Exhibit 10.2

 

ARCH CAPITAL GROUP LTD.
Restricted Share Agreement

 

THIS AGREEMENT, dated as of July 1, 2003, between Arch Capital Group Ltd. (the
“Company”), a Bermuda company, and Ralph E. Jones III (the “Employee”).

 

WHEREAS, the Employee has been granted the following award in connection with
his retention as an employee and as compensation for services to be rendered;
and the following terms reflect the Company’s 2002 Long Term Incentive and Share
Award Plan (the “Plan”);

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto agree as follows.

 

1.                                       Award of Shares.  Pursuant to the
provisions of the Plan, the terms of which are incorporated herein by reference,
the Employee is hereby awarded 50,000 Restricted Shares (the “Award”), subject
to the terms and conditions herein set forth.  Capitalized terms used herein and
not defined shall have the meanings set forth in the Plan.  In the event of any
conflict between this Agreement and the Plan, the Plan shall control.

 

2.                                       Terms and Conditions.  It is understood
and agreed that the Award of Restricted Shares evidenced hereby is subject to
the following terms and conditions:

 

(a)                                  Vesting of Award.  Subject to Section 2(b)
below and the other terms and conditions of this Agreement, this Award shall
become vested in two equal annual installments, commencing on the first
anniversary of the date hereof.  Unless otherwise provided by the Company, all
dividends and other amounts receivable in connection with any adjustments to the
Shares under Section 4(c) of the Plan shall be subject to the vesting schedule
in this Section 2(a).  Notwithstanding the foregoing, if a Change in Control
occurs, then the Restricted Shares shall become immediately vested in full;
provided, however, that in such case, the Restricted Shares subject to the Award
shall not be transferable prior to the date on which such Restricted Shares are
scheduled to vest pursuant to this Section 2(a), except that a number of Shares
having a fair market value equal to the amount of any income and employment
taxes imposed upon vesting of the Restricted Shares shall be transferable upon
such termination solely for the purpose of funding any such income and
employment taxes.

 

For purposes of this Agreement, a “Change in Control” shall be deemed to occur
if any “person” (within the meaning of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)), other than a Permitted Person, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of Voting Securities representing more than 50% of the total
voting power of all then outstanding Voting Securities.

 

“Permitted Persons” means (A) the Company; (B) any Related Party; (C) Hellman &
Friedman or any of its subsidiaries or investment funds managed or controlled by

 

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Hellman & Friedman; (D) Warburg Pincus or any of its subsidiaries or any
investment funds managed or controlled by Warburg Pincus or any of its
subsidiaries; or (E) any group (as defined in Rule 13b-3 under the Exchange Act)
comprised of any or all of the foregoing.

 

“Related Party” means (A) a majority-owned subsidiary of the Company; (B) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any majority-owned subsidiary of the Company; or (C) any entity,
50% or more of the voting power of which is owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as their
ownership of Voting Securities immediately prior to the transaction.

 

“Voting Security” means any security of the Company which carries the right to
vote generally in the election of directors.

 

(b)                                 Termination of Service; Forfeiture of
Unvested Shares.  Except as otherwise set forth in Section 2(a) above, in the
event the Employee ceases to be an employee of the Company prior to the date the
Restricted Shares otherwise become vested (i) due to his or her death or
Permanent Disability (as defined in the Employment Agreement between the
Employee and Arch Insurance Group Inc., dated as of June 4, 2003 (the
“Employment Agreement”) or (ii) due to termination (A) by the Company not for
Cause (as defined in the Employment Agreement) or (B) by the Employee for Good
Reason (as defined in the Employment Agreement), a number of any unvested
Restricted Shares subject to the Award shall become vested in full at the time
of such termination of service determined by (A) multiplying the total number of
Restricted Shares subject to the Award by a fraction, the numerator of which is
the number of months elapsed since the date hereof and the denominator of which
is 24, and (B) subtracting from such product the number of Restricted Shares
that have previously vested prior to such termination of service (if any);
provided, however, that in the case of a termination by the Company not for
Cause or by the Employee for Good Reason, the Restricted Shares subject to the
Award shall not be transferable prior to the date on which such Restricted
Shares are scheduled to vest pursuant to Section 2(a) above, except that a
number of Shares having a fair market value equal to the amount of any income
and employment taxes imposed upon vesting of the Restricted Shares shall be
transferable upon such termination solely for the purpose of funding any such
income and employment taxes.  If the Employee ceases to be an Employee of the
Company for any other reason prior to the date the Restricted Shares become
vested, the Award shall be forfeited by the Employee and become the property of
the Company.  For purposes of this Agreement, service with any of the Company’s
Subsidiaries (as defined in the Plan) shall be considered to be service with the
Company.

 

(c)                                  Certificates.  Each certificate issued in
respect of Restricted Shares awarded hereunder shall be deposited with the
Company, or its designee, together with, if requested by the Company, a stock
power executed in blank by the Employee, and shall bear a legend disclosing the
restrictions on transferability imposed on such Restricted Shares by this
Agreement (the “Restrictive Legend”).  Upon the vesting of Restricted Shares
pursuant to Section 2(a) hereof and the satisfaction of any withholding tax
liability

 

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pursuant to Section 5 hereof, the certificates evidencing such vested Shares,
not bearing the Restrictive Legend, shall be delivered to the Employee.

 

(d)                                 Rights of a Stockholder.  Prior to the time
a Restricted Share is fully vested hereunder and otherwise as provided in
Section 2(b) above, the Employee shall have no right to transfer, pledge,
hypothecate or otherwise encumber such Restricted Share.  During such period,
the Employee shall have all other rights of a stockholder, including, but not
limited to, the right to vote and to receive dividends (subject to Section 2(a)
hereof) at the time paid on such Restricted Shares.

 

(e)                                  No Right to Continued Employment.  This
Award shall not confer upon the Employee any right with respect to continuance
of employment by the Company nor shall this Award interfere with the right of
the Company to terminate the Employee’s employment at any time.

 

3.                                       Transfer of Shares.  The Shares
delivered hereunder, or any interest therein, may be sold, assigned, pledged,
hypothecated, encumbered, or transferred or disposed of in any other manner, in
whole or in part, only in compliance with the terms, conditions and restrictions
as set forth in the governing instruments of the Company, applicable United
States federal and state securities laws or any other applicable laws or
regulations and the terms and conditions hereof.

 

4.                                       Expenses of Issuance of Shares.  The
issuance of stock certificates hereunder shall be without charge to the
Employee.  The Company shall pay, and indemnify the Employee from and against
any issuance, stamp or documentary taxes (other than transfer taxes) or charges
imposed by any governmental body, agency or official (other than income taxes)
or by reason of the issuance of Shares.

 

5.                                       Withholding.  No later than the date of
vesting of (or the date of an election by the Employee under Section 83(b) of
the Code with respect to) the Award granted hereunder, the Employee shall pay to
the Company or make arrangements satisfactory to the Committee regarding payment
of any federal, state or local taxes of any kind required by law to be withheld
at such time with respect to such Award and the Company shall, to the extent
permitted or required by law, have the right to deduct from any payment of any
kind otherwise due to the Employee, federal, state and local taxes of any kind
required by law to be withheld at such time.

 

6.                                       References.  References herein to
rights and obligations of the Employee shall apply, where appropriate, to the
Employee’s legal representative or estate without regard to whether specific
reference to such legal representative or estate is contained in a particular
provision of this Agreement.

 

7.                                       Notices.  Any notice required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or by courier, or sent by
certified or registered mail, postage prepaid, return receipt

 

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requested, duly addressed to the party concerned at the address indicated below
or to such changed address as such party may subsequently by similar process
give notice of:

 

If to the Company:

 

Arch Capital Group Ltd.:

Wessex House, 3rd Floor

45 Reid Street

Hamilton HM 12 Bermuda

Attn.: Secretary

 

If to the Employee:

 

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

 

8.                                       Governing Law.  This Agreement shall be
governed by and construed in accordance with the laws of New York, without
giving effect to principles of conflict of laws.

 

9.                                       Entire Agreement.  This Agreement and
the Plan constitute the entire agreement among the parties relating to the
subject matter hereof, and any previous agreement or understanding among the
parties with respect thereto is superseded by this Agreement and the Plan.

 

10.                                 Counterparts.  This Agreement may be
executed in two counterparts, each of which shall constitute one and the same
instrument.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

 

 

ARCH CAPITAL GROUP LTD.

 

 

 

 

 

By:

/s/ John D. Vollaro

 

 

 

 

 

 

/s/ Ralph E. Jones III

 

 

Ralph E. Jones III

 

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