AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
entered into effective as of the 10th day of November, 2004 (the "Effective
Date"), between HCC INSURANCE HOLDINGS, INC. ("HCC" or "Company") and STEPHEN L.
WAY ("Executive"), sometimes collectively referred to herein as the "Parties."
R E C I T A L S:
WHEREAS, Executive is to be employed as Chief Executive Officer ("CEO")
and Executive Chairman of the Board of HCC;
WHEREAS, it is the desire of the Board of Directors of HCC (the "Board")
to (i) directly engage Executive as an officer of HCC and its subsidiaries; and
(ii) directly engage, if elected, the services of Executive as a director of HCC
and its subsidiaries;
WHEREAS, Executive is desirous of committing himself to serve HCC on the
terms herein provided;
WHEREAS, this Agreement amends and restates that certain Employment
Agreement dated effective as of January 1, 2003 as supplemented by that certain
Employment Agreement Addendum 3(a)(2) entered into effective as of December 31,
2003; and
WHEREAS, Executive and HCC have previously entered into an Employment
Agreement effective as of January 1, 2000 which is deemed to be cancelled,
terminated and of no further force or effect, as of January 1, 2003.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the Parties agree as follows:
1. TERMINATION OF 2000 CONTRACT AND TERM. Effective as of January 1, 2003,
the 2000 Contract shall be cancelled, terminated and of no further force or
effect. The Company hereby agrees to employ Executive as its Chief Executive
Officer and Executive Chairman of the Board, and Executive hereby agrees to
accept such employment, on the terms and conditions set forth herein, for the
period commencing on the January 1, 2003 and expiring as of 11:59 p.m. on
December 31, 2007 (unless sooner terminated or unless renewed as hereinafter set
forth).
Unless Executive or the Company has given written notice of termination at
least 120 days before the end of any calendar year, at the end of each year of
the term and any extension thereof, this Agreement shall be extended
automatically and without any further action on the part of any party for an
additional one year so that unless so terminated, Executive shall always have a
five-year term remaining on this Agreement. As used herein the "Term" shall mean
the initial five-year term and any subsequent renewal or renewals thereof. In
addition, at Executive's sole election, at any time during the Term, Executive
shall have the right to terminate his position as CEO, but continue
as Executive Chairman of the Board, provided, in such event the Term of this
Agreement shall continue for a period of five (5) years from the date Executive
no longer serves as CEO, with no right to further extensions.
2. DUTIES.
(a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject to
the supervision of the Board of Directors, have general management and control
of HCC in the ordinary course of its business with all such powers with respect
to such management and control as may be reasonably incident to such
responsibilities. During normal business hours, Executive shall devote
substantially all of his time and attention to diligently attending to the
business of the Company. During the Term, and except as shall exist prior to the
date of this Agreement, Executive shall not directly or indirectly render any
services of a business, commercial, or professional nature to any other person,
firm, corporation, or organization, whether for compensation or otherwise,
without the prior consent of the Board of Directors of HCC. However, Executive
shall have the right to engage in such activities as may be appropriate in order
to manage his personal investments 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. At all times during the Term, the Company shall
use its best efforts to cause Executive to be elected a director and to serve as
Executive Chairman of the Board of HCC. Any such failure to use its best efforts
prior to a Change of Control shall be a material breach of this Agreement for
purposes of Section (4)(a)(iv). Executive agrees to serve as a director and
member 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. Executive agrees that while a full time employee 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. If Executive is not a full
time employee, he shall be compensated as an outside director.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY AND DEFERRED COMPENSATION
(1) Executive shall receive a base salary (the "Base Salary")
paid by the Company at the annual rate of $800,000, during the period beginning
on the Effective Date and for each year of the Term, payable not less frequently
than in substantially equal monthly installments (or such other more frequent
times as executives of HCC normally are paid).
(2) In addition to the Base Salary, Executive shall receive
deferred compensation (the "Deferred Compensation") of $400,000 or such greater
amount as is approved by the Compensation Committee in its discretion for each
calendar year or portion thereof of the Term.
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 of the Board of Directors of the Company (the
"Compensation Committee"). 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).
Deferred Compensation accruals for a year shall be credited on December 31 of
the year, unless an earlier date is specified by the Compensation Committee.
(3) If Executive elects to terminate his position as CEO but
remain as Executive Chairman of the Board, the Base Salary set forth in (i)
above shall be reduced from $800,000 to $500,000 per annum (and all other terms
of this Agreement shall continue to apply).
(b) BONUS PAYMENTS. During the Term, Executive shall be entitled to
receive, in addition to the Base Salary, an annual cash bonus payment in amounts
to be determined at the sole discretion of the Compensation Committee.
(c) EXPENSES. During the Term of this Agreement and the Consulting
Period, defined hereunder, 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. In addition, the
Company shall reimburse Executive pursuant to the arrangement in effect as of
the date of this Agreement for all use of the Executive's aircraft during the
Term and the Consulting Period.
(d) 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 and key management 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 or Defined Compensation payable to Executive pursuant to
subsection (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.
(e) VACATIONS. Executive shall be entitled to forty (40) paid
vacation days per year during the Term, or such additional number as may be
determined by the Board from time to time. There shall be indefinite carryovers
of unused vacation 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.
(f) PERQUISITES.
(1) Executive shall be entitled to receive the perquisites and
fringe benefits applicable to a senior executive officer of HCC 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 the use of two company
vehicles similar to those Executive has been provided prior to the date of this
Agreement and the Company shall pay all expenses related to Executive's use of
such automobiles, including gasoline, insurance, and maintenance. At the
beginning of each calendar year of the Term and the Consulting Period, HCC shall
replace the older vehicle (or if both are the same age -- one of such vehicles)
with a new vehicle. Executive shall receive ownership to both such vehicles upon
termination of this Agreement; (ii) be allowed to travel with his spouse on
business utilizing First Class passage under the Company's corporate account, as
Executive determines; (iii) receive reimbursement of annual country club dues
for Executive's membership in Lochinvar Country Club, Shadow Hawk Country Club
plus one additional country club to be determined by Executive. In addition,
Executive shall have the right to change membership in any such club and to
obtain membership to any other club (at Company's sole cost) so long as Company
is not required to hold membership in, or pay dues for, more than three (3) such
country clubs at any one time. Following termination of this Agreement,
Executive shall be bonused such ownership; (iv) receive all existing life
insurance plus an additional term or life policy in an amount equal to
$5,000,000. Upon termination of Executive's position as Executive Chairman., all
such life insurance shall be converted to ordinary life insurance to be owned by
Executive or Executive's designee; (v) be entitled to utilize an office at the
Company's executive offices or, at Executive's election, to be reimbursed for
the utilization of an office at Executive's home; (vi) be entitled to utilize
the services of Company employees and contract employees at an aggregate annual
wage cost, including bonuses of $600,000 (which shall be added to Executive's
taxable income) during the Term and the Consulting Period (applicable payroll
taxes and the cost of employee fringe benefits, including medical and dental
insurance, retirement plans including 401k plans and any stock based
compensation expense, including stock options or restricted shares shall be in
addition to the $600,000 wage limitation; (vii) have the right to utilize during
the Term and the Consulting Period at no cost to Executive, the use of the
Company's airplanes or to be reimbursed for the use of the Executive's aircraft
(subject to being taxed on the basis of the appropriate IRS regulations for
transportation for personal use) and the pilots and engineers employed by the
Company pursuant to the contractual arrangement in existence as of the Effective
Date hereof; (viii) be entitled to be reimbursed for all methods of
communications used by Executive (including, without limitation, the
installation cost and use of software, telephone, facsimile machines, etc.,
other similar equipment, and all upgrades thereof) in Executive's house,
aircraft and boat which shall continue through the Term and the Consulting
Period and (ix) be entitled to incidental miscellaneous expenditures not to
exceed $10,000 per year for postage, delivery, stationery and other personal
items at the Executive's discretion.
(2) In addition to all other benefits provided for in this
Agreement, Executive shall be entitled to receive medical insurance as currently
provided under the Company's
group program, as such may be changed from time to time in the future, and
Executive shall be entitled to continue to be covered by such group program, or,
if not permitted under the terms of the group program, then the Company shall
provide Executive with a medical insurance policy providing substantially
similar benefits as to the group program for the period ending on the later of:
(i) the date of Executive's death; (ii) if Executive is married on the date of
his death, the date of the death of Executive's spouse; or (iii) as to each
minor dependent of Executive, the later of the date that each such dependent
reaches the age of twenty-five or completes college (as defined in the Company's
group program). Executive shall be entitled to receive the medical benefits
defined herein at no cost to the Executive.
(3) The Company shall pay for Executive's preparation of
estate planning and wealth preservation documents during the course of this
Agreement with the Company. Such estate planning and wealth preservation
documents may be changed from time to time, at the Company's cost and expense,
pursuant to Executive's changing circumstances.
(4) During Executive's employment he has been instrumental in
designing and utilizing the Company's Logo, Executive shall, during the Term of
this Agreement be entitled to utilize such Logo in such manner as Executive may
determine and, in the event of a Change of Control, as defined below, such Logo
shall belong exclusively to Executive.
(g) 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 or herein, shall be prorated in accordance with
the number of days in such calendar year during which he is so employed.
Notwithstanding the foregoing, any payments pursuant to Sections 4(c) or 4(d) of
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; 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 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) 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.
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, or if there is a Change of Control (a
"Termination Event"), this Agreement shall
terminate except as provided in Section 6, and Executive shall be entitled to
the following severance benefits:
(1) Base Salary and Deferred Compensation (as defined in
Section 3(a)), at the rate and payable at Executive's option (or the option of
Executive's estate) within sixty (60) days in a lump sum payment or such longer
period of time as Executive shall determine.
(2) To the extent not theretofore paid or provided, or
otherwise set forth herein, 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 Term, at its sole expense, and 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");
(3) 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 Section, 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 to the contrary, it shall be construed to effectuate said result;
(4) 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
(5) 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 Section 4, and there shall be no offset in any compensation
received from such other employment against the Base Salary set forth above.
(6) In addition to all amounts otherwise paid to Executive
pursuant to this Agreement, all amounts that Executive would otherwise have
received during the Consulting Period, including, without limitation, all
perquisites, as set forth in subsection 3(f).
(c) TERMINATION IN EVENT OF DEATH: BENEFITS. If Executive's
employment is terminated by reason of Executive's death during the Term of this
Agreement, this Agreement shall terminate except as provided in Section 6
without further obligation to Executive's legal representatives under this
Agreement, other than for payment of all compensation and unreimbursed expenses,
as Executive would have been entitled to during the remaining portion of the
Term and the Consulting Period, 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 or stock 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.
(d) TERMINATION IN EVENT OF DISABILITY: BENEFITS. If Executive's
employment is terminated by reason of Executive's Disability during the Term,
except as provided for in Section 6, this Agreement shall terminate and
Executive shall receive payment of all compensation for the Term plus the
Consulting Period, 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.
Executive's compensation shall not be reduced by any long-term disability
coverage Executive actually receives.
(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 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 Section 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. 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. Upon termination of employment or
Termination of Executive's position of Executive Chairman, for any reason,
Executive shall remain on any and all Board positions held with the Company
and/or any of its subsidiaries and affiliates. At such time, Executive shall be
paid as an outside director.
5. NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY. At the inception
of this employment relationship, and continuing on an ongoing basis, the Company
agrees to give Executive access to Confidential Information (including, without
limitation, Confidential Information, as defined below, of the Company's
Affiliates) which the 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 all 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 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 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 Term for any reason, within any of the markets in which the
Company has sold products or services or formulated a plan to sell products or
services into a market during the last twelve (12) months of Executive's employ;
engage in or contribute Executive's knowledge to any work which is competitive
with or similar to a product, process, apparatus, service, or development on
which Executive worked or with respect to which Executive had access to
Confidential Information while employed by the Company; provided, however, this
subsection (c) shall not operate to prevent Executive from engaging in retail
insurance or re-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. 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 except for Frank J. Bramanti, L. Edward Tuffly, L. Byron Way and
Rosemary P. Ghelardi, and Executive's personal service employees, 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 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 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 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 Sections 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 Sections 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 Section do not
excuse Executive from complying with the agreements contained herein.
(o) SURVIVABILITY. The agreements contained in Sections 5 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 by the Company for
Cause, HCC hereby retains Executive as a consultant (an independent contractor
and not as an employee) for a period of five (5) years (the "Consulting
Period"). During the Consulting Period, Executive shall serve as Non-Executive
Chairman of the Board. Termination of the Term shall not effect the Parties'
rights and obligations under this Section 6, subject to the following: Executive
agrees to provide, if requested, 1,000 hours of service (the "Consulting
Services") per year, as required by the Company. Prior to a Change of Control,
the Company shall use its best effort to cause Executive to continue as a
Director and Chairman of the Board during the term of the Consulting Period. HCC
shall pay Executive $450,000 per year of the Consulting Period, payable
quarterly, in advance. Executive may elect to delay payment for services, but
not the services themselves. During such Consulting Period, Executive shall
receive, to the extent permitted by law and the terms of any existing plan, all
of the Company's benefits as if Executive was a full time employee. In addition,
the terms of this Section 6 shall remain in full force and effect whether or not
Executive dies or suffers a Disability pursuant to the terms hereof during the
Consulting Period. Further, if at any time during the Term of this Agreement
Executive shall elect, at his sole option, to cease being a full time employee,
then and in that event, Executive shall become a consultant pursuant to the
terms of this Section. During the Consulting Period, Executive shall have the
right to the same benefits for the same purposes and to the same extent as were
in effect during the term of this Agreement, provided, however, if Executive
ceases to be the Executive Chairman, Executive shall no longer receive Deferred
Compensation. The Consulting Services to be provided shall be commensurate with
Executive's training, background, experience and prior duties with the Company.
Executive shall receive such stock options or cash bonuses as the Compensation
Committee, in its sole discretion shall determine. 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 Section 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 constitute hours of Consulting Services for purposes of this
Section 6. The Parties contemplate that, when appropriate, the Consulting
Services shall be performed at Executive's office or residence and at the
Company's executive offices in Houston, Texas and may be performed at such other
locations only as they may mutually agree upon. Executive shall be properly
reimbursed for all travel and other expenses reasonably incurred by Executive in
rendering the Consulting Services.
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 (which shall not constitute notice). 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: Stephen L. Way
10 East Bend Lane
Houston, Texas 77007
Fax: (713) 864-2822
If to Company: HCC Insurance Holdings, Inc.
13403 Northwest Freeway
Houston, Texas 77040
Fax: (713) 462-2401
Attention: General Counsel
with a copy (which shall Arthur S. Berner, Esq.
not constitute notice) to: Haynes and Boone, LLP
1000 Louisiana Street,
Suite 4300
Houston, Texas 77002-5012
Fax: (713) 236-5652
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. 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
twenty percent (20%) of Executive's Base Salary (or, if the dispute arises
during the Consulting Period, Executive's Base Salary as in effect immediately
prior to the beginning of the Consulting Period) 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. EFFECTIVE DATE. It is understood by Executive that this Agreement
shall be effective when signed by both Company and Executive.
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 personal jurisdiction in the
state and federal courts in Harris County, Texas.
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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/ Stephen L. Way By: /s/ Walter J. Lack
- ----------------------------- -----------------------------------------
STEPHEN L. WAY WALTER J. LACK,
Chairman of the Compensation Committee
Date: January 13, 2005 Date: January 13, 2005
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[SIGNATURE PAGE OF WAY EMPLOYMENT AGREEMENT]