-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CS2/9anEe86EO/UIDroiC6mBAUi7Rq2B7qz0NppDSiKw/RUowLRuC2oiBIsaR42r XkY9w/16nWnuRAXT3XVgIQ== 0000062709-02-000006.txt : 20020416 0000062709-02-000006.hdr.sgml : 20020416 ACCESSION NUMBER: 0000062709-02-000006 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20020412 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ARCH CAPITAL GROUP LTD CENTRAL INDEX KEY: 0000947484 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 061424716 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-48508 FILM NUMBER: 02608959 BUSINESS ADDRESS: STREET 1: 20 HORSENECK LANE CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2038624300 MAIL ADDRESS: STREET 1: 20 HORSENECK LANE CITY: GREENWICH STATE: CT ZIP: 06830 FORMER COMPANY: FORMER CONFORMED NAME: RISK CAPITAL RE INC DATE OF NAME CHANGE: 19950703 FORMER COMPANY: FORMER CONFORMED NAME: RISK CAPITAL HOLDINGS INC DATE OF NAME CHANGE: 19950816 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MARSH & MCLENNAN COMPANIES INC CENTRAL INDEX KEY: 0000062709 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 362668272 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1166 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 02109 BUSINESS PHONE: 8002251581 MAIL ADDRESS: STREET 1: 1166 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: MARLENNAN CORP DATE OF NAME CHANGE: 19760505 SC 13D/A 1 schedule13d.txt SCHEDULE 13D WITH SCHEDULE 1 Schedule 13D ------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A-2 Under the Securities Exchange Act of 1934 (Amendment No. 2) ARCH CAPITAL GROUP LTD. (Name of Issuer) Common Stock (Title of Class of Securities) 767711 10 4 (CUSIP Number) Gregory F. Van Gundy, Esq. Marsh & McLennan Companies, Inc. 1166 Avenue of the Americas New York, NY 10036-2774 Phone (212) 345-5000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 8, 2001 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [GRAPHIC OMITTED]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D ------------ - ---------------------------- --------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Marsh & McLennan Companies, Inc. IRS Identification Number: 36-2668272 - ---------------------------- --------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - ---------------------------- --------------------------------------------------- 3 SEC USE ONLY - ---------------------------- --------------------------------------------------- 4 SOURCE OF FUNDS* N/A - ---------------------------- --------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ---------------------------- --------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ---------------------------- --------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES None ----------- --------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY None ----------- --------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING None ----------- --------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER None - ---------------------------- --------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON None - ---------------------------- --------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ---------------------------- --------------------------------------------------- - ---------------------------- --------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0% - ---------------------------- --------------------------------------------------- 14 TYPE OF REPORTING PERSON* HC - ---------------------------- --------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! - ---------------------------- --------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Marsh & McLennan Risk Capital Holdings, Ltd. IRS Identification Number: 13-3689981 - ---------------------------- --------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - ---------------------------- --------------------------------------------------- 3 SEC USE ONLY - ---------------------------- --------------------------------------------------- 4 SOURCE OF FUNDS* N/A - ---------------------------- --------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ---------------------------- --------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ---------------------------- --------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 1,536,005 See Item 5 ----------- --------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY None ----------- --------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,536,005 See Item 5 ----------- --------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER None - ---------------------------- --------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,536,005 See Item 5 - ---------------------------- --------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* See Item 5 - ---------------------------- --------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.7% - ---------------------------- --------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - ---------------------------- --------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! ITEM 1. SECURITY AND ISSUER ------------------- The class of equity securities to which this Schedule 13D/A relates is the Common Stock, par value $.01 per share (the "Shares"), of Arch Capital Group, Ltd. (f/k/a Risk Capital Holdings, Inc.), a Bermuda corporation ("Arch"). The principal executive offices of Arch are located at 20 Horseneck Lane, Greenwich, Connecticut 06830. ITEM 2. IDENTITY AND BACKGROUND ----------------------- Item 2 is hereby amended to the extent set forth below: Schedule I attached hereto and incorporated herein by reference sets forth, with respect to each current executive officer and director of MMC and MMRCH the following information: (a) name; (b) residence or business address; and (c) present principal occupation or employment and the name, principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted. Each person listed on Schedule I, unless otherwise indicated, is a United States citizen. None of MMC or MMRCH, nor (to the knowledge of MMC or MMRCH) any executive officer, director or controlling person of MMC or MMRCH (a) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), during the last five years or (b) has been a party, during the last five years, to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION ------------------------------------------------- N/A ITEM 4. PURPOSE OF THE TRANSACTION -------------------------- Item 4 is hereby amended to add the following: As disclosed in Arch's Form 8-K filed on November 9, 2001, pursuant to a Letter Agreement dated November 8, 2001, MMRCH received 140,380 Shares as a result of a cashless exercise of its 905,397 Class A Warrants, and 1,770,601 class B warrants held by MMRCH were canceled in exchange for a cash payment by Arch to MMRCH of $7.50 per Class B warrant (approximately $13.3 million in the aggregate). The Shares owned by MMRCH are being held for investment purposes. Depending on market conditions, MMC or MMRCH may acquire additional Shares or dispose of some or all of the Shares reported herein. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER ------------------------------------ Item 5 is hereby amended to add the following: As of April 12, 2002, MMC and MMRCH may be deemed to beneficially own Shares as follows: Number of % of Shares of Class of Name Common Stock Common Stock MMC None 0.0% MMRCH 1,536,005 9.7% The aggregate number of Shares beneficially owned by MMRCH to which this Schedule 13D/A relates is 1,536,005, representing in the aggregate 9.7% of the 15,765,332 Shares outstanding and 3.0% of the Shares outstanding assuming conversion of the 35,687,735 shares of Series A Convertible Preferred Stock of Arch ("Series A Preferred"), in each case as reported in Arch's Form 10-K filed on March 18, 2002. MMRCH has the sole power to vote and the sole power to dispose of the outstanding Shares owned by it. As disclosed in Arch's Form 8-K filed on November 9, 2001, pursuant to a Letter Agreement dated November 8, 2001, Arch issued 1,636,729 shares of Series A Preferred and Class A Warrants to purchase 173,178 Shares to Trident II, L.P. and certain related co-investment funds (collectively, "Trident II"). MMRCH is a limited partner in Trident II and one of the general partners of the sole general partner of Trident II, L.P. MMC Capital, Inc. ("MMC Capital"), a subsidiary of MMRCH, also serves as an investment advisor to Trident II. MMC and MMRCH disclaim that they beneficially own any Shares beneficially owned by Trident II. As disclosed in the Schedule 13D/A filed on April 12, 2002 by The Trident Partnership, L.P. ("Trident I"), Trident I received 391,761 Shares on April 9, 2002, as a result of a cashless exercise of its 1,386,079 Class A Warrants. The Warrants had an exercise price of $20.00 per share, and the cashless exercise was based on the closing price of $27.88 for the Shares on April 8, 2002, the day prior to the date on which notice Trident I provided its notice of exercise. Trident I also reported that it sold 640,700 Shares in market transactions on April 9, 2002, at an average net per Share price of $27.05 (or approximately $17.3 million in the aggregate). Following these transactions, Trident I reported that it continued to own 1,061 Shares. MMRCH is a limited partner in Trident I and a minority shareholder in the general partner of Trident I. MMC Capital also serves as an investment advisor to Trident I. MMC and MMRCH disclaim that they beneficially own any Shares beneficially owned by Trident I. To the knowledge of MMC and MMRCH, none of their respective officers and directors beneficially own any Shares. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER --------------------------------------------------------------------- Item 6 is hereby amended to add the following: Pursuant to a Letter Agreement dated November 8, 2001, the right of MMRCH to designate an observer to the Board of Directors of Arch was terminated. ITEM 7. MATERIAL TO BE FILED AS EXHIBIT ------------------------------- 1. Letter Agreement dated November 8, 2001, among Arch, MMRCH and the other parties thereto. SIGNATURE --------- After reasonable inquiry and to my best knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. DATED: April 12, 2002 MARSH & MCLENNAN COMPANIES, INC. By:/s/Gregory F. Van Gundy --------------------------------- Name: Gregory F. Van Gundy Title: Secretary For this and all future filings, reference is made to an Agreement dated September 28, 1995 with respect to one filing of Schedule 13D of said entities, pursuant to Rule 13d-1(f)(1). Marsh & McLennan Companies, Inc. Unless otherwise indicated, the business address of the directors and executive officers of Marsh & McLennan Companies, Inc. is 1166 Avenue of the Americas, New York, New York 10036-2774 and all directors and executive officers are citizens of the United States of America. An asterisk indicates that a person is a director of MMC. Name and Business Address Principal Occupation or Employment Lewis W. Bernard* Chairman of Classroom, Inc. Classroom, Inc. c/o Morgan Stanley 1221 Avenue of the Americas, 30th Floor New York, NY 10020 Francis N. Bonsignore Senior Vice President, Executive Resources and Development of Marsh & McLennan Companies, Inc. Mathis Cabiallavetta* Vice Chairman of Marsh & McLennan (Citizen of Switzerland) Companies, Inc. Chairman of Marsh & McLennan Global Development Peter Coster* President & Chief Executive Officer (Citizen of the United Kingdom) of Mercer Consulting Group, Inc., a subsidiary of Marsh & McLennan Companies, Inc. Charles A. Davis* Vice Chairman of Marsh & McLennan MMC Capital, Inc. Companies, Inc. President & Chief 20 Horseneck Lane Executive Officer of MMC Capital, Greenwich, CT 06830 Inc. Robert F. Erburu* Former Chairman of The Times Mirror The Times Mirror Company Company Los Angeles Times 202 West First Street, 6th Floor Los Angeles, CA 90012 Oscar Fanjul* Chief Executive Officer of (Citizen of Spain) Omega-Capital Omega-Capital P(degree)de la Castellana, 35-7(degree) 28046 Madrid Spain Jeffrey W. Greenberg* Chairman & Chief Executive Officer of Marsh & McLennan Companies, Inc. Ray J. Groves* President & Chief Operating Officer of Marsh Inc., a subsidiary of Marsh & McLennan Companies, Inc. Stephen R. Hardis* Chairman of Axcelis Technologies, Eaton Center Inc. 1111 Superior Ave., N.E., 26th Floor Cleveland, Ohio 44114 Gwendolyn S. King* President of Podium Prose Podium Prose 1025 Connecticut Avenue, N.W. Suite 1012 Washington, DC 20036 The Rt. Hon. Lord Lang of Monkton, DL* Former British Secretary of State (Citizen of the United Kingdom) for Trade & Industry Kersland Monkton Ayshire KA9 2QU United Kingdom Lawrence J. Lasser* President & Chief Executive Officer Putnam Investments, LLC of Putnam Investments, LLC, a One Post Office Square subsidiary of Marsh & McLennan Boston, MA 02109 Companies, Inc. David A. Olsen* Former Chairman of Johnson & Higgins William L. Rosoff Senior Vice President and General Counsel of Marsh & McLennan Companies, Inc. Adele Simmons* Vice Chair of Chicago Metropolis Chicago Metropolis 2020 2020 30 West Monroe Street, 18th Floor Chicago, IL 60603 John T. Sinnott* Chairman & Chief Executive Officer of Marsh Inc., a subsidiary of Marsh & McLennan Companies, Inc. A.J.C. Smith* Former Chairman of Marsh & McLennan Companies, Inc. Sandra S. Wijnberg Senior Vice President and Chief Financial Officer of Marsh & McLennan Companies, Inc. Marsh & McLennan Risk Capital Holdings, Ltd. Unless otherwise indicated, the business address of the directors and executive officers of Marsh & McLennan Risk Capital Holdings, Ltd. is 1166 Avenue of the Americas, New York, New York 10036-2774 and all directors and executive officers are citizens of the United States of America. An asterisk indicates that a person is a director of MMRCH. Name and Business Address Principal Occupation or Employment Charles A. Davis* Vice Chairman of Marsh & McLennan MMC Capital, Inc. Companies, Inc. President & Chief 20 Horseneck Lane Executive Officer of MMC Capital, Greenwich, CT 06830 Inc. Jeffrey W. Greenberg* Chairman & Chief Executive Officer of Marsh & McLennan Companies, Inc. William L. Rosoff* Senior Vice President and General Counsel of Marsh & McLennan Companies, Inc. A.J.C. Smith* Former Chairman of Marsh & McLennan Companies, Inc. Sandra S. Wijnberg* Senior Vice President and Chief Financial Officer of Marsh & McLennan Companies, Inc. EX-13 2 ex_13darch.txt EXHIBIT FOR SCHEDULE 13D ARCH CAPITAL GROUP LTD. 20 Horseneck Lane Greenwich, CT 06830 November 8, 2001 The Trident Partnership, L.P. Warburg Pincus Private Equity VIII, L.P. ("Trident I") Warburg Pincus International Partners, L.P. Craig Appin House Warburg Pincus Netherlands International 8 Wesley Street Partners I, C.V. Hamilton HM 11 Bermuda Warburg Pincus Netherlands International Partners II, C.V. Trident II, L.P. ("Trident II") (collectively, "Warburg") Craig Appin House 466 Lexington Avenue 8 Wesley Street New York, NY 10017 Hamilton HM 11 Bermuda Marsh & McLennan Capital Professionals Fund, L.P. HFCP IV (Bermuda), L.P. ("H&F") Marsh & McLennan Employees' c/o Hellman & Friedman LLC Securities Company, L.P. One Maritime Plaza (together, the Suite 1200 "Co-Investment Funds") San Francisco, CA 94111 c/o Maples and Calder Ugland House South Church Street George Town Grand Cayman Cayman Islands, British West Indies Marsh & McLennan Risk Capital Holdings, Ltd. ("Marsh") 1166 Avenue of the Americas New York, NY 10036 Ladies and Gentlemen: This letter agreement (this "Agreement") confirms the agreement reached today among each of the parties signatories hereto regarding the participation of Trident II and the Co-Investment Funds in the purchase of a portion of the Securities, as contemplated by, and on the terms set forth in, this Agreement and the Subscription Agreement dated as of October 24, 2001 (the "Subscription Agreement") by and among Arch Capital Group Ltd. ("Arch"), Warburg and H&F (the "Purchasers"), and certain other matters in connection therewith. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Subscription Agreement. 1. Investment by Trident II. Warburg hereby assigns, without recourse or warranty by it, to Trident II and the Co-Investment Funds (collectively, the "Assignees") the right, and obligation, to purchase an aggregate of $35,000,000 of the Securities on the terms and conditions set forth in the Subscription Agreement (except as explicitly modified hereby), as Purchasers under the Subscription Agreement. The Assignees acknowledge that their investment will be required to be made on the Closing Date, simultaneously with the investments being made by the Investors. The Assignees shall become "Purchasers" under the Subscription Agreement and "Investors" under the Shareholders Agreement (solely for purposes of Sections 3.4 and 5.3 and Article IV thereof and the provisions implementing the provisions described in paragraph 6(b) below); provided that: (i) Warburg and H&F shall jointly have the sole right (on behalf of themselves and all other Purchasers) to make any and all determinations with respect to, or to take any and all actions necessary to effectuate the provisions of, Section B of the Subscription Agreement (including the right to approve any amendment or acceleration of, or to waive compliance by Arch with, any of the terms thereof), provided that the consequences of such determinations and actions by Warburg and H&F do not apply differently to any Assignee than to Warburg and H&F (or, if they apply differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to any Assignee or more favorable to Warburg and H&F as a result of such determination or action); (ii) Warburg and H&F shall have the sole right to determine whether each condition for the Purchasers contained in Section C of the Subscription Agreement is satisfied; (iii) the failure of the conditions set forth in Section C.2 of the Subscription Agreement due to any breach by any Assignee of any representation, warranty or covenant shall not affect the obligation of the Company to sell the Securities on the Closing Date to either Warburg or H&F; (iv) the Assignees shall be subject to Section D.1 and D.2 of the Subscription Agreement, including the covenants thereunder; (v) Assignees shall have no rights (including no right to consent to any action proposed to be taken by Arch under, or any right to waive compliance by Arch with, any covenant or agreement) as a "Purchaser" under Section D.4 of the Subscription Agreement, it being acknowledged that each Assignee shall, however, have the obligations of a "Purchaser" under Sections D.4(d), (g) and (i) thereof; provided that any information provided to the Company pursuant to Section D.4(g) shall be held confidentially and not used for any purpose other than as set forth in Section D.4(g); (vi) no Assignee shall be considered an "original signatory" to the Subscription Agreement for purposes of Section E.6 thereof, provided that no amendment, modification or waiver of Section E of the Subscription Agreement shall affect any Assignee differently than Warburg and H&F (or, if they apply differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to any Assignee or more favorable to Warburg and H&F as a result of such determination or action); (vii) no consent of any Assignee shall be required to effect any modification or amendment to the Subscription Agreement (including, without limitation, Schedules A and B, and Exhibits I, II and III thereto), unless such amendment or modification affects an Assignee differently than Warburg and H&F (or, if they apply differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement (as modified by this Agreement) and such differences are not made more adverse to any Assignee or more favorable to Warburg and H&F as a result of such determination or action); (viii) the Assignees shall have no rights under Section F.2, and no right to assign under Section F.4, of the Subscription Agreement; and (ix) for the avoidance of doubt, the Assignees shall become parties to the Shareholders Agreement as "Investors" solely for purposes of Sections 3.4 and 5.3 and Article IV thereof and the provisions thereof implementing the provisions of paragraph 6(b) below; it being further understood that Warburg and H&F can consent on behalf of all other Investors to (A) any amendment or modification whatsoever of the Sections of the Shareholders Agreement that do not apply to any Assignee and (B) any amendment or modification of the Sections of the Shareholders Agreement that do apply to any Assignee, so long as in the case of clause (B) such amendment or modification does not affect any Assignee differently than Warburg and H&F (or, if they apply differently, it is because of differences in the treatment of Warburg and H&F as opposed to other Purchasers existing in the Subscription Agreement or the Shareholders Agreement (as modified by this Agreement) and such differences are not made more adverse to any Assignee or more favorable to Warburg and H&F as a result of such determination or action). 2. Termination of Marsh Board Observer Rights. The parties acknowledge that the rights of Marsh & McLennan Risk Capital Holdings, Ltd. ("Marsh") under Section 5(g) of the Amended and Restated Subscription Agreement dated as of June 28, 1995 (the "1995 Marsh Subscription Agreement") by and between Arch and Marsh, as amended by paragraph 2 of the Amendment to Amended and Restated Subscription Agreement dated as of October 31, 2000 by and between Arch and Marsh, have been terminated. 3. Designation of Trident Director; Reports. The parties acknowledge that all rights of The Trident Partnership, L.P. ("Trident I") under Section 5(b) of the Amended and Restated Subscription Agreement dated as of June 28, 1995 (the "1995 Trident Subscription Agreement") between Arch and Trident I have been terminated. For so long as Trident I owns any equity interest in Arch, Arch agrees furnish to Trident I a copy of its annual and quarterly reports filed under the Securities Exchange Act of 1934. 4. Capital Commitment to Trident II. Arch is hereby released from any obligation (pursuant to the Trident II partnership agreement or otherwise) to make any additional capital contributions to Trident II; in respect of (i) any investment made by Trident II on or after the date hereof or (ii) the expenses relating to any such investment; provided that Arch shall remain committed to fund its portion (equal to $4,662,388.79) of the outstanding capital call with respect to AXIS Specialty Limited. This release shall be without any penalty, forfeiture of rights or other adverse consequence to Arch or Arch's investment in Trident II, which shall continue with respect to Arch's interest in all investments of Trident II existing as of the date hereof and the AXIS investment. For the avoidance of doubt, Arch shall be entitled to its share of profits, losses and distributions, and be obligated for its share of management fees and partnership expenses, with respect to Arch's interest in all investments of Trident II existing as of the date hereof and the Axis investment. Subject to the foregoing, Arch shall continue to be a Trident II limited partner and be subject to the rights and obligations of limited partners, including the indemnification provisions. Upon the Closing Date, Arch and Trident II shall enter into an appropriate amendment to the Trident II partnership agreement to reflect the foregoing. 5. Exchange/Cancellation of Marsh's Warrants. Effective upon the Closing Date, all of Marsh's 905,397 Class A Warrants of the Company shall be canceled in exchange for the issuance by Arch of 140,380 Common Shares. Effective upon the Closing Date, all of Marsh's 1,770,601 Class B Warrants of the Company shall be canceled in exchange for the payment by Arch of cash equal to $7.50 per Class B Warrant (such price aggregating $13,279,507.50). On the Closing Date, Marsh agrees to deliver to the Company all certificates representing such Class A Warrants and Class B Warrants (or a certificate of loss and related appropriate document), and the Company shall deliver the certificate(s), registered in the name of Marsh, representing the Common Shares issued to Marsh in exchange for its Class A Warrants. For the avoidance of doubt, any cancellation or exchange of Class B Warrants made pursuant to the terms of this Section 5 shall have no effect on any amount that may become payable to the Purchasers under Section B.2 of the Subscription Agreement. 6. Registration; Tag-Along; Take-Along. (a) For the avoidance of doubt, the parties acknowledge that this Agreement does not affect the rights of Marsh under Section 6 (Registration Rights) of the 1995 Marsh Subscription Agreement or of Trident I under Section 6 (Registration Rights) of the 1995 Trident Subscription Agreement. (b) Arch, the Purchasers and the Assignees also agree that the Shareholders Agreement will provide that: (i) if any Assignee exercises its right under Section 4.3 thereof, any cutback pursuant to Section 4.4 thereof will treat the Assignees at least as favorably as Warburg and H&F (i.e., the Assignees will have priority under clause (b), and not under clause (c), thereof); (ii) each Assignee will have the rights of a Tag-Along Investor under Section 5.1 thereof to participate ratably on the basis of securities owned in a Third Party Sale (excluding any sale or distribution described in the last sentence of Section 5.1 of the Shareholders Agreement) on the same terms as the Selling Investor (but, for the avoidance of doubt, not have the obligations of a Selling Investor under Section 5.1 thereof); provided that such Assignee shall only be responsible for its pro rata portion of any indemnification (except in respect of representations specifically relating to such Assignee); (iii) in the event of a Third Party Sale (excluding any sale or distribution described in the last sentence of Section 5.1 of the Shareholders Agreement), the Selling Investor will have the right to require each Assignee to participate ratably on the basis of securities owned in such Third Party Sale on the same terms as the Selling Investor; provided that such Assignee shall only be responsible for its pro rata portion of any indemnification (except in respect of representations specifically relating to such Assignee). (iv) each Assignee shall be subject to the restrictions of Section 5.2 of the Shareholders Agreement with respect to the Securities acquired by it under the Subscription Agreement and any securities acquired in respect thereof, to the same extent that Warburg and H&F are restricted with respect to the Securities acquired by them under the Subscription Agreement and any securities acquired in respect thereof. "Tag-Along Investor," "Third Party Sale and "Selling Investor" have the meanings given to them in the Shareholders Agreement and to the extent necessary the term "Tag-Along Investor" shall be deemed to include more than one party. 7. Further Assurances. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary or desirable under applicable legal requirements, to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Closing Date, any further action is necessary or desirable to carry out the purposes of this Agreement, the parties hereto shall use their reasonable best efforts to take or cause to be taken all such necessary or desirable action and execute, and deliver and file, or cause to be executed, delivered and filed, all necessary or desirable documentation. Each of Trident I, Trident II, Marsh and the Co-Investment Funds agree (to the full extent of their current or future ownership of securities of Arch) to vote in favor of all matters to be submitted to shareholders of Arch in connection with the foregoing or the transactions contemplated by the Subscription Agreement (and the grants of any shares or options contemplated thereby or in connection therewith). Each of the parties will consult with each other with respect to the issuance of any press release or public announcement with respect to the foregoing. 8. Notices. All notices or other communications given or made hereunder shall be validly given or made if in writing and delivered by facsimile transmission or in person at, or mailed by registered or certified mail, return receipt requested, postage prepaid, to, the addresses (and shall be deemed effective at the time of receipt thereof): (i) If to Arch: Arch Capital Group Ltd. 20 Horseneck Lane Greenwich, CT 06830 Attention: Peter Appel, President and Chief Executive Officer Facsimile: (203) 861-7240 (ii) If to Trident I, Trident II, Marsh or the Employee Co-Investment Funds, to it at: 1166 Avenue of the Americas New York, New York 10036 Attention: Mark Dallara Facsimile: (212) 345-5627 and c/o Marsh & McLennan Capital, Inc. 20 Horseneck Lane Greenwich, CT 06830 Attention: David Wermuth Facsimile: (203) 862-2925 or to such other address as the party to whom notice is to be given may have previously furnished notice in writing to the other in the manner set forth above. A notice hereunder shall not be deemed given until copies thereof are given as contemplated above. Notices to all other parties hereto shall be given in accordance with the Subscription Agreement. 9. Entire Agreement; Amendment. This Agreement contains all of the terms agreed upon by the parties with respect to the subject matter hereof. This Agreement may be amended or the provisions thereof waived only by a written instrument signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 10. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof. 11. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party without the prior written consent of the other party; provided that this Agreement may be assigned by a Purchaser consistent with an assignment in accordance with Section F.4 of the Subscription Agreement. 12. Severability. In the event that any provision or any part of this Agreement is held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall not effect the validity or enforceability of any other provision or part thereof. 13. Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the substantive laws of the State of New York, without giving effect to principles of conflicts of laws. 14. Counterparts. This Agreement and any instrument delivered in connection herewith may be executed in any number of counterparts with the same effect as if the signatures on all counterparts are upon the same instrument. [Signature pages follow] Please confirm that the foregoing is in accordance with your understanding by signing and returning to us the duplicate enclosed copy of this Agreement. Very truly yours, ARCH CAPITAL GROUP LTD. By: ------------------------------------ Name: Title: Agreed to and Accepted As of the Date First Above Written: THE TRIDENT PARTNERSHIP, L.P. By: ---------------------------------------------- Name: Title: TRIDENT II, L.P. By: ---------------------------------------------- Name: Title: MARSH & MCLENNAN RISK CAPITAL HOLDINGS, LTD. By: ---------------------------------------------- Name: Title: MARSH & MCLENNAN CAPITAL PROFESSIONALS FUND, L.P. By: ---------------------------------------------- Name: Title: MARSH & MCLENNAN EMPLOYEES' SECURITIES COMPANY, L.P. By: ---------------------------------------------- Name: Title: HFCP IV (BERMUDA), L.P. By: H&F Investors IV, LLC, its General Partner By: H&F Investors III, Inc. its Manager By: ---------------------------------------------- Name: Title: WARBURG PINCUS PRIVATE EQUITY VIII, L.P. WARBURG PINCUS INTERNATIONAL PARTNERS, L.P. WARBURG PINCUS NETHERLANDS INTERNATIONAL PARTNERS I, C.V. WARBURG PINCUS NETHERLANDS INTERNATIONAL PARTNERS II, C.V. By: Warburg, Pincus & Co., its General Partner By: ---------------------------------------------- Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----