Exhibit 10.3


 


ARCH CAPITAL GROUP LTD.

Restricted Share Agreement


 


THIS AGREEMENT, dated as of February 26, 2004, between
Arch Capital Group Ltd. (the “Company”), a Bermuda company, and Marc Grandisson
(the “Employee”).


 


WHEREAS, the Employee has been granted the following
award in connection with his or her 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 2,864
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 four equal annual installments, commencing on
the date hereof and thereafter on the first, second and third anniversaries
thereof.  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).


 


(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 Company’s Incentive Compensation Plan) or (ii)
due to termination by the Company not for Cause (as defined in the Company’s
Incentive Compensation Plan), the Restricted Shares shall become immediately
vested in full upon such termination of employment.  In the event of termination of employment (other than by the
Company for Cause) after the attainment of Retirement Age (as defined in the
Company’s Incentive Compensation Plan), the Restricted Shares shall continue to vest on the schedule set forth in
Section 2(a) above so long as the Employee 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”).  In the
event the Employee engages in a Competitive Activity, any unvested Restricted
Shares shall be forfeited by the Employee and become the property of the
Company.  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 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, 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 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, 4th Floor

45 Reid Street

Hamilton HM 12 Bermuda 

Attn.: Secretary


 


If to the
Employee:


 


To the last
address delivered to the Company by the 

Employee 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.


 

















 


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


 


	
   

  	
  ARCH CAPITAL
  GROUP LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dawna
  Ferguson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Marc
  Grandisson

  	
   

  
	
   

  	
  Marc
  Grandisson