exv10w1



 







Exhibit 10.1




EMPLOYMENT AGREEMENT




     This EMPLOYMENT AGREEMENT (“Agreement”) is entered into this 17th day of May,
2006 but effective as of the 23rd day of March, 2006 (the “Effective Date”), between HCC
Insurance Holdings, Inc., a Delaware corporation (the ”Company” or “HCC”) and John N. Molbeck, Jr.
(“Executive”). Executive and the Company are sometimes collectively referred to herein as the
“Parties” and individually as a “Party.”



RECITALS:




     WHEREAS, Executive is to be employed as the President and Chief Operating Officer of the
Company;



     WHEREAS, it is the desire of the Company to engage Executive as the President and Chief
Operating Officer of the Company; and



     WHEREAS, Executive is desirous of being employed by the Company 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:



AGREEMENT




     1. Term. Effective as of the Effective Date, the Company hereby employs Executive,
and Executive hereby accepts such employment, on the terms and conditions set forth herein, for the
period (the “Term”) commencing on the Effective Date and expiring at 11:59 p.m. on May 31, 2009
(unless sooner terminated as hereinafter set forth).



     2. Duties.



          (a) Duties as Executive of the Company. Executive shall, subject to the supervision
of the Chief Executive Officer of the Company (the “CEO”) or such other person designated by the
CEO, act as the President and Chief Operating Officer of the Company in the ordinary course of its
business with all such powers with respect to such management and control as may be reasonably
incident to such responsibilities. During normal business hours, Executive shall devote his full
time and attention to diligently attending to the business of the Company. During the Term,
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 written 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 materially interfere or conflict with the performance of his duties to the Company
hereunder. The conduct of such activity shall not be deemed to materially interfere or conflict
with Executive’s performance of his duties until Executive has been notified in writing thereof and
given a reasonable period in which to cure the same.




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          (b) Other Duties.





          (1) If elected, Executive agrees to serve as a member of such managerial committees of
the Company and of any of its direct or indirect parents or subsidiaries (collectively,
“Affiliates”) and in one or more executive offices of any of the Company’s Affiliates,
provided Executive is indemnified for serving in any and all such capacities in a manner
acceptable to the Company and Executive. If elected, Executive agrees that he shall not be
entitled to receive any compensation for serving as a director of the Company, or in any
capacities for the Company or the Company’s Affiliates other than the compensation to be
paid to Executive by the Company pursuant to this Agreement.




          (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. Executive shall receive a base salary paid by the Company of
$750,000 per year for the period from the Effective Date through the end of the Term (the “Base
Salary”). The Base Salary shall be paid in substantially equal semi-monthly installments.




          (b) Bonus. In addition to the Base Salary, during the Term, Executive shall receive
an annual cash bonus of $125,000 if the annual after-tax net earnings per share of the Company
equal or exceed the approved budget for that calendar year, as such budget may be reestablished
during any year. Additionally, during the Term, Executive shall receive a cash bonus of $125,000
if the annual after-tax net earnings per share of the Company exceed the previous calendar year’s
after-tax net earnings per share by 10% or more. The annual bonus compensation payable to
Executive under the Section 3(b), if any, (the “Bonus”) shall be calculated by the Company
following the end of each calendar year and shall be paid to Executive not later than May 1 of the
next calendar year.




          (c) Stock Options. Executive shall receive options to acquire 200,000 shares of the
Company’s common stock (the “Stock Options”). Such Stock Options shall vest in three annual
installments commencing on the first anniversary of the date of grant and expire on the fifth
anniversary of the date of grant. The Stock Options shall be granted pursuant to the terms of the
Company’s 2004 Flexible Incentive Plan and the terms of a separate stock option agreement between
the Company and Executive.




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




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          (e) Other Benefits. Executive shall be entitled to participate in or receive benefits
(“Other Benefits”) under any compensation, employee benefit plan, or other arrangement made
generally available by the Company to its senior executive officers, subject to and on a basis
consistent with the terms, conditions, and overall administration of such plan or arrangement.
Nothing paid to Executive under any plan or arrangement presently in effect or made available in
the future shall be deemed to be in lieu of the Base Salary payable to Executive hereunder.




          (f) Vacations. Executive shall be entitled to 30 days paid vacation per year during
the Term. There shall be no carryover of unused vacation from year to year. For purposes of this
Paragraph, weekends shall not count as vacation days, and Executive shall also be entitled to all
paid holidays and personal days given by the Company to its senior executive officers.




          (g) Perquisites. Executive shall be entitled to receive the perquisites provided for
on Appendix 1 hereof.




          (h) Proration. Expect with respect to the Bonus payable hereunder, any payments or
benefits payable to Executive hereunder in respect of any calendar year during which Executive is
employed by the Company for less than the entire year, unless otherwise provided in the applicable
plan or arrangement, shall be prorated in accordance with the number of days in such calendar year
during which he is so employed. Notwithstanding the foregoing, any payments pursuant to Sections
4(c) or 4(d) this Agreement shall not be subject to proration.




     4. Termination.



          (a) Definitions.





          (1) “Cause” shall mean:




          (i) Material dishonesty which is not the result of an inadvertent or innocent mistake
of Executive with respect to the Company or any of its Affiliates;




          (ii) Willful misfeasance or nonfeasance of duty by Executive;




          (iii) Violation by Executive of any material term of this Agreement; or




          (iv) Conviction of Executive of any crime other than a vehicular offense that could
reflect in some fashion unfavorably upon the Company or its Affiliates.




Executive may not be terminated for Cause unless and until there has been delivered to
Executive written notice from the CEO supplying the particulars of his acts or omissions
that the HCC Board of Directors 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 CEO with his attorney if so desired by Executive, and following which the
CEO reaffirms the previous decision of the HCC Board of Directors.




          (2) A “Change of Control” shall be deemed to have occurred if:



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          (i) Any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of 50% or
more of the Company’s then outstanding voting common stock; or




          (ii) At any time during the period of three consecutive years (not including any period
prior to the date hereof), individuals who at the beginning of such period constituted the
Board (and any new director whose election by the Board or whose nomination for election by
the Company’s shareholders were approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any reason to
constitute a majority thereof; or




          (iii) The shareholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation (a) in which a majority of
the directors of the surviving entity were directors of the Company prior to such
consolidation or merger, and (b) which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being changed into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation; or




          (iv) The shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or substantially
all of the Company’s assets.




          (3) A “Disability” shall mean the absence of Executive from Executive’s duties
with the Company on a full-time basis for 180 consecutive days, or 180 days in a 365-day
period, as a result of incapacity due to mental or physical illness which results in
Executive being unable to perform the essential functions of his position, with or without
reasonable accommodation.




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




          (i) A material alteration in the nature or status of Executive’s duties or
responsibilities, or the assignment of duties or responsibilities inconsistent with the
Executive’s status, title, or other duties and responsibilities; provided, however, that a
change in the Executive’s title or a change in the Executive’s supervisor shall not
constitute a material alteration in the nature or status of the Executive’s duties
hereunder;




          (ii) The taking of any action by the Company that would adversely affect Executive’s
participation in, or materially reduce Executive’s benefits under, any employee benefit
plan, unless such failure or such taking of any action adversely affects persons similarly
situated in the Company generally;



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          (iii) Executive’s involuntary relocation to any place, other than the executive offices
as a result of the Company relocating its executive offices, exceeding a distance of 50
miles from the place of Executive’s normal place of employment on the Effective Date, except
for reasonably required travel by Executive on the Company’s business;




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




          (v) Any failure by the Company to obtain the assumption and performance of this
Agreement by any successor (by merger, consolidation, or otherwise) or assign of the
Company.




Notwithstanding the foregoing provisions of this Section 4(a)(4), Good Reason shall exist
with respect to an above specified matter only if such matter is not corrected, or begun to
be corrected, by the Company within 30 days after the Company’s receipt of written notice of
such matter from Executive. In no event shall a termination by Executive occurring more
than 90 days following the date of the event described be a termination for Good Reason due
to such event, whether that event is corrected or not.




          (5) “Termination Date” shall mean the date Executive’s employment terminates or
is terminated for any reason pursuant to this Agreement.



          (b) Termination Without Cause or for Good Reason: Benefits. In the event there is a
termination by the Company without Cause or if Executive terminates for Good Reason or if either of
the Company or Executive terminate this Agreement for any reason other than Cause within 180 days
following a Change of Control (a “Termination Event”), this Agreement shall terminate and Executive
shall be entitled to the following severance benefits:





          (1) For the greater of (i) the remainder of the Term or (ii) a period of 12 months
after the Termination Date, Base Salary (as defined in Section 3(a)), at the rate in effect
immediately prior to the Termination Event, payable at the Company’s sole election, either
(i) at the same intervals as Executive was previously being compensated or (ii) within ten
days after the Termination Date in a lump sum, appropriately discounted to take into
consideration the lump sum early payment;




          (2) If the Termination Date occurs after October 1 of any calendar year during the
Term, Executive shall nonetheless be entitled to receive the Bonus compensation related to
such calendar year in accordance with Section 3(b).




          (3) Any Stock Options which Executive has been granted under this Agreement shall vest
immediately and shall remain exercisable throughout the remainder of their original term.




          (4) The medical insurance benefits provided to Executive and any consulting payments
due Executive under this Agreement shall continue as provided herein notwithstanding any
such Termination Event.



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          (5) All unreimbursed expenses and Other Benefits through the Termination Date. Such
amounts shall be paid to Executive in a lump sum within 30 days after the Termination Date;




          (6) If Executive receives any payments pursuant to this Section 4(b) which are subject
to an excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended, or any similar tax imposed under federal, state, or local law (collectively,
“Excise Taxes”), the Company shall pay to Executive (on or before the date on which the
Company is required to withhold such Excise Taxes), (i) an additional amount equal to all
Excise Taxes then due and payable, and (ii) the amount necessary to defray Executive’s
increased (federal, state, and local) tax liability arising due to payment of the amount
specified in this Section 4(b) which shall include any costs and expenses, including
penalties and interest incurred by Executive in connection with any audit, proceedings, etc.
related to the payment of such Excise Taxes or this payment. For purposes of calculating
the amount payable to Executive under this Section 4(b), the federal and state income tax
rates used shall be the highest marginal federal and state rates applicable to ordinary
income in Executive’s state of residence, taking into account any federal income tax
deductions or credits available to Executive for state income taxes. The Company shall
cause its independent auditors to calculate such amount and provide Executive a copy of such
calculation at least ten days prior to the date specified above for payment of such amount.
It is the intent of the Parties that this Section 4(b)(6) shall place Executive in the same
net after-tax position Executive would have been in had no payment been subject to an Excise
Tax, and, notwithstanding anything to the contrary, it shall be construed to effectuate said
result; and




          (7) Executive shall be free to accept other employment during such period, and other
than as set forth herein, there shall be no offset of any employment compensation earned by
Executive in such other employment during such period against payments due Executive under
this Section 4(b), and there shall be no offset in any compensation received from such other
employment against the amounts payable hereunder, unless the Executive is employed in a
position of competing with the Company as described in Section 5 below.



          (c) Termination In Event of Death: Benefits. Except as otherwise provided herein, 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 payment of all accrued Base Salary, unreimbursed expenses, and the
timely payment or provision of Other Benefits through the date of death and the amount of any Bonus
relating to a prior year unpaid as of the date of death. Such amounts shall be paid to Executive’s
estate or beneficiary, as applicable, in a lump sum in cash within 90 days after the date of death.
In the event that Executive’s death should occur after October 1 of any calendar year of the Term,
the Company shall pay to Executive’s estate or beneficiary, as applicable, the amount of any Bonus
compensation related to such year in accordance with Section 3(b). Any Stock Options which
Executive has been granted under this Agreement shall vest immediately and shall remain exercisable
throughout the remainder of their original term.




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          (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 but
the Company shall pay the Executive the amount of any Bonus relating to a prior year unpaid as
of the date of disability and continue to pay the Base Salary for a period of 12 months and
thereafter shall make such additional payment for the Term so that the after tax effect of
Executive’s Base Salary compensation is equal to 50% of the amount of Base Salary before the
Disability. In the event that Executive’s disability should occur after October 1 of any calendar
year of the Term, the Company shall pay to Executive the amount of any Bonus compensation related
to such year in accordance with Section 3(b). Executive shall not be entitled to any subsequent
Bonuses. Any Stock Options which Executive has been granted under this Agreement shall vest
immediately and shall remain exercisable throughout the remainder of their original term.




          (e) Voluntary Termination by Executive and Termination for Cause: Benefits. Executive
may terminate his employment with the Company by giving written notice of his intent and stating an
effective Termination Date at least 90 days after the date of such notice; provided, however, that
the Company may accelerate such effective date by paying Executive through the proposed Termination
Date (but not to exceed 90 days) and also vesting any Stock Options that would have vested but for
the acceleration of the proposed Termination Date. Upon such a termination by Executive or upon
termination for Cause by the Company, this Agreement shall terminate and the Company shall pay to
Executive all accrued Base Salary compensation, unreimbursed expenses and Other Benefits through
the Termination Date. Such amounts shall be paid to Executive in a lump sum in cash within 30 days
after the Termination Date. Executive shall have no entitlement to any unpaid Bonus. All unvested
Stock Options shall terminate upon such termination of employment. All then vested Stock Options
shall remain exercisable for a period of 30 days after the Termination Date.




          (f) Director Positions. Executive agrees that upon termination of employment, for any
reason, at the request of the Chairman of the Board, Executive will immediately tender his
resignation from any and all Board positions held with the Company and/or any of its Affiliates.
If Executive remains a Director of the Company following such termination of employment, Executive
shall be compensated for such service as an “outside” director.




     5. Non-Competition, Non-Solicitation and Confidentiality. At the inception of this
employment relationship, and continuing on an ongoing basis, the Company and HCC agree to give
Executive access to Confidential Information (including, without limitation, Confidential
Information, as defined below, of the Company’s Affiliates) that Executive has not had access to or
knowledge of before the execution of this Agreement. At the time this Agreement is made, the
Company and HCC agree 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.



          (a) Non-Competition During Employment. Executive agrees that, in consideration for
the Company’s and HCC’s promise to provide Executive with Confidential




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Information and Specialized
Training, during the Term, he will not compete with the Company by engaging in the conception,
design, development, production, marketing, or servicing of any product
or service that is substantially similar to the products or services which the Company
provides, and that he will not work for, in any capacity, assist, or become affiliated with as an
owner, partner, etc., either directly or indirectly, any individual or business which offers or
performs services, or offers or provides products substantially similar to the services and
products provided by Company; provided, however, Executive shall not be prevented from owning no
more than 2% of any company whose stock is publicly traded.




          (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”) that 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 CEO 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 in Executive’s good faith judgment
could 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 in order to protect the
Company’s and HCC’s Confidential Information, it is necessary to enter into the following
restrictive covenant, which is ancillary to the enforceable promises between the Company and
Executive otherwise contained in this Agreement. Executive agrees that Executive shall not, at any
time during the Restricted Period (as hereinafter defined), 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 12 months of Executive’s employ or which the Company enters into within
three months thereafter, engage in or contribute Executive’s knowledge to any work which is
competitive with or similar to a product, process, apparatus, service, or development on which
Executive worked or with respect to which Executive had access to Confidential Information or
Specialized Training while employed by the Company; provided however, this Section 5(c) shall not
operate to prevent Executive from engaging in retail insurance or re-insurance activities during
such Restricted 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. 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.
For the purpose of this Agreement, “Restricted Period” means a period of 24 months after
termination of Executive’s employment with the Company. The Restricted Period shall commence at
the time Executive ceases to be a full-time employee of the Company.




          (d) Confidential Information. Executive agrees that he will not, except as the
Company may otherwise consent or direct in writing, reveal or disclose, sell, use, lecture upon,




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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 Paragraph shall continue in full force
and effect after termination of Executive’s employment and after the termination of this Agreement.
Executive’s obligations under this Paragraph with respect to any specific Confidential Information
and proprietary information shall cease when that specific portion of the Confidential Information
and proprietary information becomes publicly known, in its entirety and without combining portions
of such information obtained separately. It is understood that such Confidential Information and
proprietary information of the Company include matters that Executive conceives or develops, as
well as matters Executive learns from other employees of the 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) that
relates to any aspect of the Company or their 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.




          (e) Non-Solicitation. To protect the Company’s Confidential Information, and in the
event of Executive’s termination of employment for any reason whatsoever, whether by Executive or
the Company, it is necessary to enter into the following restrictive covenant, which is ancillary
to the enforceable promises between the Company and Executive otherwise contained in this
Agreement. Executive covenants and agrees that during Executive’s employment and for the
Restricted Period, Executive will not, directly or indirectly, either individually or as a
principal, partner, agent, consultant, contractor, employee or as a director or officer of any
corporation or association, or in any other manner or capacity whatsoever, except on behalf of the
Company, solicit business, or attempt to solicit business, and products or services competitive
with products or services sold by the Company, from the Company’s clients or customers, or those
individuals or entities with whom the Company did business during Executive’s employment,
including, without limitation, the Company’s prospective or potential customers or clients.
Executive further agrees that during Executive’s employment and for the Non-Solicitation Period,
Executive will not, either directly or indirectly, or by acting in concert with others, solicit or
influence any Company employee to leave the Company’s employment.




          (f) Return of Documents, Equipment, Etc. All writings, records, and other documents
and things comprising, containing, describing, discussing, explaining, or evidencing any
Confidential Information, and all equipment, components, parts, tools, and the like in Executive’s
custody or possession that have been obtained or prepared in the course of Executive’s employment
with the Company shall be the exclusive property of the Company, shall not be copied and/or removed
from the premises of the Company, except in pursuit of the business of the Company, and shall be
delivered to the Company, without Executive retaining any copies, upon notification of the
termination of Executive’s employment or at any other time requested by the Company. The Company
shall have the right to retain, access, and inspect all property of Executive of any kind in the
office, work area, and on the premises of the Company upon termination of Executive’s




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employment
and at any time during employment by the Company to ensure compliance with the terms of this
Agreement.




          (g) Reaffirm Obligations. Upon termination of Executive’s 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.




          (h) Prior Disclosure. Executive represents and warrants that Executive 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.




          (i) No Previous Restrictive Agreements. Executive represents that, except as
disclosed in writing to the Company, Executive is not bound by the terms of any agreement with any
previous employer or other party to refrain from using or disclosing any trade secret or
confidential or proprietary information in the course of Executive’s employment by the Company or
to refrain from competing, directly or indirectly, with the business of such previous employer or
any other party. Executive further represents that Executive’s performance of all the terms of
this Agreement and Executive’s work duties for the Company does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data acquired by Executive in
confidence or in trust prior to Executive’s employment with the Company, and Executive will not
disclose to the Company or induce the Company to use any confidential or proprietary information or
material belonging to any previous employer or other party.




          (j) Breach. Executive agrees that any breach of Sections 5(a) through (f) above
cannot be remedied solely by money damages, and that in addition to any other remedies Company may
have, Company are entitled to obtain injunctive relief against Executive. Nothing herein, however,
shall be construed as limiting the Company’s right to pursue any other available remedy at law or
in equity, including recovery of damages and termination of this Agreement and/or any termination
or offset against any payments that may be due pursuant to this Agreement; provided, no payments to
Executive under Section 9 shall be offset for any purpose, so long as Executive continues to
provide the Consulting Services.




          (k) Right to Enter Agreement; Payment of Loans. Executive represents and covenants to
the 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. Executive further acknowledges that he
has repaid all outstanding loans from the Company prior to entering into this Agreement.




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




          (m) Survivability. The agreements contained in this Section 5 shall survive the
termination of this Agreement for any reason.




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          (n) Reformation. If a court concludes that any time period or the geographic area
specified in Sections 5(c) or (e) of this Agreement are unenforceable, then the time period will be
reduced by the number of months, or the geographic area will be reduced by the elimination of
the overbroad portion, or both, so that the restrictions may be enforced in the geographic area and
for the time to the fullest extent permitted by law.




     6. Offsite Work Location. Upon request to the CEO, Executive shall be permitted to
work from an offsite location as home-base for two months each year subject to the following:



          (a) Executive shall at his sole cost and expense remain in continuous contact with the Houston
corporate office and the Company’s other office locations by both telephone and email during such
period through communication systems that meet the remote communication and data security
requirements established by the Company’s Information Technology Department.




          (b) Executive shall be available to attend corporate meetings in Houston or elsewhere upon
reasonable notice, as required by the CEO, during this period.




          This period shall not be considered vacation time for purposes of this Agreement.




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



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



     9. Consulting Agreement.



          (a) Effective upon Executive’s termination of employment for any reason, HCC hereby retains
Executive as a consultant (an independent contractor and not as an employee) for a period of six
years and nine months (the “Consulting Period”). Termination of the Term shall not affect the
Parties’ rights and obligations under this Section 9. Subject to the following, Executive agrees
to provide services as a consultant to the Company (the “Consulting Services”), if requested, a
minimum of 200 hours of service per year (or prorated portion thereof), or, as requested by the
Company, up to a total of 600 hours during any one year of the Consulting Period; provided,
however, that the total number of hours to be worked over the duration of the Consulting Period
shall not exceed 1,350.




          (b) 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




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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.




          (c) The Consulting Period shall run concurrently with the Restricted Period provided for in
Section 5. Unless waived by Executive, Executive shall not be required to perform Consulting
Services for more than four days during any week or for more than eight hours during any day.
Executive’s travel time shall constitute hours of Consulting Services for purposes of this Section
9. The Parties contemplate that, when appropriate, the Consulting Services shall be performed at
Executive’s office, residence or at the Company’s executive offices in Houston, Texas and may be
performed at such other locations only as they may mutually agree upon. Executive shall be
properly reimbursed for all travel and other expenses reasonably incurred by Executive in rendering
the Consulting Services.




          (d) HCC shall pay Executive a consulting fee at a rate of $200,000 per year (the “Consulting
Fee”) during the Consulting Period, payable monthly in arrears. Executive may elect to delay
payment for the Consulting Services but not the Consulting Services themselves. Subject to
Executive providing the Consulting Services in accordance with this Section 9, Executive’s right to
receive the Consulting Fee shall be deemed fully vested as of the Effective Date of this Agreement.
Except as set forth in Sections 9(e) hereof, if Executive fails to provide the Consulting Services
and the hours requested by the Company in any 24-month period, Executive’s rights to receive any
further Consulting Fee (including any Additional Consulting Fee (as hereinafter defined)) shall
immediately terminate. During the Consulting Period, except as otherwise provided for in this
Agreement, Executive shall receive no employment benefits from HCC.




          (e) If Executive dies or becomes Disabled during the Term (or as an employee of the Company
following the Term) or during the Consulting Period, he (or, on his death, his beneficiary or
estate) shall receive or continue to receive as the case may be, the Consulting Fee, including any
Additional Consulting Fee (as hereinafter defined), during the remainder of the Consulting Period
as if such death or Disability had not occurred.




          (f) The Consulting Fee payable to the Executive hereunder shall be increased by an additional
amount of $350,000 (the “Additional Consulting Fee”) for each year of the Term completed prior to
the termination of Executive’s employment pursuant to the terms hereof. Such Additional Consulting
Fee shall be paid ratably over the Consulting Period.




     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 (which shall
not constitute notice). Notice deposited in the United States Mail, mailed in the manner described
hereinabove, shall be effective upon deposit. Notice given in any other manner shall be effective
only if and when received:



12









 





	 	 	 	 	 
	 

	 	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
	 

	 	 	 	Attn: General Counsel
Fax: (713) 744-9648
	 
	 	 	 	 
	 

	 	with a copy (which shall not	 	 
	 

	 	constitute notice) to:
	 	Arthur S. Berner, Esq.
	 

	 	 	 	Haynes and Boone, L.L.P.
	 

	 	 	 	1 Houston Center
	 

	 	 	 	1221 McKinney, Suite 2100
	 

	 	 	 	Houston, Texas 77010
	 

	 	 	 	Fax: (713) 236-5417






     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. 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, including without limitation that certain Employment Agreement dated January 5,
2000, as amended, and any continuing obligations of the parties thereunder. This Agreement 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.



13









 





     15. Understand Agreement. Executive represents and warrants that he has read and
understood each and every provision of this Agreement, and Executive understands that he has the
right to obtain advice from legal counsel of his choice, if necessary and desired, in order to
interpret any and all provisions of this Agreement, and that Executive has freely and voluntarily
entered into this Agreement.



     16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.



     17. Jurisdiction and Venue. Subject to Section 18, 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. Arbitration. In the event any dispute arises out of Executive’s employment with
or by the Company, or separation/termination therefrom, whether as an employee or as a consultant
which cannot be resolved by the Parties to this Agreement, such dispute shall be submitted to final
and binding arbitration. The arbitration shall be conducted in accordance with the National Rules
for the resolution of Employment Disputes of the American Arbitration Association (“AAA”). If the
Parties cannot agree on an arbitrator, a list of seven arbitrators will be requested from AAA, and
the arbitrator will be selected using alternate strikes with Executive striking first. The cost of
the arbitration will be shared equally by Executive and Company; provided, however, the Company
shall promptly reimburse Executive for all costs and expenses incurred in connection with any
dispute in an amount up to, but not exceeding 20% of Executive’s Base Salary (or, if the dispute
arises during the Consulting Period, Executive’s Base Salary as in effect immediately prior to the
beginning of the Consulting Period) unless such termination was for Cause in which event Executive
shall not be entitled to reimbursement unless and until it is determined he was terminated other
than for Cause. Arbitration of such disputes is mandatory and in lieu of any and all civil causes
of action and lawsuits either party may have against the other arising out of Executive’s
employment with Company, or separation therefrom. Such arbitration shall be held in Houston,
Texas.



     19. Tolling. If Executive violates any of the restrictions contained in Section 5,
the Restricted Period will be suspended and will not run in favor of Executive from the time of the
commencement of any violation until the time when Executive cures the violation to the Company’s
satisfaction.



[remainder of this page intentionally left blank]




14









 





     IN WITNESS WHEREOF, the Parties have executed this Agreement in multiple copies, effective as
of the date set forth above.



	 	 	 	 	 
	 

	 	 	 	 
	EXECUTIVE :	 	 
	 
	 	 	 	 
	John N. Molbeck, Jr.	 	 
	 
	 	 	 	 
	  /s/ John N. Molbeck, Jr.	 	 
	 	 	 
	 
	 	 	 	 
	COMPANY:	 	 
	 
	 	 	 	 
	HCC Insurance Holdings, Inc.	 	 
	 
	 	 	 	 
	By:

	 	  /s/ Stephen L. Way	 	 
	 

	 	 	 	 
	 

	 	STEPHEN L. WAY,	 	 
	 

	 	Chairman and Chief Executive Officer	 	 






Signature Page

Employment Agreement — Molbeck





 









 








APPENDIX 1

PERQUISITES





	1.	 	The Company shall pay for Executive’s preparation of estate planning and wealth preservation
documents during the course of Executive’s employment under this Agreement up to a maximum of
$50,000 in the aggregate.
	 
	2.	 	Car allowance of $3,000 per month.
	 
	3.	 	First class domestic business travel and club class international business travel using
upgrades through Company Travel Department.
	 
	4.	 	Executive shall receive a term life insurance policy in the amount of $1,000,000, in addition
to the Company’s group life insurance program in effect for its senior executive officers.
	 
	5.	 	In addition to the other benefits provided in this Agreement, Executive shall be entitled to
receive medical insurance as currently provided under the Company’s group program, as such
group program may be changed from time-to-time in the future, and Executive shall be entitled
to continue to be covered by such group program or, if not permitted under the terms of the
group program, then the Company shall provide Executive with a medical insurance policy
providing substantially similar benefits as to the group program, for the period ending on the
date of the later to die of Executive or, if Executive is married on the date of his death,
Executive’s spouse or the date all of Executive’s children complete college (as defined in the
Company’s group program). Executive shall be entitled to receive the medical benefits set
forth herein at no cost to the Executive.
	 
	6.	 	Such additional perquisites as shall be determined by the Compensation Committee of the
Company’s Board of Directors.