Exhibit 10.1
 
                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT
 
          THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Amended
Employment Agreement") is made as of November 11, 2005, to be effective as of
the date hereof, by and between DARWIN PROFESSIONAL UNDERWRITERS, INC., a
Delaware corporation (the "Company"), and STEPHEN J. SILLS (the "Executive").
 
          WHEREAS, prior to the date hereof, the Executive has been employed as
President and Chief Executive Officer of the Company pursuant to an Employment
Agreement dated as of July 28, 2003 by and among the Executive, the Company and,
for purposes of joining in certain provisions thereof, Alleghany Insurance
Holdings LLC ("AIHL," and such Employment Agreement, the "Employment
Agreement"); and
 
          WHEREAS, AIHL is the sole stockholder of Darwin Group, Inc., a
Delaware corporation ("Darwin Group"); and
 
          WHEREAS, AIHL intends to contribute $135,000,000 to the capital of
Darwin Group (the "Capital Contribution") and, subsequent to the Capital
Contribution, to contribute Darwin Group to the Company, which contribution may
take the form of a merger of Darwin Group with and into the Company, with the
Company as the surviving corporation in the merger, or, alternatively, the
exchange of shares of common stock of Darwin Group owned by AIHL for shares of
Series B Preferred Stock of the Company, all as provided in the Contribution and
Exchange Agreement by and among the Company, Darwin Group and AIHL (the
"Contribution Agreement"), a copy of which is attached hereto as Exhibit A; and
 
          WHEREAS, in connection with the Capital Contribution and the
contribution of Darwin Group to the Company, the Company and the Executive
mutually desire to enter into this Amended Employment Agreement to provide for
the modifications of the terms of the Employment Agreement as are set forth
herein and to set forth certain additional agreements between the Executive and
the Company; and
 
          WHEREAS, since AIHL has no continuing obligations to the Company or to
the Executive under the terms of this Amended Employment Agreement, each of the
Company and the Executive is willing to release AIHL from all of its obligations
under the Employment Agreement;
 
          NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the Company and the Executive hereby agree as
follows:
 
          1. Employment Period.
 
          The Company will employ the Executive, and the Executive will serve
the Company, under the terms of this Amended Employment Agreement for a period
beginning as of the date hereof and terminating on December 31, 2007 (the
"Initial Term Expiration Date"), unless such period shall have been earlier
terminated in accordance
 
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with the terms hereof; provided, however, that in the event that an IPO (as
defined herein) has taken place on or prior to December 31, 2007, then the
Initial Term Expiration Date shall automatically be extended until the date of
the third anniversary of the IPO (the "IPO Third Anniversary") (for example, if
an IPO took place on April 15, 2006, then the IPO Third Anniversary would be
April 15, 2009). Beginning on the day following the Initial Term Expiration Date
(either January 1, 2008, if no IPO has taken place on or prior to December 31,
2007, or the day following the IPO Third Anniversary, if an IPO has taken place
on or prior to December 31, 2007), the term of the Executive's employment
hereunder shall automatically be renewed for renewal terms of one year each,
unless either the Company or the Executive gives written notice of non-renewal
of the Executive's employment at least six months prior to the end of the
initial term or any subsequent renewal term. The period of the Executive's
employment hereunder, including any renewal term, is referred to herein as the
"Employment Period".
 
          2. Duties and Status.
 
          (a) The Company hereby engages the Executive as a full-time executive
employee for the Employment Period, and the Executive accepts such employment,
on the terms set forth in this Amended Employment Agreement. The Executive shall
serve as President and Chief Executive Officer of the Company and as a member of
the Board of Directors of the Company. During the Employment Period, the
Executive shall exercise such authority and perform such executive duties and
functions, and discharge such responsibilities, as are reasonably associated
with the Executive's position, commensurate with the authority vested in the
Executive pursuant to this Amended Employment Agreement. Subject to direction
(i) prior to an IPO, by the Board of Directors of the Company (the "Board of
Directors") and by the Chairman of the Compensation Committee of the Board of
Directors (the "Compensation Committee") and (ii) subsequent to an IPO, by the
Board of Directors, the Executive shall be primarily responsible for
establishing the Company's business and for the overall management of its
business activities.
 
          (b) During the Employment Period, the Executive shall devote his full
business time and efforts to the business of the Company and accept such
additional office or offices to which he may be elected by the Board of
Directors, provided that the performance of the duties of such office or offices
shall be consistent with the scope of the duties provided for in Section 2(a)
hereof.
 
          (c) If requested by the Board of Directors (or, prior to an IPO, by
the Chairman of the Compensation Committee), the Executive shall also serve,
without additional compensation, as an officer and/or director of any or all of
the Subsidiaries of the Company.
 
          (d) Nothing in this Amended Employment Agreement shall preclude the
Executive from devoting reasonable periods of time required for engaging in
charitable, religious, civic and community activities, provided that such
activities do not interfere with his duties hereunder.
 
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          3. Compensation.
 
          (a) Base Salary. During the Employment Period, the Company will pay to
the Executive, as compensation for the performance of his duties and obligations
hereunder, a base salary at the rate of $ per annum, subject to normal
withholding and other taxes, payable in arrears not less frequently than monthly
in accordance with the normal payroll schedule of the Company. Such base salary
will be subject to review prior to January 1 of each year for possible increase
by the Compensation Committee, but shall in no event be decreased from its then
existing level during the Employment Period.
 
          (b) Annual Bonus Plan. The Company has established and will maintain
an annual incentive compensation plan in which the Executive does and will
continue to participate. Under such plan, the Executive is eligible to receive
an annual bonus with a target of not less than 50% of the Executive's base
salary for each such year of employment, commencing on January 1 of each year.
The amount of each target annual bonus paid to the Executive will depend upon
the extent to which, in the judgment of the Compensation Committee, the Company
and the Executive have achieved reasonable performance objectives previously
established and mutually agreed to by the Executive and the Compensation
Committee.
 
          (c) Long-Term Incentive Plan. The Company has established and will
maintain a long-term incentive plan (the "LTIP") for the Executive and other
officers nominated by the Executive and approved by the Board of Directors or
Compensation Committee (including the Executive, the "LTIP Participants"). The
LTIP consists of interests in successive annual profit pools established for
each calendar year (each such profit pool, a "Profit Pool," and each such year,
a "Profit Pool Year").
 
          It is the intention of the Executive and the Company that 100% of the
interests in each Profit Pool established under the LTIP shall be awarded for
each Profit Pool Year. The Executive shall be entitled to receive an interest of
40% in the Profit Pool for each full Profit Pool Year for which the Executive
serves as President and Chief Executive Officer of the Company.
 
          The Executive consents to the amendment and restatement of the LTIP in
the form attached hereto as Exhibit B.
 
          4. Employee Benefits.
 
          During the Employment Period, the Executive will be entitled to
participate in the employee benefit plans and programs of the Company to the
extent that his position, tenure, salary, age, health and other qualifications
make him eligible to participate. Such plans and programs shall include all
life, accident, disability and health insurance plans of the Company, all
pension plans of the Company, and any other similar plans and programs of the
Company, as in existence at any time during the Employment Period (including the
initial term and any renewal term). The Executive will be entitled to four weeks
vacation time during each calendar year in which he is employed hereunder.
 
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          5. Restricted Stock.
 
          The Executive has received a grant of 40,000 shares of restricted
stock of the Company (representing, as of the date of this Amended Employment
Agreement, 8% of the outstanding shares of common stock of the Company) pursuant
to a restricted stock plan (the "Restricted Stock Plan") established by the
Company for the benefit of the Executive and other officers nominated by the
Executive and approved by the Board of Directors or the Compensation Committee.
Such shares of restricted stock were granted to the Executive pursuant to a
restricted stock award agreement (the "Restricted Share Agreement").
 
          The Executive consents to the amendment and restatement of the
Restricted Stock Plan in the form attached hereto as Exhibit C and to the
amendment and restatement of the Restricted Share Agreement in the form attached
hereto as Exhibit D.
 
          6. Consent.
 
          The Executive consents to the terms of the Contribution Agreement, a
copy of which is attached hereto as Exhibit A, including, without limitation,
the terms and conditions of Section 2 (Darwin Group Transfer; Exchange of DPUI
Common Stock), Section 4 (Related Party Transactions) and Section 6 (Certain
Activities) thereof, and the terms and conditions set forth on Exhibit C
thereto.
 
          7. Deferred Compensation Agreement.
 
          The Company will establish a deferred compensation plan or arrangement
for the Executive pursuant to which the Executive may elect to defer receipt of
compensation, which deferred amounts will accrue interest at a market rate of
interest to be agreed by the Company and the Executive.
 
          8. Termination of Employment.
 
          (a) Termination for Cause. The Executive's employment with the Company
may be terminated for "cause," which is defined to mean the following:
 
          (i) the commission by the Executive of gross misconduct in connection
     with the performance of any of the Executive's duties;
 
          (ii) willful failure by the Executive to implement reasonable
     directives (x) prior to an IPO, of the Board of Directors or of the
     Chairman of the Compensation Committee and (y) subsequent to an IPO, of the
     Board of Directors, after written notice of such failure to the Executive,
     which failure is not corrected within 10 days following delivery of such
     written notice; or
 
          (iii) the Executive's conviction of a felony.
 
          (b) Termination for Good Reason. The Executive shall have the right at
any time to terminate his employment with the Company for any reason. The
 
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termination of the Executive's employment shall be deemed to be for "good
reason" if and only if such termination shall be the result of:
 
          (i) a material reduction, without the Executive's consent, of the
     Executive's responsibilities, or the assignment to the Executive of duties
     materially inconsistent with his position;
 
          (ii) (x) requiring the Executive to report to anyone other than (A)
     prior to an IPO, the Board of Directors and/or the Chairman of the
     Compensation Committee and (B) subsequent to an IPO, the Board of
     Directors, or (y) subsequent to a Change of Control Event, requiring the
     Executive to report to anyone other than the Board of Directors and/or the
     chief executive officer of the Acquiring Person or, if the Acquiring Person
     is a Subsidiary of another Person (such Person, the "Parent"), requiring
     the Executive to report to anyone other than the Board of Directors and/or
     the chief executive officer of the Parent;
 
          (iii) at any time prior to the Executive's Retirement, the Executive's
     not being nominated or elected to serve as a member of the Board of
     Directors;
 
          (iv) relocation of the principal executive offices of the Company,
     without the Executive's consent, to a location more than 25 miles from
     their current location in Farmington, Connecticut;
 
          (v) termination by any of the Capitol Companies, prior to December 31,
     2007, of the fronting arrangements currently in place between the Capitol
     Companies and the insurance company subsidiaries of Darwin Group;
 
          (vi) a material breach by the Company in the performance of any of its
     obligations under this Amended Employment Agreement (including its
     obligation to cause any successor to assume the obligations of the Company
     hereunder as provided in Section 17 hereof), after written notice of such
     breach to the Board of Directors, which breach is not corrected within 10
     days following delivery of such written notice; or
 
          (vii) the Company's delivery to the Executive of written notice of
     non-renewal of the Executive's employment upon the expiration of the
     initial term or any renewal term (provided, that unless otherwise agreed by
     the Company, termination by the Executive of his employment following the
     Company's delivery of such notice of non-renewal shall be deemed to be for
     "good reason" pursuant to this clause (vii) only if the Executive remains
     in the employment of the Company until the expiration of the initial term
     or such renewal term, as the case may be).
 
          (c) Consequences of Termination Without Cause or for Good Reason. In
the event of a termination of the Executive's employment during the Employment
Period (x) by the Company, which termination is not a termination for "cause"
(as defined above) or (y) by the Executive for "good reason" (as defined above),
and provided that such termination is not by reason of death, Retirement (as
defined in
 
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Section 8(d) hereof) or Disability (as defined in Section 8(d) hereof), then (i)
the Executive shall be entitled to continued payment of base salary for a period
of 12 months following the date of termination, (ii) the Executive shall be
entitled to payment of his target annual bonus for the year in which the date of
termination occurs, such payment to be made at the time other officers of the
Company receive bonus payments in respect of such year, (iii) the Executive
shall be entitled to a Medical Coverage Subsidy (as defined under Section 8(1)
below), (iv) all LTIP interests held by the Executive shall fully and
immediately vest, with payouts to the Executive in respect of his interests in
outstanding Profit Pools thereunder to be made at the times, in the amounts and
in the manner provided in the LTIP for payments to other LTIP Participants whose
employment with the Company is continuing, (v) all shares of restricted stock
previously awarded to the Executive shall fully and immediately vest, and (vi)
following the determination of Fair Market Value in accordance with the
provisions of the Restricted Stock Plan and the Restricted Share Agreement, the
Executive shall sell to the Company, and the Company shall purchase from the
Executive, all shares of restricted stock which have vested as of the date of
termination (including shares of restricted stock which have vested by reason of
such termination), and any other shares of common stock of the Company which may
then be owned by the Executive; provided, however, that the provisions of this
Section 8(c)(vi) shall not apply if an IPO has occurred prior to the date of
such termination of the Executive's employment hereunder.
 
          (d) Termination Upon Death, Retirement or Disability. The Employment
Period shall be terminated by the death of the Executive. The Employment Period
may be terminated by the Executive by reason of the Executive's retirement
("Retirement") (i) effective as of December 31 of any calendar year beginning
December 31, 2007, if no IPO has occurred on or prior to December 31, 2007, or
(ii) if an IPO has occurred on or prior to December 31, 2007, effective as of
the IPO Third Anniversary, or as of any December 31 following the IPO Third
Anniversary (for example, if an IPO occurs on April 15, 2006, on the IPO Third
Anniversary (April 15, 2009), or as of the December 31 of any calendar year
beginning with December 31, 2009). The Employment Period may be terminated by
the Board of Directors if the Executive is unable to discharge his duties
hereunder due to physical or mental illness for one or more periods totaling six
months during any consecutive twelve-month period ("Disability").
 
          (e) Consequences of Termination Upon Death, Retirement or Disability.
In the event of a termination of the Executive's employment during the
Employment Period by reason of the Executive's death, Retirement (as defined
above) or Disability (as defined above), then (i) the Executive shall be
entitled to continued payment of base salary through the date of termination,
(ii) the Executive shall not be entitled to any payment of annual bonus provided
for in Section 3(b) above in respect of the year in which the date of
termination occurs (except in the event of Retirement by the Executive (x) on
December 31 of any year in which he is permitted to retire, in which case the
Executive will be entitled to an annual bonus for the year in which he retires
or (y) on the IPO Third Anniversary, in which case the Executive shall be
entitled to receive payment of an amount equal to (A) his target annual bonus
provided for in Section 3(b) above in respect of the year in which the IPO Third
Anniversary occurs multiplied by (B) the number of days elapsed between January
1 of such year and the date of the IPO Third
 
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Anniversary, divided by (y) 365), (iii) the Executive shall be entitled to
receive payouts in respect of all LTIP interests held by the Executive which
have vested at the date of termination, such payouts to the Executive in respect
of his interests in outstanding Profit Pools thereunder to be made at the times,
in the amounts and in the manner provided in the LTIP for payments to other LTIP
Participants whose employment with the Company is continuing, (iv) all LTIP
interests held by the Executive which have not vested at the date of termination
shall be forfeited, (v) all shares of restricted stock previously awarded to the
Executive shall fully and immediately vest, and (vi) following the determination
of Fair Market Value in accordance with the provisions of the Restricted Stock
Plan and the Restricted Share Agreement, the Executive shall sell to the
Company, and the Company shall purchase from the Executive, all shares of
restricted stock which have vested as of the date of termination (including
shares of restricted stock which have vested by reason of such termination), and
any other shares of common stock of the Company which may then be owned by the
Executive; provided, however, that the provisions of this Section 8(e)(vi) shall
not apply if an IPO has occurred prior to the date of such termination of the
Executive's employment hereunder. In addition to the foregoing, in the event of
a termination of the Executive's Employment Period during the Employment Period
by reason of the Executive's Disability (as defined above), the Company shall
provide a Medical Coverage Subsidy (as defined under Section 8(1) below).
 
          (f) The Executive agrees that in the event of a termination of the
Executive's employment hereunder by reason of Retirement, the Executive will
serve the Company as Vice Chairman for a period of two years following the date
of Retirement (the "Post-Retirement Period"). Such service as Vice Chairman
shall be on a part-time basis. As consideration for such service as Vice
Chairman during the Post-Retirement Period, notwithstanding any provision of the
LTIP to the contrary, (i) the Executive shall receive vesting credit for
purposes of the LTIP for such service as Vice Chairman and (ii) at the
conclusion of the Post-Retirement Period, the Executive shall be deemed to be
100% vested in respect of awards of interests in Profit Pools made under the
LTIP to the Executive for Profit Pool Years ending on or prior to the date of
Retirement. For example, if the Executive's date of Retirement was December 31,
2009, at completion of service as Vice Chairman during the Post-Retirement
Period on December 31, 2011, the Executive's Vested Percentage (as defined in
the LTIP) for purposes of the LTIP would be deemed to be 100% for awards of
interests in Profit Pools made to the Executive for each Profit Pool Year ended
on or prior to December 31, 2009. Any payments in respect of awards of interest
in such Profit Pools shall be made at the same time that payouts for such Profit
Pools are made to other LTIP Participants whose employment with the Company is
continuing. The Executive shall not receive any other compensation for his
service as Vice Chairman during the Post-Retirement Period. If mutually agreed
by the Executive and the Company, the Executive may continue to serve as Vice
Chairman following completion of the Post-Retirement Period, with the
Executive's compensation and benefit package for such additional service to be
agreed by the Company and the Executive.
 
          (g) Other Terminations of Employment. In the event that the
Executive's employment with the Company is terminated by the Company for "cause"
(as defined above) or by the Executive other than for "good reason" (as defined
above),
 
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and provided that such termination is not as a result of death, Retirement (as
defined above) or Disability (as defined above), then (i) the Executive shall be
entitled to continued payment of base salary through the date of termination,
(ii) the Executive shall not be entitled to any payment of annual bonus provided
for in Section 3(b) above in respect of the year in which the date of
termination occurs, (iii) all LTIP interests held by the Executive, whether
vested or unvested, shall be forfeited, (iv) all shares of restricted stock
previously awarded to the Executive which have not vested at the date of
termination shall be forfeited, and (v) the Executive shall sell to the Company,
and the Company shall purchase from the Executive, all of the shares of
restricted stock previously awarded to the Executive which have vested at the
date of termination, and any other shares of common stock of the Company which
may then be owned by the Executive, at a price per share equal to the GAAP Book
Value of one share of common stock of the Company as of the Determination Date,
with such sale to occur promptly following the Determination Date, as determined
in accordance with the provisions of the Restricted Stock Plan and the
Restricted Share Agreement; provided, however, that the provisions of this
Section 8(g)(v) shall not apply if an IPO has occurred prior to the date of such
termination of the Executive's employment hereunder.
 
          (h) Change of Control Event. In the event of a Change of Control
Event, (i) all LTIP interests held by the Executive shall fully and immediately
vest on the date of such Change of Control Event, with payouts to the Executive
in respect of his interests in outstanding Profit Pools thereunder to be made at
the times, in the amounts and in the manner provided in the LTIP for payments to
other LTIP Participants whose employment with the Company is continuing (whether
or not the Executive elects to terminate the Employment Period in connection
with such Change of Control Event as provided in the succeeding sentence of this
Section 8(h)), and (ii) all shares of restricted stock previously awarded to the
Executive shall fully and immediately vest. In addition, in connection with the
occurrence of a Change of Control Event, the Executive shall have the right to
terminate the Employment Period, such termination to be effective on the date of
such Change of Control Event, and, in the event that the Executive elects to
terminate the Employment Period, (i) the Executive shall be entitled to
continued payment of base salary through the date of termination and (ii) the
Executive shall be entitled to receive payment, on the date of such Change of
Control Event, of an amount equal to (x) (A) his target annual bonus provided
for in Section 3(b) above in respect of the year in which the date of
termination occurs multiplied by (B) the number of days elapsed between January
1 of such year and the date of such Change of Control Event, divided by (y) 365.
The Executive shall not be entitled to any other payments or benefits hereunder
in connection with such a termination.
 
          (i) No Mitigation. Following termination of the Executive's employment
with the Company, the Executive shall be under no obligation to seek
re-employment and there shall be no offset against amounts due the Executive
under this Amended Employment Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain.
 
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          (j) Nature of Payments. Any amounts due under this Section 8 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
 
          (k) Section 409A. Notwithstanding any other provision of this Amended
Employment Agreement to the contrary, in the event that any amounts of
compensation payable or benefits provided under this Amended Employment
Agreement upon the termination of the employment of the Executive are considered
as the deferral of compensation pursuant to a "nonqualified deferred
compensation plan" within the meaning of Section 409A of the Code, then this
Amended Employment Agreement shall be construed, and such compensation shall be
payable or benefits provided, so that this Amended Employment Agreement and the
payment of such compensation or benefits satisfies the requirements of Section
409A(2), (3) and (4) of the Code. The Company and the Executive shall use their
reasonable best efforts to mutually agree, prior to December 31, 2006, to such
reasonable amendments to this Amended Employment Agreement requested by the
Executive as to the time of payment (which time shall not be earlier than the
time presently provided herein) of any amounts of compensation payable or
benefits to be provided upon the termination of employment of the Executive so
as to conform this Amended Employment Agreement with the requirements of Section
409A and Proposed Treasury Regulations Sections 1.409A-1 et seq. The Company
shall have no liability either for any delay in the payment of any compensation
or the provision of any benefit (and it shall not be a breach of this Amended
Employment Agreement) that the Company reasonably believes is required by the
provisions of this Section 8(k) or for paying any amount of compensation or
providing any benefit that the Company reasonably believes will not violate the
requirements of Section 409A(2), (3) and (4) of the Code; provided, however,
that in the event of any such delay in the payment of compensation, the Company
shall pay interest on the amount of the payment so delayed, until the date of
payment, at a rate per annum equal to the 90-day U.S. Treasury rate.
 
          (l) Medical Coverage Subsidy. If the Executive becomes entitled to a
"Medical Coverage Subsidy" under either Section 8(c) or Section 8(e) above, the
Company shall pay on the Executive's behalf (i) the monthly COBRA premium under
its group medical plans (the "Medical Plans") applicable to the Executive, his
spouse and dependents for the twelve-month period immediately following the
Executive's employment termination and (ii) a tax gross-up payment on each
monthly COBRA premium payable at the same time as each monthly COBRA premium.
The tax gross up payment under this Section 8(1) shall be an amount such that,
after payment of all federal, state and local income and employment taxes on
such amount (assuming that the Executive is subject to tax at the highest
marginal tax rates), there remains a balance sufficient to pay the taxes being
reimbursed. Notwithstanding the foregoing, if the Company is able to arrange for
direct payment of the medical insurance premiums of the Executive, his spouse
and dependents under the Company's medical plans for the twelve-month period in
which he would be entitled to a Medical Coverage Subsidy under either Section
8(c) or Section 8(e) above in a manner that does not result in taxable income to
the Executive, the Company shall be entitled to make such direct payment in such
alternative manner and no tax gross up payment shall be required.
 
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          9. Excise Tax. If any payments, rights or benefits (whether pursuant
to the terms of this Amended Employment Agreement or any other plan, arrangement
or agreement between the Executive and the Company or any Affiliate of the
Company) (the "Payments") received or to be received by Executive will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or
any similar tax that may hereafter be imposed), then the Company shall pay to
Executive an amount in addition to the Payments (the "Gross-Up Payment") as
calculated below. The Gross Up Payment shall be in an amount such that, after
deduction of any Excise Tax on the Payments and any federal, state and local
income and employment tax and Excise Tax on the Gross Up Payment, but before
deduction for any federal state or local income and employment tax on the
Payments, the net amount retained by the Executive shall be equal to the
Payments. The process for calculating the Excise Tax, determining the amount of
any Gross-Up Payment and other procedures relating to this Section 9 are set
forth in Exhibit E attached hereto. For purposes of making the determinations
and calculations required herein, the Accounting Firm (as defined in Exhibit E)
may rely on reasonable, good faith interpretations concerning the application of
Section 280G and Section 4999 of the Code, provided that the Accounting Firm
shall make such determinations and calculations on the basis of "substantial
authority" (within the meaning of Section 6662 of the Code) and shall provide
opinions to that effect to both the Company and to the Executive.
 
          10. Certain Definitions.
 
          "Affiliate," when used with reference to any Person, shall mean
another Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified. The term "control" (including the terms "controlled by" and "under
common control with") means the ability, directly or indirectly, to direct or
cause the direction of the management and policies of the Person in question.
 
          "Alleghany" means Alleghany Corporation.
 
          "Capitol Companies" means, collectively, Capitol Indemnity
Corporation, Capitol Specialty Insurance Corporation, and Platte River Insurance
Company,
 
          "Change of Control Event" means (1) prior to an IPO, (x) the
occurrence of any Person, other than Alleghany or an Affiliate of Alleghany
(such Person, the "Acquiring Person"), owning directly or indirectly more than
50% of the outstanding voting securities (weighted by voting power) of the
Company, or (y) a sale of more than 50% of the total gross fair market value of
the assets of the Company to an Acquiring Person, and (ii) subsequent to an IPO,
(x) the occurrence of an Acquiring Person or a Group, owning directly or
indirectly more than 50% of the outstanding voting securities (weighted by
voting power) of the Company, or (y) a sale of more than 50% of the total gross
fair market value of the assets of the Company to an Acquiring Person or Group.
 
          "Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder by the U.S. Treasury Department, as amended
from time to time.
 
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          "Determination Date" means (i) the last day of the second calendar
year following the date of termination of Executive's employment, if the date of
termination is on or prior to June 30, and (ii) the last day of the third
calendar year following the date of termination of Executive's employment, if
the date of termination is on or after July 1.
 
          "Fair Market Value" means Fair Market Value as determined in
accordance with the provisions of the Restricted Stock Plan and the Restricted
Share Agreement.
 
          "GAAP Book Value" means GAAP Book Value as determined in accordance
with the provisions of the Restricted Stock Plan and the Restricted Share
Agreement.
 
          "Group" has the meaning set forth in Rule 13d-5 under the Securities
Exchange Act of 1934, as amended, as of the date hereof; provided, however, that
no Person (including, without limitation, Alleghany and any Affiliate of
Alleghany) who holds shares of Series B Preferred Stock, or who holds shares of
common stock of the Company acquired upon conversion of shares of Series B
Preferred Stock, shall be deemed to be a member of a Group, notwithstanding such
Person's being party to a voting agreement or any other agreement with other
Persons who are holders of shares of Series B Preferred Stock or of shares of
common stock of the Company acquired upon conversion of shares of Series B
Preferred Stock.
 
          "IPO" means the initial public offering of Company Common Stock
pursuant an effective registration statement under the Securities Act of 1933,
as amended, in connection with which the Company Common Stock becomes listed on
a U.S. national securities exchange or traded on the Nasdaq National Market
System.
 
          "Person" shall mean any natural person, corporation, partnership,
limited partnership, limited liability company, joint venture, firm,
association, trust, unincorporated organization, government or governmental
agency or any other entity.
 
          "Series B Preferred Stock" means the shares of Series B Convertible
Preferred Stock of the Company, par value $0.10 per share.
 
          "Subsidiary" means, with respect to any Person, (i) a corporation of
which shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation are at the time
owned, directly or indirectly, through one or more intermediaries, by such
Person, or (ii) in the case of unincorporated entities, any such entity with
respect to which such Person has the power, directly or indirectly, to designate
more than 50% of the individuals exercising functions similar to a board of
directors.
 
          11. Representations; Release of AIHL.
 
          (a) The Executive represents and warrants to the Company that he is
not subject to or bound by any agreement that would affect his ability to enter
into this
 
 
                                       11
<PAGE>
 
Amended Employment Agreement, to serve as President and Chief Executive Officer
of the Company, to serve as a member of the Board of Directors of the Company,
to serve as an officer or director of any Subsidiary of the Company, or to
solicit executives for employment by the Company, and that this Amended
Employment Agreement has been duly executed and delivered by the Executive.
 
          (b) The Company represents and warrants to the Executive that this
Amended Employment Agreement has been duly authorized, executed and delivered by
it.
 
          (c) Each of the Company and the Executive hereby consents and agrees
to the full release and discharge of AIHL from all of the obligations of AIHL
under the Employment Agreement.
 
          12. Noncompetition; Nondisclosure; Nonsolicitation.
 
          The Company and the Executive agree that the services rendered by the
Executive hereunder are unique and irreplaceable. The Executive hereby agrees
that he will not, during the Employment Period (including the initial term and
any renewal term), during the Post-Retirement Period or during any period
following the Post-Retirement Period during which the Executive continues to
serve as Vice Chairman of the Company as contemplated by Section 8(f) above, and
for a period of 12 months thereafter:
 
          (i) engage or participate, directly or indirectly, as an officer,
     director, employee, partner or consultant with primary responsibility for
     activities in the fields of D&O, E&O and/or professional liability
     insurance or reinsurance in the United States of America (a "Competing
     Activity"), or in any business which is, or as a result of the Executive's
     engagement or participation would become, a Competing Activity; or
 
          (ii) solicit or recruit any officer or employee of Alleghany or any
     Subsidiary of Alleghany to join any other company to engage in a Competing
     Activity, or solicit or recruit a substantial number of employees of
     Alleghany or any Subsidiary of Alleghany to work with any company with whom
     the Executive is associated.
 
          The Executive further agrees that, during the Employment Period
(including the initial term and any renewal term) and at all times thereafter:
 
          (iii) he shall keep secret and retain in strictest confidence, and
     will not use for his benefit or the benefit of others, any and all
     confidential information relating to Alleghany, the Company or any of their
     Affiliates disclosed to him in the course of his employment hereunder,
     including, without limitation, trade secrets, customer lists and other
     secret or confidential aspects of any of their businesses, and the
     Executive further agrees that he shall not disclose such information to
     anyone outside Alleghany, the Company or their Affiliates, except in the
     performance by him of the services provided for hereunder or as required by
     law in connection with any judicial or administrative proceeding or inquiry
 
 
                                       12
 
<PAGE>
 
     (provided prior written notice thereof is given by the Executive to the
     Company and to Alleghany) or with the prior written consent of the Company,
     unless such information is known generally to the public or the trade
     through sources other than the Executive's unauthorized disclosure; and
 
          (iv) he shall not engage in or participate in, directly or indirectly,
     any business conducted under a name that shall be the same as or similar to
     the name of, or any trade name used by, Alleghany, the Company or any of
     their Affiliates.
 
          The Executive acknowledges that irreparable damage would result to the
Company if the provisions of this Section 12 are not specifically enforced, and
agrees that the Company shall be entitled to any appropriate legal, equitable or
other remedy, including injunctive relief, in respect of any failure to comply
with the provisions of this Section.
 
          13. Business Expenses.
 
          The Company shall promptly reimburse the Executive for all
appropriately documented, reasonable business expenses incurred by the Executive
in the performance of his duties under this Amended Employment Agreement, in
accordance with the Company's policies.
 
          14. Office.
 
          The Company shall provide the Executive with a suitable workplace
appropriate for his responsibilities, secretarial and other business services at
the Company's principal executive offices, which office space shall initially be
located in the Company's current office space in Farmington, Connecticut.
 
          15. Insurance.
 
          The Company shall have the right at its own cost and expense to apply
for and to secure in its own name, or otherwise, life, health or accident
insurance, or any or all of them, covering the Executive, and the Executive
agrees to submit to the usual and customary medical examination and otherwise to
cooperate with the Company in connection with the procurement of any such
insurance, and any claims thereunder.
 
          16. Waiver of Breach.
 
          Any waiver of any breach of this Amended Employment Agreement shall
not be construed to be a continuing waiver or consent to any subsequent breach
on the part either of the Executive or of the Company.
 
          17. Assignment.
 
          (a) This Amended Employment Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and any person or other
entity that succeeds to all or substantially all of the business, assets or
property of the Company.
 
 
                                       13
<PAGE>
 
Except as specifically provided otherwise herein or as otherwise required by
applicable law, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, transfer or otherwise) to all or
substantially all of the business, assets or property of the Company, to
expressly assume and agree to perform the obligations of the Company under this
Amended Employment Agreement in the same manner and to the same extent that the
Company is required to perform hereunder. As used in this Amended Employment
Agreement, the "Company" shall mean the Company as hereinabove defined and any
successor to its business, assets or property as aforesaid which executes and
delivers an agreement provided for in this Section 17 or which otherwise becomes
bound by all the terms and provisions of this Amended Employment Agreement by
operation of law. Except as provided by the foregoing provisions of this Section
17, this Amended Employment Agreement shall not be assignable by the Company
without the prior written consent of the Executive.
 
          (b) This Amended Employment Agreement is personal in nature and the
obligations of the Executive hereunder are not assignable to any person. Except
as specifically provided in this Section 17, none of the Executive's rights
pursuant to this Amended Employment Agreement may be assigned to any person. If
the Executive should die while any cash amounts are due and payable to the
Executive hereunder, all such amounts, unless otherwise provided herein, shall
be paid to the Executive's designated beneficiary or, if there is no such
designated beneficiary, to the legal representatives of the Executive's estate.
If the Executive should die prior to an IPO and at the time of death shall own
any shares of common stock of the Company (whether restricted shares granted to
the Executive pursuant to the Restricted Stock Plan or otherwise), all of such
shares shall be sold by the Executive's designated beneficiary, or legal
representatives, as the case may be, to the Company for a purchase price equal
to the Fair Market Value as of the Determination Date, to be determined in
accordance with the provisions of the Restricted Stock Plan and the Restricted
Share Agreement; provided, however, that in the event that the Executive should
die prior to the occurrence of an IPO and an IPO subsequently occurred prior to
the Determination Date, then, upon the occurrence of the IPO, the requirement of
this Section 17(b) that the shares of common stock of the Company owned by the
Executive at the time of death be sold to the Company will be terminated.
 
          18. Severability.
 
          To the extent any provision of this Amended Employment Agreement or
portion thereof shall be invalid or unenforceable, it shall be considered
deleted therefrom and the remainder of such provision and of this Amended
Employment Agreement shall be unaffected and shall continue in full force and
effect. In furtherance and not in limitation of the foregoing, should the
duration or geographical extent of, or business activities covered by, any
provision of this Amended Employment Agreement be in excess of that which is
valid and enforceable under applicable law, then such provision shall be
construed to cover only that duration, extent or activities which may be validly
and enforceably covered.
 
 
                                       14
 
<PAGE>
 
          19. Third-Party Beneficiaries.
 
          This Amended Employment Agreement is for the benefit of the parties
hereto and their respective successors and permitted assigns, and, except for
the release and discharge of AIHL by the Company and by the Executive provided
for in Section 11(c) hereof, is not intended to confer upon any other Person any
rights or remedies hereunder.
 
          20. Survival.
 
          This Amended Employment Agreement shall terminate upon the expiration
of the Employment Period or, if earlier, upon the termination of the Executive's
employment under any of the circumstances described in Section 8, except that
the terms of this Amended Employment Agreement which must survive the
termination of this Amended Employment Agreement in order to be effectuated
(including the provisions of Sections 6, 8, 9, 10, 11, 12, 16, 17, 18, 19, 21,
22, 23, 24 and this Section 20) shall survive.
 
          21. Notices.
 
          All notices, requests and other communications pursuant to this
Amended Employment Agreement shall be in writing and shall be deemed to have
been duly given, if delivered in person or by courier, or sent by express,
registered or certified mail, postage prepaid, addressed as follows:
 
          If to the Company:
 
          Darwin Professional Underwriters, Inc.
          9 Farm Springs Road
          Farmington, Connecticut 06032
          Attention: General Counsel
 
          with a copy to:
 
          Alleghany Corporation
          7 Times Square Tower
          17th Floor
          New York, NY 10036
          Attention: General Counsel
 
          If to the Executive:
 
          Stephen J. Sills
          17 Orchard Road
          West Hartford, Connecticut 06117-2911
 
Any party may, by written notice to the other party hereto, change the address
to which notices to such party are to be delivered or mailed.
 
 
                                       15
 
<PAGE>
 
          22. Amendment.
 
          This Amended Employment Agreement may be amended or modified only by a
written instrument executed by the Company and the Executive.
 
          23. Governing Law.
 
          This Amended Employment Agreement shall be construed and enforced in
accordance with the laws of the State of Connecticut, without giving effect to
the choice of law principles thereof.
 
                     [Remainder of page intentionally blank]
 
 
 
                                       16
<PAGE>
 
          24. Entire Agreement.
 
          This Amended Employment Agreement, together with the Exhibits hereto
and the other writings referred to herein or delivered pursuant hereto, which
form a part hereof, contains the entire agreement and understanding between the
Company and the Executive with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or between the parties, written or oral, which may have related to the
subject matter hereof in any way.
 
          IN WITNESS WHEREOF, the parties have executed this Amended Employment
Agreement as of the date first written above.
 
                                        DARWIN PROFESSIONAL UNDERWRITERS, INC.
 
 
                                        By: /s/ Weston M. Hicks
                                            ------------------------------------
                                        Name: Weston M. Hicks
                                        Title: Chairman of the Compensation
                                               Committee of the Board of
                                               Directors
 
                                        /s/ Stephen J. Sills
                                        ----------------------------------------
                                        Stephen J. Sills
 
 
 
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