Document:

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                              EMPLOYMENT AGREEMENT

         This Employment Agreement ("Agreement") is entered into as of the
7th day of December, 1998 (the "Effective Date"), between HOUSTON CASUALTY
COMPANY ("HC" or "Company"), and BENJAMIN D. WILCOX ("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 and Chief
Operating Officer of HC, U.S. Specialty Insurance Company ("USSIC") and
Trafalgar Insurance Company ("TIC");

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

         WHEREAS, Executive is desirous of committing himself to serve HC 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 its
President and Chief Operating Officer and President and Chief Operating
Officer of USSIC and TIC, and Executive hereby agrees to accept such
employment, on the terms and conditions set forth herein, for the period
commencing on the Effective Date and expiring as of 11:59 p.m. on December
31, 2003 (the "Basic Term") (unless sooner terminated as hereinafter set
forth).

         2. DUTIES.

                  (a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall,
subject to the supervision of the Chief Executive Officer and Board, have
general management and control of HC, USSIC and TIC in the ordinary course of
its business with all such powers with respect to such management and control
as may be reasonably incident to such responsibilities. During normal
business hours, Executive shall devote his full time and attention to
diligently attending to the business of the Company during the Basic Term.
During the Basic Term, Executive shall not directly or indirectly render any
services of a business, commercial, or professional nature to any other
person, firm, corporation, or organization, whether for compensation or
otherwise, without the prior written consent of the Chairman of the Board.
However, Executive shall have the right to engage in such activities as may
be appropriate in order to manage his personal investments so long as such
activities do not materially interfere or conflict with the performance

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of his duties to the Company hereunder. The conduct of such activity shall
not be deemed to materially interfere or conflict with Executive's
performance of his duties until Executive has been notified in writing
thereof and given a reasonable period in which to cure the same.

                  (b) OTHER DUTIES. Executive agrees to serve on the Senior
Management Committee of HCC Insurance Holdings, Inc. ("HCC") and as a
Director of HC, USSIC, TIC, and Avemco Insurance Company ("AIC"), provided
Executive is indemnified for serving in any and all such capacities in a
manner acceptable to the Company and Executive. If elected, Executive agrees
that he shall not be entitled to receive any additional compensation for
serving as a director other than the compensation to be paid to Executive by
the Company pursuant to this Agreement.

         3.       COMPENSATION AND RELATED MATTERS.

                  (a) BASE SALARY. Executive shall receive a base salary paid
by the Company at the annual rate of $300,000, during the period beginning on
the Effective Date payable not less frequently than in substantially equal
monthly installments. The base salary shall be increased by $15,000 each
January 1, commencing January 1, 2000. For purposes of this Agreement, "Base
Salary" shall mean the Executive's initial base salary and, when increased,
the increased base salary.

                  (b) BONUS PAYMENTS. Each year Executive shall be entitled
to receive, in addition to the Base Salary, an annual bonus payment effective
as of December 7, 1999, of not less than $50,000 at the discretion of the
Board of Directors and the Executive Committee of HCC based on Executive's
personal performance, Executive's group operating earnings per share ("OEPS")
and the price of HCC's Common Stock. For purposes of this Agreement, OEPS is
defined as HC's consolidated net earnings less capital gains/losses, currency
gains/losses, and any nonrecurring merger and acquisition income or expenses.

                  (c) STOCK OPTIONS. On the Effective Date, Executive shall
be provided with options to purchase 100,000 shares of HCC Common Stock at a
price per share equal to $16 15/16. Such shares will vest at 20% per year
beginning on the first anniversary of the Effective Date and 20% on each of
the four anniversaries thereafter. Such option will expire on the sixth
anniversary of the Effective Date.

                  (d) EXPENSES. During the Basic Term, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by him in accordance with the policies and procedures established by the
Compensation Committee 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. Executive shall be entitled to
participate in or receive benefits under any compensatory employee benefit
plan or other arrangement made available by the Company now or in the future
to its senior executive officers and key management

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employees, subject to and on a basis consistent with the terms, conditions,
and overall administration of such plan or arrangement. Nothing paid to
Executive under any plan or arrangement presently in effect or made available
in the future shall be deemed to be in lieu of the Base Salary payable to
Executive pursuant to Paragraph (a) of this Section. The Company shall not
make any changes in any employee benefit plans or other arrangements in
effect on the date hereof or subsequently in effect in which Executive
currently or in the future participates (including, without limitation, each
pension and retirement plan, supplemental pension and retirement plan,
savings and profit sharing plan, stock or unit ownership plan, stock or unit
purchase plan, stock or unit option plan, life insurance plan, medical
insurance plan, disability plan, dental plan, health and accident plan, or
any other similar plan or arrangement) that would adversely affect
Executive's rights or benefits thereunder, unless such change occurs pursuant
to a program applicable to substantially all executives of the Company and
does not result in a proportionately greater reduction in the rights of or
benefits to Executive as compared with any other executive of the Company.

                  (f) VACATIONS. Executive shall be entitled to twenty (20)
paid vacation days per year during the Basic Term. There shall be no
carryover of unused vacation from year to year. For purposes of this
Paragraph, weekends shall not count as vacation days, and Executive shall
also be entitled to all paid holidays and personal days given by the Company
to its senior executive officers.

                  (g) PERQUISITES. Executive shall be entitled to receive the
perquisites and fringe benefits appertaining to an executive officer of HC in
accordance with any practice established by the Compensation Committee.
Notwithstanding, and in addition to, any perquisites to which Executive is
entitled pursuant to the preceding sentence, Executive shall: (i) have a car
allowance of $1,250 per month; (ii) be allowed to travel on business
utilizing first class domestic passage and business class international
passage (and, upon approval of the Chief Executive Officer, will be entitled
to travel with Executive's spouse); (iii) receive annual country club dues at
the Lochinvar Golf and the Bayou Clubs; and (iv) receive a total of
$1,000,000 life insurance (either term or "split dollar" in HC's discretion),
which shall be in addition to the standard benefits provided to the Executive
under the Company's or HCC's group life insurance programs that covers
officers.

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

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         4.       TERMINATION.

                  (a)      DEFINITIONS.

                           (1)  "CAUSE" shall mean:

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

                                 (ii)  Willful misfeasance or nonfeasance of
         duty by Executive intended to injure or having the effect of injuring
         in some material fashion the reputation, business, or business
         relationships of the Company or any of its subsidiaries or any of their
         respective officers, directors, or employees;

                                 (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 which could reflect in some material fashion unfavorably upon
         the Company or any of its subsidiaries.

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 by action of not less than two-thirds of its members
furnishes to Executive a written resolution specifying in detail its findings
that Executive has been terminated for Cause as of the date set forth in the
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)  At any time during the period of three
         (3) consecutive years (not including any period prior to the date
         hereof), individuals who at the beginning of such period constituted
         the Board (and any new director whose election by the Board or whose
         nomination for election by the Company's shareholders were approved by
         a vote of at least two-thirds of the directors then still in office who
         either were directors at the beginning of such period or whose election
         or nomination for election was previously so approved) cease for any
         reason to constitute a majority thereof; or

                                 (iii) The shareholders of the Company
         approve a merger or consolidation of the Company with any other
         corporation, other than a merger or

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

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

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

                           (4)   A "GOOD REASON" shall mean any of the
following (without Executive's express written consent):

                                 (i)   Following a Change of Control, a
         material alteration in the nature or status of Executive's title,
         duties or responsibilities, or the assignment of duties or
         responsibilities inconsistent with Executive's status, title, duties
         and responsibilities;

                                 (ii)  A failure by the Company to continue in
         effect any employee benefit plan in which Executive was participating,
         or the taking of any action by the Company that would adversely affect
         Executive's participation in, or materially reduce Executive's benefits
         under, any such employee benefit plan, unless such failure or such
         taking of any action adversely affects the senior members of corporate
         management of the Company generally to the same extent;

                                 (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; or

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

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         However, Good Reason shall exist with respect to an above specified
         matter only if such matter is not corrected by the Company within
         thirty (30) days of its receipt of written notice of such matter from
         Executive, and in no event shall a termination by Executive occurring
         more than ninety (90) days following the date of the event described
         above be a termination for Good Reason due to such event.

                      (5) "TERMINATION DATE" shall mean the date Executive
is terminated for any reason pursuant to this Agreement.

                  (b) TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD REASON:
BENEFITS. In the event there is a termination by the Company without Cause, or
if Executive terminates for Good Reason (a "Termination Event"), this Agreement
shall terminate, except as provided in Paragraph 6, and Executive shall be
entitled to the following severance benefits:

                      (1) For a period of twelve (12) months after the
         Termination Date (unless the remainder of the Basic Term is less than
         twelve (12) months in which case, for an amount of time equal to the
         remainder of the Basic Term), Base Salary (as defined in Paragraph
         3(a)), at the rate, and payable quarterly unless such termination is by
         the Company without Cause, in which event such amount of Base Salary
         shall be paid in a lump sum within ten (10) days of the Termination
         Event.

                      (2) If there is a Change of Control or if there is a
         termination by the Company without Cause or by Executive for Good
         Reason, any stock options and other stock-related grants ("Stock
         Awards") which Executive has received under any of the HCC stock plans
         shall vest immediately; and further, if there is a termination for Good
         Reason or by the Company other than for Cause, all vested options shall
         be exercisable for one year or the remainder of their term, whichever
         is less.

                      (3) To the extent not theretofore paid or provided,
         the Company shall timely pay or provide to Executive any other amounts
         or benefits required to be paid or provided or which Executive is
         eligible to receive under any plan, program, policy or practice, or
         contract or agreement of the Company and its affiliated companies for
         the period of time equal to the remainder of the Basic Term (such other
         amounts and benefits shall be hereinafter referred to as the "Other
         Benefits"). Without limiting the preceding sentence, through December
         31, 2003 the Company, at its sole expense, shall continue to provide
         (through its own plan and/or individual policies) Executive (and
         Executive's dependents) with health benefits no less favorable than the
         group health plan benefits provided during such period to any senior
         executive officer of the Company or any affiliated company (to the
         extent any such coverage or benefits are taxable to Executive by reason
         of being provided under a self-insured health plan of the Company or an
         affiliate, the Company shall make Executive "whole" for the same on an
         after-tax basis). In any event, the Other Benefits provided for
         pursuant to this Paragraph shall be secondary to any benefits and
         coverage Executive (or his dependents) receive from another employer.

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                      (4) If Executive receives any payments whether or not
         pursuant to this Agreement which are subject to an excise tax imposed
         under Section 4999 of the Internal Revenue Code of 1986, as amended,
         or any similar tax imposed under federal, state, or local law
         (collectively, "Excise Taxes"), the Company shall pay to Executive (on
         or before the date on which the Company is required to withhold such
         Excise Taxes), 1) an additional amount equal to all Excise Taxes then
         due and payable, and 2) the amount necessary to defray Executive's
         increased (federal, state, and local) tax liability arising due to
         payment of the amount specified in this Subsection (4) which shall
         include any costs and expenses, including penalties and interest
         incurred by Executive in connection with any audit, proceedings, etc.
         related to the payment of such Excise Taxes or this payment. For
         purposes of calculating the amount payable to Executive under this
         Paragraph, the federal and state income tax rates used shall be the
         highest marginal federal and state rates applicable to ordinary income
         in Executive's state of residence, taking into account any federal
         income tax deductions or credits available to Executive for state
         income taxes. The Company shall cause its independent auditors to
         calculate such amount and provide Executive a copy of such calculation
         at least ten (10) days prior to the date specified above for payment of
         such amount. It is the intent of the Parties that this Subsection (4)
         shall place Executive in the same net after-tax position Executive
         would have been in had no payment been subject to an Excise Tax and,
         notwithstanding anything herein to the contrary, it shall be construed
         to effectuate said result.

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

                      (6) Executive shall be free to accept other employment
         during such period, and there shall be no offset of any employment
         compensation earned by Executive in such other employment during such
         period against payments due Executive under this Paragraph (4), and
         there shall be no offset in any compensation received from such other
         employment against the Base Salary set forth above.

                  (c) TERMINATION IN EVENT OF DEATH: BENEFITS. If Executive's
employment is terminated by reason of Executive's death during the Basic Term,
this Agreement shall terminate, except as provided in Paragraph 6, without
further obligation to Executive's legal representatives under this Agreement,
other than for payment of all accrued compensation, unreimbursed expenses, the
timely payment or provision of Other Benefits through the date of death, and, if
such death occurs on or after October 1 of any year, such cash bonus as
Executive would otherwise have been awarded in such year if Executive's death
had not occurred. Such amounts shall be paid to Executive's estate or
beneficiary, as applicable, in a lump sum in cash within ninety (90) days after
the date of death. With respect to the provision of Other Benefits, the term
Other Benefits as used in this Paragraph 4(c) shall include, without limitation,
and Executive's estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the Company
to the estates and beneficiaries of other executive level

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employees of the Company under such plans, programs, practices, and policies
relating to death benefits, if any, as in effect with respect to other
executives and their beneficiaries at any time during the 120-day period
immediately preceding the date of death. Additionally, all Stock Awards for
which Executive would have been eligible had he completed the Basic Term
(except as set forth in Paragraph 4(b)(2)), shall be accelerated, and
Executive's estate or beneficiary shall be vested in such Stock Awards as of
the date of Executive's termination.

                  (d) TERMINATION IN EVENT OF DISABILITY: BENEFITS. If
Executive's employment is terminated by reason of Executive's Disability
during the Basic Term, this Agreement shall continue in full force for a
period of one (1) year following such Disability and if such Disability
occurs on or after October 1 of any year Executive shall be entitled to the
same cash or stock bonus in such year that Executive would have been awarded
if such Disability had not occurred. Following such one (1) year period, this
Agreement shall continue in full force except that (a) the Base Salary shall
be reduced by 50% and (b) Executive shall not be entitled to any subsequent
cash bonuses. In addition, all outstanding Stock Awards shall vest
immediately upon such termination due to Disability. If Executive's
Disability occurs prior to the commencement of the Consulting Period, defined
below, in addition to the amounts provided for herein, Executive shall
receive the Consulting Fee, defined below, at such time as it would have
otherwise been earned, whether or not Executive can perform Consulting
Services, defined below.

                  (e) VOLUNTARY TERMINATION BY EMPLOYEE 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 through the proposed Termination Date and also
vesting awards that would have vested but for this acceleration of the
proposed Termination Date. Upon such a termination by Executive except as
provided in Paragraph 6 or upon termination for Cause by the Company, this
Agreement shall terminate and the Company shall pay to Executive all accrued
compensation, unreimbursed expenses and the Other Benefits through the
Termination Date. All unvested options shall be void. Such amounts shall be
paid to Executive in a lump sum in cash within thirty (30) days after the
date of termination.

                  (f) DIRECTOR POSITIONS. Executive agrees that upon
termination of employment, for any reason, at the request of the Chairman of
the Board, he will immediately tender his resignation from any and all Board
positions held with the Company and/or any of its subsidiaries and
affiliates. If Executive remains as a director, after such termination,
Executive shall be compensated as an outside director.

              5.  NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY.
Executive recognizes and agrees that the benefit of not being employed
at-will, is provided in consideration for, among other things, the agreements
contained in this Section, as well as the Stock Options granted to Executive
pursuant to this Agreement. The Company agrees that while employed pursuant
to this Agreement, Executive will be provided with confidential information
of Company;

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specialized training on how to perform his duties; and contact with the
Company's customers and potential customers. Furthermore, in the event
Executive is terminated without Cause, or terminates for Good Reason, and
more than one (1) year remains on the existing Basic Term, then Executive
shall receive additional consideration in an amount equal to the quotient of
the Base Salary divided by 12, which shall thereupon be multiplied by the
number of months remaining in the Basic Term minus 12 months and which shall
be paid in one lump sum within ten (10) days of such termination.

         In consideration of all of the foregoing, Executive agrees as
follows:

                  (a) NON-COMPETITION DURING EMPLOYMENT. Executive agrees
during the Basic Term he will not compete with the Company by engaging in the
conception, design, development, production, marketing, or servicing of any
product or service that is substantially similar to the products or services
which the Company provides, and that he will not work for, in any capacity,
assist, or become affiliated with as an owner, partner, etc., either directly
or indirectly, any individual or business which offers or performs services,
or offers or provides products substantially similar to the services and
products provided by Company.

                  (b) CONFLICTS OF INTEREST. Executive agrees that during the
Basic 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 Company 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 Basic Term, for any reason, within any of the
markets in which the Company has sold products or services or formulated a
plan to sell products or services into a market during the last twelve (12)
months of Executive's employ or which the Company enters into within three
(3) months thereafter, engage in or contribute Executive's knowledge to any
work which is competitive with or similar to a product, process, apparatus,
service, or development on which Executive worked or with respect to which
Executive had access to Confidential Information while employed by the
Company; provided, however, this Paragraph (c) shall not operate to prevent
Executive from engaging in retail insurance activities during such two-year
period to the extent such activities do not compete or permit any other
person or entity to compete with any business the Company or any of its
subsidiaries or affiliated companies were engaged in at the time of such
termination or which the Company enters into within three (3) months
thereafter. Following the expiration of said two (2) year period, Executive
shall continue to be obligated under the Confidential

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Information Paragraph 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 Basic 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 Basic Term, and for a period of two (2) years after
the termination of the Basic 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 Company 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 Paragraph with respect to any specific
Confidential Information and proprietary information shall cease when that
specific portion of the Confidential Information and proprietary information
becomes publicly known, in its entirety and without combining portions of
such information obtained separately. It is understood that such Confidential
Information and proprietary information of the Company include matters that
Executive conceives or develops, as well as matters Executive learns from
other employees of Company. Confidential Information is defined to include
information: (1) disclosed to or known by the 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

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Executive's employment with the Company shall be the exclusive property of
the Company, shall not be copied and/or removed from the premises of the
Company, except in pursuit of the business of the Company, and shall be
delivered to the Company, without Executive retaining any copies, upon
notification of the termination of Executive's employment or at any other
time requested by the Company. The Company shall have the right to retain,
access, and inspect all property of Executive of any kind in the office, work
area, and on the premises of the Company upon termination of Executive's
employment and at any time during employment by the Company to ensure
compliance with the terms of this Agreement.

                  (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 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 Copyright 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 Paragraphs
5(a), (c), (d), (e) or (f) above cannot be remedied solely by money damages,
and that in addition to any other remedies Company may have, 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 Paragraphs 5(b), (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.

                  (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
Paragraph do not excuse Executive from complying with the

                                    Page 11
<PAGE>

agreements contained herein.

                  (o) SURVIVABILITY. The agreements contained in Paragraphs
5(c)-(g) shall survive the termination of this Agreement for any reason.

              6.   CONSULTING AGREEMENT. Effective upon Executive's
termination of employment for any reason other than Executive's termination
prior to the end of the Basic Term by the Company for Cause, HC hereby
retains Executive as a consultant (an independent contractor and not as an
employee) for a period of three (3) years (the "Consulting Period").
Termination of the Basic Term shall not effect the Parties' rights and
obligations under this Paragraph 6. Subject to the following, Executive
agrees to provide, if requested, a minimum of 166 hours of service per year,
or, as requested by the Company, up to a total of 500 hours during any one
year of the Consulting Period; provided, however, that the total number of
hours to be worked over the duration of the Consulting Period shall not
exceed 500 hours (the "Consulting Services"). The Consulting Services to be
provided shall be commensurate with Executive's training, background,
experience and prior duties with the Company. Executive agrees to make
himself reasonably available to provide such Consulting Services during the
Consulting Period; provided, however, the Company agrees that it shall
provide reasonable advance notice to Executive of its expected consulting
needs and any request for Consulting Services hereunder shall not
unreasonably interfere with Executive's other business activities and
personal affairs as determined in good faith by Executive. In addition,
Executive shall not be required to perform any requested Consulting Services
which, in Executive's good faith opinion, would cause Executive to breach any
fiduciary duty or contractual obligation Executive may have to another
employer. Further, during the Consulting Period, Executive shall not be
subject to any non-competition provisions except for the two-year period
provided for in Paragraph 5(c). Unless waived by Executive, Executive shall
not be required to perform Consulting Services for more than four (4) days
during any week or for more than eight (8) hours during any day. Executive's
travel time shall not constitute hours of Consulting Services for purposes of
this Paragraph 6. The Parties contemplate that, when appropriate, the
Consulting Services shall be performed at Executive's office, residence or at
the Company's executive offices in Houston, Texas and may be performed at
such other locations only as they may mutually agree upon. Executive shall be
properly reimbursed for all travel and other expenses reasonably incurred by
Executive in rendering the Consulting Services. HCC shall pay Executive
$200,000 per year (the "Consulting Fee") during the Consulting Period,
payable monthly in arrears. Executive may elect to delay payment for services
but not the services themselves. Except as set forth below and in Paragraphs
4(c) or 4(d) hereof, if Executive fails to provide the hours requested by the
Company in any 24-month period, Executive's rights to receive any further
Consulting Fee shall immediately terminate. During the Consulting Period,
Executive shall receive no employment benefits from HCC. If Executive dies or
becomes Disabled during the Basic Term (or as an employee of the Company
following the Basic Term) or during the Consulting Period he (or, on his
death, his beneficiary or estate) shall receive or continue to receive as the
case may be the Consulting Fee during the remainder of the Consulting Period
as if such death or Disability had not occurred.

                                    Page 12
<PAGE>

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

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

         9.  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 hereinabove, shall be
effective upon deposit. Notice given in any other manner shall be effective
only if and when received:

             If to Executive:             Benjamin D. Wilcox
                                          2904 Ferndale
                                          Houston, Texas 77009
                                          Fax: (713) 610-1974

             If to Company:               HCC Insurance Holdings, Inc.
                                          13403 Northwest Freeway
                                          Houston, Texas  77040
                                          Fax:  (713) 462-2401

             with a copy (which shall     Arthur S. Berner, Esq.
             not constitute notice) to:   Winstead Sechrest & Minick P.C.
                                          Suite 2400
                                          910 Travis Street
                                          Houston, Texas  77002-5895
                                          Fax:  (713) 650-2400

         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.

                                    Page 13
<PAGE>

         12. ARBITRATION. In the event any dispute arises out of Executive's
employment with or by the Company, or separation/termination therefrom,
whether as an employee or as a consultant, which cannot be resolved by the
Parties to this Agreement, such dispute shall be submitted to final and
binding arbitration. The arbitration shall be conducted in accordance with
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association ("AAA"). If the Parties cannot agree on an
arbitrator, a list of seven (7) arbitrators will be requested from AAA, and
the arbitrator will be selected using alternate strikes with Executive
striking first. The cost of the arbitration will be shared equally by
Executive and Company ; provided, however, the Company shall promptly
reimburse Executive for all costs and expenses incurred in connection with
any dispute in an amount up to, but not exceeding 20 percent of Executive's
Base Salary (or, if the dispute arises during the Consulting Period,
Executive's Base Salary as in effect immediately prior to the beginning of
the Consulting Period) unless such termination was for Cause in which event
Executive shall not be entitled to reimbursement unless and until it is
determined he was terminated other than for Cause. Arbitration of such
disputes is mandatory and in lieu of any and all civil causes of action and
lawsuits either party may have against the other arising out of Executive's
employment with Company, or separation therefrom. Such arbitration shall be
held in Houston, Texas.

         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 the Executive
and an officer or other authorized executive of Company.

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

         16. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.

         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

                                    Page 14
<PAGE>

personal jurisdiction in the state and federal courts in Harris County, Texas.

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

EXECUTIVE                                   COMPANY

                                            HOUSTON CASUALTY COMPANY

/s/ Benjamin D. Wilcox                      By: /s/ Stephen L. Way
-----------------------                        --------------------------
BENJAMIN D.  WILCOX                                 STEPHEN L. WAY
                                                    Chairman of the Board

Dated:  January 4, 1999                     Dated:  January 4, 1999
      -----------------                             ---------------------

                                    Page 15<PAGE>

                             EMPLOYMENT AGREEMENT

         This Employment Agreement ("Agreement") is entered into effective as
of the 1st day of January, 1998 (the "Effective Date"), between HCC INSURANCE
HOLDINGS, INC. ("HCC" or "Company"), and EDWARD HARDIN ELLIS, 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 Senior Vice President and
Chief Financial Officer ("CFO") until June 30, 2001, and, as an integral part
of its management who participates in the decision-making process relative to
short and long-term planning and policy for the Company, will serve on the
Company's Senior Management Committee;

         WHEREAS, it is the desire of the Board of Directors of HCC (the
"Board") to (i) directly engage Executive as an officer of HCC and its
subsidiaries; 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 a Senior
Vice President and CFO, and Executive hereby agrees to accept such
employment, on the terms and conditions set forth herein, for the period
commencing on the Effective Date and expiring as of 11:59 p.m. on September
30, 2001 (the "Basic Term") (unless sooner terminated as hereinafter set
forth).

         2. DUTIES.

            (a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject
to the supervision of the Board of Directors, act as Chief Financial Officer
of HCC in the ordinary course of its business with all such powers with
respect to such management and control as may be reasonably incident to such
responsibilities. During normal business hours, Executive shall devote his
full time and attention to diligently attending to the business of the
Company during the Basic Term. During the Basic Term, Executive shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person, firm, corporation, or organization,
whether for compensation or otherwise, without the prior written consent of
the Board of Directors of HCC. However, Executive shall have the right to
engage in such activities

                                    Page 1
<PAGE>

as may be appropriate in order to manage his personal investments so long as
such activities do not materially interfere or conflict with the performance
of his duties to the Company hereunder. The conduct of such activity shall
not be deemed to materially interfere or conflict with Executive's
performance of his duties until Executive has been notified in writing
thereof and given a reasonable period in which to cure the same.

             (b) OTHER DUTIES. If elected, Executive agrees to serve as a
member of the Senior Management Committee of HCC and of any of its
subsidiaries and in one or more executive offices of any of HCC's
subsidiaries, provided Executive is indemnified for serving in any and all
such capacities in a manner acceptable to the Company and Executive. If
elected, Executive agrees that he shall not be entitled to receive any
compensation for serving as a director of 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.

         3.  COMPENSATION AND RELATED MATTERS.

             (a) BASE SALARY. Executive shall receive a base salary paid by
the Company at the annual rate of $225,000, during each calendar year of the
Basic Term, payable in substantially equal monthly installments. For purposes
of this Agreement, "Base Salary" shall mean the Executive's initial base
salary or, if increased, then the increased base salary.

             (b) BONUS PAYMENTS. Executive shall be eligible to receive, in
addition to the Base Salary, an annual cash and/or stock bonus payment in
amount, which may be zero, to be determined at the sole discretion of the
Compensation Committee.

             (c) STOCK OPTIONS. In addition to stock options previously
granted to Executive, Executive shall be entitled to receive, in addition to
the Base Salary, options to purchase HCC shares, which may be zero, to be
determined at the sole discretion of the Board of Directors or the HCC
Compensation Committee.

             (d) EXPENSES. During the Basic Term, Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by him
(in accordance with the policies and procedures established by the 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. Executive shall be entitled to participate
in or receive benefits under any compensation employee benefit plan or other
arrangement made available by the Company now or in the future to its senior
executive officers, subject to and on a basis consistent with the terms,
conditions, and overall administration of such plan or arrangement. Nothing
paid to Executive under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of the Base Salary
payable to Executive pursuant to Paragraph (a) of this Section. The Company
shall not make any changes in any employee benefit plans or other
arrangements in effect on the date hereof or subsequently in effect in which

                                     Page 2
<PAGE>

Executive currently or in the future participates (including, without
limitation, each pension and retirement plan, supplemental pension and
retirement plan, savings and profit sharing plan, stock or unit ownership
plan, stock or unit purchase plan, stock or unit option plan, life insurance
plan, medical insurance plan, disability plan, dental plan, health and
accident plan, or any other similar plan or arrangement) that would adversely
affect Executive's rights or benefits thereunder, unless such change occurs
pursuant to a program applicable to substantially all executives of the
Company and does not result in a proportionately greater reduction in the
rights of or benefits to Executive as compared with any other executive of
the Company.

             (f) VACATIONS. Executive shall be entitled to twenty (20) paid
vacation days per year during the Basic Term. There shall be no carryover of
unused vacation from year to year. For purposes of this Paragraph, weekends
shall not count as vacation days, and Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.

             (g) PERQUISITES. Executive shall be entitled to receive the
perquisites and fringe benefits appertaining to an executive officer of HCC
in accordance with any practice established by the Board.

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

         4.  TERMINATION.

             (a) DEFINITIONS.

                 (1) "CAUSE" shall mean:

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

                     (ii)  Willful misfeasance or nonfeasance of duty by
         Executive intended to injure or having the effect of injuring in some
         material fashion the reputation, business, or business relationships
         of the Company or any of its subsidiaries or any of their respective
         officers, directors, or employees;

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

                     (iv)  Conviction of Executive of any felony, any crime
         involving moral turpitude or any crime other than a vehicular offense
         which could reflect in some

                                      Page 3
<PAGE>

         material fashion unfavorably upon the Company or any of its
         subsidiaries.

                 (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)  At any time during the period of three (3)
         consecutive years (not including any period prior to the date
         hereof), individuals who at the beginning of such period constituted
         the Board (and any new director whose election by the Board or whose
         nomination for election by the Company's shareholders were approved
         by a vote of at least two-thirds of the directors then still in
         office who either were directors at the beginning of such period or
         whose election or nomination for election was previously so
         approved) cease for any reason to constitute a majority thereof; or

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

                     (iv)  The shareholders 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.

         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 his 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 by action of not less than two-thirds of its
         members furnishes to Executive a written resolution specifying in
         detail its findings that Executive has been terminated for Cause as of
         the date set forth in the notice to Executive.

                 (3) A "DISABILITY" shall mean the absence of Executive from
Executive's duties with the Company on a full-time basis for 180 consecutive
days, or 180 days

                                     Page 4
<PAGE>

in a 365-day period, as a result of incapacity due to mental or physical
illness which results in the Executive being unable to perform the essential
functions of his position, with or without reasonable accommodation.

                 (4) A "GOOD REASON" shall mean any of the following (without
Executive's express written consent):

                     (i)   Following a change of control,  a material
         alteration in the nature or status of Executive's title, duties or
         responsibilities, or the assignment of duties or responsibilities
         inconsistent with, Executive's status title, duties and
         responsibilities;

                     (ii)  A failure by the Company to continue in effect any
         employee benefit plan in which Executive was participating, or the
         taking of any action by the Company that would adversely affect
         Executive's participation in, or materially reduce Executive's
         benefits under, any such employee benefit plan, unless such failure
         or such taking of any action adversely affects the senior members of
         corporate management of the Company generally;

                     (iii) A relocation of the Company's executive offices,
         or Executive's relocation to any place other than the 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; or

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

However, Good Reason shall exist with respect to an above specified matter only
if such matter is not corrected by the Company within thirty (30) days of its
receipt of written notice of such matter from Executive and in no event shall a
termination by Executive occurring more than ninety (90) days following the date
of the event described above be a termination for Good Reason due to such event.

                 (5) "TERMINATION DATE" shall mean the date Executive is
terminated for any reason pursuant to this Agreement.

                 (6) "TERMINATION  FOLLOWING  A  CHANGE  OF  CONTROL" shall
mean failure of any successor/surviving company to adopt this Agreement.

                     (b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON:
BENEFITS. In the event there is a termination by the Company without Cause,
or if Executive terminates for Good

                                     Page 5
<PAGE>

Reason (a "Termination Event"), this Agreement shall terminate and Executive
shall be entitled to the following severance benefits:

                           (1) For the remainder of the Basic Term after the
         Termination Date, Base Salary (as defined in Paragraph 3(a)), at the
         rate in effect immediately prior to the Termination Event, payable in a
         lump sum;

                           (2) If there is a Change of Control or if there is a
         termination by the Company without Cause or by Executive for Good
         Reason any stock options and other stock-related grants ("Stock
         Awards") which Executive has received under any of the HCC Stock Option
         Plans shall vest immediately provided, however, if there is a
         termination for Good Reason, or by the Company other than for Cause,
         all options shall be exercisable for one year or the remainder of that
         term, whichever is less;

                           (3) To the extent not theretofore paid or provided,
         the Company shall timely pay or provide to Executive any other amounts
         or benefits required to be paid or provided or which Executive is
         eligible to receive under any plan, program, policy or practice, or
         contract or agreement of the Company and its affiliated companies for
         the period of time equal to the remainder of the Basic Term and through
         December 31, 2001 the Company, at its sole expense, shall continue to
         provide (through its own plan and/or individual policies) Executive
         (and Executive's dependents) with health benefits no less favorable
         than the group health plan benefits provided during such period to any
         senior executive officer of the Company or any affiliated company (to
         the extent any such coverage or benefits are taxable to Executive by
         reason of being provided under a self-insured health plan of the
         Company or an affiliate, the Company shall make Executive "whole" for
         the same on an after-tax basis), provided, however, such coverage shall
         be secondary to any group health plan coverage Executive (or his
         dependents) receive from another employer, (such other amounts and
         benefits shall be hereinafter referred to as the "Other Benefits");

                           (4) If Executive receives any payments whether or not
         pursuant to this Agreement which are subject to an excise tax imposed
         under Section 4999 of the Internal Revenue Code of 1986, as amended, or
         any similar tax imposed under federal, state, or local law
         (collectively, "Excise Taxes"), the Company shall pay to Executive (on
         or before the date on which the Company is required to withhold such
         Excise Taxes), 1) an additional amount equal to all Excise Taxes then
         due and payable, and 2) the amount necessary to defray Executive's
         increased (federal, state, and local) tax liability arising due to
         payment of the amounts specified in this Subsections (4) of this
         Paragraph 4, which shall include any costs and expenses, including
         penalties and interest incurred by Executive in connection with any
         audit, proceedings, etc. related to the payment of such Excise Taxes or
         this payment. For purposes of calculating the amount payable to
         Executive under this Paragraph, the federal and state income tax rates
         used shall be the highest marginal federal and state rates applicable
         to ordinary income in Executive's state of residence, taking into
         account any federal income tax deductions or credits available to

                                     Page 6
<PAGE>

         Executive for state income taxes. The Company shall cause its
         independent auditors to calculate such amount and provide Executive a
         copy of such calculation at least ten (10) days prior to the date
         specified above for payment of such amount. It is the intent of the
         Parties that this Subsection (4) shall place Executive in the same net
         after-tax position Executive would have been in had no payment been
         subject to an Excise Tax and, notwithstanding anything herein to the
         contrary, it shall be construed to effectuate said result;

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

                           (6) Executive shall be free to accept other
         employment during such period, and there shall be no offset of any
         employment compensation earned by Executive in such other employment
         during such period against payments due Executive under this Paragraph
         (4), and there shall be not offset in any compensation received from
         such other employment against the Base Salary set forth above.

                     (c)   TERMINATION IN EVENT OF DEATH: BENEFITS. If
Executive's employment is terminated by reason of Executive's death during
the Basic Term, this Agreement shall terminate without further obligation to
Executive's legal representatives under this Agreement, other than for
payment of all accrued compensation, unreimbursed expenses, the timely
payment or provision of Other Benefits through the date of death. Such
amounts shall be paid to Executive's estate or beneficiary, as applicable, in
a lump sum in cash within ninety (90) days after the date of death. With
respect to the provision of Other Benefits, the term Other Benefits as used
in this Paragraph 4(c) shall include, without limitation, and Executive's
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company to the estates
and beneficiaries of other executive level employees of the Company under
such plans, programs, practices, and policies relating to death benefits, if
any, as in effect with respect to other executives and their beneficiaries at
any time during the 120-day period immediately preceding the date of death.
Additionally, all Stock Awards for which Executive would have been eligible
had he completed the Basic Term shall be accelerated, and Executive's estate
or beneficiary shall be vested in such Stock Awards as of the date of
Executive's termination.

                     (d)   TERMINATION IN EVENT OF DISABILITY: BENEFITS. If
Executive's employment is terminated by reason of Executive's Disability
during the Basic Term, this Agreement shall continue in full force for a
period of one (1) year following such Disability. Following such one (1) year
period, this Agreement shall continue in full force except that (a) the Base
Salary shall be reduced by 50% and (b) Executive shall, not be entitled to
any subsequent cash or stock bonuses. In addition, all outstanding Stock
Awards shall vest immediately upon such termination due to Disability.

                     (e)   VOLUNTARY TERMINATION BY EMPLOYEE AND TERMINATION
FOR CAUSE:

                                   Page 7
<PAGE>

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 through the proposed Termination Date and also vesting
awards that would have vested but for this acceleration of the proposed
Termination Date. Upon such a termination by Executive or upon termination
for Cause by the Company, this Agreement shall terminate and the Company
shall pay to Executive all accrued compensation, unreimbursed expenses and
the Other Benefits through the Termination Date. Such amounts shall be paid
to Executive in a lump sum in cash within thirty (30) days after the date of
termination.

               (f) DIRECTOR POSITIONS. Executive agrees that upon termination
of employment, for any reason, at the request of the Chairman of the Board,
Executive will immediately tender his resignation from any and all Board
positions held with the Company and/or any of its subsidiaries and affiliates.

           5.  NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY.
Executive recognizes and agrees that the benefit of not being employed
at-will, is provided in consideration for, among other things, the agreements
contained in this Section. The Company agrees that while employed pursuant to
this Agreement, Executive will be provided with confidential information of
Company; specialized training on how to perform his duties; and contact with
the Company's customers and potential customers.

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

               (b) CONFLICTS OF INTEREST. Executive agrees that during the
Basic 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
President of the Company as to each offer received by Executive to engage in
any such activity. Executive further agrees to disclose to the Company any
other facts of which Executive becomes aware which in Executive's good faith
judgment could reasonably be expected to involve or give rise to a Conflict
of Interest or potential Conflict of Interest.

                                   Page 8
<PAGE>

               (c) 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 Paragraph with respect to any specific Confidential Information and
proprietary information shall cease when that specific portion of the
Confidential Information and proprietary information becomes publicly known,
in its entirety and without combining portions of such information obtained
separately. It is understood that such Confidential Information and
proprietary information of the Company include matters that Executive
conceives or develops, as well as matters Executive learns from other
employees of Company. Confidential Information is defined to include
information: (1) disclosed to or known by the 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.

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

               (e) 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.

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

                                   Page 9
<PAGE>

               (g) 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 Copyright 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.

               (h) BREACH. Executive agrees that any breach of Paragraphs
5(a) or (c) above cannot be remedied solely by money damages, and that in
addition to any other remedies Company may have, 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.

               (i) 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.

               (j) 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 Paragraph
do not excuse Executive from complying with the agreements contained herein.

               (k) SURVIVABILITY. The agreements contained in Paragraphs
5(c)-(d) shall survive the termination of this Agreement for any reason.

           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. Failure of the Company to obtain such written
agreement prior to the effectiveness of any such succession shall be a
material breach of this Agreement.

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

           8.  NOTICES. All notices pursuant to this Agreement shall be in
writing and sent certified mail, return receipt requested, addressed as set
forth below, or by delivering the same in person to such party, or by
transmission by facsimile to the number set forth below (which shall not
constitute notice). Notice deposited in the United States Mail, mailed in the
manner

                                   Page 10
<PAGE>

described hereinabove, shall be effective upon deposit. Notice given in any
other manner shall be effective only if and when received:

               If to Executive:             Edward Hardin Ellis, Jr.
                                            1826 Castlerock
                                            Houston  Texas  77090
                                            --------------------

               If to Company:               HCC Insurance Holdings, Inc.
                                            13403 Northwest Freeway
                                            Houston, Texas  77040
                                            Fax:  (713) 462-2401

               with a copy (which shall     Arthur S. Berner, Esq.
               not constitute notice) to:   Winstead Sechrest & Minick P.C.
                                            Suite 2400
                                            910 Travis Street
                                            Houston, Texas  77002-5895
                                            Fax:  (713) 650-2400

         9.  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.

         10. 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.

         11. ARBITRATION. In the event any dispute arises out of 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. 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. The cost of the arbitration will be shared equally by Executive and
Company ; provided, however, the Company shall promptly reimburse Executive for
all costs and expenses incurred in connection with any dispute in an amount up
to, but not exceeding 20 percent of Executive's base salary unless such
termination was for Cause in which event Executive shall not be entitled to
reimbursement unless and until it is determined he was terminated other than for
Cause. Arbitration of such disputes is mandatory and in lieu of any and all
civil causes of action and lawsuits either party may have against the other
arising out of Executive's employment with Company, or separation therefrom.
Such arbitration shall be held in Houston, Texas.

                                    Page 11
<PAGE>

         12. 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.

         13. 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 the Executive
and an officer or other authorized executive of Company.

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

         15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.

         16. 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.

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

EXECUTIVE                                   COMPANY

                                            HCC INSURANCE HOLDINGS, INC.

/s/ Edward H. Ellis, Jr.                    By: /s/ Stephen L. Way
------------------------                       --------------------------------
EDWARD HARDIN ELLIS, JR.                            STEPHEN L. WAY
                                                    Chief Executive Officer and
                                                    Chairman of the Board

Dated:  1/23/98                             Dated:  1/23/98
      ------------------                          -----------------------------

                                   Page 12

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