Document:

Exhibit 10.8

 

SUPPLEMENTAL
EXECUTIVE RETIREMENT AGREEMENT

 

This Supplemental
Executive Retirement Agreement (“Agreement”) is made this 1st day of January,
2004 by and between AXIS Specialty Limited, a Bermuda company (“Axis”), and
John R. Charman (the “Executive”);

 

WHEREAS, the
Executive and Axis are parties to an employment agreement dated as of December
15, 2003 relating to the Executive’s continued service as the President and
Chief Executive Officer of Axis (the “Employment Agreement”);

 

WHEREAS, the Compensation
Committee of the Board of Directors of Axis has determined that it is in the
best interest of Axis and its shareholders to provide the Executive with a
supplemental retirement benefit in consideration for his continuing service
with Axis; and

 

WHEREAS, Axis
and the Executive desire to enter into this Agreement to evidence the terms and
conditions of the supplemental retirement benefit that will be provided by Axis
to the Executive;

 

NOW,
THEREFORE, in consideration of the terms and conditions contained in this
Agreement, Axis and the Executive agree as follows:

 

1.             Retirement Benefit.  Subject to the terms and conditions of this
Agreement, the Executive shall be entitled to an annual “Retirement Benefit”,
paid annually as of each January 1, beginning January 1, 2009 or, if earlier,
the January 1 following the date on which the Executive’s employment with Axis
and its affiliates terminates for any reason (his “Termination Date”)  and
continuing through the twentieth anniversary of such January 1 (the “Payment
Period”) such that the Executive receives a total of twenty annual payments
hereunder.  Each annual payment shall be
made as soon as practicable following the applicable January 1. The amount of
the Retirement Benefit payable to the Executive for any year during the Payment
Period shall be equal to the “Applicable Amount” determined in accordance with
Exhibit A hereto, which Exhibit A is incorporated into and forms a part of this
Agreement; provided, however, that if the Executive’s Termination Date occurs
prior to December 31, 2008, the amount of his Retirement Benefit for any year
during the Payment Period shall be equal to (a) the product of the “Base
Pension Amount” for such year determined in accordance with Exhibit A hereto
multiplied by the Vesting Percentage determined in accordance with the
following schedule as of his Termination Date, minus (b) the “Offset
Amount” determined in accordance with Exhibit A hereto:

 

 

	
  Termination Date Occurs

  	
   

  	
  Vested
  Percentage

  	
   

  
	
  Prior to
  December 31, 2006

  	
   

  	
  0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  On or after
  December 31, 2006 and

  prior to December 31, 2007

  	
   

  	
  50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  On or after
  December 31, 2007 and

  prior to  December 31, 2008

  	
   

  	
  75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  On or after
  December 31, 2008

  	
   

  	
  100

  	
  %

  

 

Notwithstanding the foregoing, if the Executive’s
Termination Date occurs prior to December 31, 2008 on account of death,
Disability (as defined in the AXIS Capital Holdings Limited 2003 Long-Term
Equity Compensation Plan) or if a Change in Control (as defined in the
Employment Agreement) occurs prior to December 31, 2008, the Executive shall be
fully vested in his Retirement Benefit hereunder.  The Executive shall forfeit, and have no rights to, any portion
of any Retirement Benefit which is not fully vested on his Termination Date or
otherwise in accordance with the foregoing provisions of this Section 1.

 

2.             Payments on Death.  Notwithstanding the provisions of Section 1,
if the Executive dies prior to the date on which he has received all of the
payments due to him hereunder, then all of the then remaining Retirement
Benefits to which he is entitled hereunder, determined in accordance with
Exhibit A (without any adjustment for early payment), shall be paid in a lump
sum as soon as practicable following the Executive’s death to the trustees of
the Dragon Holdings Trust or such other person or entity nominated by the
Executive in writing and delivered to Axis.

 

3.             Payments on Disability. 
Notwithstanding the provisions of Section 1, if the Executive incurs a
Disability prior to the date on which he has received all of the payments due
to him hereunder, all of the then remaining Retirement Benefits to which he is
entitled hereunder, determined in accordance with Exhibit A (without any
adjustment for early payment), shall be
paid to him in a lump sum as soon as practicable following the date of his
Disability.

 

4.             Payments on Change
in Control.  Notwithstanding the
provisions of Section 1, if a Change in Control occurs prior to the date on
which the Executive has received all of the payments due his hereunder, all of
the then remaining Retirement Benefits to which he is entitled hereunder,
determined in accordance with Exhibit A (without any adjustment for early
payment), shall be paid to the Executive in a lump sum as soon as practicable
following the Change in Control.

 

5.             Withholding.  All payments under this Agreement will be
subject to such deductions as may be required to be made pursuant to law,
government regulation or order, or by agreement with or consent of the
Executive.  All tax liability resulting
from the payments and

 

2

 

benefits under this Agreement (other than the employer
portion of any applicable employment taxes) shall be the responsibility of
Executive (or, in the event of his death, his estate or such other person
responsible for such tax under applicable law).

 

6.             Liability for
Benefit Payments.  The amount of any
benefit payable under this Agreement shall be paid from the general assets of
Axis; provided, however, that Axis, in its sole discretion, may provide for
other methods of payment, including, but not limited to, funding through a
trust or through the purchase of insurance. 
Axis’ obligation under this Agreement shall be reduced to the extent
that any amounts due under the Agreement are paid from one or more trusts or
insurance contracts.  Neither the
Executive nor any other person shall, by reason of this Agreement, acquire any
right in or title to any assets, funds or property of Axis whatsoever, including,
without limitation, any specific funds, assets, or other property which Axis,
in its sole discretion, may set aside in anticipation of a liability under the
Agreement.  The Executive shall have
only a contractual right to the amounts, if any, payable under this Agreement,
unsecured by any assets of Axis. 
Nothing contained in this Agreement shall constitute a guarantee by Axis
that the assets of Axis shall be sufficient to pay any benefits to any
person.  If Axis determines that this
Agreement shall be subject to Part 2, 3 or 4 of Title I of the Employee
Retirement Income Security Act of 1974, as amended, the balance of the
Executive’s Retirement Account shall be immediately paid to the Executive in a
lump sum.

 

7.             Binding Nature.  This Agreement shall be binding upon the
parties hereto, their beneficiaries, heirs, executors, administrators and
successors.

 

8.             Transferability.  Except as set forth in Section 2, the
Executive shall not have, without the prior written consent of Axis, the power
or right to transfer, assign, anticipate, pledge, mortgage, commute or
otherwise encumber in advance any of the benefits payable hereunder, nor shall
said benefits be subject to seizure for the payment of any debts or judgments
or be transferable by operation of law in the event of bankruptcy, insolvency,
or otherwise.

 

9.             Not A Contract of
Continued Service.  This Agreement
shall not be deemed to constitute a contract of employment or continued service
between the parties hereto, nor shall any provision herein restrict the right
of Axis to discharge or otherwise terminate the services of the Executive, or
restrict the right of the Executive to terminate his services to Axis.

 

10.           Interpretation.  The Compensation Committee of AXIS Capital
Holdings Limited shall have the discretion to interpret this Agreement and
remedy any ambiguities or inconsistencies herein.

 

11.           Amendment.  Axis and the Executive may amend this
Agreement at any time.

 

12.           Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of Bermuda.

 

3

 

The parties have executed this Agreement
effective as of the date first above written.

 

	
   

  	
  AXIS Specialty Limited

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank J. Tasco

  	
   

  
	
   

  	
  Its:

  	
  Chairman of the Compensation Committee

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John R. Charman

  	
   

  
	
   

  	
  John R. Charman

  
						

 

4

 

EXHIBIT A

TO SUPPLEMENTAL EXECUTIVE

RETIREMENT AGREEMENT

 

	
  Applicable Year

  	
   

  	
  Base
  Pension Amount

  	
   

  
	
  January 1, 2004 through December 31, 2004

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  January 1, 2005 through December 31, 2005

  	
   

  	
  $

  	
  772,500

  	
   

  
	
  January 1, 2006 through December 31, 2006

  	
   

  	
  $

  	
  795,695

  	
   

  
	
  January 1, 2007 through December 31, 2007

  	
   

  	
  $

  	
  819,545

  	
   

  
	
  January 1, 2008 through December 31, 2008

  	
   

  	
  $

  	
  844,132

  	
   

  
	
  January 1, 2009 through December 31, 2009

  	
   

  	
  $

  	
  869,456

  	
   

  
	
  January 1, 2010 through December 31, 2010

  	
   

  	
  $

  	
  895,539

  	
   

  
	
  January 1, 2011 through December 31, 2011

  	
   

  	
  $

  	
  922,405

  	
   

  
	
  January 1, 2012 through December 31, 2012

  	
   

  	
  $

  	
  950,078

  	
   

  
	
  January 1, 2013 through December 31, 2013

  	
   

  	
  $

  	
  978,580

  	
   

  
	
  January 1, 2014 through December 31, 2014

  	
   

  	
  $

  	
  1,007,937

  	
   

  
	
  January 1, 2015 through December 31, 2015

  	
   

  	
  $

  	
  1,038,175

  	
   

  
	
  January 1, 2016 through December 31, 2016

  	
   

  	
  $

  	
  1,069,321

  	
   

  
	
  January 1, 2017 through December 31, 2017

  	
   

  	
  $

  	
  1,101,400

  	
   

  
	
  January 1, 2018 through December 31, 2018

  	
   

  	
  $

  	
  1,134,442

  	
   

  
	
  January 1, 2019 through December 31, 2019

  	
   

  	
  $

  	
  1,168,476

  	
   

  
	
  January 1, 2020 through December 31, 2020

  	
   

  	
  $

  	
  1,203,530

  	
   

  
	
  January 1, 2021 through December 31, 2021

  	
   

  	
  $

  	
  1,239,636

  	
   

  
	
  January 1, 2022 through December 31, 2022

  	
   

  	
  $

  	
  1,276,825

  	
   

  
	
  January 1, 2023 through December 31, 2023

  	
   

  	
  $

  	
  1,315,130

  	
   

  

 

 

	
  Applicable Year

  	
   

  	
  Base
  Pension Amount

  	
   

  
	
  January 1, 2024 through December 31, 2024

  	
   

  	
  $

  	
  1,354,583

  	
   

  
	
  January 1, 2025 through December 31, 2025

  	
   

  	
  $

  	
  1,395,221

  	
   

  
	
  January 1, 2026 through December 31, 2026

  	
   

  	
  $

  	
  1,437,078

  	
   

  
	
  January 1, 2027 through December 31, 2027

  	
   

  	
  $

  	
  1,480,190

  	
   

  
	
  January 1, 2028 through December 31, 2028

  	
   

  	
  $

  	
  1,524,596

  	
   

  

 

1.             General Rule for
Determination of Applicable Amount. 
The “Applicable Amount” for any Applicable Year shall be equal to the
difference (but not less than zero) between (a) the Base Pension Amount for the
Applicable Year, minus (b) the benefit payable to the Executive under
the AXIS Specialty Limited International Pension Plan (the “International
Plan”), determined based on the balance to the Executive’s credit under the
International Plan as of December 31 of the year immediately preceding the
Applicable Year and expressed in the form of a twenty year certain annuity
payable annually commencing on January 1 of the Applicable Year (the “Offset
Amount”).

 

2.             Special Rule for
Accelerated Payments.  In the event
the Executive is entitled to accelerated payments of the Applicable Amounts
pursuant to Section 2 (relating to payments on death), 3 (relating to payments
on account of Disability) or 4 (relating to payments on account of a Change in
Control), the “Applicable Amount” for each Applicable Year which is accelerated
pursuant to Sections 2, 3 or 4, as applicable, shall be equal to the difference
(but not less than zero) between (a) the Base Pension Amount for the Applicable
Year, minus (b) the benefit payable to the Executive under the
International Plan, determined based on the balance to the Executive’s credit
under the International Plan as of December 31 of the year immediately
preceding the event described in Section 2, 3 or 4, as applicable (each an
“Acceleration Event”), expressed in the form of a twenty year certain annuity
payable annually commencing on January 1 of the year in which the applicable
Acceleration Event occurs.

 

3.             Interest Rate.
 The interest rate that shall be used
for purposes of converting the balance to the Executive’s credit under the
International Plan to a twenty year certain annuity for any Applicable Year
shall be the U.S. treasury rate for 20 year bonds plus 100 basis points,
determined as of January 1 of the Applicable Year.EXHIBIT 10.2

 

	
  

  
	
   

  
	
  
  www.fcg.com

  

  

 

 

March 22, 2004

 

Mary Franz

118 12th
Street

Seal Beach, California
90740

 

Dear Mary,

 

As we have discussed, you
will focus during the next five quarters on leading and establishing our
FirstQuality initiative as well as continuing and transitioning your other
regular duties as a member of senior management.   In addition, we have mutually agreed that your target separation
date from FCG is July 1, 2005.

 

In recognition of this
new arrangement, we have agreed to the follow compensation plan for you:

 

•                                          You will
continue to earn a salary of $415,000 per year for the balance of your
employment with FCG;

 

•                                          You will
continue to participate in the FCG Bonus Plan according to the terms of such
plan and as it pertains to the Executive Committee or similar management body;

 

•                                          You will
receive a retention bonus of $415,000 (the “Retention Bonus”), which amount is
payable to you on July 1, 2005 (except if FCG terminates your employment
earlier than July 1, 2005, other than for “cause”, then such amount shall be
payable earlier as described below);

 

•                                          You will
continue to receive any SERP contribution made by FCG for employees at the
Executive Vice President level through your date of termination;

 

•                                          Upon your
termination from FCG, you will receive monthly reimbursement for any cost of
COBRA to you for benefits continuation at your then-current level of benefits
coverage for a period of 12 months from your separation date; and

 

•                                          Upon your
termination from FCG, you will receive an Executive Outplacement Package with
our current outplacement vendor of four months.  This outplacement package will be the equivalent of that provided
for other FCG senior executives who have received such services in connection
with termination of their employment from FCG. 
You may begin this program at any time after January 1, 2005, unless FCG
has terminated your employment earlier than such date.

 

If FCG were to terminate
your employment other than for “cause” prior to July 1, 2005, the Retention
Bonus shall be payable to you as of your termination date.  No other compensation would be due to you
upon such termination, except for (i) all accrued and unpaid base salary and
unused paid time off earned

 

	
  111 West Ocean Boulevard, 4th Floor, Long
  Beach, California  90802-4646

  	
   

  	
  •

  	
  562/624-5200

  	
   

  	
  562/983-9384
  (Fax)

  

 

 

through your separation
date; and (ii) the COBRA reimbursement and outplacement benefits described
above.

 

If you voluntarily resign
your employment prior to July 1, 2005, you will forfeit the Retention Bonus and
you will receive no additional compensation or severance from FCG upon your
separation of employment, except for all accrued and unpaid base salary and
unused paid time off earned through your separation date.

 

If your employment is
terminated for “cause” by FCG, you will forfeit the Retention Bonus and you
will not be eligible for any compensation or severance from FCG upon your
separation of employment, except for all accrued and unpaid base salary and
unused paid time off earned through your separation date.

 

For purposes of this
arrangement, “cause” is defined as (i) an intentional material act of fraud or
dishonesty in connection with your employment with FCG; (ii) your conviction of
or pleading guilty or “no contest” to any felony or any crime involving moral
turpitude or dishonesty; (iii) willful and material breach of FCG’s policies or
your Vice President agreement, which breach is not cured within 30 days notice
of such breach provided to you by FCG; (iv) intentional and material damage to Company’s
property; or (v) willful violation of any law or regulation applicable to the
FCG’s business, including any federal or state securities laws. For purposes of
this definition, your conduct will not be considered “willful” unless committed
without good faith and without a reasonable belief that the act or omission was
in FCG’s best interest.

 

If neither you nor FCG
terminates your employment from FCG prior to July 1, 2005, your employment with
FCG will terminate on July 1, 2005.

 

The arrangement described
in this letter will not modify your status as an “at will” employee, meaning
that you or FCG can terminate your employment at any time for any reason or no
reason.  In addition, should FCG
undertake a program to tender for or exchange stock options for cash or other
equity incentives, you shall be eligible to participate in any such program
that occurs prior to the termination of your employment to the same extent as
other senior executives at FCG.

 

All of amounts paid to
you under this arrangement shall be less federal, state and other applicable
taxes and any authorized withholdings to the extent applicable to such amounts.

 

On your effective date of
separation, we would execute the standard form of FCG separation agreement to
effect your separation terms.  Execution
of the agreement is a condition to receiving the payment of your retention
bonus amounts and other benefits described in this letter.

 

This letter may only be
modified in writing by mutual agreement of you and FCG.  This letter is binding on FCG and its
successors and assigns.

 

2

 

If you have any
questions, please feel free to contact me or Jan Blue.

 

Sincerely,

 

First Consulting Group, Inc.

 

 

	
  By:

  	
  /s/
  Luther J. Nussbaum

  	
   

  
	
   

  	
  Luther
  J. Nussbaum

  
	
   

  	
  Chairman
  and Chief Executive Officer

  

 

Agreed:

 

 

	
   

  	
  /s/ Mary Franz

  	
   

  
	
   

  	
  Mary Franz

  

 

 

cc:           Jan Blue, Vice President

 

3

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