EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of the 1st
day of January, 1998 (the "Effective Date"), between HCC INSURANCE HOLDINGS,
INC. ("HCC" or "Company"), and XXXX X. XXXXXXX, XX. ("Executive"), sometimes
collectively referred to herein as the "Parties."
R E C I T A L S:
WHEREAS, Executive is to be employed as President 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:
2. TERM. The Company hereby agrees to employ Executive as its
President, 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, 2002 (the "Basic
Term") (unless sooner terminated as hereinafter set forth). On or before
December 31, 1999, Executive shall assume the additional responsibilities of
Chief Executive Officer of HCC.
3. DUTIES.
(a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject
to the supervision of the Chief Executive Officer and Board (until such time
as Employee is elected Chief Executive Officer, at which time Employee shall
be subject to the supervision of the Chairman of the Board and Board), 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 Basic Term. During the Basic Term,
Executive shall not directly or indirectly render
EMPLOYMENT AGREEMENT - Page 1
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 written consent of the Chairman of the Board.
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 materially 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 Basic Term, the Company
shall use its best efforts to cause Executive to be elected a director and to
serve on the Executive Committee and Senior Management 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 Paragraph 4(a)(iv). If
elected, Executive agrees to serve as a director and on the Executive
Committee and Senior Management 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. If
elected, Executive agrees that 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.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Executive shall receive a base salary paid by
the Company at the annual rate of $500,000, during the period beginning on
the Effective Date payable not less frequently than in substantially equal
monthly installments. The base salary shall be increased by $25,000 each
January 1, commencing January 1, 1999, until Executive's base salary reaches
$600,000. For purposes of this Agreement, "Base Salary" shall mean the
Executive's initial base salary and, when increased, the increased base
salary.
(b) BONUS PAYMENTS. Each year Executive shall be entitled to
receive, in addition to the Base Salary, an annual bonus payment based on
HCC's annual operating earnings per share ("OEPS") as set forth below:
$50,000 bonus if OEPS growth is 10% or more in any one year;
$100,000 bonus if OEPS growth is 15% or more in any one year
period; and
$200,000 bonus if OEPS growth is 20% or more in any one year
period.
For purposes of this Agreement, OEPS is defined as HCC's consolidated net
earnings less capital gains/losses, currency gains/losses, and any
nonrecurring merger and acquisition income or
EMPLOYMENT AGREEMENT - Page 2
expenses as reported in HCC's Annual Report on Form 10-K.
(c) STOCK OPTIONS. In addition to stock options previously
granted to Executive, if any, in partial consideration for Executive's
non-competition agreement, set forth herein, Executive shall be provided with
additional options to purchase HCC shares as follows:
(1) On January 7, 1998, an option to acquire 200,000
shares, exercisable at a price of $16.50 per share and
vesting at 20% per year beginning on December 31, 1998
and on each of the four December 31st thereafter;
(2) For each year beginning with the year ending
December 31, 1999, of Executive's employment hereunder;
15,000 shares if, on such December 31, the price of the HCC
Common Stock has increased since the previous January 1, by
an amount that is greater than or equal to 10%, but less
than 15%;
20,000 shares if, on such December 31, the price of the HCC
Common Stock has increased since the previous January 1, by
an amount that is greater than or equal to 15%, but less
than 20%;
25,000 shares if, on such December 31, the price of the HCC
Common Stock has increased since the previous January 1, by
an amount that is greater than or equal to 20%, but less
than 25%; and
30,000 shares if, on such December 31, the price of the HCC
Common Stock has increased since the previous January 1, by
an amount that is greater than or equal to 25%; and
An additional option to acquire an additional 5,000 shares
for each additional 5% increase in the price of the HCC
Common Stock since the previous January 1.
Each of such options set forth in this Subparagraph (ii) shall be
priced at the average of the closing prices of HCC shares for the
month of December of the year of the grant and shall vest immediately.
For purposes of this Subparagraph, the granting of any option shall
not be pro-rated if the criteria set forth herein are not achieved in
full.
(d) EXPENSES. During the Basic Term, 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
Compensation Committee for the Company's senior executive officers in
performing services hereunder, provided that Executive properly accounts
EMPLOYMENT AGREEMENT - Page 3
therefor in accordance with Company policy.
(e) OTHER BENEFITS. Executive shall be entitled to participate in
or receive benefits under any compensatory 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 Paragraph (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 twenty-five (25)
paid vacation days per year during the Basic Term. There shall be no
carryover of unused vacation from year to year. For purposes of this
Paragraph, weekends shall not count as vacation days, and Executive shall
also be entitled to all paid holidays and personal days given by the Company
to its senior executive officers.
(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 1998 Mercedes 500 SEL automobile, and the Company shall pay all expenses
related to Executive's use of such car, including gasoline, insurance, and
maintenance; (ii) be allowed to travel on business utilizing first class
passage (whether domestic or international); (iii) receive an annual country
club dues allowance of up to $16,000; and (iv) receive a total of $1,000,000
term life insurance (which shall be in addition to the standard benefits
provided to Executive under the Company's group life insurance program that
covers officers).
(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, 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 Paragraphs 4(c) or
4(d) of this Agreement shall not be subject to proration.
EMPLOYMENT AGREEMENT - Page 4
5. 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
EMPLOYMENT AGREEMENT - Page 5
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) Following a Change of Control, 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
EMPLOYMENT AGREEMENT - Page 6
this Agreement including, without limitation, a failure to elect Executive
the Chief Executive Officer of the Company on or before December 31, 1999;
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 Paragraph 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 Basic 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 Paragraph 3(a)), at the rate,
and payable quarterly 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 if there is a termination
by the Company without Cause or by 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 shall vest immediately; provided,
however, that the right to receive options referenced in Paragraph 3(c)(2)
above shall terminate upon termination from employment for any reason, and
further, 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.
(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 (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits"). Without limiting the
preceding sentence, through December 31, 2002 the Company, at its sole
expense, shall continue to
EMPLOYMENT AGREEMENT - Page 7
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). In any event, the Other Benefits provided for pursuant to this
Paragraph shall be secondary to any benefits and coverage Executive (or
his dependents) receive from another employer.
(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 Paragraph, 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 herein 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 Paragraph (4), and there shall be not
offset in any compensation received from such other employment against the
Base Salary set forth above.
(c) TERMINATION IN EVENT OF DEATH: BENEFITS. If Executive's
employment is terminated by reason of Executive's death during the Basic
Term, this Agreement shall terminate, except as provided in Paragraph 6,
without further obligation to Executive's legal representatives
EMPLOYMENT AGREEMENT - Page 8
under this Agreement, other than for payment of all accrued compensation,
unreimbursed expenses, 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
Paragraph 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 (except as set forth in Paragraph 4(b)(2)),
shall be accelerated, and Executive's estate or beneficiary shall be vested
in such Stock Awards as of the date of Executive's termination.
(d) TERMINATION IN EVENT OF DISABILITY: BENEFITS. If Executive's
employment is terminated by reason of Executive's Disability during the Basic
Term, this Agreement shall continue in full force for a period of one (1)
year following such Disability 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. Following such one (1) year period, this Agreement shall
continue in full force except that (a) the Base Salary shall be reduced by
50% and (b) Executive shall not be entitled to any subsequent cash or stock
bonuses. In addition, all outstanding Stock Awards shall vest immediately
upon such termination due to Disability. If Executive's Disability occurs
prior to the commencement of the Consulting Period, defined below, in
addition to the amounts provided for herein, Executive shall receive the
Consulting Fee, defined below, at such time as it would have otherwise been
earned, whether or not Executive can perform Consulting Services, defined
below.
(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
Paragraph 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. Executive agrees that upon termination of
employment, for any reason, at the request of the Chairman of the Board, he
will immediately
EMPLOYMENT AGREEMENT - Page 9
tender his resignation from any and all Board positions held with the Company
and/or any of its subsidiaries and affiliates. If Executive remains as a
director, after such termination, Executive shall be compensated as an
outside director.
6. 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 existing Basic Term, 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 minus 12 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 Basic 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 Basis
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 two (2) years after the
termination of the Basic 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 or which the Company enters into within three (3) months
thereafter, engage
EMPLOYMENT AGREEMENT - Page 10
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 Paragraph (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 or which
the Company enters into within three (3) months thereafter. Following the
expiration of said two (2) year period, Executive shall continue to be
obligated under the Confidential Information Paragraph 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 two (2) years after the termination of the Basic 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 Basic Term, and for a period of two (2) years after the
termination of the Basic Term, 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 Paragraph 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,
EMPLOYMENT AGREEMENT - Page 11
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 Paragraphs 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
EMPLOYMENT AGREEMENT - Page 12
which he is a party or by which he is bound.
(m) EXTENSION OF POST-EMPLOYMENT RESTRICTIONS. In the event
Executive breaches Paragraphs 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
Paragraph do not excuse Executive from complying with the agreements
contained herein.
(o) SURVIVABILITY. The agreements contained in Paragraphs
5(c)-(g) shall survive the termination of this Agreement for any reason.
7. CONSULTING AGREEMENT. Effective upon Executive's termination of
employment for any reason other than Executive's termination prior to the end
of the Basic Term by the Company for Cause, HCC hereby retains Executive as a
consultant (an independent contractor and not as an employee) for a period of
ten (10) years (the "Consulting Period"). Termination of the Basic Term
shall not effect the Parties' rights and obligations under this Paragraph 6.
Subject to the following, Executive agrees to provide, if requested, a
minimum of 200 hours of service per year, or, as requested by the Company, up
to a total of 600 hours during any one year of the Consulting Period;
provided, however, that the total number of hours to be worked over the
duration of the Consulting Period shall not exceed 2,000 (the "Consulting
Services"). The Consulting Services to be provided shall be commensurate
with Executive's training, background, experience and prior duties with the
Company. 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 two-year period
provided for in Paragraph 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 Paragraph 6. The Parties contemplate that, when appropriate, the
Consulting Services shall be performed at Executive's office, residence or 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. HCC shall pay Executive
$100,000 per year (the "Consulting Fee") during the Consulting Period,
payable monthly in arrears. Executive may elect to delay payment for services
but not the services themselves. Except as set forth below
EMPLOYMENT AGREEMENT - Page 13
and in Paragraphs 4(c) or 4(d) hereof, if Executive fails to provide the
hours requested by the Company in any 24-month period, Executive's rights to
receive any further Consulting Fee shall immediately terminate. During the
Consulting Period, Executive shall receive no employment benefits from HCC.
If Executive dies or becomes Disabled during the Basic Term (or as an
employee of the Company following the Basic Term) or during the Consulting
Period he (or, on his death, his beneficiary or estate) shall receive or
continue to receive as the case may be the Consulting Fee during the
remainder of the Consulting Period as if such death or Disability had not
occurred.
8. 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.
9. BINDING AGREEMENT. Executive understands that his obligations
under this Agreement are binding upon Executive's heirs, successors, personal
representatives, and legal representatives.
10. 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. Notice deposited in
the United States Mail, mailed in the manner described hereinabove, shall be
effective upon deposit. Notice given in any other manner shall be effective
only if and when received:
If to Executive: Xxxx X. Xxxxxxx, Xx.
0000 Xxxx Xxx Xxxx
Xxxxxxx, Xxxxx 00000
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
EMPLOYMENT AGREEMENT - Page 14
11. 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.
12. 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.
13. 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 20 percent 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.
14. 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.
15. 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.
16. UNDERSTAND AGREEMENT. Executive represents and warrants that he
has read and understood each and every provision of this Agreement, and
Executive understands that he has the right to obtain advice from legal
counsel of choice, if necessary and desired, in order to interpret any and
all provisions of this Agreement, and that Executive has freely and
voluntarily entered into this Agreement.
EMPLOYMENT AGREEMENT - Page 15
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
18. 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/ Xxxx X. Xxxxxxx, Xx. By: /s/ Xxxxxxx X. Way
-------------------------------- ------------------------------------
XXXX X. XXXXXXX, XX. XXXXXXX X. WAY
Chief Executive Officer and
Chairman of the Board
Dated: 1/23/98 Dated: 1/23/98
-------------------------- --------------------------------------
EMPLOYMENT AGREEMENT - Page 16
