EXHIBIT 10.12

 

AMBAC FINANCIAL GROUP, INC.

1997 NON-EMPLOYEE DIRECTORS EQUITY PLAN,

AS AMENDED

 

Form of Notice of Award of Director Five-Year Restricted Stock Units

 

Ambac Financial Group, Inc. (the “Company”) has adopted the 1997 Non- Employee
Directors Equity Plan, as amended (the “Plan”) 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.

 

This Notice of Award sets forth the terms and conditions of an award of
restricted stock units (“Director Five-Year Stock Units”) granted under Section
6 of the Plan. Annex A of this Notice of Award (“Annex A”) names the individual
to whom the Director Five-Year Stock Units are granted (the “Participant”) and
sets forth the number of Director Five-Year Stock Units subject to the award.

 

This Notice of Award and the Director Five-Year Stock Units granted hereby shall
be subject to the Plan, the terms of which are incorporated herein by reference,
and in the event of any conflict or inconsistency between the Plan and this
Notice of Award, the Plan shall govern. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan, a copy of which
has been furnished to the Participant.

 

  1. Grant of Director Five-Year Stock Units.

 

Subject to the terms and conditions contained herein and in the Plan, the
Company grants to the Participant, as of the date of grant indicated on Annex A
(the “Date of Grant”), the number of Director Five-Year Stock Units indicated on
Annex A.

 

  2. Terms and Conditions of the Director Five-Year Stock Units.

 

The Director Five-Year Stock Units shall have the following terms and
conditions:

 

(a) General. Each Director Five-Year Stock Unit shall represent the unsecured
promise of the Company to transfer to the Participant, on the settlement date of
such Unit and subject to the terms and conditions set forth in this Notice of
Award, one share of the Company’s common stock, par value $0.01 per share
(“Common Stock”).

 

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Ambac 1997 Non-Employee Directors Equity Plan

Form of Notice of Award of Director Five-Year Stock Units

 

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(b) Director Account. As provided in the Plan, the Company will maintain a
bookkeeping record for the Participant (the Participant’s “Director Account”) to
which number of Director Five-Year Stock Units indicated on Annex A will be
credited as of the Date of Grant.

 

(c) Vesting.

 

(i) Normal Vesting. The Director Five-Year Stock Units, including any additional
Director Five-Year Stock Units credited to the Participant’s Director Account
pursuant to Section 2(d) below, shall vest on the fifth anniversary of the Date
of Grant, provided that the Participant shall have remained a member of the
Company’s Board of Directors (the “Board”) continuously from the Date of Grant
until the earlier of (A) such fifth anniversary or (B) if the Participant
declines to stand for re-election to the Board at the annual meeting of the
Company’s stockholders (an “Annual Meeting”) held in the fifth calendar year
following the Date of Grant, the date of such Annual Meeting.

 

(ii) Accelerated Vesting. Notwithstanding clause (i) above, all of the Director
Five-Year Stock Units, including any additional Director Five-Year Stock Units
credited to the Participant’s Director Account pursuant to Section 2(d) below,
shall immediately vest upon the first to occur of (A) the Participant’s 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) the
Participant’s ceasing to be a member of the Board as a result of death or
Permanent Disability (as defined below) or (C) subject to the following
sentence, a Change in Control of the Company. 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 Five-Year Stock Units subject to this Notice of Award 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 Participant, if the
Participant so desires, to tender the shares issued upon settlement of such
Director Five-Year Stock Units into such offer.

 

(iii) Forfeiture. Except in the case of accelerated vesting provided for in
clause (ii) above, all of the Director Five-Year Stock Units subject to this
Notice of Award shall be forfeited, and all rights of the Participant to or with
respect to such Director Units shall terminate without any obligation on the
part of the Company, if the Participant’s service as a member of the Board
terminates prior to the fifth anniversary of the Date of Grant.

 

(d) Dividends and Distribution on Common Stock. If the Company pays any cash or
other dividend or makes any other distribution in respect of the Common Stock,
the Participant’s 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 (as defined below) of a share of
Common Stock for the date of such payment or distribution, and multiplying the
result of such

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Ambac 1997 Non-Employee Directors Equity Plan

Form of Notice of Award of Director Five-Year Stock Units

 

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division by (C) the number of Director Five-Year Stock Units indicated on Annex
A, plus the number of Director Five-Year Stock Units previously credited to the
Participant’s Director Account in respect of such Director Five-Year Stock Units
pursuant to this Section 2(d). Credits shall be made effective as of the date of
the dividend or other distribution in respect of the Common Stock.

 

(e) Delivery of Share Certificates.

 

  (i) Ordinary Settlement. Subject to Section 3(d)(ii), settlement of any
Director Five-Year Stock Units shall occur promptly following the date on which
such Director Five-Year Stock Units vest. Director Five-Year Stock Units will be
settled, at the election of the Participant, either by:

 

  (A) Delivery of a stock certificate or certificates representing the number of
shares of Common Stock equal to the number of Director Five-Year Stock Units
being settled (any fractional Director Five-Year Stock Units being rounded up to
the next whole Director Five-Year Stock Unit). Certificates shall be issued in
the name of the Participant (or of the person or persons to whom such Director
Five-Year Stock Units were transferred by will or the laws of descent and
distribution or pursuant to a Qualified Domestic Relations Order).

 

  (B) The transfer of the corresponding number of shares of Common Stock equal
to the number of Director Five-Year Stock Units being settled (or any fractional
Director Five-Year Stock Unit being rounded up to the next whole Director
Five-Year Stock Unit) to the brokerage account designated by the Participant to
the Company in writing prior to settlement.

 

  (ii) Deferred Settlement. Unless the Committee, in its sole discretion,
determines otherwise, a Participant may irrevocably elect to defer settlement of
any Director Five-Year Stock Units until a future date, provided that

 

  (A) the Participant’s election is made no later than six months preceding the
first year in which all or any portion of the Director Five-Year Stock Units are
scheduled to vest as described in Annex A hereto,

 

AND

 

  (B) no such settlement may extend beyond the earlier of (i) the Participant’s
service on the Board or (ii) the Participant’s death.

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Ambac 1997 Non-Employee Directors Equity Plan

Form of Notice of Award of Director Five-Year Stock Units

 

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A deferral election shall be made on a form provided to the Participant by the
Company for this purpose.

 

  (iii) Certain Exceptions Pursuant to Company Policy. Anything herein to the
contrary notwithstanding, settlement of a Director Five-Year Stock Unit shall
not occur on a date on which the Company’s policies then in effect prohibit the
Participant from engaging in transactions in the Company’s securities. Instead,
settlement shall occur on, or as promptly as practicable following, the first
date that the Participant is again permitted to engage in transactions in the
Company’s securities under the Company policies.

 

  (iv) Transfer Restrictions on Common Stock. Shares of Common Stock issued upon
the settlement of Director Five-Year Stock Units will not be subject to
restrictions on transfer (except for any restrictions imposed by the federal
securities laws or other applicable laws or regulations and for any restrictions
under the Company’s trading policies applicable to employees).

 

(f) Transfer Restrictions on Director Five-Year Stock Units. Director Five-Year
Stock Units may not be transferred, except by will or the laws of descent and
distribution or pursuant to a Qualified Domestic Relations Order.

 

  3. Tax Withholding.

 

The Company shall not, unless required or permitted by the Internal Revenue Code
or applicable accounting rules or regulations, withhold shares of Common Stock
that would otherwise be received by the Participant or deduct from cash payments
to be made pursuant to or in connection with the settlement of the Director
Five-Year Stock Units, any amount for the purpose of satisfying any Federal,
state or local tax withholding requirement.

 

The Company, to the extent required or permitted by the Internal Revenue Code
and/or applicable accounting rules, shall have the right, prior to the delivery
of any certificates evidencing shares of Common Stock to be issued upon full or
partial settlement of the Director Five-Year Stock Units, to require the
Participant to remit to the Company any amount sufficient to satisfy any
Federal, state or local tax withholding requirements. The Company may permit the
Participant 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 the Participant, pursuant to such rules as the Board may establish
from time to time. The Company shall also have the right to deduct from all cash
payments made pursuant to or in connection with the Director Five-Year Stock
Units any Federal, state or local taxes required to be withheld with respect to
such payments.

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Ambac 1997 Non-Employee Directors Equity Plan

Form of Notice of Award of Director Five-Year Stock Units

 

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  4. No Restriction on Right to Effect Corporate Changes; No Right to
Re-election;

 

Neither the Plan, this Notice of Award, the grant of the Director Five-Year
Stock Units nor any action taken hereunder shall 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 bonds, debentures, preferred or prior preference
stocks ahead of or convertible into, or otherwise affecting the Common Stock or
the rights thereof, 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.

 

In addition, neither the Plan, this Notice of Award, the grant of the Director
Five-Year Stock Units nor any action taken hereunder shall be deemed to create
any obligation on the part of the Board to nominate the Participant for
re-election by the Company’s stockholders, nor confer upon the Participant the
right to remain a member of the Board for any period of time or at any
particular rate of compensation.

 

  5. Adjustment of and Changes in Shares.

 

In the event of any merger, consolidation, recapitalization, reclassification,
stock dividend, special cash dividend, or other change in corporate structure
affecting the Common Stock, the Board shall make such adjustments, if any, as it
deems appropriate in the number and class of shares subject to the Director
Five-Year Stock Units. The foregoing adjustments shall be determined by the
Board in its sole discretion.

 

  6. Preemption of Applicable Laws and Regulations.

 

Anything herein to the contrary notwithstanding, if, at any time specified
herein for the issuance of shares of Common Stock to the Participant, any law,
regulation or requirement of any governmental authority having jurisdiction
shall require either the Company or the Participant to take any action in
connection with the shares then to be issued, the issuance of such shares shall
be deferred until such action shall have been taken.

 

  7. Board Decisions Final.

 

Any dispute or disagreement which shall rise under, or as a result of, or
pursuant to, or in connection with, this Notice of Award or the Director
Five-Year Stock Units shall be determined by the Board, and any such
determination or any other determination by the Board under or pursuant to this
Notice of Award and any interpretation by the Board of the terms of the Director
Five-Year Stock Units shall be final and binding on all persons affected
thereby.

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Ambac 1997 Non-Employee Directors Equity Plan

Form of Notice of Award of Director Five-Year Stock Units

 

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  8. Amendments.

 

The Board shall have the power to alter or amend the terms of the Director
Five-Year Stock Units as set forth herein, from time to time, in any manner
consistent with the provisions of Section 11 of the Plan, and any alteration or
amendment of the terms of the Director Five-Year Stock Units by the Board shall,
upon adoption, become and be binding on all persons affected thereby without
requirement for consent or other action with respect thereto by any such person.
The Board shall give written notice to the Participant of any such alteration or
amendment as promptly as practicable after the adoption thereof. The foregoing
shall not restrict the ability of the Participant and the Company by mutual
consent to alter or amend the terms of the Director Five-Year Stock Units in any
manner which is consistent with the Plan and approved by the Board.

 

  9. Notice Requirements.

 

Any notice which either party hereto may be required or permitted to give to the
other shall be in writing. Such notice may be delivered to the Company
personally or by mail, postage prepaid, addressed as follows: Ambac Financial
Group, Inc., One State Street Plaza, New York, New York 10004, attention:
Corporate Secretary, or at such other address as the Company, by notice to the
Participant, may designate in writing from time to time, and to the Participant
at the Participant’s address as shown on the records of the Company or at such
other address as the Participant, by notice to the Company, may designate in
writing from time to time.

 

  10. Governing Law.

 

The terms and conditions stated herein are to be governed by, and construed in
accordance with, the laws of the State of Delaware.

 

  11. Entire Agreement; Headings.

 

This Notice of Award (which includes Annex A) and the other related documents
expressly referred to herein set forth the entire agreement and understanding
between the parties hereto and supersede all prior agreements and understandings
relating to the subject matter hereof. In the event of a discrepancy or
inconsistency in the number of Director Five-Year Stock Units, the Date of
Grant, the vesting of the Director Five-Year Stock Units or any other term in
this Notice of Award and the provisions of the Plan authorizing the grant of the
Director Five-Year Stock Units, the provisions of the Plan shall control and the
Company shall have the right in its sole discretion, to replace the Notice of
Award with a correct version or any portion thereof (including any portion of
Annex A). The headings of Sections and subsections herein are included solely
for convenience of reference and shall not affect the meaning of any of the
provisions of this Notice.

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Ambac 1997 Non-Employee Directors Equity Plan

Form of Notice of Award of Director Five-Year Stock Units

 

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  12. Definitions.

 

For purposes hereof, the following terms shall have the meanings specified
below.

 

(a) Change in Control. “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;

 

(ii) individuals who, as of the date the Plan was approved by the Board,
constituted 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

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Ambac 1997 Non-Employee Directors Equity Plan

Form of Notice of Award of Director Five-Year Stock Units

 

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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.

 

(b) Permanent Disability. “Permanent Disability” means a physical or mental
impairment rendering the Participant substantially unable to function as a
member of the Board for any period of six consecutive months. Any dispute as to
whether the Participant is Permanently Disabled shall be resolved by a physician
mutually acceptable to the Participant and the Company, whose decision shall be
final and binding upon the Participant and the Company.

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ANNEX A TO THE

FORM OF DIRECTOR FIVE-YEAR STOCK UNITS

AWARD AGREEMENT

 

DIRECTOR FIVE-YEAR STOCK UNITS AWARD

 

Participant:    [Name]    Social Security No.:      No. of Shares:    _______   
Vesting Date:    ______ Date of Grant: