Exhibit 10.14

 

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT

 

Second amendment (“Amendment”), dated as of November 24, 2008, to Employment
Agreement, dated as of October 23, 2001 (as amended November 16, 2005, the
“Agreement”), between Arch Capital Group Ltd., a Bermuda company (the
“Company”), and Marc Grandisson (the “Executive”).  Capitalized terms used
without definition herein have the meanings given to them in the Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties have agreed to amend the Agreement as follows:

 

1.                                       The definition of “Good Reason” set
forth in Section 1.01 shall be hereby amended and restated as follows:

 

“Good Reason” means, without the Executive’s written consent and subject to the
timely notice requirement and the Company’s opportunity to cure set forth in
Section 5.05 below, (a) the material diminution of any material duties or
responsibilities of the Executive; or (b) a material reduction in the
Executive’s Base Salary.

 

2.                                       The last sentence of Section 4.04 shall
be hereby amended and restated as follows:

 

IN ADDITION, THE COMPANY WILL REIMBURSE THE EXECUTIVE, ON AN AFTER-TAX BASIS,
FOR HIS REASONABLE EXPENSES INCURRED IN TRAVELING BETWEEN BERMUDA AND CANADA
DURING THE EMPLOYMENT PERIOD, AND SUCH REIMBURSEMENT SHALL BE MADE PROMPTLY, BUT
IN NO EVENT LATER THAN THE END OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR
DURING WHICH THE EXPENSE WAS INCURRED BY THE EXECUTIVE.

 

3.                                       Section 5.02 shall be hereby amended
and restated as follows:

 

SECTION 5.02. Unjustified Termination. Except as otherwise provided in
Section 12.14, if the Employment Period shall be terminated (i) at the end of
the Employment Period due to the Company giving written notice of non-extension
pursuant to Section 5.01 above, or (ii) prior to the expiration of the original
term (or the Employment Period as extended pursuant to Section 5.01) by the
Executive for Good Reason or by the Company not for Cause (such terminations
under clauses (i) and (ii) of this Section 5.02 are collectively referred to as
“Unjustified Terminations”), the Executive shall be paid solely (except as
provided in Section 5.04 below or as specifically provided in the Company’s
Incentive Compensation Plan or successor plan) an amount equal to his annual
Base Salary, provided the Executive shall be entitled to such payments only if
the Executive has not breached and does not breach the provisions of Sections
6.01, 7.01, 8.01, 9.01 or 9.02 and the Executive has entered into a general
release of claims reasonably satisfactory to the Company on or before the date
that is fifty (50) days following the Date of Termination and does not revoke
such release prior to the end of the statutory seven (7) day revocation period. 
Subject to Section 12.14 below, such

 

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amounts will be paid in twelve (12) equal installments, the first two (2) of
which shall be paid on the date that is two (2) months following the Date of
Termination and the next ten (10) of which will be paid in ten (10) equal
monthly installments commencing on the date that is three (3) months following
the Date of Termination and continuing on each of the next nine (9) monthly
anniversaries of the Date of Termination.  In addition, promptly following an
Unjustified Termination, the Executive shall also be reimbursed for all
Reimbursable Expenses incurred by the Executive prior to such Unjustified
Termination.  Notwithstanding any provision hereof to the contrary, in order for
the Executive to terminate the Employment Period for Good Reason, such
termination of employment must occur no later than sixty (60) days after the
date the Executive gives written notice in accordance with Section 5.05 below to
the Company of the occurrence of the event or condition that constitutes Good
Reason.  Notwithstanding any provision of this Agreement to the contrary, for
purposes of this Section 5.02 and the last sentence of Section 5.04, the
Executive will be deemed to have terminated his employment on the date of his
“separation from service” (within the meaning of Treasury Regulation
Section 1.409A-1(h)) with the Company, the Employment Period will be deemed to
have ended on the date of his “separation from service” with the Company, and
the Date of Termination will be deemed to be the date of his “separation from
service” with the Company.

 

4.                                       The last sentence of Section 5.04 shall
be hereby amended and restated as follows:

 

Notwithstanding the foregoing, if such Justified Termination is a result of a
Permanent Disability or if the Employment Period is terminated as a result of an
Unjustified Termination, the Executive shall continue to receive his major
medical insurance coverage benefits from the Company’s plan in effect at the
time of such termination for a period equal to the lesser of (i) twelve (12)
months after the Date of Termination, and (ii) until the Executive is provided
by another employer with benefits substantially comparable (with no pre-existing
condition limitations) to the benefits provided by such plan.

 

5.                                       Section 5.05 shall be hereby amended
and restated as follows:

 

SECTION 5.05.  Notice of Termination and Opportunity to Cure.  Any termination
by the Company for Permanent Disability or Cause or without Cause or by the
Executive for Good Reason shall be communicated by written Notice of Termination
to the other party hereto.  For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the date the termination
is to take effect (consistent with the terms of this Agreement), the specific
termination provision in this Agreement relied upon and, for a termination for
Permanent Disability or for Cause or for a resignation for Good Reason, shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of employment under the provision indicated.  It shall be
a condition precedent to the Executive’s right to terminate employment for Good
Reason that (i) 

 

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the Executive shall first have given the Company written notice that an event or
condition constituting Good Reason has occurred within ninety (90) days after
such occurrence, and any failure to give such written notice within such period
will result in a waiver by the Executive of his right to terminate for Good
Reason as a result of such event or condition, and (ii) a period of thirty (30)
days from and after the giving of such written notice shall have elapsed without
the Company having effectively cured or remedied such occurrence during such
30-day period, unless such occurrence cannot be cured or remedied within thirty
(30) days, in which case the period for remedy or cure shall be extended for a
reasonable time (not to exceed an additional fifteen (15) days) provided that
the Company has made and continues to make a diligent effort to effect such
remedy or cure.

 

6.                                       Section 5.06 shall be hereby amended
and restated as follows:

 

SECTION 5.06.  Date of Termination.  “Date of Termination” shall mean (a) if the
Employment Period is terminated as a result of a Permanent Disability, five
(5) days after a Notice of Termination is given, (b) if the Employment Period is
terminated by the Executive for Good Reason, the date specified in the Notice of
Termination consistent with the terms hereof, (c) if the Employment Period
terminates due to expiration of the term of this Agreement, the date the term
expires, and (d) if the Employment Period is terminated for any other reason
(including for Cause), the date designated by the Company in the Notice of
Termination.

 

7.                                       The third sentence included in
Section 9.01 shall be hereby amended and restated in its entirety as follows:

 

Notwithstanding the foregoing, the Noncompetition Period shall be twelve (12)
months following the Date of Termination if such termination is an Unjustified
Termination or due to the Executive giving written notice pursuant to
Section 5.01 of his intention not to extend the Employment Period.

 

8.                                       Section 12.14 shall be hereby added at
the end of the Agreement as follows:

 

SECTION 12.14. 409A and 457A.  It is intended that this Agreement will comply
with Sections 409A and 457A of the Internal Revenue Code of 1986, as amended
(the “Code”) (and any regulations and guidelines issued thereunder), to the
extent the Agreement is subject thereto, and the Agreement shall be interpreted
on a basis consistent with such intent.  If an amendment of the Agreement is
necessary in order for it to comply with Section 409A or Section 457A, the
parties hereto will negotiate in good faith to amend the Agreement in a manner
that preserves the original intent of the parties to the extent reasonably
possible.  No action or failure to act, pursuant to this Section 12.14 shall
subject the Company to any claim, liability, or expense, and the Company shall
not have any obligation to indemnify or otherwise protect the Executive from the
obligation to pay any taxes, interest or penalties pursuant to Section 409A or
Section 457A of the Code.

 

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Notwithstanding any provision to the contrary in this Agreement, if the
Executive is deemed on the date of his “separation from service” (within the
meaning of Treasury Regulation Section 1.409A-1(h)) to be a “specified employee”
within the meaning of that term under Section 409A(a)(2)(B) of the Code, then
with regard to any payment that is required to be delayed pursuant to
Section 409A(a)(2)(B) of the Code (after taking into account the applicable
provisions of Treasury Regulation Section 1.409A-1(b)(9)(iii)), the portion, if
any, of such payment so required to be delayed shall not be made prior to the
earlier of (i) the expiration of the six (6)-month period measured from the date
of his “separation from service” or (ii) the date of his death (the “Delay
Period”).  Upon the expiration of the Delay Period, all payments and benefits
delayed pursuant to this Section (whether they would have otherwise been payable
in a single sum or in installments in the absence of such delay) shall be paid
or reimbursed to the Executive in a lump sum, and any remaining payments due
under this Agreement shall be paid in accordance with the normal payment dates
specified for them herein.  Whenever payments under this Agreement are to be
made in installments, each such installment shall be deemed to be a separate
payment for purposes of Section 409A of the Code.  In no case will compliance
with this Section by the Company constitute a breach of the Company’s
obligations under this Agreement.

 

With respect to any reimbursement or in-kind benefit arrangements of the Company
and its subsidiaries that constitute deferred compensation for purposes of
Section 409A, except as otherwise permitted by Section 409A, the following
conditions shall be applicable: (i) the amount eligible for reimbursement, or
in-kind benefits provided, under any such arrangement in one calendar year may
not affect the amount eligible for reimbursement, or in-kind benefits to be
provided, under such arrangement in any other calendar year (except that the
health and dental plans may impose a limit on the amount that may be reimbursed
or paid), (ii) any reimbursement must be made on or before the last day of the
calendar year following the calendar year in which the expense was incurred, and
(iii) the right to reimbursement or in-kind benefits is not subject to
liquidation or exchange for another benefit.

 

9.                                       SECTION 12.15 SHALL BE HEREBY ADDED AT
THE END OF THE AGREEMENT AS FOLLOWS:

 

SECTION 12.15.  Excess Parachute Payments.

 

(a)                                  Notwithstanding any other provision of this
Agreement, in the event that the amount of payments or other benefits payable to
the Executive under this Agreement (including, without limitation, the
acceleration of any payment or the accelerated vesting of any payment or other
benefit), together with any payments, awards or benefits payable under any other
plan, program, arrangement or agreement maintained by the Company or one of its
affiliates, would constitute an “excess parachute payment” (within the meaning
of Section 280G of the Code), the

 

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payments under Section 5.02 of this Agreement shall be reduced (by the minimum
possible amounts) until no amount payable to the Executive under this Agreement
constitutes an “excess parachute payment” (within the meaning of Section 280G of
the Code); provided, however, that no such reduction shall be made if the net
after-tax payment (after taking into account federal, state, local or other
income, employment and excise taxes) to which the Executive would otherwise be
entitled without such reduction would be greater than the net after-tax payment
(after taking into account federal, state, local or other income, employment and
excise taxes) to the Executive resulting from the receipt of such payments with
such reduction.

 

(b)                                 All determinations required to be made under
this Section 12.15, including whether a payment would result in an “excess
parachute payment” and the assumptions to be utilized in arriving at such
determinations, shall be made by an accounting firm designated by the Company
(the “Accounting Firm”) which shall provide detailed supporting calculations
both to the Company and the Executive as requested by the Company or the
Executive.  All fees and expenses of the Accounting Firm shall be borne solely
by the Company and shall be paid by the Company.  Absent manifest error, all
determinations made by the Accounting Firm under this Section 12.15 shall be
final and binding upon the Company and the Executive.

 

10.                                 All other provisions of the Agreement shall
remain in full force and effect.  This amendment shall be governed by and
construed in accordance with the laws of Bermuda, without giving effect to
principles of conflict of laws, and may be executed in two or more counterparts,
each of which shall constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date and year first above written.

 

 

ARCH CAPITAL GROUP LTD.

 

 

 

 

 

By:

/s/ Constantine Iordanou

 

Name:

Constantine Iordanou

 

Title:

President and Chief Executive Officer

 

 

 

 

 

/s/ Marc Grandisson

 

Marc Grandisson

 

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