Document:

Exhibit 10.1

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

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

 

R E C I T A L S:

 

WHEREAS, Executive is to be employed as President of HCC;

 

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

 

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

 

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

 

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

 

2.                                      Duties.

 

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

 

 

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

 

(b)                                 Other Duties.

 

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

 

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

 

3.                                      Compensation and Related Matters.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)                                    Vacations.  From the Effective Date through the date Executive is appointed Chief Executive Officer, Executive shall be entitled to twenty-five (25) days of paid vacation, or such additional number as may be determined by the Board from time to time.  From the date Executive is appointed Chief Executive Officer through the expiration of the Term, Executive shall be entitled to thirty (30) days of paid vacation, or such additional number as may be determined by the Board from time to time.  In no event shall any unused vacation days carry over from year-to-year.  For purposes of this Section, weekends shall not count as vacation days, and Executive shall also be entitled to all paid holidays given by the Company to its senior executive officers.

 

(g)                                 Proration.  The Base Salary, bonus, and vacation payable to Executive hereunder in respect of any calendar year during which Executive is employed by the Company for less than the entire year, unless otherwise provided in the applicable arrangement, shall be prorated

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.                                      Termination.

 

(a)                                  Definitions.

 

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

 

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

 

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

 

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

 

(iv)                              Conviction of Executive of any felony, any crime involving moral turpitude, or any crime (other than a vehicular offense not involving DUI or personal injury) which in some material fashion results in the injury of the Company’s and any of its subsidiaries’ reputation, business, or business relationships.

 

Executive may not be terminated for Cause unless and until there has been delivered to Executive written notice from the Board supplying the particulars of Executive’s acts or omissions that the Board believes constitute Cause, a reasonable period of time (not less than 30 days) has been given to Executive after such notice to either cure the same or to meet with the Board, with his attorney if so desired by Executive, and following which the Board reaffirms that Executive has been terminated for Cause as of the date set forth in the final notice to Executive.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Voluntary Termination by Executive and Termination for Cause:  Benefits.  Executive may terminate his employment with the Company without Good Reason by giving written notice of his intent and stating an effective Termination Date at least ninety (90) days after the date of such notice; provided, however, that the Company may accelerate such effective date by paying Executive’s Base Salary and crediting Executive’s Deferred Compensation through the proposed Termination Date and also vesting awards (including stock option awards granted on, before, or after the Effective Date) that would have vested but for this acceleration of the proposed Termination Date.  The provisions of this Section 4(e) requiring the vesting of any stock options due to the Company’s acceleration of the Termination Date constitute an amendment to the terms of each applicable option agreement.  Subject to Section 18, upon such a termination by Executive, or upon termination for Cause by the Company, this Agreement shall terminate; and the Company shall pay to Executive:

 

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

 

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

 

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

 

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

 

In consideration of the foregoing, Executive agrees as follows:

 

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

 

(b)                                 Conflicts of Interest.  Executive agrees that during the Term, he will not engage, either directly or indirectly, in any activity (a “Conflict of Interest”) which might adversely affect the Company or its affiliates, including ownership of a material interest in any supplier, contractor, distributor, subcontractor, customer or other entity with which the Company does business or accepting any material payment, service, loan, gift, trip, entertainment, or other favor from a supplier, contractor, distributor, subcontractor, customer or other entity with which the Company does business, and that Executive will promptly inform the Chairman of the Board of the Company in writing as to each offer received by Executive to engage in any such activity.  Executive further agrees to disclose to the Company any other facts of which Executive becomes aware which might in Executive’s good faith judgment reasonably be expected to involve or give rise to a Conflict of Interest or potential Conflict of Interest.

 

(c)                                  Non-Competition After Termination.  Executive agrees that Executive shall not, at any time during the period of two (2) years after the termination of the Term for any reason (“Restricted Period”), within any of the markets in which the Company has sold products or services or formulated a plan to sell products or services into a market during the last twelve (12) months of Executive’s employ, engage in or contribute Executive’s knowledge to any work which is competitive with or similar to a product, process, apparatus, service, or development on which Executive worked or with respect to which Executive had access to Confidential Information while employed by the Company; provided however, that this Section 5(c) shall not operate to prevent Executive from engaging in retail insurance or re-insurance activities during such period to the extent such activities do not compete or permit any other person or entity to compete with any business the Company or its affiliates were engaged in at the time of such termination.  Executive shall be precluded from service as a member of the Board of Directors of any insurance company or

 

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insurance holding company during the Restricted Period.  Following the expiration of said two (2) year period, Executive shall continue to be obligated under the Confidential Information Section of this Agreement not to use or to disclose Confidential Information of the Company so long as it shall not be publicly available.  It is understood that the geographical area set forth in this covenant is divisible so that if this clause is invalid or unenforceable in an included geographic area, that area is severable and the clause remains in effect for the remaining included geographic areas in which the clause is valid.

 

(d)                                 Non-Solicitation of Customers.  Executive further agrees that for a period of two (2) years after the termination of the Term, he will not solicit or accept any business from any customer or client or prospective customer or client with whom Executive dealt or solicited while employed by Company during the last twelve (12) months of his employment.

 

(e)                                  Non-Solicitation of Employees.  Executive agrees that for the duration of the Term, and for a period of two (2) years after the termination of the Term he will not either directly or indirectly, on his own behalf or on behalf of others, solicit, attempt to hire, or hire any person employed by the Company or any person that has been employed by the Company within the previous six (6) months to work for Executive or for another entity, firm, corporation, or individual.

 

(f)                                    Confidential Information.  Executive further agrees that he will not, except as the Company may otherwise consent or direct in writing, reveal or disclose, sell, use, lecture upon, publish or otherwise disclose to any third party any Confidential Information or proprietary information of the Company, or authorize anyone else to do these things at any time either during or subsequent to his employment with the Company.  This Section shall continue in full force and effect after termination of Executive’s employment and after the termination of this Agreement.  Executive’s obligations under this Section with respect to any specific Confidential Information and proprietary information shall cease when that specific portion of the Confidential Information and proprietary information becomes publicly known, in its entirety and without combining portions of such information obtained separately.  It is understood that such Confidential Information and proprietary information of the Company include matters that Executive conceives or develops, as well as matters Executive learns from other employees of Company.  Confidential Information is defined to include information:  (1) disclosed to or known by Executive as a consequence of or through his employment with the Company; (2) not generally known outside the Company; and (3) which relates to any aspect of the Company or its business, finances, operation plans, budgets, research, or strategic development.  “Confidential Information” includes, but is not limited to the Company’s trade secrets, proprietary information, financial documents, long range plans, customer lists, employer compensation, marketing strategy, data bases, costing data, computer software developed by the Company, investments made by the Company, and any information provided to the Company by a third party under restrictions against disclosure or use by the Company or others.

 

(g)                                 Return of Documents, Equipment, Etc.  All writings, records, and other documents and things comprising, containing, describing, discussing, explaining, or evidencing any Confidential Information, and all equipment, components, parts, tools, and the like in Executive’s custody or possession that have been obtained or prepared in the course of Executive’s employment with the Company shall be the exclusive property of the Company, shall not be copied and/or removed from the premises of the Company, except in pursuit of the business of the Company, and

 

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shall be delivered to the Company, without Executive retaining any copies, upon notification of the termination of Executive’s employment or at any other time requested by the Company.  The Company shall have the right to retain, access, and inspect all property of Executive of any kind in the office, work area, Executive’s residence or houses, and on the premises of the Company upon termination of Executive’s employment and at any time during employment by the Company to ensure compliance with the terms of this Agreement.  All office equipment, telecommunications equipment and equipment of a like or similar kind installed by the Company at the residence of Executive to facilitate necessary communication and assist Executive in the performance of his duties shall be conveyed to Executive without the payment of consideration upon termination of Executive’s employment for any reason and after an opportunity for inspection and removal of Company information.  The Parties understand and agree that the materials described in this Section 5(g) exclude all of Executive’s personal files, personal e-mail correspondence, personal notes and professional readers.

 

(h)                                 Reaffirm Obligations.  Upon termination of his employment with the Company, Executive, if requested by Company, shall reaffirm in writing Executive’s recognition of the importance of maintaining the confidentiality of the Company’s Confidential Information and proprietary information, and reaffirm any other obligations set forth in this Agreement.

 

(i)                                     Prior Disclosure.  Executive represents and warrants that he has not used or disclosed any Confidential Information he may have obtained from the Company prior to signing this Agreement, in any way inconsistent with the provisions of this Agreement.

 

(j)                                     Confidential Information of Prior Companies.  Executive will not disclose or use during the period of his employment with the Company any proprietary or Confidential Information or copyrighted works which Executive may have acquired because of employment with an employer other than the Company or acquired from any other third party, whether such information is in Executive’s memory or embodied in a writing or other physical form.

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

6.                                      Assignment.  This Agreement cannot be assigned by Executive.  The Company may assign this Agreement only to a successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and assets of the Company provided such successor expressly agrees in writing reasonably satisfactory to Executive to assume and perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession and assignment had taken place.  The Company shall obtain the assumption and performance of this Agreement by any such successor; provided, however, that such commitment by the Company (including a failure to satisfy such commitment) shall not give Executive the right to object to or enjoin any transaction among the Company, any of its affiliates, and any such successor.  To the extent a failure by the Company to satisfy the foregoing commitment constitutes a material breach of this Agreement and to the extent not cured in accordance with Section 4(a)(4), such failure shall constitute “Good Reason” pursuant to Section 4(a)(4)(iv).

 

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

 

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

 

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

 

	
If   to Executive:
    	
 
    	
Mr. Christopher   J. Williams, Jr.
    
	
 
    	
 
    	
25510   River Road
    
	
 
    	
 
    	
Cloverdale,   CA 95425
    
	
 
    	
 
    	
Fax:   (707) 894-2982
    

 

13

 

	
If   to Company:
    	
 
    	
HCC   Insurance Holdings, Inc.
    
	
 
    	
 
    	
13403   Northwest Freeway
    
	
 
    	
 
    	
Houston,   Texas 77040
    
	
 
    	
 
    	
Fax:   (713) 744-9648
    
	
 
    	
 
    	
Attention:   General Counsel
    

 

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

 

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

 

12.                               Arbitration.  Except as provided in subsection (d) below, in the event any dispute arises out of or related to Executive’s employment with or by the Company, or separation/termination therefrom, which cannot be resolved by the Parties to this Agreement, such dispute shall be submitted to final and binding arbitration.  Except as provided in subsection (d) below, arbitration of such disputes is mandatory and in lieu of any and all civil causes of action and lawsuits either party may have against the other arising out of Executive’s employment with the Company, or separation therefrom.

 

(a)                                  The arbitration shall be conducted in accordance with the National Rules for the resolution of Employment Disputes of the American Arbitration Association (“AAA”).  If the Parties cannot agree on an arbitrator, a list of seven (7) arbitrators will be requested from AAA, and the arbitrator will be selected using alternate strikes with Executive striking first.  Subject to subsection (c) below, cost of the arbitration will be shared equally by Executive and Company.  Such arbitration shall be held in Houston, Texas.

 

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

 

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

 

14

 

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

 

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

 

13.                               Entire Agreement.  The terms and provisions contained herein shall constitute the entire agreement between the Parties with respect to Executive’s employment with Company during the time period covered by this Agreement.  This Agreement replaces and supersedes any and all existing agreements entered into between Executive and the Company relating generally to the same subject matter, if any, and shall be binding upon Executive’s heirs, executors, administrators, or other legal representatives or assigns.

 

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

 

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

 

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

 

17.                               Jurisdiction and Venue.  With respect to any litigation regarding this Agreement, Executive agrees to venue in the state or federal courts in Harris County, Texas, and agrees to waive and does hereby waive any defenses and/or arguments based upon improper venue and/or lack of personal jurisdiction.  By entering into this Agreement, Executive agrees to personal jurisdiction in the state and federal courts in Harris County, Texas.

 

18.                               Compliance With Section 409A.

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

[remainder of page intentionally left blank]

 

17

 

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

 

	
EXECUTIVE:
    	
 
    	
COMPANY:  
    
	
 
    	
 
    	
HCC   Insurance Holdings, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   Christopher J. Williams, Jr.
    	
 
    	
By:
    	
/s/   John H. Molbeck, Jr.
    
	
Christopher   J. Williams, Jr.
    	
 
    	
 
    	
John   N. Molbeck, Jr.
    
	
 
    	
 
    	
 
    	
President   and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
Date:
    	
April 27,   2011
    	
 
    	
Date:
    	
April 27,   2011
    
						

 

SIGNATURE PAGE

 

EMPLOYMENT AGREEMENT — CHRISTOPHER J. WILLIAMS, JR.

 

 

EXHIBIT 3(N)

OPTION VESTING AND EXERCISE PROVISIONS

 

Termination of Employment.

 

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

 

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

 

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

 

4.               In the event of the death of the Employee while in the employ of the Company or the Subsidiaries, this option may be exercised for the full number of shares not previously exercised, or any portion thereof, except as to the issuance of fractional shares, to the full extent of this option at any time within the unexpired term of this option, by the person or persons to whom the Employee’s rights under this option shall pass by the Employee’s will or by the laws of descent and distribution, whichever is applicable.Exhibit 10.2

 

Execution Copy

 

HCC INSURANCE HOLDINGS, INC.

 

NONQUALIFIED DEFERRED COMPENSATION PLAN

 

FOR CHRISTOPHER J.B. WILLIAMS

 

(Effective as of May 1, 2011)

 

 

HCC INSURANCE HOLDINGS, INC.
 NONQUALIFIED DEFERRED COMPENSATION PLAN
 FOR CHRISTOPHER J.B. WILLIAMS

 

Table of Contents

 

	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I DEFINITIONS
    	
1
    
	
 
    	
 
    
	
ARTICLE II ELIGIBILITY
    	
3
    
	
 
    	
 
    
	
ARTICLE III CONTRIBUTIONS
    	
3
    
	
 
    	
 
    
	
ARTICLE IV ADJUSTMENT OF ACCOUNT
    	
4
    
	
 
    	
 
    
	
ARTICLE V PAYMENT OF BENEFITS
    	
5
    
	
 
    	
 
    
	
ARTICLE VI ADMINISTRATION OF THE PLAN
    	
7
    
	
 
    	
 
    
	
ARTICLE VII CLAIM REVIEW PROCEDURE
    	
8
    
	
 
    	
 
    
	
ARTICLE VIII LIMITATION OF RIGHTS
    	
9
    
	
 
    	
 
    
	
ARTICLE IX FUNDING AND ASSIGNMENT
    	
9
    
	
 
    	
 
    
	
ARTICLE X AMENDMENT OR TERMINATION OF THE PLAN
    	
11
    
	
 
    	
 
    
	
ARTICLE XI GENERAL AND MISCELLANEOUS
    	
11
    
	
 
    	
 
    
	
ARTICLE XII COMPLIANCE WITH CODE SECTION 409A
    	
15
    

 

 

HCC INSURANCE HOLDINGS, INC.

 

NONQUALIFIED DEFERRED COMPENSATION PLAN

 

FOR CHRISTOPHER J.B. WILLIAMS

 

PREAMBLE

 

WHEREAS, Christopher J.B. Williams (the “Participant”) has been appointed as the President of the Company effective as of the Effective Date; and

 

WHEREAS, the Company desires to adopt this nonqualified deferred compensation plan, effective as of the Effective Date, for the exclusive benefit of the Participant to reflect the Contributions payable to the Participant under that certain Employment Agreement dated May 1, 2011, between the Company and the Participant (the “Employment Agreement”); and

 

WHEREAS, the Company intends that the Participant and his Beneficiary under the Plan shall have the status of unsecured general creditors of the Company with respect to the Plan and that the Plan shall constitute an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select key management and highly compensated employee within the meaning of Section 201(2) and similar provisions of ERISA;

 

NOW, THEREFORE, the Company hereby adopts the “HCC Insurance Holdings, Inc. Nonqualified Deferred Compensation Plan for Christopher J.B. Williams” (the “Plan”), effective as of the Effective Date.  Nothing herein shall be construed to require Contributions for periods prior to the Effective Date or to require the payment or acceleration of payment of benefits in violation of the requirements of Section 409A of the Internal Revenue Code.

 

ARTICLE I
 DEFINITIONS

 

1.1                                 “Account” shall mean the record maintained by the Committee showing the monetary value of the individual interest in the Plan of the Participant.  The term “Account” shall refer only to a bookkeeping entry and shall not be construed to require the segregation of assets on behalf of the Participant.

 

1.2                                 “Accrual Date” shall mean the Valuation Date on which a Contribution is deemed to be made to the Participant’s Account as specified by Section 3.2 or Section 3.3 or, with respect to Contributions credited under Section 3.4, as specified by the Committee action approving such Contribution.  The Accrual Date is relevant for purposes of adjusting the Account for deemed investment experience that is credited or debited to the Account hereunder.

 

1.3                                 “Affiliate” shall mean a member of the controlled group of corporations (as defined in Section 1563 of the Code) of which the Company is a member.  For purposes of Section 1.20, such term shall mean all persons with whom the Company would be considered a single employer under Code Section 414(b) and/or under Code Section 414(c), as modified by the first sentence of Treasury Regulation Section 1.409A-1(h)(3).

 

1

 

1.4                                 “Beneficiary” shall mean the beneficiary or beneficiaries (including any contingent beneficiary or beneficiaries, if applicable) that is designated by the Participant to receive death benefits, if any, hereunder, as specified in Section 5.3..

 

1.5                                 “Board” shall mean the Board of Directors of the Company, as constituted from time to time.

 

1.6                                 “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time, and the rules and regulations promulgated thereunder.

 

1.7                                 “Committee” shall mean the Compensation Committee of the Board or, if none, the Board.  An individual who ceases to be a member of such Compensation Committee (or Board, if applicable) shall automatically cease to be a member of the Committee hereunder, and an individual who becomes a member of such Compensation Committee (or Board, if applicable) shall automatically become a member of the Committee hereunder.

 

1.8                                 “Company” shall mean HCC Insurance Holdings, Inc., a Delaware corporation, or its successor in interest.

 

1.9                                 “Contribution” shall mean a bookkeeping entry which reflects the periodic accrual to the Participant’s Account, if any, as provided in Article III.

 

1.10                           “Effective Date” shall mean May 1, 2011, the initial effective date of the Plan.

 

1.11                           “Employment Agreement” is defined in the above Preamble of the Plan.

 

1.12                           “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time, and the rules and regulations promulgated thereunder.

 

1.13                           “HCC Stock Rate” for a Valuation Date shall mean the one-month total return, dividend reinvested, for the common stock of the Company (or any successor security) for the month containing such Valuation Date, as determined in the sole discretion of the Committee; provided that if the common stock of the Company (or the successor security) ceases to be publicly traded prior to a Valuation Date, the HCC Stock Rate shall be equal to the S&P Rate for such Valuation Date.

 

1.14                           “Investment Election” shall mean a written instrument, in a form acceptable to the Committee, that is executed by the Participant and delivered to the Committee specifying the Participant’s instructions regarding the matters addressed by Section 4.3.

 

1.15                           “Participant” is defined in the above Preamble of the Plan.

 

1.16                           “Plan” shall mean this “HCC Insurance Holdings, Inc. Nonqualified Deferred Compensation Plan for Christopher J.B. Williams”, as it may be amended from time to time.

 

1.17                           “Plan Year” shall mean the annual period beginning January 1 and ending December 31, both dates inclusive of each year; provided, however, the first Plan Year will be a short year beginning on the Effective Date and ending on December 31, 2011.

 

2

 

1.18                           “Prime Rate” for a Valuation Date shall mean the latest United States prime lending rate announced by Wells Fargo Bank, N.A. (or its successor) on the business day that is coincident with or immediately precedes such Valuation Date, as adjusted to reflect monthly compounding.

 

1.19                           “Separation from Service” shall mean the Participant’s “separation from service” with the Company and its Affiliates as such term is defined for purposes of Code Sections 409A(a)(2)(A)(i) and 409A(a)(2)(B)(i).  To the extent permitted by Treasury Regulation Section 1.409A-1(h)(5), the Participant may be considered to have such a separation from service even if he continues to provide services as a non-employee director of the Company or any of its Affiliates.

 

1.20                           “Specified Employee” shall mean “specified employee”, as defined by Code Section 409A(a)(2)(B)(i), determined by applying the default rules applicable under such Code Section, except to the extent such rules are modified by a written resolution that is adopted by the Committee and that applies for purposes of all deferred compensation plans of the Company and its Affiliates that are subject to Code Section 409A.

 

1.21                           “S&P Rate” for a Valuation Date shall mean the one-month total return, cash dividend reinvested, for the S&P 500 Index for the month containing such Valuation Date, as published by Standard & Poor’s (or any successor thereto).

 

1.22                           “Valuation Date” shall mean the last calendar day of each month during the respective Plan Year.

 

ARTICLE II
 ELIGIBILITY

 

The only individual eligible to participate under the Plan is the Participant.  He shall be eligible to participate only while he is an employee of the Company and/or its Affiliates as recorded on the payroll records of the Company or Affiliate.  No Contributions shall be credited to the Participant’s Account with respect to any time period after his Separation from Service.

 

ARTICLE III
 CONTRIBUTIONS

 

3.1                                 Initial Account Balance.  As of the Effective Date, the Participant’s Account balance shall be zero.

 

3.2                                 Required Monthly Contributions after the Effective Date and before Becoming CEO.  The Company shall credit the Participant’s Account with an amount equal to $29,167  as of the Valuation Date for each month during the period beginning on the Effective Date and ending on the earliest to occur of (a) the Participant’s Separation from Service; (b) the termination of the Employment Agreement; (c) the date that Participant becomes the Chief Executive Officer of the Company (“CEO”); and (d) May 31, 2013; provided that such accrual for a month containing the last day of such period that is not the month end shall be prorated by multiplying $29,167  by a fraction, with the numerator being equal to the number of calendar

 

3

 

days in such month prior to and including such last day and the denominator being the total number of calendar days in such month.

 

3.3                                 Required Monthly Contributions after Becoming the CEO.  Only if the Participant becomes the CEO not later than by May 31, 2013, the Company shall credit the Participant’s Account with an amount equal to $79,167  as of the Valuation Date for each month during the period that begins on the effective date that the Participant became the CEO  and ends on the earliest to occur of (a) the Participant’s Separation from Service; (b) the termination of the Employment Agreement; and (c) April 30, 2016; provided that such accrual for a month containing the last day of such period that is not the month end shall be prorated by multiplying $79,166.67  by a fraction, with the numerator being equal to the number of calendar days in such month prior to and including such last day and the denominator being the total number of calendar days in such month.

 

3.4                                 Discretionary Contributions.  The Committee may approve additional, discretionary Company Contribution to the Participant’s Account for a Plan Year or portion of a Plan Year.  Any such discretionary Contributions shall be effective only upon approval by the Committee, which approval shall specify the Accrual Date for each such discretionary Contribution.  Discretionary Contributions shall be accrued by the Company or an Affiliate, as directed by the Committee.

 

ARTICLE IV
 ADJUSTMENT OF ACCOUNT

 

4.1                                 Contributions and Distributions.  Contributions by the Company under Article III shall be credited to the Account of the Participant as of the Accrual Date.  All distributions from the Account pursuant to Article V shall be charged against the Account as of the date of such distribution.

 

4.2                                 Deemed Investment Return.

 

(a)                                  The Participant’s Account shall be adjusted each Valuation Date to reflect earnings (or losses) at the Prime Rate, the HCC Stock Rate, and/or the S&P Rate, as applicable under Section 4.3.

 

(i)                                     The portion of the Participant’s Account (if any) that is deemed to be invested at the Prime Rate shall be credited with an amount equal to the balance of such portion (if any) as of the close of the immediately preceding Valuation Date multiplied by the Prime Rate for the current Valuation Date.

 

(ii)                                  The portion of the Participant’s Account (if any) that is deemed to be invested at the HCC Stock Rate shall be credited with an amount equal to the balance of such portion (if any) as of the close of the immediately preceding Valuation Date multiplied by the HCC Stock Rate for the current Valuation Date.

 

(iii)                               The portion of the Participant’s Account (if any) that is deemed to be invested at the S&P Rate shall be credited (or debited) with an amount equal to

 

4

 

the balance of such portion (if any) as of the close of the immediately preceding Valuation Date multiplied by the S&P Rate for the current Valuation Date.

 

(b)                                 A Contribution to the Participant’s Account shall not be adjusted for deemed investment experience for any period prior to the Accrual Date on which the Contribution is credited to the Account (even if the Contribution amount is known prior to such date).  No amount shall be adjusted for deemed investment experience after the Valuation Date coincident with or immediately preceding the date on which the amount is distributed from the Participant’s Account.

 

(c)                                  The crediting of earnings and losses under the Plan does not mean, and shall not be construed to mean, that the Participant’s Account is actually invested in any security, fund or other investment, and neither the Participant nor any Beneficiary shall have any security or other interest or property right with respect to any security, fund or investment, even if the Company maintains actual investments that mirror or are substantially similar to liabilities under the Plan.

 

4.3                                 Investment Election.  The Participant (or his Beneficiary in the event of the Participant’s death) shall be permitted to determine the manner in which his Account is deemed invested in the Prime Rate option, the HCC Stock Rate option, and the S&P Rate option, by delivering an Investment Election to the Committee.  The Investment Election shall specify the portion of the Account (in a whole percentage of the total Account balance) to which each such option applies.  The Participant’s initial Investment Election shall be made prior to the Effective Date.  A subsequent Investment Election shall be effective as of the first day of the calendar quarter next following the date on which the election is received by the Committee (so that the election shall apply in determining earnings for the calendar quarter following the calendar quarter in which the election is received).  An Investment Election shall remain in effect with respect to the Participant’s Account balance (including subsequent Contributions and earnings credited to the Account) until the effective date of a subsequent Investment Election, which may be filed by the Participant (or his Beneficiary in the event of the Participant’s death) at any time.  In the absence of an effective Investment Election with respect to all or a portion of the Participant’s Account, the Account (or such portion, as applicable) shall be deemed invested in the Prime Rate option.

 

ARTICLE V
 PAYMENT OF BENEFITS

 

5.1                                 Benefit Payment Events.

 

(a)                                  Payment of the Participant’s Account balance shall commence after the first to occur of the following events:

 

(i)                                     the Participant’s Separation from Service due to death; and

 

(ii)                                  the Participant’s Separation from Service for any reason other than death.

 

5

 

(b)                                 If the Participant dies after Separation from Service for any reason other than death and before the distribution of the Participant’s entire Account balance under Section 5.4 (for example, if the Participant is a Specified Employee and dies during the six-month period described in Section 12.2), any remaining payments under such Section shall cease, and payment shall occur instead under Section 5.2.  Such payment shall not be subject to Section 12.2.

 

(c)                                  For purposes of this Article V, neither the Participant nor any Beneficiary shall have a right to designate the taxable year of any administratively delayed payment.

 

5.2                                 Death.  In the event of the Participant’s death, his Beneficiary shall be entitled to the entire value of all amounts credited to the Participant’s Account.  Payment of such death benefit shall be made in a single lump sum cash payment to the Beneficiary on or as soon as administratively practicable after the first Valuation Date that is at least 30 days after the date of the Participant’s death, but not later than the later of (i) 90 days from such Valuation Date or (ii) the end of the calendar year containing the date of the Participant’s death.  The Beneficiary may not elect to defer the date of distribution or change the form of payment of the distribution.

 

5.3                                 Beneficiary Designation.

 

(a)                                  The Participant may, from time to time, designate a Beneficiary(ies) (who may be named contingently or successively) to whom any payment is to be paid under the Plan in case of the Participant’s death before he receives such payment.  Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by the Committee, and shall be effective only when filed by the Participant in writing with the Committee (or its delegate) during the Participant’s  lifetime.  A Participant may, from time to time, revoke or change his beneficiary designation by filing a new designation form with the Committee (or its delegate).  The last valid designation received shall be controlling; provided, however, that no Beneficiary designation, or change or revocation thereof, shall be effective unless received prior to the Participant’s death and in no event shall it be retroactively effective as of a date prior to its receipt.  Notwithstanding any contrary provision of this Section 5.3, no Beneficiary designation made by a married Participant, other than one under which the surviving lawful spouse of such Participant is designated as the sole 100% primary Beneficiary, shall be valid and effective without the prior written consent of such spouse to the designation of another primary Beneficiary.  In the event of Participant’s final divorce from his spouse that occurs prior to his death, the Participant’s prior designation of his former spouse as his Beneficiary hereunder shall be automatically revoked under the Plan without the necessity of any further action by the Participant, unless the Participant affirmatively re-designates his former spouse as his Beneficiary following his divorce by filing a subsequent Beneficiary designation form with the Committee (or its delegate).  To be effective, any Beneficiary designation, or revocation of a Beneficiary designation, must be in writing on a form acceptable to the Committee, must be signed by the Participant, and must be received by the Committee prior to the death of the Participant.

 

(b)                                 Any designation of a person as a Beneficiary shall be deemed to be contingent upon the person’s surviving the Participant.  Any designation of a class or

 

6

 

group of Beneficiaries shall be deemed to be a designation of only those members of the class or group who are living at the time of the Participant’s death.  Any designation of a trust as a Beneficiary shall be invalid if the trust is not in existence at the time of the Participant’s death.  The Participant may designate (in the manner provided in subsection (a), above) one or more persons as a contingent Beneficiary or Beneficiaries to receive, upon the Participant’s death, the benefit that the primary Beneficiary would have received had the primary Beneficiary survived the Participant.

 

(c)                                  If the Participant does not make an effective Beneficiary designation prior to death, or if all Beneficiaries (primary and contingent) designated by the Participant predecease him, the entire death benefit under this Section 5.3 shall be paid to the Participant’s estate.  If a Beneficiary dies after the Participant and after becoming entitled to a benefit hereunder, but before the designated payment date for such benefit, such benefit shall be paid to the Beneficiary’s estate.

 

(d)                                 References hereunder to a benefit payable to or with respect to the Participant include any benefit payable to the Participant’s Beneficiary or estate, as applicable.

 

(e)                                  If the Company is in doubt as to the right of any Beneficiary to receive any payment hereunder, it may direct that the amount be paid into any court of competent jurisdiction in an interpleader action, and such payment shall be a full and complete discharge of any and all liability or obligation of the Plan and Company in such respect.

 

5.4                                 Separation from Service.  Upon the Participant’s Separation from Service for any reason other than death, the Participant shall be entitled to the entire value of all amounts credited to his Account.  Subject to Section 12.2, payment of the Participant’s benefit pursuant to this Section 5.4 shall be made in a single lump sum cash payment to the Participant on or as soon as administratively practicable after the first Valuation Date that is at least 30 days after his Separation from Service but not later than 60 days from such Valuation Date.  The Participant may not elect to defer the date of distribution or change the form of payment of the distribution.

 

ARTICLE VI
 ADMINISTRATION OF THE PLAN

 

6.1                                 The Plan shall be administered by the Committee.  The members of the Committee shall not receive compensation with respect to their services for the Plan.  The members of the Committee shall serve without bond or other security for the performance of their duties hereunder unless applicable law makes the furnishing of such bond or other security mandatory or unless required by the Company.

 

6.2                                 The Committee shall perform any act which the Plan authorizes expressed by a vote at a meeting or in a writing signed by a majority of its members without a meeting.  The Committee may, by a writing signed by a majority of its members, appoint any one or more members of the Committee to act on behalf of the Committee.

 

6.3                                 The Committee may designate in writing other persons to carry out its responsibilities under the Plan, and may remove any person designated to carry out its

 

7

 

responsibilities under the Plan by notice in writing to that person.  The Committee may employ persons to render advice with regard to any of its responsibilities.  All usual and reasonable expenses of the Committee shall be paid by the Company.  The Company shall indemnify and hold harmless each member of the Committee from and against any and all claims and expenses (including, without limitation, attorney’s fees and related costs), in connection with the performance by such member of his duties in that capacity, other than any of the foregoing arising in connection with the willful neglect or willful misconduct of the person so acting.

 

6.4                                 The Committee shall establish rules, not contrary to the provisions of the Plan, for the administration of the Plan and the transaction of its business.  The Committee shall interpret the Plan in its sole and absolute discretion, and shall determine all questions arising in the administration, interpretation, and application of the Plan.  All determinations of the Committee shall be conclusive and binding on the Participant and all other interested persons.

 

6.5                                 Any action to be taken hereunder by the Company shall be taken by resolution adopted by the Board or an executive committee thereof; provided, however, that by resolution, the Board or an executive committee thereof may delegate to any officer of the Company the authority to take any action hereunder, other than the power to amend or terminate the Plan.

 

ARTICLE VII
 CLAIM REVIEW PROCEDURE

 

7.1                                 The Committee shall automatically direct the distribution of all benefits to which the Participant or his Beneficiary is entitled hereunder.  In the event that the Participant or his Beneficiary (the “Claimant”) believes that he (or she) has been denied benefits to which he (or she) is entitled under the provisions of the Plan, the Committee shall, within 90 days after receiving a written request from the Claimant, provide to the Claimant written notice of the denial which shall set forth:

 

(a)                                  the specific reason or reasons for the denial;

 

(b)                                 specific references to pertinent Plan provisions on which the Committee based its denial;

 

(c)                                  a description of any additional material or information needed for the Claimant to perfect the claim and an explanation of why the material or information is needed;

 

(d)                                 a statement that the Claimant or his authorized representative may:

 

(i)                                     Request a review upon written application to the Committee;

 

(ii)                                  Review pertinent Plan documents; and

 

(iii)                               Submit issues and comments in writing;

 

(e)                                  a statement that any appeal the Claimant wishes to make of the adverse determination must be made in writing to the Committee within 60 days after receipt of

 

8

 

the Committee’s notice of denial of benefits and that failure to appeal the initial determination to the Committee, in writing, within such 60-day period will render the Committee’s determination final, binding, and conclusive on the Participant and all other interested persons; and

 

(f)            the address to which the Claimant must forward any request for review.

 

7.2           If the Claimant should appeal to the Committee, he, or his duly authorized representative, may submit, in writing, whatever issues and comments he, or his duly authorized representative, feels are pertinent.  The Committee shall re-examine all facts related to the appeal and make a final determination as to whether the denial of the claim is justified under the circumstances.  The Committee shall advise the Claimant in writing of its decision on appeal, the specific reasons for the decision, and the specific Plan provisions on which the decision is based.  The notice of the decision shall be given within 60 days after the Claimant’s written request for review, unless special circumstances (such as a hearing) would make the rendering of a decision within such 60-day period impracticable.  In such case, notice of an extension shall be provided to the Claimant within the original 60-day period, and notice of a final decision regarding the denial of a claim for benefits will be provided within 120 days after its receipt of a request for review.  If an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the date the extension period commences.  All decisions of the Committee shall be in writing and shall include specific reasons for whatever action has been taken, as well as the pertinent Plan provisions on which its decision is based.

 

7.3           A Claimant’s compliance with the foregoing provisions of this Article VII is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan, including submission to mandatory arbitration in accordance with Section 11.7.

 

ARTICLE VIII
 LIMITATION OF RIGHTS

 

The establishment of this Plan shall not be construed as giving the Participant or any person claiming by, through, or on behalf of the Participant, any legal, equitable or other rights against the Company, any Affiliate, or the respective officers, directors, employees, agents or shareholders of the Company or any Affiliate, except as expressly provided herein, or as giving to the Participant or his Beneficiary, or any person claiming by, through, or on behalf of the Participant or his Beneficiary, any equity or other interest in the assets or business of the Company or any Affiliate or shares of stock of the Company or any Affiliate, or as giving the Participant the right to be retained in the employment of the Company or any of its Affiliates.

 

ARTICLE IX
 FUNDING AND ASSIGNMENT

 

9.1           No Assignment or Alienation of Benefits.  Except as provided in Section 12.3, no benefits which may be payable under the Plan to the Participant or his Beneficiary shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance

 

9

 

or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of the same shall be void.  No benefits shall in any manner be subject to the debts, contracts, liabilities, engagements or torts of the Participant or his Beneficiary, nor shall they be subject to attachment or legal process for or against any person, except to the extent required by law.

 

The first paragraph of this Section 9.1 shall not preclude (a) a Beneficiary from receiving any benefit payable hereunder upon the Participant’s death, or (b) the executors, administrators, or other legal representatives of the Participant or his estate from assigning any rights hereunder to the person or persons entitled thereto.

 

In the event that any Participant’s or Beneficiary’s benefits hereunder are garnished or attached by order of any court, the Company may bring an action or a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid under the Plan.  During the pendency of said action, any benefits that become payable shall be held by the Company or, if the Company prefers, paid into the court as they become payable, to be distributed by the court to the recipient as the court deems proper at the close of said action.

 

9.2           No Trust or Fund Created.  All benefits under the Plan shall be paid from the general assets of the Company or, to the extent applicable, an Affiliate which has accrued a Contribution in accordance with Article III.  Title to and beneficial ownership of any funds represented by a Participant’s Account will at all times remain in the Company, and such funds will continue for all purposes to be a part of the general funds of the Company and may be used for any corporate purpose.  No assets will be placed in trust or otherwise segregated from the general assets of the Company or any Affiliate for the payment of obligations hereunder.  Nothing herein and no action taken hereunder requires or shall be construed to require the Company, any Affiliate, or the Committee to establish or maintain any fund or trust or to segregate any amount for the benefit of any Participant or Beneficiary; creates a trust or fiduciary relationship of any kind between the Company and any Participant, Beneficiary, or other person; or shall create any right to, title or interest whatsoever in or to any assets of the Company or any Affiliate or any investment reserves, accounts, or funds that the Company or any Affiliate may purchase, establish, or accumulate in order to aid in providing benefits under the Plan.

 

9.3           Unsecured Creditor Status.  To the extent that any person acquires a right to receive payments hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company and, to the extent applicable, of any Affiliate which has accrued a Contribution in accordance with Article III.

 

9.4           Funding and Liability of Company.  The Plan shall be “unfunded”, particularly for purposes of ERISA and the Code.  No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made, or otherwise to segregate any assets.  Any liability or obligation of the Company to the Participant under the Plan shall be based solely upon any contractual obligations created by the Plan, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company.  Any amounts which may be set aside by the Company or an Affiliate to meet its obligations under the Plan shall remain the exclusive property of the Company or Affiliate,

 

10

 

subject to the claims of their secured and unsecured creditors.  The rights of the Participant or his Beneficiary (and any person claiming under the Participant or Beneficiary) shall not rise above or exceed those of an unsecured general creditor of the Employer.

 

ARTICLE X
 AMENDMENT OR TERMINATION OF THE PLAN

 

10.1         Amendment.  The Company reserves the right at any time to amend the Plan, in whole or in part, by action of the Board.  No amendment shall have the effect of retroactively decreasing the Participant’s Account or depriving the Participant or his Beneficiary of rights that have already accrued under the Plan at the time of such amendment, unless the Participant (or his Beneficiary in the event of the Participant’s death prior to the adoption of the amendment) consents to the amendment.  In the event that the Company should change its name, the Plan shall be deemed to be amended to reflect the name change without further action of the Company, and the language of the Plan shall be changed accordingly.  No amendment may be made to the Plan except in accordance with this Section.

 

10.2         Termination.  The Company reserves the right at any time to terminate the Plan by action of the Board.  No Contributions shall be credited to the Participant’s Account with respect to periods after the termination of the Plan, but the Account shall continue to be adjusted for deemed investment experience under Section 4.2.  Except as provided in Section 12.3, the termination of the Plan shall not accelerate the payment of benefits under the Plan.

 

ARTICLE XI
 GENERAL AND MISCELLANEOUS

 

11.1         Severability.  In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.

 

11.2         Construction.  The section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of this Plan.  Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular.  The words “hereof,” “herein,” “hereunder” and other similar compounds of the word “here” shall, unless otherwise specifically stated, mean and refer to the entire Plan, not to any particular provision or Section.  The word “including” and words of similar import when used in this Plan shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified.  The word “or” shall not be exclusive.

 

11.3         Governing Law.  Except to the extent superseded by applicable Federal law, the validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Texas, without giving effect to conflict of laws principles thereof.

 

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11.4         Taxes.

 

(a)           All amounts payable hereunder shall be reduced by any and all federal, state, and local taxes imposed upon the Participant or his Beneficiary which are required to be paid or withheld by the Plan, the Company, an Affiliate, or any fund from which such amounts are paid.  The Participant or Beneficiary, as applicable, shall be responsible for the payment of all taxes relating to benefits accrued under or payable from the Plan, including (without limitation) income, excise, self-employment, payroll, Social Security, and Medicare taxes.  To the extent that taxes of the Participant must be withheld or paid by the Company or an Affiliate with respect to amounts not distributable from the Plan, the Participant shall (1) pay such amount to the Company or Affiliate or (2) permit the Company or Affiliate pay to withhold such amount from other compensation payable to the Participant.

 

(b)           Deemed investment earnings credited at the Prime Rate shall be subject to Social Security and Medicare (FICA) taxes when credited and vested to the extent such earnings exceed the earnings which are determined at an interest rate equivalent to the last published, monthly adjusted average corporate bond yield as announced by Moody’s Investors Service, as determined by the Committee.

 

(c)           If any action or omission by the Company or any Affiliate causes any benefit or payment under the Plan to be subject to an additional tax (including any additional interest) under Code Section 409A(a)(1)(B), and such action or omission was not caused by the negligence or intentional misconduct of Participant, the Company shall pay a “tax gross-up” payment to the Participant in the amount necessary to pay such additional tax (including any additional interest) and to pay all Federal, state, and local income, excise, employment, and other taxes (including any additional taxes and interest under Code Section 409A(a)(1)(B)) on such gross-up payment, such that the Participant retains, after the payment of all applicable taxes, the amount necessary to pay such additional tax (including interest) under Code Section 409A(a)(1)(B).    Such tax gross-up payment shall be paid to the Participant on or as soon as administratively practicable after the Valuation Date next following the date of such action or omission by the Company or any Affiliate and, in any event, shall be paid by the end of the taxable year of the Participant next following the taxable year in which the Participant remits such additional tax (including any additional interest).

 

(d)           The Board, Company, Committee and any other person do not make any commitment or guarantee that any federal, state or local tax treatment will apply or be available to the Participant or any other person hereunder; provided, however, this provision shall not be construed to limit or restrict Section 11.4(c) to the extent that the tax gross-up payment thereunder is applicable..

 

11.5         Waiver.  Neither the failure nor any delay on the part of the Company, any Affiliate, or the Committee to exercise any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise or waiver of any such right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege available to the Company, its Affiliates, or the Committee at law or in equity.  No waiver by the Company of a breach of any provision of the Plan by the Participant, or of compliance with any condition or provision of the Plan to be performed by the Participant, will

 

12

 

operate or be construed as a waiver of any subsequent breach by the Company of any similar or dissimilar provision or condition at the same or any subsequent time.

 

11.6         Severability.  In the event that any provision of the Plan shall be held illegal, invalid or unenforceable for any reason, such term or provision shall be fully severable, but shall not affect the remaining terms and provisions of the Plan, and the Plan shall be construed and enforced as if the illegal, invalid, or unenforceable term or provision was not included herein.

 

11.7         Entire Agreement; Amendment and Termination.  Subject to Section 11.11, the Plan contains the entire agreement of the Company and the Participant with respect to all matters covered herein; moreover, the Plan supersedes all prior and contemporaneous agreements, promises representations, and understandings, oral or written, between the Company and the Participant concerning such matters.

 

11.8         Benefit Payments to Minors and Incompetents.  Notwithstanding Section 9.1, whenever any benefit which shall be payable under the Plan is to be paid to or for the benefit of any person who is then a minor or is determined by the Committee, on the basis of qualified medical advice, to be incompetent, the Committee need not require the appointment of a guardian or custodian, but shall be authorized to cause the same to be paid over to the person having custody of the minor or incompetent, or to cause the same to be paid to the minor or incompetent without the intervention of a guardian or custodian, or to cause the same to be paid to a legal guardian or custodian of the minor or incompetent, if one has been appointed, or to cause the same to be used for the benefit of the minor or incompetent.

 

11.9         Arbitration.  Subject to exhaustion of the administrative claim process under Article VII, any dispute controversy or claim arising out of or relating to this Plan or the breach thereof, which cannot be resolved by the Company, the Committee, and the Participant, shall be submitted to final and binding arbitration.

 

(a)           The arbitration shall be conducted in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“AAA”) before a single arbitrator.  If the parties cannot mutually agree on an arbitrator, a list of seven arbitrators will be requested from AAA, and the arbitrator will be selected using alternate strikes with Participant striking first.  The cost of the arbitration will be shared equally by the Participant and the Company.  Arbitration of such disputes is mandatory and in lieu of any and all civil causes of action and lawsuits either party may have against the other arising out of Participant’s participation in or benefits under the Plan, and the parties waive the right to seek such remedies in court.  The arbitration proceedings shall be held in Houston, Texas, unless the parties to the arbitration mutually agree to another location.

 

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

 

(c)           The Company shall promptly reimburse the Participant for all eligible, reasonable costs and expenses incurred in connection with any dispute, controversy, or

 

13

 

claim submitted to binding arbitration in accordance with this Section in an amount up to, but not exceeding $200,000 per taxable year of the Participant, unless the Participant’s Separation from Service was for “cause,” as such term is defined by the Employment Agreement, in which event the Participant shall not be entitled to reimbursement unless and until it is determined he was terminated other than for “cause” (as defined by the Employment Agreement).  To be eligible for reimbursement under this subsection (c), (i) the expenses must be incurred during the period beginning on the Effective Date and ending on the date that is ten (10) years  after the Participant’s Separation from Service and (ii) the expenses must be submitted to the Committee for reimbursement within 90 days after the end of the taxable year of the Participant in which the expenses were incurred.  Amounts eligible for reimbursement shall be paid to the Participant before the last day of the taxable year of the Participant following the taxable year in which the expenses were incurred.  The amount of expenses eligible for reimbursement during the Participant’s taxable year may not affect the expenses eligible for reimbursement in any other taxable year of the Participant.  The Participant’s right to reimbursement under this subsection (c) may not be assigned, alienated, or exchanged for any other benefit.

 

11.10       Notices.  All notices or elections required by or made in accordance with this Plan shall be in writing and sent certified mail, return receipt requested, addressed as set forth below (or to any successor address for which notice is provided), or by delivering the same in person, or by transmission by facsimile to the number set forth below (or to any successor number for which notice is provided).  Notice deposited in the United States Mail, mailed in the manner described herein above, shall be effective upon deposit.  Notice given in any other manner shall be effective only if and when received.

 

	
If   to Participant:
    	
Christopher   J.B. Williams
    
	
 
    	
25510   River Road
    
	
 
    	
Cloverdale,   CA 95425
    
	
 
    	
Fax:   (707)894-2982
    
	
 
    	
 
    
	
If   to the Committee:
    	
HCC   Insurance Holdings, Inc.
    
	
 
    	
13403   Northwest Freeway
    
	
 
    	
Houston,   Texas 77040
    
	
 
    	
Fax:   (713) 462-2401
    
	
 
    	
Attention:   Compensation Committee
    

 

11.11       Relationship to Employment Agreement.  The Plan is intended to implement the commitments of the Company under Section 3(b) of the Employment Agreement, but shall not otherwise be affected by the terms or requirements of the Employment Agreement.  Benefits are payable hereunder solely pursuant to the terms of this Plan without regard to the terms of the Employment Agreement or any amendments to the Employment Agreement.  To the extent the terms of this Plan are inconsistent with or otherwise conflict with the terms of the Employment Agreement, the terms of this Plan shall prevail and be controlling with respect to all matters relating to the Plan or Section 3(b) of the Employment Agreement.  Participation in the Plan shall not confer upon the Participant any right to continue in the employ of the Company.

 

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11.12       Successors.  All obligations of the Company under the Plan shall be binding on any successor in interest to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise.  In addition to any obligations imposed by law upon any successor to the Company, the Company shall require any successor to all or substantially all of the Company’s business or assets (whether direct or indirect and whether by purchase, reorganization, merger, share exchange, consolidation, or otherwise) to expressly assume and agree to perform the Company’s obligations under the Plan to the same extent, and in the same manner, as the Company would be required to perform if no such succession had occurred.  The Plan shall be binding upon, and inure to the benefit of, any successor to the Company.

 

ARTICLE XII
 COMPLIANCE WITH CODE SECTION 409A

 

12.1         Interpretation.  The Plan and the provisions of this Article XII are intended to constitute good faith compliance with the requirements of Code Section 409A and shall be construed and applied in accordance with such requirements.  In the event of any conflict or inconsistency between the provisions of this Article XII and any other provisions of the Plan, the provisions of this Article XII shall be controlling.

 

12.2         Delayed Payment to a Specified Employee.  Payment to the Participant pursuant to Section 5.4 shall be delayed to the extent required by Code Section 409A(a)(2)(B)(i) to preclude taxation to the Participant under Code Section 409A.  Accordingly, if the Participant is a Specified Employee, any payments which the Participant is otherwise entitled to receive under Section 5.4 during the six-month period beginning on the date of the Participant’s Separation from Service shall be accumulated and paid effective as of the earlier to occur of (a) the first Valuation Date that occurs on or after the date that is six (6) months after the date the Participant’s Separation from Service or (b) the first Valuation Date that is at least 30 days after the date of the Participant’s death.  The Participant’s Account, including such delayed payments, shall be adjusted for investment experience in accordance with Section 4.2 while payment is delayed pursuant to this Section.  Reimbursements under Sections 11.4(c) and 11.9(c) shall be subject to the provisions of this Section to the extent required by Code Section 409A(a)(2)(B)(i).

 

12.3         No Acceleration of Benefit Payments.  Except as provided in this Section 12.3 and notwithstanding anything herein to the contrary, the payment of benefits under the Plan shall not be accelerated in a manner that would cause such benefits to be includable in income under Code Section 409A.

 

(a)           The Committee may establish a procedure for the Plan to administer qualified domestic relations orders.  Such procedure shall comply with the applicable requirements of ERISA Sections 206(d)(3) and 514(b)(7) (which provisions shall be applied as if the Plan were a pension plan under ERISA).  The Committee may approve immediate payment to an alternative payee (who is not the Participant) pursuant to the terms of a qualified domestic relations order, as defined under ERISA Sections 206(d)(3) and 514(b)(7).  Any such payment shall not be prohibited by Section 9.1 and shall not be subject to the limitation of Section 12.2.

 

15

 

(b)           If a benefit hereunder is required to be included in the income of the Participant under Code Section 409A as a result of the failure to comply with the requirements of Code Section 409A, the benefit amount so includable shall be paid to the Participant as of the Valuation Date next following such compliance failure.  This subsection shall not accelerate the payment of a benefit that is subject to the six-month delay under Section 12.2.

 

(c)           The Committee may accelerate the payment of amounts credited to the Participant’s Account (i) to the extent necessary for any Federal officer or employee in the executive branch to comply with an ethics agreement with the Federal government and (ii) to the extent reasonably necessary to avoid the violation of an applicable Federal, state, local, or foreign ethics law or conflicts of interest law.  Any such payment shall be made in a single lump sum cash payment to the Participant on or as soon as administratively practicable after the first Valuation Date that occurs on or after the Committee’s determination.  Any such payment shall not be subject to the limitation of Section 12.2.

 

(d)           The entire amount credited to the Participant’s Account shall be paid to the Participant if (i) the Plan is terminated in accordance with Section 10.2 and (ii) the Committee determines that the requirements of the Treasury Regulations that are effective under Code Section 409A in the event of such termination have been, or will be, satisfied in connection with such termination.  Any such payment shall be made in a single lump sum cash payment to the Participant on or as soon as administratively practicable after the first Valuation Date that occurs on or after the Plan termination and the Committee’s determination.  This subsection shall not accelerate the payment of a benefit that is subject to the six-month delay under Section 12.2.

 

12.4         Overall Compliance.  To the extent any provision of this Plan or any omission from the Plan would (absent this Section 12.4) cause amounts to be includable in income under Code Section 409A(a)(1), the Plan shall be deemed amended to the extent necessary to comply with the requirements of Code Section 409A; provided, however, that this Section 12.4 shall not apply and shall not be construed to amend any provision of the Plan to the extent this Section 12.4 or any amendment required thereby would itself cause any amounts to be includable in income under Code Section 409A(a)(1).

 

To the extent the Plan provides for nonqualified deferred compensation subject to, and not exempt under, Code Section 409A, it is intended to comply with the applicable provisions of Code Section 409A.  The Plan is intended to be written, administered, interpreted and construed in a manner such that no benefit under the Plan becomes subject to (i) the gross income inclusion set forth in Code Section 409A(a)(1)(A) or (ii) the interest and additional tax set forth in Code Section 409A(a)(1)(B) (collectively, “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of the Section 409A Penalties.

 

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[Signature page follows.]

 

17

 

IN WITNESS WHEREOF, the Company has caused its corporate seal to be affixed hereto and these presents to be duly executed in its name and behalf by a duly authorized officer on this 27th day of April, 2011.

 

 

	
ATTEST:
    	
 
    	
COMPANY
    
	
 
    	
 
    	
 
    	
HCC   INSURANCE HOLDINGS, INC.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/   Randy D. Rinicella
    	
 
    	
By:
    	
/s/   John N. Molbeck, Jr.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
Randy   D. Rinicella
    	
 
    	
Name:
    	
John   N. Molbeck, Jr.
    
	
Date:
    	
April 27,   2011
    	
 
    	
Title:
    	
President &   Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Accepted and Agreed:
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
PARTICIPANT
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
/s/   Christopher J.B. Williams
    
	
 
    	
 
    	
 
    	
Christopher   J.B. Williams
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Date:
    	
April 27,   2011
    
						

 

18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00188-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00188-of-00352.parquet"}]]