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Exhibit
10.02
EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT
dated as of January 30, 2007 by and between AMBAC FINANCIAL
GROUP, INC. , a Delaware corporation (the “
Company ”), and WILLIAM T. McKINNON (
the “ Executive ”).
WHEREAS, the Executive
currently serves as Senior Managing Director and Chief Risk Officer
of the Company; and
WHEREAS, the Company and the
Executive wish to enter into this Agreement to provide for the
continuation of the Executive’s service with the Company on
the terms and conditions set forth herein;
NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows (capitalized terms
used herein without definition shall have the meanings ascribed to
such terms in Section 6 below):
1. Employment and
Duties.
(a) Term of the
Agreement . This Agreement will apply for a non-renewable term
beginning on the date this Agreement is signed by both the
Executive and the Company and ending on January 30, 2009 (the
“ Term ”). The Executive’s
employment may continue beyond the end of the Term, but nothing
herein shall require the Executive to continue his employment with
the Company after the end of the Term. In addition, nothing in this
Agreement shall alter the Executive’s status as an “at
will” employee of the Company, subject to the
Executive’s rights and obligations under this
Agreement.
(b) General . The
Executive will continue to serve as Senior Managing Director and
Chief Risk Officer of the Company during the Term.
(c) Full-Time
Employment . The Executive shall devote his full-time working
hours and best efforts to his duties hereunder.
2. Relation of this
Agreement to Retention Agreement.
The Company and the Executive
are parties to an Amended and Restated Management Retention
Agreement, dated as of January 27, 2004 (the “
Retention Agreement ”), that sets forth certain
provisions applicable to the Executive’s employment in the
event of a “ Change in Control ” as
defined therein. Notwithstanding anything to the contrary in this
Agreement, following a Change in Control, the term of the
Executive’s employment, as well as his compensation and
benefits, rights upon termination of employment and other matters
provided for in the Retention Agreement, shall be governed by the
Retention Agreement (or any successor thereto) rather than the
present Agreement. Without limiting the generality of the preceding
sentence, following a Change in Control: (i) the equity grant
provided for in Section
3(b) below shall automatically vest
pursuant to the terms of the Retention Agreement; and (ii) the
definition of “Cause” set forth in the Retention
Agreement shall apply, rather than the definition set forth in this
Agreement.
3. Compensation and Other
Benefits.
Subject to the provisions of
this Agreement, the Company shall pay and provide the following
compensation and other benefits to the Executive during the Term as
compensation for services rendered hereunder:
(a) Salary . Effective
as of the date of this Agreement, the Executive’s annual
salary (the “ Salary ”) shall be
$400,000. The Salary is payable in accordance with the
Company’s payroll practices as established by the Company
from time to time. The Compensation Committee of the Board of
Directors (or any successor thereto) (the “
Committee ”) shall periodically review and may
increase, but not decrease, the Executive’s
Salary.
(b) Special Equity
Grant . Management will recommend to the Committee that, in
connection with its meeting to be held on January 29, 2007,
the Committee approve a special grant to the Executive of
restricted stock units (“ RSUs ”) under
the Company’s 1997 Equity Plan, as amended (the “
Equity Plan ”). The number of RSUs included in
such award will be determined by dividing (i) $750,000 by
(ii) the Fair Market Value of a share of the Company’s
common stock (the “ Common Stock ”) on
the date the Committee approves such award. All RSUs included in
such award will vest on the third anniversary of the date of the
grant ; provided, however, that if the Executive elects to
retire at any time prior to the third anniversary of the date of
grant, notwithstanding the foregoing or terms of the Equity Plan or
award agreement, only that portion RSUs proportionate to time
worked, defined as X divided by Y, (X = the number of whole months
worked from the Term through the retirement date; Y = thirty-six)
will vest . Regardless of when they vest, the RSUs included in the
Executive’s award shall be settled by delivery of the
corresponding shares of Common Stock to the Executive on
July 29, 2010 or the six month anniversary of the termination
of the Executive’s employment, whichever is sooner, or as
promptly thereafter as practicable. Such settlement shall be
subject to the provisions of Section 5(b) below.
(c) Annual Bonus . The
Executive shall participate in a bonus arrangement pursuant to
which he shall be eligible to earn an annual bonus, based on the
Company’s achieving certain performance goals that the
Committee shall establish. The Executive’s guaranteed minimum
bonus for the 2007 performance year shall be $800,000 and for the
2008 performance year shall be $850,000, which amounts shall be
paid regardless of the Company’s performance or results. The
amounts specified in the preceding sentence are minimum guaranteed
amounts and shall not preclude the Committee from paying the
Executive a higher annual bonus for 2007 and/or 2008. The Executive
shall have the opportunity, on the same terms and conditions
available to the Company’s other senior executives, to defer
all or a portion of his annual bonus in the form of restricted
stock units. To the extent not so deferred, the Executive’s
bonus for each year will be paid at the same time that the Company
pays the cash portion of annual bonuses to its other senior
executives.
(d) Long-Term Incentive
Compensation . The Executive will receive long-term incentive
compensation awards under the Equity Plan (or any successor or
similar equity plan or program of the Company) as follows: in
January 2008, the Company will make awards to the Executive
consisting of $325,000 in stock options and $425,000 in RSUs, and
in January 2009, the Company will make awards to the Executive
consisting of $325,000 in stock options and $425,000 in RSUs. The
number of stock options and RSUs corresponding to such amounts and
included in such awards will be determined on the same basis that
the Committee uses to determine the size of equity awards to the
Company’s other senior executives. The Executive’s
awards shall be subject to the vesting requirements and other terms
and conditions applicable to equity awards made at the same time to
the Company’s other senior executives.
(e) Expenses . The
Company shall reimburse the Executive for reasonable travel and
other business-related expenses incurred by him in performance of
the business of the Company.
(f) 401(k), Welfare and
Fringe Benefits . The Executive shall participate in each
401(k), welfare, life insurance, health, disability and other
fringe benefit plan or program maintained by the Company for its
executive officers in accordance with the terms thereof.
(g) Termination Due to
Death or Disability . In the event of the Executive’s
Disability, the Company shall be entitled to terminate his
employment. Notwithstanding anything contained in this Agreement to
the contrary, if the Executive’s employment terminates before
the end of the Term due to death or Disability, any Salary earned
by the Executive up to the date of such termination, plus a pro
rata portion (based on the number of days elapsed prior to such
termination) of his guaranteed bonus and long-term incentive
compensation (which, at the Company’s discretion can be paid
in cash or RSUs/options) for the year in which such termination
occurs, shall be paid to the Executive or his estate, as the case
may be, within 30 days of his termination date. All stock options,
restricted stock, restricted stock units or other awards awarded to
the Executive under the Equity Plan or any other equity
compensation plan of the Company (including without limitation the
awards provided for in Sections 3(b) and 3(d) above) shall be fully
vested as of the date of the Executive’s death or termination
of employment due to Disability.
(h) Continuation at the
End of the Term . If the Executive’s employment with the
Company continues “at will” following the expiration of
the Term, then, during the twelve month period following the
expiration of the Term, the Executive’s annual rate of Salary
will not be less than the annual rate of Salary in effect for him
immediately prior to the expiration of the Term and the Executive
will also continue to be eligible for a bonus and to participate in
the long-term incentive programs of the Company, as in effect from
time to time, in a manner commensurate with the participation of
other similarly situated employees of the Company and the
Company’s then current practices and valuation methodologies
regarding long-term incentives.
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