Document:

EXHIBIT 10.4.6

 

FIFTH
LEASE MODIFICATION AGREEMENT

 

FIFTH LEASE MODIFICATION AGREEMENT (hereinafter called
this “Agreement”) dated as of the 15th day of December, 2005 between BFP
ONE LIBERTY PLAZA CO. LLC, having an office c/o Brookfield Financial Properties,
L.P., Three World Financial Center, 200 Vesey Street, 11th Floor, New York, New
York 10281-1021 (hereinafter called “Landlord”), and ARCH INSURANCE
COMPANY, a Missouri corporation, having an office at One Liberty Plaza, 165
Broadway, New York, New York 10006 (hereinafter called “Tenant”).

 

W I T N E
S S E T H:

 

WHEREAS:

 

A.                                   Landlord
and Tenant have heretofore entered into a certain lease dated September 26,
2002, as amended by that certain First Lease Modification Agreement
(hereinafter called the “First Modification”) dated as of May 7,
2003, by that certain Second Lease Modification Agreement (hereinafter called
the “Second Modification”) dated as of July 31, 2003, by that
certain Third Lease Modification Agreement (hereinafter called the “Third
Modification”) dated as of February 18, 2004, by that certain Fourth
Lease Modification Agreement (hereinafter called the “Fourth Modification”)
dated as of May 13, 2004, and by that certain Substitution of Storage
Space Agreement (hereinafter called the “Storage Substitution Agreement”)
dated as of September 30, 2004 (such lease, as the same has been and may
hereafter be further amended, being hereinafter called the “Lease”),
with respect to the entire rentable area of

 

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the fifty-third (53rd) and seventeenth (17th) floors
of the building, a portion of the sixteenth (16th) floor of the building (the “16th
Floor Existing Space”), and storage space located on the concourse level of
the building (such space being hereinafter collectively called the “Existing
Premises”), in the building known as One Liberty Plaza, 165 Broadway, New
York, New York (hereinafter called the “Building”) for a term expiring
on January 31, 2014 with respect to the portions of the Existing Premises
located on the 53rd and 17th floors of the Building and the storage space
located on the concourse level, and on March 31, 2007 with respect to the 16th
Floor Existing Space, or on such earlier date upon which the term may expire or
be terminated pursuant to any conditions of limitation or other provisions of
the Lease or pursuant to law; and

 

B.                                     Landlord
and Tenant hereby desire to modify the Lease to provide for the inclusion
therein of additional space located on the sixteenth (16th) floor of the Building
and the extension of the term of the Lease with respect to the 16th Floor Existing
Space, upon and subject to the terms and conditions hereinafter more
particularly set forth.

 

NOW, THEREFORE, in consideration of the premises and
mutual covenants hereinafter contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

1.                                       DEFINED
TERMS.  All capitalized terms
contained in this Agreement and not otherwise defined herein shall, for
purposes hereof, have the same meanings ascribed to them in the Lease.

 

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2.                                       ADDED
SPACE.  Effective during the period
commencing on the date (hereinafter called the “16th Floor Additional Space Inclusion
Date”) that Landlord substantially completes the work described in
Paragraph 6 hereof and delivers the 16th Floor Additional Space to Tenant in
the condition described in Paragraph 6 hereof, and ending on the New 16th Floor
Expiration Date (as hereinafter defined in Paragraph 3(a) hereof), there
shall be added to and included in the Existing Premises the following
additional space in the Building, to wit:

 

The portion of the sixteenth (16th) floor of the Building,
substantially as shown hatched on the floor plan annexed hereto as Exhibit A
(hereinafter called “16th Floor Additional Space”), which the parties
hereto agree contains 4,968 rentable square feet.

 

Landlord does hereby lease to Tenant and Tenant does
hereby hire from Landlord the 16th Floor Additional Space subject and
subordinate to all superior leases and superior mortgages as provided in the
Lease and upon and subject to all the covenants, agreements, terms and
conditions of the Lease as supplemented by this Agreement (other than Article 36
of the Lease, Section 38.05 of the Lease, and Paragraphs 4, 5, 6 and 8 of
the First Modification, and Paragraphs 5, 6, 7(b), 8 and 10 of the Second
Modification, Paragraphs 4, 5, 6, 7 and 8 of the Third Modification, Paragraphs
4, 5 and 7 of the Fourth Modification and Paragraphs 4, 5, 7 and 8 of the
Storage Substitution Agreement).  From
and after the 16th Floor Additional Space Inclusion Date, the term “Premises”
as defined in the Lease will be deemed to include the Existing Premises and the
16th Floor Additional Space.

 

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3.                                       16TH
FLOOR EXISTING SPACE EXTENSION.  The
term of the Lease with respect to the 16th Floor Existing Space (which is
currently scheduled to expire on March 31, 2007) is hereby extended for an
additional three (3) years commencing on April 1, 2007 (the “16th
Floor Existing Space Adjustment Date”) so that the term of the Lease with
respect to the 16th Floor Existing Space (and the term of the Lease with
respect to the 16th Floor Additional Space) shall end and expire at 11:59 p.m.
on March 31, 2010 (hereinafter called the “New 16th Floor Expiration
Date”), or on such earlier date upon which said term may expire or be
terminated pursuant to any conditions of limitation or other provisions of the
Lease or pursuant to law.  From and after
the date hereof, Paragraph 8 of the Third Modification is hereby deleted in its
entirety and shall be of no further force and effect.

 

4.                                       LEASE
MODIFICATION.

 

(a)                                  Effective
during the period commencing on the 16th Floor Additional Space Inclusion Date
and ending on the New 16th Floor Expiration Date (i.e., March 31, 2010),
the Lease shall be modified as follows:

 

(1)                                  The
Fixed Rent payable by Tenant pursuant to Section 1.04(a) of the Lease
(as modified by Paragraph 3(a) of the First Modification, Paragraph 4(a) of
the Second Modification, Paragraph 3(a) of the Third Modification,
Paragraph 3(a) of the Fourth Modification, and Paragraph 3(a) of the
Storage Substitution Agreement, respectively) shall be increased by the sum of ONE
HUNDRED SEVENTY-THREE THOUSAND EIGHT HUNDRED EIGHTY AND 00/100 ($173,880.00)
DOLLARS per

 

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annum [or $14,490.00 per month], calculated on an
annual basis at the rate of $35 per rentable square foot, on account of the
inclusion of the 16th Floor Additional Space.

 

(2)                                  With
respect to the Additional Charges payable pursuant to Article 3 of the
Lease (hereinafter called the “Basic Escalation Payments”) with respect
to the Existing Premises, there shall be computed, in addition to the Basic
Escalation Payments, escalation payments with respect to increases on account
of Taxes and Operating Expenses attributable to the 16th Floor Additional
Space.  Additional Charges with respect to
Taxes and Operating Expenses with respect to the 16th Floor Additional Space
shall be computed in the same manner as adjustments of rent with respect to
Taxes and Operating Expenses for the purpose of the Basic Escalation Payments,
except that for the purpose of such computations with respect to the 16th Floor
Additional Space:

 

(i)                                     The
“Base Operating Amount”, as such term is defined in Section 3.01(a) of
the Lease (as modified by Paragraph 4(b)(i) of the Second Modification as
modified by Paragraph 3(b)(i) of the Third Modification), shall mean the
Operating Expenses incurred for the Operating Year commencing on January 1,
2006;

 

(ii)                                  The
“Base Tax Amount”, as such term is defined in Section 3.01(b) of the
Lease (as modified by Paragraph 3(c)(i) of the First Modification,
Paragraph 4(b)(ii) of the Second Modification, Paragraph 3(b)(ii) of
the Third Modification, Paragraph 3(b)(ii) of the Fourth Modification and
Paragraph 3(b)(i) of the Storage Substitution Agreement, respectively),
shall mean one-half of the sum of (x) the Taxes for the Tax Year commencing July 1,
2005 and (y) the Taxes for the Tax Year commencing July 1, 2006, both as
finally determined; and

 

(iii)                               “Tenant’s
Share”, as such term is defined in Section 3.01(i) of the Lease (as
modified by Paragraph 3(c)(ii) of the First Modification, Paragraph 4(b)(iii) of
the Second Modification, Paragraph 3(b)(iii) of the Third Modification,
Paragraph 3(b)(iii) of the Fourth Modification and Paragraph 3(b)(ii) of
the Storage Substitution Agreement, respectively), shall mean 0.23 (0.23%)
percent with respect to 16th Floor Additional Space.

 

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(3)                                  Electrical
service shall be supplied to the 16th Floor Additional Space on a submetered
basis in accordance with the terms and provisions of Article 14 of the
Lease, except that for purposes hereof, the words “seven (7) watts” set
forth in the first (1st) and second (2nd) sentences of Section 14.08 of
the Lease shall be deleted and replaced with the words “six (6) watts”,
and Tenant agrees to purchase from Landlord or from a meter company designated
by Landlord all electricity consumed, used or to be used in the 16th Floor
Additional Space in accordance with Article 14.

 

(b)                                 Effective
during the period commencing on the 16th Floor Existing Space Adjustment Date (i.e.,
April 1, 2007) and ending on the New 16th Floor Expiration Date, the Lease
shall be modified as follows:

 

(1)                                  The
Fixed Rent payable by Tenant pursuant to Section 1.04(a) of the Lease
(as modified by Paragraph 3(a) of the First Modification, Paragraph 4(a) of
the Second Modification, Paragraph 3(a) of the Third Modification,
Paragraph 3(a) of the Fourth Modification, Paragraph 3(a) of the
Storage Substitution Agreement and Paragraph 4(a)(i) of this Agreement,
respectively) shall be modified, with respect to the 16th Floor Existing Space,
to the sum of EIGHT HUNDRED NINETEEN THOUSAND EIGHT HUNDRED FIVE AND 00/100
($819,805.00) DOLLARS per annum [or $68,317.09 per month], calculated on an
annual basis at the rate of $35 per rentable square foot.

 

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(2)                                  For
the purposes of calculating the Additional Charges payable by Tenant pursuant
to Article 3 of the Lease with respect to the 16th Floor Existing Space, the
following terms shall apply:

 

(i)             The “Base Operating
Amount”, as such term is defined in Section 3.01(a) of the Lease (as
modified by Paragraph 4(b)(i) of the Second Modification as modified by
Paragraph 3(b)(i) of the Third Modification), shall mean the Operating
Expenses incurred for the Operating Year commencing on January 1, 2006;
and

 

(ii)          The “Base Tax Amount”,
as such term is defined in Section 3.01(b) of the Lease (as modified
by Paragraph 3(c)(i) of the First Modification, Paragraph 4(b)(ii) of
the Second Modification, Paragraph 3(b)(ii) of the Third Modification,
Paragraph 3(b)(ii) of the Fourth Modification and Paragraph 3(b)(i) of
the Storage Substitution Agreement, respectively), shall mean one-half of the
sum of (x) the Taxes for the Tax Year commencing July 1, 2005 and (y) the
Taxes for the Tax Year commencing July 1, 2006, both as finally determined.

 

5.                                       16TH
FLOOR ADDITIONAL SPACE RENT ABATEMENT. Notwithstanding the foregoing
provisions of Paragraph 4(a)(1) above, provided that Tenant is not then in
default, after notice and the expiration of any applicable cure periods, under
any of the terms, provisions or conditions of the Lease (as modified hereby),
the increase in the Fixed Rent payable hereunder with respect to 16th Floor
Additional Space only shall be abated during the period (hereinafter called the
“16th Floor Additional Space Abatement Period”) commencing on the 16th
Floor Additional Space Inclusion Date and ending on the date which is one
hundred eighty (180) days following the 16th Floor Additional

 

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Space Inclusion Date; provided that Tenant shall pay
the Additional Charges with respect to the 16th Floor Additional Space during
the 16th Floor Additional Space Abatement Period, including, without
limitation, the Additional Charges attributable to Tenant’s consumption of
electricity in the 16th Floor Additional Space pursuant to Paragraph 4(a)(3) above.  There shall be no abatement of the Fixed Rent
or Additional Charges with respect to the Existing Premises.

 

6.                                       CONDITION
OF 16TH FLOOR ADDITIONAL SPACE/LANDLORD’S WORK.  Tenant agrees to accept possession of the 16th
Floor Additional Space “as is” in the condition and state of repair in which it
exists as of the date hereof and understands and agrees that Landlord is not
required to perform any work, supply any materials, incur any expense or
provide any allowance or contribution in connection with preparing the 16th
Floor Additional Space for Tenant’s occupancy; provided, however, Landlord shall,
at its sole expense, using materials and finishes of a type and quality
designated by Landlord as standard for the Building and in compliance with all
applicable legal requirements, install a demising wall and door connecting the
16th Floor Additional Space to the common corridor as more particularly set forth
on Exhibit B attached hereto (hereinafter called “Landlord’s
Demising Wall Work”), and shall deliver the 16th Floor Additional Space to
Tenant in “broom clean” condition.  Landlord’s
Demising Wall Work shall be commenced promptly following the date upon which
this Agreement has been executed by both Landlord and Tenant and a
fully-executed counterpart thereof has been delivered to Tenant, and shall be
performed in a diligent manner.  Tenant
shall execute and deliver to Landlord such documents that Landlord may
reasonably request from time to time to acknowledge the occurrence of the 16th
Floor Additional Space Inclusion Date; provided, however, that the failure of
Landlord to request, or the failure of Tenant to execute, such documentation
shall have no effect whatsoever on the obligations of Tenant hereunder.  Landlord agrees to deliver an ACP-5 covering
the 16th

 

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Floor Additional Space promptly after Tenant has
delivered to Landlord: (i) final plans and/or specifications (which plans
and/or specifications shall have been approved by Landlord) describing Tenant’s
16th Floor Additional Space Work (as hereinafter defined), and (ii) true
and complete copies of all necessary governmental permits and certificates for
the commencement and performance of Tenant’s 16th Floor Additional Space Work.

 

7.                                       TENANT’S
16TH FLOOR ADDITIONAL SPACE WORK.

 

(a)                                  Tenant
hereby covenants and agrees that Tenant shall, at Tenant’s sole cost and
expense, and in a good and workmanlike manner, make and complete the work and
installations to be performed by Tenant to prepare the 16th Floor Additional
Space for Tenant’s occupancy (hereinafter called “Tenant’s 16th Floor
Additional Space Work”) in accordance with the provisions set forth in
Articles 11 and 38 of the Lease (other than the provisions of Section 38.05
thereof), except that for purposes hereof, all references therein to the terms “Tenant’s
Work” and “Premises” shall be deemed to mean Tenant’s 16th Floor Additional
Space Work and the 16th Floor Additional Space, respectively.

 

(b)(1)                   Landlord shall allow Tenant a work
allowance in the aggregate amount of TWO HUNDRED NINETY THOUSAND NINE HUNDRED NINETY-FIVE
AND 00/100 ($290,995.00) DOLLARS (hereinafter called the “16th Floor
Additional Space Work Credit”), which 16th Floor Additional Space Work
Credit shall be applied solely against the cost and expense of the actual
construction work to be performed by Tenant to

 

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prepare the 16th Floor Additional Space for Tenant’s
occupancy (hereinafter called the “Tenant’s 16th Floor Additional Space Work”)
and the cost and expense of the actual construction work to be performed by
Tenant to prepare additional improvements to the 16th Floor Existing Space (“Tenant’s
16th Floor Existing Space Work”; together with Tenant’s 16th Floor
Additional Space Work, “Tenant’s 16th Floor Work”).  In the event that the cost and expense of
Tenant’s 16th Floor Work shall exceed the amount of the 16th Floor Additional
Space Work Credit, Tenant shall be entirely responsible for such excess.  If Tenant does not use all or any part of the
16th Floor Additional Space Work Credit, then the 16th Floor Additional Space
Work Credit shall be reduced accordingly.

 

(2)                                  Provided
that Tenant is not in default of any of the terms and conditions of the Lease,
the 16th Floor Additional Space Work Credit shall be payable by Landlord to
Tenant in installments as Tenant’s 16th Floor Work progresses, but in no event
more frequently than monthly; provided, however, that in no event shall Tenant
be entitled to any payment for any portion of Tenant’s 16th Floor Existing
Space Work unless and until Tenant has substantially completed Tenant’s 16th
Floor Additional Space Work in accordance with Tenant’s final plan.  Tenant shall deliver to Landlord a written
request for disbursement (each called a “Tenant Requisition”), which
shall be accompanied by: (1) paid invoices from the contractors and
subcontractors performing the portion of Tenant’s 16th Floor Work referenced in
such Tenant Requisition, (2) a certificate signed by Tenant’s architect
and an officer of Tenant certifying that the portions of Tenant’s 16th Floor
Work represented by the aforesaid invoices and referenced in such Tenant
Requisition has been satisfactorily completed in accordance

 

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with the Tenant’s final plan with respect to Tenant’s
16th Floor Work, as approved by Landlord, and (3) partial lien waivers (in
recordable form and form satisfactory to Landlord) from the contractors,
subcontractors and all materialmen who shall have performed any such work
releasing Tenant from all liability for the same.  Landlord shall be permitted to retain from
each disbursement an amount equal to five (5%) percent of the amount requested
to be disbursed by Tenant.  The aggregate
amount of the retainages shall be paid by Landlord to Tenant upon completion of
Tenant’s 16th Floor Work and upon receipt from Tenant of (i) a certificate
signed by Tenant’s architect and an officer of Tenant certifying that Tenant’s
16th Floor Work has been satisfactorily completed in accordance with Tenant’s
final plan, (ii) final “as-built” drawings as required pursuant to Section 11.08
of the Lease, and all sign-offs, inspection certificates and any permits
required to be issued by the New York City Building Department, Fire Department
and by any other governmental entities having jurisdiction thereover with respect
to the 16th Floor Additional Space, and (iii) a general release from all
contractors and subcontractors performing Tenant’s 16th Floor Work releasing
Landlord and Tenant from all liability for any Tenant’s 16th Floor Work.

 

(3)                                  At
any and all times during the progress of Tenant’s 16th Floor Work,
representatives of Landlord shall have the right of access to the 16th Floor
Additional Space and the 16th Floor Existing Space and inspection thereof and
Landlord shall have the right to withhold payment of any portion of the 16th
Floor Work Credit representing the reasonably estimated cost of any such work
not being performed in a manner reasonably satisfactory to Landlord; provided,
however, that Landlord shall incur

 

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no liability, obligation or responsibility to Tenant
or any third party by reason of such access and inspection.

 

(4)                                  The
16th Floor Additional Space Work Credit is being given for the benefit of
Tenant only.  No third party shall be
permitted to make any claims against Landlord or Tenant with respect to any
portion of the 16th Floor Additional Space Work Credit.

 

8.                                       NOTICES.  Article 29 of the Lease shall be
modified by deleting the address to which notices to Landlord shall be sent and
replacing same with the following:

 

“If to
Landlord:

 

BFP ONE LIBERTY PLAZA CO. LLC

c/o Brookfield Financial Properties, L.P.

Three World Financial Center

200 Vesey Street, 11th Floor

New York, New York 10281-1021

Attention: Senior Vice President/Director of Leasing

 

with a
copy to:

 

BFP ONE LIBERTY PLAZA CO. LLC

c/o Brookfield Financial Properties, L.P.

Three World Financial Center

200 Vesey Street, 11th Floor

New York, New York 10281-1021

Attention: General
Counsel.”

 

9.                                       BROKER.  Landlord and Tenant each covenant, warrant
and represent that no broker or agent except CB Richard Ellis, Inc.
(hereinafter called the “Broker”) was instrumental in bringing about or
consummating this Agreement and that neither had

 

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any conversations or negotiations with any broker or
agent except the Broker concerning the leasing of the 16th Floor Additional
Space and the extension of the term with respect to the 16th Floor Existing
Space.  Tenant agrees to indemnify and
hold harmless Landlord against and from any claims for any brokerage
commissions and all costs, expenses and liabilities in connection therewith,
including, without limitation, reasonable attorneys’ fees and expenses, arising
out of any conversations or negotiations had by Tenant with any broker or agent
other than the Broker with respect to this Agreement.  Landlord agrees to indemnify and hold
harmless Tenant against and from any claims for any brokerage commissions and
all costs, expenses and liabilities in connection therewith, including, without
limitation, reasonable attorneys’ fees and expenses, arising out of
conversations or negotiations had by Landlord with any broker or agent other
than the Broker with respect to this Agreement. 
Landlord agrees that it shall pay to the Broker any commission or
compensation to which the Broker may be entitled in connection with this
Agreement pursuant to a separate agreement between Landlord and the Broker.

 

10.                                 RATIFICATION
OF LEASE TERMS.  Except as modified
by this Agreement, the Lease and all of the covenants, agreements, terms and
conditions thereof shall remain in full force and effect and are hereby in all
respects ratified and confirmed.

 

11.                                 BINDING
EFFECT.  The covenants, agreements,
terms, provisions and conditions contained in this Agreement shall be binding
upon and enure to the benefit of the parties hereto and their respective
successors and, except as otherwise provided in the Lease, their respective
assigns.

 

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12.                                 WRITTEN
MODIFICATIONS.  This Agreement may
not be changed or terminated orally but only by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification,
termination or discharge is sought.

 

13.                                 GOVERNING
LAW.  This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New
York.

 

14.                                 COUNTERPARTS.  This Agreement may be executed in any number
of counterparts, each of which shall, when executed, be deemed to be an
original and all of which shall be deemed to be one and the same instrument.

 

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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.

 

	
   

  	
  BFP ONE LIBERTY PLAZA CO. LLC,
  Landlord

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
                    /s/
  Jeremiah B. Larkin

  	
   

  
	
   

  	
   

  	
  Name: Jeremiah B.
  Larkin

  
	
   

  	
   

  	
  Title: Senior Vice
  President, Director of

  Leasing

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARCH INSURANCE COMPANY, a
  Missouri

  corporation, Tenant

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  Mark D. Lyons

  	
   

  
	
   

  	
   

  	
  Name:  Mark D. Lyons

  Title:  Executive Vice President

  

 

15EXHIBIT 10.12.5

 

ARCH CAPITAL GROUP LTD.

Restricted Share Agreement

 

THIS AGREEMENT, dated as of November 15, 2005,
between Arch Capital Group Ltd. (the “Company”), a Bermuda company, and Marc
Grandisson (the “Employee”).

 

WHEREAS, the Employee has been granted the following
award under 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 50,000 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 on December 31,
2008.  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.  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 (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 October 23, 2001 (as
amended), between the Employee, Arch Reinsurance Ltd. and the Company), 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 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

 

2

 

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.

 

3

 

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

 

	
   

  	
  ARCH CAPITAL
  GROUP LTD.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Vollaro

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Marc
  Grandisson

  	
   

  
	
   

  	
  Marc Grandisson

  

 

4

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