Exhibit
10.2


FIRST AMENDMENT TO

ARCH CAPITAL GROUP LTD. INCENTIVE COMPENSATION PLAN


                The Arch Capital Group Ltd. Incentive Compensation
Plan is hereby amended as follows, effective February 26, 2004:


1.             The following is hereby added at the end of Section 2 of
the Plan:


“2.36  ‘Retirement Age’ means the later of
an Eligible Employee’s 55th birthday or the fifth anniversary of the
first day of the Plan Year in which such Eligible Employee’s participation in
the Plan commenced.”


2.                                       Section 5.3 of
the Plan is hereby amended and restated as follows:


“5.3         Vesting.  Each Eligible Employee must be employed by
the Company at the time of each payment of an Award unless terminated (i) by
the Company not for Cause, (ii) with respect to an Eligible Employee
designated by the Committee, by the Eligible Employee for Good Reason (as
defined within such Eligible Employee’s employment agreement, unless otherwise
determined by the Committee), (iii) as a result of death or, subject to the
immediately following paragraph, Permanent Disability or (iv) subject to the
immediately following paragraph, due to termination of employment (other than
by the Company for Cause) after attainment of Retirement Age.


In
the event an Eligible Employee ceases to be an employee of the Company prior to
the date an Award is paid (i) due to termination (A) by the Company not for
Cause or (B) with respect to an Eligible Employee designated by the Committee,
by the Eligible Employee for Good Reason (as defined within such Eligible
Employee’s employment agreement, unless otherwise determined by the
Committee), or (ii) as a result of death of the Eligible
Employee, the Award shall become vested in full at the time of such termination
of service and shall be paid when such Award is regularly paid hereunder following
such termination of employment in the form determined by the Committee.  In the event an Eligible Employee ceases to
be an employee of the Company prior to the date an Award is paid (i) due
to termination as a result of Permanent Disability or (ii) due
to termination of employment (other than by the Company for Cause) after the
attainment of Retirement Age, such Award shall continue to vest on its
normal vesting schedule and be paid when the Award is normally paid hereunder
in the form determined by the Committee so long as, prior to the
applicable vesting date, such Eligible Employee does
not engage in any activity in competition with any activity of the Company
or any of its Subsidiaries other than serving on the board of directors (or
similar governing body) of another company or as a consultant for no more than
26 weeks per calendar year; provided that if the Eligible Employee
does engage in such activity after termination for such reasons, any
unvested portion of  the Award shall be forfeited by the Eligible Employee
and become the property of the Company. 
For purposes hereof, 


 


 

















 


service
with any of the Company’s Subsidiaries shall be considered to be service with
the Company.


If the Eligible Employee
ceases to be an employee of the Company for any other reason prior to the date
that an Award is paid, the Award shall be forfeited by the Eligible Employee
and become the property of the Company. 
For purposes hereof, service with any of the Subsidiaries shall be considered
to be service with the Company.  Vested
amounts shall reflect applicable carryforwards and Deficits, and terminated
employees unvested amounts shall be removed from the applicable bonus pool.”


3.             The following is hereby added after Section 8.8 the
Plan:


“8.9         The Committee may require deferral of
payments under this Plan if, in the sole judgment of the Committee, it may be
necessary in order to avoid nondeductibility of the payments under Section
162(m) of the Code.”


 


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