As filed with the Securities and Exchange Commission on ______________, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
AMBAC FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3621676
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One State Street Plaza
New York, New York 10004
(Address of Principal Executive Offices)
Ambac Financial Group, Inc. 1997 Equity Plan
Ambac Financial Group, Inc. 1997 Non-Employee Directors Equity Plan
Ambac Financial Group, Inc. Savings Incentive Plan
(Full title of the plan)
----------
Richard B. Gross, Esq.
Senior Vice President, General Counsel and Secretary
Ambac Financial Group, Inc.
One State Street Plaza
New York, New York 10004
(Name and address of agent for service)
(212) 208-3354
(Telephone number, including area code, of agent for service)
----------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be to be Offering Price Per Aggregate Registration
Registered Registered Share(*) Offering Price Fee(*)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, par value $0.01 per share** 5,500,000 $55.71875 $306,453,125 $90,404
Common Stock, par value $0.01 per share*** 140,000 $55.71875 $ 7,800,625 $ 2,302
Common Stock, par value $0.01 per share**** 100,000 $55.71875 $ 5,571,875 $ 1,644
==========================================================================================================================
<FN>
* Pursuant to Rule 457(c) under the Securities Act of 1933, the maximum
offering price per share and the registration fee relating to the Common
Stock, par value $0.01 per share ("Common Stock") of Ambac Financial Group,
Inc. ("Ambac"), being registered are based on the average of the high and
low prices of the Common Stock on the New York Stock Exchange composite
tape on May 11, 1998 and are utilized solely for the purpose of
calculating the registration fee.
** Shares available under the Ambac Financial Group, Inc. 1997 Equity Plan, as
amended (the "Equity Plan"). In addition, this registration statement
covers 871,693 shares of the Common Stock that were carried forward to the
Equity Plan from Ambac's 1991 Stock Incentive Plan, as amended (the "1991
Plan") and as to which Ambac paid a registration fee of $5,584 upon
filing of its registration statement on Form S-8, No. 33-63134 (filed May
21, 1993) relating to the 1991 Plan.
*** Shares available under the Ambac Financial Group, Inc. 1997 Non-Employee
Directors Equity Plan, as amended (the "Directors Plan"). In addition, this
registration statement covers 19,642 shares of Common Stock that were
carried forward to the Directors Plan from Ambac's 1991 Non-Employee
Directors Stock Plan, as amended (the "1991 Directors Plan") and as to
which Ambac paid a registration fee of $107 upon filing of its registration
statement on Form S-8, No. 33-47971 (filed May 18, 1992) relating to the
1991 Directors Plan.
**** Shares available under the Ambac Financial Group, Inc. Savings Incentive
Plan, as amended. In addition, pursuant to Rule 416(c) under the Securities
Act of 1933, this Registration Statement covers an indeterminate amount of
interests to be offered or sold pursuant to the Ambac Financial Group, Inc.
Savings Incentive Plan.
</FN>
</TABLE>
Page 1 of
Exhibit Index appears on Page 10
<PAGE>
2
Part I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.*
Item 2. Registrant Information and Employee Plan Annual Information.*
- --------------------
* Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
Rule 428 under the Securities Act of 1933, as amended (the "Securities
Act"), and the "Note" to Part I of Form S-8.
<PAGE>
Part II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities and Exchange
Commission (the "Commission") by Ambac are incorporated by reference in this
Registration Statement:
(a) Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
(b) Current Reports on Form 8-K dated February 7, 1998
and March 27, 1998.
(c) (i) The description of Ambac's Common Stock set forth
in Ambac's registration statement on Form 8-A as
filed with the Commission on June 12, 1991, including
amendments thereto (as so amended, the "Form 8-A")
under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and (ii) the description of the
Common Stock set forth under the heading "Description
of Capital Stock" in Ambac's registration statement
on Form S-1 (Registration No. 33-40306) filed
pursuant to the Securities Act, and having an
effective date of July 11, 1991, including
amendments thereto, which description is incorporated
by reference in the Form 8-A.
All documents subsequently filed by Ambac pursuant to Section
13(a) and (c) of the Exchange Act, and any definitive proxy or information
statements filed pursuant to Section 14 of the Exchange Act in connection with
any subsequent stockholders' meeting and any reports filed pursuant to Section
15(d) of the Exchange Act prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities that have not been sold, will be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof from the date
of filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
As authorized by Section 145 of the General Corporation Law of
Delaware, each director and officer of Ambac may be indemnified by Ambac against
expenses (including attorneys' fees, judgments, fines and amounts paid in
settlement) actually and reasonably incurred by such director or officer in
connection with the defense or settlement of any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which he is involved by reason of the fact that he is or was a
director or officer of Ambac if he acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of Ambac,
<PAGE>
and, with respect to any criminal action or proceeding, if he had no reasonable
cause to believe that his conduct was unlawful. In addition, Article VII of the
Amended and Restated Certificate of Incorporation of Ambac and Article IX of its
Bylaws authorize Ambac to indemnify any person entitled to be indemnified under
law. If the legal proceeding, however, is by or in the right of Ambac, the
director or officer may not be indemnified in respect of any claim, issue or
matter as to which he shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to Ambac unless a court determines
otherwise.
In addition, Ambac maintains a Directors' and Officers'
liability insurance policy.
Article VI of the Amended and Restated Certificate of
Incorporation of Ambac provides that, to the fullest extent permitted by law, no
director of Ambac will be personally liable for monetary damages to Ambac or its
stockholders for any breach of fiduciary duty as a director.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
The following exhibits are filed as part of this Registration
Statement:
4.1 Ambac Financial Group, Inc. 1997 Equity Plan, as
amended through October 28, 1997. (Filed as Exhibit
10.03 to Ambac's Annual Report on Form 10-K for the
year ended December 31, 1997 and incorporated herein
by reference.)
4.2 Ambac Financial Group, Inc. 1997 Non-Employee
Directors Equity Plan, as amended through April 29,
1998.
4.3 Amended and Restated Certificate of Incorporation of
Ambac filed with the Secretary of State of the State
of Delaware on July 11, 1997. (Filed as Exhibit 4.05
to Ambac's Quarterly Report on Form 10-Q for the
period ended September 30, 1997 and incorporated
herein by reference.)
4.4 Bylaws of Ambac, as amended through January 28, 1998.
(Filed as Exhibit 3.02 to Ambac's Annual Report on
Form 10-K for the year ended December 31, 1997 and
incorporated herein by reference.)
5.1 Opinion of Shearman & Sterling re legality of Common
Stock being registered.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Shearman & Sterling (included in Exhibit
5.1).
In addition, Ambac undertakes that it will submit the Ambac
Financial Group, Inc. Savings Incentive Plan and any amendments thereto to the
Internal Revenue Service in a timely manner and will make all changes required
by the Internal Revenue Service in order to qualify such Plan under Section 401
of the Internal Revenue Code.
<PAGE>
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
this Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in this Registration
Statement;
(ii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement;
provided, however, that the undertakings set forth in
paragraphs (i) and (ii) above do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by Ambac
pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this Registration
Statement;
(2) That, for the purpose of determining any liability
under the Securities Act each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby further undertakes that, for
purposes of determining any liability under the Securities
Act, each filing of Ambac's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act that is incorporated by
reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of Ambac pursuant to the foregoing
provisions, or otherwise, Ambac has been advised that in the
opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by Ambac of expenses incurred or paid by a director,
officer or controlling person of Ambac in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, Ambac will, unless in the opinion
of its
<PAGE>
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities
Act, Ambac Financial Group, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the ___ day of May, 1998.
Ambac Financial Group, Inc.
By: /s/ Richard B. Gross
--------------------------------
Richard B. Gross
Senior Vice President,
General Counsel and Secretary
KNOW ALL MEN BY THESE PRESENTS that each person whose
signature to this Registration Statement appears below hereby constitutes and
appoints each of Phillip B. Lassiter, Frank J. Bivona and Richard B. Gross as
such person's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments to
the Registration Statement, including post-effective amendments, and
registration statements fled pursuant to Rule 462 under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commissions, and does
hereby grant unto each said attorney-in-fact and agent full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
each said attorney-in-fact and agent, or any substitute therefor, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities indicated on the ___ day of May, 1998.
Signature Title
- --------- -----
/s/ Phillip B. Lassiter
- ----------------------- Chairman, President and Chief Executive Officer
Phillip B. Lassiter and Director (Principal Executive Officer)
/s/ Frank J. Bivona Executive Vice President, Chief Financial Officer
- ----------------------- and Treasurer (Principal Financial and
Frank J. Bivona Accounting Officer)
<PAGE>
Signature Title
- --------- -----
- -----------------------
Michael A. Callen Director
/s/ Renso L. Caporali
- -----------------------
Renso L. Caporali Director
/s/ Richard Dulude
- -----------------------
Richard Dulude Director
/s/ W. Grant Gregory
- -----------------------
W. Grant Gregory Director
/s/ C. Roderick O'Neil
- -----------------------
C. Roderick O'Neil Director
<PAGE>
Ambac Financial Group, Inc. Savings Incentive Plan. Pursuant
to the requirements of the Securities Act of 1933, the trustee (or other persons
who administer the employee benefit plan) have duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the _____ day of May,
1998.
Ambac Financial Group, Inc. Savings Incentive Plan
By: /s/ Gregg L. Bienstock
----------------------------------------
Gregg L. Bienstock
Chairman, Plan Administrative Committee
<PAGE>
Exhibit Index
Exhibit No. Description of Document Page
4.1 Ambac Financial Group, Inc. 1997 Equity Plan, as
amended through October 28, 1997. (Filed as Exhibit
10.03 to Ambac's Annual Report on Form 10-K for the
year ended December 31, 1997 and incorporated herein
by reference.)
4.2 Ambac Financial Group, Inc. 1997 Non-Employee
Directors Equity Plan, as amended through April 29,
1998.
4.3 Amended and Restated Certificate of Incorporation of
Ambac filed with the Secretary of State of the State
of Delaware on July 11, 1997. (Filed as Exhibit 4.05
to Ambac's Quarterly Report on Form 10-Q for the
period ended September 30, 1997 and incorporated
herein by reference.)
4.4 Bylaws of Ambac, as amended through January 28,
1998. (Filed as Exhibit 3.02 to Ambac's Annual
Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference.)
5.1 Opinion of Shearman & Sterling re legality of common
stock being registered.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Shearman & Sterling (included in Exhibit
5.1).
AMBAC FINANCIAL GROUP, INC.
1997 NON-EMPLOYEE DIRECTORS EQUITY PLAN
as amended through April 29, 1998
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 10 below, no further awards shall be made under the
Predecessor Plan.
2. Definitions
For purposes of the Plan, the following terms shall be defined
as follows:
"Annual Meeting" means an annual meeting of the Company's
stockholders.
"Board" means the Board of Directors of the Company.
"Change in Control" means:
(i) the acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the Common Stock then outstanding, but shall not
include any such acquisition by:
(A) the Company;
(B) any Subsidiary of the Company;
(C) any employee benefit plan of the Company or of
any Subsidiary of the Company;
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 2 of 14
(D) any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any
such plan;
(E) any Person who as of January 31, 1996 was the
beneficial owner of 15% or more of the shares of Common Stock
outstanding on such date unless and until such Person,
together with all affiliates and associates of such Person,
becomes the beneficial owner of 25% or more of the shares of
Common Stock then outstanding whereupon a Change in Control
shall be deemed to have occurred; or
(F) any Person who becomes the Beneficial Owner of
20% or more, or, with respect to a Person described in clause
(E) above, 25% or more, of the shares of Common Stock then
outstanding as a result of a reduction in the number of shares
of Common Stock outstanding due to the repurchase of shares of
Common Stock by the Company unless and until such Person,
after becoming aware that such Person has become the
beneficial owner of 20% or more, or 25% or more, as the case
may be, of the then outstanding shares of Common Stock,
acquires beneficial ownership of additional shares of Common
Stock representing 1% or more of the shares of Common Stock
then outstanding, whereupon a Change in Control shall be
deemed to have occurred;
(ii) individuals who, as of the date 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
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 3 of 14
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 12 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 Option" means a right to purchase shares of Common
Stock granted to a Non-Employee Director pursuant to Section 7 hereof.
"Director Stock Unit " means a restricted stock unit granted
to a Non-Employee Director pursuant to Section 6 hereof.
"Effective Date" means the effective date of the Plan provided
for in Section 10 below.
"Fair Market Value" means the average of the highest and the
lowest quoted selling prices 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.
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 4 of 14
"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.
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 5 of 14
(b) Award Certificate. The terms and conditions of each grant
of Directors Stock Units and Director Options under the Plan shall be embodied
in an award agreement or award certificate which shall incorporate the Plan by
reference, shall indicate the date on which the Director Stock Units or Director
Options were granted and the number of Director Stock Units or Director Options
granted on such date.
4. Shares Available
Subject to the provisions of Section 12 below, the maximum
number of shares of Common Stock which may be issued under the Plan (the
"Section 4 Limit") shall be 140,000 shares plus the number of shares of Common
Stock that remain available for issuance under the Predecessor Plan as of the
date the Plan is approved by the stockholders of the Company (increased by any
shares of Common Stock subject to any award (or portion thereof) outstanding
under the Predecessor Plan on such date which lapses, expires or is otherwise
terminated without the issuance of such shares or is settled by the delivery of
consideration other than shares). Subject to Section 12 below, of the shares of
Common Stock available for issuance under the Plan, no more than 50,000 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 Stock Units
(a) General. A Director Stock Unit shall represent the right
to receive one share of Common Stock upon satisfaction of the conditions to
vesting and settlement specified in the Plan. Director Stock Units will be
settled exclusively in Common Stock.
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 6 of 14
(b) Grants of Director Stock Units. Director Stock Units shall
be awarded under the Plan as follows:
(i) On the date of the Annual Meeting coincident with or first
succeeding a Non-Employee Director's initial election to the Board (or
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 2,000 Director Stock Units.
(ii) As of the date of the Annual Meeting that is closest in
time to the applicable vesting date of any Director Stock Units in
accordance with Section 6(d)(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 2,000 Director Stock Units, provided that (A) the Annual
Meeting as of which such additional grant is to be made occurs during
the term of the Plan as set forth in Section 10 below, and (B) the
Non-Employee Director is standing for re-election at such Annual
Meeting.
(c) Accounts. As of the date of each Annual Meeting as of
which a Non-Employee Director is granted Director Stock Units, the Director
Account of such Non-Employee Director will be credited with 2,000 Director
Stock Units. In the event that the Company pays any cash or other dividend or
makes any other distribution in respect of the Common Stock, each Director
Account will be credited with an additional number of Director 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.
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 7 of 14
(d) Vesting; Accelerated Vesting; Deferral.
(i) Director Stock Units granted in respect of a given Annual
Meeting, and any additional Director Stock Units credited to a Director
Account in respect of earnings or other distributions on such Director
Stock Units as provided in Section 6(c), shall vest on the 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.
(ii) Notwithstanding the provisions of Section 6(d)(i) above,
all Director Stock Units granted to a Non-Employee Director shall
immediately vest upon the first to occur of (A) a Non-Employee Director
ceasing to be a member of the Board as a result of retirement from the
Board in accordance with the retirement policy then applicable to Board
members, (B) a Non-Employee Director ceasing to be a member of the
Board as a result of death or Permanent Disability or (C) 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 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 Stock Units into such offer.
(iii) Notwithstanding the provisions of Sections 6(d)(i) and
6(d)(ii) above, a Non-Employee Director may elect to defer settlement
of any or all Director Stock Units to a date subsequent to the vesting
date of such Director Stock Units, provided that no such deferral may
extend beyond the earlier of (A) the Non-Employee Director's
termination of service on the Board or (B) the Non-Employee's death.
Settlement of any deferred Director Stock Units shall be made on or as
soon as practicable following the date specified by the Non-Employee
Director in the relevant deferral election or, if applicable, the
earlier of the dates specified in clauses (A) and (B) of the preceding
sentence.
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 8 of 14
(e) Forfeiture of Grant. Except as provided in Section
6(d)(ii) above, all Director Stock Units shall be forfeited, and all rights of
the Non-Employee Director to or with respect to such Director 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 Stock Units vest in accordance with Section
6(d)(i) above.
(f) Delivery of Share Certificates. As soon as practicable
following the vesting of Director Stock Units as provided in Sections 6(d)(i)
and 6(d)(ii) above, or the date for deferred settlement as provided in Section
6(d)(iii) above, Director Stock Units shall be settled by delivery to the
Non-Employee Director of a share certificate for the number of shares
corresponding to such Director Stock Units. 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.
(g) No Stockholder Rights. The crediting of Director Stock
Units to a Director Account shall not confer on the relevant Non-Employee
Director any rights as a stockholder of the Company.
7. Grants of Director Options
(a) General. A Director Option shall entitle a Non-Employee
Director to purchase a specified number of shares of Common Stock during a
specified period at an exercise price per share of Common Stock determined as
provided below. All Director Options provided for herein shall have the general
terms and conditions set forth in Section 8 below.
(b) Annual Grants of Director Options. As of the date of each
Annual Meeting, commencing with the 1997 Annual Meeting, each Non-Employee
Director shall automatically receive Director Options to purchase 2,000 shares
of Common Stock provided that the Non-Employee Director shall continue to serve
as a director of the Company after such Annual Meeting. The exercise price per
share of Common Stock of each Director Option provided for in this Section 7(b)
shall be the Fair Market Value of one share of Common Stock on the date of the
relevant Annual Meeting.
(c) Grants of Director Options to New Directors. A
Non-Employee Director who is initially elected or appointed to the Board other
than in connection with an
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 9 of 14
Annual Meeting shall receive, as of the date of such initial election or
appointment, Director Options to purchase a number of shares determined by
multiplying 2,000 by a fraction, the numerator of which is the number of full
months remaining until the next Annual Meeting (starting with the month
following the date of election or appointment and counting the month in which
the next Annual Meeting is scheduled to occur as a full month) and the
denominator of which is 12. (If the date of the next Annual Meeting has not been
scheduled at the time of the Non-Employee Director's initial election or
appointment, it shall be assumed that the next Annual Meeting will occur in the
same month as the immediately preceding Annual Meeting.) The exercise price per
share of Common Stock of each Director Option provided for in this Section 7(d)
shall be the Fair Market Value of one share of Common Stock on the date of the
Non-Employee Director's election or appointment to the Board.
8. General Terms and Conditions of Directors Options
(a) Option Term. Each Director Option shall expire on the date
of the Annual Meeting held in the seventh calendar year following the date of
grant, subject to earlier expiration as provided herein, provided, however, that
Director Options granted to a Non-Employee Director whose initial election
occurs other than in connection with an Annual Meeting shall be treated for this
purpose as though they had been granted at the first Annual Meeting following
such initial election.
(b) Vesting; Accelerated Vesting; Effect of Termination of
Service.
(i) Vesting Generally. Director Options shall vest and become
exercisable as of the 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 re-election 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 Director Options shall be considered fully vested and
exercisable 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 Director Options granted to a Non-Employee Director shall vest
immediately prior to the scheduled expiration of such tender offer, and
the Company shall have instituted
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 10 of 14
procedures to enable the Non-Employee Director, if he so desires, to
tender the shares issued upon the exercise of such stock options into
such offer.
(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 cases, to earlier expiration of the Director Option
pursuant to Section 8(a) above.
(c) Notice of Exercise. Subject to the other terms and
conditions of the Plan, a Non-Employee Director may exercise all or any portion
of a vested Director Option by giving 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 notice or (ii) the date on which the conditions provided
in Sections 8(d) and 8(e) below are satisfied.
(d) Payment. The exercise price of a Director Option may be
paid in cash or previously owned shares or a combination thereof or by any other
method approved by the Board.
(e) Limitation on Exercise. A Director Option shall not be
exercisable unless the Common Stock subject thereto has been registered under
the Securities Act of 1933, as amended (the "1933 Act"), and qualified under
applicable state "blue sky" laws in
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 11 of 14
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 and 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.
9. Transferability
Director Stock Units (including interests in a Director
Account) and Director Options may not be transferred, pledged, assigned or
otherwise disposed of except by will or the laws of descent and distribution or
pursuant to a domestic relations order, provided, however, that Director Options
may be transferred to a member or members of a Non-Employee Director's
immediate family (as defined below) or to one or more trusts or partnerships
established in whole or in part for the benefit of one or more of such immediate
family members (collectively as "Permitted Transferees"), subject to such rules
and procedures as may from time to time be adopted or imposed by the Board. If a
Director 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.
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 12 of 14
10. 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 11 below, the Plan shall expire on the date of the
Annual Meeting held in 2004. Grants of Director Stock Units and Director Options
shall be made in connection with the Annual Meeting held in 2004, and shall be
the last grants made under the Plan. Expiration of the Plan in connection with
the Annual Meeting held in 2004 shall not affect awards of Director Stock Units
and Director Options made prior to such Annual Meeting, which awards shall
remain outstanding subject to the terms hereof.
(b) Coordination with Predecessor Plan. Awards of "Directors
Shares" (as such term is defined in the Predecessor Plan) shall be made under
the Predecessor Plan in connection with the 1997 Annual Meeting. Assuming the
Plan is approved by the stockholders of the Company at the 1997 Annual Meeting,
no further awards shall be made under the Predecessor Plan after the Effective
Date. Awards outstanding under the Predecessor Plan (including awards made in
connection with the 1997 Annual Meeting) shall remain outstanding after the
Effective Date subject to the terms thereof.
11. Amendments
The Board may at any time and from time to time alter, amend,
suspend or terminate the Plan in whole of in part, including without limitation
to amend the provisions for determining the amount of Director Stock Units or
Directors Options to be issued to a Non-Employee Director, provided, however,
that:
(i) any amendment which under the requirements of applicable
law or stock exchange rule must be approved by the stockholders of the
Company shall not be effective unless and until such stockholder
approval has been obtained in compliance with such law or rule; and
(ii) except as provided in Section 12 below, the Board may
not, without the approval of the Company's stockholders, increase the
number of shares available for issuance under the Plan pursuant to
Section 4 above or the number of Director Stock
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 13 of 14
Units to be issued to any Non-Employee Director pursuant to Section 6
above or reduce the exercise price of a Director Option.
No termination or amendment of the Plan that would adversely affect a
Non-Employee Director's rights under the Plan with respect to any award of
Directors Stock Units or Director Options made prior to such action shall be
effective as to such Non-Employee Director unless he or she consents thereto.
12. Adjustment of and Changes in Shares
In the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, distribution of property, special cash
dividend or other change in corporate structure affecting the shares, the Board,
in its discretion, may make (i) such proportionate adjustments as it considers
appropriate in the number and kind of shares authorized for issuance hereunder
in order to preserve, but not increase, the benefits or potential benefits
intended to be made available hereunder and/or (ii) such other adjustments as it
deems appropriate. The Board's determination as to what, if any, adjustments
shall be made shall be final and binding on the Company and all Non-Employee
Directors who receive grants under the Plan.
13. No Right to Re-election
Nothing in the Plan shall be deemed to create any obligation
on the part of the Board to nominate any of its members for re-election by the
Company's stockholders, nor confer upon any Non-Employee Director the right to
remain a member of the Board for any period of time, or at any particular rate
of compensation.
14. Governing Law
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.
<PAGE>
Ambac Financial Group, Inc.
1997 Non-Employee Directors Equity Plan
Page 14 of 14
15. No Restriction on Right of Company to Effect Corporate Changes
The Plan shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
16. Unfunded Plan
The Plan is unfunded. Prior to the payment or settlement of
any award of Director Stock Units or the exercise of any Director Options,
nothing contained herein shall give any non-Employee Director any rights that
are greater than those of a general creditor of the Company. In its sole
discretion, the Board may authorize the creation of trusts or other arrangements
to meet the obligations created under the Plan to deliver Common Stock with
respect to awards hereunder.
[Shearman & Sterling Letterhead]
May 11, 1998
Ambac Financial Group, Inc.
One State Street Plaza
New York, New York 10004
Ladies and Gentlemen:
We have acted as counsel for Ambac Financial Group, Inc., a
Delaware corporation (the "Company"), in connection with the Company's
Registration Statement on Form S-8 (the "Registration Statement") to be filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, with respect to 5,740,000 shares of common stock, par value $0.01 per
share, of the Company (the "Shares"), to be issued from time to time pursuant to
(i) the Ambac Financial Group, Inc. 1997 Equity Plan, as amended (the "Equity
Plan"); (ii) the Ambac Financial Group, Inc. 1997 Non-Employee Directors Stock
Plan, as amended (the "Directors Plan"); and (iii) the Ambac Financial Group,
Inc. Savings Incentive Plan, as amended (together with the Equity Plan and the
Directors Plan, the "Plans").
In so acting, we have examined the Registration Statement and
have also examined and relied as to factual matters upon the representations and
warranties contained in originals, or copies certified or otherwise identified
to our satisfaction, of such documents, records, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents, certificates
and instruments submitted to us as originals and the conformity with originals
of all documents submitted to us as copies.
The opinion expressed below is limited to the law of the State
of New York, the General Corporation Law of Delaware and the federal law of the
United States, and we do not express any opinion herein concerning any other
law.
Based upon the foregoing and having regard for such legal
considerations as we have deemed relevant, we are of the opinion that the Shares
have been duly authorized by the Company and, when (a) issued and delivered by
the Company in accordance with the terms of
<PAGE>
Ambac Financial Group, Inc. 2 May 11, 1998
the Plans and (b) paid for in full in accordance with the terms of the Plans,
the Shares will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/ Shearman & Sterling
Shearman & Sterling
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ambac Financial Group, Inc.:
We consent to the use of our reports incorporated herein by reference.
/s/ KPMG Peat Marwick LLP
New York, New York
May 8, 1998
