Exhibit 10.12.4


 


ARCH CAPITAL GROUP LTD.

Share Appreciation Right Agreement


 


AGREEMENT, made and entered into this 6th day of May,
2009, by and between Arch Capital Group Ltd. (the “Company”), a Bermuda company,
and        (the “SAR Holder”).


 


WHEREAS, the SAR Holder has been granted the following
award under the Company’s 2007 Long Term Incentive and Share Award Plan (the “Plan”);


 


NOW, THEREFORE, in consideration of the premises and
mutual covenants contained herein, and for other good and valuable consideration,
the Company and the SAR Holder agree as follows:


 


(a)           Grant. 
Pursuant to the provisions of the Plan, the terms of which are
incorporated herein by reference, the Company hereby grants to the SAR Holder a
Share Appreciation Right (the “SAR”) with respect to       
Shares.  The SAR represents a right to be
paid, upon exercise of the SAR, an amount measured by (x) the difference
between the Fair Market Value per Share on the date of exercise and the
exercise price per Share of the SAR, multiplied by (y) the number of Shares
with respect to which the SAR is exercised, with such amount to be paid in the
form of Shares valued at their Fair Market Value on the date of exercise.  The SAR is granted as of May 6, 2009
(the “Date of Grant”), and such grant is subject to the terms and conditions
herein and the terms and conditions of the Plan.  In the event there is any conflict between
the terms of the Plan and this Agreement, the terms of the Plan shall
control.  Capitalized terms used herein
but not defined shall have the meanings given to them in the Plan.


 


(b)           Exercise
Price.  The exercise price of the SAR
shall be equal to $57.88 per Share.


 


(c)           Status
of Shares.  Upon issue, the shares received
upon exercise of the SAR shall rank equally in all respects with the other
Shares.


 


(d)           Term
of SAR.  The SAR may be exercised
only during the period (the “SAR Period”) set forth in paragraph (f) below
and shall remain exercisable until the tenth anniversary of the Date of
Grant.  Thereafter, the SAR Holder shall
cease to have any rights in respect thereof. 
The right to exercise the SAR shall be subject to sooner termination as
provided in paragraph (j) below.


 

















 


(e)           No
Rights of Shareholder.  The SAR
Holder shall not, by virtue hereof, be entitled to any rights of a shareholder
in the Company, either at law or in equity.


 


(f)            Exercisability.  Except as otherwise set forth in paragraph (j) below,
the SAR shall become exercisable  in three equal
annual installments on the first, second and third anniversaries of the Date of
Grant, in each case subject to paragraph (j) below.  Subject to paragraph (j) below, the SAR
may be exercised at any time or from time to time during the SAR Period in
regard to all or any portion of the SAR which is then exercisable, as may be
adjusted pursuant to paragraph (g) below.


 


(g)           Adjustments
for Recapitalization and Dividends. 
In the event that, prior to the expiration of the SAR, any dividend in
Shares, recapitalization, Share split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
such change affects the Shares such that they are increased or decreased or
changed into or exchanged for a different number or kind of shares, other
securities of the Company or of another corporation or other consideration,
then in order to maintain the proportionate interest of the SAR Holder and
preserve the value of the SAR, (i) there shall automatically be
substituted for each Share subject to the unexercised SAR the number and kind
of shares, other securities or other consideration (including cash) into which
each outstanding Share shall be changed or for which each such Share shall be
exchanged, and (ii) the exercise price shall be increased or decreased
proportionately so that the aggregate purchase price for the Shares subject to
the unexercised SAR shall remain the same as immediately prior to such event.


 


(h)           Nontransferability.  The SAR, or any interest therein, may not be
assigned or otherwise transferred, disposed of or encumbered by the SAR Holder,
other than by will or by the laws of descent and distribution.  During the lifetime of the SAR Holder, the SAR
shall be exercisable only by the SAR Holder or by his or her guardian or legal
representative.  Notwithstanding the
foregoing, the SAR may be transferred by the SAR Holder to members of his or
her “immediate family “ or to a trust or other entity established for the
exclusive benefit of solely one or more members of the SAR Holder’s “immediate
family.”  Any SAR held by the transferee
will continue to be subject to the same terms and conditions that were
applicable to the SAR immediately prior to the transfer, except that the SAR
will be transferable by the transferee only by will or the laws of descent and
distribution.  For purposes hereof, “immediate
family” means the SAR Holder’s children, stepchildren, grandchildren, parents,
stepparents, grandparents, spouse, siblings (including half brother and
sisters), in laws, and relationships arising because of legal adoption.


 


(i)            Exercise
of SAR.  In order to exercise the SAR,
the SAR Holder shall submit to the Company an instrument specifying the whole
number of Shares in respect of which the SAR is being exercised. Shares will be
issued accordingly by the Company, and a share certificate dispatched to the SAR
Holder within 30 days. The payment upon a SAR exercise shall be solely the
number of whole Shares calculated in paragraph (a) above.  Fractional Shares shall be rounded down to
the nearest whole Share with no cash consideration being paid upon exercise. Anything
to the contrary herein notwithstanding, the Company shall not be obligated to
issue any Shares hereunder if the issuance of such Shares would violate the
provision of any applicable


 


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law, in which event the
Company shall, as soon as practicable, take whatever action it reasonably can
so that such Shares may be issued without resulting in such violations of law.


 


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(j)            Termination
of Service.


 


1.     In the
event the SAR Holder ceases to be an employee of the Company due to his death
or Permanent Disability (as defined in the Company’s Incentive Compensation
Plan on the date hereof), the SAR, to the extent not already exercisable in
full, shall become immediately exercisable in full and shall continue to be exercisable
by the SAR Holder (or his Beneficiary or estate in the event of his death) for
a period of three years following such termination of employment (but not
beyond the SAR Period).


 


2.     In the
event of termination of employment (other than by the Company for Cause, as
such term is defined in the Company’s Incentive Compensation Plan on the date
hereof) after the attainment of Retirement Age (as defined in the Company’s Incentive
Compensation Plan on the date hereof), the SAR shall continue to become exercisable
on the schedule set forth in paragraph (f) above so long as the SAR Holder
does not engage in any activity in competition with any activity of the Company
or any of its Subsidiaries other than serving on the board of directors (or
similar governing body) of another company or as a consultant for no more than
26 weeks per calendar year (“Competitive Activity”) and shall continue to be
exercisable by the SAR Holder (or his Beneficiary or estate in the event of his
death) for the remainder of the SAR Period. 
In the event the SAR Holder engages in a Competitive Activity, (A) the
SAR, to the extent then exercisable, may be exercised for 30 days following the
date on which the SAR Holder engages in such Competitive Activity (but not
beyond the SAR Period) and (B) the SAR, to the extent then not
exercisable, shall be immediately forfeited.


 


3.     In the
event the SAR Holder ceases to be an employee of the Company after a Change in
Control (as defined below) due to termination (A) by the Company not
for Cause or (B) by the SAR Holder for Good Reason (as defined in the Employment
Agreement, dated as of       , between the SAR
Holder and       ), in either case, on or before the second anniversary of
the occurrence of the Change in Control, the SAR, to the extent not already
exercisable in full, shall become immediately exercisable in full and shall
continue to be exercisable by the SAR Holder for a period of 90 days following
such termination of employment (but not beyond the SAR Period).


 


4.     In the
event that the SAR Holder ceases to be an employee of the Company for any other
reason, except due to a termination of the SAR Holder’s employment by the
Company for Cause, (A) the SAR, to the extent then exercisable, may be
exercised for 90 days following termination of employment (but not beyond the SAR
Period) and (B) the SAR, to the extent then not exercisable, shall be
immediately forfeited; provided that, in the event of a Redundancy (as defined
below), the Committee, in its sole discretion, may, in accordance with its
authority under the Plan, determine that the SAR, to the extent not
exercisable, shall become exercisable and shall continue to be exercisable by
the SAR Holder for a period of 90 days following such termination of employment
(but not beyond the SAR Period).


 


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5.     In the
event of a termination of the SAR Holder’s employment for Cause, the SAR shall
immediately cease to be exercisable and shall be immediately forfeited.


 


6.     For
purposes of this SAR, service with any of the Company’s Subsidiaries (as
defined in the Plan) shall be considered to be service with the Company.


 


7.     “Change in Control” shall mean:


 


(A)           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
50% or more of the total voting power or value of all the then outstanding
Voting Securities; or


 


(B)             the individuals who, as of the date hereof,
constitute the Board of Directors of the Company (the “Board”) together with
those who become directors subsequent to such date and whose recommendation,
election or nomination for election to the Board was approved by a vote of at
least a majority of the directors then still in office who either were
directors as of such date or whose recommendation, election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the members of the Board; or


 


(C)             the consummation of a merger, consolidation,
recapitalization, liquidation, sale or disposition by the Company of all or
substantially all of the Company’s assets, or reorganization of the Company,
other than any such transaction which would (x) result in more than 50% of
the total voting power and value represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by the former shareholders of the Company and (y) not
otherwise be deemed a Change in Control under subparagraphs (A) or (B) of
this paragraph.


 


“Permitted Persons” means (A) the
Company; (B) any Related Party; (C) Warburg Pincus or any of its
subsidiaries or any investment funds managed or controlled by Warburg Pincus or
any of its subsidiaries; or (D) 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
shareholders of the


 


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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.


 


8.               “Redundancy” shall mean termination of
employment by the Company due to its need to reduce the size of its workforce,
including due to closure of a business or a particular workplace or change in
business process.  Whether a termination of employment is due to a “redundancy”
shall be determined by the Committee in its sole and absolute discretion, such
determination being final and binding on all parties hereto and all persons
claiming through, in the name of or on behalf of such parties.


 


(k)           Obligations
as to Capital.  The Company agrees
that it will at all times maintain authorized and unissued share capital sufficient
to fulfill all of its obligations under the SAR.


 


(l)            Transfer
of Shares.  The SAR, the Shares
issued hereunder, or any interest in either, 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 and the terms and conditions
hereof.


 


(m)          Expenses
of Issuance of Shares.  The issuance
of stock certificates upon the exercise of the SAR in whole or in part, shall
be without charge to the SAR Holder.  The
Company shall pay any issuance, stamp or documentary taxes (other than transfer
taxes) or charges imposed by any governmental body, agency or official (other
than income taxes) by reason of the exercise of the SAR in whole or in part or
the resulting issuance of Shares hereunder.


 


(n)           Withholding.  No later than the date of exercise of the SAR
granted hereunder, the SAR Holder 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 upon the exercise of such SAR
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 SAR Holder,
federal, state and local taxes of any kind required by law to be withheld upon
the exercise of such SAR.


 


(o)           References.  References herein to rights and obligations
of the SAR Holder shall apply, where appropriate, to the SAR Holder’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 SAR.


 


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(p)           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 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

45 Reid Street

Hamilton HM 12 Bermuda 

Attn:  Secretary


 


If to the SAR Holder:


 


The last address
delivered to the Company by the SAR Holder in the manner set forth herein.


 


(q)           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 thereof.


 


(r)            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.


 


(s)           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 of Grant.


 


	
   

  	
  ARCH CAPITAL GROUP LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dawna Ferguson

  
	
   

  	
   

  	
  Name: Dawna Ferguson

  
	
   

  	
   

  	
  Title: Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME]

  



 


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