EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into effective as of
the 1st day of January, 1998 (the "Effective Date"), between HCC INSURANCE
HOLDINGS, INC. ("HCC" or the "Company"), and XXXXXXX X. XXXXXXXX
("Executive"), sometimes collectively referred to herein as the "Parties".
R E C I T A L S:
WHEREAS, Executive is to be employed as Vice Chairman of the Board of
Directors of HCC and Chairman and Chief Executive Officer of LDG Reinsurance
Corporation ("LDG"); and
WHEREAS, it is the desire of the Board of Directors of HCC (the "Board")
to directly engage Executive in the capacities set forth above; 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 Vice
Chairman of the Board of Directors, as the Chairman and Chief Executive
Officer of LDG and as a director of HCC Benefits, Inc. ("Benefits"), 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). At any time on or after January
1, 2000, and prior to December 31, 2002, Executive may, at his option, cease
to be a full time employee and elect to begin the Consulting Period as
defined in Section 6 hereof. (The period of time beginning as of the date
Executive commences the Consulting Period, if before December 31, 2002, and
ending on December 31, 2002 is hereinafter called the "Early Consulting
Period").
3. DUTIES.
(a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject
to the supervision of the Board act as Vice Chairman of the Board of HCC,
Chairman and Chief Executive Officer of LDG, and a director of Benefits in
the ordinary course of its business with all such powers as may be reasonably
incident to such responsibilities. Executive shall report to the Chairman of
the Board or the President of HCC. During normal business hours Executive
shall devote his full time and attention to diligently attending to the
business of the Company and its subsidiaries during his term of employment
hereunder. During his term of employment, Executive shall not directly or
indirectly render any services of a business, commercial, or
EMPLOYMENT AGREEMENT - Page 1
professional nature to any other person, firm, corporation, or organization,
whether for compensation or otherwise, without the prior written consent 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 interfere or conflict with the performance
of his duties to the Company and its subsidiaries as set forth 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 director and to
serve on the Senior Management Committee of HCC. If elected, Executive
agrees that he shall not be entitled to receive any compensation for serving
as a Director of HCC or any 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 an initial base salary
paid by the Company at the annual rate of $450,000, during 1998 and 1999.
Subject to Executive's right to begin the Consulting Period, as set forth in
Section 6, if Executive no longer acts as the Chief Executive Officer of LDG
such base salary shall be reduced to $100,000 beginning January 1, 2000 or
such later date as Executive ceases to act as Chief Executive Officer of LDG
and shall remain at $100,000 during the remainder of the Basic Term. All
base salary payments shall be payable in substantially equal monthly
installments. For purposes of this Agreement, "Base Salary" shall mean the
Executive's initial base salary and, when changed, the changed base salary.
(b) BONUS PAYMENTS. Executive shall be eligible to receive, in
addition to the Base Salary, an annual cash bonus payment in an amount, which
may be zero, to be determined in the sole discretion of the Company's
Compensation Committee.
(c) STOCK OPTIONS. In addition to stock options previously
granted to Executive, in partial consideration for Executive's
non-competition agreements, set forth herein, Executive shall be provided
with additional options to purchase HCC shares as follows:
(1) 150,000 shares to be granted effective as of January 7,
1998, at an exercise price of $16.50 per share vesting in
two equal installments of 75,000 shares on December 31, 1998
and December 31, 1999;
(2) 50,000 shares on December 31 of each year during the Basic
Term if, but only if, Executive is maintaining the position
of Chief Executive Officer of LDG and if not maintaining
such position on such date such option shall be reduced to
25,000 options if, but only if, Executive is acting as
Chairman of LDG. Such options
EMPLOYMENT AGREEMENT - Page 2
shall be priced at the average closing price of HCC shares
for the month of December of the year of the grant. Any option
so granted shall vest immediately.
(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 Board for
its senior executive officers) in performing services hereunder, provided
that Executive properly accounts therefor in accordance with Company policy
and such expenses are approved by the Chairman of the Board or President of
HCC.
(e) OTHER BENEFITS. Executive shall be entitled to participate in
or receive benefits under any 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 fifty (50) paid
vacation days per year for each of the calendar years ended December 31 of
the Basic Term while Executive is a full-time Employee. There shall be no
carryover 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.
(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 Company's 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 500 SEL automobile, and the Company shall pay all
expenses related to Executive's use of such car, including gasoline,
insurance, and maintenance; and (ii) be allowed to travel on business
utilizing: (x) First Class Domestic and International passage plus (y) for so
long as Executive remains as Chief Executive Officer or Chairman of the Board
of LDG, up to $3,000,000 of corporate aircraft expense (not to exceed
$650,000 in each of the calendar years ending December 31, 1998 and 1999 and
$575,000 in each of the calendar years
EMPLOYMENT AGREEMENT - Page 3
ending December 31, 2000 and 2001 and $550,000 in the calendar year ending
December 31, 2002). To avoid confusion, Executive's use of the corporate
aircraft shall terminate if Executive ceases to be both Chief Executive
Officer and the Chairman of the Board of LDG but not if he ceases to hold
only one of such positions while retaining the other. In addition,
Executive's right to use corporate aircraft shall immediately terminate upon
Executive's death or termination for Cause, whether during the Basic Term,
the Early Consulting Period, or the Consulting Period. From and after the
Effective Date, Executive shall be entitled to utilization of an office and
employees (whose compensation will not exceed $75,000 per year).
(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.
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 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
constitutes 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 Board with his attorney if so desired by Executive, and following which
the Board by action of not less than two-thirds (2/3rd) of its members
furnishes to Executive a written resolution specifying in detail with
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:
EMPLOYMENT AGREEMENT - Page 4
(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) 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 inconsistent with, or a substantial and
material alteration in the nature or status of, Executive's duties and
responsibilities;
EMPLOYMENT AGREEMENT - Page 5
(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) Executive's required relocation to any place other
than his current office exceeding a distance of one hundred (100) miles
from Wakefield, Massachusetts, 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 if such material breach has not been cured within thirty
(30) days following written notice of such breach by Executive to the
Company setting forth with reasonable specificity the nature of the breach;
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 without Cause or if Executive
terminates for Good Reason (a "Termination Event"), this Agreement shall
terminate and Executive shall be entitled to the following severance benefits:
(1) For a period of twelve (12) months after the Termination
Event (unless the remainder of the Basic Term is less than 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 in effect
immediately prior to the Termination Event, payable quarterly, in arrears.
(2) Subject to any contrary provisions of any stock option grant
or plan that might provide for acceleration of vesting of options at an
earlier date than set forth herein, if there is a Change of Control or if
there is a termination without Cause, any
EMPLOYMENT AGREEMENT - Page 6
stock options which Executive has received under the HCC Stock Option Plans
shall vest immediately; provided, however, that the right to receive
options referenced in Section 3(c)(2) above shall terminate upon
termination from employment for any reason, and further, if there is a
termination for Good Reason, all unvested options shall be void.
(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 (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 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 in 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 Section 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 (b)(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 (b)(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
EMPLOYMENT AGREEMENT - Page 7
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 hereunder, and there shall be not offset in any
compensation received from such other employment against the Base Salary
set forth above; provided, however, that such compensation may terminate if
acceptance of such employment would violate any of the provisions of
Section 5, below
If Executive's employment is terminated pursuant to this subsection (b)
on or after October 1 of any year, any cash or stock bonus which Executive
would otherwise have been awarded in such year shall be awarded as if
termination had not taken place.
(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 without further obligation to
Executive's legal representatives 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 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 options for
which Executive would have been eligible had he completed the Basic Term
(except as set forth in Section 4(b)(2), shall be accelerated, and
Executive's estate or beneficiary shall be vested in such options 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 for the remainder of the Basic Term 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 options shall vest immediately upon the date of such Disability.
(e) VOLUNTARY TERMINATION BY EXECUTIVE AND TERMINATION FOR CAUSE:
BENEFITS. Executive may terminate his employment with the Company by giving
written notice
EMPLOYMENT AGREEMENT - Page 8
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. The Company may terminate Executive's employment with
Cause at any time. Upon such a termination by Executive 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 later of
the date of termination or the date of the Board's decision as set forth
herein. Upon a voluntary termination by employee or termination for Cause,
Executive shall be entitled to receive no further salary nor consulting
payments as set forth herein. Upon such termination, all unvested options
shall terminate and be of no further force or effect.
(f) DIRECTOR POSITIONS. Executive agrees that upon termination of
employment, for any reason, at the request of the Chairman of the Board, and
if Executive owns less than 2,000,000 shares of HCC Common Stock or if
Executive has been terminated for Cause, he will immediately tender his
resignation from any and all Board positions held with the Company and/or any
of its subsidiaries and affiliates, including without limitation, as Vice
Chairman of the Company, Chairman of LDG, and a Director of Benefits. If
Executive remains as a Director, after such termination, Executive shall be
compensated as an outside director. While an outside Director, Executive
shall be entitled to First Class Business Travel but shall no longer be
entitled to use of corporate aircraft.
(g) SEVERANCE PAYMENT. In addition to all other payments due
hereunder in the event of Executive's termination other than for Cause, as
both Chief Executive Officer and Chairman of the Board of LDG, Executive
shall receive a severance payment in the amount of $1.3 million reduced by
the corporate aircraft expense previously utilized by Executive since January
1, 1998 in excess of $300,000 in each calendar year beginning January 1,
1998. At the Company's sole election, such severance may be paid in cash or
by permitting the Executive to incur additional corporate aircraft expense.
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:
EMPLOYMENT AGREEMENT - Page 9
(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 Basic
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 (the
"Non-Competition Period"; unless there shall be a Change of Control of HCC,
in which case the Non-Competition Period shall be reduced to 18 months) 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 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
three-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 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 Basic Term
(unless there shall be a Change
EMPLOYMENT AGREEMENT - Page 10
of Control of HCC in which case such period shall be reduced to 18 months),
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 three (3) 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 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
EMPLOYMENT AGREEMENT - Page 11
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 the 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),
(b), (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 the 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), (c), (d), or (e) or (f) 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 this 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)
through (g) shall survive the termination of this Agreement for any reason.
7. CONSULTING AGREEMENT. (a) Effective upon Executive's termination of
employment for any reason other than Executive's termination prior to the end of
the Basic Term
EMPLOYMENT AGREEMENT - Page 12
by the Company for Cause, 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"). Termination of the Basic Term shall not effect
the Parties' rights and obligations under this Section 6. Subject to the
following, Executive agrees to provide, if requested, a minimum of 100 hours
of service per year, or, as requested by the Company, up to a total of 500
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 500 (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 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, residence or at
LDG's executive offices in Wakefield, Massachusetts, 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 but Executive shall not be
entitled to utilize corporate aircraft during the Consulting Period. HCC
shall pay Executive $100,000 per year (the "Yearly Consulting Fee") and a
total of $500,000 (the "Total Consulting Fee") during the Consulting Period,
payable monthly in arrears, provided, however, if Executive works in excess
of 100 hours in any calendar year, such calendar year's Yearly Consulting Fee
shall be increased by multiplying the number of hours in excess of 100 by
$1,000 and such excess amount shall be reduced from the final Yearly
Consulting Fee paid to Executive as set forth in this Section 6 and shall not
increase the Total Consulting Fee. Executive may elect to delay payment for
services but not the services themselves. Except as set forth below and in
Sections 4(c) or 4(d) hereof, if Executive fails to provide the hours
requested by the Company in any 12-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 Consulting Period neither he
nor, 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.
(b) If Executive has elected to begin the Early Consulting Period,
during such Early Consulting Period Executive shall be required to provide
Consulting Services in any amount of, at least, 500 hours per each calendar
year. During such Early Consulting Period,
EMPLOYMENT AGREEMENT - Page 13
Executive shall: (a) receive the Consulting Fee of $100,000 per year; (b)
receive stock options in an amount equal to 25,000 shares per year
(exercisable at a price as set forth in Section 3(c)(2) hereof); and (c)
shall be entitled to the use of corporate aircraft in a manner determined in
accordance with Section 3(g) hereof. During such Early Consulting Period,
Executive shall receive no employment benefits from HCC. If Executive dies
or becomes Disabled during the Early Consulting Period, for the remainder of
such Early Consulting Period (but not for the Consulting Period) Executive
(or, on his death, his beneficiary or estate) shall continue to receive as
the case may be the Consulting Fee for the remainder of the Early Consulting
Period.
8. ASSIGNMENT. This Agreement may be assigned by Company, but cannot
be assigned by Executive.
9. BINDING AGREEMENT. Executive understands that his obligations
under this Agreement are binding upon Executive's heirs, successors, personal
representatives, and legal representatives.
If to Executive: Xxxxxxx X. Xxxxxxxx
00 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Fax: _______________
If to Company: HCC Insurance Holdings, Inc.
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Att.: Chairman of the Board
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, XX 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 the Company, or separation therefrom, which cannot be
resolved by the Parties, such dispute
EMPLOYMENT AGREEMENT - Page 14
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 the Company. 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 the Company.
15. 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 his 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.
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 as of the
date first written above.
EXECUTIVE COMPANY
HCC INSURANCE HOLDINGS, INC.
EMPLOYMENT AGREEMENT - Page 15
/s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Way
-------------------------------- ------------------------------
XXXXXXX X. XXXXXXXX XXXXXXX X. WAY
Chief Executive Officer and
Chairman of the Board
Dated: 3/3/99 Dated: 3/3/99
-------------------------- ---------------------------
EMPLOYMENT AGREEMENT - Page 16
