Exhibit 10.1

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on April 27, 2011
but effective as of the 1st day of May, 2011 (the “Effective Date”), between HCC
INSURANCE HOLDINGS, INC. (“HCC” or “Company”) and Christopher J. Williams, Jr.
(“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;

 

WHEREAS, it is the desire of the Board of Directors of HCC (the “Board”) to
directly engage Executive as an officer of HCC; and

 

WHEREAS, Executive is desirous of committing himself to serve HCC on the terms
herein provided.

 

NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the Parties agree as follows:

 

1.                                      Term.  The Company hereby agrees to
employ Executive as President and Executive hereby agrees to accept such
employment, on the terms and conditions set forth herein, for the period (the
“Term”) commencing on the Effective Date and expiring at the earlier to occur of
(a) 11:59 p.m. on the date that is five (5) years after the Effective Date (the
“Expiration Date”) and (b) the Termination Date (as hereinafter defined);
provided that the Company agrees that, no later than May 31, 2013, the Company
shall appoint and employ Executive as its President and Chief Executive Officer
through the expiration of the Term.

 

2.                                      Duties.

 

(a)                                  Duties as Employee of the Company. 
Executive shall, subject to the supervision of the Chief Executive Officer of
HCC (“CEO”) and, following his appointment as CEO, subject to the supervision of
the 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.  Executive may also be
responsible for special corporate projects as designated by the CEO, including
any merger or acquisition projects or the management of any acquired or merged
subsidiaries.  During normal business hours, Executive shall devote
substantially all of his time and attention to diligently attending to the
business of the Company.  During the Term, Executive shall not directly or
indirectly render any services of a business, commercial, or professional nature
to any other person, firm, corporation, or organization, whether for
compensation or otherwise, without the prior consent of the CEO.  However,
Executive shall have the right to engage in such activities as may be
appropriate in order to manage his personal investments and in educational,
charitable and philanthropic activities so long as such activities do not
interfere or conflict with the performance of his duties to the Company
hereunder.  The conduct of such activity shall not be deemed to materially
interfere or conflict with Executive’s performance

 

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of his duties until Executive has been notified in writing thereof and given a
reasonable period in which to cure same.

 

(b)                                 Other Duties.

 

(1)                      If elected, Executive agrees to serve in one or more
executive offices of any of HCC’s subsidiaries including managerial committees
or directorships, provided Executive is indemnified for serving in any and all
such capacities in a manner acceptable to the Company and Executive.  Executive
agrees that while a full time employee he shall not be entitled to receive any
compensation, if elected, for serving as a director of HCC, or in any capacities
of HCC’s subsidiaries other than the compensation to be paid to Executive by the
Company pursuant to this Agreement.  If Executive is not a full time employee of
the Company or its subsidiary, he shall be compensated as an outside director,
if elected.

 

(2)                      Executive acknowledges and agrees that he has read and
considered the written business policies and procedures of HCC as posted on
HCC’s intranet and that he will abide by such policies and procedures throughout
the term of his employment with the Company.  Executive further agrees that he
will familiarize himself with any amendments to the policies and procedures and
that he will abide by such policies and procedures as they may change from time
to time.

 

3.                                      Compensation and Related Matters.

 

(a)                                  Base Salary.  During the Term Executive
shall receive a base salary (the “Base Salary”) paid by the Company at the
annual rate of $1,000,000.00 payable not less frequently than in substantially
equal monthly installments (or such other, more frequent times as executives of
HCC normally are paid).

 

(b)                                 Deferred Compensation.  Executive shall
receive deferred compensation (the “Deferred Compensation”) from the Effective
Date through the date Executive is appointed Chief Executive Officer, at the
annual rate of $350,000 or such greater amount as is approved by the
Compensation Committee of the Board (the “Compensation Committee”) in its
discretion, and from the date Executive is appointed Chief Executive Officer
through the expiration of the Term, at the annual rate of $950,000 or such
greater amount as is approved by the Compensation Committee in its discretion.  
Deferred Compensation under this Agreement shall be accrued under one or more of
the Company’s deferred compensation plans as determined from time to time by the
Compensation Committee.  Deferred Compensation accruals for a year shall be
credited monthly on a ratable basis throughout the year, unless more frequent
crediting is required by the applicable deferred compensation plan. 
Notwithstanding anything herein to the contrary, such accruals of Deferred
Compensation shall be subject to and shall be governed by the terms of the plan
under which accrued (including, without limitation, plan terms regarding the
crediting of income and the timing of distributions).

 

(c)                                  Bonus Payments.  During the Term Executive
shall be eligible to receive, in addition to the Base Salary, an annual cash
bonus payment amounts to be determined as follows:

 

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(1)                      If Executive is a participant under the 2008 Flexible
Incentive Plan (the “Incentive Plan”) for a calendar year during the Term, then
Executive’s bonus payment, if any, for such year shall be determined and paid in
accordance with the terms of the Incentive Plan.

 

(2)                      If Executive is not a participant in the Incentive
Plan, Executive shall be eligible to receive an annual cash bonus payment in an
amount, which may be zero, to be determined at the sole discretion of the
Compensation Committee in accordance with HCC’s policies and payable in a lump
sum within 30 days after the Compensation Committee’s determination of the
amount of said cash bonus.  The Board or Compensation Committee may unilaterally
reduce or eliminate any annual bonus payment, if any, up until the time the
bonus is actually paid (and notwithstanding any earlier, tentative determination
of the bonus amount).  Subject to Sections 4(b), 4(c), and 4(d), no bonus
payment shall be paid to Executive pursuant to this subsection (2) for a year if
Executive’s Termination Date occurs at any time during such year.

 

(d)                                 Expenses.  During the Term of this
Agreement, Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by him (in accordance with the policies
and procedures established by the Board for the Company’s senior executive
officers) in performing services hereunder, provided that Executive properly
accounts therefor in accordance with Company policy.

 

(e)                                  Other Benefits.  From time to time, the
Company may make available other compensation and employee benefit plans and
arrangements.  Executive shall be eligible to participate in such other
compensation and employee benefit plans and arrangements, except the Company’s
paid time off policy, on the same basis as similarly situated senior executive
officers and key management employees, subject to and on a basis consistent with
the terms, conditions, and overall administration of such plans and
arrangements, as amended from time to time.  Nothing in this Agreement shall be
deemed to confer upon Executive or any other person (including any beneficiary
or dependent of Executive) any rights under or with respect to any such plan or
arrangement or to amend any such plan or arrangement, and Executive and each
other person (including any beneficiary) shall be entitled to look only to the
express terms of any such plan or arrangement for his or her rights thereunder. 
Nothing paid to Executive under any such 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 Section 3(a).

 

(f)                                    Vacations.  From the Effective Date
through the date Executive is appointed Chief Executive Officer, Executive shall
be entitled to twenty-five (25) days of paid vacation, or such additional number
as may be determined by the Board from time to time.  From the date Executive is
appointed Chief Executive Officer through the expiration of the Term, Executive
shall be entitled to thirty (30) days of paid vacation, or such additional
number as may be determined by the Board from time to time.  In no event shall
any unused vacation days carry over 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)                                 Proration.  The Base Salary, bonus, and
vacation 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 arrangement, shall be prorated

 

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in accordance with the number of days in such calendar year during which he is
so employed.  The amounts payable to Executive pursuant to subsection (j) below
in respect of any month during which Executive is employed by the Company for
less than the entire month shall be prorated in accordance with the number of
days in such month during which he is so employed.

 

(h)                                 Life Insurance.  The Company shall provide
to Executive a term life insurance policy or policies in an aggregate face
amount of $1,000,000.00 and shall pay the premiums therefor during the Term. 
Upon Executive’s cessation as an employee of the Company during or after the
Term for any reason other than death, the Company shall assign such policy or
policies to Executive.  The life insurance provided for in this
Section 3(h) shall be in addition to the group life insurance program covering
Executive and substantially all of the employees of the Company during the Term.

 

(i)                                     Relocation Costs.  The Company shall
provide to Executive benefits in connection with Executive’s relocation to
Houston, Texas, in accordance with the terms of that certain Relocation Policy
and Reimbursement Agreement (“Relocation Agreement”) to be entered into
contemporaneously herewith.

 

(j)                                     Car Allowance.   Beginning on the
Effective Date and continuing up to but not to exceed nine (9) months from the
Effective Date, the Company shall reimburse Executive  for a temporary auto
lease for a full-sized sport utility vehicle or the equivalent.

 

(k)                                  Air Travel.  During the Term Executive
shall be entitled to domestic and international first class air travel, where
available, when traveling on Company business, and Executive agrees to use any
upgrade programs or opportunities for such travel whenever feasible.  During the
Term Executive shall have use of the Company’s aircraft for business travel
subject to, prior to his appointment as CEO of HCC, the approval of the CEO. 
From the Effective Date through the date Executive is appointed Chief Executive
Officer, Executive shall, upon approval of the CEO of HCC, have use of the
Company’s aircraft for personal travel in North America provided that such
travel shall be limited to four (4) trips in any year.  From the date Executive
is appointed Chief Executive Officer through the expiration of the Term,
Executive shall have use of the Company’s aircraft for personal travel in North
America provided that such travel shall be limited to six (6) trips in any
year.  Personal use of the Company’s aircraft shall be taxable to Executive
based on the then-current Internal Revenue Service rules for the taxation of
such benefit.

 

(l)                                     Country Club Membership.  During the
Term the Company will provide Executive with a corporate membership to Lochinvar
Golf Club.  This corporate membership will be owned by the Company but Executive
agrees to pay membership dues.

 

(m)                               Other Perquisites.  In addition to the
benefits, compensation, bonuses, and other payments provided herein, Executive
shall be entitled to receive any additional payments or perquisites as are
determined at the sole discretion of the Compensation Committee.

 

(n)                                 Stock Options.  Stock options, if any,
issued to Executive during the Term shall be issued under a stock option
agreement containing terms with respect to vesting and exercise upon the
occurrence of certain termination events that are substantially the same as
those set forth on

 

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Exhibit 3(n) hereto, subject to any then required approval by the Compensation
Committee of the Board.

 

4.                                      Termination.

 

(a)                                  Definitions.

 

(1)                      “Cause” shall mean any of the following:

 

(i)                                     Material dishonesty by Executive 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;

 

(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
not involving DUI or personal injury) which in some material fashion results in
the injury of the Company’s and any of its subsidiaries’ reputation, business,
or business relationships.

 

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 reaffirms
that Executive has been terminated for Cause as of the date set forth in the
final 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)                                  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

 

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power of the voting securities of the surviving entity outstanding immediately
after such merger or consolidation; or

 

(iii)                               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 inability of Executive to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months.  Executive shall be considered to have a Disability (i) if he is
determined to be totally disabled by the Social Security Administration or
(ii) if he is determined to be disabled under HCC’s long-term disability plan in
which Executive participates and if such plan defines “disability” in a manner
that is consistent with the immediately preceding sentence.

 

(4)                      A “Good Reason” shall mean any of the following
(without Executive’s express written consent):

 

(i)                                     A material diminution in Executive’s
authority, duties or responsibilities;

 

(ii)                                  A material diminution in Executive’s Base
Salary;

 

(iii)                               A relocation of the Company’s principal
executive offices, or Executive’s relocation to any place other than the
principal executive offices, exceeding a distance of fifty (50) miles from the
Company’s current executive office located in Houston, Texas, except for
reasonably required travel by Executive on the Company’s business;

 

(iv)                              Any material breach by the Company of any
provision of this Agreement including, without limitation, a failure to appoint
Executive the Chief Executive Officer of the Company on or before May 31, 2013;

 

(v)                                 following Executive’s appointment as CEO of
HCC, the termination or replacement of Executive as CEO of HCC, including after
a Change of Control, or

 

(vi)                              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 a matter specified above only
if such matter is not corrected by the Company within thirty (30) days after the
Company’s receipt of written notice of such matter from Executive.  Any such
notice from Executive must be provided within thirty (30) days after the initial
existence of the specified event.  In no event shall a termination by Executive
occurring more than ninety (90) days following the initial date of the event
described above be a termination for Good Reason due to such event.

 

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(5)                      “Termination Date” shall mean the date Executive’s
employment with the Company terminates or is terminated for any reason pursuant
to this Agreement (including due to the lapse of the Agreement after the
Expiration Date).  For purposes of Sections 4(d) and 18(a), Executive’s
employment with the Company shall be considered terminated only if Executive has
a “separation from service” with the Company and its controlled subsidiaries and
affiliates as such term is defined for purposes of Sections 409A(a)(2)(A)(i) and
409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (including any
related Treasury regulations) (the “Code”).  To the extent permitted by Code
Section 409A, Executive may be considered to have such a separation from service
even if (i) he continues to provide services as a non-employee director of the
Company or any of its controlled subsidiaries or affiliates and/or (ii) he
continues to provide limited services as an employee or independent contractor
of the Company or any of its controlled subsidiaries or affiliates.

 

(b)                                 Termination Without Cause, or Termination
For Good Reason:  Benefits.  Subject to Section 18, in the event the Company
terminates Executive’s employment with the Company without Cause during the
Term, or if Executive terminates his employment with the Company for Good Reason
during the Term, this Agreement shall terminate and Executive shall be entitled
to the following severance benefits:

 

(1)                      An amount equal to the Base Salary that would have been
payable after the Termination Date and before the Expiration Date or for twelve
(12) months, whichever period is longer, payable in a lump sum in cash,
appropriately discounted for present value at the rate of return on 90-day
Treasury bills in existence at the Termination Date.  Such amount shall be paid
within thirty (30) days after the Termination Date;

 

(2)                      An amount equal to the Deferred Compensation that would
have been accrued after the Termination Date and before the Expiration Date or
for twelve (12) months, whichever period is longer, payable in a lump sum in
cash, appropriately discounted for present value at the rate of return on 90-day
Treasury bills in existence at the Termination Date.  Such amount shall be paid
within thirty (30) days after the Termination Date;

 

(3)                      An amount equal to the average of the bonuses that were
paid to Executive over the last two years, except that (i) in the event of a
termination for Good Reason pursuant to Section 4(a)(4)(v), Executive shall
receive an amount equal to the aggregate of the Base Salary and bonus received
by Executive for the two (2) full calendar years prior to such termination and
(ii) in the case of a termination by the Company without Cause or a termination
by the Executive for Good Reason, in each case prior to Executive’s appointment
as CEO of HCC, or in the case of Executive’s termination for Good Reason under
Section (4)(a)(4)(iv) due to the failure to appoint Executive as CEO of HCC on
or before May 31, 2013, the amount payable under this Section 4(b)(3) shall not
be less than fifty percent (50%) of the sum of the aggregate annual Base Salary
plus the minimum annual Deferred Compensation specified in Sections 3(a) and
(b).  In each case, the payment of such amount under this Section 4(b)(3), if
any, shall be payable in a lump sum and shall occur on or after the Termination
Date and before March 15 of the year following the year in which the Termination
Date occurs;

 

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(4)                      All accrued Base Salary through the Termination Date
and all unreimbursed expenses through the Termination Date in accordance with
Section 3(d).  Such amounts shall be paid to Executive in a lump sum in cash
within thirty (30) days after the Termination Date; and

 

(5)                      Executive shall be free to accept other employment, and
there shall be no offset of any employment compensation earned by Executive in
such other employment against payments due Executive unless specified under this
Section. Without limiting the foregoing, there shall be no offset of any
compensation received from such other employment against the Base Salary set
forth above, unless Executive accepts employment that is in violation of his
obligations under Section 5 of this Agreement.

 

(c)                                  Termination In Event of Death:  Benefits. 
Subject to Section 18, if Executive’s employment is terminated by reason of
Executive’s death during the Term, this Agreement shall terminate without
further obligation to Executive’s legal representatives under this Agreement,
other than for

 

(1)                      Payment of all accrued Base Salary and unreimbursed
expenses (in accordance with Section 3(d)) due through the date of death.  Such
amounts shall be paid to Executive’s estate in a lump sum in cash within thirty
(30) days after the Termination Date;

 

(2)                      Payment of an additional amount equal to Executive’s
Base Salary for the lesser of (i) eighteen (18) months or (ii) the period from
the Termination Date to the Expiration Date.  Such amount shall be appropriately
discounted for present value at the rate of return on 90-day Treasury bills in
existence at the Termination Date and shall be paid to Executive’s estate in a
lump sum in cash within thirty (30) days after the Termination Date;

 

(3)                      Payment of an additional amount equal to the Deferred
Compensation that would have been accrued after the Termination Date and before
the Expiration Date or for eighteen (18) months, whichever period is shorter. 
Such amount shall be appropriately discounted for present value at the rate of
return on 90-day Treasury bills in existence at the Termination Date  and shall
be paid to Executive’s estate in a lump sum in cash within thirty (30) days
after the Termination Date; and

 

(4)                      If Executive is a participant in the Incentive Plan,
his entitlement to a bonus following the Termination Date shall be determined in
accordance with the terms of the Incentive Plan.  If Executive is not a
participant in the Incentive Plan, he shall be entitled to consideration for a
bonus payment under Section 3(c)(2) with respect to the year in which Executive
dies; provided that the payment of any such bonus, if any, shall in any event
occur on or after such date of death and before March 15 of the year following
the year of death.

 

(d)                                 Termination In Event of Disability: 
Benefits.  Subject to Section 18, if Executive’s employment is terminated by
reason of Executive’s Disability during the Term, this Agreement shall terminate
and Executive shall be entitled to the following benefits:

 

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(1)                      Payment of all accrued Base Salary through the
Termination Date and all unreimbursed expenses through the Termination Date in
accordance with Section 3(d). Such amounts shall be paid to Executive in a lump
sum in cash within thirty (30) days after the Termination Date;

 

(2)                      Payment of an additional amount equal to Executive’s
Base Salary for the lesser of (i) eighteen (18) months or (ii) the period from
the Termination Date to the Expiration Date.  Such amount shall be paid to
Executive in a lump sum in cash, appropriately discounted for present value at
the rate of return on 90-day Treasury bills in existence at the Termination
Date, within thirty (30) days after the Termination Date;

 

(3)                      Payment of an additional amount equal to the Deferred
Compensation that would have been accrued after the Termination Date and before
the Expiration Date or for eighteen (18) months, whichever period is shorter. 
Such amount shall be paid to Executive in a lump sum in cash, appropriately
discounted for present value at the rate of return on 90-day Treasury bills in
existence at the Termination Date within thirty (30) days after the Termination
Date; and

 

(4)                      If Executive is a participant in the Incentive Plan,
his entitlement to a bonus following the Termination Date shall be determined in
accordance with the terms of the Incentive Plan.  If Executive is not a
participant in the Incentive Plan, he shall be entitled to consideration for a
bonus payment under Section 3(c)(2) with respect to the year in which
Executive’s employment terminates due to Disability.

 

(e)                                  Voluntary Termination by Executive 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’s Base Salary and crediting Executive’s
Deferred Compensation through the proposed Termination Date and also vesting
awards (including stock option awards granted on, before, or after the Effective
Date) that would have vested but for this acceleration of the proposed
Termination Date.  The provisions of this Section 4(e) requiring the vesting of
any stock options due to the Company’s acceleration of the Termination Date
constitute an amendment to the terms of each applicable option agreement. 
Subject to Section 18, 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:

 

(1)                      Payment of all accrued Base Salary through the
Termination Date and all unreimbursed expenses through the Termination Date in
accordance with Section 3(d).  Such amounts shall be paid to Executive in a lump
sum in cash within thirty (30) days after the Termination Date; and

 

(f)                                    Director Positions.  Upon termination of
employment for any reason, Executive shall immediately tender his resignation
from any and all officer, Board, and other board of director positions held with
the Company and/or any of its subsidiaries and affiliates.

 

5.                                      Non-Competition, Non-Solicitation and
Confidentiality.  At the inception of this employment relationship, and
continuing on an ongoing basis, the Company agrees to give Executive

 

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Confidential Information (including, without limitation, Confidential
Information, as defined below, of the Company’s affiliates) which Executive has
not had access to or knowledge of before the execution of this Agreement.  At
the time this Agreement is made, the Company agrees to provide Executive with
initial and ongoing Specialized Training, which Executive has not had access to
or knowledge of before the execution of this Agreement.  “Specialized Training”
includes the training the Company provides to its employees that is unique to
its business and enhances Executive’s ability to perform Executive’s job duties
effectively.  Specialized Training includes, without limitation, orientation
training; sales methods/techniques training; operation methods training; and
computer and systems training.

 

In consideration of the foregoing, Executive agrees as follows:

 

(a)                                  Non-Competition During Employment. 
Executive agrees that, in consideration for the Company’s promise to provide
Executive with Confidential Information and Specialized Training, during the
Term he will not compete, or prepare to compete, with the Company by engaging in
the conception, design, development, production, marketing, or servicing of any
product or service that is substantially similar to the products or services
which the Company provides, and that he will not work for, in any capacity,
assist, or become affiliated with as an owner, partner, etc., either directly or
indirectly, any individual or business which offers or performs services, or
offers or provides products substantially similar to the services and products
provided by Company.

 

(b)                                 Conflicts of Interest.  Executive agrees
that during the Term, he will not engage, either directly or indirectly, in any
activity (a “Conflict of Interest”) which might adversely affect the Company or
its affiliates, including ownership of a material interest in any supplier,
contractor, distributor, subcontractor, customer or other entity with which the
Company does business or accepting any material payment, service, loan, gift,
trip, entertainment, or other favor from a supplier, contractor, distributor,
subcontractor, customer or other entity with which the Company does business,
and that Executive will promptly inform the Chairman of the Board of the Company
in writing 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 Term for any reason (“Restricted
Period”), within any of the markets in which the Company has sold products or
services or formulated a plan to sell products or services into a market during
the last twelve (12) months of Executive’s employ, engage in or contribute
Executive’s knowledge to any work which is competitive with or similar to a
product, process, apparatus, service, or development on which Executive worked
or with respect to which Executive had access to Confidential Information while
employed by the Company; provided however, that this Section 5(c) shall not
operate to prevent Executive from engaging in retail insurance or re-insurance
activities during such period to the extent such activities do not compete or
permit any other person or entity to compete with any business the Company or
its affiliates were engaged in at the time of such termination.  Executive shall
be precluded from service as a member of the Board of Directors of any insurance
company or

 

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insurance holding company during the Restricted Period.  Following the
expiration of said two (2) 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 two (2) years after the termination of the
Term, he will not solicit or accept any business from any customer or client or
prospective customer or client with whom Executive dealt or solicited while
employed by Company during the last twelve (12) months of his employment.

 

(e)                                  Non-Solicitation of Employees.  Executive
agrees that for the duration of the Term, and for a period of two (2) years
after the termination of the 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 the Company or any person that has been employed by the
Company within the previous six (6) months 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 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

 

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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,
Executive’s residence or houses, 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.  All office
equipment, telecommunications equipment and equipment of a like or similar kind
installed by the Company at the residence of Executive to facilitate necessary
communication and assist Executive in the performance of his duties shall be
conveyed to Executive without the payment of consideration upon termination of
Executive’s employment for any reason and after an opportunity for inspection
and removal of Company information.  The Parties understand and agree that the
materials described in this Section 5(g) exclude all of Executive’s personal
files, personal e-mail correspondence, personal notes and professional readers.

 

(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
copyrighted works which Executive may have acquired because of employment with
an employer other than the Company or acquired from any other third party,
whether such information is in Executive’s memory or embodied in a writing or
other physical form.

 

(k)                                  Breach.  Executive agrees that any breach
of Sections 5(a), (c), (d), (e) or (f) above cannot be remedied solely by money
damages, and that in addition to any other remedies the Company may have, the
Company is entitled to obtain injunctive relief against Executive.  Nothing
herein, however, shall be construed as limiting Company’s right to pursue any
other available remedy at law or in equity, including recovery of damages and
termination of this Agreement and/or any payments that may be due pursuant to
this Agreement.

 

(l)                                     Right to Enter Agreement.  Executive
represents and covenants to Company that he has full power and authority to
enter into this Agreement and that the execution of this Agreement will not
breach or constitute a default of any other agreement or contract to which he is
a party or by which he is bound.

 

(m)                               Extension of Post-Employment Restrictions.  In
the event Executive breaches Sections 5(c), (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.  The restrictive time
periods contained in Sections 5(c), (d), or (e) shall likewise be extended
during any time period

 

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in which litigation is pending by Executive against the Company or by the
Company against Executive with regard to the enforcement of the provisions of
Section 5 of this Agreement.

 

(n)                                 Enforceability.  The agreements contained in
Section 5 are independent of the other agreements contained herein. 
Accordingly, failure of the Company to comply with any of its obligations
outside of this Section does not excuse Executive from complying with the
agreements contained herein.

 

(o)                                 Ownership in Publicly Traded Company.  The
Executive’s ownership in a publicly traded business entity in competition with
the Company shall not be regarded by the Parties as employment in a competitive
activity in violation of this Section, provided that Executive’s ownership
interest in such company is passive and constitutes no more than a two percent
(2%) ownership in the stock of such publicly traded company.

 

6.                                      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.  The Company shall obtain the
assumption and performance of this Agreement by any such successor; provided,
however, that such commitment by the Company (including a failure to satisfy
such commitment) shall not give Executive the right to object to or enjoin any
transaction among the Company, any of its affiliates, and any such successor. 
To the extent a failure by the Company to satisfy the foregoing commitment
constitutes a material breach of this Agreement and to the extent not cured in
accordance with Section 4(a)(4), such failure shall constitute “Good Reason”
pursuant to Section 4(a)(4)(iv).

 

7.                                      Binding Agreement.  Executive
understands that his obligations under this Agreement are binding upon
Executive’s heirs, successors, personal representatives, and legal
representatives.

 

8.                                      Survivability.  The provisions of this
Agreement which call for performance after the end of the Term, including,
without limitation, the agreements contained in Section 5, shall survive the
termination of this Agreement for any reason.

 

9.                                      Notices.  All notices pursuant to this
Agreement shall be in writing and sent certified mail, return receipt requested,
addressed as set forth below, or by delivering the same in person to such party,
or by transmission by facsimile to the number set forth below.  Notice deposited
in the United States Mail, mailed in the manner described herein above, shall be
effective upon deposit.  Notice given in any other manner shall be effective
only if and when received:

 

If to Executive:

 

Mr. Christopher J. Williams, Jr.

 

 

25510 River Road

 

 

Cloverdale, CA 95425

 

 

Fax: (707) 894-2982

 

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If to Company:

 

HCC Insurance Holdings, Inc.

 

 

13403 Northwest Freeway

 

 

Houston, Texas 77040

 

 

Fax: (713) 744-9648

 

 

Attention: General Counsel

 

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.  Except as provided in subsection
(d) below, in the event any dispute arises out of or related to Executive’s
employment with or by the Company, or separation/termination therefrom, which
cannot be resolved by the Parties to this Agreement, such dispute shall be
submitted to final and binding arbitration.  Except as provided in subsection
(d) below, 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 the Company, or separation therefrom.

 

(a)                                  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.  Subject to subsection (c) below, cost of the arbitration will be shared
equally by Executive and Company.  Such arbitration shall be held in Houston,
Texas.

 

(b)                                 Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof by the filing
of a petition to enforce the award.  Costs of filing may be recovered by the
party that initiates such action to have the award enforced.

 

(c)                                  The Company shall promptly reimburse
Executive for all eligible, reasonable costs and expenses incurred in connection
with any dispute, controversy, or claim submitted to binding arbitration in
accordance with this Section in an amount up to, but not exceeding an amount
equal to twenty percent (20%) of Executive’s Base Salary per taxable year of
Executive, unless Executive was terminated 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.  To be eligible for reimbursement under this
subsection (c), (1) the expenses must be incurred during the period beginning on
the Effective Date and ending on the date that is ten years after the end of the
Term and (2) the expenses must be submitted to the Company for reimbursement
within 90 days after the end of the taxable year of Executive in which the
expenses were incurred.  Amounts eligible for reimbursement shall be paid to
Executive before the last day of the taxable year of Executive following the
taxable year in which the expenses were incurred.  The amount of expenses
eligible for

 

14

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reimbursement during Executive’s taxable year may not affect the expenses
eligible for reimbursement in any other taxable year of Executive.  Executive’s
right to reimbursement under this subsection (c) may not be assigned, alienated,
or exchanged for any other benefit.

 

(d)                                 It is specifically agreed by the Parties
that any enforcement action by the Company against Executive for equitable
relief, including, but not limited to, injunctive relief under Section 5 of this
Agreement shall not be subject to this Section requiring arbitration and that
the Company shall not be required to seek arbitration against Executive for any
purported violation by Executive of his obligations under Section 5 of this
Agreement.

 

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
Executive and an officer or other authorized executive of Company.

 

15.                               Effective Date.  It is understood by the
Parties that this Agreement shall be effective as of the Effective Date when
signed by both the Company and Executive.

 

16.                               Governing Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas
without regard to conflict of laws principles.

 

17.                               Jurisdiction and Venue.  With respect to any
litigation regarding this Agreement, Executive agrees to venue in the state or
federal courts in Harris 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 Harris County, Texas.

 

18.                               Compliance With Section 409A.

 

(a)                                  Delay in Payments. Notwithstanding anything
to the contrary in this Agreement, (i) if upon the Termination Date, Executive
is a “specified employee” within the meaning of Code Section 409A and the
deferral of any amounts otherwise payable under this Agreement as a result of
Executive’s termination of employment is necessary in order to prevent any
accelerated or additional tax to Executive under Code Section 409A, then the
Company will defer the payment of any such amounts hereunder until the date that
is six (6) months following the date of Executive’s termination of employment
with the Company, at which time any such delayed amounts will be paid to
Executive in a single lump sum, with interest from the date otherwise payable at
the United States prime rate as published in the “Money Rates” section of The
Wall Street Journal on the first publication date coincident with or immediately
following the Termination Date, and (ii) if any other payments of money or other
benefits due to Executive hereunder could cause the application of

 

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an accelerated or additional tax under Code Section 409A, such payments or other
benefits shall be deferred if deferral will make such payment or other benefits
compliant under Code Section 409A and if this subsection (ii) does not otherwise
cause the application of an accelerated or additional tax under Code
Section 409A.

 

(b)                                 Separation from Service.  A termination of
employment shall not be deemed to have occurred for purposes of any provision of
this Agreement providing for the payment of any amounts or benefits upon or
following a termination of employment unless such termination is also a
“separation from service” (within the meaning of Code Section 409A).

 

(c)                                  Separate Payments.  For purposes of Code
Section 409A, each payment under Section 4 (and each other severance plan
payment) will be treated as a separate payment.

 

(d)                                 Overall Compliance.  To the extent any
provision of this Agreement or any omission from the Agreement would (absent
this Section 18(d)) cause amounts to be includable in income under Code
Section 409A(a)(1), the Agreement shall be deemed amended to the extent
necessary to comply with the requirements of Code Section 409A; provided,
however, that this Section 18(d) shall not apply and shall not be construed to
amend any provision of the Agreement to the extent this Section 18(d) or any
amendment required thereby would itself cause any amounts to be includable in
income under Code Section 409A(a)(1).

 

(e)                                  Reformation. If any provision of this
Agreement would cause Executive to incur any additional tax under Code
Section 409A, the Parties will in good faith attempt to reform the provision in
a manner that maintains, to the extent possible, the original intent of the
applicable provision without violating the provision of Code Section 409A.

 

(f)                                    Code Section 409A Excise Tax Gross Up. 
If the terms of this Agreement (as may be modified under Sections 18(d) and
18(e)) or any action or omission by the Company in its performance under this
Agreement, causes any payment or benefit received or to be received by Executive
from the Company pursuant to this Agreement (the “Agreement Payments”) to be
subject to the excise tax and additional interest imposed by Code
Section 409A(a)(1)(B) (the “409A Excise Tax”), the Company shall pay Executive,
at the time specified below, an additional amount (the “409A Gross-Up Payment”)
such that the net amount that Executive retains, after deduction of the 409A
Excise Tax on the Agreement Payments; any federal, state, and local income and
employment taxes; any additional 409A Excise Taxes upon the 409A Gross-Up
Payment; and any interest, penalties, or additions to tax payable by Executive
with respect thereto, shall be equal to the total present value (using the
applicable federal rate (as defined in Section 1274(d) of the Code) in such
calculation) of the Agreement Payments at the time such payments are to be
made.  Payment of such additional amount shall occur on or before the earlier to
occur of (i) the date which the Company is required to withhold any such taxes
and (ii) the date on which Executive remits such taxes to the Internal Revenue
Service (to the extent not withheld).  For purposes of determining the amount of
the 409A Gross-Up Payment, Executive shall be deemed to pay federal income taxes
at the highest marginal rates of federal income taxation applicable to
individuals in the calendar year in which the 409A Gross-Up Payment is to be
made and state and local income taxes at the highest marginal rates of taxation
applicable to individuals as are in effect in the state and locality of
Executive’s residence in the calendar year in which the 409A Gross-Up Payment is
to be made, net of the maximum

 

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reduction in federal income taxes that can be obtained from deduction of such
state and local taxes, taking into account any limitations applicable to
individuals subject to federal income tax at the highest marginal rates.  This
Section 18(f) does not require the Company to pay, reimburse, or gross up
Executive with respect to excise taxes imposed under any other section of the
Code or under state or local law.

 

[remainder of page intentionally left blank]

 

17

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IN WITNESS WHEREOF, the Parties have executed this Agreement in multiple copies,
effective as of the Effective Date.

 

EXECUTIVE:

 

COMPANY:

 

 

HCC Insurance Holdings, Inc.

 

 

 

 

 

 

/s/ Christopher J. Williams, Jr.

 

By:

/s/ John H. Molbeck, Jr.

Christopher J. Williams, Jr.

 

 

John N. Molbeck, Jr.

 

 

 

President and Chief Executive Officer

 

 

 

Date:

April 27, 2011

 

Date:

April 27, 2011

 

SIGNATURE PAGE

 

EMPLOYMENT AGREEMENT — CHRISTOPHER J. WILLIAMS, JR.

 

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EXHIBIT 3(N)

OPTION VESTING AND EXERCISE PROVISIONS

 

Termination of Employment.

 

1.               In the event the employment of the Employee is terminated by
the Employee for Good Reason (as such term is defined in the Employment
Agreement between the Company and the Employee entered into on April 27, 2011
but effective as of the 1st day of May, 2011 (the “Employment Agreement”)) or by
the Company without Cause (as such term is defined in the Employment Agreement),
the Employee shall have the right to exercise this option for the full number of
shares not previously exercised or any portion thereof, except as to the
issuance of fractional shares, to the full extent of this option at any time
within the unexpired term of this option.

 

2.               In the event the employment of the Employee is terminated for
Cause or by Employee without Good Reason, the Employee shall have the right at
any time within thirty (30) days after the termination of such employment or, if
shorter, during the unexpired term of this option, to exercise this option for
the full number of shares not previously exercised or any portion thereof,
except as to the issuance of fractional shares, but only to the extent this
option was otherwise exercisable in accordance with Paragraph 4(e) hereof  as of
the date of such termination of employment.

 

3.               In the event the employment of the Employee is terminated by
reason of Disability (as such term is defined in the Employment Agreement), then
the Employee shall have the right to exercise this option for the full number of
shares not previously exercised or any portion thereof, except as to the
issuance of fractional shares, to the full extent of this option at any time
within the unexpired term of this option.

 

4.               In the event of the death of the Employee while in the employ
of the Company or the Subsidiaries, this option may be exercised for the full
number of shares not previously exercised, or any portion thereof, except as to
the issuance of fractional shares, to the full extent of this option at any time
within the unexpired term of this option, by the person or persons to whom the
Employee’s rights under this option shall pass by the Employee’s will or by the
laws of descent and distribution, whichever is applicable.

 

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