 3.10 (and, solely for the purpose of Section 3.10, any defined term used therein) may be amended, altered, supplemented, waived or modified by an instrument in writing signed by, or on behalf of, (i) the
Ambac Parties and (ii) a majority of the Policy Beneficiaries; provided, further, that from and after the Closing, Section 3.04 (except in the case of any amendment to the first sentence of Section 3.04(f)) (and, solely for
the purpose of Section 3.04, any defined term used therein) may be amended, altered, supplemented, waived or modified by (i) an instrument in writing signed by and only by the Ambac Parties, (ii) with the consent of Section 3.04 Benefited
Parties holding more than 50% in aggregate principal amount of the AAC Surplus Notes that cast a ballot (disregarding in any such calculation (in both the numerator and the denominator) the principal amount of any AAC Surplus Notes that are
beneficially owned by any Ambac Party or any of its Affiliates, or the voting of which any Ambac Party or any of its Affiliates has the right to direct with respect to such amendment, alteration, supplement, waiver or modification) and
(iii) approved by OCI. No amendment, alteration, supplement, waiver or modification shall, unless in writing and signed by a Policy Beneficiary, affect the duties or obligations of such Policy Beneficiary under this Agreement or any Ancillary
Agreement. 
  

 29 

 Section 6.07. No Third-Party Beneficiaries. This Agreement shall be binding upon
and inure solely to the benefit of the Parties and their respective successors and permitted assigns, and except as provided in Section 6.09 and except that the Section 3.04 Benefited Parties are third party beneficiaries of Section 3.04 and the
proviso to Section 6.06, nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit, remedy or right of action of any nature whatsoever, arising directly or indirectly out of, based
upon, or in any way related to or in connection with this Agreement. 
 Section 6.08. Rights and Remedies. Each
Party acknowledges and agrees that each Party may be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any material breach of this Agreement by another Party may not be
adequately compensated by monetary damages alone. Accordingly, in addition to any other right or remedy to which such Party may be entitled, at Law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific
performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. 

Section 6.09. Several Liability of the Policy Beneficiaries; Releases. (a) The obligations, representations,
warranties and covenants of the Policy Beneficiaries under this Agreement and the Ancillary Agreements shall be several and not joint or joint and several. No Policy Beneficiary shall be liable for any breach of any other Policy Beneficiary.

 (b) Each Policy Beneficiary acknowledges that it has, independently and without reliance upon any other Policy Beneficiary
and based on such documents and information as it has deemed appropriate, made its own analysis and decision to enter into this Agreement and its Commutation Agreement and with respect to the Restructuring. Each Policy Beneficiary also acknowledges
that it will, independently and without reliance upon any other Policy Beneficiary and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action with
respect to the Restructuring, any related agreement or any document furnished hereunder or thereunder, or any other matter relating to any insurance policy issued by AAC for the benefit of such Policy Beneficiary. 

(c) Effective automatically upon, and as of, the Closing, each Policy Beneficiary releases (i) each other Policy Beneficiary,
(ii) the respective Representatives of each such other Policy Beneficiary (including the Common Advisors) and (iii) to the extent a Policy Beneficiary’s Affiliate (for the avoidance of doubt, excluding any Ambac Party or any of its
Affiliates) was involved in the Restructuring, such Affiliate and its Representatives (each party described in (i), (ii) and (iii), a “Released Party”) from and against any and all losses, claims, damages, and liabilities,
joint or several, to which such Released Party may be or become subject under any applicable federal, state or foreign 

 

 30 

 
law (including common law) or otherwise, caused by or arising in any manner out of the formulation, negotiation or implementation of this Agreement or any Ancillary Agreement, the Restructuring
or any agreement executed and delivered in connection with the Restructuring or any document furnished under or in connection with any of the foregoing, including the service of any Released Party on any formal or informal negotiating committee or
any action taken or omitted to be taken by it in its capacity as a member of any formal or informal negotiating committee (subject to the following proviso, the “Released Matters”); provided, however, that the
foregoing release shall not apply with respect to, and the Released Matters shall not include, any particular loss, claim, damage or liability, to the extent that such loss, claim, damage or liability is found in a final judgment by a court of
competent jurisdiction to have resulted primarily from such Released Party’s fraud, willful misconduct or gross negligence. 

Section 6.10. Governing Law and Jurisdiction. Except as provided herein, this Agreement shall be interpreted under and
governed by the Laws of the State of New York without giving effect to conflicts of law provisions thereof that would make the law of any other jurisdiction applicable to this Agreement. In the event that there is a dispute between or among the
Parties arising under this Agreement, the Parties (i) agree that the exclusive forum to seek remedy shall be to institute a legal proceeding in the courts of the State of New York located in the City and County of New York or the United States
District Court for the Southern District of New York and (ii) hereby expressly submit to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waive any claim of lack of personal jurisdiction and improper
venue and any claim that such courts are an inconvenient forum. Each Party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the address provided to the Parties in accordance with Section 6.02, such service to become effective 10 days after such mailing. 

Section 6.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HEREBY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.11. 
  

 31 

 Section 6.12. Fully Negotiated Agreement. Each Party has had the opportunity to
negotiate the terms, consult with counsel, and modify the provisions of this Agreement and the Ancillary Agreements. Therefore, the terms of this Agreement and the Ancillary Agreements shall be considered and interpreted without any presumption,
inference or rule requiring construction or interpretation of any provision of this Agreement against the interests of the drafter of the Agreement. The Ambac Parties acknowledge and agree that each Policy Beneficiary, on the one hand, and the Ambac
Parties and their Affiliates, on the other hand, have an arms-length business relationship that does not directly or indirectly give rise to, nor do the Ambac Parties or their Affiliates rely on, any fiduciary, advisory or agency relationship or
duty with respect to any Policy Beneficiary. Other than relationships under written engagements, no Policy Beneficiary is advising the Ambac Parties or their Affiliates as to any legal, tax, investment, accounting or regulatory matters in any
jurisdiction, as to which matters the Ambac Parties are relying on their own advisors. Any review by or on behalf of any Policy Beneficiary of the Ambac Parties, the Transactions, the other transactions contemplated hereby or other matters relating
to such transactions have been performed solely for the benefit of such Policy Beneficiary and its Affiliates and not on behalf of any Ambac Party or its Affiliates. The Ambac Parties further acknowledge that the Policy Beneficiaries or their
Affiliates are full service banks or securities firms engaged in a broad range of transactions that may involve interests that differ from the interests of the Ambac Parties and their Affiliates, and that no Policy Beneficiary or Affiliate thereof
has any obligation to disclose such interests and transactions to the Ambac Parties. 
 Section 6.13. Currency.
Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars and all payments hereunder shall be made in United States (U.S.) dollars by wire
transfer in immediately available funds. 
 Section 6.14. Counterparts. This Agreement may be executed and delivered
in multiple counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement. A facsimile or Portable Document Format copy of a signature
shall have the same force and effect as an original signature. 
 Section 6.15. Segregated Account. This Agreement
is not an obligation of or binding upon the Segregated Account but only AAC acting through the General Account. 
 [NO FURTHER
TEXT ON THIS PAGE] 
  

 32 

 IN WITNESS WHEREOF, the Ambac Parties and the Policy Beneficiaries have caused this
Agreement to be executed as of the date first written above. 
  

					
	AMBAC PARTIES:
	
	AMBAC ASSURANCE CORPORATION
		
	By:	 	 /s/ Kevin J. Doyle

		 	 Name:
	 	Kevin J. Doyle
		 	Title: 	 	Senior Vice President and General Counsel
	
	AMBAC CREDIT PRODUCTS, LLC
		
	By:	 	 /s/ Kevin J. Doyle

		 	Name:	 	Kevin J. Doyle
		 	Title:	 	Senior Vice President and General Counsel
	
	AMBAC FINANCIAL GROUP, INC.
		
	By:	 	 /s/ Kevin J. Doyle

		 	Name:	 	Kevin J. Doyle
		 	Title:	 	Senior Vice President and General CounselForm of Commutation Agreement.

 Exhibit 10.2 

EXHIBIT D 

CONFIDENTIAL 

COMMUTATION
AGREEMENT1 

THIS COMMUTATION AGREEMENT (this “Agreement”) is made as of June 7, 2010 by and among the Policy Beneficiary
identified on the signature page hereof (the “Policy Beneficiary”), Ambac Credit Products, LLC (“ACP”) and Ambac Assurance Corporation (“AAC”). 

Reference is hereby made to [that] [those] certain financial guaranty insurance polic[y][ies] listed on Schedule 1 hereto
([collectively,] the “Polic[y][ies]”), issued by AAC in connection with the corresponding transaction[s] listed on Schedule 1 hereto (such listed corresponding transaction[s, collectively], the “Commuted Swap
Transaction[s]”) between ACP and the Policy Beneficiary. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Settlement Agreement (the “Settlement Agreement”) dated as of June 7,
2010 among AAC, ACP and Ambac Financial Group, Inc., on the one hand, and certain beneficiaries of financial guaranty insurance policies issued by AAC, including the Policy Beneficiary, on the other hand. 

WHEREAS, the parties have engaged in good faith, arm’s length negotiations to settle the parties’ respective rights and
obligations related to the Polic[y][ies] and the Commuted Swap Transaction[s]; 
 WHEREAS, the Policy Beneficiary and ACP have
agreed to terminate the Commuted Swap Transaction[s] and each of their respective obligations thereunder subject to the terms hereof; and 

[WHEREAS, the Policy Beneficiary and AAC have each agreed to terminate the Polic[y][ies] only in respect of the Commuted Swap
Transaction[s], subject to the terms hereof.]2 

 

	1
	[Note: With respect to any Commuted Swap Transaction where a Commuting Policy Beneficiary is not a party thereto but an indirect beneficiary thereof, the related
Commutation Agreement shall differ from this form to the extent necessary to release and discharge the liabilities of ACP and AAC thereunder, whether through novation or otherwise.] 

	2
	[Insert if relevant.] 

  

 1 

 NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration,
the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows: 
 ARTICLE 1 

TERMINATION OF COMMUTED SWAP TRANSACTION[S]

 Section 1.01. Each party hereto hereby agrees that, from and after the execution of this Agreement by each of the
parties hereto and the receipt by the Policy Beneficiary of the cash payment and, if applicable, AAC Surplus Notes referred to in Section 1.02 hereof concurrently with the Closing under the Settlement Agreement (the “Effective
Time”) and in any event subject to Section 3.01 hereof: 
 (a) the Commuted Swap Transaction[s] shall be
terminated in full and be of no further force or effect and except as provided in Section 1.02 hereof, no party hereto shall have any claims for payment of amounts under the terminated Commuted Swap Transaction[s]; 

(b) with respect to each Commuted Swap Transaction, the related ISDA Master Agreement, Schedules and Confirmations, control rights
agreements, voting agreements, and other contracts and agreements between AAC or ACP, on the one hand, and the Policy Beneficiary, on the other hand, constituting such Commuted Swap Transaction, and any guaranty or other credit support issued to the
Policy Beneficiary by AAC or ACP, solely with respect to such Commuted Swap Transaction, shall be terminated in full and be of no further force or effect; 

(c) except as provided in Section 1.02 hereof, no party hereto shall owe any other party any termination payment or other amounts in
connection with the termination of the Commuted Swap Transaction[s]; and 
 (d) any requirement of notice of termination or
delivery of any other document required in connection with termination of the Commuted Swap Transaction[s] is hereby waived by each party entitled to such notice or other document. 

Section 1.02. In consideration of the termination of the Commuted Swap Transaction[s] and the Policies as they relate solely
to the Commuted Swap Transaction[s] and of the other agreements of the Policy Beneficiary contained herein, AAC hereby agrees to pay to the Policy Beneficiary at the Effective Time the Commutation Consideration as follows: 

(a) cash, in the amount specified on Annex A hereto as the “Settlement Amount,” by wire transfer of immediately
available funds to the account of the Policy Beneficiary specified as the “Payment Account” on Annex A hereto; 

(b) if applicable, AAC Surplus Notes in an aggregate principal amount equal to the “Surplus Note Amount” specified on
Annex A hereto; such AAC Surplus Notes to be issued in certificated form and delivered to the Policy Beneficiary by The Bank of New York Mellon, as Fiscal Agent for the AAC Surplus Notes; and 

 

 2 

 (c) premiums or other payments paid by the Policy Beneficiary to AAC or any of its
Affiliates on account of the Commuted Swap Transaction[s] since March 24, 2010 (being the amounts segregated by AAC pursuant to Section 3(b) of that certain Forbearance and Standstill Agreement dated as of March 24, 2010 among AAC,
ACP, the Office of the Commissioner of Insurance of the State of Wisconsin (“OCI”) and the “Policy Beneficiaries” signatory thereto) in the aggregate amount of
$            . 
 Section 1.03. The Policy Beneficiary
represents and warrants that, from the execution and delivery of each Commuted Swap Transaction to the execution and delivery of this Agreement and as of the Effective Time, it has not sold, assigned, conveyed, pledged, encumbered or otherwise
transferred (other than pursuant to a lien or security interest previously granted that has been released) any of its interest in such Commuted Swap Transaction. 

ARTICLE 2 

TERMINATION OF POLIC[Y][IES] 

Section 2.01. The Policy Beneficiary represents and warrants that, from the execution and delivery of the Polic[y][ies] to
the execution and delivery of this Agreement and as of the Effective Time, it has not sold, assigned, conveyed, pledged, encumbered or otherwise transferred (other than pursuant to a lien or security interest previously granted that has been
released) any of the Policy Beneficiary’s interest in the Polic[y][ies]. 
 Section 2.02. Each party hereto
hereby agrees that, from and after the Effective Time and in any event subject to Section 3.01 hereof: 
 (a) all
obligations of AAC under the Polic[y][ies] (in the case of any Multiple CDS Policy, solely as such obligations pertain to the Commuted Swap Transaction[s]) shall terminate in full and be of no further force or effect and except as provided in
Section 1.02 hereof, no party hereto shall have any claims for payment of amounts under such terminated Polic[y][ies] (in the case of any Multiple CDS Policy, solely as such obligations pertain to the Commuted Swap Transaction[s]); 

(b) except as provided in Section 1.02 hereof, no party shall owe any other party any termination payment or other amount in
connection with the termination of obligations with respect to the Commuted Swap Transaction[s] under the Polic[y][ies]; 
 (c)
any requirement of notice of termination or delivery of any other document required in connection with termination of obligations with respect to the Commuted Swap Transaction[s] under the Polic[y][ies] is hereby waived by each party entitled to
such notice or other document; and 
  

 3 

 (d) The Policy Beneficiary acquiesces in and consents and agrees to such termination of
obligations with respect to the Commuted Swap Transaction[s] under the Polic[y][ies]. 
 ARTICLE
33 

CONFIRMATION OF MULTIPLE CDS POLIC[Y][IES]
AND MULTIPLE CDS ISDA MASTERS 
 Section 3.01. Each of the parties hereto
acknowledges that [certain of] the Polic[y][ies] cover[s] (or may cover), and that certain of the ISDA Master Agreement[s], Schedule[s] and other agreements (other than the [Confirmation[s] related to the Commuted Swap Transaction[s]) apply to (or
may apply to), both the Commuted Swap Transaction[s] and other CDSs (or other transactions) that are not Commuted Swap Transaction[s] (any such Policy, a “Multiple CDS Policy” and each such ISDA Master Agreement, Schedule and other
agreement, collectively, a “Multiple CDS ISDA Master”), and each of the parties hereto further acknowledges, and, in any event agrees (notwithstanding anything in this Agreement to the contrary), that each such Multiple CDS ISDA
Master and/or Multiple CDS Policy shall remain in full force and effect notwithstanding the execution and delivery of this Agreement except only that, from and after the Effective Time, such Multiple CDS ISDA Master and Multiple CDS Policy shall
cease to cover or apply to the Commuted Swap Transaction[s] formerly documented and/or insured thereunder. Further, with respect to any Multiple CDS ISDA Master that shall remain in effect from and after the Effective Time (with respect to any CDS
(or other transaction) that is not a Commuted Swap Transaction), any obligations of a party hereto to make any payment with respect to any Commuted Swap Transaction documented under any such Multiple CDS ISDA Master shall be terminated as of the
Effective Time. Further, this Agreement does not affect and is without prejudice to the obligations of any of the parties with respect to any financial guaranty insurance policies and/or other agreements (including CDSs) that are not either [a/the]
Policy (other than a Multiple CDS Policy, but only to the extent not related to [a/the] Commuted Swap Transaction) or [a/the] Commuted Swap Transaction. 

ARTICLE 4 

RELEASES AND OTHER AGREEMENTS 

Section 4.01. Effective as of the Effective Time, the Policy Beneficiary, for good and valuable consideration, the
sufficiency of which it hereby acknowledges, hereby forever releases (i) each of the Ambac Parties, (ii) the respective Subsidiaries of each Ambac Party and (iii) each of the respective past and present parent companies, divisions,

  

	3
	This Article may be deleted if there are no Multiple CDS ISDA Masters and/or Multiple CDS Policy(ies) between the relevant Ambac Parties and the Policy Beneficiary.

  

 4 

 
affiliates, joint ventures, predecessors, successors, transferees, assigns, subrogees, insurers, co-insurers, reinsurers, servants, Representatives, stockholders, owners of the Persons listed or
described in clauses (i) and/or (ii) (in the case of each of the foregoing listed or described in this clause (iii), solely as such) (and/or any person claiming by or through any of the foregoing, solely as such) ((i), (ii) and
(iii) collectively, the “Ambac Releasees”), from any and all Claims (as defined below) of any nature whatsoever that the Policy Beneficiary (and/or any person claiming by or through the Policy Beneficiary) ever had, now has or
can, shall or may have, by reason of any matter, cause or thing occurring prior to the Effective Time solely to the extent the same arise out of or in any way relate to (i) the Commuted Swap Transaction[s] and (ii) solely in respect of any
Commuted Swap Transaction, the Polic[y][ies].4 

Section 4.02. Effective as of the Effective Time, the Ambac Parties, for good and valuable consideration, the sufficiency of
which they hereby acknowledge, hereby forever release (i) each of the Policy Beneficiaries, (ii) the respective Subsidiaries of each Policy Beneficiary and (iii) each of the respective past and present parent companies, divisions,
affiliates, joint ventures, predecessors, successors, transferees, assigns, subrogees, insurers, co-insurers, reinsurers, servants, Representatives, stockholders, owners of the Persons listed or described in clauses (i) and/or (ii) (in the
case of each of the foregoing listed or described in this clause (iii), solely as such) (and/or any person claiming by or through any of the foregoing, solely as such) ((i), (ii) and (iii) collectively, the “Policy Beneficiary
Releasees”), from any and all Claims of any nature whatsoever that the Ambac Parties (and/or any person claiming by or through the Ambac Parties) ever had, now has or can, shall or may have, by reason of any matter, cause or thing occurring
prior to the Effective Time solely to the extent the same arise out of or in any way relate to (i) the Commuted Swap Transaction[s] and (ii) solely in respect of any Commuted Swap Transaction, the Polic[y][ies]. 

Section 4.03. For the avoidance of doubt, it is explicitly agreed and understood that the parties are not releasing,
acquitting, discharging or waiving any Claim of any nature whatsoever that such party ever had, now has or can, shall or may have, by reason of any matter, cause or thing occurring prior to the Effective Time arising directly or indirectly out of,
based upon, or in any way related to or in connection with any obligations under, or actions required by, this Agreement, the Settlement Agreement or any Ancillary Agreement. Nothing in this Section 4.03 is intended to, or shall, increase the
scope of the releases set forth in Section 4.01 and Section 4.02. 
 Section 4.04.
“Claims” means any action or actions, cause or causes of action, in law or in equity, suits, liens, liabilities, claims, demands, obligations, damages, punitive 

 

	4
	[In lieu of the forms of releases for Commuted Swap Transactions contained in Sections 4.01 and 4.02 hereof, broader releases may be negotiated with applicable
bank-specific carve-outs subject to agreed upon consideration.] 

  

 5 

 
damages, losses, costs, expenses and attorneys’ fees of any nature whatsoever, including, but not limited to claims based on breach of fiduciary duty or other legal duty, legal fault,
negligence, negligent misrepresentation, offense, quasi-offense, contract or breach of fiduciary duty, ratification, promissory estoppel, breach of the implied covenant of good faith and fair dealing, any securities law or any other theory [other
than fraud].5 The term “Claims” includes,
but is not limited to, any claim that any Ambac Party or the Policy Beneficiary does not know or even suspect to exist in its favor at the time of this Agreement, which, if known, may have affected its decision to enter into this Agreement. The
parties understand that they may have suffered damages that are unknown to them at present and that they may suffer unknown damages in the future. The parties acknowledge that any actions taken in consideration of this Agreement are intended to and
in fact do release and discharge any and all Claims stated to be released hereby, whether known or unknown, suspected or unsuspected, contingent or non-contingent, which now exist or have existed upon any theory of law or equity. 

Section 4.05. In addition to and without in any way limiting any optional termination rights that the Policy Beneficiary may have
under its existing policies issued by AAC and contracts with ACP (with or without make-whole premium), and subject to the limitations set forth below, with respect to any credit default swap (and any associated financial guaranty insurance policy
solely to the extent such financial guarantee policy pertains to such credit default swap) or financial guaranty insurance policy listed on Schedule 2 hereto (a “Potential Tear Up Policy,”), from and after the Effective Time, the
Policy Beneficiary may irrevocably elect to terminate such Potential Tear Up Polic[y] [ies], together with all agreements related to such Potential Tear Up Polic[y] [ies] between the Policy Beneficiary and ACP and/or AAC (together, the
“Related Potential Tear Up Agreements”), without any obligation of ACP, AAC, or the Policy Beneficiary to make any termination payment, “make whole” payment, or other future payments (a “Tear Up
Election”), by providing written notice thereof to AAC and ACP (a “Tear Up Election Notice”) identifying the Potential Tear Up Polic[y] [ies] (and Related Potential Tear Up Agreements) subject to the Tear Up Election and
specifying a date (the “Tear Up Effective Date”) on which the Tear Up Election shall be effective. Notwithstanding the foregoing, such Tear Up Election shall be deemed ineffective unless each of the following conditions (the
“Tear Up Conditions”) is satisfied on or before the Tear Up Effective Date specified in the Tear Up Election: 
  

	 	(a)	the Tear Up Election Notice is received by AAC and ACP no later than 5:00 p.m. (prevailing Eastern time) on Friday, March 23, 2012; 

 

	5
	Bracketed language may be included at the option of the Ambac Parties and the relevant Policy Beneficiary. 

 

 6 

	 	(b)	the Tear Up Effective Date specified in the Tear Election Notice is a Business Day at least 10 calendar days, and no more than 180 calendar days, after the receipt by
AAC and ACP of the Tear Up Election Notice; 

  

	 	(c)	the Tear Up Election delivered by the Policy Beneficiary applies to, and elects termination of, all (but not less than all) of such Policy Beneficiary’s Potential
Tear Up Policies (and Related Potential Tear Up Agreements) in the same asset class as such Potential Tear Up Policy (as such asset classes are listed on Schedule 3 hereto and indicated in parentheses following the description of each Potential Tear
Up Policy on Schedule 2); and 

  

	 	(d)	payment by the Policy Beneficiary has been made to ACP and/or AAC of all accrued but unpaid premium and other amounts (if any) due to ACP and/or AAC under the Potential
Tear Up Policies and Related Potential Tear Up Agreements to be terminated pursuant to the Tear Up Election Notice up to and including the Tear Up Effective Date (the “Termination Payments”). 

For the avoidance of doubt, until such time as the Tear Up Effective Date occurs, the delivery of the Tear Up Election Notice shall not
limit or have any other effect on the rights and obligations of the parties under the Potential Tear Up Policies (and Related Potential Tear Up Agreements) subject to such Tear Up Election Notice and the parties shall be entitled to exercise any
rights and remedies that would otherwise be exercisable in the absence of the Tear Up Election. 
 Upon the Tear Up Effective
Date (subject to the satisfaction of each of the Tear Up Conditions), (i) the Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s] referred to in the Tear Up Election Notice shall be terminated in full and be of no
further force or effect and other than the Termination Payments, no party hereto shall have any claims for payment of amounts under such terminated Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s]; (ii) the Policy
Beneficiary’s obligations to make premium payments to AAC (or any affiliate of AAC, as applicable) shall cease and other than Termination Payments, no party hereto shall owe any other party any termination payment or other amounts in connection
with the termination of such Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s]; (iii) Section 2.01, Section 3.01, and Article 4 of this Agreement shall apply to the Potential Tear Up Polic[y] [ies] and
Related Potential Tear Up Agreements subject to the Tear Up Election Notice on the Tear Up Effective Date and solely for such purposes, (a) the Potential Tear Up Polic[y] [ies] shall constitute Polic[y] [ies], (b) the Related Potential
Tear Up Agreements shall constitute Commuted Swap Transactions, and (c) the Tear Up Effective Date shall constitute the Effective Time; and (iv) any requirement of notice of termination or delivery of any other document required in
connection with termination of such Potential Tear Up Polic[y] [ies] and Related Potential Tear Up Agreement[s] is hereby waived by each party entitled to such notice or other document. 

 

 7 

 For the avoidance of doubt, notwithstanding the foregoing, if the Policy Beneficiary’s
Potential Tear Up Polic[y] [ies] included optional termination provisions as of the Effective Date, (i) Section 4.05 hereof shall not apply to any such Polic[y][ies] and (ii) such termination provisions may be exercised in accordance
with their terms (including, to the extent required by their terms, payment of any applicable make-whole premium, and without any additional limitation on the form of notice or time of exercise, and without any requirement that the exercise of any
such termination provision requires that other policies be terminated, whether pursuant to a Tear Up Election or otherwise). 

ARTICLE 5 

REPRESENTATIONS AND WARRANTIES OF THE PARTIES

 Each of the Ambac Parties, jointly and severally, represents and warrants to the Policy Beneficiary, and the Policy
Beneficiary represents and warrants to the Ambac Parties, in each case as follows: 
 Section 5.01. Such party is a
corporation or business entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all necessary power and authority to enter into this Agreement, the Settlement
Agreement and any Ancillary Agreement to which it may be a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby to be consummated by it (the “Transactions”).

 Section 5.02. The execution, delivery and performance by such party of this Agreement, the Settlement Agreement
and any Ancillary Agreement to which it may be a party, the performance by such party of its obligations hereunder and thereunder and the consummation by such party of the Transactions have been duly authorized by all necessary actions on the part
of such party. This Agreement, the Settlement Agreement and any Ancillary Agreement to which it may be a party each constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms.

 Section 5.03. The execution, delivery and performance by such party of this Agreement, the Settlement Agreement
and any Ancillary Agreement to which it is a party, the performance by such party of its obligations hereunder and thereunder and the consummation by such party of the Transactions do not and will not, (i) violate, conflict with or result in
the breach of any provision of the organizational documents of such party, (ii) conflict with or violate in any material respect any applicable law or order of any governmental authority currently in effect with respect to such party or any of
its 
  

 8 

 
properties or assets, or (iii) conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which such party is a party or by which such party is bound, other than, in the case of this clause (iii), breaches or defaults which would not have a material adverse effect on the ability of such
party to consummate the Transactions. 
 Section 5.04. Neither the execution and delivery by such party of this
Agreement, the Settlement Agreement and any Ancillary Agreement to which it may be a party nor compliance by such party with or fulfillment by such party of the terms, conditions and provisions hereof will require any authorization, consent,
approval, exemption or license from, or any filing or registration with, or other order of, action by or notification to any governmental authority, other than those which have been obtained or made prior to, and remain in full force and effect as
of, the Effective Time. 
 ARTICLE 6 

ADDITIONAL REPRESENTATIONS AND WARRANTIES OF AAC 

AAC represents and warrants to the Policy Beneficiary as follows: 

Section 6.01. Immediately after giving effect to the Transactions and the consummation of all transactions consummated prior
to or simultaneously with this Agreement as of the Effective Time, (a) the present fair saleable value of the property of the general account of AAC will be greater than the amount that will be required to pay the probable liability of its
policy obligations, debts and other liabilities, subordinated, contingent or otherwise (except Surplus Notes and preferred shares of AAC), as such policy obligations, debts and other liabilities become absolute and matured; (b) the general
account of AAC will be able to pay its policy obligations, debts and liabilities, subordinated, contingent or otherwise (except Surplus Notes and preferred shares of AAC), as such policy obligations, debts and liabilities become absolute and
matured; and (c) the general account of AAC will be solvent, and will not be insolvent or otherwise left with an unreasonably small amount of capital with which to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted following the Effective Time. 
 Section 6.02. AAC has fully disclosed this
Agreement, the Settlement Agreement, the Ancillary Agreements to which it is a party, all related agreements and the Transactions to OCI. For each aspect of the Transaction that is subject to the prior reporting and disapproval provisions of Wis.
Stat § 617.21, Wis. Admin. Code § INS 40.04 and any other related statutory or code provisions; OCI has declined to disapprove such aspect(s) of the Transaction and the 30-day (or such shorter period as the OCI has approved in writing)
prior notice requirement with respect thereto has expired. 
  

 9 

 Section 6.03. The consideration provided by the Policy Beneficiary pursuant to
the terms of this Agreement, to the knowledge of AAC, constitutes at least reasonably equivalent value to AAC and ACP for the consideration that the Policy Beneficiary is receiving from AAC, under this Agreement. 

Section 6.04. AAC is not transferring any assets to the Policy Beneficiary with any intent to hinder, delay or defraud any of
its creditors. 
 ARTICLE 7 

ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE
POLICY BENEFICIARY 
 The Policy Beneficiary represents and warrants to AAC as follows:

 Section 7.01. The AAC Surplus Notes, if any, are being acquired by the Policy Beneficiary for its own account and
without a view to the public distribution or sale of the AAC Surplus Notes or any interest in them. The Policy Beneficiary understands and agrees that it may not sell, transfer, assign, pledge or otherwise dispose of any of the AAC Surplus Notes
other than pursuant to a registered offering in compliance with, or in a transaction exempt from, the registration requirements of the Securities Act of 1933, as amended, and applicable state and foreign securities Laws. 

ARTICLE 8 

GOVERNING LAW 

Section 8.01. Except as provided herein, this Agreement shall be interpreted under and governed by the Laws of the State of
New York without giving effect to conflicts of law provisions thereof that would make the law of any other jurisdiction applicable to this Agreement. 

Section 8.02. In the event that there is a dispute between or among the Parties arising under this Agreement, the Parties
(i) agree that the exclusive forum to seek remedy shall be to institute a legal proceeding in the courts of the State of New York located in the City and County of New York or the United States District Court for the Southern District of New
York and (ii) hereby expressly submit to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waive any claim of lack of personal jurisdiction and improper venue and any claim that such courts are an
inconvenient forum. Each Party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the
address provided to the Parties in accordance with Section 6.02 of the Settlement Agreement, such service to become effective 10 days after such mailing. 
  

 10 

 ARTICLE 9 

CONFIDENTIALITY 

Section 9.01. Each party hereto agrees that the terms of this Agreement are confidential and that neither its existence nor its
terms (collectively, the “CA Confidential Information”) will be disclosed to any person other than such party’s affiliates and their respective Representatives, who agree to keep such CA Confidential Information confidential in
accordance with this Section 9.01. Notwithstanding the foregoing, each party may make such disclosures (i) to any governmental or regulatory agencies, or to any self-regulatory authority (including, without limitation, stock exchanges),
with authority over (or claiming to have authority over) such party, to any rating agencies and to any bank examiner, in each case to the extent required or requested by them or if such party determines it is advisable to provide them with such
information, in each case if (to the extent not prohibited by any Law and if reasonably practicable) such party informs them of the confidential nature of such information and requests that they maintain its confidentiality; (ii) to the extent
required by applicable law, rule or regulation; (iii) in connection with any action to enforce this Agreement or any provision of this Agreement or in connection with any proceeding, including steps leading to a potential proceeding, that might
involve this Agreement or any provision of this Agreement, and (iv) to the extent such information shall be in the public domain without breach by any party of its obligation hereunder. Notwithstanding anything in this Section 9.01 above
to the contrary, the Policy Beneficiary may disclose CA Confidential Information to a transferee or prospective transferee (in each case, direct or indirect) of any right, title or interest of the Policy Beneficiary in, to or under any Surplus Note,
any Commuted Swap Transaction or Amended CDS, any Policy or Potential Tear Up Policy, the Settlement Agreement or this Agreement, in each case that has agreed in writing prior to any disclosure to abide by the terms of this Section 9.01 above.
Notwithstanding the foregoing restrictions, a party is permitted to disclose the subject matter hereof, notional amount settled and amount of settlement payment, but not the names of the parties hereto, and, in the event of any public notice
thereof, shall give the other party or parties a copy of any proposed public release (if any) announcing the termination of the Commuted Swap Transaction[s] and the parties’ respective rights and obligations related to the Commuted Swap
Transaction[s] prior to its release to the general public (it being understood and agreed that solely the portion of any such press release which describes the Agreement shall be provided and that the portion of any such press release which relates
to items other than solely the Agreement may be redacted). Each party agrees to promptly notify the other parties in the event it shall be required by law to publicly disclose the name of the other parties hereto. Information shall not be considered
confidential pursuant to this Section 9.01 to the extent it is or becomes generally known to the public other than due to a breach of this Agreement by a party hereto. This Section 9.01 is in addition to, and does not modify or limit,
Section 3.01 of the Settlement Agreement. 
  

 11 

 ARTICLE 10 

WAIVER OF JURY TRIAL 

EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT
TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR THE COMMUTED SWAP TRANSACTIONS OR THE TERMINATION OF THE POTENTIAL TEAR UP POLICIES AND RELATED POTENTIAL TEAR UP AGREEMENTS. EACH OF THE PARTIES
HEREBY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(II) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS ARTICLE 10. 

ARTICLE 11 

COUNTERPARTS 

This Agreement may be executed in several counterparts (including by facsimile transmission or electronic transmission of a Portable
Document Format file), each of which shall be an original and all which together shall constitute a single agreement. 
 ARTICLE
12 
 AMENDMENTS 

No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including writing evidenced by
facsimile transmission or electronic transmission of a Portable Document Format file) and executed by each of the parties hereto. 

ARTICLE 13 

[RESERVED] 

[Reserved] 
  

 12 

 ARTICLE 14 

ENTIRE AGREEMENT 

Except as provided in the Settlement Agreement, this Agreement sets forth the entire understanding and agreement between the parties as
to the matters covered herein and supersedes and replaces any prior understanding, agreement or statement of intent, in each case, written or oral. 

ARTICLE 15 

NOTICES 

All demands and notices hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by
first class mail, postage prepaid, or by express delivery service, or faxed (with telephone confirmation of receipt by the addressee) to the address and facsimile numbers as advised to the parties by the other parties in writing from time to time.
Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the other party receives such notice. 

ARTICLE 16 

SUCCESSORS AND ASSIGNS 

This Agreement shall inure to the benefit of and be binding upon each party to this Agreement and each of their respective successors and
permitted assigns. This Agreement may be assigned by a Policy Beneficiary in connection with or as part of a merger, consolidation or sale of substantially all of such Policy Beneficiary’s assets to the Person(s) with whom the Policy
Beneficiary is merging or to whom substantially all of the Policy Beneficiary’s assets are being transferred and that (by operation of Law or written instrument of assumption) assumes all obligations of the assignor under this Agreement.

 ARTICLE 17 

NO THIRD PARTY BENEFICIARIES 

Except as provided in Sections 4.01, 4.02, 4.03 and 4.04 hereof, nothing in this Agreement is intended or shall be construed to create or
give to any persons other than the parties hereto any rights by reason of this Agreement. 
  

 13 

 EXHIBIT D 

IN WITNESS WHEREOF, the Policy Beneficiary, AAC, and ACP have each caused this instrument to be signed in its name by its proper officer
thereunto duly authorized, as of the date first above written. 
  

			
	[NAME OF POLICY BENEFICIARY]
		
	 By:
	 	  

		 	 Name:

		 	 Title:

	
	AMBAC CREDIT PRODUCTS, LLC
		
	 By:
	 	  

		 	 Name:

		 	 Title:

	
	AMBAC ASSURANCE CORPORATION
		
	 By:
	 	  

		 	 Name:

		 	 Title:

 

 14 

 Schedule 1 to 

Commutation Agreement 

Insurance Policies and Swaps or Other Commuted Swap Transaction[s] to be Commuted 

 

 15 

 Schedule 2 to 

Commutation Agreement 

Potential Tear Up Policies 
  

 16 

 Schedule 3 to 

Commutation Agreement 

Asset Classes 
  

	1.	Asset Backed 

  

	2.	Government General Obligations 

  

	3.	Housing 

  

	4.	Investor Owned Utility 

  

	5.	Mortgage Backed Securities 

  

	6.	Private Finance Initiatives 

  

	7.	Emerging Market CDOs 

  

	8.	TruPs CDOs 

  

	9.	CLOs 

  

	10.	Other Pooled Debt Obligations 

  

	11.	Structured Insurance 

  

	12.	Student Loans 

  

	13.	Transportation 

  

 17 

 Annex A to 

Commutation Agreement 

Settlement Amount: $             

Surplus Note Amount: $             

Payout Account: [Name of Bank]  

ABA#: 
 BIC:

 A/C#: 

REF: 
 FFC:

  

 18

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