Document:

<PAGE>

                                                                   Exhibit 10.13

                  TRANSITION, RETIREMENT AND RELEASE AGREEMENT
                  --------------------------------------------

     This TRANSITION, RETIREMENT AND RELEASE AGREEMENT (this "Agreement") is
made and entered into by and between Horace Mann Service Corporation ("Horace
Mann"), an Illinois corporation, and George J. Zock ("Zock") to provide an
orderly and amicable arrangement with respect to Zock's performance of
transitional duties preliminary to his retirement from Horace Mann.

     In consideration for the mutual promises provided herein, the parties
hereby agree as follows:

1)   Change of Current Duties; Conditions While Performing Consulting Duties;
     Retirement Date

     a)   Zock shall cease his current duties, salary, responsibilities, title
          and office as Executive Vice President effective on December 31, 2003.
          i)    On or about each of December 15, 2003 and December 31, 2003,
                Zock will receive a gross salary payment of Twelve Thousand
                Eighty Three and 50/100 Dollars ($12,083.50) and continue to be
                eligible for normal employee benefits.

          ii)   From January 1, 2004 until his Retirement Date as such term is
                defined in Paragraph 1.C. below, (such period referred to herein
                as the "Consulting Period") Zock shall remain employed on the
                payroll of Horace Mann paid at a salary rate of Fourteen
                Thousand One Hundred Twenty Eight and no/100 Dollars
                ($14,128.00) per month which will be paid in semi-monthly
                installments in the amount of Seven Thousand Sixty Four and
                no/100 Dollars ($7,064.00 per pay) in accordance with Horace
                Mann's payroll practices.

          iii)  Zock shall be eligible for bonus consideration for his service
                in 2003, calculated using 2003 salary earnings, and otherwise in
                accordance with the terms of the Annual Incentive Program for
                Officers as detailed in Exhibit A, if any is payable in 2004.

          iv)   Prior to his Retirement Date, Zock shall be eligible to continue
                participation in the Long Term Incentive Plan ("LTIP"), as such
                may be amended from time to time. Further, Zock will be eligible
                for payment in 2005 of two-thirds (2/3) of the LTIP bonus
                payment for the 2002-2004 measurement period which will be
                calculated based on two thirds (2/3) of the achieved performance
                results multiplied by the target opportunity as detailed on
                Exhibit B, as such may be amended from time to time.

          v)    All stock option awards previously granted will continue to vest
                as detailed in the specific Stock Option Agreements applicable
                to him which have been issued prior to December 31, 2003.

          vi)   Zock shall be eligible to remove any freestanding office
                furniture in his office, to include desk, chairs, coffee table,
                and couch. In addition, Zock is eligible to take the laptop
                computer, docking station, monitor, keyboard and mouse assigned
                to him, provided that all Horace Mann proprietary, confidential
                and the like information and software is removed from the
                computer. The removal of such is Zock's responsibility and at
                his cost and will be done at a mutually agreeable time and
                manner.

          vii)  Horace Mann continue to pay for Zock's membership to the Sangamo
                Club through Zock's Retirement Date.

<PAGE>

          viii) Other than the payments provided for in paragraph 1(a)(ii), Zock
                shall not be eligible for any bonus consideration, vacation or
                vacation pay, stock option awards or any other remuneration or
                compensation during the Consulting Period. During the Consulting
                Period, Zock shall otherwise remain eligible for benefits
                available under the Horace Mann Benefit Programs consistent with
                a salary rate of Fourteen Thousand One Hundred Twenty Eight and
                no/100 Dollars ($14,128.00) per month.

     b)   During the Consulting Period, Zock shall, at the discretion of the
          President and Chief Executive Officer ("CEO") of Horace Mann, perform
          limited consulting responsibilities ("Consulting Duties") as assigned
          and deemed appropriate by such CEO with such responsibilities being
          performed at mutually agreeable locations. It is expected such duties
          will focus primarily on transitional advice relating to matters in
          which Zock participated while actively employed. Zock's good faith
          performance of such duties to the best of his abilities shall
          constitute compliance with this requirement. Any reasonable and
          necessary business expenses incurred in connection with such
          Consulting Duties assigned shall be reimbursed in accordance with
          Horace Mann's normal expense reimbursement policies. During the
          Consulting Period, Zock shall owe Horace Mann the same duty of loyalty
          owed to Horace Mann by an officer of Horace Mann, and he shall not
          engage in any competing business or other activities that are
          detrimental to the interests or welfare of Horace Mann. Provided,
          however, Zock may, with the advance written approval of the CEO of
          Horace Mann, consult, become employed by, or act as an independent
          contractor for business entities whose interests do not directly
          conflict with those of Horace Mann.

     c)   Zock will retire from Horace Mann on November 15, 2005 (such date
          referred to herein as "Retirement Date") and he will complete all
          documents necessary to effectuate such retirement. Zock states that
          this retirement is voluntary; that he understands that his employment
          (and this Agreement) with Horace Mann shall cease on his Retirement
          Date (or upon his death); that he shall not accrue any further
          benefits thereafter; nor shall he be eligible for any other salary
          payments after such date. Zock shall be eligible for retirement
          benefits and other benefits in effect at his Retirement Date and due
          to him under Horace Mann's benefit plans attributable to service prior
          to his Retirement Date, including any applicable death benefits.
          Provided, however, he acknowledges that he is not eligible for any
          severance payments.

2)   Releases and Covenants Not To Sue.

     a)   Zock, for himself, his agents, legal representatives, assigns, heirs,
          distributees, devisees, legatees, administrators, personal
          representatives and executors (the "Releasing Parties"), hereby
          releases and forever discharges Horace Mann, its present or past
          parent corporations, subsidiaries, divisions and affiliates, or
          related companies, successors or assigns, and their respective present
          or past officers, trustees, directors, employees and agents of each of
          them (the "Released Parties"), from any and all claims, demands,
          actions, liabilities and other claims for relief and remuneration
          whatsoever, whether known or unknown arising or which could have
          arisen up to and including the date of his execution of this
          Agreement, including, without limitation, those arising out of or
          relating to Zock's employment and cessation of employment, his change
          in employment duties, consulting status and his retirement from Horace
          Mann on or before November 15, 2005, and any claims arising under
          Title VII of the Civil Rights Act of 1964 (as amended by the Civil
          Rights Act of 1991), the Americans With Disabilities Act, the
          Rehabilitation Act of 1973, the Equal Pay Act, the Fair Labor
          Standards Act, the Older Workers Benefits Protection Act, the Age
          Discrimination in Employment Act, the Illinois Human Rights Act, the
          Illinois Wage Payment

                                      - 2 -

<PAGE>

          and Collection Act, the Employee Retirement Income Security Act
          ("ERISA"), as such acts have been amended, or any other federal,
          state, or local statute, law, ordinance, regulation, code or executive
          order, any tort or contract claims, and any of the claims, matters and
          issues which could have been asserted by Zock against Horace Mann,
          provided that the Releasing Parties do not release potential claims
          arising under ERISA to any benefits to which Zock is entitled in
          accordance with the Horace Mann Benefit Programs by virtue of his
          employment with Horace Mann prior to his Retirement Date.

     b)   Zock further agrees not to assert any claim, suit or other legal
          proceeding against the Released Parties, in any court, based on any
          events, whether known or unknown, which are the subject of the release
          contained in section A. of this Paragraph 2. Zock further agrees that
          if any entity or person shall bring any claim that has been released
          in section A. of this Paragraph 2 on his behalf, he shall not accept
          any recovery or remedy with respect to any such claim.

3)   Confidentiality.

     a)   Except as required by law, Zock agrees not to discuss, divulge,
          publicize, publish or use any information he received or used in the
          course of his employment with Horace Mann which is not publicly
          available. Zock further agrees not to disclose, divulge, publicize or
          publish the terms of this Agreement or the facts or circumstances that
          led to this Agreement, except to his counsel, spouse or financial
          advisor, or as required by law, or as required to enforce the terms of
          this Agreement. In addition, Zock will require his spouse, current or
          any future attorneys or professional tax preparers or other financial
          advisor, or their employees, as a condition of discussing this
          Agreement or any of the matters described in the Agreement with them
          to execute a Confidentiality Acknowledgment in a form attached hereto
          as Exhibit C and to send a copy of such form in a confidential
          envelope to Ann Caparros, Esq., General Counsel, (or her successor)
          Horace Mann Service Corporation, 1 Horace Mann Plaza, Springfield,
          Illinois 62715-0001. Zock shall instruct his present or future
          attorney, spouse, tax preparer or other financial advisor, as the case
          may be, that they are subject to the same requirements.

     b)   Zock further agrees that if he is subpoenaed to testify or produce
          documents or any other information relating in any way to the subject
          matter of this Agreement, or if he is otherwise in a position in which
          he feels he is required by law to make a disclosure otherwise
          prohibited by Paragraph 3., he or his attorneys shall immediately
          notify Horace Mann in care of Ann M. Caparros, Esq., General Counsel
          (or her successor), at Horace Mann Service Corporation, 1 Horace Mann
          Plaza, Springfield, Illinois 62715-0001, by telephone (217.788.5757)
          and in writing of this fact and before he complies with any such
          subpoena or otherwise make such disclosure in order to permit Horace
          Mann to take steps to protect its interests in this regard. In
          addition, Zock will cooperate with Horace Mann in all reasonable
          respects necessary to effectuate a motion to quash any subpoena or
          production request in this regard, and to cooperate with Horace Mann's
          opposition to such disclosure. Zock's reasonable costs, expenses and
          attorney's fees in this regard shall be paid by Horace Mann, but
          provided, further, that no such costs, fees or expenses shall be
          committed or expended without Horace Mann's express written approval.
          If after following the procedures set forth in this paragraph, Zock
          nevertheless is compelled by court order or otherwise required by law
          to testify or produce documents. Zock's compliance shall not
          constitute or be construed as a breach of this Agreement.

                                      - 3 -

<PAGE>

     c)   Zock further agrees and understands that if he fails to comply with
          the requirements of Paragraph 3 of this Agreement, Horace Mann shall
          be entitled to cease all further payments or benefits which would
          otherwise be due to Zock under this Agreement, as well as any other
          remedy for breach of this Agreement, as permitted by law.

4)   No Reinstatement; No Reapplication. Zock waives any rights to reinstatement
     or re-employment with Horace Mann or any related entity after the
     completion of the Consulting Period. He further agrees not to reapply for
     employment to such entities in the future. Horace Mann and its affiliates
     shall not be required to consider any application for employment or
     re-employment by Zock.

5)   Return of Horace Mann Materials and Property. Zock hereby acknowledges that
     at the conclusion of the Consulting Period, he will return or destroy all
     Horace Mann materials and property, including all intellectual property to
     Horace Mann. Zock further agrees not to make or keep any copies, electronic
     or paper, of any Horace Mann documents or other intellectual property.

6)   Voluntary Agreement; Legal Counsel; 21 Day Consideration Period. Zock
     acknowledges and states that he has read this Agreement; that he has had
     opportunity to, and has been advised orally and in writing hereby, to
     consult with legal counsel prior to executing this Agreement, that he
     understands the legal effect and binding nature of this Agreement; and that
     he is acting voluntarily and with full knowledge of his actions in
     executing this Agreement. Further, Zock acknowledges and states that he has
     been given at least 21 days to fully consider entering into this Agreement
     before its execution.

7)   Revocation. This Agreement may be revoked by Zock within seven (7) days
     following his execution of this Agreement, in which case this Agreement
     shall not become effective or enforceable and all terms within the
     Agreement shall become null and void. If not revoked during this seven (7)
     day revocation period, this Agreement shall be and remain in full force and
     effect.

8)   Assignment. This Agreement shall not be assigned by Zock, but it is binding
     upon and shall inure to the benefit of Horace Mann and its successors and
     assigns.

9)   Governing Law; Disputes. This Agreement shall be governed by, and construed
     and enforced in accordance with, the laws of the State of Illinois, without
     giving effect to its conflict or choice of law provisions. Any action
     brought to enforce this Agreement shall be brought in a state or federal
     court of competent jurisdiction located in Springfield, Illinois. All
     parties agree that if any action is brought to enforce this Agreement in a
     state or federal court outside of Illinois, that all parties hereby consent
     to a transfer to a court located in Springfield, Illinois.

10)  Miscellaneous. No provision of this Agreement may be modified, waived or
     discharged unless such waiver, modification or discharge is agreed to in
     writing signed by Zock and Horace Mann. No waiver by either party hereto at
     any time of any breach by the other party hereto of, or compliance with,
     any condition or provision of this Agreement to be performed by such other
     party shall be deemed a waiver of similar or dissimilar provisions or
     conditions at the same or at any prior or subsequent time. This Agreement
     shall be enforced in accordance with its terms and shall not be construed
     against either party.

11)  Counterparts. This Agreement may be executed in two counterparts, each of
     which shall be deemed to be an original but both of which together will
     constitute one and the same instrument.

                                      - 4 -

<PAGE>

12)  Withholding. Horace Mann shall withhold benefits otherwise due or payable
     hereunder in order to comply with any federal, state, local or other income
     or other tax laws requiring withholding with respect to compensation and
     benefits provided to Zock pursuant to this Agreement.

13)  Entire Agreement; Termination of Prior Agreements. This Agreement contains
     the entire agreement between the parties hereto with respect to the
     transactions contemplated hereby and supersedes, terminates and discharges
     all previous oral and written agreements relating to the subject matters
     herein, including the Severance Agreement between himself, Horace Mann
     Educators Corporation and Horace Mann Service Corporation which was
     effective December 27, 1991 ("Severance Agreement") attached as Exhibit D.
     Zock hereby acknowledges and agrees to sign an amendment terminating the
     Severance Agreement in accordance with the terms of the Severance
     Agreement.

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
     date written below.

                                          HORACE MANN SERVICE CORPORATION

Dated:  December 31, 2003                 By: /s/ Valerie A. Chrisman
        ------------------------------       -----------------------------------
                                             Name: Valerie A. Chrisman
                                             Title: Senior Vice President -
                                             Employee and Corporate Services

                                          GEORGE J. ZOCK

Dated:  December 31, 2003                 By: /s/ George J. Zock
        ------------------------------       -----------------------------------
                                             Name: George J. Zock,
                                             Title: Executive Vice President

                                      - 5 -

<PAGE>

                                    Exhibit A

               CLIENT, FINANCIAL & INFORMATION TECHNOLOGY SERVICES

                              PERFORMANCE MEASURES

                          FOR THE ANNUAL INCENTIVE PLAN
                                      2003

MEASURE                                               WEIGHTING
---------------------------------------------------------------
   Corporate Performance Measures                            50%

   Business Measurements Roll-Up                             50%
      Property and Casualty                   15%
      Life/Annuity                            20%
      Marketing                               15%

No awards greater than target will be paid unless threshold EPS is achieved
($1.24).

                       George Zock - 50% Bonus Opportunity

<PAGE>

                                   Exhibit B.1

                            Participant: George Zock

              Three year cash award opportunity at target: $540,000
           Three year stock option opportunity: 110,000 option shares

                         Threshold              Target             Maximum
                       %            $$      %            $$      %            $$
2002 Actual           9%  $     48,600     9%  $     48,600     9%  $     48,600
2003 Opportunity     15%  $     81,000    30%  $    162,000    60%  $    324,000
2004 Opportunity     25%  $    135,000    50%  $    270,000   100%  $    540,000
--------------------------------------------------------------------------------
Total 2003-2004      49%  $    264,600    89%  $    480,600   169%  $    912,600

2002-2004 Stock Option Performance        9,900 vested shares at $20.80 per
Vesting:                                  share

2002-2004 Long Term Incentive Plan -
     3-year performance period
     Cash payment made in 2005 after the end of the performance period
     Must be employed at the end of the performance period to receive payment
          Exceptions for retirement, death, and disability

<PAGE>

                                   Exhibit B.2

                         CORPORATE PERFORMANCE MEASURES
                   FOR THE LONG TERM INCENTIVE PLAN 2002-2004

<TABLE>
<CAPTION>
Measure                      Weight   2002 (20% Vesting)         2003 (30% Vesting)              2004 (50% Vesting)
-------------------------------------------------------------------------------------------------------------------------
                                      Thres.   Target   Max.     Thres.   Target   Max.          Thres.   Target   Max.
                                      -----------------------------------------------------------------------------------
<S>                          <C>      <C>      <C>      <C>      <C>      <C>      <C>           <C>      <C>      <C>
GAAP Operating EPS/(1)(2)/       50%  $ 1.10   $ 1.20   $ 1.40   $ 1.24   $ 1.34   $ 1.53/(3)/   $ 1.44   $ 1.53   $ 1.72/(3)/
Net Income ROAE/(2)/             50%    10.0%    11.0%    12.5%    11.0%    12.0%    13.0%         12.0%    12.5%    13.5%
</TABLE>

Note: Threshold payout is at 50%. Target payout is at 100%. Maximum payout is at
200%.

/(1)/ 2002 threshold-target-max consistent with AIP levels. 2003 and 2004
      targets 15% annual increases (rounded) from 2002 target. 2003 and 2004
      ranges around target consistent with 2002.
/(2)/ Excludes any change in DOLI charges from 12/31/01 level ($2.7 million
      after tax), and any release of escrowed NC auto premiums.
/(3)/ Adjusted from original measures for the impact of share dilution created
      by the 2002 recapitalization of the company.

                                   2002 Actual
                                   -----------

                                          December    Percent of    Weighted
Measure                         Weight     Actual       Target       Result
----------------------------------------------------------------------------
GAAP Operating EPS/(1)(2)/          50%   $   1.18         90.00%      45.00%
Net Income ROAE/(2)/                50%        2.4%         0.00%      00.00%
Total                              100%                                45.00%
2002 Target Opportunity             20%                                 9.00%

<PAGE>

                                    EXHIBIT C

                         CONFIDENTIALITY ACKNOWLEDGMENT

     The undersigned has received a copy of, seen or discussed matters leading
to the Transition, Retirement and Release Agreement between George J. Zock and
Horace Mann Service Corporation (hereinafter "the Agreement"). Except as
required by law, the undersigned hereby agrees that he/she will not disclose any
of the terms or conditions of the Agreement or any of the matters described in
the Agreement to any person or entity who is not a party to the Agreement or
this Confidentiality Acknowledgment.

     The undersigned further agrees that if subpoenaed, requested or noticed to
testify or produce documents relating in any way to the subject matter of the
Agreement, before he/she complies he/she shall notify Horace Mann Service
Corporation, c/o Ann M. Caparros, Esq., General Counsel, 1 Horace Mann Plaza,
Springfield, Illinois 62715-0001 (217/788-5757) (or her successor), of the
return date, time and location before complying with such subpoena, request or
notice.

                                        ----------------------------------------
                                        [Name]

                                        Title:
                                               ---------------------------------
                                        Date:
                                               ---------------------------------Employment Agreement

 EXHIBIT 10.02 
  
 EMPLOYMENT AGREEMENT 
  
 EMPLOYMENT AGREEMENT dated as of January 27, 2004 by and between AMBAC FINANCIAL GROUP, INC., a Delaware corporation (the
“Company”), and ROBERT J. GENADER (the “Executive”). 
  
 WHEREAS, the Executive currently serves at President and Chief Operating Officer of the Company; and 
  
 WHEREAS, the Company and the Executive wish to enter into this Agreement to
provide for the Executive to serve, effective as of January 27, 2004 (the “Effective Date”), as its President and Chief Executive Officer upon the terms and conditions set forth herein; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows (capitalized terms used herein without definition shall have the meanings ascribed to such terms in Section 10 below): 
  
 1. Employment and Duties. 
  
 (a) General. The Executive will serve as the President and Chief Executive Officer of the Company starting on the Effective Date. In addition, the
Executive will serve as the President and Chief Executive Officer of Ambac Assurance Corporation, a Wisconsin corporation that is a wholly-owned subsidiary of the Company (“Ambac Assurance”). 
  
 (b) Full-Time Employment. The Executive shall devote his full-time
working hours and best efforts to his duties hereunder. 
  
 (c)
Board Membership. The Executive currently serves as a member of the Company’s Board of Directors (the “Board”). The Company agrees to nominate the Executive for reelection to the Board as a member of the
management slate at each annual meeting of stockholders (or if the members of the Board are divided into classes pursuant to Section 141(d) of the Delaware General Corporation Law, at each annual meeting of stockholders at which the Executive’s
director class comes up for election) during his employment hereunder. The Executive agrees to serve on the Board if elected. 
  
 (d) Other Subsidiaries. In addition to the foregoing positions and responsibilities, the Executive agrees to serve, if requested by the Board, as
an officer or director of any subsidiary or Affiliate of the Company at no additional compensation. 
  
 2. Relation of this Agreement to Retention Agreement. 
  
 The Company and the Executive are parties to an Amended and Restated Management Retention Agreement, dated as of January 25, 2000 (the
“Retention Agreement”), that sets forth certain provisions applicable to the Executive’s employment in the event of a “Change in Control” as defined therein. Notwithstanding anything to the
contrary in this Agreement, following a Change in Control, the term of the Executive’s employment, as well as his compensation and benefits, rights upon termination of employment and other matters provided for in the Retention Agreement, shall
be governed by the Retention Agreement rather than the present Agreement. Without limiting the generality of the preceding sentence, 

  

 Employment Agreement 
 Page 2 of 10 
  

 
following a Change in Control the definitions of “Cause” and “Good Reason” set forth in the Retention Agreement shall apply, rather than
the definitions set forth in this Agreement. 
  
 3. Term of
Employment. 
  
 The term of the Executive’s employment
under this Agreement (the “Term”) will commence on the Effective Date and continue until December 31, 2004. On December 31, 2004 and each December 31 thereafter the Term shall automatically be extended for an additional
period of one calendar year, provided, however, that (i) the Company or the Executive may give the other notice that it does not wish to extend the Term beyond the termination date then in effect, such notice to be given at least 90
calendar days before the termination date then in effect, and (ii) unless the Company shall specify in writing to the contrary, the Term shall not extend past December 31 of the year in which occurs the Executive’s sixty-fifth birthday. Nothing
in this Section 3 shall limit the right of the Company to terminate the Executive’s employment hereunder on the terms and conditions set forth in Section 5. 
  
 4. Compensation and Other Benefits. 
  
 Subject to the provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits
to the Executive during the Term as compensation for services rendered hereunder: 
  
 (a) Salary. The Executive’s annual salary (the “Salary”) shall initially be $525,000. The Salary is payable in accordance with the Company’s payroll practices as established by
the Company from time to time. The Compensation and Organization Committee of the Board (or any successor thereto) (the “Committee”) shall periodically review and may increase, but not decrease, the Executive’s Salary.

  
 (b) Bonus. The Executive shall participate for each
calendar year in a bonus arrangement pursuant to which he shall be eligible to earn an annual bonus, based on the Company’s achieving certain performance goals which the Committee shall establish. The form of payment of the Executive’s
bonus (whether in cash, in awards under the Company’s 1997 Equity Plan, as the same may be amended from time to time, or any successor thereto (the “Equity Plan”), in a combination of cash and such awards or in some
other form), and the value to be attributed to any non-cash component of the bonus, will be determined by the Committee in its discretion. 
  
 (c) Long-Term Incentive Compensation. The Executive’s long-term incentive compensation awards, whether under the Equity Plan or any other plan
or program of the Company, shall be determined by the Committee in its discretion. 
  
 (d) Expenses. The Company shall reimburse the Executive for reasonable travel and other business-related expenses incurred by him in performance of the business of the Company. In addition, the Company shall
reimburse the Executive up to $50,000 for club initiation fees and up to $15,000 per year for annual club dues or membership fees. 
  

 Employment Agreement 
 Page 3 of 10 
  

 (e) Pension, Welfare and Fringe Benefits. The Executive shall participate in each pension,
welfare, life insurance, health, disability and other fringe benefit plan or program maintained by the Company for its executive officers in accordance with the terms thereof. 
  
 5. Termination of Employment. 
  
 This Section 5 sets forth the provisions that will apply generally upon a termination of the Executive’s employment
with the Company. Following a Change in Control, the termination of employment provisions set forth in the Retention Agreement, rather than those set forth below, will apply. 
  
 (a) Termination for Cause; Resignation Without Good Reason. 
  
 (i) Rights on Termination. If, prior to the
expiration of the Term, the Company terminates the Executive’s employment for Cause, or the Executive resigns from his employment other than for Good Reason, the Executive shall be entitled to payment of his Salary accrued through the
Termination Date, plus any other accrued but unpaid benefits, provided, however, that the Executive shall not be entitled to any bonus compensation pursuant to Section 4(b)or otherwise in respect of the year in which such termination
or resignation occurs or any prior year to the extent the bonus for any prior year has not been paid. Except as may be provided under the terms of any applicable grants to the Executive under the Equity Plan, the Executive shall have no right under
this Agreement or otherwise to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation of employment. 
  
 (ii) Notice of Termination or Resignation.
Termination of the Executive’s employment for Cause shall be communicated by delivery to the Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice to the Executive and reasonable opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board prior to such vote), finding that in the
good faith opinion of the Board an event constituting Cause for termination in accordance with Section 10 has occurred and specifying the particulars thereof (a “Notice of Termination”). If the event constituting Cause for
termination is of a type specified in clause (i) or clause (iii) of the definition of Cause set forth in Section 10, the Executive shall have 20 business days from the date of receipt of such Notice of Termination to effect a cure of the event
described therein and, upon cure thereof by the Executive to the reasonable satisfaction of the Company, such event shall no longer constitute Cause for purposes of this Agreement. 
  

 Employment Agreement 
 Page 4 of 10 
  

 (b) Termination Without Cause; Resignation for Good Reason. 
  
 If, prior to the expiration of the Term, the Company terminates the
Executive’s employment without Cause, or the Executive resigns from his employment for Good Reason, the following shall apply: 
  
 (i) Severance Amount. The Company shall pay the Executive his Salary accrued up to and including the Termination Date, plus a pro
rata portion (based on the number of days elapsed prior to the Termination Date) of his target bonus for the year in which such termination or resignation occurs, plus any other accrued but unpaid benefits or compensation. In addition, the Company
shall pay the Executive an amount (the “Severance Amount”) equal to two years of Salary at the rate in effect on the Termination Date. The Company shall pay the Severance Amount in a lump sum in cash (subject to regular payroll
deductions) within 10 business days of the Termination Date. 
  
 (ii) Equity Compensation. The Executive shall be fully vested in all stock options, restricted stock, restricted stock units and any other awards theretofore awarded to him under the Company’s 1991 Stock
Incentive Plan, as amended (the “Stock Plan”), the Equity Plan, or any successor thereto. 
  
 (iii) Other Benefits. The Executive shall be entitled to the following benefits: 
  

	 	(A)	For six months following the Termination Date, the Executive and his dependents, if any, shall continue to participate (at no greater expense to them than was the case for such
coverage prior to his termination) in the employee benefit arrangements described in Section 4(e)(i) above, provided, however, that such benefits shall cease to the extent the Executive begins coverage under plans of a subsequent
employer. 

  

	 	(B)	For six months following the Termination Date, the Company shall provide the Executive with appropriate individual outplacement services and financial planning at the Company’s
expense. 

  

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

  
 Anything
herein to the contrary notwithstanding, the Company shall have no obligation to continue to maintain following the Termination Date any plan or program solely as a result of the provisions of this Agreement. 
  
 (iv) Offset Provisions. In the event of any
termination of the Executive’s employment, the Executive shall be under no obligation to seek other employment or otherwise to mitigate damages resulting from his termination of employment. Nevertheless, amounts owed to the Executive under
Section 5(b)(i) shall be offset by the amount of cash compensation to which the Executive becomes entitled, or which is voluntarily deferred at his request, during Severance Period, from a Third Party Employer. Promptly upon becoming engaged by a
Third Party Employer, the Executive shall provide the Company with written notice of such engagement and shall set forth the terms of his compensation, including any amount of guaranteed or target bonus. If the Company has not yet made the payment
provided for in Section 5(b)(i), then within 10 business days of the receipt of such notice, the Company shall make such lump-sum 

  

 Employment Agreement 
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payment to the Executive reduced by the Offset Amount. If the Company has already made the payment provided for in Section 5(b)(i), then within 10 business
days of the receipt of such notice, the Executive shall make a payment to the company equal to the Offset Amount (but in no event greater than the Severance Amount). The Company and the Executive shall use their good faith efforts to agree upon the
Offset Amount, but in the event they are unable to agree, the amount proposed by the Executive, and certified by an independent certified public account selected by the Executive, shall control. 
  
 (c) Termination Due to Death or Disability. In the event of the
Executive’s Disability, the Company shall be entitled to terminate his employment. Notwithstanding anything contained in this Agreement to the contrary, if the Executive’s employment terminates due to death or Disability, any Salary earned
by the Executive up to the date of such termination, plus a pro rata portion (based on the number of days elapsed prior to such termination or resignation) of his target bonus for the year in which such termination occurs, shall be paid to the
Executive or his estate, as the case may be, within 30 days of the Termination Date. All stock options, restricted stock, restricted stock units or other awards awarded to the Executive under the Stock Plan and/or the Equity Plan shall be fully
vested as of the date of death or termination of employment due to Disability. 
  
 6. Protection of the Company’s Interests. 
  
 (a) Confidential Information. Except for actions taken in the course of his employment hereunder or as required by law, at no time shall the Executive divulge, furnish or make accessible to any person any
information of a confidential or proprietary nature obtained by him while in the employ of the Company. Upon termination of his employment with the Company, the Executive shall return to the Company all such information which exists in written or
other physical form and all copies thereof in his possession or under his control. 
  
 (b) Exclusive Services. For so long as the Executive is employed by the Company and continuing through the first anniversary of the Termination Date, the Executive shall not directly or indirectly engage in
competition with, or own any interest in any business which competes with, any business of the Company or any of its subsidiaries, provided, however, that the provisions of this Section 6 shall not prohibit the Executive’s
ownership of not more than 5% of the voting stock of any publicly held corporation, and provided, further, that the Executive’s covenant under this Section 6(b) shall not apply following termination of his employment following a
Change in Control. 
  
 7. Remedies. 
  
 The Executive acknowledges that a breach of any of the covenants contained in
Section 6 may result in material irreparable injury to the Company or its Affiliates for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such breach or
threat thereof, the Company shall be entitled, in addition to any other rights or remedies it may have, to obtain a temporary restraining order and/or a preliminary or permanent injunction enjoining or restraining the Executive from engaging in
activities prohibited by Section 6. 
  

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 8. Indemnification.  
  
 The Company will indemnify the Executive to the fullest extent permitted (including payment of expenses in advance of final
disposition of a proceeding) by the laws of the State of Delaware, as in effect at the time of the subject act or omission, or by the Certificate of Incorporation and By-Laws of the Company, as in effect at such time or on the Effective Date of this
Agreement, whichever affords or afforded greatest protection to the Executive, and the Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and officers
(and to the extent the Company maintains such an insurance policy or policies, the Executive shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage provided for any Company officer
or director), against all costs, charges and expenses whatsoever incurred or sustained by him or his legal representatives at the time such costs, charges and expenses are incurred or sustained, in connection with any action, suit or proceeding to
which he may be made a party by reason of his being or having been a director, officer or employee of the Company or any subsidiary thereof, or his serving or having served any other enterprise as a director, officer or employee at the request of
the Company. 
  
 9. Arbitration.  
  
 (a) Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

  
 (b) The Company shall promptly reimburse the Executive for all
legal fees and expenses incurred by the Executive in connection any claim to enforce his rights under this Agreement, except for any claim which shall have been determined, in an arbitration conducted in accordance with subsection (a) above, to have
been brought by the Executive in bad faith. 
  
 10.
Definitions. For purposes of this Agreement, the following definitions shall apply. 
  
 “Affiliate” includes any company or other entity or person controlling, controlled by or under common control with
the Company. 
  
 “Beneficiary” means the person or persons designated by the Executive in writing to the Company to receive payments under this Agreement following the Executive’s death or, if no such person or persons are
designated, the Executive’s estate. 
  
 “Cause” means any of the following: 
  
 (i) the willful commission by the Executive of acts that are dishonest and demonstrably and materially injurious to the Company or any of its Affiliates, monetarily or otherwise; 
  

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 (ii) the conviction of the Executive, or his pleading guilty or “nolo
contendre” for a felony resulting in material harm to the financial condition or business reputation of the Company or any of its Affiliates; or 
  
 (iii) a material breach of any of the covenants set forth in Section 6 of this Agreement. 
  
 “Good Reason” means, without the
Executive’s express written consent, any of the following: 
  
 (i) a substantial adverse alteration in the nature or status of the Executive’s duties or responsibilities or in the Executive’s title, including the Executive’s ceasing to report directly to the Board,
except that the appointment by the Company and/or Ambac Assurance of an individual other than the Executive as its President shall not constitute Good Reason hereunder, so long as the Executive retains the titles and responsibilities of Chief
Executive Officer; 
  
 (ii) a reduction in the
Salary as then in effect or failure of the Company to pay any amount owing to the Executive hereunder when due; 
  
 (iii) the Company’s requiring the Executive to be based at any office or location more than 100 miles outside of the city limits of
New York City; 
  
 (iv) the failure to obtain a
satisfactory agreement from any successor of the Company to assume and agree to perform this Agreement, as contemplated in Section 11(d) hereof; 
  
 provided, however, that unless the Executive provides written notification of his intention to resign within 10 business days after the
Executive has actual knowledge of the occurrence of any such event constituting Good Reason, the Executive shall be deemed to have consented thereto and such event shall no longer constitute Good Reason for purposes of this Agreement. If the
Executive provides such written notice to the Company, the Company shall have 20 business days from the date of receipt of such notice to effect a cure of the event described therein and, upon cure thereof by the Company to the reasonable
satisfaction of the Executive, such event shall no longer constitute Good Reason for purposes of this Agreement. 
  
 “Disability” shall be defined in the same manner as such term or a similar term is defined in any long-term
disability policy maintained by the Company which covers the Executive and is in effect on the date of the Executive’s termination of employment with the Company. Any dispute as to whether or not the Executive is disabled within the meaning of
the preceding sentence shall be resolved by the Company’s long-term disability carrier. 
  
 “Offset Amount” means the amount of cash compensation to which the Executive is expected to become entitled during
the Severance Period from a Third Party Employer (including any amounts which are to be voluntarily deferred at his request) based on the compensation information set forth in his notice to the Company pursuant to 

  

 Employment Agreement 
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Section 5(b)(iv), including therein a pro rata portion (based on the number of days remaining in the Severance Period) of any guaranteed or target bonus.

  
 “Severance Period”
means, if the Company terminates the Executive’s employment without Cause or the Executive resigns without Good Reason, the period beginning on the Termination Date and ending on the first anniversary thereof. 
  
 “Subsidiary” means (i) a corporation
or other entity with respect to which the Company, directly or indirectly, has the power, whether through the ownership of voting securities, by contract or otherwise, to elect at least a majority of the members of such corporation’s board of
directors or analogous governing body, or (ii) any other corporation or other entity in which the Company, directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for purposes of this Agreement.

  
 “Termination Date”
means: 
  
 (i) in the case of a termination of
the Executive’s employment by the Company for Cause, the effective date of such termination specified in the Notice of Termination, which, if the event constituting Cause for termination is of a type specified in clause (i) or clause (iii) of
the definition of Cause, shall be not less than 21 business days from receipt of the Notice of Termination by the Executive; 
  
 (ii) in the case of a termination of the Executive’s employment by the Company without Cause, the date specified in a written notice
of termination to the Executive, such written notice to provide at least 90 days’ advance written notice of termination; 
  
 (iii) in the case of the Executive’s resignation from employment without Good Reason, the date specified in a written notice of
resignation from the Executive to the Company, such written notice provide at least 90 days’ advance written notice of resignation; 
  
 (iv) in the case of the Executive’s resignation from employment for Good Reason, the date specified in a written notice of
resignation from the Executive to the Company, provided, however, that no such written notice shall be effective unless the cure period specified in the definition of Good Reason has expired without the Company having corrected, to the reasonable
satisfaction of the Executive, the event or events subject to cure; 
  
 (v) in the case of termination of employment due to the Executive’s death, the date of death; and 
  
 (vi) in the case of termination of employment due to the Executive’s Disability, the effective date of termination specified in a
written notice of termination from the Company to the Executive, which effective date shall be not earlier than the last day of the 180 day period provided for in the definition of “Disability” above. 
  

 Employment Agreement 
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 11. General Provisions.  
  
 (a) No Other Severance Benefits. Except as specifically set forth in this Agreement, the Executive covenants and
agrees that he shall not be entitled to any other form of severance benefits from the Company, including, without limitation, benefits otherwise payable under any of the Company’s regular severance policies, in the event his employment
hereunder ends for any reason and, except with respect to obligations of the Company expressly provided for herein, the Executive unconditionally releases the Company and its subsidiaries and affiliates, and their respective directors, officers,
employees and stockholders, or any of them, form any and all claims, liabilities or obligations under this Agreement or under any severance or termination arrangements of the Company or any of its subsidiaries or affiliates for compensation or
benefits in connection with his employment or the termination thereof. 
  
 (b) Notices. Any notice hereunder by either party to the other (including, without limitation, any notice of intention to arbitrate pursuant to Section 9) shall be given in writing by personal delivery, telex, telecopy or certified
mail, return receipt requested, to the applicable address set forth below: 
  

			
	 To the Company:
	 	 Ambac Financial Group, Inc.
 One State Street Plaza
 New York, NY 10004
 Attention: General Counsel

  
 To the Executive: at
the address indicated on the signature page hereof or to such other person or other address as either party may specify to the other in writing. 
  
 (c) Limited Waiver. The waiver by the Company or the Executive of a violation of any of the provisions of this Agreement, whether express or
implied, shall not operate or be construed as a waiver of any subsequent violation of any such provision. 
  
 (d) Assignment. No right, benefit or interest hereunder shall be subject to assignment, encumbrance, charge, pledge, hypothecation or set off by
the Executive in respect of any claim, debt, obligation or similar process. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets or
the Company to assume expressly and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 
  
 (e) Amendment. This Agreement may not be amended, modified or canceled
except by written agreement of the Executive and the Company. 
  
 (f) Severability. If any term or provision hereof is determined to be invalid or unenforceable in a final court or arbitration proceeding, (i) the remaining terms and provisions hereof shall be unimpaired and (ii) the invalid or
unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. 
  

 Employment Agreement 
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 (g) Unsecured Promise. No benefit or promise hereunder shall be secured by any specific assets
of the Company. Unless otherwise stated herein, the Executive shall have only the rights of an unsecured general creditor of the Company in seeking satisfaction of such benefits or promises. 
  
 (h) Governing Law. This Agreement has been made in and shall be
governed by and construed in accordance with the laws of the State of New York. 
  
 (i) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. 
  
 (j) Headings. The headings and captions of the Sections of this
Agreement are included solely for convenience of reference and shall not control the meaning or interpretation of any provisions of this Agreement. 
  
 (k) Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same document. 
  
 IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the day and year first written above. 
  

			
	AMBAC FINANCIAL GROUP, INC.
		
	By:	 	 
	 	 	

	 	 	 Name:

	 	 	 Title:

  

			
	EXECUTIVE
	
	 
	

	 Robert J. Genader

		
	Address:

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