Ambac Financial Group, Inc. ("Ambac" or the Company) is a holding company whose subsidiaries provide financial guarantee products and other financial services to clients in both the public and private sectors around the world. The Company and its subsidiaries operate in two segments: financial guarantee and financial services.

The original Complaint charges Ambac and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Specifically, the Complaint alleges that during the Class Period, Defendants issued materially false and misleading statements regarding the Company’s business and financial results related to its insurance coverage on collateralized debt obligations (“CDO”) contracts.

According to the Complaint, the true facts, which were known by the Defendants but concealed from the investing public during the Class Period, were as follows: (i) that the Company lacked requisite internal controls to ensure that the Company’s underwriting standards and its internal rating system for its CDO contracts were adequate, and, as a result, the Company’s projections and reported results issued during the Class Period were based upon defective assumptions and/or manipulated facts; (ii) that the Company’s financial statements were materially misstated due to its failure to properly account for its mark-to-market losses; (iii) that, given the deterioration and the increased volatility in the mortgage market, the Company would be forced to tighten its underwriting standards related to its asset-backed securities, which would have a direct material negative impact on its premium production going forward; (iv) that the Company had far greater exposure to anticipated losses and defaults related to its CDO contracts containing subprime loans, including even highly rated CDOs, than it had previously disclosed; (v) that the Company had far greater exposure to a potential ratings downgrade from one of the credit ratings agencies than it had previously disclosed; and (vi) that Defendants’ Class Period statements about the Company’s selective underwriting practices during the 2005 through 2007 timeframe related to its CDOs backed by subprime assets were patently false, as the Company’s underwriting standards were at best aggressive and at a minimum were completely inadequate. As the truth began to be disclosed, shares of Ambac common stock plummeted, causing substantial losses to investors.

On May 9, 2008, the Court granted motion to appoint U.S. Public Pension Fund instead as lead Plaintiff. Plaintiffs filed the Consolidated Amended Class Action Complaint on August 25, 2008. The Complaint added two officers of Ambac to the Defendant list and also dropped two officers. Defendants moved for dismissal on October 21, 2008. On December 5, 2008 Defendant Lehman Brothers filed a Notice of Bankruptcy with the court, and an automatic stay was enacted on December 23, 2008. On July 15, 2009, an Order was entered withdrawing all the Defendants' pending motions to dismiss the Consolidation Amended Class Action Complaint. On August 27, 2009, the Defendants filed several renewed motions to dismiss. On February 22, 2010, the judge granted in part and denied in part the Defendants' motion to dismiss. The parties moved to the discovery phase of the proceedings.

According to the Company’s Form 8-K dated December 15, 2010, on December 9, 2010, Ambac and certain of its present or former officers or directors, including the present or former officers or directors who are Defendants in the Securities Class Actions, entered into a memorandum of understanding (the “MOU”) with the lead Plaintiffs in In re Ambac Financial Group, Inc. Securities Litigation and the named Plaintiffs in Tolin v. Ambac Financial Group, Inc. for settlement of both of the Securities Class Actions. The MOU provides that the claims of the putative Plaintiff classes will be settled for a cash payment of $27.1 million. The insurance carriers who provided directors and officers liability coverage to Ambac’s present and former officers and directors for the period July 2007-July 2009 have agreed to pay $24.6 million of the settlement and Ambac has agreed to pay $2.5 million of the settlement. Lead and named Plaintiffs in the Securities Class Actions, on behalf of themselves and all other members of the settlement class, have agreed to releases of claims against, among others, Ambac and the present or former officers or directors who are parties to the MOU. The settlement provided for in the MOU is subject to various conditions, including among others bankruptcy court approval of the settlement and of the releases and bar orders that would release and bar claims against present or former officers or directors of Ambac that were, could have been, might have been or might be in the future asserted by or on behalf of Ambac, including claims purportedly asserted derivatively by any shareholder or creditor of Ambac. The settlement provided for in the MOU also contemplates an order entered by a bankruptcy court directing the filing of appropriate applications seeking dismissal of the Shareholder Derivative Actions (if those Actions have not been previously dismissed). The MOU further provides that nothing in the MOU shall be deemed an admission by any Defendant (or any person or entity associated with any Defendant) of any fault, liability, or wrongdoing.

On May 6, 2011, a Notice of Settlement was filed. The pending settlement will settle claims with the Company Defendant and the individual Defendants. According to the notice, the Settlement Amount is $27.1 million in cash paid or to be paid into the Escrow Account by Ambac and the D&O Insurers. The settlement was preliminarily approved on June 14, 2011.

On September 28, 2011, Judge Naomi Reice Buchwald approved the plan of allocation and lead Counsel's application for an award of attorneys' fees and reimbursement of expenses. According to the Order, the Court hereby awards attorneys' fees of 17% of the total Settlement Fund, or $5,610,000, payable to lead Counsel and as further set forth in this Order. Judge Buchwald also approved both class action settlements with Ambac and the individual Defendants as well as with the underwriter Defendants.