Exhibit 10.21
EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT (“
Agreement ”), dated as of August 1, 2006, between
Arch Insurance Group Inc., a Delaware corporation (the “
Company ”), and Mark D. Lyons (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:
“ Base Salary ”
has the meaning set forth in Section 4.01.
“ Cause ” means
(a) theft or embezzlement by the Executive with respect to the
Companies or their Subsidiaries; (b) malfeasance or gross
negligence in the performance of the Executive’s duties;
(c) the commission by the Executive of any felony or any crime
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 without
the same being corrected within ten (10) days after being
given written notice thereof; (e) continued and habitual use
of alcohol by the Executive to an extent which materially impairs
the Executive’s performance of his duties without the same
being corrected within ten (10) days after being given written
notice thereof; (f) the Executive’s use of illegal drugs
without the same being corrected within ten (10) days after being
given written notice thereof; or (g) the material breach by
the Executive of any of the covenants contained in this
Agreement.
“ Companies ”
means the Company and Parent.
“ Confidential
Information ” means information that is not generally
known to the public and that was or is used, developed or obtained
by the Companies or their Subsidiaries in connection with their
business. It shall not include information (a) required to be
disclosed by court or administrative order, (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 Companies.
“ Date of Termination
” has the meaning set forth in Section 5.06.
“ Employment Period
” has the meaning set forth in Section 2.01.
“ Good Reason ”
means, without the Executive’s written consent, (a) the
material diminution of any material duties or responsibilities of
the Executive without the same being
corrected within ten (10) days
after being given written notice thereof; (b) a material
reduction in the Executive’s Base Salary; or (c) the
Company giving written notice pursuant to Section 5.01 of its
intention not to extend the Employment Period.
“ 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.
“ Parent ” means
Arch Capital Group Ltd., a Bermuda company.
“ 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.
“ 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, 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.
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ARTICLE 2
EMPLOYMENT
SECTION 2.01. Employment
. The Company shall 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 President and Chief Operating Officer of the Company and
shall have such responsibilities, powers and duties as may from
time to time be prescribed by the Chief Executive Officer and the
Board of Directors of the Company; provided that such
responsibilities, powers and duties are substantially consistent
with those customarily assigned to individuals serving in such
position at comparable companies or as may be reasonably required
by the conduct of the business of the Company. During the
Employment Period the Executive shall devote substantially all of
his working time and efforts to the business and affairs of the
Company. 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 Companies or their Subsidiaries, whether for compensation or
otherwise, without prior written consent of the Company.
ARTICLE 4
BASE SALARY AND
BENEFITS
SECTION 4.01. Base
Salary . During the Employment Period, the Executive’s
base salary will be $500,000 per annum (the “ Base
Salary ”). 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 Board of Directors of the Company
shall review with the Executive his job performance and
compensation, and if deemed appropriate by the Board of Directors
of the Company, in its discretion, the Executive’s Base
Salary may be increased.
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:
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(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)
a maximum of four (4) weeks of paid vacation annually during
the term of the Employment Period; and
(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.
In addition, during the Employment
Period, the Company shall reimburse the Executive for reasonable
housing costs in the New York Metropolitan area, subject to the
Company’s requirements with respect to reporting and
documenting expenses.
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.
ARTICLE 5
TERM AND
TERMINATION
SECTION 5.01. Term . The
Employment Period will terminate on July 31, 2009; 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 such date,
if such termination shall be for Good Reason. In addition, this
Agreement will be automatically extended on the same terms and
conditions for successive one year periods following the original
term until either the Company or the Executive, at least sixty (60)
days prior to the expiration of the original term or any extended
term, shall give written notice of their intention not to renew the
Agreement.
SECTION 5.02. Unjustified
Termination . Except as otherwise provided in
Section 5.03, if the Employment Period shall be terminated
prior to the expiration of the original term (or the extension of
the Employment Period pursuant to Section 5.01) by the
Executive for Good Reason or by the Company not for Cause
(collectively, an “ Unjustified Termination ”)
(it being understood that a termination (a) for Cause,
(b) as a result of the Executive’s resignation or
leaving his employment other than for Good Reason, or (c) as a
result of the death or Permanent Disability of the Executive shall
not constitute an Unjustified Termination), the Executive shall be
paid solely (except as provided in Section 5.04 below) the
amount of his Base Salary, provided the Executive shall be entitled
to such payments only if the Executive has not breached
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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 and not revoked a general release of claims reasonably
satisfactory to the Company. Such amounts will be payable in equal
monthly installments for a period of twelve (12) months commencing
on the first month following the Date of Termination. In addition,
promptly following an Unjustified Termination, the Executive shall
also be reimbursed all Reimbursable Expenses incurred by the
Executive prior to such Unjustified Termination.
SECTION 5.03. Justified
Termination . If the Employment Period shall be terminated
prior to the expiration of the original term (or the extension of
the Employment Period pursuant to Section 5.01) (a) for
Cause, (b) as a result of the Executive’s resignation or
leaving of his employment, other than for Good Reason, (c) as
a result of the death or Permanent Disability of the Executive, or
(d) as a result of the Executive’s provision of written
notice not to extend the Employment Period under Section 5.01
(collectively, a “ Justified Termination
”), the Executive shall be entitled to receive solely (except
as provided in Section 5.04 below) his Base Salary through the
Date of Termination and reimbursement of all Reimbursable Expenses
incurred by the Executive prior to such Justified
Termination.
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 of twelve (12) months after the Date of Termination.
To the extent permitted by the then applicable plan document, the
Executive’s 18-month COBRA eligibility period will commence
after such 12-month period.
SECTION 5.05. Notice of
Termination . 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 specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
employment under the provision indicated.
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 for Good Reason, the date specified in the Notice of
Termination, and (c) if the Employment Period is terminated
for any other reason (including for Cause), the date designated by
the Company in the Notice of Termination (but in no event earlier
than the date of the Notice of Termination).
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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 Companies 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 Companies as now or hereinafter
conducted (collectively, “ Intellectual Property
”), the Executive acknowledges that such Intellectual
Property is the sole and exclusive property of the Companies and
hereby assigns all right title and interest in and to such
Intellectual Property to the Companies. 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 Copyright Act of 1976, as amended, and the
Companies 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 Companies to
protect the Companies’ 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 Companies,
whether such requests occur prior to or after termination of
Executive’s employment hereunder).
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 Companies 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
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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 Companies.
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
Companies, their Subsidiaries and their respective predecessors,
and that his services will be of special, unique and extraordinary
value to the Companies. In additio
