Document:

Exhibit 10.1

 

[ARCH CAPITAL GROUP LTD. LETTERHEAD]

 

 

May 27,
2005

 

Mr. W. Preston
Hutchings

“The Deanery”

12 Middle Road

Paget, PG03

Bermuda

 

Dear Preston:

 

This letter agreement confirms that Arch Capital Group Ltd.,
a Bermuda company (the “Company”), shall employ you, and that you shall
accept such employment, all on the terms outlined below:

 

1.                              Employment:  The Company shall employ you, and you shall
accept employment with the Company, upon the terms and conditions set forth in
this letter agreement for the period beginning on July 1, 2005 and ending
as provided in paragraph 3 (the “Employment Period”).

 

2.                              Position &
Responsibilities:  (A)  You
shall serve as Senior Vice President, Chief Investment Officer of the Company,
and that in such capacity you shall report to the Chief Financial Officer of
the Company.  During the Employment
Period, you shall devote substantially all of your working time and efforts to
the business and affairs of the Company.

 

(B)  While employed by the Company hereunder, you shall
perform your duties at the offices of the Company in Bermuda.  You shall travel to such places outside of
Bermuda on the business of the Company in such manner and on such occasions as
the Company may from time to time reasonably require.

 

3.                              Term
of Employment:  The Employment Period shall continue until the
Company gives notice in writing to you or you give notice in writing to the
Company of at least one month, subject to earlier termination as provided under
The Employment Act 2000.

 

4.                              Compensation:  Compensation for your services hereunder
shall be at an annual base salary rate of $400,000, and an annual performance
bonus opportunity to be determined by the Board of Directors of the Company in
its sole discretion (it being understood that your bonus will not be prorated
for 2005 based on the number of days you are employed by the Company during
2005).  The target rate for the annual
bonus shall be 100% of the base salary rate, subject to a maximum amount of
200% of the base salary rate.  The base
salary will be payable monthly on the 15th day of each month, two
weeks in arrears and two weeks in advance. 
Normal hours of employment are 8:30 a.m. to 5:00 p.m., Monday
to Friday.  Your base salary has been
computed to reflect that your regular duties are likely, from time to time, to
require more than the normal hours per week and you shall not be entitled to
receive any additional remuneration for work outside normal hours.

 

 

Subject
to the approval of the Board of Directors of the Company (the “Board”), the
Company shall grant to you under one of its share based compensation plans an
option (the “Option”) to purchase 50,000 common shares of the Company at
a purchase price per share equal to the closing market price of the Company’s
shares on the date of grant (the “Grant Date”), with one-third of the
Option vesting and becoming exercisable on each of the Grant Date and the first
anniversary and the second anniversary of the Grant Date, provided that on such
date you are still employed by the Company as provided in the applicable award
agreement.  Such Option shall be
exercisable for ten years from the Grant Date, subject to sooner termination in
the event employment with the Company is terminated as provided in the applicable
award agreement.

 

In
addition, subject to the approval of the Board, the Company shall grant to you
12,500 restricted common shares of the Company on the Grant Date, which will
vest on the fifth anniversary of the Date of Grant and will be subject to all
other provisions included in the applicable award agreement.  In the event your employment is terminated by the Company without cause
(as defined in the award agreement), such restricted shares, to the extent not
already vested in full, shall become immediately and fully vested at the time
of such termination of service as provided in the award agreement.

 

5.                              Benefits:  In addition to the compensation described
above, you shall be entitled to the following benefits during the Employment
Period:

 

(A)  such major medical, life insurance and
disability insurance coverage as is, or may during the Employment Period, be
provided generally for other employees of the Company as set forth from time to
time in the applicable plan documents, copies of which may be obtained by you
from the Company;

 

(B) 
in addition to the usual public holidays and ten (10) paid days off for
sick leave, a maximum of four weeks of paid vacation annually during the term
of the Employment Period (Section 11 of the Bermuda Employment Act 2000
shall otherwise not apply to your employment hereunder);

 

(C) 
benefits under any plan or arrangement available generally for the employees of
the Company, subject to and consistent with the terms and conditions and
overall administration of such plans as set forth from time to time in the
applicable plan documents; and

 

(D) 
the additional benefits set forth on Schedule I.

 

6.                              Expenses:  The Company shall reimburse you for all reasonable
expenses incurred by you in the course of performing your duties under this
letter agreement which are consistent with the Company’s policies in effect
from time to time with respect to travel, entertainment and other business
expenses, subject to the Company’s requirements with respect to reporting and
documentation of expenses.

 

7.                              Confidential Information; Intellectual
Property:  (A)  You will not disclose or use at any
time during or after the Employment Period any Confidential Information (as
defined below) of which you are or become aware, whether or not such
information is developed by you, except to the extent that such disclosure or
use is directly related to and required by your performance of duties assigned
to you pursuant to this letter agreement. 
Under all circumstances and at all times, you will take all appropriate
steps to safeguard Confidential Information in your possession and to protect
it against disclosure,

 

2

 

misuse,
espionage, loss and theft.  “Confidential
Information” means information that is not generally known to the public
and that was or is used, developed or obtained by
the Company or any of its subsidiaries (collectively, the “Companies”) in
connection with their business.  It shall
not include information (a) required to be disclosed by court or
administrative order, (b) lawfully obtainable from other sources or which
is in the public domain through no fault of you; or (c) the disclosure of
which is consented to in writing by the Companies.

 

(B) 
In the event that you as part of your activities on behalf of the Company generates,
authors or contributes to any invention, design, new development, device,
product, method of process (whether or not patentable or reduced to practice or
comprising Confidential Information), any copyrightable work (whether or not
comprising Confidential Information) or any other form of Confidential
Information relating directly or indirectly to the business of the Companies as
now or hereinafter conducted (collectively, “Intellectual Property”),
you acknowledge that such Intellectual Property is the sole and exclusive
property of the Companies and hereby assign all right title and interest in and
to such Intellectual Property to the Companies. 
Any copyrightable work prepared in whole or in part by you during the
Employment Period will be deemed “a work made for hire” under Section 201(b) of
the Copyright Act of 1976, as amended, and the Companies will own all of the
rights comprised in the copyright therein. 
You will promptly and fully disclose all Intellectual Property and will
cooperate with the Companies to protect the Companies’ interests in and rights
to such Intellectual Property (including providing reasonable assistance in
securing patent protection and copyright registrations and executing all
documents as reasonably requested by the Company, whether such requests occur
prior to or after termination of your employment hereunder).

 

(C) 
As requested by the Company, from time to time and upon the termination of your
employment with the Company for any reason, you will promptly deliver to the
Company all copies and embodiments, in whatever form or medium, of all
Confidential Information or Intellectual Property in your possession or within
your control (including written records, notes, photographs, manuals,
notebooks, documentation, program listings, flow charts, magnetic media, disks,
diskettes, tapes and all other materials containing any Confidential
Information or Intellectual Property) irrespective of the location or form of
such material and, if requested by the Company, will provide the Company with
written confirmation that all such materials have been delivered to the Company.

 

8.                              Nonsolicitation:  (A) 
You hereby agree that (a) during the Employment Period and for a period of
one (1) year after the date of termination of your employment hereunder
(the “Nonsolicitation Period”) you will not, directly or indirectly
through another entity, induce or attempt to induce any employee of the
Companies to leave the employ of the Companies, or in any way interfere with
the relationship between the Companies and any employee thereof or otherwise
employ or receive the services of any individual who was an employee of the
Companies at any time during such Nonsolicitation Period or within the
six-month period prior thereto and (b) during the Nonsolicitation Period,
you will not induce or attempt to induce any customer, supplier, client,
insured, reinsured, reinsurer, broker, licensee or other business relation of
the Companies to cease doing business with the Companies.

 

(B) 
If, at the enforcement of this paragraph 8, a court holds that the duration,
scope or area restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum duration, scope or
area reasonable under such circumstances will be substituted for the stated
duration, scope or area and that the court will be permitted to revise the
restrictions contained in this paragraph 8 to cover the maximum duration, scope
and area permitted by law.

 

3

 

9.                              Equitable
Relief:  You acknowledge that (a) the
covenants contained herein are reasonable, (b) your services are unique,
and (c) a breach or threatened breach by you of any of your covenants and
agreements with the Companies contained in paragraphs 7 and 8 could cause
irreparable harm to the Companies for which they would have no adequate remedy
at law.  Accordingly, and in addition to
any remedies which the Companies may have at law, in the event of an actual or
threatened breach by you of your covenants and agreements contained in
paragraphs 7 and 8, the Companies shall have the absolute right to apply to any
court of competent jurisdiction for such injunctive or other equitable relief
as such court may deem necessary or appropriate in the circumstances.

 

10.                        Representation:  You hereby represent and warrant to the
Company that (a) the execution, delivery and performance of this letter
agreement by you does not and will not conflict with, breach, violate or cause
a default under any contract, agreement, instrument, order, judgment or decree
to which you are a party or by which you are bound, (b) you are not a
party to or bound by any employment agreement, noncompetition agreement or
confidentiality agreement with any other person and (c) upon the execution
and delivery of this letter agreement by the Company, this letter agreement
will be the valid and binding obligation of you, enforceable in accordance with
its terms.

 

11.                        Notice:  Any notice or request required or permitted
under this letter agreement shall be in writing and given or made by fax, email
or by post-paid registered certified mail return, receipt requested, addressed
to the Company at its registered office or to you at the address specified
therefor on the first page hereof or to either party at such other address
or addresses as such party may from time to time specify for the purpose in a
notice given to the other party in accordance with this paragraph.

 

12.                        General:  There are currently no disciplinary or
grievance procedures in place, and there is no collective agreement in place.
You also understand that professional office attire based on the local customs
of Bermuda is required at all times. 
This letter agreement constitutes the entire agreement among the parties
hereto relating to the subject matter hereof, may be executed in two or more
counterparts, and shall be governed by the laws of Bermuda without regard to
choice of law rules.

 

4

 

Please
confirm your agreement to the above by signing and returning the enclosed
duplicate of this letter agreement.

 

We
look forward to a mutually satisfactory relationship.

 

	
   

  	
  ARCH CAPITAL
  GROUP LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Vollaro

  
	
   

  	
  Name:

  	
  John D. Vollaro

  
	
   

  	
  Title:

  	
  Executive Vice
  President and Chief

  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted as of
  the date first above written:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ W. Preston
  Hutchings

  	
   

  	
   

  	
   

  
	
  W. Preston
  Hutchings

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  cc: Dinos
  Iordanou

  	
   

  	
   

  
					

 

5

 

Schedule I

 

The Company shall
reimburse you for the following expenses incurred by you, subject, in each
case, to the Company’s requirements with respect to reporting and documentation
of such expenses:

 

•                  A one-time automobile allowance of $35,000
for the purchase of an automobile; and

 

•                  Annual dues for membership in one
club.Exhibit 10.1

 

CONSULTING
AGREEMENT

 

THIS CONSULTING AGREEMENT, (this “Agreement”), effective upon the 3rd
of June, 2005 (the “Effective Date”), is by and between investment management
company Bushido Capital Partners, Ltd. (“Consultant”), a Cayman Islands exempt
company with offices at 275 Seventh Avenue, Suite 2000,  New York, NY 10001 and Vistula Communications
Services, Inc., a Delaware corporation with offices at Suite 801, 405
Park Avenue, New York, New York 10022 (“Company”), singularly and collectively
referred to herein as the “Party” or “Parties,” respectively.

 

W I T N E S S E T H:

 

WHEREAS,
Consultant occasionally provides advisory and consulting services to public and
private companies to assist them in raising equity and/or debt capital primarily
from institutional investors; and,

 

WHEREAS,
Company wishes Consultant to provide to Company advice and consultation
services regarding Company’s interest in raising capital through private and/or
public capital markets and Consultant wishes to provide such services;

 

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

 

1.                                       Services.  During the Term, as hereafter defined,
Consultant hereby agrees, at the request of and as directed by the Chief
Executive Officer and/or Chief Financial Officer of Company, to provide
business consulting services to Company, which shall include but not be limited
to advising Company on credit line formation for Company’s wholesale business
and introducing potential credit line provider(s) to Company (collectively, the
“Services”).

 

2.                                       Compensation.

 

a.                                       For
Services rendered by Consultant hereunder, the Company shall pay Consultant a
fee equal to $200,000 in cash (“Cash Fee”), and shall issue to Consultant a
warrant (the “Warrant”) to purchase 200,000 shares (the “Warrant Shares”) of
Company’s common stock (“Common Stock”) at an exercise price of $1.00 per share
(the “Exercise Price”).  The Warrant
shall have a term of exercise equal to five (5) years. The Warrant shall
become exercisable solely in the event that the Company obtains a credit line
for receivables financing of the Company’s wholesale call services business in
an aggregate amount of $5,000,000 or more within one year following the date of
this Agreement, irrespective of whether the provider of the credit line was
introduced to the Company by Consultant in connection with the performance of
the Services by Consultant hereunder.

 

b.                                      If
at any time after one year from the date of issuance of the Warrant there is no
effective registration statement registering, or no current prospectus
available for, the resale of the Warrant Shares by Consultant, then this
Warrant may also be exercised at such time by means of a “cashless exercise” in
which the Consultant shall be entitled to receive a

 

1

 

certificate for the number of Warrant shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A) where:

 

i.                  (A) =
Volume Weighted Average Price of the Common Stock on the Trading Day
immediately preceding the date of such election;

ii.               (B) = the
Exercise Price of this Warrant, as adjusted in accordance with the terms of the
Warrant; and

iii.            (X) = the number of
Warrant Shares issuable upon exercise of the Warrant in accordance with the
terms of the Warrant by means of a cash exercise rather than a cashless
exercise.

 

For the purposes of this Agreement and the
Warrant, (i) the term ‘Volume Weighted Average Price” shall mean for any
date, the price determined by the first of the following clauses that applies: (a) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b)  if the
Common Stock is not then listed or quoted on a Trading Market and if prices for
the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on the OTC Bulletin Board; (c) if the Common Stock is not then listed or
quoted on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as reasonably
determined by the board of directors of Company;  (ii) the term “Trading Day” means a day
on which the Common Stock is traded on a Trading Market; and (iii) ”Trading
Market” means, as applicable, the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, the OTC Bulletin Board or the “Pink Sheets”
published by the Pink Sheets LLC.

 

c.                                       The
Warrant and fifty percent (50%) of the Cash Fee shall be issued and paid,
respectively, to Consultant on the Effective Date.  The remaining fifty percent (50%) of the Cash
Fee shall be paid to Consultant in six (6) equal installments of
$16,666.67 per month, to be paid on or before the third day of each calendar
month, beginning on July 3, 2005, and continuing for a period of six (6) consecutive
calendar months until fully paid.

 

d.                                      For
the avoidance of doubt, Consultant shall not be entitled to any compensation or
other payments from Company with respect to advice provided or other services
performed by Consultant prior to the date of this Agreement, including without
limitation any advice provided or other services performed in connection with
the Company’s convertible debt and warrant financing completed in February/March 2005
(the “Past Services”), and Consultant hereby acknowledges and agrees that it is
not entitled to any compensation arising from or in connection with the Past
Services.

 

3.                                       Term.
This Agreement shall commence as of the Effective Date and shall expire on the
later of: (i) the date six (6) calendar months from the Effective
Date, or (ii) the date sixty (60) days from the first day of trading of
the Company’s Common Stock on one of the following North American

 

2

 

public stock exchanges: New York Stock
Exchange, American Stock Exchange, Nasdaq Stock Market and Over-the-Counter
Bulletin Board (the “Term”), unless extended in writing by mutual consent of
the Parties.

 

4.                                       No
Representations, Warranties, Covenants or Agreement.  Except as set forth in this Agreement,
neither party has made any representation, warranty, covenant or agreement with
respect to the matters contained herein, and each party has not and will not
rely on any representation, warranty, covenant or agreement with respect to the
matters contained herein, except as set forth in this Agreement.

 

5.                                       Company
Information.  The parties agree that
Consultant will use and rely on data, material and other information furnished
to Consultant by Company and Company shall be solely responsible for the
accuracy of the data, material and other information furnished.

 

6.                                       Conflicts.
Consultant represents and warrants to Company that it does not have a conflict
of interest arising from or in connection with this Agreement and the
performance by Consultant of the Services hereunder. In the event that during
the Term a conflict of interest arises on the part of Consultant in connection
with this Agreement or the performance by Consultant of its Services hereunder,
it shall promptly (but not later than seven (7) days following the date on
which the conflict arises) notify Company in writing of such conflict. In the
event such notice is delivered to the Company, the Company shall have the right
at any time thereafter to terminate this Agreement upon seven (7) days
prior written notice to Consultant. In the event that the Company terminates
the Agreement in accordance with the immediately preceding sentence, the Cash
Fee for the month in which the termination occurs shall be prorated taking to
account the actual number of days in the month in which the Agreement was in
full force and effect.

 

7.                                       Indemnification.  Company agrees to indemnify and hold harmless
Consultant from and against any and all losses, claims, damages, liabilities,
suits, actions, proceedings, costs and expenses (collectively, “Damages”),
including, without limitation, reasonable attorney fees and expenses, as and
when incurred, if such Damages were directly caused by, relating to, based upon
or arising out of Services rendered by Consultant under this Agreement, so long
as Consultant shall not have engaged in illegal, intentional or willful
misconduct, or shall not have acted in a negligent manner, in connection with
the Services provided which form the basis of the claim for
indemnification.  This paragraph shall
survive the termination of this Agreement.

 

8.                                       Confidentiality.
Consultant agrees that all non-public information concerning the Company which
is provided or disclosed to Consultant, if any, in connection with this
engagement shall be used solely in connection with the performance of the
Services hereunder and shall be treated confidentially by Consultant for so
long as it remains non-public.  Except as
otherwise required by law or regulatory authority, Consultant shall not
disclose this information to a third party without the consent of the Company.
This paragraph shall survive the termination or expiration of this Agreement.

 

9.                                       Independent
Contractors.  Consultant shall perform its services hereunder
as an independent contractor and not as an employee of the Company or any
affiliate thereof.  Each party shall have
no authority to act for, represent or bind the other party or any affiliate
thereof in any manner, except as may be expressly agreed to by the other party
in writing.

 

3

 

10.                                 Arbitration. 
In the event of any dispute under this Agreement, then and in such
event, each party agrees that the same shall be submitted to the American
Arbitration Association (“AAA”) in the City of New York or nearest city, for
its decision and determination in accordance with its rules and regulation
then in effect.  Each of the parties
agrees that the decision and/or award made by the AAA may be entered as judgment
of the Courts of the State of New York, and shall be enforceable as such.  The losing party in any such arbitration
shall pay the reasonable attorneys’ fees and expenses of the winning party;
provided, that, if there is a ruling as to which each party claims partial
victory, the principle stated herein shall nevertheless remain in effect
proportionately, and the arbitrator shall be required to apportion such fees
and expenses between the parties on the basis of such principle.

 

11.                                 Notices.  Any notice to
be given by either party to the other hereunder shall be sufficient if in
writing and sent by (a) nationally recognized overnight courier, (b) facsimile
transmission electronically verified and confirmed, (c) electronic mail
transmission electronically verified and confirmed, (d) hand delivery
against receipt, (e) registered or certified mail, return receipt
requested, in each case addressed to such party at the address specified on the
first page of this Agreement or such other address as either party may
have given to the other in writing.

 

12.                                 Miscellaneous. 
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof.  No
provision of this Agreement may be amended, modified or waived, except in
writing signed by both parties.  This
Agreement shall be binding upon and inure to the benefit of each of the parties
and their respective successors, legal representatives and assigns.  This Agreement shall not be assigned by
either party without the written consent of the other party.  This Agreement may be executed in
counterparts.  This Agreement shall be
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws.

 

[Remainder
of page intentionally left blank]

 

IN WITNESS WHEREOF, each
of the Parties hereto has executed this Agreement as of the Effective Date: June 3,
2005

 

	
  VISTULA COMMUNICATIONS

  	
  BUSHIDO CAPITAL PARTNERS, LTD

  
	
  SERVICES, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Rupert Galliers-Pratt

  	
   

  	
  By:

  	
  /s/ Ron Dagar

  	
   

  
	
  Name: Rupert Galliers-Pratt

  	
  Name:

  	
  Ron Dagar

  
	
  Title: CEO/President

  	
  Title:

  	
  Partner

  
							

 

4

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