Document:

Exhibit
10.1

 

Execution
Copy

 

SEVENTH AMENDMENT TO

THIRD
AMENDED AND RESTATED CREDIT AGREEMENT

AND
CONSENT OF GUARANTORS

 

This SEVENTH
AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT AND CONSENT OF
GUARANTORS (this “Amendment”) is dated as of August 6,
2008, and entered into by and among FLEETWOOD
ENTERPRISES, INC.  (“Fleetwood”),
FLEETWOOD HOLDINGS INC. (“Holdings”)  and its Subsidiaries listed on the signature pages hereof
(collectively, “Borrowers”), the banks and other financial institutions
signatory hereto that are parties as Lenders to the Credit Agreement referred
to below (the “Lenders”), and BANK OF AMERICA, N.A.,
as administrative agent and collateral agent (in such capacity, the “Agent”)
for the Lenders.

 

Recitals

 

Whereas,
Fleetwood, the Borrowers, the Lenders, and the Agent have entered into that
certain Third Amended and Restated Credit Agreement dated as of January 5,
2007, as amended by that certain First Amendment to Third Amended and Restated
Credit Agreement and Consent of Guarantors dated as of May 25, 2007, that
certain Second Amendment to Third Amended and Restated Credit Agreement and
Consent of Guarantors dated as of September 18, 2007, that certain Third
Amendment to Third Amended and Restated Credit Agreement and Consent of Guarantors
dated as of January 16, 2008, that certain Fourth Amendment to Third
Amended and Restated Credit Agreement and Consent of Guarantors dated as of March 5,
2008, that certain Fifth Amendment to Third Amended and Restated Credit
Agreement and Consent of Guarantors dated as of April 9, 2008, and that
certain Sixth Amendment to Third Amended and Restated Credit Agreement and
Consent of Guarantors dated as of April 24, 2008 (as amended, amended and
restated, extended, supplemented or otherwise modified from time to time, the “Credit Agreement”).  Any terms defined in the Credit Agreement and
not defined in this Amendment are used herein as defined in the Credit
Agreement;

 

Whereas, the
Borrowers have requested an amendment to the Credit Agreement to permit
Holdings and Fleetwood to guaranty mortgage Debt permitted by Section 7.13(s) of
the Credit Agreement; and

 

Whereas, the
Majority Lenders and the Agent are willing to agree to the amendment requested
by the Borrowers, on the terms and conditions set forth in this Amendment;

 

Now
Therefore, in consideration of the premises and the
mutual agreements set forth herein, Fleetwood, the Borrowers, the Lenders, and
the Agent agree as follows:

 

1.     AMENDMENTS TO CREDIT
AGREEMENT.  Subject to the
conditions and upon the terms set forth in this Amendment and in reliance on
the representations and 

 

 

warranties of Fleetwood and the
Borrowers set forth in this Amendment, the Credit Agreement is hereby amended
as follows:

 

1.1   Amendment to Section 7.12.    Section 7.12
shall be amended by deleting clause (h) and the word “and” immediately
preceding clause (h) and replacing it with the following:

 

“(h) Guaranties by Fleetwood of
mortgage Debt permitted to be incurred pursuant to Section 7.13(s),
provided that such Guaranty shall not be secured by any property other
than the property pledged by the primary obligor securing the underlying
mortgage Debt; and (i) other Guaranties in an aggregate amount not to
exceed $10,000,000 at any time in effect.”

 

 

2.     REPRESENTATIONS AND
WARRANTIES OF FLEETWOOD AND THE BORROWERS. 
In order to induce the Lenders and the Agent to enter into
this Amendment, each of Fleetwood and each Borrower represents and warrants to
each Lender and the Agent that the following statements are true, correct and
complete:

 

2.1   Power and Authority.  Each of the Loan Parties has all corporate
power and authority to enter into this Amendment and, as applicable, the
Consent of Guarantors attached hereto (the “Consent”), and to carry out
the transactions contemplated by, and to perform its obligations under or in
respect of, the Credit Agreement.

 

2.2   Corporate Action.  The execution and delivery of this Amendment
and the Consent and the performance of the obligations of each Loan Party under
or in respect of the Credit Agreement as amended hereby have been duly
authorized by all necessary corporate action on the part of each of the Loan
Parties.

 

2.3   No Conflict or Violation or Required Consent or
Approval.  The execution
and delivery of this Amendment and the Consent and the performance of the
obligations of each Loan Party under or in respect of the Credit Agreement as
amended hereby do not and will not conflict with or violate (a) any
provision of the governing documents of any Loan Party or any of its Subsidiaries,
(b) any Requirement of Law, (c) any order, judgment or decree of any
court or other governmental agency binding on any Loan Party or any of its
Subsidiaries, or (d) any indenture, agreement or instrument to which any
Loan Party or any of its Subsidiaries is a party or by which any Loan Party or
any of its Subsidiaries, or any property of any of them, is bound, and do not
and will not require any consent or approval of any Person.

 

2.4   Execution, Delivery and Enforceability.  This Amendment and the Consent have been duly
executed and delivered by each Loan Party which is a party thereto and are the
legal, valid and binding obligations of such Loan Party, enforceable in
accordance with their terms, except as enforceability may be affected by
applicable bankruptcy, insolvency, and similar proceedings affecting the rights
of creditors generally, and general 

 

2

 

principles
of equity.  The Agent’s Liens in the
Collateral continue to be valid, binding and enforceable first priority Liens
which secure the Obligations.

 

2.5   No Default or Event of Default.  No event has occurred and is continuing or
will result from the execution and delivery of this Amendment or the Consent
that would constitute a Default or an Event of Default.

 

2.6   Representations and Warranties.  Each of the representations and warranties
contained in the Loan Documents is and will be true and correct in all material
respects on and as of the date hereof and as of the effective date of this Amendment,
except to the extent that such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and complete
in all material respects as of such earlier date.

 

3.     CONDITIONS TO
EFFECTIVENESS OF THIS AMENDMENT.  This
Amendment, and the consents and approvals contained herein, shall be effective
only if and when signed by, and when counterparts hereof shall have been
delivered to the Agent (by hand delivery, mail or telecopy) by, Fleetwood, the
Borrowers and each Lender and only if and when each of the following conditions
is satisfied:

 

3.1   Consent of Guarantors.  Each of the Guarantors shall
have executed and delivered to the Agent the Consent.

 

3.2   No Default or Event of Default; Accuracy of
Representations and Warranties. 
No Default or Event of Default shall exist and each of the
representations and warranties made by the Loan Parties herein and in or
pursuant to the Loan Documents shall be true and correct in all material
respects as if made on and as of the date on which this Amendment becomes
effective (except that any such representation or warranty that is expressly
stated as being made only as of a specified earlier date shall be true and
correct as of such earlier date), and the Borrowers shall have delivered to the
Agent a certificate confirming such matters.

 

3.3   Delivery of Documents.  The Agent shall have received such
documents as the Agent may reasonably request in connection with this
Amendment.

 

4.     EFFECTIVE DATE.  This
Amendment shall become effective (the “Effective Date”) on the date of
the satisfaction of the conditions set forth in Section 3.

 

5.     EFFECT OF AMENDMENT;
RATIFICATION.  This Amendment
is a Loan Document.  From and after the
date on which this Amendment becomes effective, all references in the Loan
Documents to the Credit Agreement shall mean the Credit Agreement as amended
hereby.  Except as expressly amended
hereby or waived herein, the Credit Agreement and the other Loan Documents,
including the Liens granted thereunder, shall remain in full force and effect,
and all terms and provisions thereof are hereby ratified and confirmed.

 

6.     Each of Fleetwood and the Borrowers
confirms that as amended hereby, each of the Loan Documents is in full force
and effect, and that none of the Credit Parties has any defenses, setoffs or
counterclaims to its Obligations.

 

3

 

7.     APPLICABLE LAW.  THE VALIDITY, INTERPRETATIONS AND
ENFORCEMENT OF THIS AMENDMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION
WITH THIS AMENDMENT, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE GOVERNED BY THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.

 

8.     NO WAIVER.  The execution, delivery and
effectiveness of this Amendment does not constitute a waiver of any Default or
Event of Default, amend or modify any provision of any Loan Document except as
expressly set forth herein or constitute a course of dealing or any other basis
for altering the Obligations of any Loan Party.

 

9.     COMPLETE AGREEMENT.  This Amendment sets forth the
complete agreement of the parties in respect of any amendment to any of the
provisions of any Loan Document or any waiver thereof.  The execution, delivery and effectiveness of
this Amendment do not constitute a waiver of any Default or Event of Default,
amend or modify any provision of any Loan Document except as expressly set
forth herein or constitute a course of dealing or any other basis for altering
the Obligations of any Loan Party.

 

10.   CAPTIONS;
COUNTERPARTS.  The catchlines
and captions herein are intended solely for convenience of reference and shall
not be used to interpret or construe the provisions hereof.  This Amendment may be executed by one or more
of the parties to this Amendment on any number of separate counterparts
(including by telecopy), all of which taken together shall constitute but one
and the same instrument.

 

[signatures follow; remainder of page intentionally
left blank]

 

4

 

IN WITNESS WHEREOF,
each of the undersigned has duly executed this Amendment as of the date set
forth above.

 

	
  BORROWERS

  	
   

  	
  FLEETWOOD HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF ARIZONA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF CALIFORNIA, 

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF FLORIDA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF GEORGIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF IDAHO, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF INDIANA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF KENTUCKY, 

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF NORTH 

  CAROLINA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF OREGON, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF 

  PENNSYLVANIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF TENNESSEE, 

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF TEXAS, L.P.

  By: FLEETWOOD GENERAL PARTNER

  OF TEXAS, INC., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF VIRGINIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES OF WASHINGTON, 

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD MOTOR HOMES OF 

  CALIFORNIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD MOTOR HOMES OF 

  INDIANA, INC.

  

 

Seventh Amendment and Consent of
Guarantors

 

S-1

 

	
   

  	
   

  	
  FLEETWOOD MOTOR HOMES OF 

  PENNSYLVANIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF 

  CALIFORNIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF 

  INDIANA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF 

  KENTUCKY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF 

  MARYLAND, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF 

  OHIO, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF 

  OREGON, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD TRAVEL TRAILERS OF 

  TEXAS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD FOLDING TRAILERS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GOLD SHIELD, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GOLD SHIELD OF INDIANA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HAUSER LAKE LUMBER OPERATION, 

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CONTINENTAL LUMBER PRODUCTS, 

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD GENERAL PARTNER OF 

  TEXAS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FLEETWOOD HOMES INVESTMENT, INC.

  

 

 

	
   

  	
  By: 

  	
   /s/ Boyd R. Plowman

  
	
   

  	
  Name: 

  	
   Boyd R. Plowman

  
	
   

  	
  Title: 

  	
  Exec. V.P. and Chief Financial Officer

  

 

S-2

 

	
  GUARANTOR

  	
  FLEETWOOD ENTERPRISES, INC., as the 

  Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   /s/ Boyd R. Plowman

  
	
   

  	
  Name: 

  	
   Boyd R.
  Plowman

  
	
   

  	
  Title: 

  	
  Exec. V.P. and Chief Financial Officer

  

 

S-3

 

 

IN
WITNESS WHEREOF,
each of the undersigned has duly executed this Amendment as of the date set
forth above.

 

	
   

  	
  BANK OF AMERICA, N.A., as the Agent
  and 

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   /s/ Todd Eggertsen

  
	
   

  	
  Name: 

  	
  Todd Eggertsen

  
	
   

  	
  Title: 

  	
  Vice President

  

 

S-4

 

	
   

  	
  WELLS FARGO FOOTHILL, INC., fka 

  
	
   

  	
  FOOTHILL CAPITAL CORPORATION, as 

  
	
   

  	
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   /s/ Juan Barrera

  
	
   

  	
  Name: 

  	
  Juan Barrera

  
	
   

  	
  Title: 

  	
  Vice President

  

 

S-5

 

	
   

  	
  TEXTRON FINANCIAL CORPORATION, 

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   /s/ Norbert Schmidt

  
	
   

  	
  Name: 

  	
  Norbert Schmidt

  
	
   

  	
  Title: 

  	
  Senior Account Executive

  

 

S-6

 

	
   

  	
  PNC BANK, NATIONAL ASSOCIATION, as 

  
	
   

  	
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name: 

  	
   

  
	
   

  	
  Title: 

  	
   

  

 

S-7

 

	
   

  	
  WACHOVIA CAPITAL FINANCE 

  
	
   

  	
  CORPORATION (WESTERN), as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name: 

  	
   

  
	
   

  	
  Title: 

  	
   

  

 

S-8

 

CONSENT
OF GUARANTORS

 

Each
of the undersigned is a Guarantor of the Obligations of the Borrowers under the
Credit Agreement and hereby (a) consents to the foregoing Amendment, (b) acknowledges
that notwithstanding the execution and delivery of the foregoing Amendment, the
obligations of each of the undersigned Guarantors are not impaired or affected
and the Guaranties continue in full force and effect, and (c) ratifies its
Guaranty and each of the Loan Documents to which it is a party.

 

IN
WITNESS WHEREOF, each of the undersigned has executed and delivered this
CONSENT OF GUARANTORS as of the 6th day of August, 2008.

 

 

	
  GUARANTORS

  	
  FLEETWOOD
  ENTERPRISES, INC.

  
	
   

  	
  FLEETWOOD
  CANADA LTD.

  
	
   

  	
  FLEETWOOD
  INTERNATIONAL INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   /s/ Boyd R. Plowman

  
	
   

  	
  Name: 

  	
  Boyd R. Plowman

  
	
   

  	
  Title: 

  	
  Exec. V.P. and
  Chief Financial Officer

  

 

S-9

 

Execution Copy

 

CERTIFICATE OF BORROWERS

 

The undersigned, the Executive Vice President and
Chief Financial Officer of FLEETWOOD ENTERPRISES, INC. (the “Company”),
hereby certifies, as of August 6, 2008, as follows in the name and on
behalf of the Company, in accordance with the Third Amended and Restated Credit
Agreement dated as of January 5, 2007 by and between the Company as a
Guarantor, Fleetwood Holdings Inc. (“Holdings”) and certain Subsidiaries
of Holdings (each of Holdings and each such Subsidiary individually, a “Borrower”
and, collectively, the “Borrowers”), Bank of America, N.A., in its
capacity as administrative agent for the Lenders (in such capacity, the “Agent”)
and the Lenders named therein, as amended by that certain First Amendment to
Third Amended and Restated Credit Agreement and Consent of Guarantors dated as
of May 25, 2007, as amended by that certain Second Amendment to Third Amended
and Restated Credit Agreement and Consent of Guarantors dated as of September 18,
2007, as amended by that certain Third Amendment to Third Amended and Restated
Credit Agreement and Consent of Guarantors dated as of January 15, 2008,
as amended by that certain Fourth Amendment to Third Amended and Restated
Credit Agreement and Consent of Guarantors dated as of March 5, 2008, as
amended by that certain Fifth Amendment to Third Amended and Restated Credit
Agreement and Consent of Guarantors dated as of April 9, 2008, as amended
by that certain Sixth Amendment to Third Amended and Restated Credit Agreement
and Consent of Guarantors dated as of April 24, 2008, and as amended by
that certain Seventh Amendment to Third Amended and Restated Credit Agreement
and Consent of Guarantors dated as of August 6, 2008 (as amended, amended
and restated, extended, supplemented or otherwise modified from time to time,
the “Credit Agreement”):(1)

 

1.          No Default or Event of Default has occurred and is
continuing as of August 6, 2008;

 

2.          Each of the representations and warranties made by the Loan
Parties in or pursuant to that certain Seventh Amendment to Third Amended and
Restated Credit Agreement and Consent of Guarantors dated as of August 6,
2008 (the “Amendment”) and in or pursuant to the Loan Documents is true and
correct in all material respects as if made on and as of August 6, 2008
(except that any such representation or warranty that is expressly stated as
being made only as of a specified earlier date shall be true and correct as of
such earlier date);

 

3.                             All conditions
set forth in Section 3 of the Amendment have been satisfied.

 

[Remainder of page intentionally left blank]

 

(1)                                Unless otherwise defined
herein, all capitalized terms shall have the meanings given them in the Credit
Agreement. This Certificate is a Loan Document.

 

 

IN
WITNESS WHEREOF, the undersigned have
executed and delivered this certificate as of the day and year first above
written.

 

	
   

  	
  FLEETWOOD ENTERPRISES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Boyd R. Plowman

  
	
   

  	
  Name:

  	
  Boyd R. Plowman

  
	
   

  	
  Title:

  	
  Executive Vice President and Chief

  
	
   

  	
   

  	
  Financial Officer

  

 

Certificate of Borrowers

 

S-1EXHIBIT 10.1

 

AGREEMENT

 

Agreement (“Agreement”),
dated May 14, 2008 among, Arch Capital Group Ltd., a Bermuda company (“Parent”),
Arch Insurance Group Inc., a Delaware corporation (“Arch Insurance”),
and Ralph E. Jones III (the “Executive”).

 

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

 

Employment
Agreement

 

1.                  Arch Insurance and the Executive hereby
confirm the following:  (a) the employment
relationship between the Executive and Arch Insurance will terminate on July 1,
2008 (the “Termination Date”); and (b) for purposes of the
Employment Agreement, dated June 4, 2003 (the “Employment Agreement”),
between Arch Insurance and the Executive, such termination of employment shall
be deemed to be pursuant to, and in compliance with, written notice by the
Executive pursuant to Section 5.01 of the Employment Agreement of his
intention not to extend the Employment Period (as defined in the Employment
Agreement) beyond the original five-year term. 
Effective on the Termination Date, the Executive hereby resigns all director,
officer and employee positions with Parent, Arch Insurance and their respective
subsidiaries.

 

Restricted
Share Unit Agreements

 

2.                  Effective on the Termination Date, Section 2(b)(ii) of
the Restricted Share Unit Agreements, between Parent and the Executive, dated
as of February 23, 2006 and May 11, 2007 (collectively, the “Unit
Agreements”), shall each be hereby amended and restated as follows
(capitalized terms used below have the meanings set forth in the Unit
Agreements):

 

“In the event of termination of employment (other than
by the Company for Cause, as such term is defined in the Incentive Compensation
Plan) on July 1, 2008 as contemplated by the Agreement, dated May 14,
2008, among the Employee, the Company and Arch Insurance Group Inc. (such a
termination shall be deemed a termination after attaining “Retirement Age” for
purposes hereof), the Restricted Share Units shall continue to vest on the
schedule set forth in paragraph 2(a) above so long as the 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 (“Competitive Activity”).  In the event the

 

 

Employee engages in a Competitive Activity, any
unvested Restricted Share Units shall be forfeited by the Employee and become
the property of the Company.”

 

2

 

Stock Option Agreements

 

3.                   Effective on the Termination Date, (a) the
following shall be added at the end of paragraph (j) of the Option
Agreement, dated as of July 1, 2003, between Parent and the Executive, and
(b) the second and third sentences of paragraph (j) of the Option
Agreement, dated as of September 22, 2004, between Parent and the Executive,
and paragraph (j)2 of the Option Agreement, dated as of February 23, 2006,
between Parent and the Executive (collectively, the “Option Agreements”),
shall be hereby amended and restated as follows (capitalized terms used below
have the meanings set forth in such Option Agreements):

 

 “Notwithstanding anything to the contrary herein, in the event of
termination of employment (other than by the Company for Cause, as such term is
defined in the Company’s Incentive Compensation Plan) on July 1, 2008 as contemplated by the Agreement,
dated May 14, 2008, among the Option Holder, the Company and Arch
Insurance Group Inc., the Option shall continue to become exercisable on
the schedule set forth in paragraph (f) above so long as the Option Holder
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 (“Competitive Activity”) and shall continue to be
exercisable by the Option Holder (or his Beneficiary or estate in the event of
his death) for a period ending July 1, 2011 (but not beyond the Option
Period).  In the event the Option Holder
engages in a Competitive Activity, the Option, to the extent then exercisable,
may be exercised for 30 days following the date on which the Option Holder
engages in such Competitive Activity (but not beyond the Option Period).”

 

Share
Appreciation Rights Agreement

 

4.                   Effective on the Termination Date, paragraph (j)2 of
the Share Appreciation Rights Agreement, between Parent and the Executive,
dated as of May 11, 2007 (the “SAR Agreement” and, together with
the Unit Agreements and the Option Agreements, the “Award Agreements”),
shall be hereby amended and restated as follows (capitalized terms used below
have the meanings set forth in the SAR Agreement):

 

“In the event of termination
of employment (other than by the Company for Cause, as such term is defined in
the Company’s Incentive Compensation Plan on the date hereof) on July 1, 2008 as contemplated by the Agreement,
dated May 14, 2008, among the SAR Holder, the Company and Arch Insurance
Group Inc., the SAR shall continue to become exercisable on the schedule set forth
in paragraph (f) above so long as the SAR Holder 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 (“Competitive Activity”) and shall continue to be exercisable by
the SAR Holder (or his Beneficiary or estate in the event of his death) for a
period ending July 1, 2011 (but not beyond the SAR 

 

3

 

Period).  In the event the SAR Holder engages in a
Competitive Activity, (A) the SAR, to the extent then exercisable, may be
exercised for 30 days following the date on which the SAR Holder engages in
such Competitive Activity (but not beyond the SAR Period) and (B) the SAR,
to the extent then not exercisable, shall be immediately forfeited.”

 

5.                   All other provisions of the Employment
Agreement and the Award Agreements shall remain in full force and effect.  This amendment shall be governed by and
construed in accordance with the laws of New York, 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.

 

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

  
	
   

  	
  Printed
  Name: 

  	
  /s/
  Constantine Iordanou

  
	
   

  	
  Title:
  

  	
  President &
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARCH
  INSURANCE GROUP INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Mark D. Lyons

  
	
   

  	
  Printed
  Name:

  	
  /s/
  Mark D. Lyons

  
	
   

  	
  Title:
  

  	
  President &
  COO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Ralph E. Jones III

  
	
   

  	
  Ralph E. Jones III

  
							

 

4

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