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


 

















 


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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