2008 NOTICE OF 2007 STOCK OPTION AWARD

Exhibit 10.06

Ambac 1997 Equity Plan

2008 NOTICE OF 2007 STOCK OPTION AWARD

Table of Contents

Ambac 1997 Equity Plan

2004 Stock Option Award Agreement

Page 2 of 9

Ambac 1997 Equity Plan

2008 NOTICE OF 2007 STOCK OPTION AWARD

Ambac Financial Group, Inc., a Delaware corporation (the “ Company ”), has adopted the Ambac 1997 Equity Plan, as amended (the “ Plan ”), for the purposes of providing an incentive to selected employees of the Company and its affiliates to remain in its employ and to increase their interest in the success of the Company by providing them with opportunities to increase their proprietary interest in the Company and to receive compensation based upon the Company’s success.

This 2007 Notice of 2006 Stock Option Award (the “ Award Agreement ”) sets forth the terms and conditions of the stock options granted pursuant to the Plan. Annex A of this Award Agreement (“ Annex A ”) names the individual to whom the option is granted (the “ Participant ”) and sets forth the number of shares of common stock of the Company (“ Common Stock ”) subject to the option, the exercise price of such option, the date of grant and the expiration date of such option and the vesting schedule applicable thereto.

This Award Agreement and the option granted hereby shall be subject to the Plan, the terms of which are incorporated herein by reference, and in the event of any conflict or inconsistency between the Plan and this Award Agreement, the Plan shall govern. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan, a copy of which has been furnished to the Participant.

Subject to the conditions contained herein and in the Plan, the Company grants to the Participant, as of the date of grant indicated on Annex A (the “ Date of Grant ”), an option (the “ Option ”) to purchase the number of shares of Common Stock specified on Annex A, at an exercise price (the “ Exercise Price ”) specified on Annex A. The shares of Common Stock issuable upon exercise of the Option are from time to time referred to herein as the “ Option Shares .” The grant of an Option shall impose no obligation on the part of the Participant to exercise the Option. The Option shall vest and be exercisable as hereinafter provided.

The Option is granted subject to the following terms and conditions:

(a) Vesting; Exercisability. The Option shall vest and become exercisable in accordance with the vesting schedule set forth on Annex A, unless the Option has earlier vested or been forfeited in accordance with the terms hereof.

(b) Term of the Option . The Option shall terminate and no longer be exercisable on the earlier of (i) the seventh anniversary of the Date of Grant or (ii) the date specified for termination of the Option in Sections 4(a), 4(b) and 4(c) below; provided, however, if the termination date falls on a date which the Participant is prohibited by Corporation policy in effect on such date, from engaging in transactions in the Corporation’s securities, such termination date shall be extended to the first date that the Participant is permitted to engage in transactions in the Corporation’s securities under such Corporation policy.

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(c) Notice of Exercise . Subject to Sections 3(d), 3(f) and 4 hereof, the Participant may exercise all or any portion of the Option ( to the extent vested ) by giving notice of exercise to the Company or the Company’s agent, provided, however, that no less than 10 Option Shares may be purchased upon any exercise of the Option unless the number of Option Shares purchased at such time is the total number of Option Shares in respect of which the Option is then exercisable, and provided, further, that in no event shall the Option be exercisable for a fractional share. The date of exercise of an Option shall be the later of (i) the date on which the Company or the Company’s agent receives such notice or (ii) the date on which the conditions provided in Sections 3(d) and 3(f) are satisfied. Notwithstanding any other provision of this Award Agreement, the Participant may not exercise the Option, whether in whole or in part, and no Option Shares will be issued by the Company in respect of any such attempted exercise, at any time when such exercise is prohibited by Company policy then in effect concerning transactions by the Participant in the Company’s securities.

(d) Payment . Prior to the issuance of a certificate pursuant to Section 3(g) hereof evidencing the Option Shares in respect of which all or a portion of the Option shall have been exercised, the Participant shall have paid to the Company the Exercise Price for all Option Shares purchased pursuant to the exercise of such Option. Payment may be made by personal check, bank draft or postal or express money order ( such modes of payment are collectively referred to as “ cash ”) payable to the order of the Company in U.S. dollars. Payment may also be made in mature shares of Common Stock owned by the Participant, or in any combination of cash or such mature shares as the Committee in its sole discretion may approve. Such shares shall be valued at their Fair Market Value as of the date of exercise. Payment of the Exercise Price in mature shares of Common Stock owned by the Participant shall be made by delivering to the Company the share certificate(s) representing the required number of shares, with the Participant signing his or her name on the back, or by attaching executed stock powers ( with the signature of the Participant guaranteed in either case ); payment of the exercise price in mature shares of Common Stock owned by the Participant may also be made through constructive surrender, by submission of an attestation of ownership in the form approved by the Company and with such signatures or other guarantees as may be required by the Company. The Company may also permit the Participant to pay for such Option Shares by directing the Company to withhold shares of Common Stock that would otherwise be received by the Participant, pursuant to such rules as the Committee may establish from time to time. In the discretion of the Committee, and in accordance with rules and procedures established by the Committee ( or by any person to whom authority to establish such rules and procedures shall have been delegated by the Committee ), the Participant may be permitted to make a “cashless” exercise of all or a portion of the Option.

(e) Stockholder Rights . The Participant shall have no rights as a stockholder with respect to any shares of Common Stock issuable upon exercise of the Option until the Participant shall become the holder of record thereof, and no adjustment shall be made for dividends or distributions or other rights in respect of any share for which the record date is prior to the date upon which the Participant shall become the holder of record thereof.

(f) Limitation on Exercise . The Option shall not be exercisable unless the offer and sale of Common Stock pursuant thereto has been registered under the Securities Act of 1933, as amended (the “ 1933 Act ”), and qualified under applicable state “ blue sky ” laws or the Company has determined that an exemption from registration under the 1933 Act and from qualification under such state “blue sky” laws is available.

(g) Issuance of Shares . Subject to the foregoing conditions, as soon as is reasonably practicable after its receipt of a proper notice of exercise and payment of the Exercise Price for the number of shares with respect to which the Option is exercised, the Company either (i) shall deliver or cause to be delivered to the Participant (or to such person to whom the Option has been transferred pursuant to Section 5 hereof; or following the Participant’s death, to such other person entitled to exercise the Option ), at the principal office of the Company or at such other location as may be acceptable to the Company and the Participant ( or such other person ), one or more stock certificates in the name of the Participant ( or of the person or persons to whom such option was transferred by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order) for the appropriate number of shares of Common Stock issued in connection with such exercise or (ii) shall transfer the appropriate number of shares of Common Stock issued in connection with such exercise to the brokerage account designated by the Participant to the Company in writing prior to exercise. Such shares shall be fully paid and nonassessable.

(h) Non-qualified Status of the Option . The Option granted hereby is not intended to qualify, and shall not be treated, as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”).

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(i) Cancellation . Notwithstanding any other provision of this Award Agreement, the Committee may cancel all or any unexercised portion of the Option, whether or not vested, if at any time the Participant initiates or becomes a party to any lawsuit or other legal action in any federal or state court in which the Participant seeks damages or injunctive or other equitable relief from or against the Company, any of its Subsidiaries or any of its officers, employees or directors in connection with any claim arising from or relating to the Participant’s employment with the Company or any of its Subsidiaries or the termination of such employment (and regardless of whether any such termination is the result of the Participant’s voluntary resignation or retirement or of the involuntary termination of the Participant’s employment by the Company or one of its subsidiaries). This Section 3(i) is not intended as a waiver by the Participant of any claims the Participant may have against the Company, any of its subsidiaries or any of its officers, employees or directors. Instead, it provides for the consequences specified in the second preceding sentence in the event the Participant engages in the conduct described therein.

(j) Acceptance of Award Terms . Notwithstanding any other provision of this Award Agreement, the Participant shall have no further rights in the Option represented by this Award Agreement, and this Award Agreement and the Option represented thereby shall automatically be cancelled, unless the Participant accepts the terms and conditions of the grant by signing this Award Agreement in the space provided for below and returning a signed copy of this award agreement to the Company’s Human Resources Department, or by electronically acknowledging receipt and acceptance of the terms of this Award Certificate in the manner indicated to the Participant by the Company, in either case no more than [            ] business days after the Date of Grant.

(k) Notice Period . By the Participant’s acceptance of the Option and the terms of this Award Agreement in the manner provided for in Section 3(j), the Participant agrees to provide the Company or the Subsidiary that employs the Participant with at least three months advance written notice (the “Minimum Notice ” ) prior to termination of employment. Notwithstanding any other provision of this Award Agreement, the Committee may cancel all or any unexercised portion of the Option, whether or not vested, if the Participant resigns his or her employment with the Company and its Subsidiaries without having provided the Company or the Subsidiary that employs the Participant with the Minimum Notice. During the period covered by the Minimum Notice (the “ Notice Period ”), the Participant (i) shall remain employed by the Company and its Subsidiaries and receive base salary and certain benefits, but will not accrue any rights to a bonus, and (ii) shall not commence employment with any other employer or directly or indirectly induce or solicit any client of the Company or any of its subsidiaries to terminate or modify its relationship with any of them.

(a) General . Subject to Section 4(c) hereof, if the Participant’s employment with the Company and its Subsidiaries terminates for any reason other than death or Permanent Disability (as defined herein ) prior to the satisfaction of any vesting period requirement under Section 3(a) hereof, the unvested portion of the Option shall be forfeited to the Company, and the Participant shall have no further right or interest therein, unless the Committee in its sole discretion shall determine otherwise, provided , however , that in the case of a termination of employment mutually agreed to by the Participant and the Company ( or the relevant employer Subsidiary ), but not in the case of a termination for Cause ( as defined herein ), if the Participant (A) signs a waiver and a release, in the form requested by the Company, irrevocably waiving any and all claim