Document:

Exhibit 10.1

 

FIFTH AMENDMENT TO

HADDRILL EMPLOYMENT AGREEMENT

 

This
Fifth Amendment to the Employment Agreement (the “Fifth Amendment”) is
made and entered into as of October 22, 2008 (the “Effective Date”), by
and between Bally Technologies, Inc., a Nevada corporation (the “Company”),
and Richard Haddrill (“Haddrill”).

 

WHEREAS,
the Company and Haddrill are parties to that certain Employment Agreement dated
as of June 30, 2004, as amended on December 22, 2004, June 13,
2005, June 20, 2006 and February 13, 2008 (as amended, the “Employment
Agreement”) pursuant to which Haddrill is employed as the Company’s Chief
Executive Officer; and

 

WHEREAS,
the Company and Haddrill desire to amend the Employment Agreement in accordance
with and subject to the terms and conditions of this Fifth Amendment.

 

NOW
THEREFORE, on the basis of the foregoing premises and in consideration of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:

 

1.             The Company and Haddrill
agree that the following sentence shall be added at the end of Section 2(a) of
the Employment Agreement:

 

“For so long as Haddrill remains in continuous
service with the Company, he shall serve on such committees or subcommittees,
and/or assist with such initiatives as may be reasonably requested of him by
the Board of Directors.”

 

2.             During the term of the
Employment Agreement: (i) Haddrill will continue to receive the
compensation and benefits currently provided to him on the terms and conditions
set forth in Sections 4(a) and (b) of the Employment Agreement and (ii) Haddrill’s
base salary will remain at $998,000 per year through December 31, 2010 and
shall be reduced to $375,000 per year for the calendar year beginning January 1,
2011.

 

3.             On October 17, 2008, the
Company granted Haddrill additional non-statutory stock options (the “Additional
Options”) to acquire 50,000 shares of the Company’s common stock under the
Company’s Amended and Restated 2001 Long Term Incentive Plan (the “Plan”).  The Additional Options shall be granted at an
exercise price per share equal to the closing price of the stock on the grant
date. The Additional Options shall vest and be subject to the terms and
conditions set forth in the Plan and on Schedule A-3.

 

4.             On October 17, 2008,
the Company granted Haddrill a number of restricted stock units under the Plan
(the “Additional Restricted Stock Units”) having a value equal to $1.7 million
dollars, as calculated in accordance with Schedule B-3 hereto.  The Additional Restricted Stock Units shall
vest and be subject to the terms and conditions set forth in the Plan and on
Schedule B-3 hereto.

 

5.             Except as
expressly modified by this Fifth Amendment, the Employment Agreement shall
remain unchanged and shall remain in full force and effect.

 

[signatures on next page]

 

1

 

IN
WITNESS WHEREOF, the Company and Haddrill have duly executed this Fifth
Amendment as of the date first above written.

 

 

	
   

  	
  BALLY
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark Lerner

  
	
   

  	
  Name:

  	
  Mark
  Lerner

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Richard Haddrill

  
	
   

  	
  Richard
  Haddrill

  
					

 

[Signature Page to Fifth Amendment to Haddrill Employment Agreement]

 

 

Schedule A-3

 

ADDITIONAL OPTIONS

 

1.             The Additional
Options shall vest in full on December 31, 2010, so long as Haddrill
remains in continuous service with the Company through the earlier of (i) December 31,
2010 or (ii) the date of the Company’s annual meeting of stockholders that
follows the Company’s fiscal year ending June 30, 2010.

 

2.             Once the Additional
Options become vested and exercisable hereunder, they shall remain exercisable
until the seventh anniversary of the date of grant thereof without regard to
whether Haddrill remains in continuous service with the Company through such
date.

 

3.             In addition to the
above, notwithstanding any provision of the Employment Agreement, or the Plan
to the contrary, in the event of a Change of Control (as defined in the
Employment Agreement): (i) if such Change of Control is consummated on or
prior to January 1, 2009, and, within one year following such Change of
Control Haddrill’s service with the Company (or any successor) is terminated
under paragraphs 7(b) or 7(c) of the Employment Agreement, the
Additional Options shall become immediately and fully vested and exercisable
effective as of immediately prior to the date of such termination of service
and (ii) if such Change of Control is consummated after January 1,
2009, the Additional Options shall become immediately and fully vested and
exercisable effective as of immediately prior to such Change of Control.

 

4.             Once the
Additional Options become vested and exercisable hereunder, they shall remain
exercisable until the seventh anniversary of the date of grant thereof without
regard to whether Haddrill remains in continuous service with the Company
through such date.

 

5.             Except as
described in this Schedule A-3, upon a termination of Haddrill’s service with
the Company (or any successor) for any reason, the unvested portion of the
Additional Options at the time of such termination of service (after giving
effect to the accelerated vesting, if any, described in this Schedule A-3, if
any) shall terminate effective as of the date of termination.

 

 

Schedule B-3

 

ADDITIONAL RESTRICTED
STOCK UNITS

 

1.             The number of
shares of common stock subject to the Additional Restricted Stock Units was determined
by dividing $1.7 million dollars by the average per share closing price of
the Company’s common stock on the stock exchange in which the stock is
principally traded for the 20 business days immediately prior to the date of
the grant.

 

2.             The Additional
Restricted Stock Units shall vest in full on December 31, 2010, so long as
Haddrill remains in continuous service with the Company through the earlier of (i) December 31,
2010 or (ii) the date of the Company’s annual meeting of stockholders that
follows the Company’s fiscal year ending June 30, 2010.

 

3.             If Haddrill’s
employment with the Company is terminated under paragraphs 7(b) or 7(c) of
the Employment Agreement, and such termination occurs after January 1,
2009, in addition to the other compensation and benefits provided under the
Employment Agreement, the vesting of the Additional Restricted Stock Units will
accelerate in full as of the termination date.

 

4.             In addition to
the above, notwithstanding any provision of the Employment Agreement, or the
Plan to the contrary, in the event of a Change of Control (as defined in the
Employment Agreement): (i) if such Change of Control is consummated on or
prior to January 1, 2009, and, within one year following such Change of
Control Haddrill’s service with the Company (or any successor) is terminated
under paragraphs 7(b) or 7(c) of the Employment Agreement, the
Additional Restricted Stock Units shall become immediately and fully vested and
exercisable effective as of immediately prior to the date of such termination
of service and (ii) if such Change of Control is consummated after January 1,
2009, the Additional Restricted Stock Units shall become immediately and fully
vested and exercisable effective as of immediately prior to such Change of
Control.

 

5.             Each vested
Additional Restricted Stock Unit represents Haddrill’s right to receive one
share of the Company’s common stock on the applicable vesting date (subject to
the terms and conditions of the Plan, including the satisfaction of any tax
withholding obligations).

 

6.             Except as
described in this Schedule B-3, upon a termination of Haddrill’s service with
the Company (or any successor) for any reason, the unvested portion of the
Additional Restricted Stock Units at the time of such termination of service
(after giving effect to the accelerated vesting, if any, described in this
Schedule B-3, if any) shall be forfeited effective as of the date of
termination.Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT (“Agreement”),
dated as of October 27, 2008, between Arch Capital Group Ltd., a Bermuda
corporation (the “Company”), and
John D. Vollaro (the “Executive”).

 

The parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

SECTION 1.01. Definitions.
For purposes of this Agreement, the following terms have the meanings set forth
below:

 

“Accounting Firm” has the meaning set
forth in Section 12.10(b).

 

“Base Salary” has the meaning set forth
in Section 4.01.

 

“Cause”  means (a) theft or embezzlement by the Executive with
respect to the Company or its Subsidiaries; (b) malfeasance or gross
negligence in the performance of the Executive’s duties; (c) the Executive’s
conviction of any felony or any misdemeanor involving moral turpitude; (d) willful
or prolonged absence from work by the Executive (other than by reason of
disability due to physical or mental illness) or failure, neglect or refusal by
the Executive to perform his duties and responsibilities; (e) continued
and habitual use of alcohol by the Executive to an extent which materially
impairs the Executive’s performance of his duties; (f) the Executive’s use
of illegal drugs; (g) the Executive’s failure to use his best efforts to obtain,
maintain or renew the work permit described in Section 3.02 below (if
applicable); or (h) the material breach by the Executive of any of the
provisions contained in this Agreement, including, without limitation, Section 11.01.
Cause
shall not exist with respect to items (b), (d), (e), (f), (g) or (h) (other
than, in the case of item (h), a breach of Section 11.01) unless and until
Executive has been given written notice specifying in detail the circumstances
giving rise to the alleged cause, and the Executive shall have failed, within
twenty (20) days after such notice, to remedy (or, if such alleged cause cannot
be remedied within twenty (20) days, diligently commenced to remedy) the
alleged cause.

 

“Code” has the meaning set forth in Section 12.09.

 

“Confidential Information” means
information that is not generally known to the public and that was or is used,
developed or obtained by the Company or its Subsidiaries in connection with
their business. It shall not include information (a) required to be
disclosed by court or administrative order or called for in a subpoena or
discovery request regular on its face, (b) lawfully obtainable from other
sources or which is in the public domain through no fault of the Executive; or (c) the
disclosure of which is consented to in writing by the Company.

 

“Date of Termination” has the meaning
set forth in Section 5.06 and Section 5.02.

 

 

“Employment Period” has the meaning set
forth in Section 2.01 and Section 5.02.

 

“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; or (c) any
material breach by the Company of the provisions contained in this Agreement.

 

“Intellectual Property” has the meaning
set forth in Section 7.01.

 

“Notice of Termination” has the meaning
set forth in Section 5.05.

 

“Noncompetition Period”  has the meaning set forth in Section 9.01.

 

“Nonsolicitation Period” has the meaning
set forth in Section 9.02.

 

“Person” means an individual, a
partnership, a corporation, a limited liability company, an association, a
joint stock company, an estate, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.

 

“Permanent Disability” means those
circumstances where the Executive is unable to continue to perform the usual
customary duties of his assigned job or as otherwise assigned in accordance
with the provisions of this Agreement for a period of six (6) months in
any twelve (12) month period because of physical, mental or emotional
incapacity resulting from injury, sickness or disease. Any questions as to the
existence of a Permanent Disability shall be determined by a qualified,
independent physician selected by the Company and approved by the Executive
(which approval shall not be unreasonably withheld). The determination of any such
physician shall be final and conclusive for all purposes of this Agreement.

 

“Reimbursable Expenses” has the meaning
set forth in Section 4.04.

 

“Severance Amount” has the meaning set
forth in Section 5.02.

 

“Subsidiary” or “Subsidiaries” means, with respect to any Person, any
corporation, partnership, limited liability company, association or other
business entity of which (a) if a corporation, fifty (50) percent or more
of the total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other Subsidiaries of that Person or
combination thereof; or (b) if a partnership, limited liability company,
association or other business entity, fifty (50) percent or more of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes of this definition, a
Person or Persons will be deemed to have a fifty (50) percent or more ownership
interest in a partnership, limited liability company,

 

2

 

association or other business
entity if such Person or Persons are allocated fifty (50) percent or more of
partnership, limited liability company, association or other business entity
gains or losses or control the managing director or member or general partner
of such partnership, limited liability company, association or other business
entity.

 

ARTICLE 2

 

EMPLOYMENT

 

SECTION 2.01. Employment. The
Company shall continue to employ the Executive, and the Executive shall accept
employment with the Company, upon the terms and conditions set forth in this
Agreement for the period beginning on the date hereof and ending as provided in
Section 5.01 (the “Employment Period”).

 

ARTICLE 3

 

POSITION AND DUTIES

 

SECTION 3.01. Position and Duties.
During the Employment Period, the Executive shall serve as (a) Executive
Vice President and Chief Financial Officer of the Company from the date hereof
until March 31, 2009 and (b) Senior Advisor of the Company from April 1,
2009 through the remainder of the Employment Period, and, in each case, shall
have such responsibilities, powers and duties as may from time to time be
prescribed by the President and Chief Executive Officer of the Company;
provided that such responsibilities, powers and duties are substantially
consistent with those customarily assigned to individuals serving in such
positions at comparable companies or as may be reasonably required by the
conduct of the business of the Company. From and after April 1, 2009
during the Employment Period, the parties hereto anticipate that the Executive’s
working time hereunder will be at least two (2) days per week. During the
Employment Period, the Executive shall not directly or indirectly render any
services of a business, commercial or professional nature to any other person
or for-profit organization not related to the business of the Company or its
Subsidiaries, whether for compensation or otherwise, without prior written
consent of the Company.

 

SECTION 3.02. Work Permits.
The Executive shall use his best efforts to obtain, maintain and renew a
suitable (for the purposes of the Executive’s contemplated employment by the
Company) work permit by the Bermuda government authorities and any other
permits required by any Bermuda government authority to the extent such work
permit is required under applicable law. The Company shall be responsible for
permit fees, and all other expenses, including legal expenses, in connection
with obtaining and maintaining such work permit.

 

SECTION 3.03. Relocation. Upon
the termination of Executive’s employment for any reason, the Company shall
reimburse the Executive for all reasonable expenses incurred by him for the
cost of relocating all of his household items to the United States and airfare
for Executive and his family to return to the United States, in each case,
subject to the Company’s requirements with respect to reporting and
documentation of such expenses; provided, however, that any such
expenses must be incurred by the Executive not later than the last day of the
calendar year following the calendar year in which the Executive’s “separation
from service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with
the Company occurs, and any such reimbursement shall be made

 

3

 

promptly
by the Company and, in all events, no later than the last day of the second
calendar year following the calendar year in which the Executive’s “separation
from service” with the Company occurs.

 

ARTICLE 4

 

BASE SALARY AND BENEFITS

 

SECTION 4.01. Base Salary.
During the Employment Period, the Executive’s base salary (the “Base Salary”) will be paid at the rate of (a) $500,000
per annum from the date hereof through March 31, 2009 and (b) $250,000
per annum from April 1, 2009 through the remainder of the Employment
Period. The Base Salary will be payable bi-monthly on the 15th and last working
day of each month in arrears. Annually during the Employment Period the Company
shall review with the Executive his job performance and compensation, and if
deemed appropriate by the Company, in its discretion, the Executive’s Base
Salary may be increased. The Executive’s salary has been computed to reflect
that his regular duties are likely, from time to time, to require more than the
normal hours per week and the Executive shall not be entitled to receive any
additional remuneration for work outside normal hours.

 

SECTION 4.02. Bonuses. In
addition to the Base Salary, the Executive shall be eligible to participate in
an annual bonus plan on terms set forth from time to time by the Board of
Directors of the Company; provided, however, that the Executive’s
target annual bonus will be 100% of his Base Salary.

 

SECTION 4.03. Benefits. In
addition to the Base Salary, and any bonuses payable to the Executive pursuant
to this Agreement, the Executive shall be entitled to the following benefits
during the Employment Period:

 

(a)          such major medical, life
insurance and disability insurance coverage as is, or may during the Employment
Period, be provided generally for other senior executive officers of the
Company as set forth from time to time in the applicable plan documents;

 

(b)         in addition to the usual
public holidays and eight (8) paid days off for sick leave, a maximum of
four (4) weeks of paid vacation annually during the term of the Employment
Period (Section 11 of the Bermuda Employment Act 2000 shall otherwise not
apply to the Executive’s employment hereunder);

 

(c)          benefits under any plan
or arrangement available generally for the senior executive officers of the
Company, subject to and consistent with the terms and conditions and overall
administration of such plans as set forth from time to time in the applicable
plan documents;

 

(d)         payment by the Company of
the reasonable cost of preparation of annual tax returns and associated tax
planning on a basis no less favorable than such arrangements provided to
similarly situated senior executives residing in Bermuda, and the cost paid by
the Company under this Section 4.03(d) for

 

4

 

one (1) calendar year shall be paid by
the Company not later than the end of the following calendar year;

 

(e)          payment by the Company
of an amount equal to the excess, if any, of the amount of income and
employment taxes payable by the Executive for a calendar year to Bermuda,
Connecticut and any other governmental taxing authority on the compensation
paid to the Executive by the Company over the amount that would have been
payable by the Executive on such compensation had he resided in Connecticut for
the entire calendar year, such reimbursement to be made on or before the last
day of the calendar year following the calendar year for which the excess tax
was incurred; and

 

(f)            other fringe benefits
customarily provided to similarly situated senior executives residing in
Bermuda.

 

SECTION 4.04.
Expenses. The Company shall reimburse
the Executive for all reasonable expenses incurred by him in the course of
performing his duties under this Agreement which are consistent with the Company’s
policies in effect from time to time with respect to travel, entertainment and
other business expenses (“Reimbursable Expenses”),  subject to the Company’s requirements with respect to reporting
and documentation of expenses. In addition, the Company will reimburse the
Executive, on an after-tax basis, for his reasonable expenses incurred in traveling
between Bermuda and the United States 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.

 

ARTICLE 5

 

TERM AND TERMINATION

 

SECTION 5.01. Term. The
Employment Period will terminate on April 1, 2012; provided that (a) the
Employment Period shall terminate prior to such date upon the Executive’s death
or Permanent Disability, (b) the Employment Period may be terminated by
the Company for any reason prior to such date, and (c) the Employment
Period may be terminated by the Executive at any time prior to March 31,
2009, if such termination shall be for Good Reason. In addition, unless either
the Company or the Executive provides written notice of their intention not to
renew the Agreement at least 180 days prior to the expiration of the original term,
the Employment Period shall continue on the same terms and conditions for an
indefinite period until terminated (a) by either party by providing at
least six (6) months’ prior written notice to the other party, (b) upon
the Executive’s death or Permanent Disability, or (c) by the Company for
any reason.

 

SECTION 5.02. Unjustified Termination.
Except as otherwise provided in Section 12.09, if the Employment Period
shall be terminated 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 on or before March 31, 2009 or by the Company not for
Cause (such terminations under 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

 

5

 

Incentive
Compensation Plan or successor plan) an amount equal to:  (i) with respect to an Unjustified
Termination that occurs during the period ending March 31, 2009, eighteen
(18) months of the Base Salary; and (ii) with respect to an Unjustified
Termination that occurs during the period extending from April 1, 2009
through the remainder of the Employment Period, the sum of the total remaining
Base Salary and target annual bonus which would have been paid to the Executive
under this Agreement for the period through the later of (A) the end of
the original term of this Agreement and (B) six (6) months after the
date of termination of employment (such amount under clause (ii) of this Section 5.02
is referred to as the “Severance Amount”),
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 12.09 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.

 

SECTION 5.03. Justified
Termination. If the Employment Period shall be terminated (i) prior
to the expiration of the original term (or the Employment Period as extended
pursuant to Section 5.01) (a) by the Company for Cause, (b) as a
result of the Executive’s resignation or leaving of his employment, other than
for Good Reason or (c) as a result of the death or Permanent Disability of
the Executive, or (ii) at the end of the Employment Period as a result of
either the Company’s or the Executive’s provision of written notice not to
extend the Employment Period under Section 5.01 (such terminations under
clauses (i) and (ii) of this Section 5.03 are collectively
referred to as “Justified  Terminations”),
the Executive shall be entitled to receive solely (except as provided in the
next sentence of this Section 5.03 or Section 5.04 below or as
specifically provided in the Company’s Incentive Compensation Plan or successor
plan) his Base Salary earned through the date of termination of employment and
reimbursement of all Reimbursable Expenses incurred by the Executive prior to
such Justified Termination. If the termination is by reason of the death or
Permanent Disability of the Executive, (A) for the period ending March 31,
2009, the Executive also shall be entitled to receive a prorated portion of his
annual bonus (for such purposes, the annual bonus shall not be

 

6

 

less than the average annual bonus received for the preceding three (3) years)
based on the number of days elapsed in the calendar year through the Date of
Termination; and (B) for the period extending from April 1, 2009 through
the remainder of the Employment Period, an amount equal to the Severance
Amount, in each case, (i) offset by any proceeds received from any
insurance coverages provided by the Company or any of its affiliates, and (ii) such
amount, if any, shall be paid to the Executive promptly upon death or Permanent
Disability, as applicable, and in no event later than March 15 of the calendar
year following the calendar year of such termination of employment.

 

SECTION 5.04. Benefits.
Except as otherwise required by mandatory provisions of law, all of the
Executive’s rights to fringe and other benefits under this Agreement or
otherwise, if any, accruing after the termination of the Employment Period as a
result of a Justified Termination will cease upon such Justified Termination.
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.

 

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) 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.

 

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

 

7

 

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.

 

ARTICLE 6

 

CONFIDENTIAL INFORMATION

 

SECTION 6.01. Nondisclosure and Nonuse
of Confidential Information. The Executive will not disclose or use
at any time during or after the Employment Period any Confidential Information
of which the Executive is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by the Executive’s performance of duties assigned to
the Executive pursuant to this Agreement. Under all circumstances and at all
times, the Executive will take all appropriate steps to safeguard Confidential
Information in his possession and to protect it against disclosure, misuse,
espionage, loss and theft.

 

ARTICLE 7

 

INTELLECTUAL PROPERTY

 

SECTION 7.01. Ownership of Intellectual
Property. In the event that the Executive as part of his activities
on behalf of the Company generates, authors or contributes to any invention,
design, new development, device, product, method of process (whether or not
patentable or reduced to practice or comprising Confidential Information), any
copyrightable work (whether or not comprising Confidential Information) or any
other form of Confidential Information relating directly or indirectly to the
business of the Company as now or hereinafter conducted (collectively, “Intellectual Property”), the Executive acknowledges that
such Intellectual Property is the sole and exclusive property of the Company
and hereby assigns all right title and interest in and to such Intellectual
Property to the Company. Any copyrightable work prepared in whole or in part by
the Executive during the Employment Period will be deemed “a work made for hire”
under Section 201(b) of the United States Copyright Act of 1976, as
amended, and the Company will own all of the rights comprised in the copyright
therein. The Executive will promptly and fully disclose all Intellectual
Property and will cooperate with the Company to protect the Company’s interests
in and rights to such Intellectual Property (including providing reasonable
assistance in securing patent protection and copyright registrations and
executing all documents as reasonably requested by the Company, whether such
requests occur prior to or after termination of Executive’s employment
hereunder).

 

8

 

ARTICLE 8

 

DELIVERY OF MATERIALS UPON TERMINATION OF
EMPLOYMENT

 

SECTION 8.01. Delivery of Materials upon
Termination of Employment. As requested by the Company, from time to
time and upon the termination of the Executive’s employment with the Company
for any reason, the Executive will promptly deliver to the Company all copies
and embodiments, in whatever form or medium, of all Confidential Information or
Intellectual Property in the Executive’s possession or within his control
(including written records, notes, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential Information or
Intellectual Property) irrespective of the location or form of such material
and, if requested by the Company, will provide the Company with written confirmation
that all such materials have been delivered to the Company.

 

ARTICLE 9

 

NONCOMPETITION AND NONSOLICITATION

 

SECTION 9.01.
Noncompetition.  The
Executive acknowledges that during his employment with the Company, he will
become familiar with trade secrets and other Confidential Information
concerning the Company and its Subsidiaries and their respective predecessors,
and that his services will be of special, unique and extraordinary value to the
Company. In addition, the Executive hereby agrees that at any time during the
Employment Period, and for a period ending two (2) years after the
termination of the Executive’s employment 
(the “Noncompetition Period”), he will
not directly or indirectly own, manage, control, participate in, consult with,
render services for or in any manner engage in any business competing with the
businesses of the Company or its Subsidiaries as such businesses exist or are
in process or being planned as of the date of termination, within any geographical
area in which the Company or its Subsidiaries engage or plan to engage in such
businesses. Notwithstanding the foregoing, if such termination is an
Unjustified Termination, the Noncompetition Period shall end one (1) year
after such termination. It shall not be considered a violation of this Section 9.01
for the Executive to be a passive owner of not more than 2% of the outstanding
stock of any class of a corporation which is publicly traded, so long as the
Executive has no active participation in the business of such corporation.

 

SECTION 9.02. Nonsolicitation.
The Executive acknowledges that during his employment with the Company, he will
become familiar with trade secrets and other Confidential Information
concerning the Company, its Subsidiaries and their respective predecessors, and
that his services will be of special, unique and extraordinary value to the
Company. The Executive hereby agrees that (a) during the Employment Period
and for a period of two (2) years after the date of termination of
employment (the “Nonsolicitation Period”) the
Executive will not, directly or indirectly, induce or attempt to induce any
employee of the Company or its Subsidiaries to leave the employ of the Company
or its Subsidiaries, or in any way interfere with the relationship between the
Company or its Subsidiaries and any employee thereof or otherwise employ or
receive the services of any individual who was an employee of the Company or
its Subsidiaries at the Date of Termination or within the six (6)-month period

 

9

 

prior thereto,
and (b) during the Nonsolicitation Period, the Executive will not induce
or attempt to induce any customer, supplier, client, insured, reinsured,
reinsurer, broker, licensee or other business relation of the Company or its
Subsidiaries to cease doing business with the Company or its Subsidiaries.

 

SECTION 9.03. Enforcement.
If, at the enforcement of Sections 9.01 or 9.02, a court holds that the
duration or scope stated therein are unreasonable under circumstances then
existing, the parties agree that the maximum duration and scope reasonable
under such circumstances will be substituted for the stated duration or scope
and that the court will be permitted to revise the restrictions contained in
this Article 9 to cover the maximum duration and scope permitted by law.

 

ARTICLE 10

 

EQUITABLE RELIEF

 

SECTION 10.01. Equitable Relief.
The Executive acknowledges that (a) the covenants contained herein are
reasonable, (b) the Executive’s services are unique, and (c) a breach
or threatened breach by him of any of his covenants and agreements with the
Company contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02 could cause
irreparable harm to the Company for which it would have no adequate remedy at
law. Accordingly, and in addition to any remedies which the Company may have at
law, in the event of an actual or threatened breach by the Executive of his
covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02,
the Company shall have the absolute right to apply to any court of competent
jurisdiction for such injunctive or other equitable relief as such court may
deem necessary or appropriate in the circumstances.

 

ARTICLE 11

 

REPRESENTATIONS

 

SECTION 11.01. Executive Representations.
The Executive hereby represents and warrants to the Company that (a) the
execution, delivery and performance of this Agreement by the Executive does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which the
Executive is a party or by which he is bound, (b) the Executive is not a
party to or bound by any employment agreement, noncompetition agreement or
confidentiality agreement with any other Person that affects his right or
ability to perform the duties contemplated by this Agreement and (c) upon
the execution and delivery of this Agreement by the Company, this Agreement
will be the valid and binding obligation of the Executive, enforceable in
accordance with its terms.

 

SECTION 11.02. Company
Representations. The Company hereby represents and warrants to the
Executive that (a) all acts required to be taken to authorize, deliver and
perform this Agreement and the obligations of the Company provided for
hereunder have been duly taken; and (b) upon the execution and delivery of
this Agreement by the Company, this Agreement will be valid and binding
obligation of the Company, enforceable in accordance with its terms.

 

10

 

ARTICLE 12

 

MISCELLANEOUS

 

SECTION 12.01. Remedies. The
Company will have all rights and remedies set forth in this Agreement, all
rights and remedies which the Company has been granted at any time under any
other agreement or contract and all of the rights which the Company has under
any law. The Company will be entitled to enforce such rights specifically,
without posting a bond or other security, to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
granted by law. There are currently no disciplinary or grievance procedures in
place, there is no collective agreement in place, and there is no probationary
period.

 

SECTION 12.02. Consent to Amendments.
The provisions of this Agreement may be amended or waived only by a written
agreement executed and delivered by the Company and the Executive. No other
course of dealing between the parties to this Agreement or any delay in
exercising any rights hereunder will operate as a waiver of any rights of any
such parties.

 

SECTION 12.03. Successors and Assigns.
All covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not,
provided that the Executive may not assign his rights or delegate his
obligations under this Agreement without the written consent of the Company.

 

SECTION 12.04. Severability.
Whenever possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.

 

SECTION 12.05. Counterparts.
This Agreement may be executed simultaneously in two (2) counterparts, any
one of which need not contain the signatures of more than one party, but all of
which counterparts taken together will constitute one and the same agreement.

 

SECTION 12.06. Descriptive Headings.
The descriptive headings of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.

 

SECTION 12.07. Notices. All
notices, demands or other communications to be given or delivered under or by
reason of the provisions of this Agreement will be in writing and shall be
delivered personally by hand, by electronic transmission (with a copy following
by hand or by overnight courier), by registered or certified mail, postage
prepaid, return receipt requested, or by overnight courier service (charges
prepaid). Communications delivered personally by hand shall be deemed received
on the date when delivered personally to the recipient; communications sent by
electronic means shall be deemed received one (1) business day after
the sending thereof; communications sent by registered or certified mail shall
be deemed received four (4) business days after the sending thereof; and
communications delivered by overnight courier shall be

 

11

 

deemed
received one (1) business day after the date when sent to the recipient. Such
notices, demands and other communications will be sent to the Executive and to
the Company at the addresses set forth below.

 

	
  If to the
  Executive:

  	
   

  	
  To the last
  address delivered to the Company by the Executive in the manner set forth
  herein.

  
	
   

  	
   

  	
   

  
	
  If to the
  Company:

  	
   

  	
  Arch Capital
  Group Ltd.

  
	
   

  	
   

  	
  Wessex
  House, 4th Floor

  
	
   

  	
   

  	
  45
  Reid Street

  
	
   

  	
   

  	
  Hamilton
  HM 12, Bermuda

  
	
   

  	
   

  	
  Attention:
  Secretary

  
	
   

  	
   

  	
  Tel:
  (441) 278-9250

  
	
   

  	
   

  	
  Fax:
  441-278-9255

  
	
   

  	
   

  	
  Email:  Dawna.Ferguson@conyersdillandpearman.com

  

 

or to such
other address or to the attention of such other person as the recipient party
has specified by prior written notice to the sending party.

 

SECTION 12.08. Withholding.
The Company may withhold from any amounts payable under this Agreement such
federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

 

SECTION 12.09. 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 12.09 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.

 

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

 

12

 

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 provided for herein
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 (1) 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.

 

SECTION 12.10. 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
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 12.10, 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 12.10 shall be final and binding upon
the Company and the Executive.

 

SECTION 12.11. No Third Party Beneficiary.
This Agreement will not confer any rights or remedies upon any person other
than the Company, the Executive and their respective heirs,

 

13

 

executors,
successors and assigns.

 

SECTION 12.12. Entire Agreement.
This Agreement (including the documents referred to herein) constitutes the
entire agreement among the parties and supersedes any prior understandings,
agreements or representations by or among the parties, written or oral, that
may have related in any way to the subject matter hereof, including the
Agreement, dated as of January 18, 2002, between the Executive and the
Company (as amended). This Agreement shall serve as a written statement of
employment for purposes of Section 6 of the Bermuda Employment Act 2000.

 

SECTION 12.13. Construction.
The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rule of strict
construction will be applied against any party. Any reference to any federal,
state, local or foreign statute or law will be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
use of the word “including” in this Agreement means
including without limitation and is intended by the parties to be by way of
example rather than limitation.

 

SECTION 12.14. Survival.
Sections 6.01, 7.01, 8.01 and Articles 9, 10, 11 and 12 will survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.

 

SECTION 12.15. GOVERNING LAW.
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW OF BERMUDA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.

 

14

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement 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/ John D. Vollaro

  
	
   

  	
  Name: John
  D. Vollaro

  

 

15

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