ARCH CAPITAL GROUP LTD
EXHIBIT 10.11
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<TYPE>EX-10.11
<SEQUENCE>17
<FILENAME>a2063466zex10_11.txt
<DESCRIPTION>EXHIBIT 10.11
<TEXT>
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                                                                   Exhibit 10.11

                             ARCH CAPITAL GROUP LTD.

                           RESTRICTED SHARE AGREEMENT

      THIS AGREEMENT, dated as of October 23, 2001, 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 retention as an employee and as compensation for services to be
rendered; and the following terms reflect the Company's Long Term Incentive Plan
For New Employees (as amended, 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
12,500 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 the fifth
anniversary of the date hereof. 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 (i) a Change in Control
occurs and (ii) within two years following such Change in Control, the
employment of the Employee is terminated by the Company not for Cause or
Permanent Disability (as defined in the Employment Agreement between the
Employee, the Company and Arch Reinsurance Ltd. dated as of October __, 2001
(the "Employment Agreement")) or the Employee terminates his employment with the
Company for Good Reason (as defined in the Employment Agreement), then the
Restricted Shares shall become immediately vested in full upon such termination
of employment.

      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.

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      "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. Except as
otherwise set forth in Section 2(a) above, in the event the Employee ceases to
be an employee of the Company for any reason (other than due to his death or
Permanent Disability (as defined in the Employment Agreement)) prior to the date
the Award vests, 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 wholly owned subsidiaries shall be considered to be service with the
Company. If the Employee ceases to be an employee of the Company due to his
death or Permanent Disability on or before the first anniversary of the date
hereof, one-fifth of the Award will vest at the time of such termination. If the
Employee ceases to be an employee of the Company due to his death or Permanent
Disability after the first anniversary of the date hereof but on or before the
second anniversary of the date hereof, two-fifths of the Award will vest at the
time of such termination. If the Employee ceases to be an employee of the
Company due to his death or Permanent Disability after the second anniversary of
the date hereof but on or before the third anniversary of the date hereof,
three-fifths of the Award will vest at the time of such termination. If the
Employee ceases to be an employee of the Company due to his death or Permanent
Disability after the third anniversary of the date hereof but on or before the
fourth anniversary of the date hereof, four-fifths of the Award will vest at the
time of such termination. If the Employee ceases to be an employee of the
Company due to his death or Permanent Disability after the fourth anniversary of
the date hereof, the Award will vest in full at the time of such termination.

      (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

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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 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 upon the vesting of 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 upon
the vesting of such Award.

      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.
       EXECUTIVE OFFICES:
       20 Horseneck Lane
       Greenwich, CT 06830
       Attn.: Secretary

       If to the Employee:

      To the last address delivered to the Company by the Executive in the
      manner set forth herein.

      8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Bermuda, without giving effect to principles of
conflict of laws.

      9. ENTIRE AGREEMENT. This Agreement and the Plan constitutes 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/ Louis T. Petrillo
                                            ----------------------------------


                                        /s/ Marc Grandisson
                                        ---------------------------------------
                                        Marc Grandisson

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