Exhibit 10.7


 


ARCH CAPITAL GROUP LTD.


 


Restricted Share Unit Agreement


 


THIS
AGREEMENT, dated as of September 22, 2004, 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, commencing
on the date hereof and thereafter on the first and second anniversaries
thereof.  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.  In the event the Employee ceases to be an employee of the Company
prior to the date the Restricted Share Units 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 (A) by the Company not for Cause
(as defined in the Company’s Incentive Compensation Plan) 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.), the
Restricted Share Units 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


 

















 


Share Units
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 Share Units 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 Share Units
become vested, the unvested Restricted Share Units 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)                                  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.


 


(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


 


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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) 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:


 


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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:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Ralph E. Jones, III

  



 


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