Exhibit
10.1


 


AGREEMENT


 


This Agreement (the “Agreement”) is entered into on this 4th day of
August, 2003, between Arch Capital Group Ltd. and its affiliates (collectively,
the “Company”) and Peter Appel (the “Executive”).


 


The Executive and the Company agree as follows:


 


1.                                  The employment
relationship between the Executive and the Company terminated on July 31, 2003
(the “Termination Date”).  Effective on
the Termination Date, the Executive has resigned all officer and employee
positions with the Company and its subsidiaries.


 


2.                                  The Executive will
continue to serve on the Board of Directors of Arch Capital Group Ltd. (the
“Board”); provided, however, that the Executive’s continued service on
the Board shall not be a condition to any payments provided for in this
Agreement or in the Non-Core Business Payment Agreement between the Company and
the Executive of even date herewith (the “Non-Core Business Payment
Agreement”).  The Executive hereby
acknowledges that, if he becomes employed by, or otherwise related to, an
insurance business in competition with the Company, conflicts with his position
on the Board may arise.  In the event
the Board determines that such a conflict has arisen, the Executive will enter
into discussions with the Board in order to resolve the conflict.


 


3.                                  Following the
completion of the 7-day revocation period referred to in paragraph 22 below,
the Executive will receive a payment from the Company in the amount


 

















 


of $2,263,166, less required tax withholding.  The Executive will also receive an aggregate of $16,000 (less
required tax withholding) from the Company, payable over the two year period
following the Termination Date in equal semimonthly installments.


 


4.                                  The Compensation
Committee of the Board (the “Compensation Committee”) shall determine a
prorated annual bonus for the Executive for the period from January 1, 2003
through the Termination Date.  The
amount of any such bonus shall be determined by the Compensation Committee in
accordance with past practice and paid (less required tax withholding) in cash
in a single lump sum as soon as practicable following the next regularly
scheduled Compensation Committee meeting after the Termination Date.


 


5.                                  Medical, dental, and
vision benefits will remain in effect for the Executive and his covered
dependents until the earlier of (i) the second anniversary of the
Termination Date or (ii) the date the Executive obtains other employment
or engagement, whether as a proprietor, partner or otherwise, in which he is
eligible for such insurance coverage. 
The insurance coverage shall be provided on the same basis as provided
to active U.S.-based employees of the Company in accordance with the terms and
provisions of each applicable plan as in effect from time to time, including
any contribution required to be made by the Executive toward such coverage in
excess of $145 per month.


 


6.                                  For the avoidance of
doubt, (i) all options to purchase common stock of Arch Capital Group Ltd.
(“ACGL”) held by the Executive (all of which are listed on Annex I hereto and
are referred to herein as the “Stock Option Agreements”) shall continue to be


 


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exercisable for their respective full option terms, notwithstanding the
Executive’s termination of employment, and (ii) the restricted shares of
common stock of ACGL set forth in the Restricted Share Agreement between the
Executive and ACGL dated February 20, 2003 shall vest in full on the
Termination Date.


 


7.                                  Except as set forth
in paragraph 5 above, the Executive will cease participation in all
employee benefit plans and arrangements of the Company as of the Termination
Date.  The Executive’s rights with
respect to his accrued benefits as of the Termination Date under the Company’s
Savings Plan, the Company’s Pension Plan, the Company’s Executive Supplemental
Non-Qualified Savings and Retirement Plan and the Company’s 1995 Employee Stock
Purchase Plan are as set forth in the applicable plan documents.  Other than as expressly set forth in this
Agreement, the Executive will have no continuing rights under any employee
benefit plan or arrangement of the Company following the Termination Date.


 


8.                                  In consideration of
the above, the sufficiency of which the Executive hereby acknowledges, the
Executive, on behalf of the Executive and the Executive’s heirs, executors and
assigns hereby releases and forever discharges the Company and its members,
shareholders, parents, affiliates, subsidiaries, divisions, any and all current
and former directors, officers, employees, agents, and contractors and their
heirs and assigns, and any and all employee pension benefit or welfare benefit
plans of the Company, including current and former trustees and administrators
of such employee pension benefit and welfare benefit


 


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plans, from all claims, charges, or demands, in law or in equity,
whether known or unknown, which may have existed or which may now exist from
the beginning of time to the date of this Agreement, including, without
limitation, any claims the Executive may have arising from or relating to the
Executive’s employment or termination from employment with the Company,
including a release of any rights or claims the Executive may have under Title
VII of the Civil Rights Act of 1964, as amended, and the Civil Rights Act of
1991 (which prohibit discrimination in employment based upon race, color, sex,
religion and national origin); the Americans with Disabilities Act of 1990, as
amended, and the Rehabilitation Act of 1973 (which prohibit discrimination
based upon disability); the Family and Medical Leave Act of 1993 (which prohibits
discrimination based on requesting or taking a family or medical leave); the
Equal Pay Act, as amended, 29 U.S.C. §206(d)(1); the Fair Labor Standards Act of
1938, as amended; Section 1981 of the Civil Rights Act of 1866 (which prohibits
discrimination based upon race); Section 1985(3) of the Civil Rights Act of
1871 (which prohibits conspiracies to discriminate); the Employee Retirement
Income Security Act of 1974, as amended; any other federal, state or local laws
against discrimination; or any other federal, state, or local statute, or
common law relating to employment, wages, hours, or any other terms and
conditions of employment.  This includes
a release by the Executive of any claims for wrongful discharge, breach of
contract, torts or any other claims in any way related to the Executive’s
employment with or termination from the Company.  This release also includes a release of any claims for age
discrimination under the Age Discrimination in Employment Act, as amended
(“ADEA”).  The ADEA requires that the
Executive be advised


 


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to consult with an attorney before the Executive waives any claim under
ADEA.  In addition, the ADEA provides
the Executive with at least 21 days to decide whether to waive claims under
ADEA and seven days after the Executive signs the Agreement to revoke that
waiver.  This release does not release
the Company from any obligations due to the Executive (i) under this
Agreement, (ii) under the Non-Core Business Payment Agreement,
(iii) under the Executive’s Stock Option Agreements, or (iv) for
indemnification in accordance with the Company’s By-Laws.


 


9.                                  In consideration of
the above, the sufficiency of which the Company hereby acknowledges, the
Company hereby releases and forever discharges the Executive and his heirs,
executors and assigns, from all claims, charges or demands, in law or in
equity, whether known or unknown, which may have existed or which may now exist
from the beginning of time to the date of this Agreement, including, but not
limited to, any claims, related to the Executive’s employment with the
Company.  This release does not release
the Executive from any obligations due to the Company under this Agreement, the
Non-Core Business Payment Agreement or the Executive’s Stock Option
Agreements.  The Executive acknowledges,
and hereby confirms, that his agreements relating to noncompetition and
nonsolicitation set forth in the Non-Qualified Stock Option Agreement between
ACGL and the Executive dated as of October 23, 2001 shall continue in effect in
accordance with their terms and shall survive the exercise of the option set
forth in such Non-Qualified Stock Option Agreement and continue through the
second anniversary of the Termination Date.


 


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10.                            This Agreement is not an
admission by either the Executive or the Company of any wrongdoing or
liability.


 


11.                            The Executive understands
and agrees that the consideration provided for herein is more than the
Executive would otherwise be entitled to under the Company’s existing plans.


 


12.                            The Executive waives any
right to reinstatement or future employment with the Company following the
Executive’s separation from the Company on the Termination Date.


 


13.                            (a)  The Executive recognizes and acknowledges
that the Company’s and its subsidiaries’ and their affiliates’ trade secrets
and confidential or proprietary information, are valuable, special and unique
assets of the Company’s business.  For
purposes of this Agreement, a trade secret or confidential or proprietary
information shall mean and include information treated as confidential or as a
trade secret by the Company, any of its subsidiaries or their affiliates,
including but not limited to information regarding contemplated products,
models, compilations, business and financial methods or practices, marketing,
merchandising and selling techniques, customers, vendors, suppliers, trade
secrets, training programs, manuals or materials, technical information,
contracts, systems, procedures, mailing lists, know-how, trade names, improvements,
pricing, price lists, financial or other data (including the revenues, costs or
profits associated with any of the Company’s or its subsidiaries, products or
services), business plans, strategy, code books, invoices and other


 


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financial statements, computer programs, software systems, databases,
discs and printouts, other plans (technical or otherwise), customer and
industry lists, supplier lists, correspondence, internal reports, personnel
files, sales and advertising material, telephone numbers, names, addresses, or
any other compilation of information, written or unwritten, which is or was
used in the business of the Company, any of its subsidiaries or their affiliates.  In addition, without in any way limiting the
foregoing, confidential or proprietary information includes any and all
information in the Executive’s possession or of which the Executive has
knowledge relating to or arising out of any actual or threatened regulatory
investigation or proceeding or settlement or any other litigation, claim,
investigation, suit, action or other proceeding involving or relating to the
Company or any of its subsidiaries or affiliates, so long as such
investigation, proceeding, settlement, claim, litigation, suit, action or other
proceeding or the Executive’s knowledge thereof occurred or was obtained during
or prior to the term of the Executive’s employment by the Company or his
directorship with the Company.


 


(b)  Except as may be required
by the lawful order of a court or agency of competent jurisdiction or required
by applicable law, the Executive will not, at any time during or after the
termination of his employment by the Company, in whole or in part, disclose
such trade secrets or confidential or proprietary information to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever, or make use of any such property for his own purposes or for the
benefit of any person, firm, corporation or other entity (except the Company)
under any circumstances.  The
Executive’s obligation under this paragraph 13 shall not apply to any
information which is generally available to the public or


 


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hereafter becomes available to the public without the fault of the
Executive.  The Executive agrees and
acknowledges that all of such information, in any form, and copies and extracts
thereof, are and shall remain the sole and exclusive property of the Company
and the Executive shall return to the Company the originals and all copies of
any such information provided to or acquired by the Executive in connection
with the performance of his duties for the Company, and shall return to the
Company all files, correspondence and/or other communications received,
maintained and/or originated by the Executive during the course of his
employment, and no copy of any such information shall be retained by him.


 


(c)  It is the desire and intent
of the parties that the provisions of this paragraph 13 shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought.  Accordingly, if any particular portion of this paragraph 13 shall
be adjudicated to be invalid or unenforceable, this paragraph 13 shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid
or unenforceable, such deletion to apply only with respect to the operation of
this paragraph 13 in the particular jurisdiction in which such adjudication is
made.


 


(d)  If there is a breach or
threatened breach of the provisions of paragraph 13 of this Agreement, the
Company or its affiliates shall be entitled to an injunction restraining the
Executive from such breach.  Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies for such breach or threatened breach.


 


14.                 The
Company agrees that if the Executive is made a party, or is threatened to be
made a party, to any pending or threatened action, suit or proceeding, whether
civil, criminal, administrative or investigative (each, a “Proceeding”), by
reason of the fact that he is or was a director, officer or employee of the
Company or is or was serving


 


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at the request of the Company as a director, officer, member, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, the
Executive shall be indemnified and held harmless by the Company to the fullest
extent permitted or authorized by applicable law and the Company’s certificate
of incorporation or bylaws, against all liability, loss and reasonable costs
and expenses incurred or suffered by the Executive in connection therewith,
including, without limitation, judgments and reasonable attorney’s fees and
disbursements, and the Company shall advance expenses in connection therewith,
to the fullest extent permitted or authorized by applicable law and the
Company’s certificate of incorporation or bylaws.  Such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of the Executive’s heirs, executors
and administrators.  The Company agrees
to continue and maintain a directors’ and officers’ liability insurance policy
covering the Executive to the extent the Company provides such coverage for its
other directors and executive officers.


 


15.                 Except
as otherwise provided in paragraph 5 of the Non-Core Business Payment
Agreement, the Executive shall promptly return all the Company’s property in
the Executive’s possession, including, but not limited to, the Company’s keys,
credit cards, cellular phones, computer equipment, software and peripherals and
originals or copies of books, records, or other information pertaining to the
Company’s business.


 


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16.                 The
Executive shall, at the request of the Company, assist the Company in effecting
the transition in management of the Company.


 


17.                 The
Executive shall, at the reasonable request of the Company, reasonably assist
and cooperate with the Company in the defense and/or investigation of any third
party claim or any investigation or proceeding, whether actual or threatened,
including, without limitation, participating as a witness in any litigation,
arbitration, hearing or other proceeding between the Company and a third party
or any government body.  The Company
shall reimburse the Executive for all reasonable out-of-pocket expenses
incurred by him in connection with such assistance, including, without
limitation, travel and lodging expenses.


 


18.                 This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without reference to the principles of conflict of laws
thereof.


 


19.                 All
payments to be made hereunder shall be net of all applicable income,
employment, social security or other taxes required to be withheld therefrom.


 


20.                 This
Agreement and the Non-Core Business Payment Agreement represent the complete
agreement between the Executive and the Company concerning the subject matter
in this Agreement and the Non-Core Business Payment Agreement, and they
supersede all prior agreements or understandings, written or oral.  This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.


 


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21.                 Each
of the paragraphs contained in this Agreement shall be enforceable
independently of every other paragraph in this Agreement, and the invalidity or
unenforceability of any paragraph shall not invalidate or render unenforceable
any other paragraph contained in this Agreement.


 


22.                 It
is further understood that, for a period of 7 days following the execution of
this Agreement, the Executive may revoke this Agreement.  Any such revocation must be effected by
delivery of a written notification of revocation of the Agreement to the Chief
Financial Officer of ACGL prior to the end of such 7 day revocation
period.  In the event that the Agreement
is revoked by the Executive, the Company shall have no obligations under the
Agreement or under the Non-Core Business Payment Agreement, no amounts will be
payable under either agreement, and this Agreement and the Non-Core Business
Payment Agreement shall each be deemed to be void ab  initio and
of no force or effect.


 


23.                 This
Agreement has been entered into voluntarily and not as a result of coercion,
duress, or undue influence.  The
Executive acknowledges that the Executive has read and fully understands the
terms of this Agreement and has been advised to consult with an attorney before
executing this Agreement.  Additionally,
the Executive acknowledges that the Executive has been afforded the opportunity
of at least 21 days to consider this Agreement.


 


24.                 The
Company will require any successor or assignee, whether direct or indirect, by
purchase, merger, consolidation or otherwise, of all, or substantially all, of
the


 


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business and/or assets of the Company to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if such succession or assignment had not taken place.


 


25.                 This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal and legal representatives, executors, administrators, heirs, distributees,
devisees and legatees.  If the Executive
dies while any amounts are still payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive’s devisee, legatee, or other designee or, if
there be no such designee, to the Executive’s estate.


 


The parties to this Agreement have executed this Agreement on the day
and year first written above.


 


	
   

  	
  ARCH CAPITAL GROUP LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
       /s/ Robert Clements

  	
   

  
	
   

  	
  Name:

  	
  Robert Clements

  
	
   

  	
  Title:

  	
  Chairman

  
	
   

  	
   

  
	
   

  	
  PETER APPEL

  
	
   

  	
   

  
	
   

  	
       /s/ Peter Appel

  	
   

  
					



 


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ANNEX I


 


Schedule
of the Executive’s Stock Options


 


	
  Grant Date

  	
   

  	
  Options

  	
   

  	
  Expiration

  Date

  	
   

  	
  Exercise

  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11/13/1995

  	
   

  	
  25,000

  	
   

  	
  5/5/2007

  	
   

  	
  $

  	
  21.00

  	
   

  
	
  11/19/1996

  	
   

  	
  39,500

  	
   

  	
  5/5/2007

  	
   

  	
  $

  	
  17.63

  	
   

  
	
  11/18/1997

  	
   

  	
  34,153

  	
   

  	
  5/5/2007

  	
   

  	
  $

  	
  23.00

  	
   

  
	
  11/18/1997 (ISO)

  	
   

  	
  4,347

  	
   

  	
  11/18/2007

  	
   

  	
  $

  	
  23.00

  	
   

  
	
  11/17/1998

  	
   

  	
  60,124

  	
  (1)

  	
  5/5/2007

  	
   

  	
  $

  	
  22.44

  	
   

  
	
  11/17/1998 (ISO)

  	
   

  	
  2,676

  	
   

  	
  11/17/2008

  	
   

  	
  $

  	
  22.44

  	
   

  
	
  4/24/2000

  	
   

  	
  100,000

  	
   

  	
  4/24/2010

  	
   

  	
  $

  	
  15.13

  	
   

  
	
  10/23/2001

  	
   

  	
  422,407

  	
   

  	
  10/23/2011

  	
   

  	
  $

  	
  20.00

  	
   

  
	
   

  	
   

  	
  688,207

  	
   

  	
   

  	
   

  	
   

  	
   

  



 












(1)                                  Includes
1,780 stock options with an expiration date of November 17, 2008.


 


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