EXHIBIT 10.05
AMBAC FINANCIAL GROUP, INC.
1997 NON-EMPLOYEE DIRECTORS EQUITY PLAN
(as amended through December 12, 2000)
1. Purpose
The purpose of the Ambac Financial Group, Inc. 1997 Non-Employee Directors
Equity Plan (the "Plan") is to promote the long-term growth and financial
success of the Company by attracting, motivating and retaining non-employee
directors of outstanding ability and assisting the Company in promoting a
greater identity of interest between the Company's non-employee directors and
its stockholders.
The Plan replaces the AMBAC Inc. 1991 Non-Employee Directors Stock Plan (the
"Predecessor Plan"). From and after the effective date of the Plan as provided
in Section 10 below, no further awards shall be made under the Predecessor Plan.
2. Definitions
For purposes of the Plan, the following terms shall be defined as follows:
"Annual Meeting" means an annual meeting of the Company's stockholders.
"Board" means the Board of Directors of the Company.
"Change in Control" means:
(i) the acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the
Common Stock then outstanding, but shall not include any such acquisition by:
(A) the Company;
(B) any Subsidiary of the Company;
(C) any employee benefit plan of the Company or of any Subsidiary of the
Company;
(D) any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan;
(E) any Person who as of January 31, 1996 was the beneficial owner of
15% or more of the shares of Common Stock outstanding on such date unless
and until such Person, together with all affiliates and associates of such
Person, becomes the beneficial owner of 25% or more of the shares of Common
Stock then outstanding whereupon a Change in Control shall be deemed to have
occurred; or
(F) any Person who becomes the Beneficial Owner of 20% or more, or, with
respect to a Person described in clause (E) above, 25% or more, of the
shares of Common Stock then outstanding as a result of a reduction in the
number of shares of Common Stock outstanding due to the repurchase of shares
of Common Stock by the Company unless and until such Person, after becoming
aware that such Person has become the beneficial owner of 20% or more, or
25% or more, as the case may be, of the then outstanding shares of Common
Stock, acquires beneficial ownership of additional shares of Common Stock
representing 1% or more of the shares of Common Stock then outstanding,
whereupon a Change in Control shall be deemed to have occurred or
(ii) individuals who, as of the date this Plan is approved by the Board,
constitute the Board, and subsequently elected members of the Board whose
election is approved or recommended by at least a majority of such current
members or their successors whose election was so approved or recommended (other
than any subsequently elected members whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the Board), cease for
any reason to constitute at least a majority of such Board; or
(iii) approval by the stockholders of the Company of (A) a merger or
consolidation of the Company with any other corporation, (B) the issuance of
voting securities of the Company in connection with a merger or consolidation of
the Company (or any Subsidiary) pursuant to applicable stock exchange
requirements, or (C) sale or other disposition of all or substantially all of
the assets of the Company or the acquisition of assets of another corporation
(each, a "Business Combination"), unless, in each case, immediately following
such Business Combination, all or substantially all of the individuals and
entities who were the beneficial owners of the Common Stock outstanding
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 70% of the then outstanding shares of common stock and 70%
of the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Common Stock.
"Common Stock" means the Common Stock of the Company, par value $.01 per
share, or such other class or kind of shares or other securities as may be
applicable under Section 12 below.
"Company" means Ambac Financial Group, Inc., a Delaware corporation, or any
successor to substantially all its business.
"Director Account" means the bookkeeping record established for each
Non-Employee Director. A Director Account is established only for purposes of
measuring the value of the Company's obligation to a Non-Employee Director in
respect of Director Stock Units and earnings thereon and not to segregate assets
or to identify assets that may be used to settle Director Stock Units.
"Director Option" means a right to purchase shares of Common Stock granted
to a Non-Employee Director pursuant to Section 7 hereof.
"Director Stock Unit" means a restricted stock unit granted to a
Non-Employee Director pursuant to Section 6 hereof.
"Effective Date" means the effective date of the Plan provided for in
Section 10 below.
"Fair Market Value" means the average of the highest and the lowest quoted
selling price of Common Stock as reported on the composite tape for securities
listed on the New York Stock Exchange on the applicable valuation date or, if
there were no sales on such valuation date, the average of the highest and the
lowest quoted selling prices on said composite tape for the preceding business
day.
"Non-Employee Director" means a member of the Board who is not an employee
of the Company or any of its subsidiaries.
"Permanent Disability" means a physical or mental impairment rendering a
Non-Employee Director substantially unable to function as a member of the Board
for any period of six consecutive months. Any dispute as to whether a
Non-Employee Director is Permanently Disabled shall be resolved by a physician
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mutually acceptable to the Non-Employee Director and the Company, whose decision
shall be final and binding upon the Non-Employee Director and the Company.
"Person" means any individual, firm, corporation, partnership or other
entity.
"Predecessor Plan" has the meaning set forth in Section 1 above.
"Subsidiary" means (i) a corporation or other entity with respect to which
the Company, directly or indirectly, has the power, whether through the
ownership of voting securities, by contract or otherwise, to elect at least a
majority of the members of such corporation's board of directors or analogous
governing body, or (ii) any other corporation or other entity in which the
Company, directly or indirectly, has an equity or similar interest and which the
Committee designates as a Subsidiary for purposes of the Plan.
3. Administration
(a) Administration by the Board. The Plan shall be administered by the
Board, which may adopt rules and regulations it considers necessary or
appropriate to carry out the Plan's purposes. The Board's interpretation and
construction of any Plan provision shall be final and conclusive. The Board may,
but need not, from time to time delegate some or all of its authority under the
Plan to a committee consisting of one or more members of the Board, any such
delegation to be subject to the restrictions and limits that the Board specifies
at the time of such delegation or thereafter. References in the Plan to the
"Board" shall, to the extent consistent with the terms and limitations of any
such delegation, be deemed to include a reference to any such committee to which
the Board's authority hereunder has been delegated.
(b) Award Certificate. The terms and conditions of each grant of Directors
Stock Units and Director Options under the Plan shall be embodied in an award
agreement or award certificate which shall incorporate the Plan by reference,
shall indicate the date on which the Director Stock Units or Director Options
were granted and the number of Director Stock Units or Director Options granted
on such date.
4. Shares Available
Subject to the provisions of Section 12 below, the maximum number of shares
of Common Stock which may be issued under the Plan (the "Section 4 Limit") shall
be 210,000 shares plus the number of shares of Common Stock that remain
available for issuance under the Predecessor Plan as of the date the Plan is
approved by the stockholders of the Company (increased by any shares of Common
Stock subject to any award (or portion thereof) outstanding under the
Predecessor Plan on such date which lapses, expires or is otherwise terminated
without the issuance of such shares or is settled by the delivery of
consideration other than shares). Subject to Section 12 below, of the shares of
Common Stock available for issuance under the Plan, no more than 75,000 shares
may be issued upon settlement of Director Stock Units. For purposes of
determining the number of shares of Common Stock that remain available for
issuance, there shall be added back to the Section 4 Limit and again be
available under the Plan any shares of Common Stock tendered to pay the exercise
price of a Director Option. Either authorized and unissued shares of Common
Stock or treasury shares may be delivered pursuant to the Plan.
5. Eligibility
Director Stock Units and Director Options shall be granted only to
Non-Employee Directors.
6. Director Stock Units
(a) General. A Director Stock Unit shall represent the right to receive one
share of Common Stock upon satisfaction of the conditions to vesting and
settlement specified in the Plan. Director Stock Units will be settled
exclusively in Common Stock.
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(b) Grants of Director Stock Units. Director Stock Units shall be
awarded under the Plan as follows:
(i) On the date of the Annual Meeting coincident with or first
succeeding a Non-Employee Director's initial election to the Board (or
re-election to the Board after a period during which the Non-Employee
Director did not serve on the Board), the Non-Employee Director shall
receive a grant of 3,000 Director Stock Units.
(ii) As of the date of the Annual Meeting that is closest in time to the
applicable vesting date of any Director Stock Units in accordance with
Section 6(d)(i) below, or the vesting date of any restricted shares under
the Predecessor Plan in accordance with Section 6(c)(i) thereof, a
Non-Employee Director shall receive an additional grant of 3,000 Director
Stock Units, provided that (A) the Annual Meeting as of which such
additional grant is to be made occurs during the term of the Plan as set
forth in Section 10 below, and (B) the Non-Employee Director is standing for
re-election at such Annual Meeting.
(c) Accounts. As of the date of each Annual Meeting as of which a
Non-Employee Director is granted Director Stock Units, the Director Account
of such Non-Employee Director will be credited with 3,000 Director Stock
Units. In the event that the Company pays any cash or other dividend or
makes any other distribution in respect of the Common Stock, each Director
Account will be credited with an additional number of Director Stock Units
(including fractions thereof) determined by dividing (A) the amount of cash,
or the value (as determined by the Board) of any securities or other
property, paid or distributed in respect of one outstanding share of Common
Stock by (B) the Fair Market Value of a share of Common Stock for the date
of such payment or distribution, and multiplying the result of such division
by (C) the number of Director Stock Units that were credited to the Director
Account immediately prior to the date of the dividend or other distribution.
Credits shall be made effective as of the date of the dividend or other
distribution in respect of the Common Stock.
(d) Vesting; Accelerated Vesting; Deferral.
(i) Director Stock Units granted in respect of a given Annual Meeting,
and any additional Director Stock Units credited to a Director Account in
respect of earnings or other distributions on such Director Stock Units as
provided in Section 6(c), shall vest on the fifth anniversary of the date of
grant and shall be settled as soon as practicable thereafter, provided that
the Non-Employee Director shall have remained a member of the Board
continuously from the date of grant until the earlier of (A) such fifth
anniversary or (B) if the Non-Employee Director declines to stand for
re-election to the Board at the Annual Meeting held in the fifth calendar
year following the date of grant, the date of such Annual Meeting.
(ii) Notwithstanding the provisions of Section 6(d)(i) above, all
Director Stock Units granted to a Non-Employee Director shall immediately
vest upon the first to occur of (A) a Non-Employee Director ceasing to be a
member of the Board as a result of retirement from the Board in accordance
with the retirement policy then applicable to Board members, (B) a
Non-Employee Director ceasing to be a member of the Board as a result of
death or Permanent Disability or (C) subject to the following sentence, a
Change in Control of the Company, and shall be settled as soon as
practicable thereafter. Notwithstanding the preceding sentence, if any
Person commences a tender offer for shares of Common Stock which, if
successfully completed, would result in a Change in Control, then all
Director Stock Units granted to a Non-Employee Director shall vest and be
settled immediately prior to the scheduled expiration of such tender offer,
and the Company shall have instituted procedures to enable the Non-Employee
Director, if he so desires, to tender the shares issued upon settlement of
such Directors Stock Units into such offer
(iii) Notwithstanding the provisions of Sections 6(d)(i) and 6(d)(ii)
above, a Non-Employee Director may elect to defer settlement of any or all
Director Stock Units to a date subsequent to the vesting date of such
Director Stock Units, provided that no such deferral may extend beyond the
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earlier of (A) the Non-Employee Director's termination of service on the
Board or (B) the Non-Employee's death. Settlement of any deferred Director
Stock Units shall be made on or as soon as practicable following the date
specified by the Non-Employee Director in the relevant deferral election or,
if applicable, the earlier of the dates specified in clauses (A) and (B) of
the preceding sentence.
(e) Forfeiture of Grant. Except as provided in Section 6(d)(ii) above,
all Director Stock Units shall be forfeited, and all rights of the
Non-Employee Director to or with respect to such Director Units shall
terminate without any obligation on the part of the Company, upon the
termination of a Non-Employee Director's service as a member of the Board
prior to the date on which such Director Stock Units vest in accordance with
Section 6(d)(i) above.
(f) Delivery of Share Certificates. As soon as practicable following the
vesting of Director Stock Units as provided in Sections 6(d)(i) and 6(d)(ii)
above, or the date for deferred settlement as provided in Section 6(d)(iii)
above, Director Stock Units shall be settled by delivery to the Non-Employee
Director of a share certificate for the number of shares corresponding to
such Director Units. Shares delivered in settlement of Director Stock Units
shall be free of all such restrictions, except any that may be imposed under
applicable law or the Company's trading policy.
(g) No Stockholder Rights. The crediting of Director Stock Units to a
Director Account shall not confer on the relevant Non-Employee Director any
rights as a stockholder of the Company.
7. Grants of Director Options
(a) General. A Director Option shall entitle a Non-Employee Director to
purchase a specified number of shares of Common Stock during a specified
period at an exercise price per share of Common Stock determined as provided
below. All Director Options provided for herein shall have the general terms
and conditions set forth in Section 8 below.
(b) Annual Grants of Director Options. As of the date of each Annual
Meeting, commencing with the 1997 Annual Meeting, each Non-Employee Director
shall automatically receive Director Options to purchase 3,750 shares of
Common Stock provided that the Non-Employee Director shall continue to serve
as a director of the Company after such Annual Meeting. The exercise price
per share of Common Stock of each Director Option provided for in this
Section 7(b) shall be the Fair Market Value of one share of Common Stock on
the date of the relevant Annual Meeting.
(c) Grants of Director Options to New Directors. A Non-Employee Director
who is initially elected or appointed to the Board other than in connection
with an Annual Meeting shall receive, as of the date of such initial
election or appointment, Director Options to purchase a number of shares
determined by multiplying 3,750 by a fraction, the numerator of which is the
number of full months remaining until the next Annual Meeting (starting with
the month following the date of election or appointment and counting the
month in which the next Annual Meeting is scheduled to occur as a full
month) and the denominator of which is 12. (If the date of the next Annual
Meeting has not been scheduled at the time of the Non-Employee Director's
initial election or appointment, it shall be assumed that the next Annual
Meeting will occur in the same month as the immediately preceding Annual
Meeting.) The exercise price per share of Common Stock of each Director
Option provided for in this Section 7(d) shall be the Fair Market Value of
one share of Common Stock on the date of the Non-Employee Director's
election or appointment to the Board.
8. General Terms and Conditions of Directors Options
(a) Option Term. Each Director Option shall expire on the date of the Annual
Meeting held in the seventh calendar year following the date of grant, subject
to earlier expiration as provided herein, provided, however, that Director
Options granted to a Non-Employee Director whose initial election
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occurs other than in connection with an Annual Meeting shall be treated for this
purpose as though they had been granted at the first Annual Meeting following
such initial election.
(b) Vesting; Accelerated Vesting; Effect of Termination of Service.
(i) Vesting Generally. Director Options shall vest and become
exercisable as of the first anniversary of the date of grant, assuming that
the Non-Employee Director has continued to serve as a member of the Board
until the earlier of (A) such first anniversary or (B) if the Non-Employee
Director declines to stand for reelection to the Board at the Annual Meeting
held in the calendar year following the date of grant, the date of such
Annual Meeting. Notwithstanding the preceding sentence, all Director Options
shall be considered fully vested and exercisable upon the earlier to occur
of (X) termination of the Non-Employee Director's service on the Board by
reason of death or Permanent Disability or (Y) a Change in Control,
provided, however, that if any Person commences a tender offer for shares of
Common Stock which, if successfully completed, would result in a Change in
Control, then all Director Options granted to a Non-Employee Director shall
vest immediately prior to the scheduled expiration of such tender offer, and
the Company shall have instituted procedures to enable the Non-Employee
Director, if he so desires, to tender the shares issued upon the exercise of
such stock options into such offer.
(ii) Exercise Following Termination of Service. Following termination of
a Non-Employee Director's service on the Board, the former Non-Employee
Director (or the former Non-Employee Directors' estate, personal
representative or beneficiary, as the case may be) shall have the right,
subject to the other terms and conditions hereof, to exercise all Director
Options that had vested as of or in connection with the termination of
service:
(A) at any time within three years after the date of termination of
service, if such termination was by reason of death, Permanent
Disability or retirement from the Board in accordance with the
retirement policy then in effect for Board members, or
(B) in all other cases, at any time within one year after the date
of termination of service; subject, in all case, to earlier expiration
of the Director Option pursuant to Section 8(a) above.
(c) Notice of Exercise. Subject to the other terms and conditions of the
Plan, a Non-Employee Director may exercise all or any portion of a vested
Director Option by giving written notice of exercise to the Company or its
designated agent, provided, however, that no fewer than 10 shares of Common
Stock may be purchased upon any exercise of a Director Option unless the number
of shares purchased at such time is the total number of shares in respect of
which the Director Option is then exercisable, and provided, further, that in no
event shall the Option be exercisable for a fractional share. The date of
exercise of an Option shall be the later of (i) the date on which the Company or
its agent receives such written notice or (ii) the date on which the conditions
provided in Sections 8(d) and 8(e) below are satisfied.
(d) Payment. The exercise price of a Director Option may be paid in cash or
previously owned shares or a combination thereof or by any other method approved
by the Board.
(e) Limitation on Exercise. A Director Option shall not be exercisable
unless the Common Stock subject thereto has been registered under the Securities
Act of 1933, as amended (the "1933 Act"), and qualified under applicable state
"blue sky" laws in connection with the offer and sale thereof, or the Company
has determined that an exemption from registration under the 1933 Act and from
qualification under such state "blue sky" laws is available.
(f) Issuance of Shares. Subject to the foregoing conditions, as soon as is
reasonably practicable after its receipt of a proper notice of exercise and
payment of the exercise price for the number of shares with respect to which a
Director Option is exercised, the Company shall deliver to the exercising
Non-
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Employee Director, at the principal office of the Company or at such other
location as may be acceptable to the Company and the Non-Employee Director, one
or more stock certificates for the appropriate number of shares of Common Stock
issued in connection with such exercise. Such shares shall be fully paid and
nonassessable and shall be issued in the name of the Non-Employee Director.
Notwithstanding the foregoing, the Board in its discretion may, subject to rules
and procedures as it may adopt or impose from time to time, provide Non-Employee
Directors with the opportunity to defer receipt of shares of Common Stock
issuable upon exercise of Director Options.
9. Transferability
Director Stock Units (including interests in a Director Account) and
Director Options may not be transferred, pledged, assigned or otherwise disposed
of except by will or the laws of descent and distribution or pursuant to a
domestic relations order, provided, however, that Director Options may be
transferred to a member or members of a Non-Employee Director's immediate family
(as defined below) or to one or more trusts or partnerships established in whole
or in part for the benefit of one or more of such immediate family members
(collectively as "Permitted Transferees"), subject to such rules and procedures
as may from time to time be adopted or imposed by the Board. If a Director Stock
Option is transferred to a Permitted Transferee, it shall be further
transferable only by will or the laws of descent and distribution or, for no
consideration, to another Permitted Transferee of the Non-Employee Director. A
Non-Employee Director shall notify the Company in writing prior to any proposed
transfer of a Director Option to a Permitted Transferee and shall furnish the
Company, upon request, with information concerning such Permitted Transferee's
financial condition and investment experience. For purposes of the Plan, a
Non-Employee Director's "immediate family" means any child, stepchild,
grandchild, spouse, son-in-law or daughter-in-law and shall include adoptive
relationships; provided, however, that if the Company adopts a different
definition of "immediate family" (or similar term) in connection with the
transferability of employee stock options awarded to employees of the Company,
such definition shall apply, without further action of the Board, to the Plan.
10. Term
(a) Effective Date; Expiration. The Effective Date shall be the date of the
1997 Annual Meeting, assuming the Plan is approved by the stockholders of the
Company at such Annual Meeting. Unless earlier terminated in accordance with
Section 11 below, the Plan shall expire on the date of the Annual Meeting held
in 2004. Grants of Director Stock Units and Director Options shall be made in
connection with the Annual Meeting held in 2004, and shall be the last grants
made under the Plan. Expiration of the Plan in connection with the Annual
Meeting held in 2004 shall not affect awards of Director Stock Units and
Director Options made prior to such Annual Meeting, which awards shall remain
outstanding subject to the terms hereof.
(b) Coordination with Predecessor Plan. Awards of "Directors Shares" (as
such term is defined in the Predecessor Plan) shall be made under the
Predecessor Plan in connection with the 1997 Annual Meeting. Assuming the Plan
is approved by the stockholders of the Company at the 1997 Annual Meeting, no
further awards shall be made under the Predecessor Plan after the Effective
Date. Awards outstanding under the Predecessor Plan (including awards made in
connection with the 1997 Annual Meeting) shall remain outstanding after the
Effective Date subject to the terms thereof.
11. Amendments
The Board may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole of in part, including without limitation to amend
the provisions for determining the amount of Director Stock Units or Directors
Options to be issued to a Non-Employee Director, provided, however, that:
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(i) any amendment which under the requirements of applicable law or
stock exchange rule must be approved by the stockholders of the Company
shall not be effective unless and until such stockholder approval has been
obtained in compliance with such law or rule;
(ii) except as provided in Section 12 below, the Board may not, without
the approval of the Company's stockholders, increase the number of shares
available for issuance under the Plan pursuant to Section 4 above or the
number of Director Stock Units to be issued to any Non-Employee Director
pursuant to Section 6 above or reduce the exercise price of a Director
Option.
No termination or amendment of the Plan that would adversely affect a
Non-Employee Director's rights under the Plan with respect to any award of
Directors Stock Units or Director Options made prior to such action shall be
effective as to such Non-Employee Director unless he or she consents thereto.
12. Adjustment of and Changes in Shares
In the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, distribution of property, special cash
dividend or other change in corporate structure affecting the shares, the Board,
in its discretion, may make (i) such proportionate adjustments as it considers
appropriate in the number and kind of shares authorized for issuance hereunder
in order to preserve, but not increase, the benefits or potential benefits
intended to be made available hereunder and/or (ii) such other adjustments as it
deems appropriate. The Board's determination as to what, if any, adjustments
shall be made shall be final and binding on the Company and all Non-Employee
Directors who receive grants under the Plan.
13. No Right to Re-election
Nothing in the Plan shall be deemed to create any obligation on the part of
the Board to nominate any of its members for re-election by the Company's
stockholders, nor confer upon any Non-Employee Director the right to remain a
member of the Board for any period of time, or at any particular rate of
compensation.
14. Governing Law
The Plan and all agreements entered into under the Plan shall be construed
in accordance with and governed by the laws of the State of Delaware.
15. No Restriction on Right of Company to Effect Corporate Changes
The Plan shall not affect in any way the right or power of the Company or
its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of stock
or of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect the
Common Stock or the rights thereof or which are convertible into or exchangeable
for Common Stock, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
16. Unfunded Plan
The Plan is unfunded. Prior to the payment or settlement of any award of
Director Stock Units or the exercise of any Director Options, nothing contained
herein shall give any non-Employee Director any rights that are greater than
those of a general creditor of the Company. In its sole discretion, the Board
may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock with respect to
awards hereunder.
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