FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

EXHIBIT 10.40

E XECUTION C OPY

U.S. $400,000,000

FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

Dated as of July 30, 2007

Among

AMBAC FINANCIAL GROUP, INC. and

AMBAC ASSURANCE CORPORATION,

as Borrowers,

CERTAIN COMMERCIAL LENDING INSTITUTIONS,

as Lenders,

CITIBANK, N.A.,

as Administrative Agent,

THE BANK OF NEW YORK and

KEYBANK, NATIONAL ASSOCIATION,

as Co-Syndication Agents,

HSBC BANK USA, N.A. and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Co-Documentation Agents,

and

CITIGROUP GLOBAL MARKETS INC.,

as Sole Lead Arranger and Sole Book Runner

TABLE OF CONTENTS

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FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of July 30, 2007 (this “ Agreement ”) among AMBAC FINANCIAL GROUP, INC., a Delaware corporation (“ Ambac Financial ”), AMBAC ASSURANCE CORPORATION, a Wisconsin stock insurance corporation (“ Ambac Assurance ” and, together with Ambac Financial, the “ Borrowers ”), the banks, financial institutions and other institutional lenders listed on the signature pages hereof (the “ Initial Lenders ”) and CITIBANK, N.A. (“ Citibank ”), as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”).

The Borrowers, certain banks and Citibank, as administrative agent, are parties to a Revolving Credit Agreement dated as of July 28, 2005 (as amended by Amendment No. 1 thereto dated as of July 28, 2006, the “ Existing Credit Agreement ”). The parties hereto desire to amend the Existing Credit Agreement in certain respects and to restate in its entirety the Existing Credit Agreement as so amended, and, accordingly, the parties hereto agree that the Existing Credit Agreement shall, effective on the Effective Date (as defined below), be amended and restated to read in its entirety as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01 Certain Defined Terms .

As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ ABC Securities ” means securities issued by a Finance Trust representing an undivided beneficial interest in assets acquired by a Finance Trust from Ambac Assurance with the net proceeds of such issuance.

“ Additional Commitment Agreement ” has the meaning specified in Section 2.17(c).

“ Additional Commitment Lender ” has the meaning specified in Section 2.17(c).

“ Administrative Agent ” has the meaning specified in the preamble.

“ Administrative Agent’s Account ” means, with respect to any Currency, the account of the Administrative Agent for such Currency designated in Schedule II hereto or as otherwise designated by it as such account for such Currency by notice to the Lenders and the Borrowers; provided that any such account shall at all times be located in either the United States or the United Kingdom.

“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“ Advance ” has the meaning specified in Section 2.01.

“ Affected Person ” has the meaning specified in Section 2.18.

“ Affiliate ” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

“ Agreement ” has the meaning specified in the preamble.

“ Aleutian ” means Aleutian Investments LLC, a Delaware limited liability company.

“ Alternate Currency ” means, at any time, Euros or Sterling; provided that, at such time, such Currency is available to be borrowed in the London interbank deposit market and is freely convertible into Dollars.

“ Alternate Currency Equivalent ” means, with respect to any amount denominated in Dollars on any date, the amount of an Alternate Currency that would be required to purchase such amount of Dollars, as determined by the Administrative Agent, at the spot selling rate at which Citibank offers to sell Dollars for such Alternate Currency, at approximately 11:00 A.M., London time, for delivery two Business Days thereafter, determinations thereof made in good faith by the Administrative Agent to be conclusive and binding on the parties in the absence of manifest error.

“ Ambac Assurance ” has the meaning specified in the preamble.

“ Ambac Financial ” has the meaning specified in the preamble.

“ Applicable Lending Office ” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Base Rate Advance and such Lender’s Eurocurrency Lending Office in the case of a Eurocurrency Rate Advance.

“ Applicable Margin ” means, as of any date, a percentage per annum determined by reference to the Financial Strength Rating in effect on such date as set forth below:

provided that upon the occurrence and during the continuance of any Event of Default, the Applicable Margin determined as provided above shall be increased by 2% per annum.

“ Asset Disposition ” has the meaning specified in Section 5.02(c).

“ Assignment and Acceptance ” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit C hereto.

“ Base Rate ” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:

(a) the rate of interest announced publicly by Citibank in New York City from time to time as Citibank’s base rate; and

(b) the Federal Funds Rate plus 0.5% per annum.

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“ Base Rate Advance ” means an Advance that bears interest as provided in Section 2.06(a)(i).

“ Borrowers ” has the meaning specified in the preamble.

“ Borrowing ” means a borrowing consisting of Advances of the same Type made to a Borrower on the same day by the Lenders.

“ Business Day ” means any day (a) on which commercial banks are not authorized or required by law to close in New York City, and (b) if such day relates to (i) any Eurocurrency Rate Advance denominated in Dollars, a day that is also a London Banking Day, (ii) if such day relates to any Advance denominated in Sterling, a day also on which foreign exchange trading is carried out in the London interbank market and on which banks are open in London and (iii) if such day relates to any EURIBOR Advance a day on which foreign exchange trading is carried out in the London interbank market and that is also a Target Operating Day and, if applicable, a day on which foreign exchange trading is carried out in the Brussels interbank market.

“ Change of Control ” means any of the following events:

(a) Ambac Financial shall (i) cease to own, beneficially and of record, directly or indirectly, at least 51% of the shares of capital stock of Ambac Assurance (other than directors’ qualifying shares) or (ii) cease to have the ability to elect a majority of the board of directors of Ambac Assurance; or

(b) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable, except that for purposes of this paragraph (b) such person or group shall be deemed to have “beneficial ownership” of all shares that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), other than any “person” or “group” that is a wholly-owned Subsidiary of either Borrower, is or becomes the “beneficial owner” (as such term is used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly or indirectly, of more than 30% of the aggregate voting power of all Voting Stock of Ambac Financial.

“ Citibank ” has the meaning specified in the preamble.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Commitment ” has the meaning specified in Section 2.01.

“ Commitment Date ” has the meaning specified in Section 2.16.

“ Commitment Termination Date ” means the earlier of (a) July 30, 2012, as the same may be extended on and subject to the terms and conditions of this Agreement, and (b) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01; provided that if such day is not a Business Day, the Commitment Termination Date shall be the immediately preceding Business Day.

“ Compliance Certificate ” means a certificate duly completed and executed by a Responsible Officer of Ambac Financial, substantially in the form of Exhibit D hereto.

“ Consolidated ” refers to the consolidation of accounts in accordance with GAAP.

“ Contingent-Capital Securities ” means notes or securities so long as:

(a) at the time of any relevant determination under this Agreement such notes or securities are classified as “soft capital” or “contingent capital” in accordance with then-applicable methodology by Moody’s and S&P;

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(b) such notes or securities are issued by either Borrower or any Subsidiary thereof, or by a special purpose vehicle, under one or more facilities that permit such issuer or any Subsidiary thereof or, if such issuer is a special purpose vehicle, either Borrower or any Subsidiary thereof to draw funds at the discretion of such Person or upon the occurrence or existence of any event or condition specified therein; and

(c) the proceeds of which are (i) deposited into a segregated account in the name of such issuer, (ii) accessible from such account in accordance with the terms of a put option, capital contribution or other similar agreement or facility between the issuer thereof and either Borrower or any Subsidiary thereof, as applicable, and (iii) withdrawn from such account solely to (A) acquire or purchase investments that are credited to such account, (B) contribute capital to Ambac Assurance or (C) to repay such notes or securities and pay interest thereon and other amounts payable with respect thereto.

“ Contingent Liability ” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person’s obligation under any Contingent Liability at any time shall (subject to any limitation set forth therein) be deemed to be the outstanding amount at such time (or, except in the case of the Indebtedness or obligation guaranteed thereby being unutilized credit lines for Derivative Transactions, if larger, the maximum amount) of the Indebtedness or obligation guaranteed thereby.

“ Controlled Group ” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with either Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.

“ Convert ”, “ Conversion ” and “ Converted ” each refers to a conversion of Base Rate Advances into Eurocurrency Rate Advances denominated in Dollars, or of Eurocurrency Rate Advances denominated in Dollars into Base Rate Advances, pursuant to Section 2.07 or 2.08.

“ Credit-Linked Notes ” means notes or other securities issued by either Borrower or any Subsidiary thereof (a) containing provisions providing that the payment of principal thereof, or interest thereon, may be altered if certain events occur relating to a Person other than the issuer thereof, (b) that are not treated as short term debt or long term debt for GAAP purposes and (c) that are accorded risk transfer credit by Moody’s and S&P at the time of issuance thereof.

“ Currency ” means Dollars or any Alternate Currency.

“ Current Commitment Termination Date ” has the meaning specified in Section 2.17(a).

“ Debt ” of any Person means, without duplication, all Indebtedness of such Person of any type described in clause (a), (b) or (c) of the definition of “Indebtedness” and all Contingent Liabilities of such Person in respect of any Indebtedness of any other Person of any such type.

“ Declining Lender ” has the meaning specified in Section 2.17(b).

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“ Default ” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

“ Derivative Transactions ” means, with respect to any Person, interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate options, interest rate futures, foreign currency swap agreements, foreign currency cap agreements, foreign currency collar agreements, foreign currency options, foreign currency futures and all other similar agreements or arrangements and all liabilities of such Person thereunder.

“ Dollar Equivalent ” means, with respect to any amount denominated in an Alternate Currency on any date, the amount of Dollars that would be required to purchase such amount of such Alternate Currency, as determined by the Administrative Agent, at the spot selling rate at which Citibank offers to sell such Alternate Currency for Dollars, at approximately 11:00 A.M., London time, for delivery two Business Days thereafter, determinations thereof made in good faith by the Administrative Agent to be conclusive and binding on the parties in the absence of manifest error.

“ Dollars ” and “ $ ” mean the lawful money of the United States of America.

“ Domestic Lending Office ” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” in its Administrative Questionnaire, or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Administrative Agent.

“ Effective Date ” means the first date on which the Administrative Agent notifies each Borrower and the Initial Lenders that all of the conditions set forth in Section 3.01 have been satisfied.

“ Eligible Assignee ” means (a) the Federal Reserve Bank of the United States and (b) an Eligible Transferee; provided , however , that neither Borrower nor an Affiliate of the Borrowers shall qualify as an Eligible Assignee.

“ Eligible Transferee ” means a commercial bank or other financial institution having the Required Lender Rating.

“ EMU ” means economic and monetary union as contemplated in the Treaty on European Union.

“ EMU Legislation ” means legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency (whether known as the Euro or otherwise), being in part the implementation of the third stage of EMU.

“ Equity Issuance ” means any issuance or sale (including, without limitation, as a result of a conversion or exchange of debt securities) by either Borrower or any of their Subsidiaries of equity securities issued by either Borrower or any of their Subsidiaries.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ EURIBOR Advance ” means any Eurocurrency Rate Advance which is denominated in Euros and bears interest at a rate determined in accordance with clause (b) of the definition of Eurocurrency Rate in this Section 1.01.

“ Eurocurrency Lending Office ” means, with respect to any Lender, the office of such Lender specified as its “Eurocurrency Lending Office” in its Administrative Questionnaire (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Administrative Agent.

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“ Eurocurrency Liabilities ” has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“ Eurocurrency Rate ” means:

(a) for any Interest Period for each Eurocurrency Rate Advance denominated in Dollars or Sterling comprising part of the same Borrowing, the rate per annum equal to the rate for deposits in such Currency having a maturity closest to such Interest Period which appears on the relevant Screen as of 11:00 A.M., London time, on the day two London Banking Days prior to the first day of such Interest Period ( provided that, if such rate does not appear on the relevant Screen for such Interest Period, the Eurocurrency Rate for that Interest Period will be the arithmetic average of quotations obtained by the Administrative Agent from the Reference Banks for the rate at which deposits in such Currency having a maturity closest to such Interest Period are offered by the principal London office of each such Reference Bank at approximately 11:00 A.M., London time, on the day that is two London Banking Days preceding the first day of such Interest Period to other prime banks in the London interbank market in a principal amount of $5,000,000 (or, in the case of a Eurocurrency Rate Advance denominated in Sterling, the Alternate Currency Equivalent thereof in Sterling computed as of the day two London Banking Days prior to the first day of such Interest Period, rounded to the nearest 1,000 units of such Alternate Currency)); and

(b) for any Interest Period for each EURIBOR Advance comprising part of the same Borrowing, the rate per annum equal to the interbank offered rates for deposits having a maturity closest to such Interest Period which appears on the relevant Screen as of 11:00 A.M., London time, on the day two London Banking Days prior to the first day of such Interest Period; provided that, if such rate does not appear on such Screen for such Interest Period (or, if such Screen shall cease to be publicly available or if the information contained on such Screen, in the Administrative Agent’s reasonable judgment, shall cease accurately to reflect such interbank offered rates for deposits in Euros within the member states of the European Union which are Participating Member States, as reported by any publicly available source of similar market data selected by the Administrative Agent that, in the Administrative Agent’s reasonable judgment, accurately reflects such interbank offered rates for deposits in Euros within the member states of the European Union which are Participating Member States), the Eurocurrency Rate for that Interest Period will be the arithmetic average of quotations obtained by the Administrative Agent from the Reference Banks for the rate at which deposits in Euros having a maturity closest to such Interest Period are offered by the principal office of each of the Reference Banks in (i) London to prime banks in the London interbank market at approximately 11:00 A.M., London time, or (ii) at the request of a Borrower, Brussels to prime banks in the interbank market within the member states of the European Union which are Participating Member States at approximately 12:00 noon (Brussels time), in each case on the day that is two Business Days before the first day of that Interest Period in a principal amount equal to the Alternate Currency Equivalent in Euros computed as of the day two Business Days before the first day of such Interest Period (rounded to the nearest 1,000 Euros) of $5,000,000.

“ Eurocurrency Rate Advance ” means an Advance that bears interest as provided in Section 2.06(a)(ii).

“ Eurocurrency Rate Reserve Percentage ” means, for any Interest Period for all Eurocurrency Rate Advances comprising part of the same Borrowing, the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Rate Advances is determined) having a term equal to such Interest Period.

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“ Euro ” means the single currency of Participating Member States of the European Union.

“ Events of Default ” has the meaning specified in Section 6.01.

“ Existing Credit Agreement ” has the meaning specified in the preamble.

“ Extended Commitment Termination Date ” has the meaning specified in Section 2.17(a).

“ Facility Fee Rate ” means, as of any date, a percentage per annum determined by reference to the Financial Strength Rating in effect on such date as set forth below:

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Finance Trust ” means a trust formed for the purpose of issuing ABC Securities, using the proceeds of such issuance to purchase assets from Ambac Assurance and entering into a Put Agreement with Ambac Assurance.

“ Financial Strength Rating ” means, as of any date, the rating that has been most recently announced by either S&P or Moody’s, as the case may be, for the financial strength or insurance financial strength, as the case may be, of Ambac Assurance. For purposes of the foregoing, (a) if the ratings established by S&P and Moody’s shall fall within different levels, the Applicable Margin, the Facility Fee Rate and the Utilization Fee Rate shall be based upon the lower rating; (b) if any rating established by S&P or Moody’s shall be changed, such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; and (c) if S&P or Moody’s shall change the basis on which ratings are established, each reference to the Financial Strength Rating announced by S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as the case may be.

“ GAAP ” has the meaning specified in Section 1.03.

“ Hybrid Securities ” means notes or other securities (other than Contingent-Capital Securities or Credit-Linked Notes) issued by either Borrower or any Subsidiary thereof that are contractually subordinated to other Debt of such issuer and the payment of interest thereon may be subject to optional or mandatory deferral under the terms thereof or under laws, rules or regulations applicable to such issuer, which notes or other securities are accorded some degree of equity treatment by S&P at the time such notes or other securities are issued in accordance with then-applicable methodology.

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“ Hybrid Securities Amount ” means, with respect to any Hybrid Securities, the amount (which amount may be a portion of the aggregate amount) of such Hybrid Securities at the time of issuance thereof that received equity classification by S&P.

“ Increase Date ” has the meaning specified in Section 2.16.

“ Increase Request ” has the meaning specified in Section 2.16.

“ Increasing Lender ” has the meaning specified in Section 2.16.

“ Indebtedness ” of any Person means, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker’s acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as capitalized lease liabilities; (d) net obligations of such Person under all Derivative Transactions (other than Derivative Transactions that are designated by such Person as hedges in accordance with GAAP); (e) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person’s business); (f) all obligations (excluding prepaid interest thereon) of any other Person of any type described in any of clauses (a) through (e) of this definition which is secured by a Lien on property owned by such Person (including obligations arising under conditional sales or other title retention agreements), even though such Person has not assumed or become liable for the payment of such obligations of such other Person; and (g) all Contingent Liabilities of such Person; provided , however , that the following shall not constitute Indebtedness of either Borrower or any Subsidiary of either Borrower: (i) obligations under securities reverse repurchase agreements of either Borrower or any Subsidiary of either Borrower as the buyer of securities to deliver such securities to the seller thereunder, (ii) obligations of an insurance company under insurance policies in the nature of financial guarantees and financial guarantees, in each case from time to time issued in the ordinary course of such insurance company’s business, (iii) obligations of any Subsidiary of Ambac Financial in the business of issuing investment contracts, under Specified Investment Contracts issued by such Subsidiary, (iv) obligations of such Person under any Specified Swaps and Specified Hedges, (v) obligations of Ambac Assurance to pay Put Premiums pursuant to any Put Agreement, (vi) obligations of either Borrower or any Subsidiary of either Borrower under or in respect of any preferred stock issued, or to be issued, by such Borrower or Subsidiary and (vii) obligations of Persons which are Consolidated or subject to be Consolidated on the financial statements of Ambac Financial, Ambac Assurance and their Subsidiaries according to the provisions of Financial Accounting Standards Board Interpretation No. 46 (R) (Consolidation of Variable Interest Entities). For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner.

“ Interest Period ” means, for each Eurocurrency Rate Advance, the period commencing on (and including) the date of such Eurocurrency Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurocurrency Rate Advance and ending on (but excluding) the final day of the period selected by either Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the final of the next preceding Interest Period and ending on the final day of the period selected by such Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, or 9 or 12 months if available to all Lenders, as such Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided , however , that:

(a) any Interest Period with respect to any Eurocurrency Rate Advance that would otherwise end after the Commitment Termination Date shall end on the Commitment Termination Date;

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(b) whenever the final day of any Interest Period would otherwise occur on a day other than a Business Day, the final day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided , however , that, if such extension would cause the final day of such Interest Period to occur in the next succeeding calendar month, the final day of such Interest Period shall occur on the next preceding Business Day;

(c) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the final Business Day of such succeeding calendar month; and

(d) neither Borrower shall be permitted to select Interest Periods to be in effect at any one time with respect to Eurocurrency Rate Advances made to such Borrower denominated in the same Currency which have expiration dates occurring on more than five different dates.

“ Juneau ” means Juneau Investments LLC, a Delaware limited liability company.

“ Lenders ” means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 2.16, 2.17, 2.18 or 8.07.

“ Leverage Ratio ” means, at any time, the ratio of (a) Total Debt at such time to (b) Total Capital at such time.

“ Lien ” means any security interest, mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment or performance of an obligation, interest of any vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement or other priority or preferential arrangement of any kind or nature whatsoever; provided , however , that “Lien” shall not include (a) any reserve established in respect of insurance obligations on the books of either Borrower or any of its Subsidiaries, provided that such reserve shall not create any preferential claim or priority on any asset of such Person and (b) any reserve established in respect of Specified Swaps on the books of either Borrower or any of its Subsidiaries, provided that such reserve shall not create any preferential claim or priority on any asset of such Person.

“ Loan Documents ” means this Agreement and the Notes.

“ Local Time ” means (a) with respect to any Advance denominated, or any payment to be made, in Dollars, New York City time, and (b) with respect to any Advance denominated, or any payment to be made, in an Alternate Currency, the local time in the Principal Financial Center for such Currency.

“ London Banking Day ” means a day on which dealings in deposits in Dollars are carried on in the London interbank market.

“ Material Adverse Change ” means any material adverse change in the business, financial condition or operations of Ambac Financial and its Subsidiaries, taken as a whole.

“ Material Adverse Effect ” means a material adverse effect (a) on the business, financial condition or operations of Ambac Financial and its Subsidiaries, taken as a whole, (b) on the rights and remedies of the Administrative Agent or any Lender under any Loan Document or (c) on the ability of either Borrower to perform its obligations under any Loan Document.

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“ Material Subsidiary ” means, at any date of determination, any Subsidiary of either Borrower that, together with its Subsidiaries, as of the end of the most recent fiscal year, was the owner of (or, in the case of any Subsidiary that is acquired following such fiscal year end, would have been the owner of) at least 10% of the Consolidated assets of such Borrower and its Subsidiaries at the end of such fiscal year, all as set forth on the most recently available Consolidated financial statements of such Borrower for such fiscal year.

“ MCR Cost ” means the percentage rate per annum calculated by the Administrative Agent in accordance with Schedule III.

“ Moody’s ” means Moody’s Investors Service, Inc., and its successors.

“ Net Proceeds ” means with respect to any Equity Issuance, the gross proceeds received by such Borrower from such Equity Issuance less the amount of all underwriting discounts and commissions and other reasonable costs, fees and expenses paid by such Borrower in connection with such Equity Issuance (including, but not limited to taxes and reasonable fees and expenses paid to attorneys, brokers or other advisors or service providers).

“ Note ” means a promissory note of a Borrower payable to the order of a Lender, substantially in the form of Exhibit A hereto, evidencing the aggregate indebtedness of such Borrower to such Lender resulting from Advances made by such Lender to such Borrower.

“ Notice of Borrowing ” has the meaning specified in Section 2.02.

“ Other Taxes ” has the meaning specified in Section 2.13(b).

“ Participating Member State” means each state so described in any EMU Legislation.

“ Pension Plan ” means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a) (3) of ERISA), and to which either Borrower or any corporation, trade or business that is, along with such Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“ Permitted Liens ” means: (a) Liens for taxes, assessments and governmental charges or levies; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 60 days; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; and (d) encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its intended purposes.

“ Person ” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.

“ Put Agreement ” means an agreement between Ambac Assurance and a Finance Trust pursuant to which Ambac Assurance has the right, at its option, to compel a Finance Trust to purchase preferred stock issued, or to be issued, by Ambac Assurance.

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“ Principal Financial Center ” means (a) New York with respect to Dollars, (b) London with respect to Euros and Sterling and (c) any other financial center agreed to by the Borrowers and the Administrative Agent with respect to any Currency.

“ Put Premium ” means a premium payable by Ambac Assurance under a Put Agreement.

“ Reference Banks ” means Citibank, The Bank of New York and KeyBank, National Association (and any successors thereof).

“ Register ” has the meaning specified in Section 8.07(c).

“ Relevant Anniversary ” has the meaning specified in Section 2.17(a).

“ Required Lenders ” means, at any time, Lenders having at least a majority in interest of the Commitments or, if no Commitments are then outstanding, Lenders owed at least a majority in interest of the then aggregate unpaid principal amount of all outstanding Advances (computed, in the case of Advances denominated in an Alternate Currency, as the Dollar Equivalent thereof as of such time).

“ Required Lender Rating ” means an unsecured short-term senior debt rating of not less than A-1 from Moody’s and P-1 from S&P.

“ Reserve Requirement ” means, for any Interest Period for all Eurocurrency Rate Advances comprising part of the same Borrowing, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against “Eurocurrency Liabilities” (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (a) any category of liabilities that includes deposits by reference to which the Eurocurrency Rate is to be determined or (b) any category of extensions of credit or other assets that includes Eurocurrency Rate Advances.

“ Responsible Officer ” means, with respect to a Borrower, the president, chief financial officer or treasurer of such Borrower.

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

“ Screen ” means:

(a) in relation to the Eurocurrency Rate for Advances denominated in Dollars or Sterling, Reuters Page LIBOR01 or LIBOR02, as the case may be (or any successor or substitute page or service providing rate quotations comparable to those currently provided on such page, as determined by the Administrative Agent from time to time for the purposes of providing quotations of interest rates applicable to Advances denominated in such Currency in the London interbank market); and

(b) in relation to the Eurocurrency Rate for Advances denominated in Euros, Reuters Page EURIBOR01 (or any successor or substitute page or service providing rate quotations comparable to those currently provided on such page, as determined by the Administrative Agent from time to time for the purposes of providing quotations of interest rates applicable to Advances denominated in Euros within the member states of the European Union which are Participating Member States).

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“ Solvent ” means, with respect to any Person on a particular date, that (a) the fair value of the total assets of such Person is greater than the total amount of the liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, and (d) such Person is not engaged in business, and is not about to engage in business, for which such Person’s property would constitute unreasonably small capital.

“ Specified Hedge ” means any derivative transaction, securities repurchase agreement or other similar agreement or arrangement entered into by any Person that, in each case, is entered into as a hedge.

“ Specified Investment Contract ” means any investment contract entered into by Ambac Assurance or any Subsidiary of Ambac Financial in the ordinary course of Ambac Assurance’s or such Subsidiary’s respective businesses.

“ Specified Swap ” means any interest rate swap agreement or other similar agreement or arrangement entered into by any Person, as to which interest rate risk is substantially hedged.

“ Sterling ” means U.K. Pounds Sterling, the lawful currency of the United Kingdom.

“ Subsidiary ” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding Voting Stock of such corporation, (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries, or by one or more of such Person’s other Subsidiaries.

“ Target Operating Day ” means any day that is not (a) a Saturday or Sunday, (b) Christmas Day or New Year’s Day or (c) any other day on which the Trans-European Automated Real-time Gross Settlement Express Transfer system (or any successor settlement system) is not scheduled to operate (as determined by the Administrative Agent).

“ Taxes ” has the meaning specified in Section 2.13(a).

“ Total Capital ” means, at any time, the sum of (a) the stockholders’ equity of Ambac Financial and its Subsidiaries (other than Aleutian and Juneau), on a Consolidated basis (excluding unrealized gains on investments and unrealized losses on investments), computed as of the end of the most recently completed fiscal quarter of Ambac Financial (or, if such time is on the final day of any fiscal quarter of Ambac Financial, as of such day) plus (b) Total Debt as of such time plus (c) the aggregate Hybrid Securities Amounts as of such time (excluding that portion, if any, of such aggregate Hybrid Securities Amounts that exceeds 15% of Total Capital before giving effect to such exclusion, computed as of the end of the most recently completed fiscal quarter of Ambac Financial (or, if such time is on the final day of any fiscal quarter of Ambac Financial, as of such day)).

“ Total Debt ” means, at any time, the aggregate amount of Debt of Ambac Financial and its Subsidiaries (other than Aleutian and Juneau), on a Consolidated basis, excluding (a) Contingent-Capital Securities, (b) Credit-Linked Notes and (c) that portion of Debt in respect of Hybrid Securities that is included as Total Capital under clause (c) of the definition of “Total Capital” in this Section 1.01, in each case computed as of the end of the most recently completed fiscal quarter of Ambac Financial (or, if such time is on the final day of any fiscal quarter of Ambac Financial, as of such day).

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“ Type ” refers to, for any Advance, its nature as a Base Rate Advance or Eurocurrency Rate Advance.

“ Utilization Fee Rate ” means, for any day, a percentage per annum determined by reference to the Financial Strength Rating in effect on such date as set forth below:

“ Voting Stock ” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

“ Welfare Plan ” means a “welfare plan”, as such term is defined in section 3(1) of ERISA.

SECTION 1.02 Computation of Time Periods . In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

SECTION 1.03 Accounting Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e) (“ GAAP ”).

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01 The Advances . (a) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances in Dollars or in any Alternate Currency to each Borrower under this Section 2.01 (each, an “ Advance ”) from time to time on any Business Day during the period from the Effective Date until the Commitment Termination Date in an aggregate principal amount (computed as of the second Business Day next preceding the Business Day on which such Advance is made or is scheduled to be made, in the case of Advances denominated in an Alternate Currency, as the Dollar Equivalent of the aggregate principal amount of all Advances denominated in an Alternate Currency outstanding or to be made outstanding as of the Business Day on which such Advance is made or is scheduled to be made) at any one time outstanding up to but not exceeding (in the aggregate for both Borrowers) the amount set forth opposite such Lender’s name on Schedule I or, if such Lender has entered into any Additional Commitment Agreement or Assignment and Acceptance, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 or increased pursuant to Section 2.16 or 2.17 (such Lender’s “ Commitment ”).

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(b) Each Borrowing shall be in an aggregate amount of $15,000,000 or an integral multiple of $1,000,000 in excess thereof or, in the case of a Borrowing denominated in an Alternate Currency, the Alternate Currency Equivalent thereof in such Alternate Currency (computed as of the second Business Day next preceding the date of such Borrowing), rounded to the nearest 1,000 units of such Alternate Currency, and shall consist of Advances of the same Type made on the same day in the same Currency by the Lenders ratably according to their respective Commitments. Within the limits of each Lender’s Commitment, each Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.09 and reborrow under this Section 2.01.

(c) The Administrative Agent shall maintain a written record of each Advance made by a Lender to a Borrower, and of each repayment of principal of, and payment of interest on, such Advance made by such Borrower for the account of such Lender. Upon the prior written request of any Lender delivered by such Lender to the Administrative Agent and the Borrowers, each of the Borrowers shall execute and deliver to such Lender a Note to the order of such Lender.

(d) No Base Rate Advance may be borrowed in a Currency other than Dollars.

SECTION 2.02 Making the Advances . (a) Each Borrowing shall be made on notice, given not later than 12:00 Noon (New York City time) (or, in the case of a Borrowing in an Alternate Currency, London time) on the third Business Day next preceding the date of such Borrowing in the case of a Borrowing consisting of Eurocurrency Rate Advances, or 11:30 A.M. (New York City time) on the Business Day of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by either Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a “ Notice of Borrowing ”) shall be by telephone, confirmed immediately in writing or by telecopier, in substantially the form of Exhibit B, specifying therein the requested (i) date of such Borrowing, (ii) Currency and Type of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing and (iv) in the case of a Borrowing consisting of Eurocurrency Rate Advances, initial Interest Period for each such Advance. Each Lender shall, before 10:00 A.M. (Local Time) on the date of such Borrowing in the case of a Borrowing consisting of Eurocurrency Rate Advances, or 1:00 P.M. (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Base Rate Advances, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent’s Account for the relevant Currency, in same day funds, such Lender’s ratable portion of such Borrowing. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will, not later than 11:00 A.M. (Local Time) on the date of such Borrowing in the case of a Borrowing consisting of Eurocurrency Rate Advances, or 2:00 P.M. (New York City time) on the date of such Borrowing in the case of a Borrowing consisting of Base Rate Advances, make such funds available to such Borrower at the Administrative Agent’s address referred to in Section 8.02.

(b) Anything in subsection (a) above to the contrary notwithstanding, neither Borrower may select Eurocurrency Rate Advances for any Borrowing if the obligation of the Lenders to make Eurocurrency Rate Advances shall then be suspended pursuant to Section 2.07 or 2.11.

(c) In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurocurrency Rate Advances, the Borrower that has requested such Borrowing shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.

(d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such

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Lender’s ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower that has requested such Borrowing on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and such Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of such Borrower, the interest rate applicable at the time to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Advance as part of such Borrowing for purposes of this Agreement.

(e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. The obligation of either Borrower to pay any amount owing by such Borrower to any Lender under this Agreement or any of the Notes may be enforced by such Lender against such Borrower after such amount has become due and payable by such Borrower to such Lender in accordance with the terms of this Agreement or such Note and, to the fullest extent permitted by law, it shall not be necessary for the Administrative Agent or any other Lender to be joined as an additional party in any proceeding to enforce such obligation.

SECTION 2.03 Fees . (a)  Facility Fee . The Borrowers jointly and severally agree to pay to the Administrative Agent for the account of each Lender in Dollars a facility fee, for each day from the Effective Date, if such Lender shall be a party hereto on the Effective Date, or from the effective date specified in the Additional Commitment Agreement or Assignment and Acceptance pursuant to which it became a Lender or from the date it became a Lender pursuant to Section 2.16, 2.17 or 2.18, if such Lender shall become a party hereto after the Effective Date, until the Commitment Termination Date, computed at the Facility Fee Rate for such date on the amount of such Lender’s Commitment, whether or not utilized, for such date; in each case payable in arrears quarterly on the final day of each March, June, September and December, commencing on the first of such dates to occur after the Effective Date, and on the Commitment Termination Date.

(b) Administrative Agent’s Fees . The Borrowers jointly and severally agree to pay to the Administrative Agent for its own account in Dollars such fees as may from time to time be agreed between the Borrowers and the Administrative Agent.

(c) Utilization Fee . The Borrowers jointly and severally agree to pay to the Administrative Agent for the account of each Lender a utilization fee, for each day on which the aggregate outstanding principal amount of the Advances (computed, in the case of any Advance denominated in an Alternate Currency, as of the second Business Day next preceding the Business Day on which such Advance denominated in such Alternate Currency is made, as the Dollar Equivalent of the principal amount of such Advance denominated in such Alternate Currency outstanding on such day) exceeds 50% of the aggregate amount of Commitments, computed at the Utilization Fee Rate for such day on the aggregate unpaid principal amount of the Advances of such Lender to the Borrowers, payable in arrears in the case of each Advance on each day on which a payment of interest is due on such Advance under Section 2.06.

SECTION 2.04 Termination or Reduction of the Commitments . The Borrowers shall have the right, upon at least three Business Days’ notice signed by both Borrowers to the Administrative Agent (which shall promptly notify each Lender), to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $15,000,000 or an integral multiple of $1,000,000 in excess thereof. Once terminated or reduced, the Commitments may not be reinstated, except as provided in Section 2.16 or 2.17.

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SECTION 2.05 Repayment . Each Borrower shall repay to the Administrative Agent for the account of each Lender on the Commitment Termination Date the full principal amount of each Advance of such Lender made to such Borrower and outstanding on the Commitment Termination Date.

SECTION 2.06 Interest . (a) Each Borrower shall pay interest on the unpaid principal amount of each Advance made to such Borrower from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:

(i) Base Rate Advances . While such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of the (A) Base Rate in effect from time to time plus (B) the Applicable Margin for Base Rate Advances, payable in arrears quarterly on the final Business Day of each March, June, September and December, and on the date such Base Rate Advance shall be Converted or paid in full and on the Commitment Termination Date.

(ii) Eurocurrency Rate Advances . While such Advance is a Eurocurrency Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurocurrency Rate for such Interest Period for such Advance plus (B) the Applicable Margin for Eurocurrency Rate Advances, payable in arrears on the final day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurocurrency Rate Advance shall be Converted or paid in full.

(b) Additional Interest on Eurocurrency Rate Advances . Each Borrower shall pay to each Lender, so long as and to the extent such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurocurrency Rate Advance of such Lender made to such Borrower, from the date of such Eurocurrency Rate Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurocurrency Rate for the then existing Interest Period for such Advance from (ii) the rate obtained by dividing such Eurocurrency Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. Each Lender shall, as promptly as practicable after an authorized officer of such Lender having direct and ongoing involvement in the decisions made in respect of this Agreement obtains knowledge of such circumstances and the determination of such Lender to request additional interest from such Borrower pursuant to this Section 2.06(b), provide notice to the Administrative Agent and such Borrower of the circumstances entitling such Lender to such additional interest, which notice shall (A) specify the amount of any such additional interest incurred in connection with such Eurocurrency Rate Advance made to such Borrower and/or to be incurred in connection with Eurocurrency Rate Advances made by such Lender from time to time thereafter to such Borrower and (B) certify that such Lender’s claim for payment of such additional interest is not inconsistent with its treatment of other borrowers that, as a credit matter, are substantially similar to such Borrower and that are subject to comparable provisions in the loan or other credit documentation to which such borrowers are parties; provided , however , that no Lender shall be entitled to additional interest on any Eurocurrency Rate Advance pursuant to this Section 2.06(b) for any Interest Period ending more than 120 days prior to the date that notice of such additional interest is first provided by such Lender to such Borrower. A notice delivered by any Lender to either Borrower pursuant to the terms of this Section 2.06(b) shall be conclusive and binding, absent manifest error. A Lender that delivers a notice under this Section 2.06(b) shall promptly notify the Administrative Agent and such Borrower if the circumstances that gave rise to such notice no longer exist.

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(c) MCR Costs . Each Borrower shall pay additional interest on the unpaid principal amount of each Eurocurrency Rate Advance denominated in an Alternate Currency made to such Borrower, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the MCR Cost (if any) in respect of such Advance, payable on each date on which interest is payable on such Advance.

SECTION 2.07 Interest Rate Determination . (a) The Administrative Agent shall give prompt notice to each Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a).

(b) If either Borrower shall fail to select the duration of any Interest Period for any Eurocurrency Rate Advances to be made to such Borrower in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, such Interest Period shall have a duration of one month.

(c) On the date on which the aggregate unpaid principal amount of Eurocurrency Rate Advances denominated in Dollars having the same Interest Period shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Advances shall automatically, on the final day of the then existing Interest Period therefor, Convert into Base Rate Advances.

(d) Upon the occurrence and during the continuance of any Event of Default, (i) each Eurocurrency Rate Advance denominated in Dollars will automatically, on the final day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to Convert Base Rate Advances into Eurocurrency Rate Advances denominated in Dollars shall be suspended.

SECTION 2.08 Optional Conversion of Advances . Each Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 12:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and 2.11, Convert all Base Rate Advances made to such Borrower comprising the same Borrowing into Eurocurrency Rate Advances denominated in Dollars and Convert all Eurocurrency Rate Advances denominated in Dollars made to such Borrower comprising the same Borrowing into Base Rate Advances; provided , however , that (a) any Conversion of Eurocurrency Rate Advances denominated in Dollars into Base Rate Advances shall be made only on the final day of an Interest Period for such Eurocurrency Rate Advances and (b) no Conversion of any Advances shall result in more separate Interest Periods with respect to Eurocurrency Rate Advances denominated in Dollars made to such Borrower than permitted under the definition of the term “Interest Period” in Section 1.01; and provided, further, that no Base Rate Advance may be Converted to a Eurocurrency Rate Advance denominated in Dollars when any Event of Default has occurred and is continuing. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into Eurocurrency Rate Advances denominated in Dollars, the duration of the initial Interest Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the Borrowers.

SECTION 2.09 Prepayments . (a)  Optional . Each Borrower may, in the case of Eurocurrency Rate Advances upon at least two Business Days’ notice, or, in the case of Base Rate Advances upon same day notice, to the Administrative Agent (which shall promptly notify each Lender) stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given, such Borrower shall, prepay the outstanding principal amount of the Advances made to such Borrower comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided , however , that all such partial prepayments shall be in an aggregate minimum amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof (or in each case the Alternate Currency Equivalent thereof computed as of the day two Business Days before such prepayment is made). Each prepayment of any Advances made pursuant to this Section 2.09 shall be without premium or penalty, subject, however, to Section 8.04(c).

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(b) Mandatory .

(i) If on the last day of any Interest Period, by reason of fluctuation of exchange rates between Alternate Currencies and the Dollar, (1) the aggregate outstanding principal amount of all Advances (computed as of such day, in the case of Advances denominated in an Alternate Currency, as the Dollar Equivalent of such Advances) exceeds (2) an amount equal to 105% of the aggregate amount of the Commitments then in effect, the Administrative Agent shall use all reasonable efforts to give prompt written notice thereof to the Borrowers, specifying the amount to be prepaid by the Borrowers under this clause (i), so that, after giving effect to such prepayment by the Borrowers, the aggregate principal amount of the Advances outstanding to both Borrowers (determined as aforesaid) does not exceed the aggregate amount of the Commitments and, if the Administrative Agent shall give each of the Borrowers such notice, the Borrowers shall, within five Business Days after receipt by the Borrowers of such notice, prepay the Advances in an aggregate principal amount equal to the amount set forth in such notice by the Administrative Agent.

(ii) The determinations of the Administrative Agent under this Section 2.09(b) shall be conclusive and binding on the Borrowers in the absence of manifest error.

SECTION 2.10 Increased Costs . If, due to either (a) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements included in the Eurocurrency Rate Reserve Percentage), after the Effective Date in, or any change after the Effective Date in the interpretation of, any law or regulation or (b) the compliance with any guideline or request promulgated after the Effective Date from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in (i) the cost to any Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate Advances (excluding for purposes of this Section 2.10 any such increased costs resulting from Taxes or Other Taxes or from changes in the basis or rate of taxation of net income or gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is subject to tax as a result of a present or former connection between such Lender and such foreign jurisdiction or state) or (ii) the amount of capital required to be maintained by such Lender or any corporation controlling such Lender based on the existence of its Commitment or the Advances hereunder, then the Borrowers jointly and severally agree from time to time, within five Business Days after receipt by both Borrowers of a written demand by such Lender (with a copy of such demand to the Administrative Agent), to pay to the Administrative Agent for the account of such Lender additional amounts as shall accrue from and after the date of demand by such Lender to compensate such Lender (or such controlling corporation, as the case may be) for such increased cost or such increase of capital; provided , however , that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to minimize such additional amounts and to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost or such increase of capital and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender; and provided , further , that the Borrowers shall be required jointly and severally to pay to such Lender only such additional amounts as shall be required to compensate such Lender for such increased cost or such increase of capital as shall accrue from and after the date of demand by such Lender. In determining such additional amounts, such Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Lender’s determination of compensation owing under this Section 2.10 shall be conclusive and binding, absent manifest error. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 2.10, will give prompt written notice thereof to the Borrowers, which notice shall show the basis for the calculation of such additional amounts. Notwithstanding anything herein to the contrary, either Borrower shall have the right to unilaterally terminate the Commitment of any Lender demanding additional amounts under this Section 2.10 sixty (60) days after providing to such Lender a notice of termination; provided that such termination shall not result in a reduction in amounts required to be paid pursuant to this Section 2.10. Each of the Borrowers shall, concurrently with such termination, pay or prepay, as the case may be,

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to such Lender the aggregate amount, if any at such time, of all Advances and other amounts payable by such Borrower to such Lender under this Agreement. Notwithstanding any provision of this Agreement to the contrary, Section 2.13 shall provide the exclusive remedy to the Lenders in respect of Taxes and Other Taxes.

SECTION 2.11 Illegality . Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of or any change after the Effective Date in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts after the Effective Date that it is unlawful, for any Lender or its Eurocurrency Lending Office to perform its obligations hereunder to make Eurocurrency Rate Advances or to fund or maintain Eurocurrency Rate Advances hereunder, (i) each Eurocurrency Rate Advance denominated in Dollars will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to Convert Base Rate Advances into Eurocurrency Rate Advances denominated in Dollars shall be suspended until the Administrative Agent shall notify the Borrower that has requested such Advance and the Lenders that the circumstances causing such suspension no longer exist; provided , however , that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurocurrency Lending Office if the making of such a designation would allow such Lender or its Eurocurrency Lending Office to continue to perform its obligations to make Eurocurrency Rate Advances or to continue to fund or maintain Eurocurrency Rate Advances and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

SECTION 2.12 Payments and Computations .

(a) All payments of principal and of interest on any Advance denominated in Dollars and of all facility fees, agency fees and utilization fees shall be made in Dollars and in immediately available funds.

(b) All payments of principal and interest on any Advance denominated in an Alternate Currency shall be made in such Currency and in immediately available funds.

(c) Each Borrower shall make each payment to be made by it hereunder and under the Notes to the Administrative Agent at the Administrative Agent’s Account in the Principal Financial Center for the relevant Currency in immediately available funds, not later than 11:00 A.M. Local Time on the day when due and without set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed like Currency and funds relating to the payment of principal, interest or fees ratably (other than amounts payable pursuant to Section 2.10, 2.13 or 8.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like Currency and funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

(d) All computations of interest based on the Base Rate, when the Base Rate is determined by reference to Citibank’s base rate, shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all other computations of interest and of facility fees and utilization fees shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding, absent manifest error.

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(e) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest, facility fee or utilization fee, as the case may be; provided , however , that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Advances to be made in the next succeeding calendar month, such payment shall be made on the next preceding Business Day.

(f) Unless the Administrative Agent shall have received notice from either Borrower prior to the date on which any payment is due to the Lenders hereunder that such Borrower will not make such payment in full, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent such Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate.

SECTION 2.13 Taxes . (a) Any and all payments by each Borrower hereunder or under the Notes shall be made, in accordance with Section 2.12, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings imposed by the United States or by any political subdivision thereof or therein with respect to such payments, and all penalties and interest with respect thereto, excluding , in the case of each Lender and the Administrative Agent, taxes imposed on or measured by its net income or net profit, and branch profit taxes, franchise taxes, taxes on doing business and taxes measured by or imposed upon its capital or net worth, in each case imposed as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced this Agreement or the Notes) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as “ Taxes ”). If either Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable by such Borrower hereunder or under any Note to any Lender or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.13) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, the Borrowers jointly and severally agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from the execution, delivery or registration of this Agreement or the Notes (hereinafter referred to as “ Other Taxes ”); provided , however , that the Borrowers shall have no obligation to pay Other Taxes that may arise as a result of a participation referred to in Section 2.14 or 8.07.

(c) Each of the Borrowers shall indemnify each Lender and the Administrative Agent for and hold it harmless against the full amount of Taxes with respect to payments by such Borrower hereunder or under the Notes imposed on or paid by such Lender or the Administrative Agent (as the case may be) and any liability for penalties, interest and expenses arising therefrom or with respect thereto. The Borrowers shall jointly and severally indemnify each Lender and the Administrative Agent for and hold it harmless against the full amount of Other Taxes imposed on or paid by such Lender or the Administrative Agent (as the case may be) and any liability for penalties, interest and expenses arising therefrom or with respect thereto. Any indemnification under this Section 2.13(c) shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor.

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(d) Each Lender that is not a “United States person” within the meanings specified in Section 7701 of the Code, on or prior to the date of its execution and delivery of this Agreement or on the date of the Assignment and Acceptance pursuant to which it becomes a Lender, as the case may be, and from time to time thereafter as requested in writing by either Borrower (but only so long as such Lender remains lawfully able to do so), shall provide each of the Administrative Agent and such Borrower with (i) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying to such Lender’s entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement or the Notes on account of such Lender being entitled to benefits under an income tax treaty or such payments being effectively connected with such Lender’s conduct of a United States trade or business or (ii) if the Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8BEN or W-8ECI pursuant to clause (i) above, (A) a certificate in form and substance satisfactory to the Administrative Agent and such Borrower stating that such Lender is not a “person” described in Section 871(h)(3) or Section 881(c)(3) of the Code (a “ Foreign Lender Certificate ”) and (B) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (or successor form) certifying to such Lender’s entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note. In addition, each Lender agrees that from time to time, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to such Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form W-8BEN or W-8ECI, or Form W-8BEN and a Foreign Lender Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from United States withholding tax with respect to payments under this Agreement and any Note or it shall immediately notify such Borrower and the Administrative Agent of its inability to deliver any such form or certificate, in which case such Lender shall not be required to deliver any such form or certificate pursuant to this Section 2.13(d) for so long as such payments may be made free from United States withholding tax. Notwithstanding the foregoing, no Lender shall be required to deliver any such form or certificate described in the immediately preceding sentence if a change in treaty, law or regulation has occurred prior to the date on which such delivery would otherwise be required that renders any such form or certificate inapplicable or would prevent the Lender from duly completing and delivering any such form or certificate with respect to it and such Lender so advises such Borrower.

(e) For any period with respect to which a Lender has failed to provide either Borrower with the appropriate form described in Section 2.13(d), such Lender shall not be entitled to indemnification under Section 2.13(a) or (c) with respect to Taxes or Other Taxes imposed by the United States by reason of such failure.

(f) Any Lender claiming additional amounts payable pursuant to this Section 2.13 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to minimize such additional amounts and to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable determination of such Lender, be otherwise disadvantageous to such Lender.

(g) If a Lender changes its Applicable Lending Office (other than pursuant to subsection (f) above or Section 2.11 or 2.12 or otherwise at the request of either Borrower) and the effect of such change, as of the date of such change, would be to cause either Borrower to become obligated to pay any additional amounts under this Section 2.13, such Borrower shall not be obligated to pay such additional amounts.

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(h) If either Borrower is required to pay any amounts pursuant to the provisions of this Section 2.13 to or for the account of any Lender or the Administrative Agent, and if thereafter such Lender or the Administrative Agent, as the case may be, shall receive a refund of any Taxes or Other Taxes paid by or on behalf of such Lender or the Administrative Agent, as the case may be, that such Lender or the Administrative Agent, as the case may be, reasonably determines to relate solely to the amounts so paid by such Borrower, such Lender or the Administrative Agent, as the case may be, shall to the extent that it can do so without prejudice to the retention of the amount of such refund, pay to such Borrower within twenty days after the date on which such Lender or the Administrative Agent, as the case may be, actually receives such refund in an amount which such Lender or the Administrative Agent, as the case may be, determines to be the proportion of the refunded amount as will leave it, after such remittance, in no better or worse position than it would have been if the Taxes or Other Taxes had not been imposed and the corresponding additional amounts or indemnification payment not been made. Nothing in this Section 2.13(h) shall be construed as requiring any Lender or the Administrative Agent to conduct its business or to arrange or alter in any respect its tax or financial affairs so that it is entitled to receive such refund. Neither a Lender nor the Administrative Agent shall be obligated to disclose information regarding its tax affairs or computations to either Borrower in connection with this clause (h).

SECTION 2.14 Sharing of Payments, Etc . If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.10, 2.13 or 8.04(c)) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided , however , that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (a) the amount of such Lender’s required repayment to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of either Borrower in the amount of such participation.

SECTION 2.15 Use of Proceeds . Each Borrower shall use the proceeds of each Advance for working capital and general corporate or company purposes of such Borrower and its Subsidiaries.

SECTION 2.16 Increase of Commitments . (a) The Borrowers may, at any time but in any event not more than two times during any calendar year, make a written request (an “ Increase Request ”) to the Administrative Agent (who shall forward a copy to each Lender) that the Commitments of the Lenders be increased, in integral multiples of $15,000,000, by an aggregate amount, together with the aggregate amount by which the Commitments of the Lenders were previously increased pursuant to this Section 2.16, not to exceed $100,000,000 in excess of the aggregate amount of the Commitments as of the Effective Date. Such Increase Request shall include a certification by a senior officer of each Borrower that (i) on and as of the date of the Increase Request and after giving effect to the requested increase in Commitments, Ambac Financial’s long-term senior unsecured non-credit-enhanced debt ratings by Moody’s and S&P are better than or equal to Aa3 and AA-, respectively, and (ii) no Default has occurred and is continuing and all representations and warranties contained herein are true and correct in all material respects on and as of the date of the Increase Request, including without limitation the representation and warranty of the Borrowers as to the execution, delivery and performance by them of this Agreement and the Notes, taking into account such increase, having been duly authorized by all necessary corporate action (it being understood and agreed that any representation or warranty which expressly refers by its terms to a specified date shall be required to be true and correct in all material

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respects only as of such date). Any such increase in Commitments shall be effective as of a date (the “ Increase Date ”) specified in the related Increase Notice that is (i) prior to the Commitment Termination Date and (ii) at least 10 days after the date of such Increase Notice. Each Increase Notice shall specify the date by which Lenders who wish to increase their Commitments must consent to such increase (the “ Commitment Date ”), which date shall be no later than five Business Days prior to the related Increase Date. Each Lender that is willing to increase its Commitment (each an “ Increasing Lender ”), shall notify the Administrative Agent on or prior to the Commitment Date of the amount by which it is willing to increase its Commitment, which amount shall not exceed the respective amount specified in the relevant Increase Notice. No Lender shall be obligated to increase its Commitment pursuant to this Section 2.16 and any such increase shall be in the sole discretion of each Lender. If the Lenders notify the Administrative Agent that they are willing to increase the amount of their respective Commitments by an aggregate amount that exceeds the amount of the requested increase, the requested increase shall be allocated among the Lenders willing to participate therein ratably in accordance with the amount by which they offered to increase their respective Commitments on the Commitment Date.

(b) Promptly following each Commitment Date, the Administrative Agent shall notify the Borrowers as to the amount, if any, by which the Lenders are willing to participate in the requested increase. If the aggregate amount by which the Lenders are willing to increase their Commitments on any such Commitment Date is less than the requested amount, then any one or more Eligible Transferees designated by the Borrowers that agree to provide Commitments for the shortfall may become party to this Agreement by executing and delivering, together with the Borrowers, an accession agreement pursuant to which such Eligible Transferee shall become a party to this Agreement and, to the extent provided therein, shall have the rights and obligations of a Lender hereunder; provided that each such Eligible Transferee shall provide a Commitment in a minimum amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.

(c) On each Increase Date, (i) each Eligible Transferee that accepts an offer to participate in a requested Commitment increase in accordance with Section 2.16(b) shall become a Lender party to this Agreement as of such Increase Date and the Commitment of each Increasing Lender shall be increased as of such Increase Date by the amount set forth in its notice delivered to the Administrative Agent in accordance with Section 2.16(a) (or by the amount allocated to such Lender pursuant to the last sentence of Section 2.16(a)) and (ii) if on such date there are Advances outstanding, appropriate adjustments shall be made among the Lenders to cause the outstanding Advances to be held ratably by all Lenders in accordance with their respective Commitments as of the Increase Date. As soon as practicable after the Increase Date, Notes (to the extent requested by Increasing Lenders and Eligible Transferees) shall be issued to reflect the respective Commitments of any such Increasing Lenders and Eligible Transferees.

SECTION 2.17 Extension of Commitment Termination Date .

(a) The Borrowers shall have the right, upon at least 30 Business Days’ notice to the Administrative Agent (which shall promptly forward such notice to the Lenders) prior to each of the first three anniversaries of the Effective Date (each, a “ Relevant Anniversary ”), to request that the Commitment Termination Date then in effect (the “ Current Commitment Termination Date ”) be extended to the date one year after such Current Commitment Termination Date (such extended date, an “ Extended Commitment Termination Date ”).

(b) Each Lender will use its reasonable efforts to notify the Administrative Agent at least 15 Business Days before the Relevant Anniversary whether it agrees to participate in such extension. Any Lender that does not so notify the Administrative Agent that it agrees to such extension (each, a “ Declining Lender ”) shall continue to be a Lender with a Commitment until the Current Commitment Termination Date or until such Lender is replaced pursuant to subsection (c) of this Section 2.17 (but shall not have any Commitment during any extended period to which it has not agreed).

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(c) The Borrowers shall have the right to replace, effective as of the Relevant Anniversary or the Current Commitment Termination Date, each Declining Lender with, and add as “Lenders” under this Agreement, one or more Eligible Assignees (which may include any Lender with the consent of such Le