<SEC-DOCUMENT>0001144204-13-026218.txt : 20130503
<SEC-HEADER>0001144204-13-026218.hdr.sgml : 20130503
<ACCEPTANCE-DATETIME>20130503152022
ACCESSION NUMBER:		0001144204-13-026218
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20130430
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Termination of a Material Definitive Agreement
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Material Modifications to Rights of Security Holders
ITEM INFORMATION:		Changes in Control of Registrant
ITEM INFORMATION:		Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
ITEM INFORMATION:		Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20130503
DATE AS OF CHANGE:		20130503

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMBAC FINANCIAL GROUP INC
		CENTRAL INDEX KEY:			0000874501
		STANDARD INDUSTRIAL CLASSIFICATION:	SURETY INSURANCE [6351]
		IRS NUMBER:				133621676
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-10777
		FILM NUMBER:		13812343

	BUSINESS ADDRESS:	
		STREET 1:		ONE STATE ST PLZ
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10004
		BUSINESS PHONE:		2126680340

	MAIL ADDRESS:	
		STREET 1:		ONE STATE ST PLZ
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10004

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AMBAC INC /DE/
		DATE OF NAME CHANGE:	19930328
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>v343563_8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Washington, D.C. 20549 </B></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>FORM 8-K </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>CURRENT REPORT </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>PURSUANT TO SECTION 13 OR 15(d) OF THE
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>SECURITIES EXCHANGE ACT OF 1934 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Date of Report (Date of earliest event
reported): April 30, 2013 </B></P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AMBAC FINANCIAL GROUP, INC. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>(Exact name of Registrant as specified
in its charter) </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; text-align: center; font-size: 10pt; width: 33%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Delaware</B></FONT></TD>
    <TD STYLE="vertical-align: top; text-align: center; font-size: 10pt; width: 34%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>1-10777</B></FONT></TD>
    <TD STYLE="vertical-align: top; text-align: center; font-size: 10pt; width: 33%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>13-3621676</B></FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center; font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(State of incorporation)</B></FONT></TD>
    <TD STYLE="vertical-align: top; text-align: center; font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(Commission
    <BR>
file number)</B></FONT></TD>
    <TD STYLE="vertical-align: top; text-align: center; font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>(I.R.S.
    employer <BR>
identification no.)</B></FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>One State Street Plaza, New York, New
York 10004 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>(Address of principal executive offices)
(Zip Code) </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>(212) 668-0340 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>(Registrant&rsquo;s telephone number,
including area code) </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; font-size: 10pt"><FONT STYLE="font: 10pt Wingdings">&uml;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; font-size: 10pt"><FONT STYLE="font: 10pt Wingdings">&uml;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; font-size: 10pt"><FONT STYLE="font: 10pt Wingdings">&uml;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; font-size: 10pt"><FONT STYLE="font: 10pt Wingdings">&uml;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c)) </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 1.01 Entry into a Material Definitive Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 29, 2013, Ambac Financial Group, Inc. (the &ldquo;Company&rdquo;),
its principal operating subsidiary, Ambac Assurance Corporation (&ldquo;AAC&rdquo;), and certain affiliates entered into an amendment
(the &ldquo;Amendment&rdquo;) to the Tax Sharing Agreement, dated March 14, 2012, to reflect the allocation and use of certain
net operating loss carry-forwards by the Company, AAC and their respective subsidiaries. A copy of the Amendment has been filed
as Exhibit 10.1 and is incorporated by reference herein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 30, 2013, the Company entered into a Closing Agreement
with the Commissioner of Internal Revenue (the &ldquo;Closing Agreement&rdquo;) to settle certain open issues with the United
States Internal Revenue Service (&ldquo;IRS&rdquo;), which was a condition to the Company&rsquo;s emergence from bankruptcy. The
U.S. Bankruptcy Court for the Southern District of New York approved the settlement with the IRS on April 29, 2013. The settlement
calls for the consolidated tax group of which the Company is the parent to pay the IRS $101.9 million in satisfaction of certain
prior years&rsquo; federal income tax claims and settles the amount of net operating loss carry-forwards which are available to
the consolidated tax group. A copy of the Closing Agreement has been filed as Exhibit 10.2 and is incorporated by reference herein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 1.02 Termination of a Material Definitive Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Indentures corresponding to the cancelled debt securities
described in Item 3.03 below were terminated in accordance with the terms of the Plan (as defined in Item 3.02 below).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 3.02 Unregistered Sales of Equity Securities </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 1, 2013, the effective date (the &ldquo;Effective
Date&rdquo;) of the Second Modified Fifth Amended Plan of Reorganization of Ambac Financial Group, Inc. (the
&ldquo;Plan&rdquo;), the Company issued 45,000,000 new shares of common stock, par value $0.01 per share (&ldquo;New Common
Stock&rdquo;), to holders of allowed general unsecured claims, senior debt securities claims and subordinated debt securities
claims. The Company also issued warrants (the &ldquo;Warrants&rdquo;) to purchase 5,047,138 shares of New Common Stock to
holders of allowed general unsecured claims and subordinated debt securities claims. The Company relied on Section 1145(a)(1)
of the U.S. Bankruptcy Code to exempt from the registration requirements of the Securities Act of 1933, as amended the
issuance of the New Common Stock and Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Warrants are exercisable for cash at any time on or prior
to April 30, 2023 at an exercise price of $16.67. The Warrants also have a cashless exercise provision commencing May 8, 2013.
The exercise price and the number or nature of the shares of New Common Stock acquirable upon exercise of a Warrant is subject
to adjustment as provided in the terms of the Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 3.03 Material Modification to Rights of Security Holders
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt">(a)&#9;Pursuant to the Plan, on the Effective Date:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">all shares of the Company&rsquo;s common stock, par value $0.01, issued
and outstanding immediately prior to the Effective Date (&ldquo;Pre-Emergence Shares&rdquo;) were cancelled without consideration,
and holders of such common stock did not and will not receive any distributions under the Plan;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the Company&rsquo;s certificate of incorporation in effect immediately
prior to the Effective Date was amended and restated in its entirety, as described in the Company&rsquo;s Form 8-A filed on May
1, 2013 and such description is incorporated by reference herein (&ldquo;Certificate of Incorporation&rdquo;);</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the Company&rsquo;s by-laws in effect immediately prior to the Effective
Date were amended and restated in their entirety, as described in the Company&rsquo;s Form 8-A filed on May 1, 2013 and such description
is incorporated by reference herein (&ldquo;By-laws&rdquo;);</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the shares of New Common Stock were distributed as described in Item
3.02 above;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the Warrants were distributed as described in Item 3.02 above; and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD><TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">the following debt securities of the Company were extinguished and are
of no further force or effect, except to continue in effect solely for the purposes of allowing the holders thereof to receive
distributions provided under the Plan and related matters: (i) 5.875% debentures due on March 24, 2103; (ii) 5.95% debentures due
on December 5, 2035;</FONT> <FONT STYLE="font: 10pt Times New Roman, Times, Serif">(iii)</FONT> <FONT STYLE="font: 10pt Times New Roman, Times, Serif">5.95%
debentures due on February 28, 2103; (iv) 7-1/2% debentures due on May 1, 2023; (v) 9-3/8% debentures due on August 1, 2011; (vi)
9.50% senior notes due on February 15, 2021; and (vii) the 6.15% Directly-Issued Subordinated Capital Securities due February 15,
2087. The Indentures related to the foregoing debt securities were correspondingly extinguished.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">In order
to preserve certain of the Company&rsquo;s tax benefits</FONT> <FONT STYLE="font: 10pt Times New Roman, Times, Serif">that are
available to the Company post-emergence from bankruptcy, Article XII of the Certificate of Incorporation provides that any attempted
transfer of the Company&rsquo;s securities prior to the date on which the restriction in such Article is removed shall be prohibited
and void <I>ab initio</I> to the extent that, as a result of such transfer (or any series of transfers of which such transfer is
a part), either (i) any person or group of persons shall become a five-percent shareholder or (ii) the percentage stock ownership
interest in the Company of any five-percent shareholder is increased (a &ldquo;Prohibited Transfer&rdquo;). </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Until the securities that are the subject of the Prohibited
Transfer (the &ldquo;Excess Securities&rdquo;) are acquired by another person in a transfer that is not a Prohibited Transfer,
the purported transferee of a Prohibited Transfer shall not be entitled with respect to such Excess Securities to any rights of
stockholders of the Company, including, without limitation, the right to vote such Excess Securities and to receive dividends
or distributions, whether liquidating or otherwise, in respect thereof, if any. Once the Excess Securities have been acquired
in a transfer that is not a Prohibited Transfer, the securities shall cease to be Excess Securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If the Board determines that a transfer of securities constitutes
a Prohibited Transfer then, upon written demand by the Company, the purported transferee shall transfer or cause to be transferred
any certificate or other evidence of ownership of the Excess Securities within the purported transferee&rsquo;s possession or control,
together with any distributions paid by the Company with respect to such Excess Securities, to an agent designated by the Company.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Board of Directors of the Company may grant exceptions to
the restrictions of Article XII of the Certificate of Incorporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 5.01 Changes in Control of the Registrant </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the Plan, all of the Company&rsquo;s
Pre-Emergence Shares were cancelled on the Effective Date. Holders of such Pre-Emergence Shares did not and will not receive
any distributions under the Plan. In accordance with the terms of the Plan, holders of allowed general unsecured claims,
senior debt securities claims and subordinated debt securities received an aggregate of 45,000,000 shares of New Common
Stock, constituting all of the current outstanding equity of the Company other than approximately 5,047,138 additional shares
reserved for issuance upon exercise of the Warrants, and holders of allowed general unsecured claims and subordinated debt
securities claims received Warrants to purchase 5,047,138 shares of New Common Stock. As a result of the Company&rsquo;s
emergence from Chapter 11 and in accordance with the Plan, the identity of a majority of the directors on the Company&rsquo;s
Board has changed as described in Item 5.02 below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 5.02. Departure of Directors or Principal Officers;
Election of Directors; Appointment of Principal Officers. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(b) Effective May 1, 2013, the terms of the pre-Effective Date
members of the Company&rsquo;s Board of Directors expired as provided in the Plan (i.e., Mses. Jill M. Considine and Laura S. Unger
and Messrs. Michael Callen, Paul R. DeRosa, Philip N. Duff, Thomas C. Theobald, Henry D. G. Wallace, and David W. Wallis), except
for the term of Diana Adams, the President and Chief Executive Officer of the Company, which will continue from and after the Effective
Date.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(d) (1) Effective May 1, 2013, in connection with the Company&rsquo;s
emergence from Chapter 11, the following individuals began serving on the Company&rsquo;s Board of Directors as provided in the
Plan: Victor Mandel, Jeffrey S. Stein and Nader Tavakoli. In addition, Diana Adams, the Company&rsquo;s President and Chief Executive
Officer, will continue to serve on the Board. There is currently one vacancy on the Board. Pursuant to the terms of the Plan, the<FONT STYLE="font-size: 10pt; color: black">
</FONT><FONT STYLE="color: black">statutory committee of creditors appointed by the United States Trustee on November&nbsp;17,
2010 (the &ldquo;</FONT>Creditors&rsquo; Committee&rdquo;) has retained the right to nominate one additional director to the Company&rsquo;s
Board of Directors within 60 days of the Effective Date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(d)(2) Section 3.02 of the By-laws of the Company, which became
effective on May 1, 2013, provides that the initial Board of Directors consist of the Company&rsquo;s Chief Executive Officer and
four interim directors. The Plan provided for three of the interim directors to be appointed by the Creditors&rsquo; Committee
and one director to be appointed by a group of unaffiliated holders of certain senior debt securities of the Company (the &ldquo;Informal
Group&rdquo;). Messrs. Mandel and Tavakoli were appointed by the Creditors&rsquo; Committee and Mr. Stein was appointed by the
Informal Group. As stated above, the Creditors&rsquo; Committee has retained the right to nominate one additional director to the
Company&rsquo;s Board of Directors within 60 days of the Effective Date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(d)(3)The following directors are members of the Audit Committee,
Risk Management Committee, Compensation Committee and Nominating and Governance Committee of the Board of Directors of the Company:
Victor Mandel, Jeffrey S. Stein and Nader Tavakoli.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 5.03. Amendments to Articles of Incorporation or Bylaws;
Change in Fiscal Year. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(a) In connection with its emergence from Chapter 11, the Company
adopted an Amended and Restated Certificate of Incorporation and new By-laws that became effective on May 1, 2013. The material
terms of such documents are described in the Company&rsquo;s Form 8-A filed on May 1, 2013, and such description is incorporated
herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 8.01 Other Events.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Plan provided that the Company will use its commercially
reasonable best efforts to list the New Common Stock on a national securities exchange. On the Effective Date, the shares of New
Common Stock and the Warrants were registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, and began
trading on NASDAQ under the symbols AMBC and AMBCW, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 9.01 Financial Statements and Exhibits.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B><I>(d)
Exhibits</I></B></FONT></P>



<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 5%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.1</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 94%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amended and Restated Certificate of Incorporation of Ambac Financial Group, Inc., (incorporated by reference to Exhibit 3.1 to Form 8-A, filed on May 1, 2013)</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">By-laws of Ambac Financial Group, Inc., (incorporated by reference to Exhibit 3.2 to Form 8-A, filed on May 1, 2013)</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Warrant Agreement between Ambac Financial Group, Inc. and Computershare Inc. (incorporated by reference to Exhibit 4.2 to Form 8-A, filed on May 1, 2013)</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amendment No. 1 dated April 29 2013, to the Amended and Restated Tax Sharing Agreement among Ambac Financial Group, Inc. and certain of its affiliates</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>10.2</TD>
    <TD>&nbsp;</TD>
    <TD><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Closing Agreement between Ambac Financial, Group, Inc. and Commissioner
of Internal Revenue dated April 30, 2013</P>



</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">99.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Press Release dated April 29, 2013</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">99.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Press Release dated May 1, 2013</FONT></TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;&nbsp;</P>

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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Ambac Financial Group, Inc.</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(Registrant)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Dated: May 3, 2013</FONT></TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48%">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">By: </FONT></TD>
    <TD STYLE="width: 50%; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">/s/ Stephen M. Ksenak</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Stephen M. Ksenak, General Counsel</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXHIBIT INDEX </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exhibit No. </FONT></TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 85%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Description</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amended and Restated Certificate of Incorporation of Ambac Financial Group, Inc., (incorporated by reference to Exhibit 3.1 to Form 8-A, filed on May 1, 2013)</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">By-laws of Ambac Financial Group, Inc., (incorporated by reference to Exhibit 3.2 to Form 8-A, filed on May 1, 2013)</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Warrant Agreement between Ambac Financial Group, Inc. and Computershare Inc. (incorporated by reference to Exhibit 4.2 to Form 8-A, filed on May 1, 2013)</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amendment No. 1 dated April 29 2013, to the Amended and Restated Tax Sharing Agreement among Ambac Financial Group, Inc. and certain of its affiliates</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>Closing Agreement between Ambac Financial, Group, Inc. and Commissioner
of Internal Revenue dated April 30, 2013</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">99.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Press Release dated April 29, 2013</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">99.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Press Release dated May 1, 2013</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v343563_ex10-1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
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<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><U>amendment
no. 1 to tax sharing agreement</U></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">This Amendment No. 1 to Tax Sharing Agreement
(the &ldquo;Amendment&rdquo;) is executed on April 29, 2013, by and among Ambac Financial Group, Inc. (formerly known as AMBAC
Inc., and hereinafter referred to as &ldquo;AFGI&rdquo; or &ldquo;Parent&rdquo;) and each of the other corporations that is a signatory
to this Amendment below (each a &ldquo;Subsidiary&rdquo; and collectively the &ldquo;Subsidiaries&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">WHEREAS, AFGI and the Subsidiaries are parties
to that certain Tax Sharing Agreement (the &ldquo;Tax Sharing Agreement&rdquo;) executed on March 14, 2012;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">WHEREAS, AFGI, Ambac Assurance Corporation
(formerly known as AMBAC Indemnity Corporation) (&ldquo;AAC&rdquo;) and the other Subsidiaries are entitled to additional federal
income tax benefits arising from a change in the position of the IRS regarding the treatment of charge-offs under SSAP 43R (within
the meaning of the National Association of Insurance Commissioners&rsquo; Statements of Statutory Accounting Principles); and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">WHEREAS, AFGI and the Subsidiaries desire
to equitably distribute the additional tax benefits arising from such treatment of charge-offs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the parties agree as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">1.&#9;All capitalized terms used but not defined in this Amendment
shall have the meanings set forth in the Tax Sharing Agreement. All amendments described below in this Amendment shall be treated
as being effective on the Effective Date, and shall have effect for all Taxable Periods beginning on or after January 1, 2011,
subject to subparagraphs 1(a) and 1(b) of the Tax Sharing Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">2.&#9;Paragraph 1 of the Tax Sharing Agreement is hereby amended
and restated to include the following new definitions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>AAC Section 166 Directive AMT NOL Amount</U>&rdquo;
shall mean fifty percent (50%) of the Section 166 Directive AMT NOL Amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>AAC Section 166 Directive NOL Amount</U>&rdquo; shall
mean fifty percent (50%) of the Section 166 Directive NOL Amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>Section 166 Directive</U>&rdquo; shall mean the directive
(Control No. LB&amp;I-04-0712-009), dated July 30, 2012, issued by the Large Business &amp; International Division of the IRS,
relating to partial worthlessness deductions for eligible securities reported by insurance companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>Section 166 Directive AMT NOL Amount</U>&rdquo; shall
mean the excess (if any) of (i) the Specified AMT NOL Amount taking into account the Group&rsquo;s implementation of the Section
166 Directive in accordance with the terms of the Section 166 Directive and in accordance with subparagraph 6(c) <I>over</I> (ii)
the Specified AMT NOL Amount without taking into account the Group&rsquo;s implementation of the Section 166 Directive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>Section 166 Directive Election Year</U>&rdquo; shall
mean the taxable year for which the Group first implements the Section 166 Directive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>Section 166 Directive NOL Amount</U>&rdquo; shall
mean the excess (if any) of (i) the Specified NOL Amount taking into account the Group&rsquo;s implementation of the Section 166
Directive in accordance with the terms of the Section 166 Directive and in accordance with subparagraph 6(c) <I>over</I> (ii) the
Specified NOL Amount without taking into account the Group&rsquo;s implementation of the Section 166 Directive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>Specified AMT NOL Amount</U>&rdquo; shall mean the
aggregate amount of AMT NOLs of the Group that are carried forward into the Taxable Period beginning on January 1, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&ldquo;<U>Specified NOL Amount</U>&rdquo; shall mean the aggregate
amount of NOLs of the Group that are carried forward into the Taxable Period beginning on January 1, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">3. The following definitions from paragraph 1 of the Tax
Sharing Agreement are hereby amended and restated to read as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in 0pt 0">&quot;<U>Post-Determination Date AMT NOLs</U>&quot;
shall mean, subject to subparagraph 6(f), any AMT NOLs (other than any Section 166 Directive AMT NOL Amount) directly accruing
and attributable to the AAC Subgroup (determined on a Separate Subsidiary Basis) after the Determination Date, plus the AAC Section
166 Directive AMT NOL Amount. The Section 166 Directive AMT NOL Amount shall not be treated, in whole or in part, as an amount
of Pre-Determination Date AMT NOLs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.5in 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&quot;<U>Post-Determination Date NOLs</U>&quot; shall mean,
subject to subparagraph 6(f), any NOLs (other than any Section 166 Directive NOL Amount) directly accruing and attributable to
the AAC Subgroup (determined on a Separate Subsidiary Basis) after the Determination Date, plus the AAC Section 166 Directive NOL
Amount. The Section 166 Directive NOL Amount shall not be treated, in whole or in part, as an amount of Pre-Determination Date
NOLs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&quot;<U>Pre-Determination Date AMT NOLs</U>&quot; shall mean,
subject to subparagraph 6(f), any AMT NOLs generated by the Group on or prior to, and existing as of, the Determination Date, not
taking into account the consequences of any settlement with respect to the IRS Dispute and not including, in whole or in part,
the Section 166 Directive AMT NOL Amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&quot;<U>Pre-Determination Date NOLs</U>&quot; shall mean, subject
to subparagraph 6(f), any NOLs generated by the Group on or prior to, and existing as of, the Determination Date, not taking into
account the consequences of any settlement with respect to the IRS Dispute and not including, in whole or in part, the Section
166 Directive NOL Amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">4.&#9;Subparagraph 6(c) of the Tax Sharing Agreement shall be
amended and restated to read as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(c)</TD><TD><U>Payment of Tax</U>. For every Taxable Period, Parent will pay or discharge, or cause to be paid or discharged, the consolidated
Federal Tax liability or AMT liability, including payments of estimated tax, of the Group. Parent shall implement the Section 166
Directive by causing the Group to (i) file, in accordance with the terms of the Section 166 Directive, a properly completed original
(or amended, as the case may be) consolidated federal tax return for the Taxable Period beginning on January 1 of the Section 166
Directive Election Year, which return shall claim deductions pursuant to the Section 166 Directive in the maximum amount permitted
to be claimed for such Taxable Period under the terms of the Section 166 Directive, and (ii) to file, in accordance with the terms
of the Section 166 Directive, a properly completed original (or amended, as the case may be) consolidated federal tax return for
each subsequent Taxable Period, which return shall claim deductions pursuant to the Section 166 Directive in the maximum amount
permitted to be claimed for such Taxable Period under the terms of the Section 166 Directive.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">5. &#9;New subparagraph 6(g) of the Tax Sharing Agreement will
be added as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(g)</TD><TD><U>Section 166 Directive Election Year</U>. Parent will select the Section 166 Directive Election Year (other than 2009) that
results in the largest Section 166 Directive NOL Amount.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">IN WITNESS WHEREOF, the parties have caused
this Amendment No. 1 to be executed as of the date first above written.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC FINANCIAL GROUP, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 1%">By:</TD>
    <TD STYLE="width: 49%; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC ASSURANCE CORPORATION</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC CAPITAL CORPORATION</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC INVESTMENTS, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.5in; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.5in; text-indent: 0in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC CAPITAL FUNDING, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 1%">By:</TD>
    <TD STYLE="width: 49%; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC ASSET FUNDING CORPORATION</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC AII CORPORATION</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">EVERSPAN FINANCIAL GUARANTEE CORP.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">CONNIE LEE HOLDINGS, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">AMBAC (BERMUDA) LTD.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Name:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.5in; text-indent: 0in"></P>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>v343563_ex10-2.htm
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 20%"><FONT STYLE="font-size: 10pt">Form <B>906</B></FONT></TD>
    <TD STYLE="width: 60%">&nbsp;</TD>
    <TD STYLE="width: 20%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-size: 10pt">(Rev. August 1994)</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Department of the Treasury &mdash; Internal Revenue Service</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Closing Agreement on Final Determination</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Covering Specific Matters</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>_________________</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: 0.2pt"><FONT STYLE="font-size: 10pt">Under section</FONT>
<FONT STYLE="font-size: 10pt">7121 of the Internal Revenue Code: ___________________________________________________</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 93%; border-collapse: collapse; margin-left: 0.5in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 10pt; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">Ambac Financial Group, Inc., EIN: 13-3621676, One State Street Plaza, New York, NY 10004, (the &ldquo;Taxpayer&rdquo;), on behalf of itself and as agent for the members of the Ambac Financial Group, Inc. and Subsidiaries consolidated group,</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;(Taxpayer&rsquo;s name, address, and identifying number)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<!-- Field: Rule-Page --><DIV STYLE="text-align: left; margin: 1pt 0in 1pt 0.5in"><DIV STYLE="font-size: 1pt; border-top: black 0.5pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">and the Commissioner of Internal Revenue (&ldquo;Commissioner&rdquo;)
make the following agreement (the &ldquo;Closing Agreement&rdquo;):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: 0.2pt">WHEREAS, Ambac Financial Group,
Inc. (&ldquo;AFGI&rdquo;) is entering into this Closing Agreement on behalf of itself and as agent of all the members of the Ambac
Financial Group, Inc. and Subsidiaries consolidated group with which it filed consolidated federal income tax returns, as their
common parent, for the taxable years ended December 31, 2003, December 31, 2004, December 31, 2005, December 31, 2006, December
31, 2007, December 31, 2008, and December 31, 2009 (collectively, the &ldquo;2003 through 2009 Tax Years&rdquo;), and the taxable
year ended December 31, 2010 (the &ldquo;2010 Tax Year,&rdquo; and together with the 2003 through 2009 Tax Years, the &ldquo;Applicable
Tax Years&rdquo;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: 0.2pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, Ambac Assurance Corporation
(&ldquo;AAC&rdquo;) is a subsidiary of AFGI, and AAC, through its wholly owned limited liability company, Ambac Credit Products
LLC (&ldquo;ACP&rdquo;), entered into certain credit default swaps (the &ldquo;CDS Contracts&rdquo;)<SUP>1</SUP> with third parties;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, the Taxpayer claimed
operating losses attributable to the CDS Contracts for certain of the Applicable Tax Years (&ldquo;Disputed CDS Losses&rdquo;)
as set forth in Table 1 below, and claimed net operating loss carry-forwards attributable to the CDS Contracts (after taking into
account premiums received on the CDS Contracts) in certain of the Applicable Tax Years (&ldquo;Disputed Carry-Forward NOLs&rdquo;)
as set forth in Table 2 below, and the Commissioner disputes the Disputed CDS Losses and Disputed Carry-Forward NOLs claimed by
the Taxpayer;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt">Table 1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 92%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Tax&nbsp;Year</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid">Disputed&nbsp;CDS&nbsp;Losses&nbsp;($)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 88%; text-align: left; text-indent: 0in; vertical-align: top">2007</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">756,713,558</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">2008</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,413,450,726</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,881,788,012</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top; padding-bottom: 1pt">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">417,637,425</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-indent: 0in; padding-bottom: 1pt">Total</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">7,469,589,721</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><SUP>1</SUP><FONT STYLE="font-family: Times New Roman, Times, Serif">
The terms &ldquo;CDS Contracts,&rdquo; &ldquo;Bank Settlement Notes&rdquo; and &ldquo;June 9, 2010 Event&rdquo; are defined in
the Settlement Letter dated February 24, 2012 (the &ldquo;Settlement Letter&rdquo;). <I>See</I> Attachment 1. &nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt">Table 2</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 92%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Tax&nbsp;Year</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid">Disputed&nbsp;Carry-Forward&nbsp;NOLs&nbsp;($)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 82%; text-align: left; text-indent: 0in; vertical-align: top">2007</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">2008</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,286,490,389</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">2009</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,844,867,442</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top; padding-bottom: 1pt">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">328,629,729</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-indent: 0in; padding-bottom: 1pt">Total</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right; border-bottom: Black 1pt solid">4,459,987,560</TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">WHEREAS, the Taxpayer reported the
following amounts attributable to the CDS Contracts for the 2010 Tax Year: Ordinary Premium Income of $89,007,679; Ordinary Loss
of $417,637,425; and Capital Gain of $379,900,391 (which the Taxpayer offset with capital loss unrelated to the CDS Contracts);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">WHEREAS, during 2008, 2009, and
2010, AAC commuted all of the CDS Contracts from which the Disputed CDS Losses and the Disputed Carry-Forward NOLs arose, in return
for an aggregate payment by AAC of approximately $7,000,000,000.00, including approximately $5,700,000,000.00 in cash and approximately
$1,300,000,000.00 in Bank Settlement Notes, issued by AAC in 2010, with a par value of $2,000,000,000.00;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, as a result of the
Disputed CDS Losses the Taxpayer filed applications for tentative refunds and received tentative refunds as set forth in Table
3 below, the allowance of which is disputed by the Commissioner (the &ldquo;Disputed Refunds&rdquo;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt">Table 3</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 92%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Tax&nbsp;Year</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid">Disputed&nbsp;Refunds&nbsp;($)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 88%; text-align: left; text-indent: 0in; vertical-align: top">2007</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">38,142,748</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">2006</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">236,529,966</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">2005</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">210,799,742</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; vertical-align: top">2004</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">144,929,795</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 0in; vertical-align: top">2003</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">77,713,584</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; padding-bottom: 1pt; text-indent: 0in">TOTAL</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">708,115,835</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-align: center; text-indent: -0.7pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">WHEREAS, on November 8, 2010, the
Taxpayer commenced a voluntary case under Chapter 11 of Title 11 of the U.S. Code in the United States Bankruptcy Court for the
Southern District of New York, <I>In re Ambac Financial Group, Inc.</I> Chap. 11 Case No. 10-15973 (the &ldquo;Bankruptcy Case&rdquo;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, on November 9, 2010,
the Taxpayer commenced an adversary proceeding against the United States in the United States Bankruptcy Court for the Southern
District of New York, <I>Ambac Financial Group, Inc. v. United States</I>, Adv. Proc. Case No. 10-4210 (the &ldquo;Adversary Proceeding&rdquo;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">WHEREAS, on May 4, 2011, the Commissioner
proposed adjustments disallowing certain of the Disputed CDS Losses claimed by the Taxpayer (&ldquo;Disputed Proposed Adjustments&rdquo;)
and on May 5, 2011 filed a Proof of Claim in the Bankruptcy Case for tax due in the amount of $760,749,586.00 and interest to petition
date due in the amount of $46,492,441.91, for a total of $807,242,027.91 (the &ldquo;Proof of Claim&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, the Settlement Letter
was presented by the Taxpayer and others to the United States on February 24, 2012, and supplemented by letter dated April 3, 2013
(the &ldquo;Supplemental Letter&rdquo;, <I>see</I> Attachment 2) (together the two letters constitute the &ldquo;Offer&rdquo;),
and the Offer was accepted by the United States on April 4, 2013 (<I>see</I> Attachment 3);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, the Commissioner does
not challenge that the Bank Settlement Notes issued by AAC in 2010 to commute certain CDS Contracts were characterized as debt
for federal income tax purposes, and that the issuance of the Bank Settlement Notes did not cause AAC to fail to be a member of
the &ldquo;affiliated group&rdquo; (as defined in section 1504(a) of the Internal Revenue Code (the &ldquo;Code&rdquo;)) of which
Taxpayer was the common parent, and did not result in an &ldquo;ownership change&rdquo; with respect to AAC for purposes of section
382 of the Code;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, the Commissioner has
determined that the June 9, 2010 Event did not cause AAC to fail to be a member of the &ldquo;affiliated group&rdquo; (as defined
in section 1504(a) of the Code) of which Taxpayer was the common parent, and did not result in an &ldquo;ownership change&rdquo;
with respect to AAC for purposes of section 382 of the Code;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">WHEREAS, this Closing Agreement
resolves with finality all federal income tax liability of the Taxpayer for the 2003 through 2009 Tax Years, including the Disputed
Proposed Adjustments and the Disputed Refunds; and it resolves with finality the federal income tax liability of the Taxpayer for
the 2010 Tax Year solely with respect to items of income, gain, deduction or loss related to the CDS Contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt"><B>IT IS NOW HEREBY DETERMINED
AND AGREED FOR FEDERAL INCOME TAX PURPOSES THAT:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(1)</FONT></TD><TD>The Taxpayer is entitled to claim the portion of the Disputed Carry-Forward NOLs for the Applicable Tax Years up to three billion,
four hundred million dollars ($3,400,000,000). The $3,400,000,000 of Disputed Carry-Forward NOLs shall be available as ordinary
loss carry-forwards.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(2)</FONT></TD><TD>The Taxpayer is not entitled to claim any portion of the Disputed Carry-Forward NOLs for the Applicable Tax Years to the extent
it exceeds three billion, four hundred million dollars ($3,400,000,000); and the Taxpayer relinquishes all claim to the Disputed
Carry-Forward NOLs in excess of three billion, four hundred million dollars ($3,400,000,000), whether characterized as capital
or ordinary, which might otherwise be available or claimed by the Taxpayer (or any member of its affiliated group) to offset future
taxable income of the Taxpayer (or any member of its affiliated group). Disputed Carry-Forward NOLs relinquished by Taxpayer shall
be treated as having arisen in the 2008 tax year.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(3)</FONT></TD><TD>The Taxpayer is liable for: (i) payment of one hundred one million, nine hundred thousand dollars ($101,900,000), which liability
shall be paid in accordance with the terms in paragraph 4 below in full and final satisfaction of the Taxpayer&rsquo;s federal
income tax liability for the 2003 through 2009 Tax Years, and the Taxpayer&rsquo;s federal income tax liability for the 2010 Tax
Year but only with regard to items of income, gain, deduction or loss related to the CDS Contracts; and, (ii) certain toll payments
defined in the Settlement Letter.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(4)</FONT></TD><TD>Prior to the execution of this Closing Agreement, Taxpayer has satisfied all other conditions set forth in paragraphs 1 and
2 of the Settlement Letter, as amended by the Supplemental Letter, and AFGI has made a payment to the United States Department
of the Treasury of one million nine hundred thousand dollars ($1,900,000) and AAC and/or the Segregated Account (as defined in
the Settlement Letter) has made a payment to the United States Department of the Treasury of one hundred million dollars ($100,000,000).</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(5)</TD><TD><FONT STYLE="font-size: 10pt">No portion of the payments described in paragraph 4 above and no portion of the toll payments
defined in the Settlement Letter will be attributable to additions to tax or other penalties under chapter 68 of the Code.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

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<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(6)</TD><TD><FONT STYLE="font-size: 10pt">This Closing Agreement finally and conclusively resolves the federal income tax liability (and
any liabilities in respect of interest under section 6601 of the Code and additions to tax and penalties that may be imposed under
the Code) of the Taxpayer for the 2003 through 2009 Tax Years. </FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(7)</FONT></TD><TD>This Closing Agreement also finally and conclusively resolves the federal income tax liability (and any liabilities in respect
of interest under section 6601 of the Code and additions to tax and penalties that may be imposed under the Code) of the Taxpayer
for the 2010 Tax Year but only with regard to items of income, gain, deduction or loss related to the CDS Contracts, including
the Disputed CDS Losses and Disputed Carry-Forward NOLs.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(8)</FONT></TD><TD>Neither the issuance of the Bank Settlement Notes nor the June 9, 2010 Event caused AAC to fail to be a member of the &ldquo;affiliated
group&rdquo; (as defined in section 1504(a) of the Code) of which Taxpayer was the common parent or resulted in an &ldquo;ownership
change&rdquo; with respect to AAC for purposes of section 382 of the Code.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(9)</FONT></TD><TD>No inference shall be made from the execution of this Closing Agreement by the Commissioner regarding the appropriate treatment
of credit default swaps for federal income tax purposes, and nothing contained in this Closing Agreement shall be considered an
acceptance by the United States of Taxpayer&rsquo;s tax accounting methodology with respect to the CDS Contracts nor an admission
by the Taxpayer that there were faults in its tax accounting methodology with respect to the CDS Contracts.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(10)</FONT></TD><TD>Nothing in this Closing Agreement shall be construed as a limitation on the Commissioner&rsquo;s ability to adjust the tax
liabilities of Taxpayer except as expressly provided for in this Closing Agreement.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(11)</FONT></TD><TD>The Taxpayer will include a copy of this Closing Agreement and all attachments with all of its federal income tax returns filed
for a period of 20 years from the date of execution.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">(12)</FONT></TD><TD>This agreement is final and conclusive except:</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">a.</FONT></TD><TD>The matter it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of material fact;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">b.</FONT></TD><TD>It is subject to the I.R.C. provisions (including any stated exception for I.R.C. &sect;7122) notwithstanding any other law
or rule of law; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">c.</FONT></TD><TD>If it relates to a tax period ending after the date of this agreement, it is subject to any law enacted after the agreement
date that applies to the tax period.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.7pt">By signing, the above parties
certify that they have read and agreed to the terms of this document.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.7pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.7pt">TAXPAYER:</TD><TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AMBAC FINANCIAL GROUP, INC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: 0in">ON BEHALF OF ITSELF AND THE AMBAC
FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED GROUP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 92%; border-collapse: collapse; margin-left: 0.5in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 3%; text-indent: 0in">By:</TD>
    <TD STYLE="width: 30%; text-indent: 0in; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 3%; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 15%; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 20%; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 19%; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">Title:</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">Date Signed:</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="text-indent: 0in">Commissioner of Internal Revenue</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">By:</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">Title:</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">Date Signed:</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">&nbsp;</TD></TR>
</TABLE>
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<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ATTACHMENT 1</B></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36.7pt; text-indent: -0.7pt"></P>
<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 69%; font-size: 18pt; text-align: left; vertical-align: middle"><IMG SRC="tlogo1.jpg" ALT="Description: LOGO" STYLE="height: 26px; width: 247px"></TD>
    <TD STYLE="width: 31%; padding-right: 0; padding-left: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dewey &amp; LeBoeuf LLP</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">1301 Avenue of the Americas</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">New York, NY 10019-6092</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">T&#9;+1 212 259 8330</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">F&#9; +1 212 259 6333</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">lhill@dl.com</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SUBMITTED PURSUANT TO FRE 408 AND</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">WISCONSIN STATUTE SECTION 904.08</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">FOR SETTLEMENT PURPOSES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 4in">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Preet Bharara, Esq.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">United States Attorney</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Southern District of New York</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">U.S. Department of Justice</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">86 Chambers Street</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">New York, NY 10007</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">John A. DiCicco, Esq.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Principal Deputy Assistant Attorney General</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Tax Division</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">United States Department of Justice</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Washington, D.C. 20530</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in; text-align: left">Re:</TD><TD STYLE="text-align: justify"><I>Ambac Financial Group, Inc. v. United States</I>,
Adv. Proc. No. 10-4210</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0">(Bankr. S.D.N.Y.,
filed Nov. 9, 2010);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0">&#9;<I>In the Matter
of the Rehabilitation of Segregated Account of Ambac Assurance </I><BR>
<I>&#9;Corp.</I>, No. 2010CV1576 (Wis. Cir. Ct. for Dane Cnty. Jan. 24, 2011), <I>petition for &#9;&#9;review granted</I>, No.
2011AP987 (Wis. Aug. 31, 2011);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0">&#9;<I>In the Matter
of the Rehabilitation of Segregated Account of Ambac Assurance </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0"><I>&#9;Corporation</I>,
782 F. Supp. 2d 743 (W.D. Wis. 2011), <I>appeal docketed</I>,<BR>
&#9;No. 11-1158 (7th Cir. Jan. 19, 2011); and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 0"><I>United States v. Wisconsin
State Circuit Court for Dane County, et al.</I>,<BR>
&#9;767 F. Supp. 2d 980 (W.D. Wis. 2011), <I>appeal docketed</I>, No. 11-1419<BR>
&#9;(7th Cir. Feb. 22, 2011).&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-weight: normal">Dewey
&amp; LeBoeuf LLP is a New York limited liability partnership.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-variant: small-caps">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt; font-variant: small-caps">New
York&nbsp;&nbsp; | &nbsp;&nbsp;London &nbsp;&nbsp;| &nbsp;&nbsp;Washington, DC &nbsp;&nbsp;| &nbsp;&nbsp;Abu Dhabi &nbsp;&nbsp;|
&nbsp;&nbsp;Albany &nbsp;&nbsp;| &nbsp;&nbsp;Almaty &nbsp;&nbsp;| &nbsp;&nbsp;Beijing &nbsp;&nbsp;| &nbsp;&nbsp;Boston &nbsp;&nbsp;|
&nbsp;&nbsp;Brussels </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt; font-variant: small-caps">Chicago&nbsp;&nbsp;
| &nbsp;&nbsp;Doha&nbsp;&nbsp; | &nbsp;&nbsp;Dubai&nbsp;&nbsp; | &nbsp;&nbsp;Frankfurt&nbsp;&nbsp; | &nbsp;&nbsp;Hong Kong&nbsp;&nbsp;
| &nbsp;&nbsp;Houston&nbsp;&nbsp; | &nbsp;&nbsp;Johannesburg (pty ) ltd.&nbsp;&nbsp; | &nbsp;&nbsp;Los Angeles</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt; font-variant: small-caps">Madrid&nbsp;&nbsp;
| &nbsp;&nbsp;Milan&nbsp;&nbsp; | &nbsp;&nbsp;Moscow&nbsp;&nbsp; | &nbsp;&nbsp;Paris&nbsp;&nbsp; | &nbsp;&nbsp;Riyadh affiliated
office &nbsp;&nbsp;| &nbsp;&nbsp;Rome&nbsp;&nbsp; | &nbsp;&nbsp;San Francisco&nbsp;&nbsp; | &nbsp;&nbsp;Silicon Valley&nbsp;&nbsp;
| &nbsp;&nbsp;Warsaw</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 2</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dear Messrs Bharara and DiCicco:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This letter constitutes
an offer to settle the above-referenced proceedings on the terms described below. The settlement would be between the United States,
on the one hand, and Ambac Financial Group, Inc. (&ldquo;Debtor&rdquo; or &ldquo;AFGI&rdquo;), Ambac Assurance Corporation (&ldquo;AAC&rdquo;),
the Official Committee of Unsecured Creditors of AFGI (&ldquo;Official Creditors Committee&rdquo;), the Segregated Account of Ambac
Assurance Corporation (the &ldquo;Segregated Account&rdquo;)<SUP>1</SUP>, the court-appointed Rehabilitator of the Segregated Account
(the &ldquo;Rehabilitator&rdquo;) and the Wisconsin Office of the Commissioner of Insurance (&ldquo;OCI&rdquo;), on the other hand
(collectively, the United States, AFGI, AAC, Official Creditors Committee, Segregated Account, Rehabilitator and OCI are referred
herein as the &ldquo;Parties&rdquo;).<SUP>2</SUP></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><SUP>1</SUP>&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March 24, 2010, the Wisconsin Office of the
Commissioner of Insurance (&ldquo;OCI&rdquo;) approved the establishment of a segregated account of AAC, pursuant to Wis. Stat.
section 611.24(2), to segregate certain non-performing segments of AAC&rsquo;s liabilities. All policy obligations of AAC not allocated
to the Segregated Account remain in the general account of AAC; and, in addition, the Segregated Account contains a secured note
issued by the general account (the &ldquo;Secured Note&rdquo;). Further, on March 24, 2010, OCI commenced rehabilitation proceedings
with respect to the Segregated Account in the District Court of Dane County, Wisconsin to facilitate an orderly run-off and/or
settlement of the liabilities in the Segregated Account.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><SUP>2</SUP>&#9; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this letter, the term &ldquo;IRS&rdquo;
means the Internal Revenue Service; the term &ldquo;Code&rdquo; means the Internal Revenue Code of 1986, as amended; the term &ldquo;Group&rdquo;
means the &ldquo;affiliated group&rdquo; (as defined in Section 1504(a) of the Code) of which AFGI is the common parent, and AAC
(including the Segregated Account) is one of the members and the term &ldquo;CDS Contracts&rdquo; means all the CDS contracts identified
in Attachment A as the pay-as-you-go credit default swap contracts and other CDS contracts with respect to which items of income,
gain, deductions, or loss were reflected in any of the federal income tax returns filed by the Group for the tax years ending December
31, 2005, December 31, 2006, December 31, 2007, December 31, 2008, December 31, 2009 or December 31, 2010; the term &ldquo;CDS
Contracts&rdquo; does not include the CDS contracts identified in Attachment B as CDS contracts with respect to which items of
income, gain, deductions, or loss were not reflected in any of the federal income tax returns filed by the Group for the tax years
ending December 31, 2005, December 31, 2006, December 31, 2007, December 31, 2008, December 31, 2009 or December 31, 2010; the
term &ldquo;Confirmation Order&rdquo; means the plan of rehabilitation confirmation order; the term &ldquo;Bank Settlement Notes&rdquo;
means the surplus notes issued by AAC on June 7, 2010 pursuant to the Settlement Agreement, dated June 7, 2010, among AAC and certain
financial institutions as well as the issuance by the Segregated Account of $50 million in surplus notes on July 29, 2010 in connection
with a separate settlement, and the term &ldquo;Plan of Reorganization&rdquo; means AFGI&rsquo;s reorganization plan submitted
to the United States Bankruptcy Court for the Southern District of New York as finally amended and confirmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 3</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 8, 2010,
AFGI filed a voluntary case under Chapter 11 of Title 11 of the United States Code seeking bankruptcy protection (&ldquo;Bankruptcy
Case&rdquo;). On November 9, 2010, AFGI commenced an adversary proceeding in connection with the Bankruptcy Case against the United
States (&ldquo;Adversary Proceeding&rdquo;), seeking, in part, to obtain an injunction and a declaration that the Debtor applied
the proper accounting method with respect to losses on the CDS Contracts. The Adversary Proceeding is captioned <I>Ambac Financial
Group, Inc. and The Official Committee of Unsecured Creditors v. United States of America</I>, Adv. Pro. No. 10-4210 (SCC). On
May 5, 2011, the United States filed its proofs of claim in the Bankruptcy Case against AFGI, thereby asserting a priority claim
against the Debtor of $807,242,021.91 (&ldquo;IRS Claims&rdquo;). The IRS Claims seek the return of the tentative tax refunds received
by the Group resulting from the claimed recognition of losses in 2007 and 2008 with respect to the CDS Contracts. The Debtor filed
its objection to the IRS Claims on June 5, 2011.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 4</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">The United States
has also sought to assert legal rights against AAC, under Treas. Reg &sect;&sect;&nbsp;1.1502-6(a) and 1.1502-78(b)(2), with respect
to any deficiency or underpayment of federal taxes against the Group. As authorized by statute, OCI approved the creation of the
Segregated Account, which OCI then placed into rehabilitation in the Wisconsin Circuit Court of Dane County (the &ldquo;Rehabilitation
Court&rdquo;) on March 24, 2010, with the Wisconsin Commissioner of Insurance appointed as Rehabilitator.&nbsp; By order dated
November 7, 2010, the Rehabilitation Court approved the allocation of AAC&rsquo;s federal tax liability for all prior tax years,
including any liability it may have with respect to the IRS Claims to the Segregated Account.<SUP>3</SUP> On December&nbsp;8, 2010,
the United States removed the Wisconsin rehabilitation proceeding involving the Segregated Account to the United States District
Court for the Western District of Wisconsin (the &ldquo;District Court&rdquo;). The Rehabilitator moved to remand the proceeding
to the Rehabilitation Court, and on January&nbsp;14, 2011, that motion was granted by the District Court. The United States appealed
that decision to the United States Court of Appeals for the Seventh Circuit.<B> </B>On February&nbsp;9, 2011, the United States
filed a complaint and a motion for a preliminary injunction in the District Court seeking, inter alia, to enjoin enforcement of
the injunction issued by the Rehabilitation Court and the Confirmation Order against the United States in a case captioned <I>United
States of America v. Wisconsin State Circuit Court for Dane County</I>, Case No. 11-cv-099. The District Court dismissed that suit
for lack of subject matter jurisdiction on February&nbsp;18, 2011, and the United States filed a notice of appeal on February&nbsp;22,
2011. The appeals at the Seventh Circuit are pending as Appeal Nos. 11-1158 and 11-1419.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">On March 9, 2011,
the United States appealed the Order of Confirmation entered by the Rehabilitation Court on January 24, 2011. That appeal, No.
2011-AP-987, was dismissed by the Wisconsin Court of Appeals. The Wisconsin Supreme Court subsequently granted the United States&rsquo;
Petition for Review. The matter has been briefed, argued before, and submitted for decision to the Wisconsin Supreme Court.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">&nbsp;<SUP>3</SUP>&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is acknowledged that the United States disputes that this allocation was effective as to it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 5</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">AFGI, AAC, the Official
Creditors Committee, the Segregated Account, the Rehabilitator, and OCI offer to resolve and settle the disputes described above
to avoid the burden, expense and uncertainty of litigation. The terms of this offer (the &quot;Offer&quot;) are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">1.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proposed
settlement shall not be effective until this offer has been accepted by the United States, such acceptance including having received
a response of &ldquo;no adverse criticism&rdquo; from the Congressional Joint Committee on Taxation to effectuate the transactions
contemplated in this letter, and the conditions in 28 C.F.R. &sect; 0.163 relating to the settlement of appeals authorized by the
Solicitor General shall also have been satisfied, and each of the other conditions below in this paragraph 1 have been satisfied.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">a.</TD><TD STYLE="text-align: justify">The Rehabilitation Court shall have entered an order approving the transactions contemplated in
this letter.</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">b.</TD><TD STYLE="text-align: justify">The United States Bankruptcy Court for the Southern District of New York (the &ldquo;Bankruptcy
Court&rdquo;) shall have entered an order approving the stipulated dismissal with prejudice of the Adversary Proceeding and approving
the other transactions contemplated in this letter, including the Plan of Reorganization.</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">c.</TD><TD STYLE="text-align: justify">AFGI (on behalf of itself, AAC, and the other members of the Group) and the IRS shall have entered
into a closing agreement under section 7121 of the Code that provides as follows:</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(1)</TD><TD STYLE="text-align: justify">The closing agreement finally and conclusively resolves the federal income tax liability (and any
liabilities in respect of interest under section 6601 of the Code and additions to tax and penalties that may be imposed under
the Code with respect to this income tax liability) of the Group for the tax years ending December 31, 2003 through and including
December 31, 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 6</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(2)</TD><TD STYLE="text-align: justify">The closing agreement also finally and conclusively resolves the federal income tax liability (and
any liabilities in respect of interest under section 6601 of the Code and additions to tax and penalties that may be imposed under
the Code with respect to this income tax liability) of the Group for the tax year ending December 31, 2010, but only with regard
to any income, gain, deduction, or loss on the Group&rsquo;s CDS Contracts.</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(3)</TD><TD STYLE="text-align: justify">The Group (and each of its members) will relinquish all claim to all loss carry-forwards, whether
characterized as capital or ordinary, resulting from losses on the CDS Contracts arising on or before December 31, 2010, which
might otherwise be available to the Group (or any of its members) to offset future taxable income of the Group (or any of its members)
to the extent that these carry-forwards exceed $3,400,000,000. The $3,400,000,000 of losses shall be ordinary loss carry-forwards.
The Group has also claimed losses that have arisen separate and apart from its CDS Contracts (the &ldquo;non-CDS NOLs&rdquo;),
but the closing agreement will not address the non-CDS NOLs, to which the IRS reserves all of its rights.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 7</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(4)</TD><TD STYLE="text-align: justify">Nothing contained in the closing agreement or settlement shall be considered an acceptance by the
United States of AFGI&rsquo;s tax accounting methodology with respect to the CDS contracts nor an admission by AFGI that there
were faults in its tax accounting methodology with respect to the CDS contracts. No inference shall be made from the execution
of the closing agreement or settlement by the United States regarding the appropriate treatment of credit default swaps for federal
income tax purposes<B>.</B></TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(5)</TD><TD STYLE="text-align: justify">The parties to the closing agreement acknowledge that such agreement is the product of arm&rsquo;s
length negotiations and supersedes all prior communications, written or oral, with respect thereto. In connection with the negotiations
to enter into a closing agreement that satisfies the conditions described in this paragraph 1(c), the Parties agree that no payment
shall be required to be made by any members of the Group other than as described in paragraphs 2-4.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 8</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">d.</TD><TD STYLE="text-align: justify">Additional conditions precedent to the effectiveness of the proposed settlement are (i) AFGI (on
behalf of itself, AAC, and the other members of the Group, whose written consent shall be obtained) and the IRS shall have entered
into a closing agreement under section 7121 of the Code providing that neither the issuance of the Bank Settlement Notes<SUP>4</SUP>
nor the June 9, 2010 Event<SUP>5</SUP> (A) caused AAC to fail to be a member of the &ldquo;affiliated group&rdquo; (as defined
in section 1504(a) of the Code) of which AFGI was the common parent, or (B) resulted in an &ldquo;ownership change&rdquo; with
respect to AAC for purposes of section 382 of the Code, and (ii) the Internal Revenue Service shall have issued a favorable private
letter ruling (&ldquo;PLR&rdquo;) providing that upon emergence from bankruptcy AFGI would qualify for the Code section 382(l)(5)
exception, without regard to section 382(l)(5)(D); the PLR will be based solely on the information and representations included
in the private letter ruling request that shall be submitted by AFGI to the IRS within 60 days of the date of this Offer (the &ldquo;Original
PLR Request&rdquo;). The condition precedent described in this subparagraph 1(d)(ii) will be satisfied upon the IRS&rsquo;s issuance
of such a PLR based upon the Original PLR Request. In connection with the negotiations relating to (i) and (ii) of this paragraph
1(d), the Parties agree that no payment shall be required to be made by any members of the Group other than as described in paragraphs
2 - 4.</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">e.</TD><TD STYLE="text-align: justify">Another condition precedent to the effectiveness of the proposed settlement is that the United
States and the Segregated Account shall enter into a separate and independent agreement to create and maintain an escrow account
holding a balance of not less than $100&nbsp;million in cash or Qualifying Investments as defined in the Escrow Agreement -(the
&ldquo;Escrow Account&rdquo;). The terms and conditions of the Escrow Account are set forth in the form of Escrow Agreement attached
hereto as Appendix A.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><SUP>4</SUP> The IRS reserves its right to request a written
opinion to be provided by KPMG relating to issues regarding the $50 million in surplus notes issued on July 29,2010, and to withhold
a final conclusion on the issues set out above prior to receiving such written opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><SUP>5</SUP> The &ldquo;June 9, 2010 Event&rdquo; refers to
AAC's nonpayment of dividends in full to the holders of the auction market preferred shares (AMPS) for six consecutive dividend
payment dates thereby entitling the holders of the AMPS, subject to OCI's approval, to elect two members of the board of directors
of AAC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.25in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 9</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">f.</TD><TD STYLE="text-align: justify">Approval of the terms of the proposed settlement agreement as set forth herein by the AFGI and
AAC Boards of Directors (the &quot;Boards&quot;). Written notice will be provided to the United States within five (5) days of
the Boards' vote whether to accept or reject the terms of the Offer, and, after May 31, 2012, approval shall be deemed to have
occurred unless notice to the contrary is provided to the United States.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">2.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within ten (10)
business days following satisfaction of all conditions set forth in paragraph 1: (i) AFGI will pay the United States Department
of the Treasury one million nine hundred thousand dollars ($1,900,000); and (ii) AAC and/or the Segregated Account will pay the
United States Department of the Treasury one hundred million dollars ($100,000,000). The manner in which AAC and/or the Segregated
Account effectuates the payment to the IRS will not be construed as a concession of any legal issue by any of the Parties. The
payments that are described in the first sentence of this Paragraph 2 and the payments described in paragraphs 3 and 4 will be
in full and final satisfaction of the federal income tax liability (and any liabilities in respect of interest under section 6601
of the Code and additions to tax and penalties that may be imposed under the Code with respect to this income tax liability) of
the Group to the IRS for (i) the tax years ending December 31, 2003 through December 31, 2009; and (ii) the tax year ending December
31, 2010, but only with regard to items of income, gain, deduction, or loss on the Group&rsquo;s CDS Contracts. Effective at the
time of the payment described in the first sentence of this paragraph 2, the Group (and all of its members, including AAC) shall
waive forever any right to claim any overpayment of any federal income tax, liability (and any overpayment of interest, additions
to tax, or penalties with respect to this income tax liability) of the Group for any tax period ended prior to January 1, 2010
and any right to claim any overpayment of any federal income tax liability (and any overpayment of interest, additions to tax,
or penalties with respect to this income tax liability), of the Group with regard to items of income, gain, deduction, or loss
on the CDS Contracts for the tax year ended December 31, 2010. No portion of the AFGI and AAC payments will be attributable to
additions to tax or other penalties under chapter 68 of the Code. No portion of the AFGI and AAC payments, and no portion of the
Tier C and Tier D IRS Payments described in paragraphs 3 and 4 below, shall be claimed as a deduction or other tax benefit on any
federal tax return for the year of this settlement or any future year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 10</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#9;Following the
effectiveness of the Tax Sharing Agreement between AFGI and AAC, which is attached as Exhibit A to the Plan of Reorganization (the
&ldquo;TSA&rdquo;), and the satisfaction of all conditions set forth in paragraph 1, AFGI will pay the IRS an amount equal to twelve
and a half percent (12.5%) of any payment made to AFGI by AAC associated with the net operating loss (&ldquo;NOL&rdquo;) Usage
Tier C as defined in the TSA (the &ldquo;Tier C IRS Payment&rdquo;). The Tier C IRS Payment, if any, shall be made within five
(5) business days following AFGI&rsquo;s receipt of the Tier C payment, if any, made by AAC to AFGI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">4.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the
effectiveness of the TSA and the satisfaction of all conditions set forth in paragraph 1, AFGI will pay the IRS an amount equal
to seventeen and a half percent (17.5%) of any payment made to AFGI by AAC associated with the NOL Usage Tier D as defined in the
TSA (the &ldquo;Tier D IRS Payment&rdquo;). The Tier D IRS Payment, if any, shall be made within five (5) business days following
AFGI&rsquo;s receipt of the Tier D payment, if any, made by AAC to AFGI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 11</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">5.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect
to the Tier C and Tier D payments made by AAC to AFGI, AFGI will disclose in its annual federal tax return the amount of such payments
received from AAC for the applicable year. The right of the IRS to receive the Tier C IRS and Tier D IRS Payments shall not be
treated for federal income tax purposes or any other purpose as an equity interest in AFGI or in AAC, and AFGI&rsquo;s failure
to make Tier C IRS and Tier D IRS Payments will not give the IRS a claim against the Segregated Account, the general account of
AAC, or any subsidiary of AAC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">6.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the
satisfaction of all conditions set forth in paragraphs 1 and 2, OCI, the Segregated Account, the Rehabilitator, and AAC will, upon
the request of the United States, state in writing to the court that they support any motion brought by the United States seeking
to vacate (i) the Opinion and Order entered on January 14, 2011 by the United States District Court for the Western District of
Wisconsin in the proceeding captioned <I>Theodore Nickel v. United States of America</I>, Case No. 10-cv-778 and (ii) the Opinion
and Order entered on February 18, 2011 by the United States District Court for the Western District of Wisconsin in the proceeding
captioned <I>United States of America v. Wisconsin State Circuit Court for Dane County</I>, Case No. 11-cv-099.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 12</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">7.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the
satisfaction of all conditions set forth in paragraphs 1 and 2, upon stipulation, the United States, the Rehabilitator, OCI, AAC
and the Segregated Account, shall dismiss with prejudice the two cases that are currently pending before the U.S. Court of Appeals
for the Seventh Circuit and captioned as <I>Theodore Nickel v. United States of America</I>, Case No. 11-1158 and <I>United States
of America v. Wisconsin State Circuit Court for Dane County, et. al</I>., Case No. 11-1419.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">8.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the
satisfaction of all conditions set forth in paragraphs 1 and 2, the IRS Claims filed in AFGI&rsquo;s Chapter 11 Bankruptcy Case,
presently pending before the United States Bankruptcy Court for the Southern District of New York, shall be deemed allowed in the
amount of $120,000,000.00 which will be fully satisfied upon receipt by the United States Department of the Treasury of the payments
described in paragraph 2 and the payment, if any, described in paragraphs 3 and 4 above, and the IRS Claims will be deemed disallowed
in any greater amount. The $120,000,000.00 offer is for settlement purposes only and the Segregated Account and AAC shall have
no liability for any unpaid portion of this claim following satisfaction of the conditions in paragraphs 1 and 2, <I>supra</I>.
Furthermore, no cancellation of debt income shall arise with respect to the Group should no payments be made pursuant to paragraphs
3 and 4 above, or should such payments fail to bring the aggregate of payments, including those described in paragraph 2 above,
to an amount equal or exceeding $120,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">9.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the
satisfaction of all conditions set forth in paragraphs 1 and 2, by stipulation, the United States and AFGI shall dismiss with prejudice
the Adversary Proceeding, presently pending before the United States Bankruptcy Court for the Southern District of New York (Case
No. 10-4210) and the motion to withdraw the reference, presently pending before the United States District Court for the Southern
District of New York.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 13</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">10.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Offer shall
be conditioned upon the satisfaction of each of the following conditions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">a.</TD><TD STYLE="text-align: justify">The Seventh Circuit Court shall hold off rescheduling oral argument and not issue any dispositive
order, judgment or other ruling on the merits with respect to appeal No. 11-1158 or Appeal No. 11-1419.</TD></TR></TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in">b.</TD><TD STYLE="text-align: justify">Between the time the Offer is submitted to the United States and such time as the parties either
(1) satisfy all the conditions for the settlement to be effective set forth in paragraphs 1 and 2 above or (2) determine that said
conditions will not be satisfied, the United States will not submit any claim in the Rehabilitation Court or Bankruptcy Case or
take any other collection action (whether by assessment, levy, or by asserting the existence of a lien, or otherwise) with respect
to any federal income tax liability presently being asserted by the United States as to AFGI, AAC or any other member of the Group
for the 2010 tax year or any prior tax year, and will not seek to remove the rehabilitation proceeding from the Rehabilitation
Court or object to any motion of the Rehabilitator (except as to any motion that is inconsistent with the settlement terms set
forth herein). The United States, nevertheless, retains the right to submit a claim in the Rehabilitation Court or in the Bankruptcy
Case if such is necessary to satisfy a claims deadline established by the Rehabilitation Court or the Bankruptcy Court.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 14</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">11.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Segregated
Account, OCI, AAC and the United States shall each be free to write the Wisconsin Supreme Court (and to respond to representations
made in contacts by other parties) with respect to the United States&rsquo; appeal to that court, No. 2011-AP-987, if the Supreme
Court has not before then issued its final decision with respect to that appeal. In those written submissions, no party shall request
a stay or dismissal of the proceedings before the Wisconsin Supreme Court.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If, prior to the consummation
of this proposed settlement, the Wisconsin Supreme Court issues a ruling that is favorable to the United States and that results
in a remand to either the Wisconsin Court of Appeals or the Rehabilitation Court, the United States will promptly move to stay
proceedings in the court to which proceedings have been remanded and will later dismiss with prejudice its case then pending before
the Wisconsin Court of Appeals or the Rehabilitation Court, and any objection to the Rehabilitation Court&rsquo;s orders, upon
satisfaction of the conditions set forth in paragraphs 1 and 2.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">12.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Offer is
valid unless and until withdrawn in writing by the Debtor, AAC, OCI, the Segregated Account or the Official Creditors Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">13.&#9;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as to
the terms contained herein in paragraph 1.e, no term contained within this Offer will have any force or effect if settlement is
not consummated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Respectfully submitted,</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Dewey &amp; LeBoeuf LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60%; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 4%; text-indent: 0in">By:</TD>
    <TD STYLE="width: 36%; border-bottom: windowtext 1pt solid; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Lawrence M. Hill</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Counsel for Debtor and AAC</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Messrs. Bharara and DiCicco</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">February 24, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page 15</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Foley &amp; Lardner LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60%; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 4%; text-indent: 0in">By:</TD>
    <TD STYLE="width: 36%; text-indent: 0in; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Kevin G. Fitzgerald</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Counsel for the Segregated Account, the Rehabilitator, and OCI</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Morrison &amp; Foerster LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-indent: 0in">By:</TD>
    <TD STYLE="text-indent: 0in; border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Anthony Princi</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-indent: 0in">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-indent: 0in">Counsel for the Official Creditors Committee</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 2.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">cc:</TD><TD>Jeannette A. Vargas</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Daniel P. Filor</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Ellen London</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Carina H. Schoenberger</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Anthony T. Sheehan</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Roger A. Peterson</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Michael B. Van Sicklen</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Edward Froelich</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Robert Kovacev</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Sashka Koleva</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ATTACHMENT 2</B></P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">SUBMITTED PURSUANT TO FRE 408 AND<BR>
WISCONSIN STATUTE SECTION 904.8<BR>
FOR SETTLEMENT PURPOSES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">April 3, 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Preet Bharara, Esq.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">United States Attorney<BR>
Southern District of New York</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">U.S. Department of Justice</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">86 Chambers Street<BR>
New York, NY 10007</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt">John A. DiCicco, Esq.<BR>
Principal Deputy Assistant Attorney General<BR>
Tax Division<BR>
United States Department of Justice<BR>
Washington, DC 10530</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"><I>Ambac Financial Group, Inc. v. United States,
</I>Adv. Proc.No. 10-4210 (Bankr. S.D.N.Y., filed Nov. 9, 2010);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"><I>In the Matter of the Rehabilitation of Segregated
Account of Ambac Assurance Corp., </I><BR>
No. 2010CV1576 (Wis. Cir. Ct. for Dane Cnty. Jan. 24, 2011) <I>petition for review granted, </I>No. 2011AP987 (Wis. Aug. 31, 2011);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"><I>In the Matter of the Rehabilitation of Segregated
Account of Ambac Assurance Corporation, </I>782 F. Supp. 2d 743 (W.D. Wis. 2011), <I>appeal docketed, </I><BR>
No. 11-1158 (7<SUP>th</SUP> Cir. Jan. 19, 2011); and<BR>
<I>United States v. Wisconsin State Circuit Court for Dane County, et al.,</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">767 F. Supp. 2d 980 (W.D. Wis. 2011), <I>appeal docketed,
</I>No. 11-1419</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">(7<SUP>th</SUP> Cir. Feb. 22, 2011)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dear Messrs. Bharara and DiCicco:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 24, 2012, Ambac Financial Group,
Inc. (&ldquo;Debtor&rdquo; or AFGI&rdquo;), Ambac Assurance Corporation (&ldquo;AAC&rdquo;), the Official Committee of Unsecured
Credits of AFGI (&ldquo;Official Creditors Committee&rdquo;), the Segregated Account of Ambac Assurance Corporation (the &ldquo;Segregated
Account&rdquo;), the court-appointed Rehabilitator of the Segregated Account (the &ldquo;Rehabilitator&rdquo;) and the Wisconsin
Office of the Commissioner of Insurance (&ldquo;OCI&rdquo;), presented a settlement offer (&ldquo;Settlement Letter&rdquo;) to
settle the above-referenced proceedings. This letter modifies and supplements the terms of the Settlement Letter, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>


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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 10pt">Preet Bharara, Esq.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">Page 2</TD></TR>
</TABLE>
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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD>Paragraph 1(b) of the Settlement Letter is modified by deleting reference to the dismissal of the Adversary Proceeding. As
modified, paragraph 1(b) shall read: &ldquo;The United States Bankruptcy Court for the Southern District of New York (the &ldquo;Bankruptcy
Court&rdquo;) shall have entered an order approving the proposed settlement of the transactions contemplated in this letter, including
the Plan of Reorganization.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD>Paragraph 1(c)(6) shall be added to the Settlement Letter to state: &ldquo;The closing agreement shall be executed only upon
the satisfaction of all other conditions set forth in paragraphs 1 and 2 of the Settlement Letter and the entry of an order of
the United States Bankruptcy Court for the Southern District of New York, in the Chapter 11 bankruptcy proceeding of <I>In re Ambac
Financial Group, Inc.</I> Chap 11 Case No. 10-15973, approving the terms of this settlement between AFGI, on behalf of itself and
as agent for the members of AFGI and Subsidiaries consolidated group, and the United States.&rdquo;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD>Paragraph 2 of the Settlement Letter is modified by deleting the first sentence &ldquo;Within ten (10) business days following
satisfaction of all conditions set forth in paragraph 1: (i) AFGI will pay the United States Department of the Treasury one million
nine hundred thousand dollars ($1,900,000); and (ii) AAC and/or the Segregated Account will pay the United States Department of
the Treasury one hundred million dollars ($100,000,000).&rdquo; The first sentence in paragraph 2 shall read: &ldquo;Following
satisfaction of all conditions set forth in paragraph 1, except the reference to a closing agreement within paragraphs 1(c) and
(d), AFGI and the United States shall meet at which time the United States will deliver to AFGI an executed closing agreement in
accordance with the Settlement Letter upon confirmation that: (i) AFGI has paid the United States Department of the Treasury one
million nine hundred thousand dollars ($1,900,000); and (ii) AAC and/or the Segregated Account has paid the United States Department
of the Treasury one hundred million dollars ($100,000,000).&rdquo;</TD></TR></TABLE>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 10pt">Preet Bharara, Esq.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">Page 3</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 31.5pt">The remainder of paragraph (2)
in the Settlement Letter will remain unchanged. The amount to be paid by AAC and/or the Segregated Account pursuant to paragraph
2 of the Settlement Letter may be funded in accordance with paragraph 3 of the Escrow Agreement, dated as of March 8, 2012 (the
&ldquo;Escrow Agreement&rdquo;), between the Segregated Account, the United States of America and The Bank of New York Mellon,
as escrow agent, in which case the Segregated Account and the United States of America shall take such actions as are required
by the Escrow Agreement to effect such funding. Alternatively, the amount to be paid by AAC and/or the Segregated Account pursuant
to paragraph 2 of the Settlement Letter may be funded in cash, in which case the Segregated Account and the United States of America
shall take such actions as may be necessary to terminate the arrangements effected by the Escrow Agreement and return all Escrow
Property (as defined in the Escrow Agreement) to the Segregated Account.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 31.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 31.5pt">It is further agreed that paragraph
9 shall be modified by removing from that paragraph reference to the satisfaction of all conditions set forth in paragraphs 1 and
2. As modified, paragraph 9 shall read: &ldquo;Following receipt by the Taxpayer of the executed closing agreement in accordance
with the terms of the Settlement Letter, as modified by this letter, by stipulation, the United States and AFGI shall dismiss with
prejudice the Adversary Proceeding, presently pending before the United States Bankruptcy Court for the Southern District of New
York (Case No. 10-4210) and the motion to withdraw the reference, presently pending before the United States District Court for
the Southern District of New York.&rdquo;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 10pt">Preet Bharara, Esq.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">Page 4</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 31.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.3pt; text-indent: 31.7pt">It is further agreed that the
private letter ruling dated October 25, 2012 issued by the Internal Revenue Service (PLR-117798-12) to Ambac Financial Group. Inc.
satisfies the requirements set forth in paragraph 1(d)(ii) of the Settlement Letter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.3pt; text-indent: 31.7pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.3pt; text-indent: 31.7pt">All terms and conditions of the
Settlement Letter will remain unchanged except as expressly provided for in this letter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 319.7pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Respectfully submitted,</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Shearman &amp; Sterling LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 63%">&nbsp;</TD>
    <TD STYLE="width: 4%">By:</TD>
    <TD STYLE="width: 33%; border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Lawrence M. Hill</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Counsel for debtor and AAC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Foley &amp; Lardner LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Kevin G. Fitzgerald</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Counsel for the Segregated<BR>
Account, the Rehabilitator,<BR>
and OCI</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Morrison &amp; Foerster LLP</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Anthony Princi</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Counsel for the Official <BR>
Creditors Committee</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 319.5pt">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 319.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%">Preet Bharara, Esq.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Page 5</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 319.5pt; text-indent: -310.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Acknowledged and Agreed:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">UNITED STATES OF AMERICA</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 44%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Cc:</TD>
    <TD>&nbsp;</TD>
    <TD>Daniel P. Filor</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Ellen London</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Carina H. Schoenberger</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Anthony T. Sheehan</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Roger A. Peterson</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Michael B. Van Sicklen</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Edward Froelich</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Robert Kovacev</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Sashka Koleva</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Jeanette A. Vargas</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="margin: 0"></P>
<P STYLE="margin: 0"></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left">
        <P STYLE="font: 18pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt; background-color: transparent"><FONT STYLE="font-weight: normal">&nbsp;ATTACHMENT
3</FONT></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="margin: 0"></P>

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<TR STYLE="vertical-align: top">
    <TD ROWSPAN="7"><img src="tlogo2.jpg"></TD>
    <TD COLSPAN="2"><B>U.S. Department of Justice</B></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2"><B>Tax Division</B></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><I>Please reply to:</I></TD>
    <TD><I>Office of Review</I></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><I>&nbsp;</I></TD>
    <TD><I>Post Office Box 310</I></TD></TR>
<TR STYLE="vertical-align: top">
    <TD><I>&nbsp;</I></TD>
    <TD><I>Ben Franklin Station</I></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 47%; border-bottom: Black 1pt solid"><I>&nbsp;</I></TD>
    <TD STYLE="width: 16%; border-bottom: Black 1pt solid"><I>&nbsp;</I></TD>
    <TD STYLE="width: 37%; border-bottom: Black 1pt solid"><I>Washington. D.C. 20044</I></TD></TR>
</TABLE>


<P STYLE="margin: 0"><I>&nbsp;</I></P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">KK:AR:ETPerelmuter</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CMN 2011100390</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">April 4, 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black"><I><U>By Telecopier and Regular Mail</U> </I></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 12pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">Lawrence M. Hill, Esquire </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 12pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">SHEARMAN &amp; STERLING, LLP </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 12pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">599 Lexington Avenue </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 12pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black">New York, NY 10022-6069</FONT></TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="width: 9%; padding-left: 0; font-size: 12pt"><FONT STYLE="font-size: 10pt; color: black">Re:</FONT></TD>
    <TD STYLE="font-size: 12pt"><FONT STYLE="font-size: 10pt; color: black">Ambac Financial Group, Inc. v. United States,</FONT><FONT STYLE="font-size: 10pt">
    <FONT STYLE="color: black">Adv. Proc. No. 10-4210 (Bankr. S.D.N.Y.); In the Matter</FONT> <FONT STYLE="color: black">of the
    Rehabilitation of Segregated Account of Ambac Assurance</FONT> <FONT STYLE="color: black">Corp., No. 10 CV 1576 (Wis. Circuit
    Court for Dane County);</FONT> <FONT STYLE="color: black">Theodore K. Nickel v. United States (7th Cir. - No. 1158);</FONT>
    <FONT STYLE="color: black">United States v. Wisconsin State Circuit Court for Dane County,</FONT> <FONT STYLE="color: black">et
    al. (7th Cir. - No. 11-1419)</FONT></FONT></TD></TR>
</TABLE>

    <TD STYLE="text-align: left">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 19pt; background-color: transparent">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: transparent">Dear Mr. Hill:</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 19pt; text-indent: 0.5in; background-color: transparent">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: Transparent">This
        refers to your offer dated February 24, 2012, as supplemented and modified by letter dated April 3, 2013, submitted on behalf of
        Ambac Financial Group, Inc. and Ambac Assurance Corporation. This offer has been <FONT STYLE="font-size: 10pt">accepted on behalf
        of the Attorney General on the terms set forth therein. The Internal Revenue Service is being informed of this action.</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 19pt; text-indent: 0.5in; background-color: transparent">&nbsp;</P></TD>


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<TR STYLE="vertical-align: top">
    <TD STYLE="width: 25%">&nbsp;</TD>
    <TD STYLE="width: 10%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 65%; background-color: white; font-size: 10pt"><FONT STYLE="font-size: 10pt; color: black">Sincerely yours,</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="background-color: white; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="background-color: white; font-size: 10pt"><FONT STYLE="font-size: 10pt; color: black">Kathryn Keneally</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="background-color: white; font-size: 10pt"><FONT STYLE="font-size: 10pt; color: black">Assistant Attorney General</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="background-color: white; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="background-color: white; font-size: 10pt"><FONT STYLE="font-size: 10pt; color: black">By:</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt; color: windowtext"><img src="tsig.jpg"></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="background-color: white; font-size: 10pt"><FONT STYLE="font-size: 10pt; color: black">Ann Reid</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="background-color: white; font-size: 10pt"><FONT STYLE="font-size: 10pt; color: black">Acting Chief, Office of Review</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>v343563_ex99-1.htm
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
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</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ambac Positioned to Emerge From Bankruptcy
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">NEW YORK, April 29, 2013 - <B>Ambac Financial
Group, Inc.</B> (&ldquo;Ambac&rdquo;) announced today that the United States Bankruptcy Court for the Southern District of New
York (the &ldquo;Bankruptcy Court&rdquo;) approved a settlement with the United States of America (&ldquo;United States&rdquo;)
that brings resolution to claims filed against Ambac by the Internal Revenue Service (the &ldquo;IRS&rdquo;) and related litigation.
Additionally, the Bankruptcy Court approved Ambac&rsquo;s entry into an amendment to the existing tax sharing agreement with Ambac
Assurance Corporation as well as certain modifications to Ambac&rsquo;s Fifth Amended Plan of Reorganization (the &ldquo;Plan&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ambac is scheduled to execute a closing
agreement with the IRS on April 30, 2013, concurrent with its payment of $1.9 million, and the Segregated Account of Ambac Assurance
Corporation&rsquo;s payment of $100 million, to the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ambac expects to fulfill the remaining
conditions to the effectiveness of the Plan on or before May 1, 2013 (the &ldquo;Effective Date&rdquo;). Pursuant to the Plan,
Ambac will distribute 45,000,000 new common shares (the &ldquo;New Common&rdquo;) and 5,047,138 new warrants (the &ldquo;New Warrants&rdquo;)
to holders of allowed claims, in full and final satisfaction of such claims, on the Effective Date. In addition, all existing common
stock of the company will be cancelled on the Effective Date and the holders of such stock will not receive any distributions under
the Plan. Ambac has received approval from the NASDAQ OMX Group to list the New Common and New Warrants on the NASDAQ Global Select
Market, as of the Effective Date, under the ticker symbols AMBC and AMBCW, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>About Ambac</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 8, 2010, Ambac Financial Group,
Inc. (&ldquo;Ambac&rdquo;) filed for a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (&ldquo;Bankruptcy
Code&rdquo;). The Bankruptcy Court entered an order confirming Ambac&rsquo;s plan of reorganization on March 14, 2012. Until the
plan of reorganization is consummated and Ambac emerges from bankruptcy, it will continue to operate in the ordinary course of
business as &ldquo;debtor-in-possession&rdquo; in accordance with the applicable provisions of the Bankruptcy Code and the orders
of the Bankruptcy Court.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ambac&rsquo;s principal operating subsidiary,
Ambac Assurance Corporation, is a guarantor of public finance and structured finance obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 337.5pt 0pt 0">Contact Information:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 337.5pt 0pt 0">Michael Fitzgerald</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 337.5pt 0pt 0">(212) 208-3222</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 337.5pt 0pt 0"><FONT STYLE="text-underline-style: none">mfitzgerald@ambac.co</FONT>m</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 337.5pt 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 337.5pt 0pt 0"></P>

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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>5
<FILENAME>v343563_ex99-2.htm
<DESCRIPTION>EXHIBIT 99.2
<TEXT>
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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ambac Emerges from Bankruptcy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NEW YORK, May 01, 2013 (BUSINESS WIRE) -- Ambac Financial Group,
Inc. (&quot;Ambac&quot; or the &quot;Company&quot;) announced today the effectiveness of its Second Modified Fifth Amended Plan
of Reorganization (the &quot;Plan&quot;), which marks the completion of its financial restructuring and Ambac's emergence from
Chapter 11 bankruptcy protection. &quot;I would like thank all of those who dedicated so much time and effort, including our employees
and advisors, in helping us complete our restructuring,&quot; said Diana Adams, Ambac's President and CEO. &quot;This is an exciting
day and the start of a new chapter for all of us at Ambac,&quot; Ms. Adams added. &quot;We emerge with a stronger balance sheet
and a commitment to a successful future. Looking forward, we expect to pursue a number of new initiatives and identify the best
opportunities for Ambac and our stakeholders.&quot;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the terms of the restructuring, all allowed claims of
Ambac's former creditors were discharged and such creditors received new common stock, and in certain instances, new warrants,
issued by the reorganized company. Ambac's new common stock and warrants are listed on the NASDAQ Global Select Market under the
ticker symbols AMBC and AMBCW, respectively. All common stock of the Company in existence prior to Ambac's emergence from bankruptcy
has been cancelled. Holders of such existing stock have not, and will not, receive distributions under the Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">About Ambac</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Ambac Financial Group, Inc. (&quot;Ambac&quot;), headquartered
in New York City, is a holding company whose subsidiaries, including its principal operating subsidiary, Ambac Assurance Corporation
(&quot;Ambac Assurance&quot;), Everspan Financial Guarantee Corporation, and Ambac Assurance UK Limited, provided financial guarantees
and other financial services to clients in both the public and private sectors globally. Ambac Assurance, including the Segregated
Account of Ambac Assurance (in rehabilitation), is a guarantor of public finance and structured finance obligations. Ambac is also
exploring opportunities involving the development or acquisition of new financial services businesses. Ambac's common stock trades
on the NASDAQ Global Select Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt; color: black">Contact Information:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt; color: black">Michael Fitzgerald</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt; color: black">(212) 208-3222</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt; text-underline-style: none; color: black">mfitzgerald@ambac.co</FONT><FONT STYLE="font-size: 10pt; color: black">m</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt; color: black">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt; color: black"></FONT></P>

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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
