FIRST AMENDMENT TO THE REHABILITATION EXIT SUPPORT AGREEMENT

Transcription

1 EXECUTION VERSION FIRST AMENDMENT TO THE REHABILITATION EXIT SUPPORT AGREEMENT This First Amendment (the Amendment ) to the Rehabilitation Exit Support Agreement, is made as of September 21, 2017, by and among Ambac Assurance Corporation ( AAC ), Ambac Financial Group, Inc. ( AFG ) and certain holders of Ambac Assurance Corporation s 5.1% Surplus Notes due 2020 and certain holders of Ambac Assurance Corporation s deferred payment obligations (the Holders ). WHEREAS, AAC, AFG and the Holders entered into a Rehabilitation Exit Support Agreement, by and among AAC, AFG and the Holders, dated as of July 19, 2017 (the Rehabilitation Exit Support Agreement ). WHEREAS, the parties hereto (the Parties ) wish to amend certain provisions of the Rehabilitation Exit Support Agreement, as set forth herein. WHEREAS, each Holder party to the Rehabilitation Exit Support Agreement as of the date hereof has agreed to this Amendment to the Rehabilitation Exit Support Agreement. NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein and in the Rehabilitation Exit Support Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows: A. Section 1. Definitions. Capitalized terms not otherwise defined in this Amendment shall have the meanings ascribed to them in the Rehabilitation Exit Support Agreement. B. Section 2. Amendments. C. Section 2.1 The right-hand column in the row titled Record Date in the Rehabilitation Exit Term Sheet attached as Exhibit A to the Rehabilitation Exit Support Agreement (the Plan Amendment Term Sheet ) is hereby amended and restated as follows: September 30, 2017 D. Section 2.2 The right-hand column of the row titled Initial Exchange in the Plan Amendment Term Sheet is hereby amended and restated as follows: The Plan Amendment will provide that, on the Effective Date, an aggregate of $289 million in Deferred Amounts (including Accretion Amounts) 3 outstanding as of the Record Date be transferred pro rata from all holders of Deferred Amounts (other than AAC and Ambac Financial Group, Inc. ( AFG, collectively with AAC and the Segregated Account, the Ambac Parties )) (i) to AFG in exchange for AFG s transfer of $132 million (principal plus accrued interest) 4 of GA SSNs (as defined below) to such holders and (ii) to the third v14

2 Agreement (the Sponsoring GA SSN Holders ) in exchange for the Sponsoring GA SSN Holders transfer of $157 million (principal plus accrued interest) 5 of GA SSNs (as defined below) to such holders (collectively, the Initial Exchange ). The Initial Exchange will be effectuated pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the Securities Act ). 6 Section 2.3 The last sentence of the third non-bullet paragraph in the righthand column of the row titled Pre-Record Date Deferred Amounts in the Plan Amendment Term Sheet is hereby amended and restated as follows: If the related Accretion Amount is less than 7.4% of any Pre-Record Date Deferred Amount, then the remainder of the Discharged Deferred Amount will be treated in a manner acceptable to the Rehabilitator, which may or may not include serving to discharge a portion of the applicable outstanding Deferred Amount. Section 2.4 A new sentence shall be added at the bottom of the right-hand column of the row titled Pre-Record Date Deferred Amounts in the Plan Amendment Term Sheet as follows: The Rehabilitator may, in lieu of the Deferred Amount Consideration allocated to any holder of a Deferred Amount, provide an alternative consideration package to such Deferred Amount Consideration, in an amount equal to such Deferred Amount Consideration, to the extent that AAC determines, in its sole discretion, that doing so is necessary or advisable to maintain compliance with any legal or regulatory requirements applicable to AAC or the Segregated Account. Section 2.5 The second sentence in the right-hand column of the row titled Post-Record Date Permitted Policy Claims in the Plan Amendment Term Sheet shall be amended by adding the following phrase between the words Post-Record Date Permitted Policy Claims shall and be paid in full in Cash :, subject to the Effective Date, Section 2.6 A new sentence shall be added at the bottom of the right-hand column of the row titled Post-Record Date Permitted Policy Claims in the Plan Amendment Term Sheet as follows: Subject to the occurrence of the Effective Date, no Accretion Amounts shall arise or accrue with respect to Post-Record Date Permitted Policy Claims. Section 2.7 The right-hand column in the row titled Distribution Procedures in the Plan Amendment Term Sheet is hereby amended and restated as follows: Where underlying securities related to Pre-Record Date Deferred Amounts are held through DTC, AAC shall transfer the Deferred Amount Consideration allocable to such Pre-Record Date Deferred Amounts to DTC for further transfer by DTC to its participants v14 2

3 Any distribution pursuant to the Plan Amendment will be deemed to have been received by beneficial holders of the securities to which such distribution relates on the next scheduled Bond Distribution Date applicable to the relevant insured obligation or underlying indenture that gives rise to the claims to which such distribution relates, notwithstanding the date when the cash or Deferred Amount Consideration was actually received by such beneficial holders. For the avoidance of doubt, all Pre-Record Date Deferred Amount Consideration to be distributed pursuant to the Plan shall not be transferred to the applicable Trustees but shall be deemed to be transferred to such Trustees. Section 2.8 The first bullet in the right-hand column of the row titled Conditions to Effectiveness of Plan Amendment in the Plan Amendment Term Sheet is hereby amended and restated as follows: The Court will have entered an order approving the Plan Amendment (the Confirmation Order ), including an approval as to the procedural and substantive fairness of the terms and conditions of the issuance of the Senior Secured Notes and the exchange of Deferred Amounts for GA SSNs pursuant to the Initial Exchange, in form and substance satisfactory to the Rehabilitator and consistent with the requirements of Section 3(a)(10) under the Securities Act and any Blue Sky laws required for the issuance of the Senior Secured Notes and the exchange of Deferred Amounts for GA SSNs pursuant to the Initial Exchange; Section 2.9 The row titled Secured Notes Issuer in the Secured Notes Term Sheet attached as Exhibit C to the Rehabilitation Exit Support Agreement is hereby amended to add the following sentence to the end thereof: The Secured Notes Issuer will liquidate on or after a date that is at least 12 months after the earlier of (a) the satisfaction of all of the Secured Notes Issuer s obligations under the Secured Notes (other than contingent indemnification obligations) and (b) the Maturity Date (as defined below); provided that (i) prior to the satisfaction of all of the Secured Notes Issuer s obligations under the Secured Notes (other than contingent indemnification obligations), holders of the Secured Notes shall retain their rights to the Secured Notes Collateral and the Policy (as defined below) and any liquidation of the Secured Notes Issuer prior to such satisfaction shall result in the note collateral agent under the Secured Notes becoming the Holder of the Ambac Note and retaining all rights and powers of the Holder thereunder (subject to the transfer restrictions for the Ambac Note) and (ii) such liquidation shall, in any event, be completed no later than the date that is 18 months after the earlier of (x) the satisfaction of all of the Secured Notes Issuer s obligations under the Secured Notes (other than contingent indemnification obligations) and (y) the Maturity Date. Section 2.10 The fourth bullet in the right-hand column of the row titled Remedies for Failure to Pay Under Policy in the Secured Notes Term Sheet attached as v14 3

4 Exhibit C to the Rehabilitation Exit Support Agreement is hereby amended and restated as follows: None of the collateral agent, the trustee or the Secured Noteholders may sell the Ambac Note or the right to receive the RMBS Proceeds without the prior consent of AAC; provided that the foregoing shall not limit the assignment of the Ambac Note to the collateral agent in connection with a liquidation of the Secured Notes Issuer but shall limit the further assignment by the collateral agent without the prior consent of AAC. Section 2.11 The row titled Investment Company Act in the Secured Notes Term Sheet attached as Exhibit C to the Rehabilitation Exit Support Agreement is hereby amended and restated as follows: The Secured Notes Issuer is expected to be exempt from registration under the Investment Company Act of 1940, as amended. Section 2.12 The first clause of Section 4(b) of the Rehabilitation Exit Support Agreement is hereby amended and restated as follows: So long as this Agreement has not been terminated in accordance with its terms, each Holder (including, for the avoidance of doubt, any Joining Party) agrees and covenants that: Section 2.13 The right-hand column in the row titled Initial Deposit in Exhibit B to the Rehabilitation Exit Support Agreement (the Exchange Offer Term Sheet ) is hereby amended and restated as follows: On or prior to the fifteenth (15th) Business Days preceding the scheduled expiration of the Offers (as defined below), (i) each Holder (including any Joining Party) shall deposit into an escrow account specified by the Rehabilitator, which account shall be for the benefit of the depositing Holders (the Escrow Account ), its pro rata share of Notes (as defined below) with an aggregate principal amount outstanding, which when taken together with accrued and unpaid interest thereon (together, Total Value ), equal $ million (the Sponsoring Holder Notes ) and (ii) Ambac Financial Group, Inc. ( AFG ) shall deposit Notes with a Total Value equal to $ million into the Escrow Account. 13 In the event that one or more Parties fails to deposit its pro rata share of Sponsoring Holder Notes into the Escrow Account as required hereby (a Sponsoring Holder Default ), the Ambac Parties may adjust the Offers such that any shortfall may be contributed by one or more other holders of Notes or make any other appropriate adjustment to preserve the economic terms of the Offers and any such adjustment shall not constitute a breach of this Agreement or a Group Termination Event, provided that nondefaulting Holders shall not be required to purchase any Notes for such contribution. The Sponsoring Holder Notes shall be held in the Escrow Account for the benefit of the depositing Holder of the Sponsoring Holder Notes. If the Offers do not close or the Rehabilitation Exit Support Agreement terminates in v14 4

5 accordance with its terms, any Notes held in the Escrow Account will be returned to the depositing Holder pursuant to an escrow agreement to be agreed upon by the Parties. Section 2.14 The third paragraph in the right-hand column in the row titled The DPO Offer in the Exchange Offer Term Sheet is hereby amended and restated as follows: DPO Exchange Cap: Notes other than Sponsoring Holder Notes with a Total Value equal to $202 million. 15 Section 2.15 The third paragraph in the right-hand column in the row titled The AAC Sponsoring Holder Offer in the Exchange Offer Term Sheet is hereby amended and restated as follows: AAC Sponsoring Holder Exchange Cap: Each Holder shall be capped at an amount of Notes with a Total Value equal to the percentage to be determined of the Total Value of Notes owned by such Holder that are tendered in the AAC Sponsoring Holder Offer. 18 Assuming 100% participation, the AAC Sponsoring Holder Exchange Cap is $136 million, including principal amount and accrued and unpaid interest. The AAC Sponsoring Holder Exchange Cap (including the exchange cap components of principal and accrued and unpaid interest) for the Notes will be reduced if less than 100% of the Holders participate in the AAC Sponsoring Holder Offer. Section 2.16 The third paragraph in the right-hand column in the row titled The AAC Offer in the Exchange Offer Term Sheet is hereby amended and restated as follows: AAC Exchange Cap: Each holder shall be capped at an amount of Notes with a Total Value equal to approximately 87.5% of the Total Value of Notes owned by such holder (excluding the Sponsoring Holder Notes and Notes held by AAC and AFG) that are tendered in the AAC Offer. Assuming 100% participation, the AAC Exchange Cap is $492 million, including principal amount and accrued and unpaid interest. The AAC Exchange Cap (including the exchange cap components of principal and accrued and unpaid interest) for the Notes will be reduced if less than 100% of the holders participate in the AAC Offer. Section 2.17 The paragraph in the right-hand column in the row titled Holders Eligible to Participate in the Offers in the Exchange Offer Term Sheet is hereby amended and restated as follows: Each of the Offers is being made in reliance on exemptions from registration provided by the Securities Act of 1933, as amended, and only to holders of Notes who are either (x) an institutional accredited investor within the meaning of subsection (1), (2), (3) or (7) of Rule 501(a) under the Securities Act of 1933, as amended, (y) a qualified institutional buyer within the meaning of Rule 144A of the Securities Act, or (z) a non-u.s. person within the meaning of Rule 902 of the v14 5

6 Securities Act and the AAC Sponsoring Holder Offer and AAC Offer are being made only to holders of Notes who are also qualified purchasers within the meaning of Section 2(a)(51) of the Investment Company Act of 1940, as amended (each holder meeting such requirements, an Eligible Holder ). Only holders of Notes who have completed and returned an eligibility certification, electronically or otherwise, certifying as to such holder s status as an Eligible Holder are permitted to participate in the Offers. Section 3. Miscellaneous. Section 3.1 Upon execution of this Amendment, (i) the Transaction Documents listed in Exhibit A, in the forms attached thereto, shall be deemed reasonably satisfactory by each of the Parties in satisfaction of Section 3(b) of the Rehabilitation Exit Support Agreement, and the Transaction Documents listed in Exhibit B, forms of which have been reviewed by the Holders, are understood by the Parties to accurately reflect the substance of the Transaction Documents listed in Exhibit A and the applicable transactions contemplated by the Rehabilitation Exit Support Agreement, subject to completion prior to finalization; (ii) White & Case LLP shall be authorized by all Holders to submit the affidavit referenced in Section 4(b)(6) of the Rehabilitation Exit Support Agreement; and (iii) Perry, Johnson, Anderson, Miller & Moskowitz LLP shall be authorized by all Holders to deliver the letter(s) referenced in Section 4(b)(7). Section 3.2 Except as specifically set forth herein, the terms of this Amendment shall not be deemed to be a consent, waiver or modification with respect to any term, condition or obligation of any of the Parties in the Rehabilitation Exit Support Agreement and shall not obligate any of the Parties to agree to any other amendment to the Rehabilitation Exit Support Agreement. Section 3.3 This Amendment may be executed and delivered in multiple counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement. A facsimile or Portable Document Format copy of a signature shall have the same force and effect as an original signature. Section 3.4 This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. By its execution and delivery of this Amendment, each of the Parties hereby irrevocably and unconditionally agrees for itself that any legal action, suit, or proceeding against it with respect to any matter under or arising out of or in connection with this Amendment or for recognition or enforcement of any judgment rendered in any such action, suit, or proceeding, shall be brought in a federal court of competent jurisdiction in the Southern District of New York. By execution and delivery of this Amendment, each of the Parties hereto hereby irrevocably accepts and submits to the jurisdiction of such court, generally and unconditionally, with respect to any such action, suit, or proceeding. [Signature Page Follow] v14 6

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26 Exhibit A 1. Plan Amendment; 2. Disclosure Statement; 3. Amended Payment Guidelines; 4. Indenture for Secured Notes; 5. SPV Security Agreement for Secured Notes; 6. Company Pledge Agreement for Secured Notes; 7. Note issued by the Company to the SPV; and 8. Secured Notes Insurance Policy issued by the Company v14