Document:

<PAGE>

                                                                 Exhibit 10.25.8

                              EIGHTH AMENDMENT TO
                          LOAN AND SECURITY AGREEMENT
                          ---------------------------

          EIGHTH AMENDMENT, dated as of December 28, 1999 (this "Amendment"), to
                                                                 ----------
the Loan and Security Agreement referred to below by and among GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation ("Lender"), PAR PHARMACEUTICAL,
                                              -------
INC., a New Jersey corporation ("Borrower"), PHARMACEUTICAL RESOURCES, INC., a
                                 ---------
New Jersey corporation ("Parent"), NUTRICEUTICAL RESOURCES, INC., a New York
                         ------
corporation ("NRI"), and PARCARE, LTD., a New York corporation ("ParCare").
              ----                                               --------
Parent, NRI and ParCare are hereinafter referred to as "Guarantors".
                                                        -----------

                              W I T N E S S E T H
                              - - - - - - - - - -

          WHEREAS, Lender, Borrower and Guarantors are parties to that certain
Loan and Security Agreement, dated as of December 15, 1996 (as amended,
supplemented or otherwise modified prior to the date hereof, the "Loan
                                                                  ----
Agreement"); and
----------

          WHEREAS, Lender, Borrower and Guarantors have agreed to amend the Loan
Agreement in the manner, and on the terms and conditions, provided for herein.

          NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties to this Amendment hereby agree as follows:

          1.   Definitions.  Capitalized terms not otherwise defined herein
               -----------
shall have the meanings ascribed to them in the Loan Agreement.

          2.   Amendment to Recitals to the Loan Agreement.  Recital A of the
               -------------------------------------------
Loan Agreement is hereby amended as of the Amendment Effective Date (as
hereinafter defined) by (a) deleting the text "3 years" set forth under the
caption "Term:" and inserting in lieu thereof the text "5 years", (b) deleting
         ----
the text under the caption "Unused Line Fee:" and inserting in lieu thereof the
                            ---------------
text "0.25% per annum" and (c) deleting the text under the caption "Prepayment
                                                                    ----------
Fee:" and inserting in lieu thereof the text "1.0% in years three and four; and
---
0.75% in year five".

          3.   Amendments to Section 5 of the Loan Agreement.  Section 5 of the
               ---------------------------------------------   ---------
Loan Agreement is hereby amended as of the Amendment Effective Date as follows:

          (a) Section 5(b) is hereby amended and restated in its entirety to
              ------------
read as follows:

          "(c)  except as otherwise permitted in this Section 5 below, make any
          investment (including any investment in or advance to any other Person
          for research and development) in, or make or accrue loans or advances
          of money to, any Person, other than investments for research and
          development in Persons which are not Credit Parties which, together
          with the aggregate amount of research and development expenses of the
          Credit Parties, do not exceed (i) $6,500,000 in any Fiscal Year ending
          on or before December 31, 1999 and (ii) $10,000,000 in any Fiscal Year
          ending thereafter;"

                                       1
<PAGE>

          (b) Section 5(c) is amended by deleting clause (v) thereof and the
              ------------
word "and" appearing immediately before such clause and inserting in lieu
thereof the following new clauses:

          "(v) Indebtedness of Borrower secured by Borrower's real property in a
          maximum aggregate amount outstanding (together with any such
          Indebtedness secured by Borrower's real property set forth as

          Disclosure Schedule (5(c))) and (vi) Indebtedness represented by
          --------------------------
          Capital Lease Obligations; provided, however, that the aggregate
                                     --------  -------
          amount of Indebtedness incurred by Borrower under clauses (v) and (vi)
          of this Section 5(c) shall not exceed $5,000,000;"

          4.   Amendment to Schedule A to the Loan Agreement.  Schedule A to the
               ---------------------------------------------   ----------
Loan Agreement is hereby amended as of the Amendment Effective Date as follows:

          (a) The definition of "Permitted Encumbrances" is hereby amended by
                                 -----------------------
deleting the word "and" appearing immediately before clause (xiii) thereof and
inserting the following new clause immediately after such clause (xiii):

          "; and (xiv) Liens created under Capital Leases securing Capital Lease
          Obligations permitted under Section 5(c)(vi) of the Agreement."

          (b)    The definitions of "Commitment Maturity Date", "Commitment
                                     -------------------------   ----------
Termination Date", "Fiscal Year" and "Sano Stock Reserve" set forth in Schedule
-----------------   ------------      -------------------              --------
A are hereby deleted in their entirety and the following new definitions are
-
hereby inserted in appropriate alphabetical order:

          `"Commitment Maturity Date" shall mean the earliest of (i) December
            -------------------------
          30, 2001, (ii) the date Lender's obligation to advance funds is
          terminated and the Obligations are declared to be due and payable
          pursuant to Section 7.2, and (iii) the date of prepayment in full by
          Borrower of the Obligations in accordance with the provisions of
          Section 1.2(b)."

          `"Commitment Termination Date" shall mean the earliest of (i) December
            ----------------------------
          30, 2001, (ii) the date of termination of Lender's obligation to
          advance funds pursuant to Section 7.2, and (iii) the date of
          prepayment in full by Borrower of the Obligations in accordance with
          the provisions of Section 1.2(b)."

          `"Fiscal Year" shall mean any of the annual accounting periods of
            ------------
          Parent and its Subsidiaries ending on December 31 of each year.
          Subsequent changes of the fiscal year of Parent and its Subsidiaries
          shall not change the term "Fiscal Year" unless Lender shall consent in
          writing to such change."

          `"Sano Stock Reserve" shall mean a reserve in the amount of
            -------------------
          $2,852,800, established pursuant to Section 1.15 hereof; provided,
                                              ------------         --------
          however, that such reserve shall be reduced to (a) $1,426,400 upon
          -------
          receipt by Lender of Borrower's audited Financial Statements and
          supporting documentation for the Fiscal Year ending December 31, 1999,
          as required by Section 4.2(d) of the Loan Agreement, so long as no
          Default shall have occurred and be continuing on the date of such
          receipt and (b) $-0- upon receipt by Lender of Borrower's audited
          Financial Statements and supporting documentation for the Fiscal Year
          ending December 31, 2000, as required by Section 4.2(d) of the Loan
          Agreement, so long as no Default shall have occurred and be continuing
          on the date of such receipt."

                                       2
<PAGE>

          5.   Amendment to Schedule D to the Loan Agreement.   Schedule D to
               ---------------------------------------------    ----------
the Loan Agreement is hereby amended as of Amendment Effective Date as follows:

          (a)  The last two sentences of Section 2 (including the table set
forth therein) is deleted in their entirety and the following new sentence is
hereby inserted in lieu thereof:  "The" Unused Line Fee Percentage" shall be,
with respect to any period, 0.25%."

          (b) Section 4 is hereby deleted in its entirety and the following new
section is inserted in lieu thereof:

          "4.  Prepayment Fee:  An amount equal to the Maximum Amount multiplied
               --------------
          by:

               1.00% if Lender's obligation to make or incur Revolving Credit
          Advances is terminated by Borrower after the second anniversary of the
          Closing Date and on or before the fourth anniversary of the Closing
          Date, payable on the Commitment Maturity Date; or

               0.75% if Lender's obligation to make or incur Revolving Credit
          Advances is terminated by Borrower after the fourth anniversary of the
          Closing Date and on or before the fifth anniversary of the Closing
          Date, payable on the Commitment Maturity Date.

          Borrower acknowledges and agrees that (a) it would be difficult or
          impractical to calculate Lender's actual damages from Borrower's early
          termination of Lender's Revolving Credit Loan obligations pursuant to
          Section 1.2(b) of the Agreement, (b) the Prepayment Fees provided
          above are intended to be fair and reasonable approximations of such
          damages, and (c) the Prepayment Fees are not intended to be
          penalties."

          6.   Amendment to Schedule F to the Loan Agreement.   Schedule F to
               ---------------------------------------------    ----------
the Loan Agreement is hereby amended and restated as of Amendment Effective Date
in its entirety to read as set forth in Schedule F hereto.

          7.   Amendment to Schedule 1.6 to the Loan Agreement.   Schedule 1.6
               -----------------------------------------------    ------------
to the Loan Agreement is hereby amended as of Amendment Effective Date by
deleting the proviso at the end of such Schedule in its entirety and inserting
in lieu thereof the following new proviso:

          "provided, that (i) Lender shall have the right to create and adjust
           --------
          eligibility standards and related reserves from time to time in its
          reasonable credit judgment and (ii) Lender shall establish a reserve
          against the amount of Eligible Accounts otherwise used in the
          Borrowing Base calculation for each percentage point that the dilution
          of Borrower's Accounts (calculated as the average dilution over the
          rolling 12-month period then ended) exceeds 5%."

          8.   Representations and Warranties.  To induce Lender to enter into
               ------------------------------
this Amendment, each Credit Party hereby represents and warrants that:

               A.  The execution, delivery and performance of this Amendment and
     the performance of the Loan Agreement, as amended hereby (the "Amended Loan
                                                                    ------------
     Agreement"), by each Credit Party signatory thereto: (i) are within their
     ---------
     respective corporate powers; (ii) have been duly authorized by all
     necessary corporate and shareholder action; and (iii) are not in
     contravention of any provision of their respective certificates or articles
     of incorporation or by-laws or other organizational documents.

                                       3
<PAGE>

               B.  This Amendment has been duly executed and delivered by or on
     behalf of each Credit Party.

               C.  Each of this Amendment and the Amended Loan Agreement
     constitutes a legal, valid and binding obligation of each Credit Party
     signatory thereto enforceable against each Credit Party in accordance with
     its terms, except as enforceability may be limited by applicable
     bankruptcy, insolvency, reorganization, moratorium or similar laws
     affecting creditors' rights generally and by general equitable principles
     (whether enforcement is sought by proceedings in equity or at law).

               D.  No Default (other than those waived pursuant hereto) has
     occurred and is continuing both before and after giving effect to this
     Amendment.

               E.  No action, claim or proceeding is now pending or, to the
     knowledge of each Credit Party, threatened against any Credit Party, at
     law, in equity or otherwise, before any court, board, commission, agency or
     instrumentality of any federal, state, or local government or of any agency
     or subdivision thereof, or before any arbitrator or panel of arbitrators,
     which challenges any Credit Party's right, power, or competence to enter
     into this Amendment or, to the extent applicable, perform any of its
     obligations under this Amendment, the Amended Loan Agreement or any other
     Loan Document, or the validity or enforceability of this Amendment, the
     Amended Loan Agreement or any other Loan Document or any action taken under
     this Amendment, the Amended Loan Agreement or any other Loan Document.

               F.  The representations and warranties of the Credit Parties
     contained in the Loan Agreement and each other Loan Document shall be true
     and correct on and as of the Amendment Effective Date with the same effect
     as if such representations and warranties had been made on and as of such
     date, except that any such representation or warranty which is expressly
     made only as of a specified date need be true only as of such date.

          9.   No Other Amendment/Waivers.  Except as expressly provided in
               --------------------------
Section 2 hereof, the Loan Agreement shall be unmodified and shall continue to
be in full force and effect in accordance with its terms.  Except as expressly
provided in Section 3 hereof, this Amendment shall not be deemed a waiver of any
term or condition of any Loan Document and shall not be deemed to prejudice any
right or rights which Lender may now have or may have in the future under or in
connection with any Loan Document or any of the instruments or agreements
referred to therein, as the same may be amended from time to time.

          10.  Outstanding Indebtedness; Waiver of Claims.  Each Credit Party
               ------------------------------------------
hereby acknowledges and agrees that as of December 28, 1999 the aggregate
outstanding principal amount of the Revolving Credit Loan is $5,389,464.96.
Each Credit Party hereby waives, releases, remises and forever discharges Lender
and each other Indemnified Person from any and all Claims of any kind or
character, known or unknown, which each Credit Party ever had, now has or might
hereafter have against Lender which relates, directly or indirectly, to any acts
or omissions of Lender or any other Indemnified Person on or prior to the date
hereof.

          11.  Expenses.  Borrower hereby reconfirms its obligations pursuant to
               --------
Section 10.2 of the Loan Agreement to pay and reimburse Lender for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.

                                       4
<PAGE>

          12.  Effectiveness.  This Amendment shall become effective as of the
               -------------
date hereof (the "Amendment Effective Date") only upon satisfaction in full in
                  ------------------------
the judgment of the Lender of each of the following conditions on or prior to
December 29, 1999:

               A.   Amendment.  Lender shall have received two original copies
                    ---------
of this Amendment duly executed and delivered by Lender and each Credit Party.

               B.   Secretarial Certificate.  Lender shall have received in form
                    -----------------------
and substance satisfactory to it a certificate of the Secretary or an Assistant
Secretary of each Credit Party certifying (i) the resolutions adopted by its
Board of Directors approving this Amendment and the transactions contemplated
hereby and (ii) the names and true signatures of the authorized officers of such
Credit Party.

               C.   Payment of Expenses.  Borrower shall have paid to Lender all
                    --------------------
costs and expenses (including a non-refundable renewal fee in the amount of
$65,000) owing in connection with this Amendment and the other Loan Documents
and due to Lender (including, without limitation, reasonable legal fees and
expenses).

               D.   Representations and Warranties.  The representations and
                    ------------------------------
warranties of each Credit Party contained in this Amendment shall be true and
correct on and as of the Amendment Effective Date.

          13.  GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
               -------------
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

          14.  Counterparts.  This Amendment may be executed by the parties
               ------------
hereto on any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

                            (SIGNATURE PAGE FOLLOWS)

                                       5
<PAGE>

   IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered as of the day and year first above written.

                               Borrower:
                               --------

                               PAR PHARMACEUTICAL, INC.

                               By: /s/ Dennis O'Connor
                                 -------------------------------------
                               Name:  Dennis O'Connor
                               Title: VP-CFO

                               Lender:
                               ------

                               GENERAL ELECTRIC CAPITAL
                               CORPORATION

                               By: /s/ Martin S. Greenberg
                                  ------------------------------------
                               Name: Martin S. Greenberg
                               Its:  Duly Authorized Signatory

                               Parent:
                               ------

                               PHARMACEUTICAL RESOURCES,
                               INC.

                               By: /s/ Dennis O'Connor
                                  ------------------------------------
                               Name:  Dennis O'Connor
                               Title: VP-CFO

                      (SIGNATURES CONTINUED ON NEXT PAGE)

                                       6
<PAGE>

                               Subsidiary Guarantors:
                               ---------------------

                               NUTRICEUTICAL RESOURCES, INC.

                               By: /s/ Dennis O'Connor
                                 -------------------------------------
                               Name:  Dennis O'Connor
                               Title: VP-CFO

                               PARCARE, LTD.

                               By: /s/ Dennis O'Connor
                                 -------------------------------------
                               Name:  Dennis O'Connor
                               Title: VP-CFO

                                       7
<PAGE>

                                   Schedule F
                              Financial Covenants
PARAGRAPH NUMBERING REDEFINED HERE

          1    Minimum EBIT.  Parent and its Subsidiaries on a consolidated
               ------------
basis shall maintain for each four Fiscal Quarter period, commencing with the
four Fiscal Quarter period ending on or about December 31, 1999, EBIT for such
period of not less than the amount for such period set forth below:

          Four Fiscal Quarter Period Ending
          ---------------------------------
          on or about:                               Minimum EBIT
          -----------                                -------------

          December 31, 1999                           $(2,500,000)
          March 31, 2000                               (4,000,000)
          June 30, 2000                                (3,600,000)
          September 30, 2000                           (1,500,000)
          December 31, 2000                             1,800,000
          March 31, 2001                                3,000,000
          June 30, 2001                                 5,000,000
          September 30, 2001                            5,500,000
          December 31, 2001                             6,000,000

          2.   Minimum Tangible Net Worth.  Parent and its Subsidiaries on a
               --------------------------
consolidated basis shall maintain, as at the end of each Fiscal Quarter,
Tangible Net Worth of not less than the amount for such period set forth below:

          Fiscal Quarter Ending
          ---------------------
          on or about:                        Minimum Tangible Net Worth
          -----------                         --------------------------

          December 31, 1999                         $35,000,000
          March 31, 2000                             34,000,000
          June 30, 2000                              34,000,000
          September 30, 2000                         35,000,000
          December 31, 2000                          36,000,000
          March 31, 2001                             37,000,000
          June 30, 2001                              38,000,000
          September 30, 2001                         39,000,000
          December 31, 2001                          40,000,000

          3.   Capital Expenditures.  Parent and its Subsidiaries on a
               --------------------
consolidated basis shall not make aggregate Capital Expenditures in any Fiscal
Year in excess of (i)$7,000,000 for the Fiscal Year ending on or about December
31, 1999, (ii)$4,700,000 for the Fiscal Year ending on or about December 31,
2000 and (iii)$5,000,000 for the Fiscal Year ending on or about December 31,
2001.

For purposes of this covenant in Schedule F the following terms shall have the
                                 ----------
meanings set forth below:

          "EBIT" shall mean, for any period, the Net Income (Loss) of Parent and
           ----
its Subsidiaries on a consolidated basis for such period, plus interest expense,
                                                          ----
tax expense and extraordinary losses and minus extraordinary gains, in each
                                         -----
case, of Parent and its Subsidiaries on a consolidated basis for such period
determined in accordance with GAAP to the extent included in the determination
of such Net Income (Loss).

          "Net Income (Loss)" shall mean with respect to any Person and for any
           -----------------
period, the aggregate net income (or loss) after taxes of such Person for such
period, determined in accordance with GAAP.

          "Tangible Net Worth" shall mean, with respect to any Person at any
           ------------------
date, all amounts which, in

                                      -8-
<PAGE>

accordance with GAAP, would be included under stockholders' equity on a
consolidated balance sheet of such Person at such date less the aggregate of all
                                                       ----
intangibles in conformity with GAAP (including Intellectual Property, goodwill,
organization expenses, treasury stock, all deferred financing and unamortized
debt discount expenses, and all current and non-current deferred tax benefits).

                                      -9-<PAGE>

                                                                   EXHIBIT 10.18

December 21, 1999
as amended December 29, 1999

Joseph V. Salzano, Esq.
2 Charlton Street, #6A
New York, NY 10014

Dear Mr. Salzano:

     This Agreement and General Release ("Agreement") sets forth our agreement
regarding your employment relationship with Ambac Assurance Corporation
("Ambac"), and the termination of that relationship. As a result of discussions
between you and Ambac, it has been decided that a mutually agreed upon
resignation is in the best interest of both parties. By signing this Agreement,
you hereby acknowledge and agree to the following terms and conditions
concerning your resignation from Ambac:

1.   Effective Date of Resignation.
     -----------------------------

     Your Resignation as an employee of Ambac shall be effective April 28, 2000
     (the "Resignation Date").

     During the period from the date of this Agreement through February 11, 2000
     (the "Employment Period"), you will continue to report to the President and
     Chief Executive Officer and continue to perform your full-time duties.

     During the period from February 12, 2000 through April 28, 2000 (the
     "Transition Period") you will be on-call and no longer be required to
     report to the office unless requested. You agree to make yourself available
     to provide information or assistance concerning work within your
     responsibilities at Ambac, as requested by the President and Chief
     Executive Officer of Ambac.

2.   Severance Pay.
     -------------

     (a) During the Employment and Transition Periods, you will continue to
     receive your regular salary.

     (b) You will be paid severance, the total sum of which will be $225,000.
     Said amount will be paid in a lump sum, within twenty business days of the
     Effective Date of this
<PAGE>

     Page 2 of 10

     Agreement (as defined in Paragraph 20 of this Agreement). Said payment will
     be net of applicable Federal, state and local taxes.

3.   Bonuses for 1999.
     ----------------

     You will be paid a bonus of $125,000 for work performed during the calendar
     year 1999. Said amount will be paid at the same time bonuses are paid to
     Ambac's general population for the 1999 performance year. Said payment will
     be net of applicable Federal, state and local taxes. If you do not sign
     this Agreement and, following the Resignation Date, Exhibit A following or
     if you revoke this Agreement, you forfeit your right to any payment
     provided for in this paragraph 3 and, to the extent any payment has been
     made, you agree to return all payments made pursuant to this paragraph.

4.   Benefits.
     --------

     From the date of this Agreement through the Resignation Date, your current
     benefit elections will continue. During this period, you will be required
     to make your normal employee contribution to benefit coverage and will be
     subject to any increases in employee contribution that a regular employee
     with like coverage may be required to pay.

     After the Resignation Date, you will continue to be covered under Ambac's
     medical and dental plans through May 31, 2000. During this period, you will
     be required to make your normal employee contribution for benefit coverage
     and will be subject to any increases in employee contribution that a
     regular employee with like coverage may be required to pay. Thereafter, you
     will be eligible for continued benefits under the applicable provisions of
     COBRA.

5.   Vacation.
     --------

     You will be paid any accrued and unused vacation earned through the
     Resignation Date. Your accrued and unused vacation through the Resignation
     Date totals 5 days. Said vacation time will be paid with your last regular
     paycheck.

6.   Stock Options and Restricted Stock Units.
     ----------------------------------------

     i)   As of the date of this Agreement, 167,501 of the Ambac stock options
     that have been granted to you by the Compensation and Organization
     Committee of Ambac Financial Group, Inc.'s Board of Directors are vested.
     As of the Resignation Date, an additional 37,666 options will have vested.
     In consideration of your entering into this Agreement and this Agreement
     becoming irrevocable, the following options will vest on the Effective Date
     of this Agreement: 1,333 granted January 27, 1998 and 12,000 granted on
     January 26, 1999.
<PAGE>

     Page 3 of 10

     ii)   After the Effective Date, you will have thirty days from the
     Resignation Date to exercise the options with 1991 through 1993 grant
     dates, you will have six months from the Resignation Date to exercise the
     options with 1994 through 1996 grant dates and one year from the
     Resignation Date to exercise the vested stock options granted in 1997, 1998
     and 1999. The terms of the 1997 Equity Plan and the General Terms and
     Conditions of the respective stock option grants shall govern in the event
     of death or disability. Any vested options not exercised within the time
     frames set forth above will be forfeited.

     iii)  As of the date of this Agreement, none of the Ambac Restricted Stock
     Units that have been granted to you are vested. One-half of the RSUs
     granted to you in January 1999 will be vested as of January 26, 2000. These
     RSUs will be settled no later than the January following your Resignation
     Date (January 2001). The balance of the RSUs granted to you will not vest
     and be forfeited. In lieu of the RSUs that will be forfeited, Ambac will
     pay you, during calendar year 1999, the sum of $40,000.

     iv)   As of the Resignation Date, you will not be subject to Ambac's
     Insider Trading Policies, but you will remain subject to provisions imposed
     by federal and state securities laws prohibiting insider trading. If you
     have any questions regarding this matter, please contact Ambac's General
     Counsel or Managing Director, Human Resources.

7.   Outplacement
     ------------

     Ambac will engage an outplacement firm to provide you with job placement
     services for a period of three months or through the date upon which you
     secure new employment or engage in any consulting or independent contractor
     work, whichever is earlier. The terms and conditions of the outplacement
     services will be at Ambac's sole discretion. To affirmatively elect
     outplacement, please contact Ambac's Managing Director, Human Resources and
     Employment Counsel to initiate outplacement by July 30, 2000. If you do not
     commence outplacement by September 30, 2000, you forfeit this service.

8.   Retirement Plans.
     ----------------

     i) You will be vested in Ambac's Pension Plan as of your Resignation Date
     and, therefore, be entitled to a benefit as a vested participant from
     Ambac. Your pension benefit calculation will include all credited service
     through the Resignation Date.

     ii) Through the Resignation Date, company-match and profit-sharing
     contributions will be credited on your behalf to the Ambac Financial Group,
     Inc. Savings Incentive Plan, subject to the terms and conditions of the
     Plan.

9.   You agree and acknowledge that the payments and benefits to be made in
     accordance with paragraphs 2, 3, 4, 6 and 7 of this Agreement exceed any
     sums to which you would otherwise be entitled under any Ambac policy, plan
     and/or procedure.
<PAGE>

     Page 4 of 10

10.  Any Ambac property currently in your possession shall be returned to Ambac
     (at Ambac's expense) at your earliest convenience, but no later than
     February 11, 2000.

11.  Confidentiality.
     ---------------

     In consideration for the payments described above, you agree to the
     following:

        (a)   Ambac (Ambac refers to Ambac Financial Group, Inc. and all of its
        affiliates) is engaged in a highly competitive business and that, in
        connection with your employment, you have access to information relating
        to Ambac's business that provides Ambac with a competitive advantage,
        that is not generally known by persons not employed by Ambac, and that
        could not easily be determined or learned by someone outside Ambac
        (collectively, "Confidential Information"). Such Confidential
        Information includes, but is not limited to, the identity,
        characteristics and preferences of Ambac's customers (as defined below)
        and accounts, matters relating to information, pricing, fee and
        commission structures, trading policies and procedures, trade secrets,
        records, files, memoranda, documents, reports, and other written,
        printed or recorded materials and data, regardless of data storage
        method (collectively "Documents") received, created, or used by you
        during the course of your employment and other methods of doing
        business, whether or not marketed as confidential or secret. As used
        herein, "Customer" shall include all clients and actively pursued
        prospective clients of Ambac.

        (b)   You agree that before and after the Resignation Date, you shall
        not, directly or indirectly, use or disclose such Confidential
        Information, except as may be necessary in the good faith performance of
        your duties to Ambac. You acknowledge that all Confidential Information
        will remain the sole property of Ambac and will be returned by you to
        Ambac within five business days of the Resignation Date. The terms and
        conditions of this paragraph 11(a) and (b) are in addition to and do not
        supersede or replace the terms and obligations of Ambac's Code of
        Business Conduct.

        (c)   You further agree that from the Effective Date of this Agreement
        through six months following the Resignation Date, you will not, for any
        reason, unless Ambac consents in writing, hire or seek to hire, whether
        on your own behalf or on behalf of any other person or entity, any
        person who is an employee of Ambac at the Resignation Date, or who left
        the employ of Ambac within three months prior to such date. If you
        breach any of the terms of this paragraph 11(c), you forfeit your right
        to future payments provided for herein from the date of such breach and,
        to the extent any payments have been made, you agree to return all
        payments made pursuant to this Agreement.

        (d)   In view of the nature of Ambac's business, you also acknowledge
        that the restrictions contained in paragraph 11 are fair, reasonable and
        necessary to protect the legitimate business interests of Ambac and that
        Ambac will suffer irreparable harm in
<PAGE>

     Page 5 of 10

       the event of any actual or intended violation by you of this paragraph.
       You, therefore, agree that, in the event of any actual or intended
       violation by you of paragraph 11(b) or 11(c), Ambac shall be entitled to
       a court order requiring you to cease any such violations in addition to
       and without prejudice to any other rights or remedies which may be
       available to Ambac through the legal system.

     (e)  You shall not be deemed to be in breach of any covenant set forth in
     this Agreement on the basis of any communications you may have with third
     parties relating to: (i) the fact of your employment by Ambac; (ii) your
     job titles at Ambac; (iii) the dates of your employment by Ambac; (iv) the
     responsibilities and authorities of your positions at Ambac; (v) the nature
     and extent of your achievements during employment by Ambac; and (vi) the
     names and positions of individuals with whom you worked during your
     employment at Ambac. You hereby authorize Ambac to provide the information
     responsive to items (i) through (iv) and (vi) to prospective employers.

     (f)  You shall not be deemed in breach of the confidentiality obligations
     set forth in paragraph 11 if, compelled by legal process or court order,
     you are to participate in any administrative, judicial or criminal
     investigation, probe, grand jury proceeding or other demand for testimony,
     information or documentation.

     (g)  Before initiating any litigation, Ambac shall give written notice to
     you if it believes you are in violation of any covenant or obligation under
     this agreement. Upon written request, you will receive Ambac's
     determination in writing regarding whether a particular activity or act
     would be deemed in breach of your obligations and/or covenants under this
     Agreement.

12.  General Releases.
     ----------------

     In consideration of the payments provided for in paragraphs 2, 3, 4, 6 and
     7 of this Agreement, and other valuable consideration as set forth in this
     Agreement, you for yourself and for your heirs, executors, administrators,
     trustees, legal representatives and assigns (hereinafter collectively
     referred to as the "Releasors") hereby release and discharge Ambac, and any
     and all of its parent corporations, shareholders, subsidiaries, divisions,
     affiliated and related entities, employee benefit and/or pension plans or
     funds, successors and assigns, and any and all of its or their past,
     present or future officers, directors, agents, stockholders, fiduciaries,
     administrators, employees or assigns (whether acting as agents for Ambac or
     in their individual capacities) (hereinafter collectively referred to as
     "Releasees"), of and from any and all claims, demands, causes of action,
     and liabilities of any kind whatsoever, whether known or unknown, whether
     arising in law or in equity or arising out of any Federal, state or city
     constitution, statute, ordinance, bylaw or regulation (including but not
     limited to, all common law claims, all claims arising under the Age
     Discrimination in Employment Act of 1967, the Older Workers Benefit
     Protection Act, Title VII of the Civil Rights Act of 1964, as amended, the
     New York State Human Rights Law, the New
<PAGE>

     Page 6 of 10

     York City Administrative Code, and the like) or by reason of any act,
     omission, transaction, conduct or occurrence up to and including the
     Effective Date of this Agreement and General Release, which you ever had,
     now have or hereafter can, shall or may have against the Releasees for,
     upon or by reason of any act, omission, transaction, conduct or occurrence
     up to and including the date of this Agreement.

     In consideration of the payments provided for in paragraphs 2, 3, 4, 6 and
     7 of this Agreement, and other valuable consideration as set forth herein,
     you also agree to provide Ambac, on the Resignation Date, with an executed
     copy of a General Release in the form annexed hereto as Exhibit A.

     Not withstanding the above, nothing herein precludes you from enforcing the
     terms of this Agreement or from initiating a claim arising under this
     Agreement.

13.  (a) You represent and warrant that you will not commence, maintain,
     prosecute or participate in any action or proceeding of any kind (judicial
     or administrative) against any of the Releasees, arising out of any act,
     omission, transaction or occurrence happening up to and including the
     Effective Date of this Agreement, and have not done so as of the Effective
     Date of this Agreement.

     (b) Ambac represents and warrants that it will not commence or maintain any
     action or proceeding of any kind (judicial or administrative) against you,
     arising out of any act, omission, transaction or occurrence happening up to
     and including the Effective Date of this Agreement to the extent Ambac is
     aware of such act, omission, transaction or occurrence at the time this
     Agreement is executed.

14.  The terms, conditions, and existence of this Agreement are and shall be
     treated as confidential and shall not hereafter be disclosed by you to any
     person or entity, except to attorneys, accountants, financial planning or
     tax advisors, or immediate family members, or as may be required by law.
     Any individual to whom the terms and conditions of this Agreement have been
     disclosed will be advised of the confidentiality requirements of this
     paragraph.  You further agree not to solicit or initiate any demand by
     others not party to this Agreement for any disclosure of its terms and
     obligations regarding Confidential Information.

15.  You agree not to make any derogatory statements of any kind about Ambac (or
     any of its subsidiaries, parents, affiliates or related business entities),
     or any present or former employee or director of Ambac relating to
     performance of his/her duties on behalf of Ambac (or any of its
     subsidiaries, parents, affiliates or related business entities) or act in a
     manner that is or may be directly harmful to Ambac (or any of its
     subsidiaries, parents, affiliates or related business entities).
<PAGE>

     Page 7 of 10

16.  Ambac agrees to direct all officers with the title of Vice President and
     above and with knowledge of the circumstances surrounding your Resignation
     to refrain from making any derogatory statements of any kind about you.

17.  You agree to cooperate fully with Ambac and its employees by providing
     information to Ambac and its representatives, agents or advisors regarding
     any business matters with which you were involved on behalf of Ambac and to
     cooperate fully in the event of any litigation or legal, administrative or
     regulatory proceeding, the facts of which you have knowledge or regarding
     any business matters of which you have knowledge or information, including,
     but not limited to, providing testimony on behalf of Ambac at any legal,
     administrative or regulatory proceedings. Ambac will reimburse you for any
     lost wages and/or reasonable expenses for travel, lodging and meals that
     result from your compliance with this paragraph.

     To the extent you are a named party to any action, suit or proceeding as a
     result of your having been an officer or employee of the Company or any
     subsidiary thereof, the Company will indemnify you to the fullest extent
     permitted (including payment of expenses in advance of final disposition of
     a proceeding) by the laws of the State of Delaware, as in effect at the
     time of the subject act or omission, or by the Certificate of Incorporation
     and By-Laws of the Company, as in effect at such time or on the date of
     this Agreement, whichever affords the greatest protection to you, and you
     shall be entitled to the protection of any insurance policies the Company
     may elect to maintain generally for the benefit of its directors and
     officers (and to the extent the Company maintains such an insurance policy
     or policies, you shall be covered by such policy or policies, in accordance
     with its or their terms, to the maximum extent of the coverage provided for
     any Company officer or director), against all costs, charges and expenses
     whatsoever incurred or sustained by you or your legal representatives at
     the time such costs, charges and expenses are incurred or sustained, in
     connection with such actions.

18.  In the event of any breach of paragraphs 11 through 15 or paragraph 17,
     Ambac shall provide you with written notice (to the address set forth on
     page one of this Agreement) and you will have five business days from the
     date of receipt of said written notice to cure any curable breach. If you
     fail to cure any such breach or the breach is not curable, Ambac shall be
     released from any obligation to make any payment to you or on your behalf
     and provide any benefits under this Agreement. Ambac shall be further
     entitled to pursue any and all of its remedies under the law arising out of
     such breach including, but not limited to, recoupment of all monies paid to
     you by Ambac or as a result of your entering into this Agreement. In any
     action alleging breach of this Agreement, the prevailing party shall be
     entitled to recover reasonable costs and/or attorneys' fees incurred to
     enforce this Agreement.

19.  The making of this Agreement is not intended, and shall not be construed,
     as an admission that Ambac, its subsidiaries, parents, affiliates, or
     related business entities, or
<PAGE>

     Page 8 of 10

     any person now or previously employed by Ambac or any of its subsidiaries,
     parents, affiliates, or related business entities, have violated any
     Federal, state, or local law (statutory or decisional), ordinance or any
     common law rule, or that Ambac, its subsidiaries, parents, affiliates, or
     related business entities, or any person now or previously employed by
     Ambac, its subsidiaries, parents, affiliates or related business entities,
     have committed any wrong against you.

20.  You may accept this Agreement by signing it and returning it to Ambac.
     After signing this Agreement, you shall be given a period of seven (7) days
     (the "Revocation Period") during which you may revoke this Agreement by
     indicating your desire to do so in writing addressed to Ambac, Human
     Resources Department, Attention: Gregg L. Bienstock, Esq., One State Street
     Plaza, New York, New York 10004. This Agreement is effective eight (8) days
     following your signing of the Agreement and Exhibit A (the "Effective
     Date"). If you do not accept this Agreement, as indicated above, or in the
     event you revoke this Agreement or Exhibit A during the Revocation Period,
     this Agreement shall be null and void.

21.  You represent and warrant you have carefully read this Agreement in its
     entirety; that you have an opportunity to consider fully the terms of this
     Agreement for twenty one (21) days; that you have been advised by Ambac in
     writing to consult with an attorney of your choice in connection with this
     Agreement, that you fully understand the significance of all of the terms
     and conditions of this Agreement; that you have discussed it with your
     independent legal counsel, or have had a reasonable opportunity to do so;
     that you have had answered to your satisfaction any questions you have
     asked with regard to the meaning and significance of any of the provisions
     of this Agreement; and that you are signing this Agreement voluntarily and
     of your own free will and assent to all of the terms and conditions
     contained herein.

22.  Any disputes or controversies relating to this Agreement shall be
     interpreted under the laws of the State of New York without regard to
     conflicts laws principles thereof. If at any time after the date of the
     execution of this Agreement, any provision of this Agreement shall be held
     by any court of competent jurisdiction to be illegal, void, or
     unenforceable, such provision, however, shall have no effect upon and shall
     not impair the enforceability of any other provision of this Agreement,
     provided that upon a finding by a court of competent jurisdiction that the
     General Releases given by you are illegal and/or unenforceable, you shall
     be required to sign a valid release embodying substantially the same terms
     of the General Releases contained herein or, if you fail to do so, be
     required to pay Ambac all amounts paid to you or on your behalf by Ambac
     pursuant to this Agreement.
<PAGE>

     Page 9 of 10

23.  This Agreement constitutes the complete understanding between the parties.
     No other promises or agreements shall be binding unless in writing and
     signed by the parties.

 /s/ Joseph Salzano                                           12/29/99
 ------------------------------------                    ----------------
Joseph V. Salzano                                               Date

Ambac Financial Group, Inc.
Ambac Assurance Corporation

By:   /s/ Gregg Bienstock                                     12/29/99
    ---------------------------------                    ----------------
      Gregg L. Bienstock, Managing Director                     Date

<PAGE>

     Page 10 of 10

                                   Exhibit A

     In consideration of the payments and other valuable consideration as set
forth in the Agreement and General Release entered into by Ambac and Joseph V.
Salzano on December __, 1999:

     Joseph V. Salzano, for himself and for his heirs, executors,
administrators, trustees, legal representatives and assigns (hereinafter
collectively referred to as the "Releasors"), hereby releases and discharges
Ambac, and any and all of its parent corporations, shareholders, subsidiaries,
divisions, affiliated and related entities, employee benefit and/or pension
plans or funds, successors and assigns, and any and all of its or their past,
present or future officers, directors, agents, stockholders, trustees,
fiduciaries, administrators, employees or assignees (whether acting as agents
for Ambac or in their individual capacities) (hereinafter collectively referred
to as "Releasees"), of and from any and all claims, demands, causes of action,
and liabilities of any kind whatsoever, whether known or unknown, whether
arising in law or in equity or arising out of any Federal, state or city
constitution, statute, ordinance, bylaw or regulation (including but not limited
to, all common law claims, all claims arising under the Age Discrimination in
Employment Act of 1967, the Older Workers Benefit Protection Act, Title VII of
the Civil Rights Act of 1964, as amended, the New York State Human Rights Law,
the New York City Administrative Code, and the like) or by reason of any act,
omission, transaction, conduct or occurrence up to and including the date of
this Exhibit A, which you ever had, now have or hereafter can, shall or may have
against the Releasees for, upon or by reason of any act, omission, transaction
or occurrence, up to and including the date of this General Release.

____________________________________              _________
Joseph V. Salzano                                   Date

Ambac Financial Group, Inc.
Ambac Assurance Corporation

By:  _______________________________              _________
     Gregg L. Bienstock, Managing Director         Date

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