EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of the
1st day of January, 1999 (the "Effective Date"), between HCC INSURANCE HOLDINGS,
INC. ("HCC" or "Company"), and XXXXXXX X. WAY ("Executive"), sometimes
collectively referred to herein as the "Parties."
R E C I T A L S:
WHEREAS, Executive is to be employed as Chief Executive Officer ("CEO") and
Executive Chairman of the Board of HCC and, as an integral part of its
management who participates in the decision-making process relative to short and
long-term planning and policy for the Company, will serve on the Company's
Executive Committee;
WHEREAS, it is the desire of the Board of Directors of HCC (the "Board") to
(i) directly engage Executive as an officer of HCC and its subsidiaries; and
(ii) directly engage, if elected, the services of Executive as a director of HCC
and its subsidiaries; and
WHEREAS, Executive is desirous of committing himself to serve HCC on the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the Parties agree as follows:
1. TERM. The Company hereby agrees to employ Executive as its Chief
Executive Officer and Executive Chairman of the Board, and Executive hereby
agrees to accept such employment, on the terms and conditions set forth herein,
for the period commencing on the Effective Date and expiring as of 11:59 p.m. on
December 31, 2000 (the "Basic Term") (unless sooner terminated as hereinafter
set forth); provided, however, that effective January 1, 2000, Executive shall
cease to hold the position of Chief Executive Officer; and provided, further
however, that commencing on December 31, 2000, the term of this Agreement shall
automatically be extended for three (3) additional years (the "Renewal Term")
upon terms no less favorable than the terms that exist on the commencement date
of the Renewal Term, and as set forth herein unless at least thirty (30) days
prior to such December 31 date, Executive shall have given notice that he does
not wish to extend this Agreement. (The Basic Term and the Renewal Term are
herein sometimes referred to as the "Term"). It is understood that as set forth
above, during the Term, Executive will cease to act as Chief Executive Officer
but remain as Executive Chairman of the Board. In such event, Executive shall
continue on as an employee of the Company entitled to the rights and subject to
the obligations of this Agreement as they pertain to Executive as an employee.
2. DUTIES.
(a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject to
the supervision of the Board of Directors, have general management and control
of HCC in the ordinary course of its business with all such powers with respect
to such management and control as may be reasonably incident to such
responsibilities. During normal business hours, Executive shall devote his full
time and attention to diligently attending to the business of the Company during
the Term. During the Term, and except as shall exist prior to the date of the
Agreement Executive shall not directly or indirectly render any services of a
business, commercial, or professional nature to any other person, firm,
corporation, or organization, whether for compensation or otherwise, without the
prior consent of the Board of Directors of HCC. However, Executive shall have
the right to engage in such activities as may be appropriate in order to manage
his personal investments so long as such activities do not interfere or conflict
with the performance of his duties to the Company hereunder. The conduct of
such activity shall not be deemed to materially interfere or conflict with
Executive's performance of his duties until Executive has been notified in
writing thereof and given a reasonable period in which to cure the same.
(b) OTHER DUTIES. At all times during the Term, the Company shall
use its best efforts to cause Executive to be elected a director and to serve as
Chairman of the Executive Committee of HCC. Any such failure to use its best
efforts prior to a Change of Control shall be a material breach of this
Agreement for purposes of Section (4)(a)(iv). Executive agrees to serve as a
director and member of the Executive Committee of HCC and of any of its
subsidiaries and in one or more executive offices of any of HCC's subsidiaries,
provided Executive is indemnified for serving in any and all such capacities in
a manner acceptable to the Company and Executive. Executive agrees that while a
full time employee he shall not be entitled to receive any compensation for
serving as a director of HCC, or in any capacities of HCC's subsidiaries other
than the compensation to be paid to Executive by the Company pursuant to this
Agreement. If Executive is not a full time employee, he shall be compensated as
an outside director.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Executive shall receive a base salary paid by the
Company at the annual rate of $800,000, during the period beginning on the
Effective Date and for each calendar year of the Term, payable not less
frequently than in substantially equal monthly installments (or such other more
frequent times as executives of HCC normally are paid). The base salary shall
be reviewed by the Board at least as often as the compensation of other senior
officers of HCC is reviewed, and may be increased (but not decreased) at any
time in the sole discretion of the Board. Any increase in the base salary or
other compensation granted by the Board shall in no way limit or reduce any
other obligation of the Company hereunder and, once established at an increased
specified rate, Executive's base salary hereunder shall not thereafter
be reduced. For purposes of this Agreement, "Base Salary" shall mean the
Executive's initial base salary or, if increased, then the increased base
salary.
(b) BONUS PAYMENTS. Each year during the Term, Executive shall be
entitled to receive, in addition to the Base Salary, an annual cash bonus
payment in amounts to be determined at the sole discretion of the Compensation
Committee.
(c) STOCK OPTIONS. In addition to stock options previously granted
to Executive (including 150,000 shares granted as of January 7, 1998 at an
exercise price of $16.50 per share and 75,000 shares granted on December 31,
1998 at an exercise price of $17.75 per share), in partial consideration for
Executive's non-competition agreements set forth herein, Executive shall be
provided with additional options to purchase HCC shares for each year of
Executive's employment hereunder as follows:
(1) A minimum of 75,000 shares on December 31, of each year
of the Term. In addition to the minimum set forth
herein, Executive shall receive such additional options
as the Compensation Committee shall, in its sole
discretion, grant to Executive. All such options shall
be priced at the average closing price of HCC shares
for the month of December of the year of grant. Any
options so granted shall vest immediately;
(2) If this Agreement is renewed by Executive, as set forth
herein, on January 1, 2001, Executive shall be granted
an additional option of 150,000 shares (the "Renewal
Option"). Such Renewal Option shall vest in one
installment on December 31, 2001. The exercise price
for such Renewal Option shall be the average of the
closing prices on the New York Stock Exchange for the
month of December 2000.
(d) EXPENSES. During the Term of his employment and the Consulting
Period hereunder, Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by him (in accordance with the policies and
procedures established by the Board for the Company's senior executive officers)
in performing services hereunder, provided that Executive properly accounts
therefor in accordance with Company policy. Executive shall be reimbursed for
use of his home for business guests at the rate of $500 per night and for
entertaining business guests on his boat at the rate of $3,750 per day, subject
to adjustment from time to time based on International Charter Rates. In
addition, the Company shall reimburse Executive pursuant to the arrangements in
effect as of the date of this Agreement, for all of the use of Executive's
aircraft during the Term and the Consulting Period, as defined below.
(e) OTHER BENEFITS. Executive shall be entitled to participate in or
receive benefits under any compensation employee benefit plan or other
arrangement made available by the Company now or in the future to its senior
executive officers and key management employees, subject to and on a basis
consistent with the terms, conditions, and overall administration of such plan
or arrangement. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the Base Salary payable to Executive pursuant to subsection (a) of this
Section. The Company shall not make any changes in any employee benefit plans
or other arrangements in effect on the date hereof or subsequently in effect in
which Executive currently or in the future participates (including, without
limitation, each pension and retirement plan, supplemental pension and
retirement plan, savings and profit sharing plan, stock or unit ownership plan,
stock or unit purchase plan, stock or unit option plan, life insurance plan,
medical insurance plan, disability plan, dental plan, health and accident plan,
or any other similar plan or arrangement) that would adversely affect
Executive's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to substantially all executives of the Company and does not
result in a proportionately greater reduction in the rights of or benefits to
Executive as compared with any other executive of the Company.
(f) VACATIONS. Executive shall be entitled to forty (40) paid
vacation days per year during the Basic Term, or such additional number as may
be determined by the Board from time to time. There shall be indefinite
carryovers of unused vacation from year to year. For purposes of this Section,
weekends shall not count as vacation days, and Executive shall also be entitled
to all paid holidays given by the Company to its senior executive officers. In
the event Executive shall elect to renew this Agreement, during such Renewal
Term Executive shall be entitled to fifty (50) paid vacation days per year.
(g) PERQUISITES. Executive shall be entitled to receive the
perquisites and fringe benefits appertaining to an executive officer of HCC in
accordance with any practice established by the Compensation Committee.
Notwithstanding, and in addition to, any perquisites to which Executive is
entitled pursuant to the preceding sentence, Executive shall: (i) have use of a
Mercedes 600 SEC, and the Company's Bentley automobiles and the Company shall
pay all expenses related to Executive's use of such automobiles, including
gasoline, insurance, and maintenance (provided further, that if this Agreement
is extended for the Renewal Term and during the Consulting Period, as defined
below, Executive shall have the right to use a new Mercedes 600 SEC (or its
equivalent), obtained as of the commencement of the Renewal Term and/or the
Consulting Period, and to continue the use of the existing Bentley (with the
Company continuing to pay all expenses related to the use of such automobiles)
for such Renewal Term and during the Consulting Period); (ii) be allowed to
travel with his spouse on business utilizing First Class passage under the
Company's corporate account, as Executive determines; (iii) receive
reimbursement of annual country club dues for Executive's membership in
Lochinvar Country Club plus one additional country club (and following
termination of this Agreement, Executive shall continue to control such
ownership); (iv) receive all existing life
insurance which at Executive's option shall be converted to ordinary life
insurance; (v) be entitled to utilize an office at the Company's executive
offices or, at Executive's election, to be reimbursed for the utilization of
an office at Executive's home; (vi) be entitled to utilize the services of
Company employees at an aggregate annual maximum cost of $200,000 (which
shall be added to Executive's taxable income) during the Term, and the
Consulting Period; (vii) have the right to utilize during the Term and the
Consulting Period at no cost to Executive, the pilots and engineers employed
by the Company pursuant to the contractual arrangement in existence as of the
Effective Date hereof; and (viii) be entitled to be reimbursed for all
methods of communications used by Executive (including, without limitation,
the installation cost and use of software, telephone, facsimile machines,
etc., other similar equipment, and all upgrades thereof) in Executive's
house, aircraft and boat which shall continue through the Term and the
Consulting Period.
(h) PRORATION. Any payments or benefits payable to Executive
hereunder in respect of any calendar year during which Executive is employed by
the Company for less than the entire year, unless otherwise provided in the
applicable plan or arrangement or herein, shall be prorated in accordance with
the number of days in such calendar year during which he is so employed.
Notwithstanding the foregoing, any payments pursuant to Sections 4(c) or 4(d) of
this Agreement shall not be subject to proration.
4. TERMINATION.
(a) DEFINITIONS.
(1) "CAUSE" shall mean:
(i) Material dishonesty which is not the result of an
inadvertent or innocent mistake of Executive with respect to the Company or
any of its subsidiaries;
(ii) Willful misfeasance or nonfeasance of duty by
Executive intended to injure or having the effect of injuring in some
material fashion the reputation, business, or business relationships of
the Company or any of its subsidiaries or any of their respective
officers, directors, or employees;
(iii) Material violation by Executive of any material
term of this Agreement; or
(iv) Conviction of Executive of any felony, any crime
involving moral turpitude or any crime other than a vehicular offense which
could reflect in some material fashion unfavorably upon the Company or any
of its subsidiaries.
Executive may not be terminated for Cause unless and until there has been
delivered to Executive written notice from the Board supplying the particulars
of Executive's acts or omissions that the Board believes constitute Cause, a
reasonable period of time (not less than 30 days) has been given to Executive
after such notice to either cure the same or to meet with the Board, with his
attorney if so desired by Executive, and following which the Board by action of
not less than two-thirds of its members furnishes to Executive a written
resolution specifying in detail its findings that Executive has been terminated
for Cause as of the date set forth in the notice to Executive.
(2) A "CHANGE OF CONTROL" shall be deemed to have occurred if:
(i) Any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of 50% or more of the Company's then outstanding voting common
stock; or
(ii) At any time during the period of three (3) consecutive
years (not including any period prior to the date hereof), individuals who
at the beginning of such period constituted the Board (and any new director
whose election by the Board or whose nomination for election by the
Company's shareholders were approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
thereof; or
(iii) The shareholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than a
merger or consolidation (a) in which a majority of the directors of the
surviving entity were directors of the Company prior to such consolidation
or merger, and (b) which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being changed into voting securities
of the surviving entity) more than 50% of the combined voting power of the
voting securities of the surviving entity outstanding immediately after
such merger or consolidation; or
(iv) The shareholders approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
(3) A "DISABILITY" shall mean the absence of Executive from
Executive's duties with the Company on a full-time basis for 180 consecutive
days, or 180 days
in a 365-day period, as a result of incapacity due to mental or physical
illness which results in the Executive being unable to perform the essential
functions of his position, with or without reasonable accommodation.
(4) A "GOOD REASON" shall mean any of the following (without
Executive's express written consent):
(i) A material alteration in the nature or status of
Executive's title, duties or responsibilities, or the assignment of duties
or responsibilities inconsistent with Executive's status, title, duties and
responsibilities;
(ii) A failure by the Company to continue in effect any
employee benefit plan in which Executive was participating, or the taking
of any action by the Company that would adversely affect Executive's
participation in, or materially reduce Executive's benefits under, any such
employee benefit plan, unless such failure or such taking of any action
adversely affects the senior members of corporate management of the Company
generally to the same extent;
(iii) A relocation of the Company's principal executive
offices, or Executive's relocation to any place other than the principal
executive offices, exceeding a distance of fifty (50) miles from the
Company's current executive office located in Houston, Texas, except for
reasonably required travel by Executive on the Company's business;
(iv) Any material breach by the Company of any provision of
this Agreement; or
(v) Any failure by the Company to obtain the assumption
and performance of this Agreement by any successor (by merger,
consolidation, or otherwise) or assign of the Company.
However, Good Reason shall exist with respect to an above specified matter only
if such matter is not corrected by the Company within thirty (30) days of its
receipt of written notice of such matter from Executive, and in no event shall a
termination by Executive occurring more than ninety (90) days following the date
of the event described above be a termination for Good Reason due to such event.
(5) "TERMINATION DATE" shall mean the date Executive is
terminated for any reason pursuant to this Agreement.
(b) TERMINATION WITHOUT CAUSE, OR TERMINATION FOR GOOD REASON:
BENEFITS. In the event there is a termination by the Company without Cause, or
if Executive
terminates for Good Reason (a "Termination Event"), this Agreement shall
terminate except as provided in Section 6, and Executive shall be entitled to
the following severance benefits:
(1) For a period of twelve (12) months after the Termination
Date (unless the remainder of the Term is less than twelve (12) months, in
which case, for an amount of time equal to the remainder of the Basic
Term), Base Salary (as defined in Section 3(a)), at the rate and payable
quarterly in advance unless such termination is by the Company without
Cause, in which event such amount of Base Salary shall be paid in a lump
sum within ten (10) days of the Termination Event.
(2) If there is a Change of Control or termination by the
Company without Cause or by the Executive for Good Reason, any stock
options and other stock-related grants ("Stock Awards") which Executive has
received under any of the HCC stock plans including stock options which are
to be granted during the remainder of the Basic Term and during the Renewal
Term (it being assumed that such Renewal Term shall become effective)
shall, if not issued, be immediately issued and all of such options,
whether issued or not as of such date shall vest immediately, provided,
however, if there is a termination for Good Reason or by the Company other
than for Cause, all options shall be exercisable for one-year or the
remainder of their term, whichever is less. For purposes of this
subsection, the option exercise price for options which were to be granted
during the Renewal Term, shall be the average of the closing prices on the
New York Stock Exchange for the twenty (20) business days immediately
preceding, as the case may be: (i) the first announcement of the event
which results in the Change of Control or (ii) the date of such
termination.
(3) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to Executive any other amounts or benefits
required to be paid or provided or which Executive is eligible to receive
under any plan, program, policy or practice, or contract or agreement of
the Company and its affiliated companies for the period of time equal to
the remainder of the Basic Term, or any Renewal Term and through the Basic
Term and any Renewal Term, at its sole expense, shall continue to provide
(through its own plan and/or individual policies) Executive (and
Executive's dependents) with health benefits no less favorable than the
group health plan benefits provided during such period to any senior
executive officer of the Company or any affiliated company (to the extent
any such coverage or benefits are taxable to Executive by reason of being
provided under a self-insured health plan of the Company or an affiliate,
the Company shall make Executive "whole" for the same on an after-tax
basis), provided, however, such coverage shall be secondary to any group
health plan coverage Executive (or his dependents) receive from another
employer, (such other amounts and benefits shall be hereinafter referred to
as the "Other Benefits");
(4) If Executive receives any payments whether or not pursuant
to this Agreement which are subject to an excise tax imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended, or any
similar tax imposed under federal, state, or local law (collectively,
"Excise Taxes"), the Company shall pay to Executive (on or before the date
on which the Company is required to withhold such Excise Taxes), 1) an
additional amount equal to all Excise Taxes then due and payable, and
2) the amount necessary to defray Executive's increased (federal, state,
and local) tax liability arising due to payment of the amount specified in
this Subsection (4) which shall include any costs and expenses, including
penalties and interest incurred by Executive in connection with any audit,
proceedings, etc. related to the payment of such Excise Taxes or this
payment. For purposes of calculating the amount payable to Executive under
this Section, the federal and state income tax rates used shall be the
highest marginal federal and state rates applicable to ordinary income in
Executive's state of residence, taking into account any federal income tax
deductions or credits available to Executive for state income taxes. The
Company shall cause its independent auditors to calculate such amount and
provide Executive a copy of such calculation at least ten (10) days prior
to the date specified above for payment of such amount. It is the intent
of the Parties that this Subsection (4) shall place Executive in the same
net after-tax position Executive would have been in had no payment been
subject to an Excise Tax and, notwithstanding anything to the contrary, it
shall be construed to effectuate said result;
(5) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to Executive in a lump
sum in cash within thirty (30) days after the Termination Date; and
(6) Executive shall be free to accept other employment during
such period, and there shall be no offset of any employment compensation
earned by Executive in such other employment during such period against
payments due Executive under this Section (4), and there shall be no offset
in any compensation received from such other employment against the Base
Salary set forth above.
(7) In addition to all amounts otherwise paid to Executive
pursuant to this Agreement, all amounts that Executive would otherwise have
received during the full term of the Renewal Term and the Consulting
Period, including, without limitation, all perquisites, as set forth in
subsection 3(g).
(c) TERMINATION IN EVENT OF DEATH: BENEFITS. If Executive's
employment is terminated by reason of Executive's death during the Term of this
Agreement, this Agreement shall terminate except as provided in Section 6
without further obligation to Executive's legal representatives under this
Agreement, other than for payment of all compensation and unreimbursed expenses,
as Executive would have been entitled to during the remaining portion of the
Basic Term and the Renewal Terms (it being assumed that Executive would have
renewed
this Agreement), the timely payment or provision of Other Benefits through
the date of death, and, if such death occurs on or after October 1 of any
year, such cash or stock bonus as Executive would otherwise have been awarded
in such year if Executive's death had not occurred. Such amounts shall be
paid to Executive's estate or beneficiary, as applicable, in a lump sum in
cash within ninety (90) days after the date of death. With respect to the
provision of Other Benefits, the term Other Benefits as used in this Section
4(c) shall include, without limitation, and Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company to the estates and
beneficiaries of other executive level employees of the Company under such
plans, programs, practices, and policies relating to death benefits, if any,
as in effect with respect to other executives and their beneficiaries at any
time during the 120-day period immediately preceding the date of death.
Additionally, all Stock Awards for which Executive would have been eligible
had he completed the Basic Term and the Renewal Term (it being assumed that
Executive would have renewed this Agreement) of this Agreement shall be
accelerated, if issued, and if not issued, shall be issued and accelerated
and Executive's estate or beneficiary shall be vested in such Stock Awards as
of the date of Executive's death. For purposes of this subsection, the
option exercise price for options which were to be granted during the Renewal
Term shall be the average of the closing prices on the New York Stock
Exchange for the twenty (20) business days immediately preceding Executive's
death.
(d) TERMINATION IN EVENT OF DISABILITY: BENEFITS. If Executive's
employment is terminated by reason of Executive's Disability during the Term,
this Agreement shall continue in full force for the Term plus the Consulting
Period (Executive's compensation shall not `be reduced by any long-term
disability coverage Executive actually receives), and if such Disability occurs
on or after October 1 of any year, Executive shall be entitled to the same cash
or stock bonus in such year that Executive would have been awarded if such
Disability had not occurred. In addition, all outstanding Stock Awards shall
vest immediately (including any options which are to be granted during the
Renewal Term, whether issued or not) upon such termination due to Disability;
and the Executive may receive additional stock or cash bonuses at the sole
discretion of the Compensation Committee. For purposes of this subsection the
option exercise price for options which were to be granted during the Renewal
Term shall be the average of the closing prices on the New York Stock Exchange
for the twenty (20) business days immediately preceding the date the Disability
is established.
(e) VOLUNTARY TERMINATION BY EMPLOYEE AND TERMINATION FOR CAUSE:
BENEFITS. Executive may terminate his employment with the Company without Good
Reason by giving written notice of his intent and stating an effective
Termination Date at least ninety (90) days after the date of such notice;
provided, however, that the Company may accelerate such effective date by paying
Executive through the proposed Termination Date and also vesting awards that
would have vested but for this acceleration of the proposed Termination Date.
Upon such a termination by Executive, except as provided in Section 6, or upon
termination for Cause by the Company, this Agreement shall terminate, and the
Company shall pay to Executive all
accrued compensation, unreimbursed expenses and the Other Benefits through
the Termination Date. Such amounts shall be paid to Executive in a lump sum
in cash within thirty (30) days after the date of termination.
(f) DIRECTOR POSITIONS. Upon termination of employment, for any
reason Executive shall remain on any and all Board positions held with the
Company and/or any of its subsidiaries and affiliates. At such time, Executive
shall be paid as an outside director.
5. NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY. Executive
recognizes and agrees that the benefit of not being employed at-will, is
provided in consideration for, among other things, the agreements contained in
this Section as well as the Stock Options granted to Executive pursuant to this
Agreement. The Company agrees that while employed pursuant to this Agreement,
Executive will be provided with confidential information of Company; specialized
training on how to perform his duties; and contact with the Company's customers
and potential customers. Furthermore, in the event Executive is terminated
without Cause, or terminates for Good Reason and more than one (1) year remains
on the Basic Term, the Renewal Term, or the Consulting Period then Executive
shall receive additional consideration in an amount equal to the quotient of the
Base Salary divided by 12, which shall thereupon be multiplied by the number of
months remaining in the Basic Term, the Renewal Term and the Consulting Period,
minus 12 months (but which, including the number of months remaining, in the
Basic Term, the Renewal Term and the Consulting Period, shall not be less than
36 months) and which shall be paid in one lump sum within ten (10) days of such
termination.
In consideration of all of the foregoing, Executive agrees as follows:
(a) NON-COMPETITION DURING EMPLOYMENT. Executive agrees during the
Term he will not compete with the Company by engaging in the conception, design,
development, production, marketing, or servicing of any product or service that
is substantially similar to the products or services which the Company provides,
and that he will not work for, in any capacity, assist, or become affiliated
with as an owner, partner, etc., either directly or indirectly, any individual
or business which offers or performs services, or offers or provides products
substantially similar to the services and products provided by Company.
(b) CONFLICTS OF INTEREST. Executive agrees that during the Term, he
will not engage, either directly or indirectly, in any activity (a "Conflict of
Interest") which might adversely affect the Company or its affiliates, including
ownership of a material interest in any supplier, contractor, distributor,
subcontractor, customer or other entity with which the Company does business or
accepting any material payment, service, loan, gift, trip, entertainment, or
other favor from a supplier, contractor, distributor, subcontractor, customer or
other entity with which the Company does business, and that Executive will
promptly inform the Chairman of the Company as to each offer received by
Executive to engage in any such activity. Executive further agrees to disclose
to the Company any other facts of which Executive becomes aware
which might in Executive's good faith judgment reasonably be expected to
involve or give rise to a Conflict of Interest or potential Conflict of
Interest.
(c) NON-COMPETITION AFTER TERMINATION. Executive agrees that
Executive shall not, at any time during the period of three (3) years after the
termination of the Term for any reason, within any of the markets in which the
Company has sold products or services or formulated a plan to sell products or
services into a market during the last twelve (12) months of Executive's employ;
engage in or contribute Executive's knowledge to any work which is competitive
with or similar to a product, process, apparatus, service, or development on
which Executive worked or with respect to which Executive had access to
Confidential Information while employed by the Company; provided, however, this
subsection (c) shall not operate to prevent Executive from engaging in retail
insurance or re-insurance activities during such two-year period to the extent
such activities do not compete or permit any other person or entity to compete
with any business the Company or any of its subsidiaries or affiliated companies
were engaged in at the time of such termination. Following the expiration of
said three (3) year period, Executive shall continue to be obligated under the
Confidential Information Section of this Agreement not to use or to disclose
Confidential Information of the Company so long as it shall not be publicly
available. It is understood that the geographical area set forth in this
covenant is divisible so that if this clause is invalid or unenforceable in an
included geographic area, that area is severable and the clause remains in
effect for the remaining included geographic areas in which the clause is valid.
(d) NON-SOLICITATION OF CUSTOMERS. Executive further agrees that for
a period of three (3) years after the termination of the Term, he will not
solicit or accept any business from any customer or client or prospective
customer or client with whom Executive dealt or solicited while employed by
Company during the last twelve (12) months of his employment.
(e) NON-SOLICITATION OF EMPLOYEES. Executive agrees that for the
duration of the Term, and for a period of three (3) years after the termination
of the Term except for Xxxxx X. Xxxxxxxx, L. Xxxxxx Xxxxxxx and Executive's
personal service employees, he will not either directly or indirectly, on his
own behalf or on behalf of others, solicit, attempt to hire, or hire any person
employed by Company to work for Executive or for another entity, firm,
corporation, or individual.
(f) CONFIDENTIAL INFORMATION. Executive further agrees that he will
not, except as the Company may otherwise consent or direct in writing, reveal or
disclose, sell, use, lecture upon, publish or otherwise disclose to any third
party any Confidential Information or proprietary information of the Company, or
authorize anyone else to do these things at any time either during or subsequent
to his employment with the Company. This Section shall continue in full force
and effect after termination of Executive's employment and after the termination
of this Agreement. Executive's obligations under this Section with respect to
any specific Confidential
Information and proprietary information shall cease when that specific
portion of the Confidential Information and proprietary information becomes
publicly known, in its entirety and without combining portions of such
information obtained separately. It is understood that such Confidential
Information and proprietary information of the Company include matters that
Executive conceives or develops, as well as matters Executive learns from
other employees of Company. Confidential Information is defined to include
information: (1) disclosed to or known by the Executive as a consequence of
or through his employment with the Company; (2) not generally known outside
the Company; and (3) which relates to any aspect of the Company or its
business, finances, operation plans, budgets, research, or strategic
development. "Confidential Information" includes, but is not limited to the
Company's trade secrets, proprietary information, financial documents, long
range plans, customer lists, employer compensation, marketing strategy, data
bases, costing data, computer software developed by the Company, investments
made by the Company, and any information provided to the Company by a third
party under restrictions against disclosure or use by the Company or others.
(g) RETURN OF DOCUMENTS, EQUIPMENT, ETC. All writings, records, and
other documents and things comprising, containing, describing, discussing,
explaining, or evidencing any Confidential Information, and all equipment,
components, parts, tools, and the like in Executive's custody or possession that
have been obtained or prepared in the course of Executive's employment with the
Company shall be the exclusive property of the Company, shall not be copied
and/or removed from the premises of the Company, except in pursuit of the
business of the Company, and shall be delivered to the Company, without
Executive retaining any copies, upon notification of the termination of
Executive's employment or at any other time requested by the Company. The
Company shall have the right to retain, access, and inspect all property of
Executive of any kind in the office, work area, and on the premises of the
Company upon termination of Executive's employment and at any time during
employment by the Company to ensure compliance with the terms of this Agreement.
(h) REAFFIRM OBLIGATIONS. Upon termination of his employment with
the Company, Executive, if requested by Company, shall reaffirm in writing
Executive's recognition of the importance of maintaining the confidentiality of
the Company's Confidential Information and proprietary information, and reaffirm
any other obligations set forth in this Agreement.
(i) PRIOR DISCLOSURE. Executive represents and warrants that he has
not used or disclosed any Confidential Information he may have obtained from
Company prior to signing this Agreement, in any way inconsistent with the
provisions of this Agreement.
(j) CONFIDENTIAL INFORMATION OF PRIOR COMPANIES. Executive will not
disclose or use during the period of his employment with the Company any
proprietary or Confidential Information or Copyright Works which Executive may
have acquired because of employment with an employer other than the Company or
acquired from any other third party,
whether such information is in Executive's memory or embodied in a writing or
other physical form.
(k) BREACH. Executive agrees that any breach of Sections 5(a), (c),
(d), (e) or (f) above cannot be remedied solely by money damages, and that in
addition to any other remedies Company may have, Company is entitled to obtain
injunctive relief against Executive. Nothing herein, however, shall be
construed as limiting Company's right to pursue any other available remedy at
law or in equity, including recovery of damages and termination of this
Agreement and/or any payments that may be due pursuant to this Agreement.
(l) RIGHT TO ENTER AGREEMENT. Executive represents and covenants to
Company that he has full power and authority to enter into this Agreement and
that the execution of this Agreement will not breach or constitute a default of
any other agreement or contract to which he is a party or by which he is bound.
(m) EXTENSION OF POST-EMPLOYMENT RESTRICTIONS. In the event
Executive breaches Sections 5(b), (d), or (e) above, the restrictive time
periods contained in those provisions will be extended by the period of time
Executive was in violation of such provisions.
(n) ENFORCEABILITY. The agreements contained in Section 5 are
independent of the other agreements contained herein. Accordingly, failure of
the Company to comply with any of its obligations outside of this Section do not
excuse Executive from complying with the agreements contained herein.
(o) SURVIVABILITY. The agreements contained in Sections 5(c)-(g)
shall survive the termination of this Agreement for any reason.
6. CONSULTING AGREEMENT. Effective upon Executive's termination of
employment for any reason other than Executive's termination by the Company for
Cause (and whether during the Basic Term or the Renewal Term), HCC hereby
retains Executive as a consultant (an independent contractor and not as an
employee) for a period of five (5) years (the "Consulting Period"). During the
Consulting Period, Executive shall have the sole option to cease acting as
Executive Chairman of the Board and shall thereafter serve as Non-Executive
Chairman of the Board. Termination of the Term shall not effect the Parties'
rights and obligations under this Section 6, subject to the following: Executive
agrees to provide, if requested, 1,000 hours of service (the "Consulting
Services") per year, as required by the Company. Prior to a change in control,
the Company shall use its best effort to cause Executive to continue as a
Director and Chairman of the Board during the term of the Consulting Period.
HCC shall pay Executive $450,000 per year of the Consulting Period, payable
quarterly, in advance. Executive may elect to delay payment for services, but
not the services themselves. During such Consulting Period, Executive shall
receive, to the extent permitted by law and the terms of any existing plan, all
of the Company's benefits as if Executive was a full time employee. In
addition, the terms of this
Section 6 shall remain in full force and effect whether or not Executive dies
or suffers a Disability pursuant to the terms hereof during the Consulting
Period. Further, if at any time during the Term of this Agreement Executive
shall elect, at his sole option, to cease being a full time employee, then
and in that event, Executive shall become a consultant pursuant to the terms
of this Section. During the Consulting Period, Executive shall have the
right to continue using the Company's existing Bentley and a new Mercedes
automobiles and Executive's aircraft for the same purposes and to the same
extent as were in effect on the Effective Date of this Agreement. The
Consulting Services to be provided shall be commensurate with Executive's
training, background, experience and prior duties with the Company.
Executive shall receive such stock options or cash bonuses as the
Compensation Committee, in its sole discretion shall determine. Executive
agrees to make himself reasonably available to provide such Consulting
Services during the Consulting Period; provided, however, the Company agrees
that it shall provide reasonable advance notice to Executive of its expected
consulting needs and any request for Consulting Services hereunder shall not
unreasonably interfere with Executive's other business activities and
personal affairs as determined in good faith by Executive. In addition,
Executive shall not be required to perform any requested Consulting Services
which, in Executive's good faith opinion, would cause Executive to breach any
fiduciary duty or contractual obligation Executive may have to another
employer. Further, during the Consulting Period, Executive shall not be
subject to any non-competition provisions except for the three-year period
provided for in Section 5(c). Unless waived by Executive, Executive shall
not be required to perform Consulting Services for more than four (4) days
during any week or for more than eight (8) hours during any day. Executive's
travel time shall constitute hours of Consulting Services for purposes of
this Section 6. The Parties contemplate that, when appropriate, the
Consulting Services shall be performed at Executive's office or residence and
at the Company's executive offices in Houston, Texas and may be performed at
such other locations only as they may mutually agree upon. Executive shall
be properly reimbursed for all travel and other expenses reasonably incurred
by Executive in rendering the Consulting Services.
7. ASSIGNMENT. This Agreement cannot be assigned by Executive. The
Company may assign this Agreement only to a successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company provided such
successor expressly agrees in writing reasonably satisfactory to Executive to
assume and perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession and assignment
had taken place. Failure of the Company to obtain such written agreement prior
to the effectiveness of any such succession shall be a material breach of this
Agreement.
8. BINDING AGREEMENT. Executive understands that his obligations under
this Agreement are binding upon Executive's heirs, successors, personal
representatives, and legal representatives.
9. NOTICES. All notices pursuant to this Agreement shall be in writing
and sent certified mail, return receipt requested, addressed as set forth below,
or by delivering the same in person to such party, or by transmission by
facsimile to the number set forth below (which shall not constitute notice).
Notice deposited in the United States Mail, mailed in the manner
described herein above, shall be effective upon deposit. Notice given in any
other manner shall be effective only if and when received:
If to Executive: Xxxxxxx X. Way
00 Xxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
If to Company: HCC Insurance Holdings, Inc.
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
with a copy (which shall Xxxxxx X. Xxxxxx, Esq.
not constitute notice) to: Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
Suite 2400
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Fax: (000) 000-0000
10. WAIVER. No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or of any breach hereof, shall
be deemed a waiver of such right in the future or of any other right or remedy
available under this Agreement.
11. SEVERABILITY. If any provision of this Agreement is determined to be
void, invalid, unenforceable, or against public policy, such provisions shall be
deemed severable from the Agreement, and the remaining provisions of the
Agreement will remain unaffected and in full force and effect.
12. ARBITRATION. In the event any dispute arises out of Executive's
employment with or by the Company, or separation/termination therefrom, whether
as an employee or as a consultant which cannot be resolved by the Parties to
this Agreement, such dispute shall be submitted to final and binding
arbitration. The arbitration shall be conducted in accordance with the National
Rules for the resolution of Employment Disputes of the American Arbitration
Association ("AAA"). If the Parties cannot agree on an arbitrator, a list of
seven (7) arbitrators will be requested from AAA, and the arbitrator will be
selected using alternate strikes with Executive striking first. The cost of the
arbitration will be shared equally by Executive and Company; provided, however,
the Company shall promptly reimburse Executive for all costs and expenses
incurred in connection with any dispute in an amount up to, but not exceeding
twenty percent (20%) of Executive's Base Salary (or, if the dispute arises
during the Consulting Period, Executive's Base Salary as in effect immediately
prior to the beginning of the Consulting Period) unless such termination was for
Cause in which event Executive shall not be entitled to reimbursement unless and
until it is determined he was terminated other than for Cause. Arbitration of
such disputes is mandatory and in lieu of any and all civil causes of action and
lawsuits either party may have against the other arising out of Executive's
employment with Company, or separation therefrom. Such arbitration shall be
held in Houston, Texas.
13. ENTIRE AGREEMENT. The terms and provisions contained herein shall
constitute the entire agreement between the parties with respect to Executive's
employment with Company during the time period covered by this Agreement. This
Agreement replaces and supersedes any and all existing Agreements entered into
between Executive and the Company relating generally to the same subject matter,
if any, and shall be binding upon Executive's heirs, executors, administrators,
or other legal representatives or assigns.
14. MODIFICATION OF AGREEMENT. This Agreement may not be changed or
modified or released or discharged or abandoned or otherwise terminated, in
whole or in part, except by an instrument in writing signed by the Executive and
an officer or other authorized executive of Company.
15. EFFECTIVE DATE. It is understood by Executive that this Agreement
shall be effective when signed by both Company and Executive.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
17. JURISDICTION AND VENUE. With respect to any litigation regarding this
Agreement, Executive agrees to venue in the state or federal courts in Xxxxxx
County, Texas, and agrees to waive and does hereby waive any defenses and/or
arguments based upon improper venue and/or lack of personal jurisdiction. By
entering into this Agreement, Executive agrees to personal jurisdiction in the
state and federal courts in Xxxxxx County, Texas.
IN WITNESS WHEREOF, the Parties have executed this Agreement in multiple
copies, effective as of the date first written above.
EXECUTIVE COMPANY
HCC INSURANCE HOLDINGS, INC.
/s/ Xxxxxxx X. Way By: /s/ J. Xxxxxx Xxxxxxxxx
------------------------ -----------------------------------------
XXXXXXX X. WAY J. XXXXXX XXXXXXXXX
Chairman of the Compensation Committee
Dated: March 31, 1999 Dated: March 31, 1999
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