Exhibit 10.6


ARCH CAPITAL GROUP LTD.


Restricted Share Unit
Agreement


THIS AGREEMENT, dated as of February 23, 2006, 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 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 Share Units.  Pursuant
to the provisions of the Plan, the terms of which are incorporated herein by
reference, the Employee is hereby awarded 6,000 Restricted Share Units (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 Share Units 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 three equal annual installments on the first,
second and third anniversaries of the date hereof.  Unless otherwise provided by the Company, all
amounts receivable in connection with any adjustments to the Shares under
Section 4(c) of the Plan or Section 2(e) below shall be subject to the vesting
schedule in this Section 2(a).


(b)           Termination
of Service; Forfeiture of Unvested Share Units.


(i)     In the event the Employee
ceases to be an employee of the Company prior to the date the Restricted Share
Units otherwise become vested due to his or her death or Permanent Disability
(as defined in the Company’s Incentive Compensation Plan), the Restricted Share
Units shall become immediately vested in full upon such termination of employment.


(ii)    In the event of
termination of employment (other than by the Company for Cause, as such term is
defined in the Incentive Compensation Plan) after the attainment of Retirement
Age (as defined in the Company’s Incentive Compensation Plan), the Restricted
Share Units shall continue to vest on the schedule set forth in paragraph 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 Share Units shall be forfeited by
the Employee and become the property of the Company.


 


(iii)   In the event the Employee
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
Employee for Good Reason (as defined in the Employment Agreement, dated as of
June 4, 2003, between the Employee and Arch Insurance Group Inc.), in either
case, on or before the second anniversary of the occurrence of the Change in
Control, the Restricted Share Units, to the extent not already vested, shall
become immediately vested in full upon such termination of employment.


(iv)   If the Employee ceases to
be an Employee of the Company for any other reason prior to the date the
Restricted Share Units become vested, the unvested Restricted Share Units shall
be forfeited by the Employee and become the property of the Company; 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 Restricted Share Units, to the extent not vested, shall become vested
upon such termination of employment.


(v)    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.


(vi)   “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



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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) Hellman &
Friedman or any of its subsidiaries or investment funds managed or controlled
by 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 shareholders 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.


(vii)         “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.


(c)           Distribution of Shares.  At
the time the Employee ceases to be an Employee of the Company for any reason,
the Company shall distribute to the Employee (or his or her heirs in the event
of the Employee’s death) a number of Shares equal to the number of vested
Restricted Share Units then held by the Employee; provided, however,
that, to the extent required pursuant to Section 409A of the Code, the distribution
of such Shares shall be deferred until the date that is six months after the
date the Employee ceases to be employed by the Company.



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(d)           Rights and Restrictions.  The
Restricted Share Units shall not be transferable, other than pursuant to will
or the laws of descent and distribution. 
Prior to vesting of the Restricted Share Units and delivery of the
Shares to the Employee following his termination of employment, the Employee
shall not have any rights or privileges of a shareholder as to the Shares
subject to the Award.  Specifically, the
Employee shall not have the right to receive dividends or the right to vote
such Shares prior to vesting of the Award and delivery of the Shares.


(e)           Adjustments for Recapitalization
and Dividends.  In the event that,
prior to the distribution of Shares pursuant to Section 2(c) above, 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 Employee and
preserve the value of the Award, there shall automatically be substituted for
each Share subject to the Award 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.


(f)            Dividend Equivalents.  As of each date on which a cash dividend is
paid on Shares, there shall be granted to the Employee that number of
additional Restricted Share Units (including fractional units) determined by
(i) multiplying the amount of such dividend per Share by the number of
Restricted Share Units held by the Employee, and (ii) dividing the total
so determined by the Fair Market Value of a Share on the date of payment of
such cash dividend.  The Restricted Share
Units granted pursuant to this Section 2(f) will have the same terms and
conditions (including vesting dates) as the Restricted Share Units with respect
to which they are granted.


(g)           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)



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or charges imposed by any governmental body, agency or official (other
than income taxes) or by reason of the issuance of Shares.


5.             Withholding.  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 with respect to
the 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.


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.



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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/ Dawna Ferguson

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Ralph E.
  Jones III

  	
   

  
	
   

  	
  Ralph E. Jones
  III

  



 



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