exv10w2






Exhibit 10.2




EMPLOYMENT AGREEMENT




     This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on May 5, 2009 (the “Effective
Date”), between HCC INSURANCE HOLDINGS, INC. (“HCC” or “Company”) JOHN N. MOLBECK, JR.
(“Executive”), sometimes collectively referred to herein as the “Parties.”



RECITALS:




     WHEREAS, Executive is to be employed as President and Chief Executive Officer (“CEO”) of HCC;



     WHEREAS, it is the desire of the Board of Directors of HCC (the “Board”) to (i) directly
engage Executive as an officer of HCC; and (ii) directly engage, if elected, the services of
Executive as a director of HCC or its subsidiaries or affiliates; and



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



     WHEREAS, Executive and the Company have previously entered into an Employment Agreement dated
on August 10, 2007, but effective as of March 1, 2007 (the “Original Employment Agreement”); and



     WHEREAS, Executive and the Company desire to terminate the Original Employment Agreement and
enter into this Agreement.



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



     1. Term. The Company hereby agrees to employ Executive as its President and Chief
Executive Officer 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 May 31, 2013 (the “Expiration Date”) and (b)
the Termination Date (as hereinafter defined).



     2. Duties.



          (a) Duties as Employee of the Company. Executive shall, subject to the supervision of
the Board of Directors, have general management and control of HCC in the ordinary course of its
business with all such powers with respect to such management and control as may be reasonably
incident to such responsibilities. During normal business hours, Executive shall devote
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 Board of Directors of HCC. However,
Executive shall have the right to engage in such activities as may be appropriate in order to
manage his personal investments 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 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.



          (c) Work Situs. The Executive shall be entitled to work from an off-site location as
his office location for no more than two (2) months during each calendar year provided that
Executive remains available by telephone and email while working off-site and further provided that
Executive remains available while at his off-site office location to return to Houston or
elsewhere, upon reasonable notice, as requested by the Chairman of the Board. This period shall not
be considered vacation time for purposes of this Agreement.




     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. During the Term Executive shall receive deferred
compensation (the “Deferred Compensation”) at the annual rate of $950,000 or such greater amount as
is approved by the Compensation Committee of the Board (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 in amounts to be determined as follows:




               (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 for a calendar year during the
Term, then Executive’s bonus payment, if any, for such year shall be determined in the sole
discretion of the Compensation Committee and payable in a lump sum within 30 days after the
Compensation



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Committee’s determination of the amount of said cash bonus. The Board or Compensation Committee may
unilaterally reduce or eliminate any such annual bonus payment, if any, up until the time the bonus
is actually paid (and notwithstanding any earlier, tentative determination of the bonus amount).
There shall be no minimum bonus payable to Executive under this subsection (2), and, except as
provided in Sections 4(b)(3), 4(c)(7), and 4(d)(7), no bonus shall be payable 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) Medical and Other Benefits.




               (1) Other Benefits. From time to time the Company may make available other
compensation and employee benefit plans and arrangements. During the Term 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 of the Company, 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; provided, however, that medical coverage under the Company’s group health plan shall be
provided at no cost to Executive. 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).



               (2) Continuation of Health Coverage after Death.



                    (i) If Executive’s employment ceases during the Term or after the Expiration Date due to
death, each “qualified beneficiary” (as defined by the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”)) of Executive shall be eligible to continue coverage under the
Company’s group health plans in which the qualified beneficiary participated on the Termination
Date (including any successor health plans, the “Company Health Plans”) until the expiration of the
maximum required period for continuation coverage under COBRA, determined as if such qualified
beneficiary elected COBRA continuation coverage and paid the required premium for such continuation
coverage. The Company shall pay the full required premium for such continuation coverage, which
shall satisfy any obligation to provide continuation coverage under COBRA for such period.



                    (ii) After the continuation coverage under subsection (i) above ends, the Company shall
reimburse Executive’s qualified beneficiaries who would have been eligible for coverage under the
Company Health Plans at such time had Executive continued to be an active employee of the Company
for the cost of the premium for (A) an individual health insurance policy or policies which provide
benefits during the Extended Coverage Period (as hereinafter defined) which are comparable in the
aggregate to the benefits provided under the Company Health Plans (exclusive of the Company’s
health flexible spending account plan) or (B) health coverage under any other employer health plan
which is available to the qualified beneficiaries and which provides benefits during the Extended
Coverage Period which are comparable in the aggregate to the benefits provided under the Company
Health Plans



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(exclusive of the Company’s health flexible spending account plan); provided, however, that the
Company shall not reimburse the cost of such health coverage for a qualified beneficiary (including
Executive’s spouse) to the extent that coverage extends beyond the Extended Coverage Period for
such qualified beneficiary. Such reimbursement shall be subject to the requirements of Section
3(e)(4).



               (3) Continuation of Health Coverage after Other Termination Events.



                    (i) Executive ceases to be an employee of the Company during the term or after the Expiration
Date for any reason other than death (including, without limitation, due to a termination for
Cause), Executive and each of his qualified beneficiaries shall be eligible to continue coverage
under the Company Health Plans in which they participate on the Termination Date until the
expiration of the maximum required period for continuation coverage under COBRA, determined as if
Executive and each such qualified beneficiary elected COBRA continuation coverage and paid the
required premium for such continuation coverage. The Company shall pay the full required premium
for such continuation coverage, which shall satisfy any obligation to provide continuation coverage
under COBRA for such period.



                    (ii) After the continuation coverage under subsection (i) above ends, the Company shall
reimburse Executive for the cost of the premium for (A) an individual health insurance policy or
policies which provide benefits to Executive and his qualified beneficiaries who would have been
eligible for coverage under the Company Health Plans at such time had Executive continued to be an
active employee of the Company during the Extended Coverage Period (as hereinafter defined), which
benefits are comparable in the aggregate to the benefits provided under the Company Health Plans
(exclusive of the Company’s health flexible spending account plan and determined after applying the
Company Health Plan provisions regarding coordination of benefits if other health coverage
(including Medicare) is available to Executive) or (B) health coverage under any other employer
health plan which is available to Executive and such qualified beneficiaries and which provides
benefits during the Extended Coverage Period which are comparable in the aggregate to the benefits
provided under the Company Health Plans (exclusive of the Company’s health flexible spending
account plan); provided, however, that the Company shall not reimburse the cost of such health
coverage for Executive or for a qualified beneficiary (including Executive’s spouse) to the extent
such coverage extends beyond the Extended Coverage Period for Executive or for such qualified
beneficiary. Such reimbursement shall be subject to the requirements of Section 3(e)(4).



               (4) The amount of expenses eligible for reimbursement under the provisions of Sections 3(e)(2)
and 3(e)(3) which refer to this Section 3(e)(4) during the taxable year of the recipient of such
reimbursements shall not affect the expenses eligible for reimbursement in any other taxable year.
The recipient must submit such eligible expenses to the Company within a reasonable period of time
after the expenses are incurred, and payment for any such expenses must occur on or before the last
day of the recipient’s taxable year following the taxable year in which the expense was incurred
(expenses submitted after this payment deadline shall not be eligible for reimbursement). The right
to reimbursement of such expenses is not subject to liquidation or exchange for any other benefit.



               (5) The “Extended Coverage Period” for Executive or a qualified beneficiary (including
Executive’s spouse) is the period (i) beginning on the date on which deemed COBRA continuation
coverage ends and (ii) ending on the earlier to occur of (A) in the case of Executive, the date
Executive dies and, in the case of Executive’s spouse, the date Executive’s spouse dies and (B) the
date on which Executive’s qualified beneficiary (other than Executive’s spouse) would have ceased
to be eligible for coverage under the terms of the Company Health Plans if Executive had continued
to be an active employee of the Company.



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          (f) Vacations. Executive shall be entitled to thirty (30) paid vacation days per year
during the Term, or such additional number as may be determined by the Board from time to time, but
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) 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(g) shall be in addition to the group life insurance
program covering Executive and substantially all of the employees of the Company during the Term.




          (h) 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 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 (i) 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.




          (i) 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. During the
Term, Executive shall, upon approval of the Chairman of the Board of HCC, have use of the Company’s
aircraft for personal travel in North America provided that such travel shall be limited to a
maximum of 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.




          (j) 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.




          (k) Stock Options. Stock options, if any, issued to Executive during the Term shall be
at the discretion of the Company’s Compensation Committee and 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 Exhibit 3(l) 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;



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                    (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 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



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from the Company’s current executive office located in Houston, Texas, except for reasonably
required travel by Executive on the Company’s business;



                    (iv) Any material breach by the Company of any provision of this Agreement; or



                    (v) The termination or replacement of Executive as CEO, including after a Change of Control.


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.




               (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), 6, and 19(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. 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 sixty (60)
days after the Termination Date and, in any event, shall be paid after such Termination Date and
before March 15 of the year following the year containing such Termination Date; provided, however,
that if upon the Termination Date Executive is a “specified employee” within the meaning of Code
section 409A, then payment of such amount shall be deferred until the date that is six (6) months
following the Termination Date in accordance with Section 19(a). Executive shall not have the right
to designate the taxable year of such payment;



               (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 sixty (60) days after the Termination Date and, in any event, shall be paid after such
Termination Date and before March 15 of the year following the year containing such Termination
Date; provided, however, that if upon the Termination Date Executive is a “specified employee”
within the meaning of Code section 409A, then payment of such amount shall be deferred until the
date that is six (6) months



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following the Termination Date in accordance with Section 19(a). Executive shall not have the right to designate
the taxable year of such payment;



               (3) An amount equal to the average of the bonuses that were paid to Executive over the last
two years, except that 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. In each case,
the payment of such bonus, 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. Notwithstanding the foregoing provisions of this subsection, if upon the Termination Date
Executive is a “specified employee” within the meaning of Code section 409A, then payment of any
Incentive Plan or other bonus payments (as applicable) otherwise payable during the first six (6)
months following the Termination Date shall be deferred until the date that is six (6) months
following the Termination Date in accordance with Section 19(a);



               (4) A lump sum cash payment in the amount of $4,650.00 times the number of months after the
Termination Date and before the Expiration Date in lieu of any other benefits that cease on the
Termination 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 within sixty
(60) days after the Termination Date and, in any event, shall be paid after such Termination Date
and before March 15 of the year following the year containing such Termination Date; provided,
however, that if upon the Termination Date Executive is a “specified employee” within the meaning
of Code section 409A, then payment of such amount shall be deferred until the date that is six (6)
months following the Termination Date in accordance with Section 19(a). Executive shall not be
entitled to any additional payments for such other benefits. Executive shall not have the right to
designate the taxable year of such payment;



               (5) Health coverage or reimbursement for the cost of health coverage as provided in Section
3(e)(3);



               (6) 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 sixty (60) days after the Termination Date; and



               (7) 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
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. 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) Health coverage or reimbursement for the cost of health coverage for Executive’s eligible
qualified beneficiaries in accordance with Section 3(e)(2);



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               (3) A lump sum cash payment in the amount of $4,650.00 times the lesser of (i) eighteen (18)
months or (ii) the number of months after Executive’s death and before the Expiration Date in lieu
of any other benefits that cease on the date of Executive’s death. 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 within thirty (30) days
after the Termination Date and, in any event, shall be paid after such Termination Date and before
March 15 of the year following the year containing such Termination Date. Executive shall not be
entitled to any additional payments for such other benefits;



               (4) 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; provided that such amount shall in any
event be paid after such Termination Date and before March 15 of the year following the year
containing such Termination Date;



               (5) 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;
provided that such amount shall in any event be paid after such Termination Date and before March
15 of the year following the year containing such Termination Date;



               (6) An amount equal to the total Consulting Fees (as hereinafter defined) that would have been
payable during the Consulting Period (as hereinafter defined) had Executive retired on the
Expiration Date and provided Consulting Services (as hereinafter defined) during such period in
accordance with Section 6, 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; and



               (7) 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. 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:




               (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) Health coverage or reimbursement for the cost of health coverage as provided in Section
3(e)(3);



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               (3) 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 and, in any event, shall be paid after such Termination Date
and before March 15 of the year following the year containing such Termination Date;



               (4) 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, in any
event, shall be paid after such Termination Date and before March 15 of the year following the year
containing such Termination Date;



               (5) A lump sum cash payment in the amount of $4,650.00 times the number of months after the
Termination Date and before the Expiration Date in lieu of any other benefits that cease on the
Termination 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 within
thirty (30) days after the Termination Date and, in any event, shall be paid after such Termination
Date and before March 15 of the year following the year containing such Termination Date. Executive
shall not be entitled to any additional payments for such other benefits;



               (6) An amount equal to the total Consulting Fees (as hereinafter defined) that would have been
payable during the Consulting Period (as hereinafter defined) had Executive retired on the
Expiration Date and provided Consulting Services (as hereinafter defined) during such period in
accordance with Section 6, 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 and, in any event, shall be
paid after such Termination Date and before March 15 of the year following the year containing such
Termination Date; and



               (7) 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; provided that any payment of such bonus, if any, shall in any event
occur on or after such Termination Date and before March 15 of the year following the year
containing such Termination Date.



          (e) Voluntary Termination by Executive and Termination for Cause: Benefits. Executive
may terminate his employment with the Company without Good Reason (excluding a termination pursuant
to Section 4(f)) 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. Upon such a termination by
Executive, or upon termination for Cause by the Company, this Agreement shall terminate, except as
provided in Section 6, and the Company shall pay to Executive




10









 








               (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 sixty (60) days after the Termination Date; and



               (2) Health coverage or reimbursement for the cost of health coverage as provided in Section
3(e)(3).



          (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
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,
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



11









 






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 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 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



12









 






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; provided, no payments to Executive under
Section 6 shall be offset for any purpose, so long as Executive continues to provide the Consulting
Services.




          (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 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



13









 






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. Consulting Agreement. Upon Executive’s cessation as an employee of the Company
during or after the Term for any reason other than death or Disability, Executive agrees to serve
and the Company agrees to retain Executive as a consultant (as an independent contractor and not as
an employee), for a period of six (6) years and nine (9) months (the “Consulting Period”). The
Executive shall not be entitled to any benefits provided to active Company employees generally
during the Consulting Period, but shall be entitled to any payments required under this Agreement,
without any offset for the additional payments provided in this Section 6.



          (a) The Executive agrees to provide, if requested, up to but not to exceed a maximum of 600
hours of service per calendar year during the Consulting Period (the “Consulting Services”), as
required by the Company, provided, however, that the total hours of Consulting Services shall not
exceed 1,350 during the entire Consulting Period, and provided, further, that, unless waived by
Executive, he shall not be required to perform Consulting Services for more than four (4) days
during any one (1) calendar week or more than eight (8) hours in any one twenty four (24) hour
period.




          (b) For each month during the Consulting Period, HCC shall pay Executive an amount (the
“Consulting Fees”) equal to the annual consulting fee of $256,200 divided by twelve (12). Such
amount shall be payable monthly, in arrears, beginning on the last day of the month containing the
Termination Date; provided, however, that if upon the Termination Date Executive is a “specified
employee” within the meaning of Code section 409A, then payment of any Consulting Fees otherwise
payable during the first six (6) months following the Termination Date shall be deferred until the
date that is six (6) months following the Termination Date in accordance with Section 19(a).
Subject to early termination due to a failure to provide Consulting Services during a period of
twenty-four (24)-consecutive months (as described below), Executive’s right to receive Consulting
Fees under this Section 6 shall be fully vested as of the date of this Agreement.




          (c) 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. Executive’s travel
time shall constitute hours of Consulting Services for purposes of this Section 6. The Parties
contemplate that, when appropriate, the Consulting Services shall be performed at Executive’s
office or residence and at the Company’s executive offices in Houston, Texas and may be performed
at such other locations only as they may mutually agree upon. Executive shall be properly
reimbursed for all travel and other expenses reasonably incurred by Executive in rendering the
Consulting Services.




          (d) If Executive fails or refuses to provide Consulting Services as reasonably requested
within any consecutive twenty-four (24)-month period other than due to death or Disability, the
Company shall have no further obligation to pay Consulting Fees to Executive under this Section 6,
and Executive shall have no further obligation to provide Consulting Services.




14









 








          (e) In the event of Executive’s death or Disability during the Consulting Period, the Company
shall pay to Executive (or Executive’s estate in the case of Executive’s death) the remaining
Consulting Fees for the Consulting Period 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 date of
Executive’s death or Disability. Such amount shall be paid within thirty (30) days after the date
of Executive’s death or Disability; provided, however, that with respect to any such payment that
would be made as a result of Executive’s Disability, if such payment would be made within six (6)
months after the Termination Date and if Executive is a “specified employee” within the meaning of
Code section 409A as of the Termination Date, then such payment shall be deferred until the date
that is six (6) months following the Termination Date in accordance with Section 19(a).




          (f) Any period during which Executive is subject to restrictions under Sections 5(c)-5(e)
shall run concurrently with Executive’s Consulting Period.




     7. Assignment. This Agreement cannot be assigned by Executive. The Company may assign
this Agreement only to a successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and assets of the Company provided such
successor expressly agrees in writing reasonably satisfactory to Executive to assume and perform
this Agreement in the same manner and to the same extent that the Company would be required to
perform it if no such succession and assignment had taken place. 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).



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



     9. Survivability. The provisions of this Agreement which call for performance after
the end of the Term, including, without limitation, the agreements contained in Section 3(e)(2)-(3)
and Sections 5 and 6 (to the extent applicable) shall survive the termination of this Agreement for
any reason.



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




	 	If to Executive:  	 	John N. Molbeck, Jr.

11111 Claymore Road

Houston, Texas 77024

Fax: (832) 358-9529
	 
	 	If to Company:  	 	HCC Insurance Holdings, Inc.

13403 Northwest Freeway

Houston, Texas 77040

Fax: (713) 462-2401

Attention: General Counsel




15









 











     11. Waiver. No waiver by either party to this Agreement of any right to enforce any
term or condition of this Agreement, or of any breach hereof, shall be deemed a waiver of such
right in the future or of any other right or remedy available under this Agreement.



     12. Severability. If any provision of this Agreement is determined to be void,
invalid, unenforceable, or against public policy, such provisions shall be deemed severable from
the Agreement, and the remaining provisions of the Agreement will remain unaffected and in full
force and effect.



     13. Arbitration. 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 (or, if the dispute arises during the Consulting
Period, Executive’s Base Salary as in effect immediately prior to the beginning of the Consulting
Period) 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 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.




     14. Entire Agreement. The terms and provisions contained herein shall constitute the
entire agreement between the parties with respect to Executive’s employment with Company during the
time



16









 







period covered by this Agreement. This Agreement replaces and supersedes any and all existing
agreements entered into between Executive and the Company relating generally to the same subject
matter, if any, and shall be binding upon Executive’s heirs, executors, administrators, or other
legal representatives or assigns.



     15. Modification of Agreement. This Agreement may not be changed or modified or
released or discharged or abandoned or otherwise terminated, in whole or in part, except by an
instrument in writing signed by Executive and an officer or other authorized executive of Company.



     16. 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.



     17. 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.



     18. 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.



     19. Compliance With Code 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 (determined by applying the default rules applicable under such Code section except to the
extent such rules are modified by a written resolution that is adopted by the Compensation
Committee and that applies for purposes of all deferred compensation plans of the Company and its
affiliates) 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 months following the Termination Date, 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 rate of return on 90-day Treasury bills in existence at the
Termination Date and (ii) if any other payments of money or other benefits due to Executive
hereunder could cause the application of 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.




          (b) Overall Compliance. To the extent any provision of this Agreement or any omission
from the Agreement would (absent this Section 19(b)) 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 19(b) shall not
apply and shall not be construed to amend any provision of the Agreement to the extent this Section
19(b) or any amendment required thereby would itself cause any amounts to be includable in income
under Code section 409A(a)(1).




          (c) Reformation. If any provision of this Agreement would cause Executive to occur 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 provisions of Code section 409A.




17









 








          (d) Code Section 409A Excise Tax Gross Up. If the terms of this Agreement (as may be
modified under Sections 19(b) and 19(c)) 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 (including without limitation any payments
under Section 4(b)(7)) (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 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 19(d) 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.




     20. Termination of Original Employment Agreement. Effective the Effective Date, the Original
Employment Agreement is terminated.



[remainder of page intentionally left blank ]




18









 








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



	 	 	 	 	 
	 	HCC INSURANCE HOLDINGS, INC.

 	 
	 	By:  	/s/ Christopher J. B. Williams
 	 
	 	 	Christopher J. B. Williams 	 
	 	 	Chairman of the Board 	 
	 
	 	 	 
	 	                             /s/ John N. Molbeck, Jr.
 	 
	 	John N. Molbeck, Jr. 	 
	 	 	 
	 



SIGNATURE PAGE

EMPLOYMENT AGREEMENT — MOLBECK






 









 








Exhibit 3(l)

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 May ___, 2009 but effective as of the 20th day of May, 2009 (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 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, 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.



5. If Employee elects to voluntarily terminate his employment with the Company for any reason (or
no reason) pursuant to Section 4(b), 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.




EXHIBIT 3(l)