AMBAC FINANCIAL GROUP, INC. LONG-TERM INCENTIVE COMPENSATION AGREEMENT

All Performance Restricted Stock Units shall be unearned and unvested unless and until they become earned and vested and nonforfeitable in accordance with this subparagraph 3(a). The Participant shall have the ability to earn between 0% and 267% of the Target Performance Units based on the continuing employment of the Participant during the period beginning on January 1, 201[_] and ending on December 31, 201[_] (the “Performance Period”) and satisfaction of the Performance Goals set forth in Exhibit A hereto (which is incorporated into and forms part of this Agreement), as determined by the Committee. Notwithstanding anything to the contrary in the Incentive Plan or the LTIP, the Committee may not reduce the portion of the Performance Restricted Stock Units that would otherwise become earned based on the satisfaction of the Performance Goals set forth in Exhibit A hereto. Any Performance Restricted Stock Units granted pursuant to this Agreement that become earned in accordance with this Agreement shall be referred to herein as “Earned Performance Units”. Except as provided in subparagraphs 3(b) and 3(c), if the Participant’s termination of employment or service with Ambac (the “Termination Date”) occurs for any reason prior to the last day of the Performance Period, the Participant’s right to all Performance Restricted Stock Units (and

Notwithstanding the provisions of subparagraph 3(a), and other than as set forth in subparagraph 3(c), if the Participant’s Termination Date occurs prior to the last day of the Performance Period by reason of death, Disability (as defined in subparagraph 3(d)), involuntary termination by Ambac other than for Cause (as defined in subparagraph 3(d)) on or after January 1, 2017 or termination by the Participant for Good Reason (as defined in subparagraph 3(d)) on or after January 1, 2017, the Participant shall be deemed to have satisfied the service-based component of the Performance Restricted Stock Units and the Participant (or, in the event of his death, his beneficiary) shall be entitled to receive the number of Earned Performance Units (and any associated Earned Dividend Equivalent Units) that the Participant would have been entitled to receive had his Termination Date not occurred prior to the end of the Performance Period based on actual satisfaction of the Performance Goals; pro-rated to reflect the Participant’s actual service plus twelve (12) months during the Performance Period.

Notwithstanding the provisions of subparagraph 3(a), if the Participant’s Termination Date occurs prior to the last day of the Performance Period (i) by reason of involuntary termination by Ambac other than for Cause or termination by the Participant for Good Reason, in each case within one (1) year following the occurrence of a Change in Control (as defined in subparagraph 3(d)), or (ii) due to the expiration of the Employment Period (as defined in the Employment Agreement between Ambac and the Participant, entered into as of January [__], 2016 (the “Employment Agreement”)), the Participant shall be entitled to receive the number of Earned Performance Units (and any associated Earned Dividend Equivalent Units) that the Participant would have been entitled to receive had his Termination Date not occurred prior to the end of the Performance Period based on actual satisfaction of the Performance Goals.

The terms “Cause,” “Change in Control,” “Disability” and “Good Reason” shall have the meanings specified in the Employment Agreement. Notwithstanding anything in this Agreement, the Incentive Plan or the LTIP to the contrary, any dispute or controversy regarding the existence or occurrence of any of the foregoing terms shall be resolved pursuant to Section 21 of the Employment Agreement.

If, during the Performance Period, a dividend with respect to shares of Common Stock is paid in cash, then as of the dividend payment date the Participant shall be credited with

If, during the Performance Period, a dividend with respect to shares of Common Stock is paid in shares of Common Stock, then as of the dividend payment date the Participant shall be credited with that number of Dividend Equivalent Units equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, multiplied by (ii) the number of Maximum Performance Units plus the number of previously credited Dividend Equivalent Units with respect to such Performance Restricted Stock Units, if any, rounded down to the nearest whole number.

The Earned Performance Units (and associated Earned Dividend Equivalent Units) shall be settled within sixty (60) days following the end of the Performance Period (the “Settlement Date”). Settlement of the Earned Performance Units and Earned Dividend Equivalent Units on the Settlement Date shall be made in the form of shares of Common Stock with one share of Common Stock being issued in settlement of each Earned Performance Unit and each Earned Dividend Equivalent Unit (and cash equal to any fractional share). Upon the settlement of any Earned Performance Unit and associated Earned Dividend Equivalent Units, such Earned Performance Unit and Earned Dividend Equivalent Units shall be cancelled. Any Performance Restricted Stock Units and associated Dividend Equivalent Units outstanding as of the last day of the Performance Period that do not become Earned Performance Units and associated Earned Dividend Equivalent Units shall be automatically cancelled as of the last day of the Performance Period.

and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s separation from service; and

the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.