Exhibit
10.5


 


ARCH
CAPITAL GROUP LTD.

Restricted Share Agreement


 


THIS AGREEMENT, dated as
of September 22, 2004, between Arch Capital Group Ltd. (the “Company”), a
Bermuda company, and Robert Clements (the “Director”).


 


WHEREAS, 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
Director is hereby awarded 1,600 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 three equal annual
installments, commencing on the date hereof and thereafter on the first and
second 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).  Notwithstanding the foregoing, if a Change
in Control occurs and the Director ceases to be a director of the Company for
any reason, then the Restricted Shares shall become immediately vested in full
upon such termination of service.


 


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 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.  In the event the Director ceases to be a
director of the Company prior to the date the Restricted Shares otherwise
become vested due to his or her death or Permanent Disability (as defined in
the Company’s Incentive Compensation Plan), the Restricted Shares shall become
immediately vested in full upon such termination of service.  If the Director ceases to be a director of
the Company for any other reason prior to the date the Restricted Shares become
vested, the Award shall be forfeited by the Director and become the property of
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 Director, 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 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 Director.


 


(d)                                 Rights of a Stockholder.  Prior to the time a
Restricted Share is fully vested hereunder, the Director shall have no right to
transfer, pledge, hypothecate or otherwise encumber such Restricted
Shares.  During such period, the
Director 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 Services. 
This Award shall not confer upon the Director any right with respect to
continuance of services with the Company nor shall this Award interfere with
the right of the Company to terminate the Director’s services 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 Director.  The Company shall pay,
and indemnify the Director from and against any issuance, stamp or documentary
taxes (other than transfer


 


2

















 


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
Director under Section 83(b) of the Code with respect to) the Award
granted hereunder, the Director shall 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 Director, 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 Director shall apply, where appropriate, to the Director’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, 4rd Floor

45 Reid Street

Hamilton HM 12 Bermuda 

Attn.: Secretary


 


If to the Director:


 


To the last address
delivered to the Company by the 

Director 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.


 


3

















 


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


 


	
   

  	
  ARCH CAPITAL GROUP LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert Clements

  



 


4