Exhibit 10.7

 

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 Michael A. Butt (the “Executive”);

 

WHEREAS, the Executive and Axis are parties to a service agreement dated as of
December 15, 2003 relating to the Executive’s continued service as the Chairman
of the Board of Axis (the “Service 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 tenth anniversary of such January 1 (the “Payment
Period”) such that the Executive receives a total of ten 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:

 

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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 Service 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 Acton 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 benefits under this Agreement (other
than the employer portion of any applicable employment

 

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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 the Board of
Directors 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.

 

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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/ Michael A. Butt

 

 

Michael A. Butt

 

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EXHIBIT A

TO SUPPLEMENTAL EXECUTIVE

RETIREMENT AGREEMENT

 

Applicable Year

 

Base Pension Amount

 

January 1, 2004 through December 31, 2004

 

$

250,000

 

January 1, 2005 through December 31, 2005

 

$

257,500

 

January 1, 2006 through December 31, 2006

 

$

265,225

 

January 1, 2007 through December 31, 2007

 

$

273,182

 

January 1, 2008 through December 31, 2008

 

$

281,377

 

January 1, 2009 through December 31, 2009

 

$

289,819

 

January 1, 2010 through December 31, 2010

 

$

298,513

 

January 1, 2011 through December 31, 2011

 

$

307,468

 

January 1, 2012 through December 31, 2012

 

$

316,693

 

January 1, 2013 through December 31, 2013

 

$

326,193

 

January 1, 2014 through December 31, 2014

 

$

335,979

 

January 1, 2015 through December 31, 2015

 

$

346,058

 

January 1, 2016 through December 31, 2016

 

$

356,440

 

January 1, 2017 through December 31, 2017

 

$

367,133

 

January 1, 2018 through December 31, 2018

 

$

378,147

 

 

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 ten year certain annuity payable annually commencing on January
1 of the Applicable Year (the “Offset Amount”).

 

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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 ten 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 ten year certain annuity for any Applicable Year shall be the U.S. treasury
rate for 10 year bonds plus 100 basis points, determined as of January 1 of the
Applicable Year.

 

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