Severance Agreement - ACE London Services Ltd. and John Charman
16 May 2001
WITHOUT PREJUDICE
SUBJECT TO CONTRACT
John Charman
BY HAND
Dear John,
Compromise Agreement
I am writing to set out the terms relating to the termination of your
employment with ACE London Services Limited (the "Company") on 17 March
2001 (the "Termination Date").
1. The Company confirms that you have been paid your basic salary and
have received your other contractual benefits (including pension
contributions) up to and including the Termination Date. Your P45
form and final payslip were sent to you on 5 April 2001.
2. You will be reimbursed all expenses incurred in the performance
of your duties in accordance with normal policy.
3. On receipt by Allen & Overy, for and on behalf of the Company,
of your signed acceptance of these terms and a letter from your
solicitor to us in the form attached as Appendix 1 you will
receive a payment from the Company by direct credit into your bank
account of (pound)3,597,241 ("the Notice Payment"), as a payment in
lieu of notice, pursuant to your Service Agreement dated 9 July
1998 ("the Service Agreement"). Tax will be deducted from the
Notice Payment at UK basic rate only, the P45 form having been
delivered. You acknowledge that the Notice Payment must be
declared in full in your tax return and that any further tax that
may be due on the Notice Payment will be payable by you. You
undertake to indemnify the Company in respect of any additional
tax for which the Company has to account in respect of these terms
in accordance with paragraph 19 below.
4. The Company will pay you the sum of (pound)51,700 as compensation
for loss of employment ("the Compensation Payment" which together
with the Notice Payment is referred to as "the Payment"). The
first (pound)30,000 of the Compensation Payment will be paid to you
tax free for the time being and tax will be deducted from the
remainder of the Compensation Payment at UK basic rate only, the
P45 form having been delivered. You acknowledge that the
Compensation Payment must be declared in full in your tax return
and that any further tax that may be due on the Compensation
Payment will be payable by you. You undertake to indemnify the
Company in respect of any additional tax for which the Company has
to account in respect of these terms in accordance with paragraph
19 below.
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5. On receipt by Allen & Overy, for and on behalf of the Company,
of your signed acceptance of these terms and a letter from your
solicitor to us in the form attached as Appendix 1 the Company
will make (subject always to Inland Revenue permitted limits and
any restrictions imposed by the pension provider) a payment of up
to (pound) 500,000 into the Company sponsored executive pension
scheme for your benefit with Scottish Life Assurance (Members
Policy No. E\628069 Scheme Ref. No. DPP-L/1190) and will provide
you with simultaneous written confirmation of such payment. If the
Company is unable to pay the full amount of (pound)500,000 into
your personal pension plan, it shall pay the balance
of (pound)500,000 by direct credit into your bank account after
deduction of tax at UK basic rate only. Where payment is made to
your bank account, you undertake to indemnify the Company in
respect of any additional tax for which the Company has to account
in respect of these terms in accordance with paragraph 19 below.
6. The Company will continue the private healthcare cover for you
and your family with BUPA until and including 30 April 2002 on the
same basis as it did immediately prior to the Termination Date
7. By signing the letter of even date attached as Appendix 2 you
resign as a director and as a trustee and officer (with effect
from the Termination Date) of each Group Company, including,
without limitation, those listed in Appendix 2. In these terms
"Group Company" means any one of the Company, its subsidiaries,
ACE Limited and any subsidiary (as defined by section 736 of the
Companies Act 1985) of ACE Limited and all ACE managed Lloyds'
syndicates and any predecessor or incidental syndicates and "the
Group" has the corresponding meaning.
8. The Company will pay you forthwith the sum of (pound)8,300 as
compensation for the personal items that were removed from your
office and have not been replaced, provided that (1) you have
notified the Police of the disappearance of these items prior to
the date of this Agreement who have given the report a crime
reference number and (2) you have provided to the Company a
certified copy of a receipt confirming the identity and value of
the said personal items in relation to the bracelets and in the
case of the DVD player, evidence to show the cost of replacing the
item. This sum is not subject to deduction of tax as it is not an
emolument of your employment. It is further agreed that if payment
of compensation has taken place and the items are subsequently
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discovered by any person, they will belong to the Company and you
will forthwith deliver the items to it, should they be located by
or on your behalf. You further confirm that you have now retrieved
all other valuable personal items from the Company and that you
have no further claim to make in this regard. You are not aware of
whether all personal documents have been returned to you. Should
any personal documents belonging to you be recovered by the
Company they will be returned to you forthwith.
9. You confirm that you have returned to the Company all documents
and computer disks and other media in your possession or provided
to you or created in the course of your employment or your holding
office with any Group Company or relating to, or containing
information relating to, any Group Company, all credit or charge
cards, keys, personal computers and all other property belonging
to any Group Company in your possession, custody or control. You
also confirm that you have not kept or made a copy of anything
referred to in this paragraph.
10. By entering into this Agreement, you affirm that Clauses 12 and
14 of the Service Agreement shall remain in force and confirm that
that you will continue to owe to the Company the obligations set
out in those clauses and you abide by them in their entirety. As
the "Restriction Period" as defined in clause 14 of your Service
Agreement is for twelve months from the Termination Date, this
"Restriction Period" shall expire on 16 March 2002, after which
time clauses 14.2(a) and 14.2(b) of your Service Agreement shall
no longer apply. You also confirm that you will abide by the
obligations imposed upon you by the Deed of Covenant dated 9th
July, 1998 between yourself, Tarquin Limited, Charman Group
Limited, Tarquin Underwriters Limited, Charman Underwriting
Agencies Limited and their successors and assigns. As the
"Restriction Period" as defined in the Deed of Covenant is the
later of 24 months from the date of the Deed or twelve months from
the Termination Date, this "Restriction Period" shall expire on 16
March 2002 after which time clauses 4.1 and 4.2 of the Deed of
Covenant shall no longer apply.
11. Having resigned as a director of the Company and from such other
offices which you hold within the Group, you will not conduct
yourself in any way which is inconsistent with having surrendered
your authority, whether in matters of the internal administration
of any Group Company or externally. You will not represent
yourself as being a director of, employed by or connected in any
way with, any Group Company.
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12. Both parties agree:
(a) to keep the terms of this Agreement and all discussions and
other correspondence on this subject confidential and not
to disclose them to any other person, except to a
professional adviser who has agreed to be bound by this
restriction (and in your case your immediate family) and
except as may be required by law or regulatory authorities
or with the other party's prior written consent;
(b) not (except where legally required to do so as part of any
legal or regulatory investigation or proceedings) to make,
publish or issue or cause to be made, published or issued
any untrue or disparaging or derogatory statements
whatsoever concerning you or the Company and/or any Group
Company or its or their business, products, practices,
policies or any other internal Company or Group matter or
otherwise in respect of the Company or any Group Company
in its or their relations with its/their suppliers,
customers, clients, investors, shareholders, bankers,
brokers or advisers or concerning any of the officers,
directors, agents or employees of the Company or any Group
Company.
(c) not (except where legally required to do so as part of
any legal or regulatory investigation or proceedings) to
make any statement which may have the effect of damaging
or lowering the reputation of either party (in the
Company's case this includes any Group Company or any of
its officers or employees).
13. You further agree that you will not:
(a) (except where legally required to do so by any legal or
regulatory investigation or proceedings) make, publish or
issue or cause to be made, published or issued any
statement whatsoever (whether to the Company's
shareholders or to investors, investment analysts or to
journalists or to the press or to any other person
whatsoever) concerning the private affairs of the Company
and any Group Company including, without limitation,
finances or business dealings (including previous business
negotiations and/or strategic discussions with any party)
dealings, accounts, accounting policies, reporting
methods, forecasts, business plans or any similar
confidential information concerning or belonging to the
Company or any Group Company of which you were aware by
reason of your employment by or office within the Company
or any Group Company.
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14. You confirm that:
(a) in so far as you are aware you have not withheld any
material information concerning matters of which you were
solely aware on behalf of the Company up to the
Termination Date where withholding such information would
reasonably be expected to be materially detrimental to
the financial results of the Company;
(b) to the best of your knowledge and belief you are not in
breach and have not breached any material term (express or
implied) of your contract of employment;
(c) your advisers have given the Company's advisers brief
details of every complaint that you have or may have
against the Company or any Group Company or any of its
officers or employees arising out of your employment or
its termination, or otherwise about which you are aware
at the date of the Agreement ("the Complaints");
(d) you have not presented an originating application to an
office of the employment tribunals or issued a claim form
in the High Court or County Court in connection with your
employment or its termination,
and you undertake that neither you nor anyone acting on your
behalf will present any further such complaint or present or issue
an originating application or claim form.
15.1 These terms are offered without any admission of liability
whatsoever (save as to the basis upon which the Notice Payment is
made, namely as a payment in lieu of notice) and are in full and
final settlement of all claims in all jurisdictions that you may
have as at the date hereof against any Group Company (or any of
its officers or employees) arising out of or in connection with
your position as a director of any Group Company, any other
offices you hold within the Group and your contract of employment
with any Group Company or its termination or in any other respect
save as provided for in paragraphs 15.2 and 15.3 below and with
the exception of accrued pension. Specifically you acknowledge
that you have carefully considered the facts and circumstances
relating to your employment by the Company and its termination and
you accept that the Payment is paid as compensation in full and
final settlement of any costs, claims, expenses and/or rights of
action you have or may have arising against the Company and any
Group Company howsoever arising (whether under common law, statute
or otherwise and whether arising in the United Kingdom or
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elsewhere in the world) and including but not limited to a claim
for unfair dismissal arising from the fact and/or the manner of
your dismissal and/or any other claims under the Equal Pay Act
1970, Sex Discrimination Act 1975, Race Relations Act 1976, Trade
Union and Labour Relations (Consolidation) Act 1992, Employment
Rights Act 1996, Disability Discrimination Act 1995, Working Time
Regulations 1998, Human Rights Act 1998, Public Interest
Disclosure Act 1998, Employment Relations Act 1999 and/or in
respect of which a Conciliation Officer is authorised to act or
any claims arising as a consequence of the United Kingdom's
membership of the European Union, any claim for payment or pension
loss, payment in lieu of notice, holiday pay, or any other benefit
or remuneration accrued during your employment which you have or
may have against the Company and any Group Company and any
directors, employees and/or consultants of such parties whether
arising directly or indirectly out of your employment or its
termination and you hereby waive such costs, claims, expenses
and/or rights of action.
15.2 The waiver of rights given by you in paragraph 15.1 includes any
rights of action that you have or may have against the Company,
any Group Company or any of its officers or employees in
connection with the Complaints.
15.3 The waiver of rights given by you in paragraph 15.1 above does not
include any rights of action that you have or may have as a
shareholder of ACE Limited or of any Group Company against any
Group Company or any of its or their officers or employees), save
in relation to the Complaints, where your rights as a shareholder
of ACE Limited and any Group Company are hereby waived. In all
other respects, your rights as a shareholder of ACE Limited are
unaffected by this Agreement.
15.4 It is the understanding of both parties that as at 17 March 2001
the known shareholdings in ACE Limited of yourself and your family
trusts are as follows:
(a) your personal holding is 844,420 shares, including the
tranche of 5000 Restricted Stock Awards vested on 18
November 2000 and excluding all of the other unvested
Restricted Stock Awards and all of the Stock Options
(whether exercised or not) granted to you under the ACE
1995 Long-Term Incentive Plan referred to in paragraph 18
of this agreement;
(b) the holding of Dragon Holdings Trust (account reference JT49)
is 1,713,688 shares; and
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(c) the holding of the JRC Children's Settlement Trust (account
reference JT48) is 259, 969 shares.
16. The Company confirms to you that it has notified you in writing of
all complaints and that it is not aware of any claims that it or
any Group Company or any of its or their officers or employees has
or may have against you as at the date hereof.
17. The Company agrees to pay your legal fees up to (pound)86,000 plus
the VAT thereon in connection with taking advice on the
termination of your employment and the terms of this Agreement to
be paid directly to your lawyer (after receipt by the Company of
an invoice addressed to you and marked payable by the Company
within 14 days of the receipt of that invoice).
18. Both parties acknowledge that you have been awarded stock options
and restricted stock awards in respect of ACE Limited under the
ACE 1995 Long-Term Incentive Plan (as amended) ("Plan").
(a) We will procure that the Board of ACE Limited will
exercise its discretion under the Plan to procure that the
restricted stock in ACE Limited awarded to you and
summarised below will, notwithstanding the termination of
your employment, continue to vest (which for the avoidance
of doubt shall mean that the Restricted Period in relation
to each award of such restricted stock will cease and such
stock may be dealt with by you in accordance with the
terms of the awards of such restricted stock) as if your
employment with the Company were to continue until and
including 8 July 2003. Any restricted stock awards that
have not vested on 8 July 2003 shall lapse and be
forfeited with immediate effect on that date. The decision
to and the exercise of this discretion shall be
unconditional and irrevocable and evidenced by the
delivery to you of a certified copy extract of the minutes
of the board meeting of ACE Limited dated 11 May 2001 to
that effect on which you may rely for these purposes
together with an agreement (in the form approved by you as
annexed to this Agreement as Appendix 3) executed by or on
behalf of ACE Limited, you and the Company on the date of
this Agreement which varies the agreements pursuant to
which awards of restricted stock have been granted to you.
(b) We will procure that the board of ACE Limited will
exercise its discretion to procure that the stock options
in ACE Limited awarded to you and summarised below will,
notwithstanding the termination of your employment,
continue to vest and may be exercisable by you in full
without restriction under the rules of the Plan either in
relation to exercise or once exercised in relation to
dealings or otherwise and may be exercised by you in
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accordance with their terms after vesting, as if your
employment with the Company were to continue until and
including 8 July 2003. Any stock option awards that have
not vested on 8 July 2003 shall lapse and be forfeited on
that date. The period for the exercise of all stock
options awarded to you that have become exercisable shall
be extended to any time on or before the tenth anniversary
of the date of grant of each such option. The decision to
and the exercise of this discretion shall be unconditional
and irrevocable and evidenced by the delivery to you of a
certified copy extract of the minutes of the board meeting
of ACE Limited dated 11 May 2001 to that effect on which
you may rely for these purposes together with an agreement
(in the form approved by you as annexed to this Agreement
as Appendix 3) executed by or on behalf of ACE Limited,
you and the Company on the date of this Agreement which
varies the agreements pursuant to which awards of stock
options have been granted to you.
(c) You acknowledge that you will incur an income tax
liability for which the Company may be liable in whole or
in part to account to the Inland Revenue upon the
exercise of your stock option(s) and/or on the vesting of
your restricted stock award(s). For the avoidance of
doubt any liability for secondary class 1 National
Insurance Contributions shall be borne by the Company.
(d) This paragraph (d) will apply if you do not wish to
utilise ACE Limited's and the Company's cashless exercise
facility in respect of your stock options. At the same
time as you give any notice to ACE Limited to exercise
some or all of your stock options(s) (the "Exercise
Notice") accompanied by a remittance in US dollars for the
full exercise price, you will provide a copy of the
Exercise Notice to the Company together with a remittance
in pounds sterling in favour of the Company of an amount
equal to your best estimate of the amount in respect of
your income tax liability arising as a result of that
exercise for which the Company is required to account to
the Inland Revenue ("the Estimated Tax Amount"). Subject
to any changes in the law or the published practice of the
Inland Revenue after the date of this agreement, the
Estimated Tax Amount will be computed by reference to the
basic rate of UK income tax prevailing at the time of the
Exercise Notice and your gain on exercise of the relevant
stock option(s) determined by reference to the latest
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quoted price of the relevant underlying shares on the day
of the Exercise Notice available to you after consulting
the most up to date sources and the rate of exchange from
US dollars to Sterling based on the spot rate quoted by
Barclays Bank on that day for amounts exceeding
(pound)50,000. If the Company's liability to
account in respect of your income tax in respect of the
exercise of your stock option(s) falls to be computed on a
different basis at the time of the Exercise Notice from
the basis set out above you will provide a remittance to
the Company based on your best estimate of the amount the
Company is liable to account for to the Inland Revenue in
respect of your income tax liability arising as a result
of the exercise in place of the remittance computed on the
basis set out above. If the Estimated Tax Amount is less
or greater than the actual amount of tax for which the
Company is required to account to the Inland Revenue you
will pay the difference to the Company, or the Company
will refund the difference to you (the "Adjustment
Payment"), as appropriate, within 10 business days of
demand. The Company will account to the Inland Revenue for
the amount for which the Company is required to account to
the Revenue in respect of your income tax liability
arising as a result of the exercise of your relevant stock
options. The Company will account to the Inland Revenue in
respect of your income tax liability arising on exercise
of your stock option(s) even if you claim that you are not
resident in the United Kingdom at the time of exercise and
the Estimated Tax Amount (and actual tax amount) will be
so computed. If, as a consequence of a change in the law
or a change in the published Inland Revenue practice, it
is established that the Company is not liable to account
to the Inland Revenue in respect of the exercise of your
stock option(s) if you are not resident in the United
Kingdom and you provide satisfactory evidence to the
Company that the Inland Revenue accepts that you are not
United Kingdom resident at the time of exercise, then you
will not be required to account to the Company for the
Estimated Tax Amount (or actual tax amount) under this
paragraph (d).
(e) This paragraph (e) will apply if you wish to utilise ACE
Limited's and the Company's cashless exercise facility in
respect of your stock options. At the same time as you
give any notice to ACE Limited of your intention to
exercise some or all of your stock options(s) (the "
Notice of Intention to Exercise"), you will provide a copy
of the Notice of Intention to Exercise to the Company
together with several signed but undated formal notices of
exercise and a remittance in favour of the Company of an
amount equal to your best estimate of the tax liability
which would arise if the relevant stock options were
exercised at the time of the Notice of Intention to
Exercise and for which the Company would have been
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required to account to the Inland Revenue (the "Estimated
Tax Amount"). Subject to any changes in the law or the
published practice of the Inland Revenue after the date of
this agreement the Estimated Tax Amount will be computed
by reference to the basic rate of UK income tax prevailing
at the time of the Notice of Intention to Exercise and
your gain on exercise of the relevant stock option(s)
determined by reference to the latest available quoted
price of the relevant underlying shares on the day of the
Notice of Intention to Exercise and the rate of exchange
from US dollars to Sterling based on the spot rate quoted
by Barclays Bank on that day for amounts
exceeding(pound)50,000. If the Company's liability to
account in respect of your income tax in respect of the
exercise of your stock option(s) falls to be computed on a
different basis at the time you give the Notice of
Intention to Exercise from the basis set out above you
will provide a remittance to the Company based on your
best estimate of the amount of the Company's liability to
account to the Inland Revenue in respect of your income
tax liability arising as a result of such exercise in
place of the remittance computed on the basis set out
above. When ACE Limited and/or the Company confirms that
the relevant stock option(s) will be treated as being
exercised in one or more tranches and notifies ACE
Limited's and/or your agents to that effect, the relevant
stock option(s) shall be exercised in one or more tranches
(and the relevant formal notice(s) of exercise will be
dated accordingly) and the aggregate amount in respect of
your income tax liability in respect of the exercise of
the relevant stock options for which the Company is
required to account to the Inland Revenue will be
recomputed based on the achieved sale price(s)
(representing the market value(s)) on the relevant day or
days on which each tranche was exercised and the Company
will account to the Inland Revenue for that amount as
being the amount which the Company is required to account
in respect of your income tax liability arising on the
exercise of the relevant stock options. If the aggregate
tax liability exceeds the Estimated Tax Amount remitted to
the Company on the day the Notice of Intention to Exercise
was given, you will remit the additional tax liability to
the Company within 10 business days of demand. If the
aggregate tax liability is less than the Estimated Tax
Amount remitted to the Company on the day the Notice of
Intention to Exercise was given the Company will reimburse
you for that difference within 10 business days of demand.
The Company will provide you with details of the aggregate
tax liability. The Company will account to the Inland
Revenue in respect of your income tax liability arising on
the exercise of your stock option(s) even if you claim
that you are not resident in the United Kingdom at the
time of exercise and, the Estimated Tax Amount (and actual
tax amount) will be so computed. If, as a consequence of a
change in the law or a change in the published Inland
Revenue practice, it is established that the Company is
not liable to account to the Inland Revenue in respect of
the exercise of your stock option(s) if you are not
resident in the United Kingdom and you provide
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satisfactory evidence to the Company that the Inland
Revenue accepts you are not United Kingdom resident at the
time of exercise, then you will not be required to account
to the Company for the Estimated Tax Amount (or actual tax
amount) under this paragraph (e). If ACE Limited and/or
the Company establishes arrangements for its employees and
former employees generally under which the cashless
exercise facility may be used to recoup an amount equal to
the amount for which the Company is liable to account to
the Inland Revenue in respect of the tax liability arising
on exercise of the stock option(s), the Company and/or ACE
Limited will notify you of such arrangements promptly and
they will be extended to you at your request.
(f) Unless paragraph (g) below applies ACE Limited and the
Company shall operate all their normal procedures in
respect of restricted stock award(s) so as to recoup an
amount equal to the amount of your income tax arising on
the vesting of your restricted stock awards for which the
Company is required to account to the Inland Revenue.
This would be the retention or cancellation or non-issue
to you of such proportion of the shares underlying the
restricted stock award which has vested with a market
value (on the date of vesting) equal to the amount for
which the Company is required by law to account to the
Inland Revenue in respect of your income tax liability
arising on the vesting of the relevant restricted stock
award.
(g) This paragraph (g) applies if you give notice in writing
to the Company and ACE Limited not later than the
thirtieth day before the date on which any of your
restricted stock awards is due to vest that you wish to
receive the gross number of shares comprised in the
restricted stock award on vesting (rather than the net
amount after tax in accordance with paragraph (f)) ("Gross
Vesting Notice"). If you give a Gross Vesting Notice you
shall remit to the Company an amount equal to your best
estimate the amount in respect of your income tax
liability arising as a result of that vesting for which
the Company is required to account to the Inland Revenue
(the "Estimated Tax Amount"). Subject to any changes in
the law or the published practice of the Inland Revenue
after the date of this Agreement the Estimated Tax Amount
will be computed by reference to the basic rate of UK
income tax prevailing at the time the relevant restricted
stock award vests and the latest available quoted price of
the shares comprised in the relevant stock award and the
latest available rate of exchange from US dollars to
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sterling based on the spot rate quoted by Barclays Bank
for amounts exceeding(pound)50,000. Provided the Company
receives the Estimated Tax Amount on or before the date on
which the relevant restricted stock award vests paragraph
(f) above shall not apply and you shall be entitled to the
gross amount of the restricted stock award on the relevant
vesting date (but if the Estimated Tax Amount has not been
received by that date the normal procedures for recouping
the Company's liability to account for income tax in
respect of the restricted stock award that vests shall
apply). All necessary adjustments shall apply as at the
date on which the relevant restricted stock award vests
and shall be based on the market value of the underlying
stock concerned and the appropriate exchange rate on that
day (and you shall account to the Company for any
deficiency and the Company shall account to you for any
excess compared to the Estimated Tax Amount) and the
Company shall account to the Inland Revenue accordingly.
The Company will account to the Inland Revenue in respect
of your income tax liability arising on the vesting of
your restricted stock award(s) even if you claim that you
are not resident in the United Kingdom at the time of
vesting and the Estimated Tax Amount (and actual tax
amount) will be so computed. If, as a consequence of a
change in the law or a change in the published Inland
Revenue practice, it is established that the Company is
not liable to account to the Inland Revenue in respect of
the vesting of your restricted stock award(s) if you are
not resident in the United Kingdom and you provide
satisfactory evidence to the Company that the Inland
Revenue accepts that you are not United Kingdom resident
at the time of vesting, then you will not be required to
account to the Company for the Estimated Tax Amount (or
actual tax amount) under this paragraph (g).
(h) If the Company's liability to account for any amount in
respect of your income tax in respect of the exercise of
stock option(s) or the vesting of restricted stock
award(s) exceeds the amount which the Company recoups
under the procedures set out above in this clause you
agree to indemnify, and keep indemnified, the Company
against any such excess liability. The Company shall not
be entitled to recover twice from you in respect of the
same liability.
(i) If you use the cashless exercise facility in respect of
any of your stock option(s) or if you wish to retain any
shares you acquire on exercise of your stock option(s) or
any of your restricted stock after it has vested and you
consider that there has been delay by any agent acting on
behalf of ACE Limited in implementing any of the
procedures required to deal with your instructions, you
may notify us in writing of your concerns. If you so
notify us we will transmit your concerns to that agent and
use all reasonable endeavours to encourage that agent to
carry out your instructions efficiently and without
further delay. Any such agent operates its own procedures
over which ACE Limited does not have any control.
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(j) Both parties agree that the following table summarises
the stock options and restricted stock to which you are
entitled and to which this paragraph 18 applies:
Stock Options Vesting
------------- -------
Date of No. of Exercise Price No. Date
Grant Shares
12 100,000 $29.625 33,333 12 November, 1999
November,
1998 33,333 12 November, 2000
33,334 12 November, 2001
18 60,000 $19.3125 20,000 18 November, 2000
November,
1999 20,000 18 November, 2001
20,000 18 November, 2002
22 66,000 $36.30 22,000 22 February, 2002
February,
2001 22,000 22 February, 2003
22,000 22 February 2004
Restricted Stock Awards
----------------------- Vesting
-------
Date of Award No. of Shares No. Date
18 November, 1999 20,000 5,000 18 November, 2000
5,000 18 November, 2001
5,000 18 November, 2002
5,000 18 November, 2003
22 February, 2001 27,500 6,875 22 February, 2002
6,875 22 February, 2003
6,875 22 February, 2004
6,875 22 February, 2005
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For the avoidance of doubt, the table on Stock Options
includes all Stock Options whether vested or unvested and
the table on Restricted Stock Awards includes all
Restricted Stock awards whether vested or unvested.
(k) We have provided duplicate copies of each of the
agreements reflecting the awards of restricted stock and
stock options referred to above.
(l) The Company confirms to you that the exercise price of
$36.30 for the stock options which were granted to you on
22 February 2001 is the same exercise price for all
employees of the Company who were granted stock options at
that time.
(m) The Company confirms that you have not been granted
options under the ACE Limited Approved UK Stock Option
Programme approved on 24 November 1997.
19. You will be liable for and will indemnify and hold harmless the
Company in respect of any liability incurred by the Company to
account for any of your income tax in respect of the Payment under
or by virtue of any regulations made under Section 203 Income and
Corporation Tax Act 1988 or otherwise and/or any penalty, fine
and/or amount of any interest payable by the Company to the Inland
Revenue as a result of any delay, non-disclosure or other fault by
you arising from any liability for such taxation, whether arising
under or by virtue of the said Section 203 Income and Corporation
Tax Act 1988 or otherwise provided that before meeting any
assessment raised against the Company by any competent authority,
the Company will inform you of any such assessment within 21 days
of receiving the same and will provide you with its reasonable
co-operation to challenge any such assessment
20. It is confirmed that, subject to any relevant restrictions at
law, you are free and unrestricted to deal in stock of ACE
Limited.
21. You agree to give all reasonable assistance (at all reasonable
times on reasonable notice save where a witness order has been
served at short notice) to the Group upon request, with disputes
which may arise or have arisen (whether or not proceedings of any
kind have been instituted) with any Group Company where you have
relevant knowledge in relation to that dispute, including without
limitation, attending meetings, providing statements and acting as
a witness for the Company or any Group Company, as appropriate.
The Company agrees to meet your reasonable expenses incurred in
providing such assistance and in addition shall pay you a daily
rate of (pound)5,000 plus VAT for any day or part of a day spent
providing such assistance save that if you spend less than one
hour on one occasion in any 24 hour period providing such
<PAGE>
assistance then the fee for this time spent shall be(pound)1,000
plus VAT. For the avoidance of doubt, the obligation to pay for
assistance shall extend to any case where you are named as a
representative party in proceedings (whether in court or in
arbitration) arising out of or in connection with the operation of
any Group Company's business.
22. You warrant that at the time of entering into this Agreement save
for the Complaints you are not aware of any reason why any other
matter could represent a "protected and qualifying disclosure" for
the purposes of the provisions of the Public Interest Disclosure
Act 1998, or of the Employment Rights Act 1996 which (1) arose or
may have arisen during the period of your employment with the
Company and (2) could be the subject of any claim on your part.
23. The Company will on any reasonable request by a prospective
employer or employment agency or regulatory authority or
prospective business partner or prospective investor provide a
written reference in the form attached as Appendix 4 and will
respond to any oral or written enquiries in a manner consistent
with this reference and without adding a gloss of any kind.
24. The Company will maintain in force on a continuing basis
Directors' and Officers' liability insurance in respect of the
period during which you were a director of the Company or any
Group Company at the same level of cover as that enjoyed by
members of the Board of ACE Limited or the relevant Group Company,
as appropriate. You shall not be required to pay any part of the
Company's retention or aggregate deductible relating to this
insurance.
25. Except as expressly stated in paragraphs 15.1 and 28.1 of this
letter, a person who is not a party to this agreement may not
enforce any of its terms under the Contracts (Rights of Third
Parties) Act 1999.
26. There are in place various employee trusts and schemes (the
"trusts"), for the benefit of employees of Group Companies. For
the avoidance of doubt such trusts include the Charman Group
Limited 1993 Executive Share Option Scheme, the Methuen Employee
Trust and any of their successors or assigns. You do not qualify
as a beneficiary of and you confirm that you waive all rights and
entitlements which you may have to receive, or otherwise seek, any
payment or benefit in relation to those trusts.
<PAGE>
27. These terms are governed by English law. You and the Company agree
to submit to the exclusive jurisdiction of the English courts as
regards any claim or matter arising in connection with these
terms.
28.1. The provisions of these paragraphs 28.1 and 28.2 are recited
here for the avoidance of doubt, and do not limit the foregoing
provisions of this Agreement. Except for a claim based upon a
breach of this Agreement, you, on behalf of yourself and the other
Employee Releasors, release and forever discharge the Company and
the other Company Releasees from any and all Claims which you now
have or claim, or might hereafter have or claim (or the other
Employee Releasors may have, to the extent that it is derived from
a Claim which you may have), against the Company Releasees based
upon or arising out of any matter or thing whatsoever, occurring
or arising on or before the date of this Agreement, to the extent
that the Claim arises out of or relates to your employment by any
Group Company (including your service as a director of any of the
Group Companies) and/or your termination or resignation therefrom
(with the exception of accrued pension rights), and shall include,
without limitation, Claims arising out of or related to the
Service Agreement, and Claims arising under (or alleged to have
arisen under) the following laws or requirements of the United
States (including the states therein) (a) Title VII of the Civil
Rights Act of 1964, as amended; (b) The Civil Rights Act of 1991;
(c) Section 1981 through 1988 of Title 42 of the United States
Code, as amended; (d) the Employee Retirement Income Security Act
of 1974, as amended; (e) The Immigration Reform Control Act, as
amended; (f) The Americans with Disabilities Act of 1990, as
amended; (g) The National Labor Relations Act, as amended; (h) The
Fair Labor Standards Act, as amended; (I) The Occupational Safety
and Health Act, as amended; (j) The Family and Medical Leave Act
of 1993; (k) any state anti-discrimination law; (l) any state wage
and hour law; (m) any other local, state or federal law,
regulation or ordinance; (n) any public policy, contract, tort, or
common law; or (o) any allegation for costs, fees, or other
expenses including attorneys' fees incurred in these matters. For
the avoidance of doubt this waiver of rights by you does not
include any claim which you have or may have (or the Employee
Releasors may have to the extent that it is derived from a claim
which you may have) as a shareholder of ACE Limited against any
Group Company or any of the Company Releasees, save in relation to
the Complaints where your rights as a shareholder are waived.
<PAGE>
28.2 For purposes of the General Release and Waiver, the terms set
forth below shall have the following meanings:
o the term "Claims" shall include any and all rights,
claims, demands, debts, dues, sums of money,
accounts, attorneys' fees, complaints, judgements,
executions, actions and causes of action of any
nature whatsoever, cognizable at law or equity;
o the term "Company Releasees" shall include each of
the Group Companies and their officers, directors,
trustees, members, representatives, agents,
employees, shareholders, partners, attorneys,
assigns, administrators and fiduciaries under any
employee benefit plan of any of the Group Companies,
and insurers, and their predecessors and successors;
and
o the term "Employee Releasors" shall include you and
your family, heirs, executors, representatives,
agents, insurers, administrators, successors,
assigns, and any other person claiming through you.
29 To the extent that you are entitled to continuing benefit under
clause 100 of the Articles of Association of ACE Limited and any
indemnity on similar terms contained in the Articles of
Association, Bye Laws or other constitutional documents of any
Group Company the Company will procure that you shall continue to
enjoy that benefit.
30. The Company is entering into this Agreement on behalf of itself
and its Group Companies. The Company warrants that the signature
and performance of the Agreement are within the corporate powers
of the Company, have been duly authorised by all necessary
corporate action and do not contravene either the Memorandum or
Articles of Association of the Company nor any law, rule,
regulation or requirement applicable to the Company.
Please signify your agreement to these terms by signing and returning to me
the enclosed duplicate of this letter.
Yours sincerely,
BRIAN DUPERREAULT
Brian Duperreault
Director of ACE London Services Limited and of ACE Limited
For and on behalf of the Company and all of the Group Companies
<PAGE>
I agree to the terms set out in the Company's letter above and confirm that
the conditions regulating compromise agreements under the Employment Rights
Act 1996, the Disability Discrimination Act 1995, the Sex Discrimination
Act 1975, the Race Relations Act 1976, the Equal Pay Act 1970, the Trade
Union and Labour Relations (Consolidation) Act 1992, the Working Time
Regulations 1998, the Human Rights Act 1998, the Public Interest Disclosure
Act 1998 have been satisfied in relation to this Agreement.
In particular I confirm that I have taken independent legal advice from
Jane Mann of Fox Williams on the terms and effect of this letter and my
rights against the Company and any other Group Company and on the basis of
that advice I accept those terms. Ms Mann has confirmed to me that she is a
qualified solicitor holding a current practising certificate and that she
or her firm has an insurance policy in force covering the risk of a claim
by me in respect of any loss arising in consequence of her advice, less any
deductible, uninsurable or excess.
Signature: JOHN CHARMAN
Date: 16TH MAY 2001
<PAGE>
APPENDIX 1
16 May 2001
FORM OF SOLICITOR'S LETTER
I , Jane Mann. of Fox Williams refer to the letter dated 16 May 2001 from
Ace London Services Limited to John Charman (the "Letter"). I am a
qualified solicitor holding a current practising certificate as a partner
in the firm of Fox Williams. The firm has an insurance policy in force
covering the risk of a claim by Mr Charman in respect of any loss arising
in consequence of my advice, less any deductible, uninsurable or excess. I
have advised Mr Charman regarding his rights against the Company (and any
Group company as referred to in the Letter) (including his rights under the
statutes referred to in the Letter) and the effect of agreeing to the terms
set out in the Letter.
<PAGE>
APPENDIX 2
[Resignation of directorships and other offices letter]
16 May, 2001
To whom it may concern:
Resignation of directorships and other offices letter
Without claim for compensation for loss of office or otherwise (but without
prejudice to any claim I may have for damages for breach of my employment
agreement with ACE London Services Limited dated 9 July 1998), I hereby
resign and if requested by the Company will at the cost of the Company do
all things reasonably necessary to resign, effective from 17 March, 2001,
from all positions I currently hold (including directorships, officerships,
trusteeships, active underwriter positions and powers-of-attorney) with all
subsidiaries and managed syndicates of ACE Limited, a Cayman Islands
company, including, without limitation, the following companies and
syndicates:
ACE London Aviation Limited
ACE London Underwriting Limited
ACE Underwriting Agencies Limited
ACE UK Underwriting Limited
ACE Capital Limited
ACE Capital II Limited
ACE Capital III Limited
ACE Capital IV Limited
ACE Capital V Limited
ACE Capital VI Limited
ACE Capital VII Limited
ACE European Markets Reinsurance Limited
ACE European Markets Insurance Limited
ACE Financial Services Limited
ACE London Holdings Limited
ACE London Investments Limited
ACE London Group Limited
ACE (CG) Limited
ACE Group Holdings Limited
ACE Global Markets Limited
ACE Insurance SA NV
ACE UK Limited
ACE UK Holdings Limited
ACE Tarquin
ACE Tempest Reinsurance Limited
ACE London Services Limited
ACE Underwriting Services Limited
ACE (PM) Limited
AGM Underwriting Limited
ACE Trustees Limited
ACE (CR) Holdings
<PAGE>
ACE (RGB) Holdings Limited
Ridge Underwriting Agencies Limited
ACE Holdings (Gibraltar) Limited
ACE Underwriting Agencies Limited Retirement Benefits Scheme
Charman Underwriting Agencies Retirement Benefits Scheme
All ACE managed Lloyd's syndicates including but not limited to 488, 2488,
483, 375, 112, 490, 47, 122, 219, 484, 1171, 48, 925, 960, and any
predecessor or incidental syndicate.
------------------------------------
John Charman
<PAGE>
APPENDIX 3
DATED 2001
-------------------------------------------------------------------------------
ACE LIMITED (1)
JOHN CHARMAN (2)
- and -
ACE LONDON SERVICES LIMITED (3)
-------------------------------------------------------------------------------
DEED OF VARIATION IN RELATION
TO AWARDS OF STOCK OPTIONS
AND RESTRICTED STOCK IN ACE LIMITED
-------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
1. INTERPRETATION.......................................................3
2. VARIATIONS...........................................................4
3. WARRANTIES...........................................................5
4. NO WAIVER............................................................6
5. MISCELLANEOUS........................................................6
6. THIRD PARTY RIGHTS...................................................6
7. VARIATION............................................................6
8. COUNTERPARTS.........................................................6
9. ENGLISH LAW..........................................................6
<PAGE>
THIS DEED OF VARIATION is made 2001
BETWEEN:
(1) ACE LIMITED a company incorporated under the laws of the Cayman
Islands whose address is The ACE Building, 30 Woodbourne Avenue,
Hamilton HM08 Bermuda ("ACE");
(2) JOHN CHARMAN of Dell House, Wildernesse Avenue, Sevenoaks, Kent
TN15 OEA ("Mr Charman"); and
(3) ACE LONDON SERVICES LIMITED a company incorporated in England and
Wales (Company no: 3205604) whose registered office is at Crosby
Court, 38 Bishopsgate, London EC2N 4DL ("Ace London").
INTRODUCTION
(A) Mr Charman has been awarded stock options in ACE in accordance
with the terms of the Plan (as defined below) and pursuant to the
provisions of the relevant stock option agreement, brief
particulars of which are summarised in Schedule 1 ("Stock Option
Awards"). Copies of such stock option agreements are annexed
hereto ("Stock Option Agreements").
(B) Mr Charman has been awarded restricted stock in ACE in accordance
with the terms of the Plan (as defined below) and pursuant to the
provisions of the relevant restricted stock agreement, brief
particulars of which are summarised in Schedule 2 ("Restricted
Stock Awards"). Copies of such restricted stock agreements are
annexed hereto ("Restricted Stock Agreements").
(C) This Deed of Variation is entered into pursuant and is
supplemental to the provisions of a compromise agreement entered
into today between ACE London and Mr Charman which sets out the
terms relating to the termination of Mr Charman's employment with
ACE London ("Compromise Agreement").
(D) Amongst other things, it is a requirement of the Compromise
Agreement that the terms on which the Stock Option Awards and the
Restricted Stock Awards have been granted are varied in accordance
with this Deed of Variation.
(E) The Board of ACE, acting by its Compensation Committee, has
exercised its discretions under the Plan to procure that the terms
on which the Stock Option Awards and the Restricted Stock Awards
have been granted are varied in accordance with the terms of the
Compromise Agreement and this Deed of Variation.
NOW THIS DEED WITNESSES
IT IS AGREED as follows:
1. INTERPRETATION
1.1 In this Deed of Variation and its recitals and schedules, save
where otherwise expressly provided or unless the context provides
otherwise:-
"Compromise Agreement" has the meaning given in recital (C);
"Plan" means the ACE Limited 1995 Long-Term
Incentive Plan dated 15 February
1996 as amended;
<PAGE>
"Restricted Stock Agreements" has the meaning given in recital (B);
"Restricted Stock Awards" has the meaning given in recital (B);
"Stock Option Agreements" has the meaning given in recital (A);
"Stock Option Awards" has the meaning given in recital (A);
1.2 In this Deed of Variation and its recitals and schedules, save
where otherwise expressly provided or unless the context provides
otherwise:
1.2.1 words importing one gender shall be treated as importing
any gender, words importing individuals shall be treated
as importing bodies corporate, corporations,
unincorporated associations and partnerships and vice
versa, words importing the singular include the plural
and vice versa and words importing the whole shall be
treated as including a reference to any part;
1.2.2 clause, schedule and annexe headings and the list of
contents are inserted for ease of reference only and
shall not affect construction;
1.2.3 references to recitals, clauses, schedules and annexures
are to the recitals and clauses of and the schedules and
annexures to this Deed of Variation.
2. VARIATIONS
2.1 Notwithstanding the earlier termination of the employment of Mr
Charman, it is agreed that for the purposes of the Stock Option
Awards and the Restricted Stock Awards, the Date of Termination
(as such expression is defined and used in the Plan, Stock Option
Agreements and the Restricted Stock Agreements) of Mr Charman's
employment with ACE London shall be deemed to be 8 July 2003 to
the effect that:-
2.2 all Stock Option Awards shall continue to vest in accordance with
the terms of the Stock Option Agreements as if Mr Charman's
employment with Ace London continues until and including 8 July
2003; and
2.3 all Restricted Stock Awards shall continue to vest (which for the
avoidance of doubt shall mean that the Restricted Period (as such
expression is defined in the Plan and used in the Restricted Stock
Agreements) in relation to each award of such restricted stock
will cease and such stock may be dealt with by Mr Charman at that
time) in accordance with the terms of the Restricted Stock
Agreements as if Mr Charman's employment with ACE London continues
until and including 8 July 2003.
2.4 For the avoidance of doubt, no restrictions will be imposed under
the rules of the Plan on Mr Charman's dealings or otherwise in
relation to stock in ACE comprising restricted stock that has
vested or stock options that have been exercised.
<PAGE>
2.5 Once exercisable in accordance with their terms, all Stock Option
Awards may be exercised at any time within the period of ten years
from the date of grant of each such Stock Option Award.
2.6 The Stock Option Agreements and the Restricted Stock Agreements
shall in each case, to the extent relevant, be varied in
accordance with the provisions referred to above, but in all other
respects the terms on which the Stock Option Awards and Restricted
Stock Awards have been granted shall be unchanged. The variation
of each such Stock Option Agreement and Restricted Stock Agreement
(as applicable) is made unconditionally and irrevocably as from
the date of this Deed of Variation.
2.7 For the avoidance of doubt, all Restricted Stock Awards that have
not vested and Stock Option Awards that have not become
exercisable by 8 July 2003 shall be forfeited on that date and
shall lapse.
3. WARRANTIES
3.1 ACE and ACE London jointly and severally warrant to Mr Charman in
the following terms:-
3.1.1 the Board of ACE, acting by its Compensation Committee, has
lawfully and properly exercised its discretion under the Plan and
the Stock Option Agreements to vary the terms on which the Stock
Option Awards have been granted in accordance with the provisions
of clause 2 above;
3.1.2 the Board of ACE, acting by its compensation committee, has
lawfully and properly exercised its discretion under the Plan and
the Restricted Stock Agreements to vary the terms on which
Restricted Stock Awards have been granted in accordance with the
provisions of clause 2 above;
3.1.3 the information given in the Schedules to this Deed of Variation
is a true and accurate summary of all the awards of restricted
stock and stock options in ACE that have been granted to Mr
Charman under the Plan and he has not been granted restricted
Stock and Stock options in ACE under any other plan of ACE;
3.1.4 as at the date hereof each of them has full authority, power and
capacity under their respective memorandum and articles of
association or other constitutional documents to enter into and
perform the terms of this Deed of Variation;
3.1.5 the execution and performance by each of them of the terms of this
Deed of Variation have been duly authorised by all necessary
corporate action on their respective parts without any further
proceedings or action being required;
3.1.6 this Deed of Variation has been duly executed and delivered by
each of them and constitutes a valid, legal and binding legal
obligation enforceable against each of them in accordance with the
terms of this Deed of Variation;
3.1.8 each of their Directors or other persons executing on their behalf
this Deed of Variation are duly authorised;
3.1.8 the execution and performance by each of them of this Deed of
Variation is not subject to the approval or consent of any third
party, governmental authority or regulatory body or otherwise, or
if such approval or consent is required, it has been duly
obtained.
<PAGE>
4. NO WAIVER
4.1. No failure to exercise and no delay in exercising on the part of
any party any right, power of privilege under this Deed of
Variation shall operate as a waiver, nor shall any single or
partial exercise of any right, power or privilege preclude any
other or further exercise of it or the exercise of any other
right, power or privilege.
4.2 In the event that any party shall expressly waive any breach,
default or omission under this Deed of Variation, no such waiver
shall apply to, or shall operate as, a waiver of similar breaches,
defaults or omissions or be deemed a waiver of any other breach,
default or omission under this Deed of Variation.
4.3 The rights and remedies of each of the parties in connection with
this Deed of Variation are cumulative and are not exclusive of any
rights or remedies provided by law.
5. MISCELLANEOUS
5.1 ACE and ACE London shall jointly and severally do all such things
as may be within their power to ensure that the provisions of this
Deed of Variation are observed and performed and shall indemnify
and keep Mr Charman indemnified against any costs or losses
suffered by him as a result of any failure so to do.
5.2 In the event of any provision contained in this Deed of Variation
or any part of it being declared invalid or unenforceable, all
other clauses contained in this Deed of Variation shall remain in
full force and effect and shall not be affected by it.
5.3 Save in the case of fraud, this Deed of Variation, the Compromise
Agreement, the Stock Option Agreements, the Restricted Stock
Agreements and the Plan embody the entire understanding between
the parties in relation to their subject matter and there are no
promises, terms, conditions or obligations, oral or written,
expressed or implied, other than those contained herein or therein
and together they supersede any prior agreement between the
parties.
6. THIRD PARTY RIGHTS
6.1 A person who is not a party to this Deed of Variation has no right
under the Contracts (Rights of Third Parties) Act 1999 to enforce
any term of this Deed of Variation. This clause does not affect
any right or remedy of a third party which exists or is available
otherwise than by operation of that Act.
7. VARIATION
7.1 This Deed of Variation may only be varied in writing signed by all
the parties or their respective duly authorised representatives.
8. COUNTERPARTS
8.1 This Deed of Variation may be executed in any number of
counterparts all of which when executed shall constitute one and
the same agreement.
<PAGE>
9. ENGLISH LAW
9.1 This Deed of Variation shall be governed by and construed in
accordance with English Law and the parties submit to the
non-exclusive jurisdiction of the English courts in relation to
all matters, claims and disputes arising out of or in connection
with this Deed of Variation or any document supplemental to it.
EXECUTED AS A DEED the day and year first before written
<PAGE>
SCHEDULE 1
Stock Options Vesting
------------- -------
Date of No. of Exercise Price No. Date
Grant Shares
12th 100,000 $29.625 33,333 12th November, 1999
November,
1998 33,333 12th November, 2000
33,334 12th November, 2001
18th 60,000 $19.3125 20,000 18th November, 2000
November,
1999 20,000 18th November, 2001
20,000 18th November, 2002
22th 66,000 $36.30 22,000 22th February, 2002
February,
2001 22,000 22th February, 2003
22,000 22th February 2004
For the avoidance of doubt, the table of Stock Options includes all Stock
Options whether vested or unvested.
The awards of stock options were made pursuant to the Stock Option
Agreements under the Plan made between Mr Charman and ACE dated 12 November
1998, 18 November 1999 and 22 February 2001.
<PAGE>
SCHEDULE 2
Restricted Stock Awards
----------------------- Vesting
-------
Date of Award No. of Shares No. Date
18 November, 1999 20,000 5,000 18 November, 2000
5,000 18 November, 2001
5,000 18 November, 2002
5,000 18 November 2003
22 February, 2001 27,500 6,875 22 February, 2002
6,875 22 February, 2003
6,875 22 February 2004
6,875 22 February 2005
For the avoidance of doubt, the table of Restricted Stock awards includes
all Restricted Stock awards whether vested or unvested.
The awards of restricted stock were made pursuant to Restricted Stock
Agreements under the Plan made between Mr Charman and ACE and dated 18
November 1999 and 22 February 2001.
<PAGE>
EXECUTED and DELIVERED by ACE )
Limited by means of these signatures )
and delivered: )
Director
Director/Secretary
EXECUTED and DELIVERED by ACE )
London Services Limited by means of )
these signatures and delivered: )
Director
Director/Secretary
EXECUTED as a DEED by )
John Charman in the presence of: )
<PAGE>
APPENDIX 4
Agreed Reference
John Charman was employed by ACE London Services Limited as Chief Executive
Officer from 9 July 1988 (when ACE Limited acquired Charman Underwriting
Agencies Limited) until 17 March 2001. During this time he was responsible
for the management of the Lloyd's operations. He was appointed President,
ACE International and assumed responsibility for all of the ACE Group's
operations outside Bermuda and the US with effect from 1 February 2001.
ACE Limited and ACE London Services Limited have no reason to doubt Mr
Charman's honesty and integrity and are not aware of any impropriety in his
financial or other dealings.
This reference is given without liability on the part of ACE Limited and
ACE London Services Limited and the writer.