EXHIBIT 10.02
AMBAC INC. 1991 STOCK INCENTIVE PLAN
AS AMENDED THROUGH JANUARY 29, 1997
1. DEFINITIONS
(a) "Agreement" means an agreement between the Company and a Participant
setting forth the terms and conditions of an Award.
(b) "Award" means a stock option (including an incentive stock option under
Section 422 of the Code), stock appreciation right, performance unit award,
restricted stock award or other stock or stock-based award, or any combination
of them, as described in and granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "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
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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 January 29, 1997, 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.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the committee referred to in Section 3(a) of the Plan.
(g) "Common Stock" means the Common Stock of the Company, par value $.01 per
share, or such other class or kind of share or other securities as may be
applicable under Section 12.
(h) "Company" means AMBAC Inc., a Delaware corporation, or any successor
to substantially all its business.
(i) "Employee" means an officer or other employee of the Company or a
Related Company.
(j) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
(k) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
(l) "Fair Market Value" means the average of the highest and the lowest
quoted selling price of a share of Common Stock as reported on the composite
tape for securities listed on the New York Stock Exchange, or such other
national securities exchange as may be designated by the Committee, or, in the
event that the Common Stock is not listed for trading on a national securities
exchange but is quoted on an automated quotation system, on such automated
quotation system, in any such case on the valuation date (or, if there were no
sales on the valuation date, the average of
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the highest and the lowest quoted selling prices as reported on said composite
tape or automated quotation system for the most recent day during which a sale
occurred).
(m) "Incentive Stock Option" means a stock option that is intended to comply
with the requirements of Section 422 of the Code or any successor provision
thereto.
(n) "Participant" means an Employee who has been granted an Award under the
Plan.
(o) "Person" means any individual, firm, corporation, partnership or other
entity.
(p) "Plan" means the 1991 Stock Incentive Plan of the Company as described
herein.
(q) "Related Company" means any corporation or other entity in which the
Company has or obtains a proprietary interest by reason of stock ownership or
otherwise.
(r) "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.
2. PURPOSE
The Plan is intended to provide an incentive to selected Employees of the
Company and of its Related Companies to remain in the employ of the Company and
its Related Companies and to increase their interest in the success of the
Company by providing them with opportunities to increase their proprietary
interest in the Company and to receive compensation based upon the Company's
success.
3. ADMINISTRATION
(a) A committee (the "COMMITTEE") appointed by the Board shall be
responsible for administering the Plan. The Committee shall be comprised of two
or more members of the Board who qualify as "disinterested persons" as
contemplated by Rule 16b-3 promulgated under the Exchange Act, or any successor
provision thereto.
(b) The Committee shall have authority to adopt such rules as it may deem
appropriate to carry out the purposes of the Plan, and shall have authority to
interpret and construe the provisions of the Plan and any agreements under the
Plan and to make determinations pursuant to any Plan provision or agreement.
Each interpretation, determination or other action made or taken
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by the Committee pursuant to the Plan shall be final and binding on all persons.
No member of the Committee shall be liable for any action or determination made
in good faith, and the members of the Committee shall be entitled to
indemnification and reimbursement in the manner provided in the Company's
Certificate of Incorporation as it may be amended from time to time.
(c) The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may set, except
that the Committee may not delegate (i) its authority with regard to Awards
(including decisions concerning the timing, pricing and amount of Awards)
granted to Employees who are officers or directors for purposes of Section 16(b)
of the Exchange Act or (ii) its authority pursuant to Section 10 to amend the
Plan.
4. ELIGIBILITY
Awards may be granted only to Employees. The Committee shall have the
authority to select the Participants to whom Awards may be granted and to
determine the number and form of Awards to be granted to each Participant.
5. STOCK SUBJECT TO THE PROVISIONS OF THE PLAN
(a) Subject to adjustment in accordance with the provisions of Section
12, and subject to Sections 5(c) and 5(d) below, the total number of shares of
Common Stock available for Awards under the Plan shall be:
(i) 1,500,000, plus
(ii) for each calendar year, starting with 1993, during any part of
which the Plan is in effect, a number of shares (hereinafter referred to as
the "Annual Limit" for such year) equal to 1.3% of the total number of
shares of Common Stock outstanding on a fully diluted basis as of the
immediately preceding December 31,
provided, however, that at no time may any Award be made that would cause the
cumulative number of shares of Common Stock subject to Award made under the Plan
since its inception to exceed 10% of the number of shares of Common Stock
outstanding on a fully diluted basis as of the last day of the most recently
completed fiscal quarter of the Company. Any unused portion of the Annual Limit
for any calendar year shall be carried forward and shall be available for Awards
in future years. Any shares issued under the Plan may consist, in whole or in
part, of authorized but unissued Common Stock or of treasury stock.
(b) For purposes of computing the number of shares Common Stock remaining
available for Awards at any time, there shall be debited against the total
number of shares determined to be available pursuant to Section 5(a) and 5(c)
(i) the number of shares of Common
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Stock issuable upon exercise of stock options granted pursuant to Section 6,
(ii) the number of shares of restricted stock awarded pursuant to Section 6 and
(iii) the maximum number of shares of Common Stock that may be issued under
performance unit Awards or other stock or stock-based Awards granted pursuant to
Section 6. In the case of a stock option granted in tandem with a stock
appreciation right, the exercise of the option or stock appreciation right will
reduce proportionately the number of shares subject to the tandem stock
appreciation right or option, as the case may be. Any shares ceasing to be
subject to the tandem option or right because of such reduction shall not be
available for future Awards granted under the Plan.
(c) Any shares represented by Awards which are forfeited, terminated, paid
in cash or expire unexercised, any shares which have been exchanged by a
Participant or withheld by the Company as full or partial payment to the Company
in connection with any Award (including in connection with the payment of any
taxes related to such Award), and the excess amount of variable Awards which
become fixed at less than their maximum limitations (including as such any
Awards denominated in a specified number of shares of Common Stock that are
settled by issuance of a lesser number of shares), shall again be available for
grants and issuance under the Plan, provided, however, that the Committee may
limit the application of this Section 5(c) in any manner that it considers
necessary or appropriate to ensure that the Plan complies with the requirements
of Rule 16b-3 under the Exchange Act or any successor provision.
(d) At no time may any Award be made that would cause the cumulative number
of shares of Common Stock (and of units denominated in Common Stock) granted to
Participants under the Plan for no consideration other than the provision of
services, or sold for consideration in cash, other property or a combination of
cash and other property the aggregate value of which (as determined by the
Committee) is less than the Fair Market Value of such shares, since the
inception of the Plan to exceed 4% of the total number of shares of Common Stock
outstanding on a fully diluted basis as of the last day of the most recently
completed fiscal quarter of the Company, provided, however, that any such shares
or units that are granted in lieu of cash compensation that otherwise would be
paid to a Participant, or that are granted in satisfaction of any other
obligation owed by the Company or a Related Company (including without
limitation obligations under the former AMBAC Indemnity Corporation Long-Term
Incentive Plan) to a Participant (other than an obligation to a newly hired
employee), shall not be counted against such limitation.
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6. AWARDS UNDER THE PLAN
(a) Restricted Stock
(i) General. Subject to Section 5(d), shares of Common Stock may be
granted to a Participant for no consideration other than the provision of
services or may be offered for sale to a Participant at a purchase price
determined by the Committee. Such shares of Common Stock shall be subject to
such restrictions on transfer or other incidents of ownership for such
periods of time, and shall be subject to such conditions of vesting, as the
Committee may determine and as shall be set forth in the Agreement relating
to such stock. (Shares subject to such restrictions are referred to herein
as "Restricted Shares.") If shares of Common Stock are offered for sale
under the Plan, the purchase price shall be payable in cash, or, in the sole
discretion of the Committee and to the extent provided in any applicable
Agreement, in shares of Common Stock already owned by the Participant, for
other consideration acceptable to the Committee or in any combination of
cash, shares of Common Stock or such other consideration.
(ii) Share Certificates; Rights and Privileges. At the time
Restricted Shares are granted or sold to a Participant, share certificates
representing the appropriate number of Restricted Shares shall be registered
in the name of the Participant but shall be held by the Company in custody
for the account of such person. The certificates shall bear a legend
restricting their transferability as provided herein. Except for such
restrictions on transfer or other incidents of ownership as may be
determined by the Committee and set forth in the Agreement relating to an
award or sale of Restricted Shares, a Participant shall have the rights of a
stockholder as to such Restricted Shares, including the right to receive
dividends and the right to vote in accordance with the Company's Restated
Certificate of Incorporation.
(iii) Distributions. Any shares of Common Stock or other securities of
the Company received by a Participant to whom Restricted Shares have been
granted or sold as a result of a stock distribution to holders of Common
Stock or as a stock dividend on Common Stock shall be subject to the same
terms, conditions and restrictions as such Restricted Shares.
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(b) Stock Options
(i) General. A stock option shall entitle the Participant to whom
the option is granted to purchase a specified number of shares of Common
Stock during a specified time at an exercise price that is fixed at the time
of grant or for which the method of determining the exercise price is
specified at the time of grant, all as the Committee may determine. With
respect to any stock option granted on or after March 3, 1993, the per share
exercise price of any stock options whose price is fixed at the time of
grant shall not be less than the Fair Market Value of a share of Common
Stock as of the date of grant, and the per share exercise price of any stock
option whose price is not fixed at the time of grant but for which the
method of determining the exercise price is specified at the time of grant
shall be not less than the Fair Market Value of a share of Common Stock as
of the date on which such exercise price is so determined. Payment of the
exercise price shall be made in cash, or, to the extent provided in the
Agreement relating to the option, in shares of Common Stock (including
shares already owned by the Participant or to be issued to the Participant
upon exercise of the option) or in any combination of cash and shares of
Common Stock. The Agreement relating to a stock option shall set forth the
applicable vesting schedule. A stock option shall be effective for such term
as shall be determined by the Committee and set forth in the Agreement
relating to such option.
(ii) Incentive Stock Options. Each stock option granted pursuant to
the Plan shall be designated at the time of grant as either an Incentive
Stock Option (or shall otherwise be designated as an option entitled to
favorable treatment under the Code) or as a "nonqualified stock option." The
aggregate fair market value (within the meaning of the Code and determined
at the time of grant of the Award) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during a calendar year shall not exceed $100,000, or such other limit as may
from time to time be established under the Code. No Incentive Stock Option
may be issued pursuant to the Plan to any individual who, at the time the
option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any of its
subsidiaries, unless (A) the exercise price determined as of the date of
grant is at least 110% of the Fair Market Value on the date of grant of the
shares of Common Stock subject to such option, and (B) the Incentive Stock
Option is not exercisable more than five years from the date of grant
thereof.
(c) Stock Appreciation Rights
(i) General. A stock appreciation right shall entitle a Participant
to receive, upon exercise, (x) an amount in cash equal to the excess, if
any, of the Fair Market Value on the exercise date of the number of shares
of Common Stock for which the stock appreciation right is exercised, over
the Fair Market Value of such number of shares on the
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date of grant (or, in the case of a stock appreciation right granted in
tandem with a stock option, the aggregate exercise price which the
Participant would otherwise have been required to pay under the terms of the
stock option in order to purchase such shares), or (y) a number of shares of
Common Stock having an aggregate Fair Market Value, as of the date of
exercise, equal to the amount determined as in the preceding clause (x), or
(z) a combination of cash and shares having an aggregate value equal to the
amount determined as in the preceding clause (x).
(ii) Exercisability. The Committee shall determine whether payments
in respect of a stock appreciation right shall be in cash, shares of Common
Stock or a combination thereof. A stock appreciation right shall be
exercisable at the time or times established by the Committee at the time of
grant. If a stock appreciation right is granted in tandem with a stock
option, the stock appreciation right shall not be exercisable prior to or
later than the time the related stock option could be exercised.
(d) Performance Units. Performance units may be granted as fixed or
variable share-or dollar-denominated units subject to such conditions of vesting
and time of payment as the Committee may determine and as shall be set forth in
the Agreement relating to such performance units. Performance units may be paid
in Common Stock, cash or a combination of Common Stock and cash, as the
Committee may determine.
(e) Other Stock or Stock-Based Awards. An Award other than as described in
subsections (a) through (d) above may be granted pursuant to which Common Stock
is or in the future may be acquired, or which is valued or determined in whole
or part by reference to, or otherwise based upon, Common Stock.
(f) General Terms. The following terms and conditions shall be applicable
to Awards:
(i) Dividend Equivalents. The Committee may provide Participants
with the right to receive payments equivalent to dividends or interest with
respect to an outstanding Award, which payments can either be paid currently
or deemed to have been reinvested in shares of Common Stock. Payment of such
amounts can be made in Common Stock, cash or a combination of Common Stock
and cash, as the Committee shall determine.
(ii) Transfers. Unless the Committee determines otherwise, no Award
shall be transferable other than by will or by the laws of descent and
distribution or pursuant to a domestic relations order; provided, however,
that the Committee may, in its discretion and subject to such terms and
conditions as it shall specify, permit the transfer of an Award for no
consideration to a Participant's family members or to one or more trusts or
partnerships established in whole or in part for the benefit of one or more
of such family members (collectively, "PERMITTED TRANSFEREES"). Any Award
transferred to a Permitted Transferee
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shall be further transferable only by will or the laws of descent and
distribution or, for no consideration, to another Permitted Transferee of
the Participant. The Committee may in its discretion permit transfers of
Awards other than those contemplated by this Section.
(iii) Award Exercisable Only by Participant and Permitted Transferees.
During the lifetime of a Participant, a stock option, stock appreciation
right or other Award providing for exercise shall be exercisable only by the
Participant or by a Permitted Transferee to whom such stock option, stock
appreciation right or other Award has been transferred in accordance with
Section 6(f)(ii). The grant of an Award shall impose no obligation on a
Participant to exercise the Award.
(iv) Rights of a Stockholder. A Participant shall have no rights as a
stockholder with respect to shares covered by an Award until the date the
Participant or his nominee becomes the holder of record of such shares. No
adjustment will be made for dividends or other rights for which the record
date is prior to such date, except as provided in Section 12.
(v) Limitation on Exercise. An Award may not be exercised, and no
shares of Common Stock may be issued in connection with an Award, unless the
issuance of such shares has been registered under the Securities Act of
1933, as amended, and qualified under applicable state "blue sky" laws, or
the Company has determined that an exemption from registration and from
qualification under such state "blue sky" laws is available.
(vi) Single or Tandem Grants. Any Award described in subsections (a)
through (e) above may be granted singly or in combination or tandem with any
other Award, as the Committee may determine. Awards may be made in
combination with, in replacement of or as alternatives to grants or rights
under any other employee or compensation plan of the Company, including the
plan of any acquired entity.
7. AGREEMENTS
The terms and conditions of each Award shall be embodied in an Agreement in
a form approved by the Committee, which shall contain terms and conditions not
inconsistent with the Plan and which shall incorporate the Plan by reference.
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8. TERMINATION OF EMPLOYMENT
The Agreement relating to an Award will set forth provisions governing the
disposition of an Award in the event of the retirement, disability, death or
other termination of a Participant's employment.
9. TAX WITHHOLDING
The Company or a subsidiary thereof, as appropriate, may require any
individual entitled to receive a payment in respect of an Award to remit to the
Company, prior to such payment, an amount sufficient to satisfy any Federal,
state or local tax withholding requirements. The Company or a subsidiary
thereof, as appropriate, shall also have the right to deduct from all cash
payments made pursuant to or in connection with any Award any Federal, state or
local taxes required to be withheld with respect to such payments. In addition,
the Company may permit any individual to whom an Award has been made to satisfy,
in whole or in part, such obligation to remit taxes, by directing the Company to
withhold shares of Common Stock that would otherwise be received by such
individual upon settlement or exercise of such Award, pursuant to such rules as
the Committee may establish from time to time.
10. AMENDMENTS
The Committee may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part, provided, however, that any amendment
which under the requirements of applicable law 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, and
provided, further, that any amendment that must be approved by the stockholders
of the Company in order to maintain the continued qualification of the Plan
under Rule 16b-3 under the Exchange Act, or any successor provision, shall not
be effective unless and until such stockholder approval has been obtained in
compliance with such rule. No termination or amendment of the Plan may, without
the consent of the Participant to whom an Award has been granted, adversely
affect the rights of such Participant under such Award.
11. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock or other
securities pursuant to Awards will be used for general corporate purposes.
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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
Committee shall make such adjustments, if any, as it deems appropriate in the
number and class of shares subject to, and the exercise price of, outstanding
options granted under the Plan, and in the value of, or number or class of
shares subject to, other Awards granted or available to be granted under the
Plan. The foregoing adjustments shall be determined by the Committee in its sole
discretion.
13. NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to receive grants of Awards under
the Plan. Neither the Plan, the grant of Awards under the Plan, nor any action
taken or omitted to be taken under the Plan shall be deemed to create or confer
on any employee any right to be retained in the employ of the Company or any
subsidiary or other affiliate thereof, or to interfere with or to limit in any
way the right of the Company or any subsidiary or other affiliate thereof to
terminate the employment of such employee at any time.
14. CHANGE IN CONTROL
In order to maintain the Participants' rights in the event of a Change in
Control, the Committee, in its sole discretion, may, either at the time an Award
is made hereunder or at any time prior to, or coincident with or after the time
of a Change in Control:
(i) provide for the acceleration of any time periods relating to the
exercise or realization of such Awards so that such Awards may be exercised
or realized in full on or before a date fixed by the Committee;
(ii) provide for the purchase of such Awards, upon the Participant's
request, for an amount of cash equal to the amount which could have been
obtained upon the exercise or realization of such rights had such Awards
been currently exercisable or payable;
(iii) make such adjustments to the Awards then outstanding as the
Committee deems appropriate to reflect such Change in Control; or
(iv) cause the Awards then outstanding to be assumed, or new rights
substituted therefor, by the surviving corporation in such Change in
Control.
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The Committee may, in its discretion, include such further provisions and
limitations in any agreement documenting such Awards as it may deem equitable
and in the best interests of the Company in the event of a Change in Control,
except that in no event may the Committee take actions that would cause the Plan
to lose qualification under Rule 16b-3 under the Exchange Act, or take actions
that will enable any Participant to incur liability under Section 16(b) of the
Exchange Act.
15. 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.
16. EFFECTIVE DATE
The effective date of this Plan shall be the date of the consummation of the
"Equity Offerings", as such term is defined in the Company's Registration
Statement No. 33-40306 on Form S-1.
17. TERM OF THE PLAN
Unless earlier terminated pursuant to Section 10, the Plan shall terminate
on the tenth anniversary of the effective date provided for in Section 16,
except with respect to Awards then outstanding.
18. 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, recapitalization,
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.
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19. EXCHANGE ACT
Notwithstanding anything contained in the Plan or any agreement under the
Plan to the contrary, if the consummation of any transaction under the Plan, or
the taking of any action by the Committee in connection with a Change in
Control, would result in the possible imposition of liability on a Participant
pursuant to Section 16(b) of the Exchange Act, the Committee shall have the
right, in its sole discretion, but shall not be obligated, to defer such
transaction or the effectiveness of such action to the extent necessary to avoid
such liability, but in no event for a period longer than 180 days.
