AMBAC EXECUTIVE INCENTIVE PLAN
The purposes of the Ambac Executive Incentive Plan (the "Plan") are to enable Ambac Financial Group, Inc. (the
"Company") to attract, retain, motivate and reward executives and key employees of the highest caliber and
quality by providing them with the opportunity to earn incentive compensation directly linked to the Company's
For purposes of the Plan, the following terms shall be defined as follows:
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the applicable rulings and regulations
(including any proposed regulations) thereunder.
"Committee" means the Compensation and Organization Committee of the Board, any successor committee
thereto or any other committee appointed by the Board to administer the Plan. The Committee shall consist of at
least two individuals, each of whom shall be qualified as an "outside director" (or shall satisfy any successor
standard thereto) for purposes of Section 162(m), and shall serve at the pleasure of the Board.
"Common Stock" means the Common Stock, par value $.01 per share, of the Company.
"Covered Employee" means a Participant who has been designated by the Committee as a Participant whose
compensation for the relevant fiscal year may be subject to the limit on deductible compensation imposed by
Section 162(m) of the Code.
"Disability" means eligibility for disability benefits under the terms of the Company's long-term disability plan in
effect at the time the Participant becomes disabled.
"Equity Plan" means the AMBAC 1997 Equity Incentive Plan and any successor or similar plan of the Company.
"Fair Market Value" means, with respect to a share of Common Stock, the fair market value thereof as of the
relevant date of determination, as determined in accordance with a valuation methodology approved by the
Committee. In the absence of any alternative valuation methodology approved by the Com