***Execution Copy*****EMPLOYMENT AGREEMENT**     This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on August 10, 2007 buteffective as of the 1st day of March, 2007 (the “Effective Date”), between HCC INSURANCEHOLDINGS, INC. (“HCC” or “Company”) JOHN N. MOLBECK, JR. (“Executive”), sometimes collectivelyreferred to herein as the “Parties.”**R E C I T A L S:****WHEREAS**, Executive is to be employed as President and Chief Operating Officer (“COO”) of HCC;     **WHEREAS**, it is the desire of the Board of Directors of HCC (the “Board”) to (i) directlyengage Executive as an officer of HCC; and (ii) directly engage, if elected, the services ofExecutive as a director of HCC or its subsidiaries or affiliates; and     **WHEREAS**, Executive is desirous of committing himself to serve HCC on the terms hereinprovided.     **NOW, THEREFORE**, in consideration of the foregoing and of the respective covenants andagreements set forth below, the Parties agree as follows:     **1. ****Term****.**The Company hereby agrees to employ Executive as President and its ChiefOperating Officer and Executive hereby agrees to accept such employment, on the terms andconditions set forth herein, for the period (the “Term”) commencing on the Effective Date andexpiring at the earlier to occur of (a) 11:59 p.m. on December 31, 2010 (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 ofthe Chief Executive Officer of HCC (“CEO”), have general management and control of HCC in theordinary course of its business with all such powers with respect to such management and control asmay be reasonably incident to such responsibilities. Executive may also be responsible for specialcorporate projects as designated by the CEO, including any merger or acquisition projects or themanagement of any acquired or merged subsidiaries. During normal business hours, Executive shalldevote substantially all of his time and attention to diligently attending to the business of theCompany. During the Term, Executive shall not directly or indirectly render any services of abusiness, commercial, or professional nature to any other person, firm, corporation, ororganization, whether for compensation or otherwise, without the prior consent of the CEO.However, Executive shall have the right to engage in such activities as may be appropriate in orderto manage his personal investments and in educational, charitable and philanthropic activities solong as such activities do not interfere or conflict with the performance of his duties to theCompany hereunder. The conduct of such activity shall not be deemed to materially interfere orconflict with Executive’s performance of his duties until Executive has been notified in writingthereof and given a reasonable period in which to cure same.
 

 
          (b) **Relinquishment.** It is understood and agreed that Executive may be asked torelinquish the position of Chief Operating Officer to a qualified successor appointed by the Boardof Directors, provided that such successor will be a direct report of the President, and that suchaction shall in no way (1) change the other current responsibilities of Executive or those whichmay be added from time-to-time by the CEO, (2) constitute “Good Reason” or “Cause” (as hereinafterdefined), or (3) otherwise affect this Agreement.          (c) **Other Duties****.**               (1) If elected, Executive agrees to serve in one or more executive offices of any of HCC’ssubsidiaries including managerial committees or directorships, provided Executive is indemnifiedfor 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 anycompensation, if elected, for serving as a director of HCC, or in any capacities of HCC’ssubsidiaries other than the compensation to be paid to Executive by the Company pursuant to thisAgreement. If Executive is not a full time employee of the Company or its subsidiary, he shall becompensated as an outside director, if elected.               (2) Executive acknowledges and agrees that he has read and considered the written businesspolicies and procedures of HCC as posted on HCC’s intranet and that he will abide by such policiesand procedures throughout the term of his employment with the Company. Executive further agreesthat he will familiarize himself with any amendments to the policies and procedures and that hewill abide by such policies and procedures as they may change from time to time.          (d) **Work Situs.** The Executive shall be entitled to work from an off-site location ashis office location for no more than two (2) months during each calendar year provided thatExecutive remains available by telephone and email while working off-site and further provided thatExecutive remains available while at his off-site office location to return to Houston orelsewhere, upon reasonable notice, as requested by the CEO. This period shall not be consideredvacation time for purposes of this Agreement.     **3. ****Compensation and Related Matters****.**          (a) **Base Salary****.**During the Term Executive shall receive a base salary (the “BaseSalary”) paid by the Company at the annual rate of $1,000,000.00 payable not less frequently thanin substantially equal monthly installments (or such other, more frequent times as executives ofHCC normally are paid).          (b) **Deferred Compensation****.**During the Term Executive shall receive deferredcompensation (the “Deferred Compensation”) at the annual rate of $350,000 or such greater amount asis approved by the Compensation Committee of the Board (the “Compensation Committee”) in itsdiscretion. Deferred Compensation under this Agreement shall be accrued under one or more of theCompany’s deferred compensation plans as determined from time to time by the CompensationCommittee. Deferred Compensation accruals for a year shall be credited monthly on a ratable basisthroughout the year, unless more frequent crediting is required by the applicable deferredcompensation plan. Notwithstanding anything herein to the contrary, such accruals of Deferred
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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 ofdistributions).     (c) **Bonus Payments****.**During the Term, Executive shall be eligible to receive, inaddition to the Base Salary, an annual cash bonus payment in amounts to be determined as follows:          (1) If Executive is a participant under the 2007 Incentive Compensation Plan (the “IncentivePlan”) for a calendar year during the Term, then Executive’s bonus payment, if any, for such yearshall 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 theTerm, then Executive’s bonus payment, if any, for such year shall be determined in the solediscretion of the Compensation Committee and payable in a lump sum within 30 days after theCompensation Committee’s determination of the amount of said cash bonus. The Board or CompensationCommittee may unilaterally reduce or eliminate any such annual bonus payment, if any, up until thetime the bonus is actually paid (and notwithstanding any earlier, tentative determination of thebonus amount). There shall be no minimum bonus payable to Executive under this subsection (2),and, except as provided in Sections 4(b)(2), 4(c)(7), and 4(d)(7), no bonus shall be payable toExecutive pursuant to this subsection (2) for a year if Executive’s Termination Date occurs at anytime during such year..     (d) **Expenses****.**During the Term of this Agreement, Executive shall be entitled toreceive prompt reimbursement for all reasonable business expenses incurred by him (in accordancewith the policies and procedures established by the Board for the Company’s senior executiveofficers) in performing services hereunder, provided that Executive properly accounts therefor inaccordance with Company policy.     (e) **Medical and Other Benefits****.**          (1) **Other Benefits****.**From time to time the Company may make available othercompensation and employee benefit plans and arrangements. During the Term Executive shall beeligible 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 executiveofficers and key management employees of the Company, subject to and on a basis consistent with theterms, conditions, and overall administration of such plans and arrangements, as amended from timeto time; *provided, however*, that medical coverage under the Company’s group health plan shall beprovided at no cost to Executive. Nothing in this Agreement shall be deemed to confer uponExecutive or any other person (including any beneficiary or dependent of Executive) any rightsunder or with respect to any such plan or arrangement or to amend any such plan or arrangement, andExecutive and each other person (including any beneficiary) shall be entitled to look only to theexpress terms of any such plan or arrangement for his or her rights thereunder. Nothing paid toExecutive under any such plan or arrangement presently in effect or made available in the futureshall be deemed to be in lieu of the Base Salary payable to Executive pursuant to Section 3(a).
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     (2) **Continuation of Health Coverage after Death****.**          (i) If Executive’s employment ceases during the Term or after the ExpirationDate due to death, each “qualified beneficiary” (as defined by the ConsolidatedOmnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) of Executive shallbe eligible to continue coverage under the Company’s group health plans in which thequalified beneficiary participated on the Termination Date (including any successorhealth plans, the “Company Health Plans”) until the expiration of the maximumrequired period for continuation coverage under COBRA, determined as if suchqualified beneficiary elected COBRA continuation coverage and paid the requiredpremium for such continuation coverage. The Company shall pay the full requiredpremium for such continuation coverage, which shall satisfy any obligation toprovide continuation coverage under COBRA for such period.          (ii) After the continuation coverage under subsection (i) above ends, theCompany shall reimburse Executive’s qualified beneficiaries who would have beeneligible for coverage under the Company Health Plans at such time had Executivecontinued 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 duringthe Extended Coverage Period (as hereinafter defined) which are comparable in theaggregate to the benefits provided under the Company Health Plans (exclusive of theCompany’s health flexible spending account plan) or (B) health coverage under anyother employer health plan which is available to the qualified beneficiaries andwhich provides benefits during the Extended Coverage Period which are comparable inthe aggregate to the benefits provided under the Company Health Plans (exclusive ofthe Company’s health flexible spending account plan); provided, however, that theCompany shall not reimburse the cost of such health coverage for a qualifiedbeneficiary (including Executive’s spouse) to the extent that coverage extendsbeyond the Extended Coverage Period for such qualified beneficiary. Suchreimbursement shall be subject to the requirements of Section 3(e)(4).     (3) **Continuation of Health Coverage after Other Termination Events****.**          (i) If Executive ceases to be an employee of the Company during the term orafter the Expiration Date for any reason other than death (including, withoutlimitation, due to a termination for Cause), Executive and each of his qualifiedbeneficiaries shall be eligible to continue coverage under the Company Health Plansin which they participate on the Termination Date until the expiration of themaximum required period for continuation coverage under COBRA, determined as ifExecutive and each such qualified beneficiary elected COBRA continuation coverageand paid the required premium for such continuation coverage. The Company shall paythe full required premium for such continuation coverage, which shall satisfy anyobligation to provide continuation coverage under COBRA for such period.
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     (ii) After the continuation coverage under subsection (i) above ends, theCompany shall reimburse Executive for the cost of the premium for (A) an individualhealth insurance policy or policies which provide benefits to Executive and hisqualified beneficiaries who would have been eligible for coverage under the CompanyHealth Plans at such time had Executive continued to be an active employee of theCompany during the Extended Coverage Period (as hereinafter defined), which benefitsare comparable in the aggregate to the benefits provided under the Company HealthPlans (exclusive of the Company’s health flexible spending account plan anddetermined after applying the Company Health Plan provisions regarding coordinationof benefits if other health coverage (including Medicare) is available to Executive)or (B) health coverage under any other employer health plan which is available toExecutive and such qualified beneficiaries and which provides benefits during theExtended Coverage Period which are comparable in the aggregate to the benefitsprovided under the Company Health Plans (exclusive of the Company’s health flexiblespending account plan); provided, however, that the Company shall not reimburse thecost of such health coverage for Executive or for a qualified beneficiary (includingExecutive’s spouse) to the extent such coverage extends beyond the Extended CoveragePeriod for Executive or for such qualified beneficiary. Such reimbursement shall besubject 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 suchreimbursements 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 timeafter the expenses are incurred, and payment for any such expenses must occur on or before the lastday 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). Theright to reimbursement of such expenses is not subject to liquidation or exchange for any otherbenefit.          (5) The “Extended Coverage Period” for Executive or a qualified beneficiary (includingExecutive’s spouse) is the period (i) beginning on the date on which deemed COBRA continuationcoverage ends and (ii) ending on the earlier to occur of (A) in the case of Executive, the dateExecutive dies and, in the case of Executive’s spouse, the date Executive’s spouse dies and (B) thedate on which Executive’s qualified beneficiary (other than Executive’s spouse) would have ceasedto be eligible for coverage under the terms of the Company Health Plans if Executive had continuedto be an active employee of the Company.     (f) **Vacations****.**Executive shall be entitled to thirty (30) paid vacation days per yearduring the Term, or such additional number as may be determined by the Board from time to time, butin no event shall any unused vacation days carry over from year-to-year. For purposes of thisSection, weekends shall not count as vacation days, and Executive shall also be entitled to allpaid holidays given by the Company to its senior executive officers.
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     (g) **Life Insurance****.**The Company shall provide to Executive a term life insurancepolicy or policies in an aggregate face amount of $1,000,000.00 and shall pay the premiums thereforduring the Term. Upon Executive’s cessation as an employee of the Company during or after theTerm for any reason other than death, the Company shall assign such policy or policies toExecutive. The life insurance provided for in this Section 3(g) shall be in addition to the grouplife insurance program covering Executive and substantially all of the employees of the Companyduring the Term.     (h) **Proration****.**The Base Salary, bonus, and vacation payable to Executive hereunder inrespect of any calendar year during which Executive is employed by the Company for less than theentire year, unless otherwise provided in the applicable arrangement, shall be prorated inaccordance with the number of days in such calendar year during which he is so employed. Theamounts payable to Executive pursuant to subsection (i) below in respect of any month during whichExecutive is employed by the Company for less than the entire month shall be prorated in accordancewith the number of days in such month during which he is so employed.     (i) **Car Allowance****.**The Company shall pay Executive a car allowance of $3,000.00 permonth during the Term.     (j) **Estate Planning.** The Company shall reimburse Executive for amounts expended, notto exceed $46,130.89, during the Term for personal estate planning and wealth preservation.     (k) **Air Travel.** During the Term Executive shall be entitled to domestic first classand international club business class air travel, where available, when traveling on Companybusiness, and Executive agrees to use any upgrade programs or opportunities for such travelwhenever feasible. During the Term Executive shall, upon approval of the CEO of HCC, have use ofthe Company’s aircraft for business travel. During the Term, Executive shall, upon approval of theCEO of HCC, have use of the Company’s aircraft for personal travel in North America provided thatsuch travel shall be limited to seventeen (17) trips during the Term with a maximum of six (6)trips in any year. Personal use of the Company’s aircraft shall be taxable to Executive based onthe then-current Internal Revenue Service rules for the taxation of such benefit.     (l) **Other Perquisites.** In addition to the benefits, compensation, bonuses, and otherpayments provided herein, Executive shall be entitled to receive any additional payments orperquisites as are determined at the sole discretion of the Compensation Committee.     (m) **Stock Options.** Stock options, if any, issued to Executive during the Term shallbe issued under a stock option agreement containing terms with respect to vesting and exercise uponthe 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 theBoard.
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     **4. ****Termination****.**          (a) **Definitions****.**               (1) **"****Cause****”**shall mean any of the following:                    (i) Material dishonesty by Executive which is not the result of an inadvertentor innocent mistake of Executive with respect to the Company or any of itssubsidiaries;                    (ii) Willful misfeasance or nonfeasance of duty by Executive;                    (iii) Material violation by Executive of any material term of this Agreement;or                    (iv) Conviction of Executive of any felony, any crime involving moralturpitude, or any crime (other than a vehicular offense not involving DUI orpersonal injury) which in some material fashion results in the injury of theCompany’s and any of its subsidiaries’ reputation, business, or businessrelationships.Executive may not be terminated for Cause unless and until there has been delivered to Executivewritten notice from the Board supplying the particulars of Executive’s acts or omissions that theBoard believes constitute Cause, a reasonable period of time (not less than 30 days) has been givento Executive after such notice to either cure the same or to meet with the Board, with his attorneyif so desired by Executive, and following which the Board reaffirms that Executive has beenterminated 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 fiduciaryholding securities under an employee benefit plan of the Company becomes the“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of1934), directly or indirectly, of 50% or more of the Company’s then outstandingvoting common stock; or                    (ii) The shareholders of the Company approve a merger or consolidation of theCompany with any other corporation, other than a merger or consolidation (a) inwhich a majority of the directors of the surviving entity were directors of theCompany prior to such consolidation or merger, and (b) which would result in thevoting securities of the Company outstanding immediately prior thereto continuing torepresent (either by remaining outstanding or by being changed into votingsecurities of the surviving entity) more than 50% of the combined voting power ofthe voting securities of the surviving entity outstanding immediately after suchmerger or consolidation; or
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                    (iii) The shareholders approve a plan of complete liquidation of the Company oran agreement for the sale or disposition by the Company of all or substantially allof the Company’s assets.               (3) A **"****Disability****”**shall mean the inability of Executive to engage in any substantialgainful activity by reason of any medically determinable physical or mental impairment that can beexpected to result in death or can be expected to last for a continuous period of not less thantwelve (12) months. Executive shall be considered to have a Disability (i) if he is determined tobe totally disabled by the Social Security Administration or (ii) if he is determined to bedisabled under HCC’s long-term disability plan in which Executive participates and if such plandefines “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 expresswritten 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’srelocation to any place other than the principal executive offices, exceeding adistance of fifty (50) miles from the Company’s current executive office located inHouston, Texas, except for reasonably required travel by Executive on the Company’sbusiness; or                    (iv) Any material breach by the Company of any provision of this Agreement.However, Good Reason shall exist with respect to a matter specified above only if such matter isnot corrected by the Company within thirty (30) days after the Company’s receipt of written noticeof 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 byExecutive occurring more than ninety (90) days following the initial date of the event describedabove be a termination for Good Reason due to such event. For the avoidance of doubt, terminationin the event of a Change of Control in accordance with Section 4(f) is not a termination for GoodReason and shall not be subject to the time limitations set forth above.               (5) **"****Termination Date****”**shall mean the date Executive’s employment with the Companyterminates or is terminated for any reason pursuant to this Agreement (including due to the lapseof the Agreement after the Expiration Date). For purposes of Sections 4(d), 4(f), 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 suchterm is defined for purposes of sections 409A(a)(2)(A)(i) and 409A(a)(2)(B)(i) of the InternalRevenue Code of 1986, as amended (including any related Treasury regulations) (the “Code”). To theextent permitted by Code section 409A, Executive may be considered to have such a separationfrom service even if (i) he continues to provide services as a non-employee director of
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theCompany or any of its controlled subsidiaries or affiliates and/or (ii) he continues to providelimited services as an employee or independent contractor of the Company or any of its controlledsubsidiaries or affiliates.     (b) **Termination Without Cause, or Termination For Good Reason: Benefits****.**In theevent 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, thisAgreement 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 Dateand before the Expiration Date or for twelve (12) months, whichever period is longer, payable in alump sum in cash, appropriately discounted for present value at the rate of return on 90-dayTreasury 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 andbefore March 15 of the year following the year containing such Termination Date;          (2) An amount equal to the Deferred Compensation that would have been accrued after theTermination Date and before the Expiration Date or for twelve (12) months, whichever period islonger, payable in a lump sum in cash, appropriately discounted for present value at the rate ofreturn on 90-day Treasury bills in existence at the Termination Date. Such amount shall be paidwithin thirty (30) days after the Termination Date and, in any event, shall be paid after suchTermination Date and before March 15 of the year following the year containing such TerminationDate.          (3) If Executive is a participant in the Incentive Plan, his entitlement to a bonus followingthe Termination Date shall be determined in accordance with the terms of the Incentive Plan. IfExecutive is not a participant in the Incentive Plan, he shall not be entitled to any bonuspayments after the Termination Date;          (4) A lump sum cash payment in the amount of $4,650.00 times the number of months after theTermination Date and before the Expiration Date in lieu of any other benefits that cease on theTermination Date. Such amount shall be appropriately discounted for present value at the rate ofreturn on 90-day Treasury bills in existence at the Termination Date and shall be paid withinthirty (30) days after the Termination Date and, in any event, shall be paid after such TerminationDate 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;          (5) Health coverage or reimbursement for the cost of health coverage as provided in Section3(e)(3);          (6) All accrued Base Salary through the Termination Date and all unreimbursed expenses throughthe Termination Date in accordance with Section 3(d). Such amounts shall be paid to Executive in alump sum in cash within thirty (30) days after the Termination Date;
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          (7) If any payment or benefit received or to be received by Executive from the Companypursuant to this Section 4(b) (the “Section 4(b) Payments”) would be subject to the excise taximposed by Code section 4999 (the “4999 Excise Tax”), the Company shall pay Executive, at the timespecified below, an additional amount (the “Section 4(b) Gross-Up Payment”) such that the netamount that Executive retains, after deduction of the 4999 Excise Tax on the Section 4(b) Paymentsand any federal, state, and local income taxes, employment taxes, and additional 4999 Excise Taxesupon the Section 4(b) Gross-Up Payment, and any interest, penalties, or additions to tax payable byExecutive with respect thereto, shall be equal to the total present value (using the applicablefederal rate (as defined in section 1274(d) of the Code) in such calculation) of the Section 4(b)Payments at the time such payments are to be made. Payment of such additional amount shall occuron or before the earlier to occur of (i) the date which the Company is required to withhold anysuch 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 Section 4(b) Gross-UpPayment, Executive shall be deemed to pay federal income taxes at the highest marginal rates offederal income taxation applicable to individuals in the calendar year in which the Section 4(b)Gross-Up Payment is to be made and state and local income taxes at the highest marginal rates oftaxation applicable to individuals as are in effect in the state and locality of Executive’sresidence in the calendar year in which the Section 4(b) Gross-Up Payment is to be made, net of themaximum reduction in federal income taxes that can be obtained from deduction of such state andlocal taxes, taking into account any limitations applicable to individuals subject to federalincome tax at the highest marginal rates. This Section 4(b)(7) does not require the Company topay, reimburse, or gross up Executive with respect to excise taxes imposed under any other sectionof the Code (including, but not limited to, Code section 409A) or under state or local law; and          (8) Executive shall be free to accept other employment, and there shall be no offset of anyemployment compensation earned by Executive in such other employment against payments due Executiveunless specified under this Section, Without limiting the foregoing, there shall be no offset ofany 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 thisAgreement.     (c) **Termination In Event of Death: Benefits****.**If Executive’s employment is terminatedby reason of Executive’s death during the Term, this Agreement shall terminate without furtherobligation to Executive’s legal representatives under this Agreement, other than for          (1) Payment of all accrued Base Salary and unreimbursed expenses (in accordance with Section3(d)) due through the date of death. Such amounts shall be paid to Executive’s estate in a lumpsum in cash within thirty (30) days after the Termination Date;          (2) Health coverage or reimbursement for the cost of health coverage for Executive’s eligiblequalified beneficiaries in accordance with Section 3(e)(2);          (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 lieuof any other benefits that cease on the date of Executive’s death. Such amount shall beappropriately discounted for present value at the rate of return on 90-day Treasury
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bills in existence at the Termination Date and shall be paid to Executive’s estate withinthirty (30) days after the Termination Date and, in any event, shall be paid after such TerminationDate 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. Suchamount shall be appropriately discounted for present value at the rate of return on 90-day Treasurybills in existence at the Termination Date and shall be paid to Executive’s estate in a lump sum incash within thirty (30) days after the Termination Date; provided that such amount shall in anyevent be paid after such Termination Date and before March 15 of the year following the yearcontaining such Termination Date;          (5) Payment of an additional amount equal to the Deferred Compensation that would have beenaccrued 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 atthe rate of return on 90-day Treasury bills in existence at the Termination Date and shall be paidto 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 March15 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 beenpayable during the Consulting Period (as hereinafter defined) had Executive retired on theExpiration Date and provided Consulting Services (as hereinafter defined) during such period inaccordance with Section 6, payable in a lump sum in cash, appropriately discounted for presentvalue at the rate of return on 90-day Treasury bills in existence at the Termination Date. Suchamount 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 followingthe Termination Date shall be determined in accordance with the terms of the Incentive Plan. IfExecutive is not a participant in the Incentive Plan, he shall be entitled to consideration for abonus payment under Section 3(c)(2) with respect to the year in which Executive dies; provided thatthe payment of any such bonus, if any, shall in any event occur on or after such date of death andbefore March 15 of the year following the year of death.     (d) **Termination In Event of Disability: Benefits****.**If Executive’s employment isterminated by reason of Executive’s Disability during the Term, this Agreement shall terminate andExecutive shall be entitled to the following benefits:          (1) Payment of all accrued Base Salary through the Termination Date and all unreimbursedexpenses through the Termination Date in accordance with Section 3(d). Such amounts shall be paidto 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 Section3(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. Suchamount shall be paid to Executive in a lump sum in cash, appropriately discounted for present valueat 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 Dateand 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 beenaccrued 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 inexistence at the Termination Date, within thirty (30) days after the Termination Date and, in anyevent, shall be paid after such Termination Date and before March 15 of the year following the yearcontaining such Termination Date;          (5) A lump sum cash payment in the amount of $4,650.00 times the number of months after theTermination Date and before the Expiration Date in lieu of any other benefits that cease on theTermination Date. Such amount shall be appropriately discounted for present value at the rate ofreturn on 90-day Treasury bills in existence at the Termination Date and shall be paid withinthirty (30) days after the Termination Date and, in any event, shall be paid after such TerminationDate 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 beenpayable during the Consulting Period (as hereinafter defined) had Executive retired on theExpiration Date and provided Consulting Services (as hereinafter defined) during such period inaccordance with Section 6, payable in a lump sum in cash, appropriately discounted for presentvalue at the rate of return on 90-day Treasury bills in existence at the Termination Date. Suchamount shall be paid within thirty (30) days after the Termination Date and, in any event, shall bepaid after such Termination Date and before March 15 of the year following the year containing suchTermination Date; and          (7) If Executive is a participant in the Incentive Plan, his entitlement to a bonus followingthe Termination Date shall be determined in accordance with the terms of the Incentive Plan. IfExecutive is not a participant in the Incentive Plan, he shall be entitled to consideration for abonus payment under Section 3(c)(2) with respect to the year in which Executive’s employmentterminates due to Disability; provided that any payment of such bonus, if any, shall in any eventoccur on or after such Termination Date and before March 15 of the year following the yearcontaining 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 atermination pursuant to Section 4(f)) by giving written notice of his intent and stating aneffective 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 andcrediting Executive’s Deferred Compensation through the proposed Termination Date and also
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vestingawards (including stock option awards granted on, before, or after the Effective Date) that wouldhave vested but for this acceleration of the proposed Termination Date. The provisions of thisSection 4(e) requiring the vesting of any stock options due to the Company’s acceleration of theTermination Date constitute an amendment to the terms of each applicable option agreement. Uponsuch a termination by Executive, or upon termination for Cause by the Company, this Agreement shallterminate, except as provided in Section 6, and the Company shall pay to Executive          (1) Payment of all accrued Base Salary through the Termination Date and all unreimbursedexpenses through the Termination Date in accordance with Section 3(d). Such amounts shall be paidto 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 Section3(e)(3).     (f) **Voluntary Termination by Executive after a Change of Control: Benefits****.**Upon theoccurrence of a Change in Control, Executive may elect to voluntarily terminate his employment withthe Company for any reason (or no reason) within one-hundred eighty (180) days after the date ofthe Change of Control. In the event Executive elects such termination, this Agreement shallterminate 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 Dateand before the Expiration Date or for twelve (12) months, whichever period is longer, payable in alump sum in cash, appropriately discounted for present value at the rate of return on 90-dayTreasury 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 andbefore 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 Codesection 409A, then payment of such amount shall be deferred until the date that is six (6) monthsfollowing the Termination Date in accordance with Section 19(a). Executive shall not have theright to designate the taxable year of such payment;          (2) An amount equal to the Deferred Compensation that would have been accrued after theTermination Date and before the Expiration Date or for twelve (12) months, whichever period islonger, payable in a lump sum in cash, appropriately discounted for present value at the rate ofreturn on 90-day Treasury bills in existence at the Termination Date. Such amount shall be paidwithin sixty (60) days after the Termination Date and, in any event, shall be paid after suchTermination Date and before March 15 of the year following the year containing such TerminationDate; 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 thedate 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;          (3) If Executive is a participant in the Incentive Plan, his entitlement to a bonus followingthe Termination Date shall be determined in accordance with the terms of the Incentive Plan. IfExecutive is not a participant in the Incentive Plan, he shall be entitled toconsideration for a bonus payment under Section 3(c)(2) with respect to such year (determinedas if
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Executive had remained employed for the full year for which the bonus is payable); providedthat the payment of any such bonus, if any, shall occur on or after the Termination Date and beforeMarch 15 of the year following the year in which the Termination Date. Notwithstanding theforegoing provisions of this subsection, if upon the Termination Date Executive is a “specifiedemployee” within the meaning of Code section 409A, then payment of any Incentive Plan or otherbonus payments (as applicable) otherwise payable during the first six (6) months following theTermination Date shall be deferred until the date that is six (6) months following the TerminationDate 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 theTermination Date and before the Expiration Date in lieu of any other benefits that cease on theTermination Date. Such amount shall be appropriately discounted for present value at the rate ofreturn on 90-day Treasury bills in existence at the Termination Date and shall be paid withinsixty (60) days after the Termination Date and, in any event, shall be paid after such TerminationDate 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 meaningof 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 beentitled to any additional payments for such other benefits. Executive shall not have the right todesignate the taxable year of such payment;          (5) Health coverage or reimbursement for the cost of health coverage as provided in Section3(e)(3);          (6) All accrued Base Salary through the Termination Date and all unreimbursed expenses throughthe Termination Date in accordance with Section 3(d). Such amounts shall be paid to Executive in alump sum in cash within sixty (60) days after the Termination Date; and          (7) If any payment or benefit received or to be received by Executive from the Companypursuant to this Section 4(f) (the “Section 4(f) Payments”) would be subject to the 4999 Excise Tax(as defined in Section 4(b)(7), the Company shall pay Executive, at the time specified below, anadditional amount (the “Section 4(f) Gross-Up Payment”) such that the net amount that Executiveretains, after deduction of the 4999 Excise Tax on the Section 4(f) Payments and any federal,state, and local income taxes, employment taxes, and additional 4999 Excise Taxes upon the Section4(f) Gross-Up Payment, and any interest, penalties, or additions to tax payable by Executive withrespect thereto, shall be equal to the total present value (using the applicable federal rate (asdefined in section 1274(d) of the Code) in such calculation) of the Section 4(f) Payments at thetime such payments are to be made. Payment of such additional amount shall occur on or before theearlier 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 notwithheld). For purposes of determining the amount of the Section 4(f) Gross-Up Payment, Executiveshall be deemed to pay federal income taxes at the highest marginal rates of federal incometaxation applicable to individuals in the calendar year in which the Section 4(f) Gross-Up Paymentis to be made and state and local income taxes at the highest marginal rates of taxation applicabletoindividuals as are in effect in the state and locality of Executive’s residence in the
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calendar year in which the Section 4(f) Gross-Up Payment is to be made, net of the maximumreduction in federal income taxes that can be obtained from deduction of such state and localtaxes, taking into account any limitations applicable to individuals subject to federal income taxat the highest marginal rates. This Section 4(f)(7) 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(including, but not limited to, Code section 409A) or under state or local law; and          (8) Executive shall be free to accept other employment, and there shall be no offset of anyemployment compensation earned by Executive in such other employment against payments due Executiveunder this Section. Without limiting the foregoing, there shall be no offset of any compensationreceived from such other employment against the Base Salary set forth above unless Executiveaccepts employment that is in violation of his obligations under Section 5 of this Agreement.          (g) **Director Positions****.**Upon termination of employment for any reason, Executiveshall immediately tender his resignation from any and all officer, Board, and other board ofdirector positions held with the Company and/or any of its subsidiaries and affiliates.     **5. ****Non-Competition, Non-Solicitation and Confidentiality****.**At the inception of thisemployment relationship, and continuing on an ongoing basis, the Company agrees to give ExecutiveConfidential Information (including, without limitation, Confidential Information, as definedbelow, of the Company’s affiliates) which Executive has not had access to or knowledge of beforethe execution of this Agreement. At the time this Agreement is made, the Company agrees to provideExecutive with initial and ongoing Specialized Training, which Executive has not had access to orknowledge of before the execution of this Agreement. “Specialized Training” includes the trainingthe Company provides to its employees that is unique to its business and enhances Executive’sability to perform Executive’s job duties effectively. Specialized Training includes, withoutlimitation, 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 forthe 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 theconception, design, development, production, marketing, or servicing of any product or service thatis substantially similar to the products or services which the Company provides, and that he willnot work for, in any capacity, assist, or become affiliated with as an owner, partner, etc., eitherdirectly or indirectly, any individual or business which offers or performs services, or offers orprovides 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 adverselyaffect 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 doesbusiness or accepting any material payment, service, loan, gift, trip, entertainment, or otherfavor
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from a supplier, contractor, distributor, subcontractor, customer or other entity with whichthe Company does business, and that Executive will promptly inform the Chairman of the Board of theCompany 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 becomesaware which might in Executive’s good faith judgment reasonably be expected to involve or give riseto a Conflict of Interest or potential Conflict of Interest.     (c) **Non-Competition After Termination****.**Executive agrees that Executive shall not, atany 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 planto sell products or services into a market during the last twelve (12) months of Executive’semploy; engage in or contribute Executive’s knowledge to any work which is competitive with orsimilar to a product, process, apparatus, service, or development on which Executive worked or withrespect to which Executive had access to Confidential Information while employed by the Company;provided however, that this Section 5(c) shall not operate to prevent Executive from engaging inretail insurance or re-insurance activities during such period to the extent such activities do notcompete or permit any other person or entity to compete with any business the Company or itsAffiliates were engaged in at the time of such termination. Executive shall be precluded fromservice as a member of the Board of Directors of any insurance company or insurance holding companyduring the Restricted Period.. Following the expiration of said two (2) year period, Executiveshall continue to be obligated under the Confidential Information Section of this Agreement not touse or to disclose Confidential Information of the Company so long as it shall not be publiclyavailable. It is understood that the geographical area set forth in this covenant is divisible sothat if this clause is invalid or unenforceable in an included geographic area, that area isseverable and the clause remains in effect for the remaining included geographic areas in which theclause 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 anycustomer or client or prospective customer or client with whom Executive dealt or solicited whileemployed by Company during the last twelve (12) months of his employment.     (e) **Non-Solicitation of Employees****.**Executive agrees that for the duration of theTerm, and for a period of two (2) years after the termination of the Term he will not eitherdirectly or indirectly, on his own behalf or on behalf of others, solicit, attempt to hire, or hireany person employed by the Company or any person that has been employed by the Company within theprevious six (6) months to work for Executive or for another entity, firm, corporation, orindividual.     (f) **Confidential Information****.**Executive further agrees that he will not, except asthe Company may otherwise consent or direct in writing, reveal or disclose, sell, use, lectureupon, publish or otherwise disclose to any third party any Confidential Information or proprietaryinformation of the Company, or authorize anyone else to do these things at any time either duringor subsequent to his employment with the Company. This Section shall continue in full force andeffect 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 Informationand proprietaryinformation shall cease when that specific portion of the Confidential Information andproprietary information becomes publicly known, in its entirety and without combining portions of
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such information obtained separately. It is understood that such Confidential Information andproprietary information of the Company include matters that Executive conceives or develops, aswell as matters Executive learns from other employees of Company. Confidential Information isdefined to include information: (1) disclosed to or known by Executive as a consequence of orthrough his employment with the Company; (2) not generally known outside the Company; and (3) whichrelates 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’strade secrets, proprietary information, financial documents, long range plans, customer lists,employer compensation, marketing strategy, data bases, costing data, computer software developed bythe Company, investments made by the Company, and any information provided to the Company by athird party under restrictions against disclosure or use by the Company or others.     (g) **Return of Documents, Equipment, Etc****.**All writings, records, and other documentsand things comprising, containing, describing, discussing, explaining, or evidencing anyConfidential Information, and all equipment, components, parts, tools, and the like in Executive’scustody or possession that have been obtained or prepared in the course of Executive’s employmentwith the Company shall be the exclusive property of the Company, shall not be copied and/or removedfrom the premises of the Company, except in pursuit of the business of the Company, and shall bedelivered to the Company, without Executive retaining any copies, upon notification of thetermination of Executive’s employment or at any other time requested by the Company. The Companyshall have the right to retain, access, and inspect all property of Executive of any kind in theoffice, work area, Executive’s residence or houses, and on the premises of the Company upontermination of Executive’s employment and at any time during employment by the Company to ensurecompliance with the terms of this Agreement. All office equipment, telecommunications equipmentand equipment of a like or similar kind installed by the Company at the residence of Executive tofacilitate necessary communication and assist Executive in the performance of his duties shall beconveyed to Executive without the payment of consideration upon termination of Executive’semployment for any reason and after an opportunity for inspection and removal of Companyinformation. 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 andprofessional 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 theimportance of maintaining the confidentiality of the Company’s Confidential Information andproprietary information, and reaffirm any other obligations set forth in this Agreement.     (i) **Prior Disclosure****.**Executive represents and warrants that he has not used ordisclosed any Confidential Information he may have obtained from the Company prior to signing thisAgreement, in any way inconsistent with the provisions of this Agreement.     (j) **Confidential Information of Prior Companies****.**Executive will not disclose or useduring the period of his employment with the Company any proprietary or Confidential Information orcopyrighted works which Executive may have acquired because of employment withan employer other than the Company or acquired from any other third party, whether suchinformation is in Executive’s memory or embodied in a writing or other physical form.
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          (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 theCompany may have, the Company is entitled to obtain injunctive relief against Executive. Nothingherein, however, shall be construed as limiting Company’s right to pursue any other availableremedy at law or in equity, including recovery of damages and termination of this Agreement and/orany payments that may be due pursuant to this Agreement; provided, no payments to Executive underSection 6 shall be offset for any purpose, so long as Executive continues to provide the ConsultingServices.          (l) **Right to Enter Agreement****.**Executive represents and covenants to Company that hehas full power and authority to enter into this Agreement and that the execution of this Agreementwill not breach or constitute a default of any other agreement or contract to which he is a partyor by which he is bound.          (m) **Extension of Post-Employment Restrictions****.**In the event Executive breachesSections 5(c), (d), or (e) above, the restrictive time periods contained in those provisions willbe extended by the period of time Executive was in violation of such provisions. The restrictivetime periods contained in Sections 5(c), (d), or (e) shall likewise be extended during any timeperiod in which litigation is pending by Executive against the Company or by the Company againstExecutive 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 theother agreements contained herein. Accordingly, failure of the Company to comply with any of itsobligations outside of this Section does not excuse Executive from complying with the agreementscontained herein.          (o) **Ownership in Publicly Traded Company.** The Executive’s ownership in a publiclytraded business entity in competition with the Company shall not be regarded by the Parties asemployment in a competitive activity in violation of this Section, provided that Executive’sownership 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 Companyduring or after the Term for any reason other than death or Disability, Executive agrees to serveand the Company agrees to retain Executive as a consultant (as an independent contractor and not asan employee), for a period of six (6) years and nine (9) months (the “Consulting Period”). TheExecutive shall not be entitled to any benefits provided to active Company employees generallyduring 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 600hours of service per calendar year during the Consulting Period (the “Consulting Services”), asrequired by the Company, provided, however, that the total hours of ConsultingServices 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 morethan four (4) days during any one (1) calendar week or more than eight (8) hours in any one twentyfour (24) hour period.
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     (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). Suchamount shall be payable monthly, in arrears, beginning on the last day of the month containing theTermination Date; provided, however, that if upon the Termination Date Executive is a “specifiedemployee” within the meaning of Code section 409A, then payment of any Consulting Fees otherwisepayable during the first six (6) months following the Termination Date shall be deferred until thedate 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 oftwenty-four (24)-consecutive months (as described below), Executive’s right to receive ConsultingFees 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 himselfreasonably 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 itsexpected consulting needs and any request for Consulting Services hereunder shall not unreasonablyinterfere with Executive’s other business activities and personal affairs as determined in goodfaith by Executive. In addition, Executive shall not be required to perform any requestedConsulting Services which, in Executive’s good faith opinion, would cause Executive to breach anyfiduciary duty or contractual obligation Executive may have to another employer. Executive’stravel time shall constitute hours of Consulting Services for purposes of this Section 6. TheParties contemplate that, when appropriate, the Consulting Services shall be performed atExecutive’s office or residence and at the Company’s executive offices in Houston, Texas and may beperformed at such other locations only as they may mutually agree upon. Executive shall beproperly reimbursed for all travel and other expenses reasonably incurred by Executive in renderingthe Consulting Services.     (d) If Executive fails or refuses to provide Consulting Services as reasonably requestedwithin any consecutive twenty-four (24)-month period other than due to death or Disability, theCompany 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.     (e) In the event of Executive’s death or Disability during the Consulting Period, the Companyshall pay to Executive (or Executive’s estate in the case of Executive’s death) the remainingConsulting Fees for the Consulting Period in a lump sum in cash, appropriately discounted forpresent value at the rate of return on 90-day Treasury bills in existence at the date ofExecutive’s death or Disability. Such amount shall be paid within thirty (30) days after the dateof Executive’s death or Disability; provided, however, that with respect to any such payment thatwould 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 ofCode section409A as of the Termination Date, then such payment shall be deferred until the date that issix (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.
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     **7. ****Assignment****.**This Agreement cannot be assigned by Executive. The Company mayassign 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 Companyprovided such successor expressly agrees in writing reasonably satisfactory to Executive to assumeand perform this Agreement in the same manner and to the same extent that the Company would berequired to perform it if no such succession and assignment had taken place. The Company shallobtain 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 giveExecutive the right to object to or enjoin any transaction among the Company, any of itsaffiliates, and any such successor. To the extent a failure by the Company to satisfy theforegoing commitment constitutes a material breach of this Agreement and to the extent not cured inaccordance with Section 4(a)(4), such failure shall constitute “Good Reason” pursuant to Section4(a)(4)(iv).     **8. ****Binding Agreement****.**Executive understands that his obligations under this Agreementare binding upon Executive’s heirs, successors, personal representatives, and legalrepresentatives.     **9. ****Survivability****.**The provisions of this Agreement which call for performance afterthe 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 forany reason.     **10. ****Notices****.**All notices pursuant to this Agreement shall be in writing and sentcertified mail, return receipt requested, addressed as set forth below, or by delivering the samein person to such party, or by transmission by facsimile to the number set forth below. Noticedeposited in the United States Mail, mailed in the manner described herein above, shall beeffective upon deposit. Notice given in any other manner shall be effective only if and whenreceived:   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     **11. ****Waiver****.**No waiver by either party to this Agreement of any right to enforce anyterm or condition of this Agreement, or of any breach hereof, shall be deemed a waiver of suchright 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 fromthe
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Agreement, and the remaining provisions of the Agreement will remain unaffected and in fullforce and effect.     **13. ****Arbitration****.**Except as provided in subsection (d) below, in the event any disputearises out of or related to Executive’s employment with or by the Company, orseparation/termination therefrom, which cannot be resolved by the Parties to this Agreement, suchdispute 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 actionand lawsuits either party may have against the other arising out of Executive’s employment with theCompany, or separation therefrom.          (a) The arbitration shall be conducted in accordance with the National Rules for theresolution of Employment Disputes of the American Arbitration Association (“AAA”). If the Partiescannot agree on an arbitrator, a list of seven (7) arbitrators will be requested from AAA, and thearbitrator will be selected using alternate strikes with Executive striking first. Subject tosubsection (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 havingjurisdiction thereof by the filing of a petition to enforce the award. Costs of filing may berecovered by the party that initiates such action to have the award enforced.          (c) The Company shall promptly reimburse Executive for all eligible, reasonable costs andexpenses incurred in connection with any dispute, controversy, or claim submitted to bindingarbitration in accordance with this Section in an amount up to, but not exceeding an amount equalto twenty percent (20%) of Executive’s Base Salary (or, if the dispute arises during the ConsultingPeriod, Executive’s Base Salary as in effect immediately prior to the beginning of the ConsultingPeriod) per taxable year of Executive, unless Executive was terminated for Cause, in which eventExecutive shall not be entitled to reimbursement unless and until it is determined he wasterminated 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 thedate that is ten years after the end of the Term and (2) the expenses must be submitted to theCompany for reimbursement within 90 days after the end of the taxable year of Executive in whichthe expenses were incurred. Amounts eligible for reimbursement shall be paid to Executive beforethe last day of the taxable year of Executive following the taxable year in which the expenses wereincurred. The amount of expenses eligible for reimbursement during Executive’s taxable year maynot 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, orexchanged for any other benefit.          (d) It is specifically agreed by the Parties that any enforcement action by the Companyagainst Executive for equitable relief, including, but not limited to, injunctive relief underSection 5 of this Agreement shall not be subject to this Section requiring arbitration and that theCompany shall not be required to seek arbitration against Executive for any purported violation byExecutive of his obligations under Section 5 of this Agreement.
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     **14. ****Entire Agreement****.**The terms and provisions contained herein shall constitute theentire agreement between the parties with respect to Executive’s employment with Company during thetime period covered by this Agreement. This Agreement replaces and supersedes any and all existingagreements entered into between Executive and the Company relating generally to the same subjectmatter, if any, and shall be binding upon Executive’s heirs, executors, administrators, or otherlegal representatives or assigns.     **15. ****Modification of Agreement****.**This Agreement may not be changed or modified orreleased or discharged or abandoned or otherwise terminated, in whole or in part, except by aninstrument 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 beeffective 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 accordancewith 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 towaive and does hereby waive any defenses and/or arguments based upon improper venue and/or lack ofpersonal jurisdiction. By entering into this Agreement, Executive agrees to personal jurisdictionin 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 Codesection 409A (determined by applying the default rules applicable under such Code section except tothe extent such rules are modified by a written resolution that is adopted by the CompensationCommittee and that applies for purposes of all deferred compensation plans of the Company and itsaffiliates) and the deferral of any amounts otherwise payable under this Agreement as a result ofExecutive’s termination of employment is necessary in order to prevent any accelerated oradditional tax to Executive under Code section 409A, then the Company will defer the payment of anysuch amounts hereunder until the date that is six months following the Termination Date**,**at whichtime any such delayed amounts will be paid to Executive in a single lump sum, with interest fromthe date otherwise payable at the rate of return on 90-day Treasury bills in existence at theTermination Date and (ii) if any other payments of money or other benefits due to Executivehereunder 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 otherbenefits compliant under Code Section 409A.          (b) **Overall Compliance****.**To the extent any provision of this Agreement or any omissionfrom the Agreement would (absent this Section 19(b)) cause amounts to be includable in income underCode section 409A(a)(1), the Agreement shall be deemed amended to the extent necessary to complywith the requirements of Code section 409A; *provided, however*, that this Section 19(b) shall notapply and shall not be construed to amend any provision of the Agreement to
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the extent this Section19(b) or any amendment required thereby would itself cause any amounts to be includable in incomeunder Code section 409A(a)(1).     (c) **Reformation.** If any provision of this Agreement would cause Executive to occurany additional tax under Code section 409A, the parties will in good faith attempt to reform theprovision in a manner that maintains, to the extent possible, the original intent of the applicableprovision without violating the provisions of Code section 409A.     (d) **Code Section 409A Excise Tax Gross Up**. If the terms of this Agreement (as may bemodified under Sections 19(b) and 19(c)) or any action or omission by the Company in itsperformance under this Agreement, causes any payment or benefit received or to be received byExecutive from the Company pursuant to this Agreement (including without limitation any paymentsunder Sections 4(b)(7) and 4(f)(7)) (the “Agreement Payments”) to be subject to the excise tax andadditional interest imposed by Code section 409A(a)(1)(B) (the “409A Excise Tax”), the Companyshall pay Executive, at the time specified below, an additional amount (the “409A Gross-UpPayment”) such that the net amount that Executive retains, after deduction of the 409A Excise Taxon the Agreement Payments; any federal, state, and local income and employment taxes; anyadditional 409A Excise Taxes upon the 409A Gross-Up Payment; and any interest, penalties, oradditions to tax payable by Executive with respect thereto, shall be equal to the total presentvalue (using the applicable federal rate (as defined in section 1274(d) of the Code) in suchcalculation) of the Agreement Payments at the time such payments are to be made. Payment of suchadditional amount shall occur on or before the earlier to occur of (i) the date which the Companyis required to withhold any such taxes and (ii) the date on which Executive remits such taxes tothe Internal Revenue Service (to the extent not withheld). For purposes of determining the amountof the 409A Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highestmarginal rates of federal income taxation applicable to individuals in the calendar year in whichthe 409A Gross-Up Payment is to be made and state and local income taxes at the highest marginalrates of taxation applicable to individuals as are in effect in the state and locality ofExecutive’s residence in the calendar year in which the 409A Gross-Up Payment is to be made, net ofthe maximum reduction in federal income taxes that can be obtained from deduction of such state andlocal taxes, taking into account any limitations applicable to individuals subject to federalincome 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 ofthe Code or under state or local law.**[*****remainder of page intentionally left blank*****]**
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     **IN WITNESS WHEREOF**, the Parties have executed this Agreement in multiple copies,effective as of the Effective Date.               **COMPANY:****EXECUTIVE:**   **HCC Insurance Holdings, Inc.**         /s/ John N. Molbeck, Jr.   By: /s/ Frank J. Bramanti       John N. Molbeck, Jr.     Frank J. Bramanti,        Chief Executive Officer         Date: August 10, 2007                     Date: August 10, 2007               Acknowledged by:               By: /s/ Edward H. Ellis, Jr.                 Edward H. Ellis, Jr.,        Executive Vice President and Chief Financial        Officer               Date: August 10, 2007**signature page**