EXHIBIT 10.23
AMBAC 1997 NON-EMPLOYEE DIRECTORS EQUITY PLAN
1. Purpose
The purpose of the AMBAC 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.
"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 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
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
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of one or 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 Section 12 below, the maximum number of shares of Common Stock
which may be issued under the Plan (the "Section 4 Limit") shall be 70,000
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 25,000 shares may be issued upon
settlement of Director 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.
(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
reelection 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 1,500 Director Stock Units.
(ii) Upon the vesting of Director Stock Units in accordance with
Section 6(d)(i) below, or the vesting of restricted shares under the
Predecessor Plan in accordance with Section 6(c)(i) thereof, a Non-Employee
Director shall receive an additional grant of 1,500 Director Stock Units.
Such additional grants shall be made as of the date of the Annual Meeting
as of which such vesting occurs (or, if the vesting date of any restricted
shares under the Predecessor Plan does not coincide with the date of an
Annual Meeting, as of the date of the Annual Meeting that is closest in
time to the applicable vesting date) and shall be made only if (i) 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 (ii) 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
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1,500 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 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 date of the Annual Meeting held
in the fifth calendar year following 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 to 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) a Change in Control of the Company,
and shall be settled as soon as practicable thereafter.
(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
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 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 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
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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 1,000 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 1,000 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
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 date of the first Annual Meeting following the date
of grant, assuming that the Non-Employee Director has continued to serve as
a member of the Board until such date, provided, however, that all Director
Options awarded to a Non-Employee Director shall be considered fully vested
upon the earlier to occur of (A) termination of the Non-Employee Director's
service on the Board by reason of death or Permanent Disability or (B) a
Change in Control. If a Non-Employee Director's service on the Board
terminates for any reason other than death or Permanent Disability and
prior to a Change in Control, then any unvested Director Options shall be
forfeited to the Company, and the Non-Employee Director shall have no
further right or interest therein.
(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;
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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, 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 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-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 proposed 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
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(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:
(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
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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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