Credit Default Swap Payout

In the context of credit derivatives, a credit default swap (CDS) is a widely used financial instrument that allows investors to manage credit risk. When one party (the protection buyer) pays a premium to another party (the protection seller) in exchange for protection against a default on a specific debt asset, it creates the basis of a CDS agreement. This agreement transfers the credit exposure of fixed income products between parties.

Consider a CDS that has a notional amount of $10 million, where the protection buyer pays an annual premium of 2% to the protection seller. If a default occurs on the reference obligation, what amount does the protection seller pay to the protection buyer?