(EXHIBIT 10.08)
FORM OF
AMENDED AND RESTATED MANAGEMENT RETENTION
AGREEMENT
AMENDED AND RESTATED MANAGEMENT RETENTION AGREEMENT (this
"AGREEMENT"), made as of December 30, 1994, as amended and restated as of
December 2, 1997, by and between AMBAC FINANCIAL GROUP, INC., a Delaware
corporation (the "COMPANY"), and the executive officer named on the signature
page of this Agreement (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Executive is currently a valued key executive of the
Company or one of its Affiliates (as defined below); and
WHEREAS, the Compensation and Organization Committee (the "COMMITTEE")
of the Board of Directors of the Company (the "BOARD"), recognizes that in the
event of a future change in control of the Company, or any threatened change in
control, uncertainty and questions could rise among management and could result
in the departure or distraction of management personnel to the detriment of the
Company and its stockholders; and
WHEREAS, the Company considers it essential to the best interests of
its stockholders to xxxxxx the continuous employment of key management
personnel, such as the Executive, in the event of any actual or threatened
change in control by providing for the payment of severance and other benefits
in the event of the Executive's termination of employment following a change in
control;
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
The Company hereby agrees to employ the Executive in the capacity
indicated on the signature page of this Agreement (or such other, superior
position to which the Executive may be promoted by the Company in its
discretion), and the Executive hereby accepts such employment. During the Term,
as defined in Section 2 below, the Executive shall have such duties as may be
assigned to the Executive from time to time by the Board or the Board's designee
which are commensurate with the duties of the Executive in the capacity
indicated on the signature page of this Agreement (or such other, superior
position to which the Executive may be promoted by the Company in its
discretion). The Executive shall devote
2
substantially all his business time, attention, skill and efforts during the
Term to the faithful performance of his duties hereunder and shall not accept
employment elsewhere during the Term.
2. TERM
The term of the Executive's employment under this Agreement (the
"TERM") shall commence on the date of any Change in Control (as defined in
Section 8(i) of this Agreement) occurring after the date hereof and shall
continue in effect through the third anniversary thereof. Anything in this
Agreement to the contrary notwithstanding, if a Change in Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change in Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control or
(ii) otherwise arose in connection with or anticipation of a Change in Control,
then for all purposes of this Agreement the Term shall be considered to have
commenced on the date immediately prior to the date of the Executive's
termination of employment, rather than on the date of such Change in Control.
The provisions of this Agreement shall continue in effect beyond the Term to the
extent necessary to carry out the intentions of the parties hereto.
3. COMPENSATION
During the Term the Executive shall be entitled to the following
compensation for his services to the Company:
(a) BASE SALARY. The Company shall pay, and the Executive shall
accept, a base salary (the "BASE SALARY") at a rate no less than the Executive's
base salary in effect immediately prior to the Change in Control, subject to
increase in accordance with the immediately succeeding sentence. The Base
Salary shall be reviewed at least annually by the Committee and may be
increased, but not decreased, to reflect the Executive's performance and shall
be increased to provide the Executive with such other increases as shall be
consistent with increases in base salary awarded in the ordinary course of
business to other key executives of the Company or of any Affiliate.
(b) CASH BONUS. In addition to the Base Salary, the Executive shall
be paid for each full or partial fiscal year of the Company during the Term, an
annual cash bonus (the "BONUS") pursuant to the current bonus and incentive
plans of the Company, as may be amended or supplemented by the Company during
the Term; provided, however, that such annual Bonus shall in no event be less
than 70% of the Base Salary payable to the Executive for the relevant fiscal
year. Bonuses shall be paid in cash to the Executive no later than 30 days
following the close of each fiscal year during and immediately following the
Term.
3
(c) EQUITY AWARDS. Upon the occurrence of a Change in Control, the
Executive shall be fully vested in all stock options, restricted stock,
restricted stock units and any other awards theretofore awarded to him under the
Company's 1997 Equity Plan, as amended, or any successor thereto, on or after
January 1, 1998 provided, however, that if any Person (as defined in Section 8
hereof) commences a tender offer for shares of the Company's common stock, par
value $0.01 per share (the "COMMON STOCK"), which, if successfully completed,
would result in a Change in Control, then the Executive shall be fully vested in
all such stock options, restricted stock units and any other such awards, and
any such awards that by their terms are to be paid or settled by the delivery of
shares of Common Stock without the payment of any additional consideration by
the Executive shall be so paid or settled, immediately prior to the scheduled
expiration of such tender offer, and the Company shall have instituted
procedures to enable the Executive, if he so desires, to tender the shares
issued upon the exercise of such stock options or delivered in payment or
settlement of such restricted stock units or other awards into such offer.
(d) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to the
Base Salary and Bonuses payable pursuant to this Agreement, the Executive shall
be entitled to participate in incentive, savings and retirement plans and
programs, whether qualified or non-qualified, of the Company and its Affiliates
applicable to other key executives (including, without limitation, the following
plans of the Company and its Affiliates: the 1991 Stock Incentive Plan, the 1997
Equity Plan, the Savings Incentive Plan, the Retirement Plan, the Excess
Benefits Plan, the Supplemental Retirement Plan, and the Deferred Compensation
Plan for Outside Directors and Eligible Senior Officers, the Non-Qualified
Savings Incentive Plan or substantially equivalent successor or substitute
plans), providing an aggregate level of compensation (including target payouts,
where applicable) and benefits no less favorable than in effect prior to a
Change in Control.
(e) WELFARE BENEFIT PLANS. The Executive and/or the Executive's
family, as the case may be, shall be eligible for participation in and shall
receive all benefits under each welfare benefit plan of the Company applicable
to other key executives, including, without limitation, all medical, dental,
disability, group life, accidental death and travel accident insurance plans and
programs of the Company and its Affiliates, upon terms, and at a level of
participation, no less favorable than applicable to other similarly situated
executives of the Company and its Affiliates.
(f) EXPENSES. The Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by him in the performance of
his duties for the Company which shall be paid to him in accordance with the
policies and procedures of the Company as in effect at any time thereafter with
respect to other key executives.
(g) FRINGE BENEFITS. The Executive shall be entitled to fringe
benefits no less favorable than in effect prior to a Change in Control.
4
(h) OFFICE AND SUPPORT STAFF. The Executive shall be entitled to an
office or offices of a size and with furnishings and other amenities, and to
secretarial and other assistance, at least equal to those currently used by the
Executive.
(i) VACATION. The Executive shall be entitled to four weeks of paid
vacation per year, or such longer period as the Company shall institute for
senior executives, and paid holidays in accordance with the policies of the
Company as in effect at any time.
(j) APPLICATION OF SEVERANCE POLICIES AFTER THE TERM. Upon the
expiration of the Term, the Executive shall become a participant in the most
favorable severance policy applicable to similarly situated executives of the
Company and its Affiliates (other than as agreed to as part of individual
employment agreements), with all years of service with the Company and any
Affiliate counted for purposes of the calculation of such severance benefits.
4. TERMINATION OF EMPLOYMENT
(a) TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON. The
Company may terminate the Executive's employment hereunder for Cause (as defined
in Section 8(a) of this Agreement). If the Executive's employment is terminated
by the Company for Cause, or by the Executive for reasons other than Good Reason
(as defined in Section 8(b) of this Agreement) prior to the expiration of the
Term, the Company shall be obligated to make payment of any Compensation (as
defined in Section 8(h) of this Agreement) earned prior to the Date of
Termination (as defined in Section 8(d) of this Agreement) but not yet paid to
the Executive and any payment from any employee benefit plan described in
Section 3 of this Agreement which shall be paid in accordance with such plan and
the continuation of coverage under any insurance program as required under any
such benefit plan or which may be required by law. The Executive shall also be
entitled to the payment of any Bonus earned but not yet paid, including, without
limitation, any deferred Bonus, and the pro rata amount of the guaranteed
--------
minimum Bonus under Section 3(b) of this Agreement if the Date of Termination
occurs before the end of any fiscal year. Except as provided above, the Company
shall not be obligated to make any additional payments of Compensation or
benefits specified in Section 3 of this Agreement for any periods after the Date
of Termination.
(b) RESIGNATION FOR GOOD REASON; TERMINATION WITHOUT CAUSE. If the
Executive's employment is terminated by the Executive for Good Reason or by the
Company without Cause, in either case at any time prior to the expiration of the
Term, the Executive shall be entitled to the following benefits:
(i) In addition to the payment of all Base Salary and any Bonus
earned but not paid, or a pro rata portion of the guaranteed minimum Bonus
--------
under Section 3(b) of
5
this Agreement if the Date of Termination occurs prior to the end of any
fiscal year, within five business days of the Termination Date the Company
shall make a lump sum payment to the Executive equal to two times the sum
of:
(x) his highest Base Salary, plus
(y) the highest Bonus percentage paid or payable to the
Executive at any time prior to his Date of Termination times his
highest Base Salary
(the sum of the amounts described in the foregoing clauses (x) and (y)
being referred to as the "REFERENCE AMOUNT"). For purposes of calculating
the Reference Amount, "BONUS" shall include cash bonus and the value on the
grant date, as determined by the Committee, of any restricted stock or
restricted stock units or other awards granted in lieu of cash, but
excluding the value of any stock options.
(ii) For purposes of calculating the Executive's benefit under the
AMBAC Inc. Retirement Plan (or any successor plan) (the "RETIREMENT PLAN"),
the Executive shall receive an additional two years of credited service.
In addition, for all purposes under the Retirement Plan, including for
purposes of benefit calculations, the Executive shall be treated as having
retired from service with the Company and its Affiliates, rather than as a
"terminated vested" employee.
(iii) Within five business days following the Termination Date, the
Company shall make a lump sum payment to the Executive equal to the amount
that the Company would have contributed for the Executive's account under
the AMBAC Inc. Savings Incentive Plan (or any successor plan) (the "SIP")
in respect of the two years following the Termination Date, based on (A)
the formula for determining employer contributions in effect on the
Termination Date and (B) the Base Salary (and, if such formula takes
account of bonus compensation, the Bonus) used for purposes of determining
the Reference Amount, and calculated without giving effect to the
limitations provided for in Sections 401(a)(17) and 415 of the Internal
Revenue Code of 1986, as amended (the "CODE"), or any successor provisions
thereto.
(iv) Within five business days following the Termination Date the
Executive shall receive a lump sum payment of his account balance as of the
Date of Termination under any nonqualified plan maintained by the Company
or any of its Affiliates to provide benefits in excess of those permitted
under the Code to be provided by the SIP. The Company shall remain
obligated to pay to the Executive or his beneficiaries any benefits to
which he or they may be entitled under any nonqualified plan maintained by
the Company or any of its Affiliates to provide benefits in excess of those
permitted under the Code to be provided by the Retirement Plan (including
without limitation benefits under the AMBAC Excess Benefit Plan and the
AMBAC Supplemental
6
Retirement Plan, or any successors to such plans); such payments shall be
made in accordance with the terms of such plans, and benefits thereunder
shall take account of the two years of additional credited service provided
for in clause (ii) above.
(v) For a period of two years following the Date of Termination (the
"CONTINUATION PERIOD"), the Executive and his dependents, if any, shall
continue to participate (at no greater expense to them than was the case
for such coverage prior to his termination) in the employee benefit
arrangements described in Section 3(e) and 3(g) above, provided, however,
that the benefits described in Section 3(e) shall cease to the extent the
Executive begins coverage under plans of a subsequent employer.
(vi) At the end of the Continuation Period, the Executive and his
family shall be entitled for the remainder of his life to retiree medical
and dental benefits under the applicable plans and programs of the Company
as if he retired on the last day of the Continuation Period, with such
benefits to commence immediately at the end of the Continuation Period and
with the amount of contribution by the Executive to be no greater than that
of any other employee of the Company who had retired on the last day of the
Continuation Period (it being understood and agreed that contribution rates
may be changed, and the terms of such benefits may be modified, to the
extent permitted under the relevant plans, from those in effect on the date
hereof).
(vii) During the Continuation Period, the Company shall provide the
Executive with appropriate individual outplacement services and financial
planning at the Company's expense.
(viii) To the extent not previously vested pursuant to Section 3(c)
above, the Executive shall be fully vested in all stock options, restricted
stock, restricted stock units and any other awards theretofore awarded to
him under the Company's 1991 Stock Incentive Plan, as amended, or the
Company's 1997 Equity Plan, as amended, or any successor thereto.
(viii) The Executive shall receive all amounts due to him under any
compensatory plan or arrangement of the Company and not specifically
addressed above, in accordance with the terms of the relevant plan or
arrangement.
(c) DEATH BEFORE END OF TERM. If the Executive dies prior to the
expiration of the Term, the Company shall be under no obligation to make
additional payments of the Compensation and benefits described in Section 3 of
the Agreement to the Executive's estate after the Date of Termination except,
however, for any Compensation earned prior to the Date of Termination but not
yet paid, including, without limitation, any deferred Bonus and the pro rata
amount of the guaranteed minimum Bonus under Section 3(b) of this Agreement if
the Date of Termination occurs before the end of a fiscal year, and all benefits
7
payable under the various plans described in Section 3 of this Agreement, which
shall be paid in accordance with the terms of all such applicable plans. The
Company shall also continue to provide any benefits to the Executive's survivors
as required by law.
(d) DISABILITY. In the event of the Executive's Permanent
Disability (as defined in Section 8(e) of this Agreement) prior to the
expiration of the Term, the Executive's employment shall terminate. In that
event, the Executive shall be entitled to continue to receive payment of the
Compensation and benefits described in Section 3 of the Agreement through the
end of the Term, less the amount of any payment to the Executive on account of
disability from any employer sponsored disability insurance plan. In addition,
the Executive shall receive all benefits payable under the various plans
described in Section 3 of this Agreement, which shall be paid in accordance with
the terms of all such applicable plans.
(e) RETIREMENT. The Executive may terminate his employment on
account of Retirement (as defined in Section 8(f) of this Agreement). The
Executive shall not be entitled to any further payments of Compensation or other
benefits provided under Section 3 of this Agreement after the Date of
Termination, other than any retirement benefit payments from any employer
sponsored plan, any Compensation earned prior to the date of Retirement but not
yet paid, including, without limitation, any deferred Bonus and the pro rata
amount of the guaranteed minimum Bonus under Section 3(b) of this Agreement if
the Date of Termination occurs before the end of a fiscal year, and all benefits
payable under the various plans described in Section 3 of this Agreement, which
shall be paid in accordance with the terms of all such applicable plans.
(f) NOTICE OF TERMINATION REQUIRED. No termination of employment by
the Executive or by the Company pursuant to this Section 4 shall be effective
unless the terminating party shall have delivered a Notice of Termination (as
defined in Section 8(c) of this Agreement) to the other party.
(g) NATURE OF PAYMENTS. Any amounts due under this Section 4 are in
the nature of severance payments, liquidated damages, or both, and are not in
the nature of a penalty.
5. NO OBLIGATION TO MITIGATE
Following termination of the Executive's employment, the Executive
shall be under no obligation to seek other employment or otherwise to mitigate
damages resulting from his termination of employment. In addition, there shall
be no offset against amounts due to the Executive under any provision of this
Agreement, on account of any remuneration to which the Executive becomes
entitled from any Person for whom the Executive subsequently provides services
(as an officer, director, employee, independent contractor or otherwise), other
than as provided in Section 4(b)(v) relating to continuation of benefits
coverage.
8
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
6) (a "PAYMENT") would be subject to the excise tax imposed by the Code or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "EXCISE TAX"), then the Executive
shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick LLP or such other certified public accounting firm as may be jointly
designated by the Executive and the Company (the "ACCOUNTING FIRM"), which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("UNDERPAYMENT"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 6(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprize the
9
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 6(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
10
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 6(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
7. PROTECTION OF THE COMPANY'S INTERESTS
(a) CONFIDENTIAL INFORMATION. Except for actions taken in the course
of his employment hereunder or as required by law, at no time shall the
Executive divulge, furnish or make accessible to any person any information of a
confidential or proprietary nature obtained by him while in the employ of the
Company. Upon termination of his employment with the Company, the Executive
shall return to the Company all such information which exists in written or
other physical form and all copies thereof in his possession or under his
control.
(b) REMEDIES. The Executive acknowledges that a breach of any of the
covenants contained in this Section 7 may result in material irreparable injury
to the Company or its Affiliates for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of such breach or threat thereof, the Company shall be
entitled, in addition to any other rights or remedies it may have, to obtain a
temporary restraining order and/or a preliminary or permanent injunction
enjoining or restraining the Executive from engaging in activities prohibited by
this Section 7. In no event, however, shall an asserted violation of the
provisions of this Section 7 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement, unless the
Company shall have first obtained a final decision, in an arbitration conducted
in accordance with Section 17 of this Agreement, finding that the Executive has
materially breached the provisions of this Section 7.
8. DEFINITIONS
As used in this Agreement, the following terms shall have the
following
11
meanings:
(a) CAUSE. Each of the following shall constitute "CAUSE":
(i) the willful commission by the Executive of acts that are
dishonest and demonstrably and materially injurious to the Company or any
of its Affiliates, monetarily or otherwise;
(ii) the conviction of the Executive for a felonious act resulting
in material harm to the financial condition or business reputation of the
Company or any of its Affiliates; or
(iii) a material breach of any of the covenants set forth in
Section 7 of this Agreement.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless there shall have been delivered to him, together
with a Notice of Termination, a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths (3/4ths) of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth above in clause (i), (ii) or (iii) above and specifying the
particulars thereof in detail.
(b) GOOD REASON. For purposes of this Agreement, "GOOD REASON"
shall mean, without the Executive's express written consent, any of the
following:
(i) a substantial adverse alteration in the nature or status of the
Executive's duties or responsibilities or in the Executive's title;
(ii) the failure of the Company to pay when due the Executive any
Compensation or provide other benefits as specified in this Agreement or a
reduction by the Company in the Executive's Compensation or benefits or a
failure by the Company to increase the Executive's Compensation as required
in Section 3 of this Agreement;
(iii) the relocation of the office of the Executive to a location
more than 25 miles from the location where the Executive is employed
immediately prior to the Change in Control;
(iv) the failure by the Company to continue in effect any
compensation plan in which the Executive participates, including but not
limited to all plans described in
12
Section 3 of this Agreement, or any substitute plans adopted after the date
hereof, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive's participation therein on
at least as favorable a basis as that enjoyed by other similarly situated
executives of the Company and its Affiliates;
(v) the failure by the Company to continue to provide the Executive
with benefits at least as favorable to those enjoyed by other similarly
situated executives of the Company and its Affiliates under any of the
Company's pension, life insurance, medical, dental, health and accident,
disability, deferred compensation or savings plans, or the taking of any
action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive; or
(vi) the failure to obtain a satisfactory agreement from any
successor of the Company to assume and agree to perform this Agreement, as
contemplated in Section 9 hereof or, if the business of the Company for
which the Executive's services are principally performed is sold, the
purchaser of such business shall fail to agree to provide the Executive
with the same or a comparable position, duties, salary and benefits as
provided to the Executive by the Company hereunder.
Anything in this Agreement to the contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period immediately following the
first anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(c) NOTICE OF TERMINATION. For purposes of this Agreement, a
"NOTICE OF TERMINATION" shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon and, in the case of
a termination of the Executive's employment by the Company for Cause or by the
Executive for Good Reason, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(d) DATE OF TERMINATION. "DATE OF TERMINATION" shall mean:
(i) in the case of Retirement or death, the date of such event;
(ii) if the Executive's employment is terminated for Permanent
Disability, thirty (30) days after a Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period);
and
13
(iii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case
of a termination by the Company (whether with or without Cause) shall not
be less than thirty (30) days, and in the case of a resignation by the
Executive (whether with or without Good Reason) shall not be less than
thirty (30) nor more than sixty (60) days, from the date such Notice of
Termination is given).
(e) PERMANENT DISABILITY. "PERMANENT DISABILITY" shall mean a
disability within the meaning of the long-term disability plan of the Company
which covers the Executive immediately prior to the Change in Control.
(f) RETIREMENT. "RETIREMENT" shall mean the voluntary termination
of the Executive's employment by the Executive in accordance with the Retirement
Plan or any other plan or the retirement policy of the Company.
(g) AFFILIATE. The term "AFFILIATE" includes any company or other
entity or person controlling, controlled by or under common control with the
Company.
(h) COMPENSATION. The term "COMPENSATION" shall mean all amounts paid
or payable to the Executive pursuant to Sections 3(a), 3(b) and 3(c) of this
Agreement.
(i) CHANGE IN CONTROL. For purposes of this Agreement, a "CHANGE IN
-
CONTROL" shall be deemed to occur on the date on which one of the following
events occurs:
(i) the acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) 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,
14
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 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; 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.
15
As used herein, "PERSON" means any individual, firm, corporation,
partnership or other entity, and "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 this Agreement.
9. SUCCESSORS; BINDING AGREEMENT
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled
hereunder if the Executive had terminated his employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Executive's devisee,
legatee or other designee or, if there is no such designee, to the Executive's
estate.
10. INDEMNIFICATION
The Company will indemnify the Executive to the fullest extent
permitted (including payment of expenses in advance of final disposition of a
proceeding) by the laws of the State of Delaware, as in effect at the time of
the subject act or omission, or by the Certificate of Incorporation and By-Laws
of the Company, as in effect at such time or on the date of this Agreement,
whichever affords or afforded greatest protection to the Executive, and the
Executive shall be entitled to the protection of any insurance policies the
Company may elect to maintain generally for the benefit of its directors and
officers (and to the extent the Company maintains such an insurance policy or
policies, the Executive shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
provided for any Company officer or director), against all costs, charges and
16
expenses whatsoever incurred or sustained by him or his legal representatives at
the time such costs, charges and expenses are incurred or sustained, in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director, officer or employee of the
Company or any subsidiary thereof, or his serving or having served any other
enterprise as a director, officer or employee at the request of the Company.
11. NOTICES
Any notice hereunder by either party to the other shall be given in
writing by personal delivery, telex, telecopy or certified mail, return receipt
requested, to the address first set forth below in the case of the Company, and
to the address set forth on the signature page hereof in the case of the
Executive (or, in either case, to such other address as may from time to time be
designated by notice by any party hereto for such purpose):
Ambac Financial Group, Inc.
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Notice shall be deemed given, if by personal delivery, on the date of such
delivery or, if by telex or telecopy, on the business day following receipt of
answer back or telecopy confirmation or, if by certified mail, on the date shown
on the applicable return receipt.
12. AMENDMENT AND WAIVER
No provision of this Agreement may be amended, modified, waived or
discharged unless such amendment, modification, waiver or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
13. MERGER OF PRIOR NEGOTIATIONS
(a) This Agreement sets forth all of the promises, agreements,
conditions and understandings between the parties hereto respecting the subject
matter hereof and supersedes all prior negotiations, conversations, discussions,
correspondence, memoranda and agreements between the parties concerning such
subject matter.
(b) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the
17
Company, the employment of the Executive by the Company is "at will" and that,
subject to the provisions of Section 2 above, if the Executive's employment is
terminated by either the Executive or the Company at any time prior to the
beginning of the Term, the Executive shall have no further rights under this
Agreement. From and after the commencement of the Term, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
14. PARTIAL INVALIDITY
If the final determination of a court of competent jurisdiction or
arbitrator declares, after the expiration of the time within which judicial
review (if permitted) of such determination may be perfected, that any term or
provision hereof is invalid or unenforceable, (a) the remaining term and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable term
or provision shall be deemed replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
18
15. GOVERNING LAW
This Agreement is to be governed by and interpreted in accordance with
the laws of the State of New York.
16. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
17. ARBITRATION; LEGAL FEES
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in New York, New York
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to seek
specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
(b) The Company shall promptly reimburse the Executive for all legal
fees and expenses incurred by the Executive in connection any claim to enforce
his rights under this Agreement, except for any claim which shall have been
determined, in an arbitration conducted in accordance with subsection (a) above,
to have been brought by the Executive in bad faith.
(c) In addition to the reimbursement provided for in subsection (b)
above, the Company shall reimburse the Executive for up to $15,000 in legal,
accounting and financial expenses incurred after a Change in Control in
connection with this Agreement (whether or not the Executive's employment is
terminated), including without limitation in connection with financial planning
and the investigation of the Executive's rights hereunder.
19
IN WITNESS WHEREOF, the parties hereto, having entered into this
Agreement as of December 30, 1994, have executed this Amended and Restated
Management Retention Agreement as of December 2, 1997.
AMBAC FINANCIAL GROUP, INC.
By:
---------------------------------------
Xxxxxxx X. Xxxxxxxx
Chairman, President and Chief Executive
Officer
EXECUTIVE
------------------------------------------
Name:
Title:
Address:
