Document:

Exhibit
10.6

 

AXIS SPECIALTY LIMITED

106 PITTS BAY ROAD

PEMBROKE HM 08 BERMUDA

 

 

Carol S. Rivers

AXIS Specialty Limited

106 Pitts Bay Road

Pembroke HM 08 Bermuda

 

 

Dear Carol:

 

We
are delighted that you have decided to join AXIS Specialty Limited, a Bermuda
company (the “Company”) and wholly owned, indirect subsidiary of AXIS
Capital Holdings Limited, a Bermuda company (the “Parent”). We thought
it would be useful to lay out the terms and conditions of our agreement in this
letter agreement (this “Agreement”). 
This Agreement is dated as of August 1, 2003.

 

1.                                      Employment.

 

The
Company hereby agrees to employ you in the position of General Counsel or in
such position as is mutually agreeable to you and the Company.  The Company also agrees that you will have the
title of General Counsel of Parent. You will report to the Chief Executive
Officer and President of the Parent or any other appropriate designee as may be
directed by him. You will be expected to devote your full business time and
energy, attention, skills and ability to the performance of your duties and
responsibilities to the Company on an exclusive basis, including service to
subsidiaries and other affiliates of the Company as requested by the Board of
Directors of the Parent (the “Board”), and shall faithfully and
diligently endeavor to promote the business and best interests of the Company
and its subsidiaries.

 

2.                                      Compensation and Benefits.

 

(a)                                 During your employment with the
Company, your annual base salary shall be $325,000 (the base salary as may be
increased from time to time “Base Salary”) and shall be paid pursuant to
the Company’s customary payroll practices. The Base Salary will be reviewed
annually and may be increased in the sole discretion of the Company.

 

(b)                                 In addition to the Base Salary, in
each fiscal year of the Company during your employment with the Company, you
will have the opportunity to earn an annual cash bonus (“Annual Bonus”)
if the Company achieves certain performance objectives and subject to your
individual performance (each of which will be determined by the Company for
each such fiscal year); provided, however, that the Annual Bonus for the
period of August 1, 2003 to December 31, 2003 will not be less than
$81,250.  The Annual Bonus for each
period will be paid only if you are actively employed with the Company and are
not in breach of this Agreement on the date of disbursement.

 

 

(c)                                  Following the execution of this
Agreement and the commencement of your employment with the Company, Parent will
grant to you an option to purchase twenty thousand (20,000) shares of Common
Stock of Parent at an exercise price equal to the fair market value of the
Common Stock on the date of grant pursuant to the AXIS Capital Holdings Limited
2003 Long-Term Equity Compensation Plan as the same has been or may be amended
from time to time (the “Parent Equity Plan”). These options will vest
and become exercisable in three equal installments on the first, second and
third anniversary of the date of grant and as otherwise set forth in the Parent
Equity Plan and the award agreement. 
All other terms and conditions shall be provided in the Parent Equity
Plan and the award agreement.

 

(d)                                 During your employment with the
Company, you will be entitled to participate generally in the benefit plans made
available to employees of the Company in accordance with the terms of those
plans and the Company will reimburse you for all reasonable business expenses
upon presentation of statements of such expenses in accordance with the
Company’s policies and procedures now in force or as such policies and
procedures may be modified with respect to the senior executives of the
Company.

 

(e)                                  During your employment with the
Company, you will be entitled to 25 working days of paid vacation per calendar
year (pro rated according to your commencement date).  You will also be entitled to be paid for Bermuda statutory
holidays as set out under the Bermuda Public Holidays Act.

 

(f)                                    During your employment with the
Company, you will be paid by the Company a housing allowance of $14,000 per
month; provided, however, that the Company shall have no other
obligations to you relating to any of your housing expenses, including, but not
limited to, the costs of utilities and maintenance.

 

(g)                                 During your employment with the
Company, you will be paid by the Company an automobile allowance of $900 per
month; provided, however, that the Company shall have no other
obligations to you relating to any of your automobile(s), including, but not
limited to, the costs to insure or garage any of your automobile(s).

 

(h)                                 During your employment with the
Company, you will be entitled to four return trips home for you and your family
each calendar year in accordance with the Company’s home leave policy.

 

(i)                                    During your employment with the
Company, and subject to the Company’s prior review and approval, you will be
reimbursed by the Company for the initiation fees and annual membership fees of
two private clubs; provided, however, that the Company shall have no
other obligations to you relating to any other costs of your membership in that
private club.

 

(j)                                    During your employment with the
Company, the Company will pay the reasonable costs of an accountant to prepare
your personal tax forms and reports that are required to be filed in the United
States in connection with your employment in Bermuda.

 

(k)                                 In connection with your employment
with the Company, the Company will pay the reasonable costs of your relocation
to Bermuda, including, but not limited to, the costs of transportation, moving
and temporary housing for you and your family.

 

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(l)                                    During the first six months of your
employment with the Company, the Company will reimburse you for your
contributions for maintaining coverage pursuant to Section 4980B of the
Internal Revenue Code of 1986, as amended, under your former employer’s health,
dental and vision insurance.

 

3.                                      Term of Employment

 

(a)                                 The employment period shall
commence on August 1, 2003 and shall terminate on the day preceding the second
anniversary thereof; provided, however, that the term of employment
shall automatically be extended for successive one-year periods unless either
party shall give at least six (6) months’  prior written notice of
non-renewal. Notwithstanding the foregoing, your employment hereunder will be
terminated upon the earliest to occur of the following events:

 

(i)                                    Death. 
Your employment shall automatically terminate upon your death.

 

(ii)                                Disability. 
The Company shall be entitled to terminate your employment if, as a
result of your incapacity due to physical or mental illness or injury, you
shall have been unable to perform your duties hereunder for a period of 181
days in any twelve-month period.

 

(iii)                            Cause. 
The Company may terminate your employment for Cause, which, for purposes
of this Agreement, shall mean (A) your willful misconduct or gross negligence
in connection with the performance of your duties as an employee of the
Company, (B) the willful engagement by you in misconduct that is demonstrably injurious
to the Company (monetarily or otherwise) or its reputation, (C) your material
breach of this Agreement or (D) your conviction of, or pleading guilty or nolo
contendere to, a felony, an offence triable upon an indictment or a crime
involving moral turpitude.

 

(iv)                              Without Cause. 
The Company may terminate your employment at any time without Cause; provided,
however, that the Company provides you with notice of its intent to terminate
at least 30 days in advance of the date of termination. Termination without
Cause shall include the Company’s non-renewal of a successive one-year period
of your employment with the Company as provided for in this Section 3(a).

 

(v)                                  Voluntary Resignation. 
You may voluntarily terminate your employment hereunder; provided,
however, that you provide the Company with notice of your intent to terminate
at least six months  in advance of the date of termination.  Voluntary Resignation shall include your non-renewal of a
successive one-year period of your employment with the Company as provided for
in this Section 3(a).

 

(b)                                 In the event that your employment
with the Company shall terminate for any reason, except as otherwise set forth
in this Agreement, the Company’s sole obligation under the Agreement shall be
to (i) pay to you any accrued and unpaid Base Salary through the date of

 

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termination of employment
and an amount equal to such reasonable and necessary unreimbursed business
expenses incurred by you on behalf of Company on or prior to the date of
termination of employment and (ii) afford you all the employee benefits to
which you may be entitled under, and in accordance with the terms of, all
employee benefit plans in which you participate.

 

(c)                                  In the event that the Company
terminates your employment without Cause in accordance with the provisions of
Section 3(a)(iv) hereof, you shall be entitled to continuation of your
Base Salary and employee benefits for a period of twelve
(12) months  immediately
following the date of such termination; provided, however, that you
comply with your obligations under Sections 3(e), 4, 5, 6 and 7 hereof.

 

(d)                                 In the event that either party
gives notice of the non-renewal of a successive one-year period of your
employment with the Company as provided for in Section 3(a) hereof, or the
Company terminates your employment without Cause and provides notice to you
thereof, or you voluntarily terminate your employment hereunder and provide
notice to the Company thereof, during the period (or any portion thereof)
commencing on the date of such notice and ending on the date of termination
(the “Notice Period”), the Company may, in its absolute discretion, (i)
require you to perform only such duties as it may allocate to you, (ii) require
you not to perform any of your duties, (iii) require you not to have any
contact with customers or clients of the Company nor any contact (other than
purely social contact) with such employees of the Company as the Company shall
determine, (iv)  exclude you from any premises
of the Company and/or (v) require you to resign from all directorships and
other offices that you hold in connection with your employment with the Company
(including any directorships with subsidiaries or other affiliates of the
Company) effective as of any date during the Notice Period.  If the Company elects to take any such
action, such election shall not constitute a breach by the Company of this
Agreement and you shall not have any claim against the Company in connection
therewith so long as, during the Notice Period, the Company continues to pay to
you your accrued and unpaid Base Salary, afford you all the employee benefits
to which you may be entitled under, and in accordance with the terms of, all
employee benefit plans in which you participate and otherwise comply with the
terms of this Agreement.

 

(e)                                  Upon termination of your employment
with the Company for any reason, you agree (i) to resign from all directorships
and other offices that you hold in connection with your employment with the Company
(including any directorships with subsidiaries or other affiliates of the
Company) and (ii) to execute a general release and waiver, waiving all claims
you may have against the Company, its affiliates (including Parent) and their
respective successors, assigns, employees, officers, directors, consultants,
partners and shareholders.

 

(f)                                    In the event that your employment
with the Company shall terminate for any reason, other than termination by the
Company for Cause or your voluntary termination of employment or non-renewal of
this Agreement in which you don’t provide the six months’ notice required by
Section 3(a) hereof, the Company will pay the reasonable costs of your
repatriation to your country of origin, including but not limited to, the costs
of transportation and moving for you and your family.

 

(g)                                 In the event that your employment
with the Company shall terminate for any reason, the Company shall provide or
cause to be provided to you (and to your eligible

 

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dependents) continuing
health coverage that is substantially similar in all material respects to the
coverage provided to the Company’s employees who are employed in the United
States, which continuing health coverage provided to you (and to your eligible
dependents) shall be provided on the same terms and conditions as
post-termination health coverage is provided to the Company’s employees who are
employed in the United States pursuant to Section 4980B of the Internal
Revenue Code of 1986, as amended, including, without limitation, the period of
such coverage, the required contributions for such coverage and the type of
such coverage that is provided.  If you
are entitled to the continuation of employee benefits under this Agreement for
any period of time after termination at the expense of the Company, then the
Company shall be responsible for the cost of such coverage for such period of
time.  If you are not entitled to the
continuation of employee benefits under this Agreement for any period of time
after termination at the expense of the Company, or if you elect coverage for a
period of time that exceeds the period for which the Company is required by
this Agreement to pay the expenses, then you shall be responsible for the cost
of such coverage for the period of time that the Company is not required to
pay.

 

(h)                                 If within the first twelve months
following a Change of Control, (i) the nature or scope of your position,
authority or duties are materially adversely changed, (ii) your compensation is
not paid or is reduced, there is a material adverse change in your employee
benefits or the Company otherwise materially breaches this Agreement or (iii)
you are required by the Company to relocate to a place more than 50 miles from
your current place of employment, then, if you provide the Company with written
notice of your intent to terminate your employment as a result of such event,
providing the specific reasons therefor, and the Company does not make the
necessary corrections within thirty days of receipt of your written notice, you
may terminate your employment within the ten days following the expiration of
such thirty day notice period and continue to receive your Base Salary and
employee benefits for a period of twelve months  immediately following the date of
such termination and the Annual Bonus that you would have been entitled to
during such twelve months assuming all performance targets had been exceeded; provided,
however, that you comply with your obligations under Section 3(e), 4, 5 and
6 hereof.  For purposes of this
Agreement, the term “Change in Control” will be deemed to have occurred
as of the first day any of the following events occurs:

 

(i)                                    Any person
or entity is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
the U.S. Securities Exchange Act of 1934, as amended), directly or indirectly,
of securities of the Parent representing 50% or more of the combined voting
power of the Parent’s then outstanding voting securities entitled to vote
generally in the election of directors (the “Outstanding Parent Voting Securities”); provided, however, that
for purposes of this Section 3(h) (i), the following acquisitions shall
not constitute a Change in Control: (A) any acquisition directly from the
Parent, (B) any acquisition by the Parent, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Parent or any
affiliate of the Parent or (D) any acquisition by any entity pursuant to a
transaction which complies with clauses (A), (B) and (C) of Section 3(h)
(iii) hereof;

 

5

 

(ii)                                Individuals who, as of the date of
this Agreement, constitute the Board (hereinafter referred to as the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Parent’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered a member of
the Incumbent Board, excluding any individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person or entity other
than the Board;

 

(iii)                            Consummation of a reorganization,
merger, share exchange, amalgamation, recapitalization, consolidation or
similar transaction by and among the Parent and another person or entity,
including, for this purpose, a transaction as a result of which another person
or entity owns the Parent or all or substantially all of the Parent’s assets,
either directly or through one or more subsidiaries (a “Business Combination”),
in each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Parent Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors (or
equivalent management personnel) of the entity resulting from such Business
Combination or that, as a result of such Business Combination, owns the Parent
or all or substantially all of the Parent’s assets, either directly or through
one or more subsidiaries, in substantially the same proportions as their
ownership of the Outstanding Parent Voting Securities immediately prior to such
Business Combination; (B) no person or entity (excluding any entity resulting
from such Business Combination, or that, as a result of such Business
Combination, owns the Parent or all or substantially all of the Parent’s
assets, either directly or through one or more subsidiaries, or any employee
benefit plan (or related trust) of the foregoing) beneficially owns, directly
or indirectly, 50% or more of the then outstanding shares of common stock or
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors (or equivalent management
personnel) of the entity resulting from such Business Combination or that, as a
result of such Business Combination, owns the Parent or all or substantially
all of the Parent’s assets, either directly or through one or more
subsidiaries, except to the extent that such ownership existed with respect to
the Parent prior to the Business Combination; and (C) at least a majority of
the members of the board of directors (or equivalent management personnel) of
the entity resulting from such Business Combination or that, as a result of
such Business Combination, owns the Parent or all or substantially all of the

 

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Parent’s assets, either
directly or through one or more subsidiaries, were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the action
of the Board, pursuant to which such Business Combination is effected or
approved; or

 

(iv)                              Approval by the shareholders of the
Parent of a complete liquidation or dissolution of the Parent or the sale or
other disposition of all or substantially all of the Parent’s assets.

 

4.                                      Assignment of Intellectual Property
Rights

 

(a)                                 Assignment. 
You hereby assign all of your rights, title and interest to and in all
Intellectual Property Rights (as defined below) conceived, developed, invented,
made by you or otherwise owned by you and directly or indirectly relating to
the Business (defined in Section 7(a)) and you agree and acknowledge that,
on the date hereof, such rights to and in such Intellectual Property Rights
shall become the sole property of, and belong to, the Company.

 

(b)                                 Intellectual Property Rights. 
For the purposes of this Agreement, the term “Intellectual Property
Right” shall mean all proprietary and other rights in and to: (i)
trademarks, service marks, brand names, certification marks, trade dress,
assumed names, trade names and other indications of origin; (ii) patents,
inventors’ certificates and invention disclosures; (iii) trade secrets and
other confidential or non-public business information, including ideas,
formulae, compositions, inventions, discoveries and improvements, know-how,
manufacturing and production processes and techniques, and research and
development information (whether patentable or not); drawings, specifications,
designs, plans, proposals and technical data; and financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information; (iv) writings and other works of
authorship, whether copyrightable or not, including computer programs, data
bases and documentation therefor, and all copyrights to any of the foregoing;
(v) mask works; (vi) rights, title and interest in know-how, technical
information, processes, practices and systems, whether or not protectable by
patent, copyright or trade secret law; (vii) moral rights; (viii) rights to
limit the use or disclosure of confidential information by any person; (ix) any
similar tangible or intangible intellectual property or proprietary rights,
information and technology; (x) registrations of, and applications to register,
any of the foregoing with any governmental agency or authority and any renewals
or extensions thereof, (xi) the goodwill associated with each of the foregoing
and (xii) any claims or causes of action arising out of or related to any
infringement or misappropriation of any of the foregoing; in each case in any
jurisdiction.

 

5.                                      Non-Disclosure

 

(a)                                 In view of the fact that your work
for the Company will bring you into close contact with many confidential
affairs of the Company not readily available to the public, as well as plans
for future developments, you agree during your employment with the Company and
thereafter:

 

(i)                                    to keep secret and retain in the
strictest confidence all proprietary or confidential matters or trade secrets
of the Company or any of its

 

7

 

subsidiaries and
affiliates (which information will be deemed confidential notwithstanding any
prior unauthorized disclosures), including, but not limited to, data, know-how,
formulae, practices, processes, methodologies, designs, sketches, photographs,
plans, drawings, specifications, samples, reports, member or customer lists,
price lists, business strategies or arrangements, studies, findings,
inventions, ideas, software, source code, business plans and other technical,
business or financial information relating to the Company’s business, whether
existing on the date hereof or hereafter (such material collectively, “Restricted
Material”), and not to disclose such Restricted Material except with the
Company’s permission to such third parties as may be necessary in the
furtherance of the Company’s interests and in the discharge of your duties; and

 

(ii)                                to deliver promptly to the Company
upon the termination of your employment or at any other time as the Company may
so request, all documents (and all copies thereof), in whatever form,
containing Restricted Material, and all property associated therewith, which
you may then possess or have under your control; provided, however, that
Restricted Material shall not be subject to the confidentiality restrictions of
this Section 5 where you can show that such information is, at the time of
disclosure, generally known to the public.

 

(b)                                 In the event that you are requested
or required (by oral questions, interrogatories, requests for information or
documents, subpoena or similar process) to disclose any Restricted Material,
you agree to provide the Company with prompt notice of such request(s) so that
the Company may seek an appropriate protective order or other appropriate
remedy and/or waive your compliance with the provisions of this Agreement. In
the event that such protective order or other remedy is not obtained, or that
the Company grants a waiver hereunder, you may furnish that portion (and only
that portion) of the Restricted Material which you are legally compelled to
disclose and will exercise your reasonable best efforts to obtain reliable
assurance that confidential treatment will be accorded any Restricted Material
so furnished.

 

(c)                                  Nothing in this Section 5
shall be construed as granting or implying any right to you under any patent or
unpatented intellectual property right of the Company, or your right to use any
invention covered thereby.

 

6.                                      Non-Solicitation

 

Except
with prior written permission of the Company, you shall not, directly or
indirectly (individually or on behalf of other persons), during your employment
with the Company or any of its affiliates and for a period of six (6) months
following the termination of your employment with the Company for any reason,
hire, offer to hire, entice away or in any manner persuade or attempt to
persuade any officer, employee or agent of the Parent or any of its affiliates
(including the Company and any subsidiary) or any then current or prospective
customer, client or broker of the Parent or any of its affiliates (including
the Company and any subsidiary), to discontinue his or her relationship with
the Parent or any of its affiliates (including the Company and any

 

8

 

subsidiary) or to otherwise do business with
any competing business of Parent or any of its affiliates (including the
Company and any subsidiary).

 

7.                                      Non-Competition

 

Except
with prior written permission of the Company, you shall not, during your
employment with the Company or any of its affiliates and if you terminate
employment for any reason (other than your voluntary termination of employment
or non-renewal of this Agreement in which you provide the six months’ notice
required by Section 3(a) hereof), for a period of six (6) months  following
your termination of employment, directly or indirectly (individually or on
behalf of other persons): (a) enter the employ of, or render services to, any
person, firm or corporation engaged in the insurance or reinsurance business or
any other business in which the Company is, or has announced an intention to
become, engaged in at any time during your employment with the Company and
within Bermuda (hereinafter collectively referred to as the “Business”);
(b) engage in such Business on your own account; or (c) become interested in
any such Business, directly or indirectly, as an owner, partner, shareholder,
member, director, officer, principal, consultant or in any other senior
executive or managerial capacity; provided, however, that nothing
contained in this Section 7 shall be deemed to prohibit you from
acquiring, solely as a passive investment, no more than 5% of the total
outstanding securities of any publicly-held corporation.

 

8.                                      Enforcement

 

(a)                                 The parties hereto hereby declare
that it is impossible to measure in money the damages that will accrue to the
Company by reason of your failure to perform any of your obligations under
Sections 4, 5, 6 and 7. Accordingly, if the Company institutes any action or
proceeding to enforce the provisions hereof, to the extent permitted by
applicable law, you hereby waive the claim or defense that the Company has an
adequate remedy at law, and you shall not urge in any such action or proceeding
the defense that any such remedy exists at law. The foregoing rights shall be
in addition to any other rights and remedies available to the Company under law
or in equity.

 

(b)                                 If any of the covenants contained
in Sections 4, 5, 6 and 7 or any part thereof, is construed to be invalid or
unenforceable, the same shall not affect the remainder of the covenant or
covenants, which shall be given full effect, without regard to the invalid
portion(s). In addition, if any of the covenants contained in Sections 4, 5, 6
and 7 hereof, or any part thereof, is held by any person or entity with
jurisdiction over the matter to be invalid or unenforceable because of duration
of such provision or the geographical area covered thereby, the parties agree
that such person or entity shall have the power to reduce the duration and/or
geographical area of such provision and, in its reduced form, said provisions
shall then be enforceable.

 

(c)                                  It is understood and agreed that no
failure or delay by the Company in exercising any right, power or privilege
contained in Sections 4, 5, 6 and 7 shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege contained in
Sections 4, 5, 6 and 7.

 

9

 

9.                                      Miscellaneous

 

(a)                                 Any notice or other communication
required or permitted under this Agreement shall be effective only if it is in
writing and shall be deemed to be given when delivered personally or three days
after it is mailed by registered or certified mail, postage prepaid, return
receipt requested or one day after it is sent by a reputable overnight courier
service and, in each case, addressed to the relevant party at the address
provided for such party on the first page hereof, or to such other address as
any party hereto may designate by notice to the other in accordance with the
foregoing.

 

(b)                                 This Agreement and the Employment
Statement of even date herewith constitutes the entire agreement among you and
the Company with respect to your employment by the Company, and supersedes and
is in full substitution for any and all prior understanding or agreements with
respect to your employment.

 

(c)                                  This Agreement may be amended only
by an instrument in writing signed by the parties hereto, and any provision
hereof may be waived only by an instrument in writing signed by the party
against whom or which enforcement of such waiver is sought.

 

(d)                                 This Agreement and all rights and
obligations hereunder, including, without limitation, matters of construction,
validity and performance, shall be governed by and construed and interpreted in
accordance with the laws of Bermuda, without regard to principles of conflict
of laws.  The parties to this Agreement hereby
submit to the exclusive jurisdiction of the Bermuda courts to hear and decide
any suit, action, or proceeding and to settle any disputes that may arise out
of or in connection with this Agreement.

 

(e)                                  In the event of any contest or
dispute between you and the Company with respect to this Agreement, each of the
parties shall be responsible for their respective legal fees and expenses in
accordance with the Company’s Dispute Resolution Guidelines.

 

(f)                                    This Agreement shall inure for the
benefit of and be an obligation of the Company’s assigns and successors; provided,
however, that you may not assign your duties and obligations hereunder to any
other party.

 

(g)                                 The headings in this Agreement are
inserted for convenience of reference only and shall not be a part of or
control or affect the meaning of any provision hereof.

 

10

 

If
the terms of this Agreement meet with your approval, please sign and return one
copy to the Company.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  AXIS SPECIALTY LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John R. Charman

  	
   

  
	
   

  	
  Name: John R. Charman

  
	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted and Agreed

  	
   

  
	
  as of the date first set
  forth above:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Carol S. Rivers

  	
   

  	
   

  
	
  Carol S. Rivers

  	
   

  
					

 

11Exhibit 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:

 

 

	
  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

 

2

 

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.

 

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/ Michael A. Butt

  	
   

  
	
   

  	
  Michael A. Butt

  
						

 

4

 

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”).

 

5

 

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.

 

6

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