Document:

January 2004 Award of Restricted Stock Units to Phillip B. Lassiter

 EXHIBIT 10.09 
  
 AMBAC FINANCIAL GROUP, INC. 
  
 1997 EQUITY PLAN 
  
 JANUARY 2004 NOTICE OF AWARD OF RESTRICTED STOCK UNITS 
  
 Ambac Financial Group, Inc., a Delaware corporation and its Subsidiaries (referred to herein as either the “Company” or
“Ambac”), have adopted the Ambac 1997 Equity Plan (the “Plan”), for the purposes of providing an incentive to selected employees of the Company and its affiliates to remain in its employ and to
increase their interest in the success of the Company. The Company pursues these goals by providing selected employees with opportunities through the Plan to increase their proprietary interest in the Company and to receive compensation based upon
the Company’s success. 
  
 This 2004 Restricted Stock Unit
notice of award (the “Notice of Award”) sets forth the terms and conditions of the restricted stock units that have been granted under the Plan to the individual identified on Annex A (the
“Participant”). This Notice of Award sets forth the number of restricted stock units that the Participant will receive, the date of grant and the applicable vesting schedule. 
  

	1.	Incorporation of Plan Terms. 

  
 This Notice of Award and the restricted stock units granted hereby are subject to the Plan, the terms of which are incorporated herein by reference. If
there is any conflict or inconsistency between the Plan and this Notice of Award, the Plan shall govern. Capitalized terms used in this Notice of Award without definition shall have the meanings assigned to them in the Plan. A copy of the Plan is
available on Ambac’s intranet site. 
  

	2.	Grant of Restricted Stock Units. 

  
 Subject to the 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 restricted stock units (the “RSUs”) specified on Annex A. 
  

	3.	Terms and Conditions of the RSUs. 

  
 The RSUs shall have the following terms and conditions: 
  
 (a) General. Each RSU shall represent the unsecured promise of the Company to transfer to the Participant, on the settlement date of such RSU 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 (the “Common Stock”). 
  
 (b) Vesting. 
  

	 	(i)	Normal Vesting. The RSUs, including any additional RSUs credited to the Participant’s Account, shall vest on the third anniversary of the Date of Grant.

  

	 	(ii)	Accelerated Vesting. Notwithstanding Section 3(b)(i), all of the Participant’s RSUs 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 or resignation from the Board, or (B) the Participant’s ceasing to be a member of the Board as a result of death or Permanent Disability (as defined below). 

 

	 	(iii)	Forfeiture. Unless the Compensation Committee of the Board of Directors of the Company (the “Committee”), in its sole discretion, determines
otherwise, any RSUs that have not vested in accordance with this Section 3(b) shall be forfeited by the Participant if the Participant is of removed as Chairman of the Board or as a member of the Board for “Cause”. “Cause”
shall be defined as (i) the willful commission by the Participant of acts that are dishonest and demonstrably and materially injurious to the Company or any of its Affiliates, monetarily or otherwise or (ii) the conviction of the
Participant, or his pleading guilty or “ nolo contendre” for a felony resulting in material harm to the financial condition or business reputation of the Company or any of its Affiliates. 

  
 (c) Dividends and Distribution on Common Stock. In the event that,
following the Date of Grant and prior to the settlement of any RSU, the Company pays any cash or other dividend or makes any other distribution in respect of the Common Stock, each RSU shall be credited with an additional number of RSUs (including
fractions thereof) determined by dividing (i) the amount or cash, or the value (as determined by the Committee) of any other property, paid or distributed in respect of one outstanding share of Common Stock by (ii) the average of the high and low
selling price of the Common Stock on the New York Stock Exchange for the date of such payment or distribution. Any RSUs so credited shall be subject to the same vesting provisions as the RSU in respect of which they are credited. Except as otherwise
expressly provided in this Notice of Award, the Participant shall have no right as a shareholder with respect to any RSUs until a certificate or certificates evidencing such shares shall have been issued to the Participant according to the terms of
Section 3(d) below. 
  

 (d) Delivery of Share Certificates. 
  

	 	(i)	Ordinary Settlement. Subject to Section 3(d)(ii), settlement of any RSUs shall occur promptly following the date on which such RSUs vest. RSUs 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 RSUs being settled (any fractional RSU being rounded up
to the next whole RSU). Certificates shall be issued in the name of the Participant (or of the person or persons to whom such RSUs 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 RSUs being settled (or any fractional RSU being rounded up to the next whole RSU) 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 RSUs until a future
date, provided that 

  

	 	(A)	(i) the Participant’s election is made no later than six months preceding the first year in which all or any portion of the RSUs are scheduled to vest 

 
 AND 
  

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

  
 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 RSU 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 RSUs 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 

  
 (e)
Transfer Restrictions on RSUs. RSUs may not be transferred, except by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order. 
  

	4.	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 RSUs, 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 RSUs, 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 RSUs any Federal, state or local taxes required to be withheld with respect to such payments. 
  

	5.	No Restriction on Right to Effect Corporate Changes. 

  
 Neither the Plan, this Notice of Award, the grant of the RSUs 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 RSUs 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. 

 

	6.	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 Committee shall make such adjustments, if any, as it deems appropriate in the number and class of shares subject to the RSUs. Any adjustments shall be determined by the Committee in its sole discretion.

  

	7.	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 requires 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. 
  

	8.	Committee 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 shall be determined by
the Committee, and any such determination or any other determination by the Committee under or pursuant to this Notice of Award and any interpretation by the Committee of the terms hereof shall be final and binding on all persons affected thereby.

  

	9.	Amendments. 

  
 The Committee shall have the power to alter or amend the terms of the RSUs as set forth herein, from time to time, in any manner consistent with the Plan.
Any alteration or amendment of the terms of the RSUs by the Committee 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 Committee
shall give written notice to the Participant of any such alteration or amendment as promptly as practicable after it is adopted. The foregoing shall not restrict the ability of the Participant and the Company by mutual consent to alter or amend the
terms of the RSUs in any manner which is consistent with the Plan and approved by the Committee. 
  

	10.	Notice Requirements. 

  
 Any notice which either party hereto may be required or permitted to give to the other shall be in writing. 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: Managing Director, Human Resources, or at such other address as 

  

 
the Company, by notice to the Participant, may designate in writing from time to time. Notice to the Participant shall be directed either to 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 or to the Participant by a combination of interoffice mail and email.

  

	11.	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. 
  

	12.	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. 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 of Award. 
  

  
 Annex A 
  
 2004 RESTRICTED STOCK UNITS AWARD 
  

			
	Participant:    Phillip B. Lassiter	 	Social Security No: ____________
		
	Number of RSUs	 	 
	Granted:          50,000	 	 Date of Grant:   January 26, 2004

		
	Vesting Date:   January 26, 2007	 	 

  

			
	AMBAC FINANCIAL GROUP, INC.
		
	By:	 	 
	 	 	 Gregg L. Bienstock

	 	 	 Managing Director,

	 	 	 Human Resources
 and Employment CounselAmbac Financial Group, Inc. 1997 Non-Employee Directors Equity Plan

  
 EXHIBIT 10.11 
  
 AMBAC FINANCIAL GROUP, INC. 
 1997 NON-EMPLOYEE DIRECTORS EQUITY PLAN 
 (as amended through May 4, 2004) 
  
 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 11 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 Award” means an Award of Director Options (made in respect of Annual Meetings up to and including the 2003 Annual Meeting) or Director Annual Stock Units (made in respect of Annual Meetings beginning with the
2004 Annual Meeting), in each case as provided in Section 7 below. 
  
 “Annual Meeting” means an annual meeting of the Company’s stockholders. 
  
 “Award” means any or all (as the context requires) of Director Annual Stock Units, Director Five-Year Stock Units and Director
Options. 
  
 “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 13 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 Annual Stock Unit” means a restricted stock unit granted to a Non-Employee Director pursuant to Section 7
hereof. 
  
 “Director Five-Year Stock
Unit” means a restricted stock unit granted to a Non-Employee Director pursuant to Section 6 hereof. 
  
 “Director Option” means a right to purchase shares of Common Stock granted to a Non-Employee Director pursuant to Section 7
hereof. 
  

 2 

 “Director Stock Unit” means either a Director Five-Year Stock Unit or a Director
Annual Stock Unit. 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 shall be settled exclusively in Common
Stock. 
  
 “Effective Date” means the
effective date of the Plan provided for in Section 11 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 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 Director 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. 
  

 3 

 4. Shares Available 
  
 Subject to the provisions of Section 13 below, the maximum number of shares of Common Stock which may be issued under the Plan (the “Section 4
Limit”) shall be 360,000 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 13 below, of the shares of Common Stock available for issuance under the Plan, no more than 225,000 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 Five-Year Stock Units 
  
 (a) Grants of
Director Five-Year Stock Units. Director Five-Year 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 a number of Director Five-Year Stock Units calculated by dividing (x) $210,000, by (y) the
Fair Market Value of one share of Common Stock on the date of the relevant Annual Meeting. 
  
 (ii) As of the date of the Annual Meeting that is closest in time to the applicable vesting date of any Director Five-Year Stock Units in
accordance with Section 6(b)(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 Director Five-Year Stock Units
(an “Additional Grant”), provided that (A) the Annual Meeting as of which the Additional Grant is to be made occurs during the term of the Plan as set forth in Section 11 below, and (B) the Non-Employee Director is
standing for re-election at such Annual Meeting. The number of Director Five-Year Stock Units included in such Additional Grant shall be calculated by dividing (x) $210,000, by (y) the Fair Market Value of one share of Common Stock on the date of
the relevant Annual Meeting in connection with which the Additional Grant is made. 
  
 (b) Vesting; Accelerated Vesting; Deferral.  
  
 (i) Director Five-Year Stock Units granted in respect of a given Annual Meeting, and any additional Director Five-Year Stock Units
credited to a Director Account in respect of earnings or other distributions on such Director Five-Year 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. 
  

 4 

 (ii) Notwithstanding the provisions of Section 6(b)(i) above, all Director Five-Year
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 Five-Year 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 Director Five-Year Stock Units into such offer. 
  
 (c) Forfeiture of Grant. Except as provided in Section 6(b)(ii) above, all Director Five-Year Stock Units shall be forfeited, and all rights of the Non-Employee Director to or with respect to such
Director Stock 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 Five-Year Stock Units vest in
accordance with Section 6(b)(i) above. 
  
 7. Annual Awards 
  
 (a) General. As of the date of each Annual Meeting, commencing
with the 1997 Annual Meeting, each Non-Employee Director shall automatically receive an Award of Director Options or Director Annual Stock Units as provided in this Section 7. 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 9 below. 
  
 (b) 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, provided, however, that beginning with the 2004 Annual Meeting, no further Awards of Director Options shall be made. 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 Annual Stock Units. As of the date of each Annual Meeting, commencing with the 2004 Annual Meeting, each Non-Employee
Director shall automatically receive a number of Director Annual Stock Units determined by dividing (i) $60,000 by (ii) the Fair Market Value of one share of Common Stock on the date of the relevant Annual Meeting. 
  
 (d) Grants 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, (i) if such appointment is made prior to the 2004 Annual Meeting, Director Options to
purchase a number of shares determined by multiplying 3,750 by a fraction (the “Proration 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 and (ii) if such appointment is made after the 2004 Annual Meeting, a
number of Director Annual Stock Units calculated by multiplying (x) the number of Director Annual Stock Units that were awarded to each Non-Employee Director in connection with the immediately preceding Annual Meeting, times (y) the Proration
Fraction. (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 

  

 5 

 
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. 
  
 (e) Vesting. Annual Awards shall vest 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 Annual Awards shall be considered fully vested 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 Annual Awards granted to a Non-Employee Director shall vest and, in the case of Director Annual Stock Units, 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 the exercise of Director Options or upon the settlement of Director Annual Stock Units into such offer. 
  
 8. General Terms and Conditions of Director Stock Units 
  
 (a) Accounts. As of any date as of which a Non-Employee
Director is granted Director Stock Units, the Director Account of such Non-Employee Director will be credited with the number of Director Stock Units so granted. 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. 
  
 (b)
Notwithstanding the provisions of Sections 6(b)(i), 6(b)(ii) and 7(e) 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 (i) the Non-Employee Director’s termination of service on the Board or (ii) 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 (i) and (ii) of the preceding sentence. 
  
 (c) Delivery of Share Certificates. As soon as practicable
following the vesting of Director Stock Units as provided in Sections 6(b)(i), 6(b)(ii) or 7(e) above, or the date for deferred settlement as provided in Section 8(b) above, Director Stock Units shall be settled either by: (i) delivery to the
Non-Employee Director of a share certificate for the number of shares corresponding to such Director Stock Units (any fractional Director Stock Unit shall be rounded up to the next whole Director Stock Unit) or (ii) the transfer of the corresponding
number of shares equal to the number of Director Stock Units being settled (any fractional Director Stock Unit shall be rounded up to the next whole Director Stock Unit) to the brokerage account designated by the Non-Employee Director to the Company
in writing prior to settlement. 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. 
  
 (d) 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. 
  

 6 

 9. General Terms and Conditions Director 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) Exercisability. Director Options shall become exercisable upon vesting. 
  
 (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 9(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 9(d) and 9(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 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. 
  

 7 

 10. 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. 
  
 11. 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 12 below, the Plan shall expire on the date of the Annual Meeting held in 2011. Grants of Director Five-Year Stock Units and Director Annual
Stock Units shall be made in connection with the Annual Meeting held in 2011, and shall be the last grants made under the Plan. Expiration of the Plan in connection with the Annual Meeting held in 2011 shall not affect Awards 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. 
  
 12. 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 13 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 or Director Options to be issued to any Non-Employee Director pursuant to Section 6 or Section 7 above or reduce the exercise
price of a Director Option. 
  

 8 

 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 made prior to such action shall be effective as to such Non-Employee Director unless he or she consents thereto. 
  
 13. 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. 
  
 14. 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. 
  
 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. 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. 
  
 17. 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. 
  

 9

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