EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 11th day of
April 2008 (the “Effective Date”), by and between Continental Casualty Company,
an Illinois insurance company (the “Company”), and Larry A. Haefner
(“Executive”);
WITNESSETH:
          WHEREAS, the Company wishes to employ Executive as Executive Vice
President and Chief Actuary of the Company with senior management level
responsibility in the capacity of Chief Actuary for the principal business units
and subsidiaries of the Company, being hereinafter referred to as the “CNA
insurance companies,” and Executive wishes to accept and agree to such
employment under the terms and conditions set forth hereinbelow.
          NOW, THEREFORE, in consideration of the foregoing premises and the
promises and covenants herein, the parties hereto agree as follows:
          1. Employment Term. The Company and Executive agree that the Company
shall employ Executive to perform the duties of an Executive Vice President and
Chief Actuary of the CNA insurance companies for the period commencing on
Effective Date and ending on April 30, 2011, or such earlier date as of which
Executive’s employment is terminated in accordance with Section 6 hereof (said
period the “Term”). The covenants set forth in Sections 7, 8, 9, 10, 11, 12, 13,
and 14 shall survive the employment term of this Agreement.
          2. Duties of Executive.
          (a) Executive shall perform the duties and responsibilities of an
Executive Vice President and Chief Actuary [or successor title] of the CNA
insurance companies as defined and directed by the Company’s Chief Executive
Officer (hereinafter “CEO”). Executive shall report to the CEO. Executive may be
elected to and shall serve as a member of the Board of Directors of one or more
of the CNA insurance companies, and if so elected Executive agrees to serve on
such boards in such capacity without additional compensation. Executive further
agrees to resign any such position(s) on such Boards upon the termination of his
employment with the Company for any reason; provided, however, that nothing in
this Agreement shall require that any CNA insurance companies elect Executive to
its board of directors. Executive may also be elected as an executive officer of
CNA Financial Corporation (“CNAF”), a publicly-traded company that is the
indirect parent of the Company, and if so elected Executive agrees to serve in
such capacity for the term of this Agreement or any portion thereof without
additional compensation; provided, however, that nothing in this Agreement shall
require that CNAF elect or maintain Executive in any such position.

 

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     (b) Executive shall diligently and to the best of his abilities assume,
perform, and discharge the duties and responsibilities of Executive Vice
President and Chief Actuary , as well as such other specific duties and
responsibilities as the CEO shall assign or designate to Executive from time to
time not inconsistent with Executive’s status. Executive shall devote
substantially all of his working time to the performance of his duties as set
forth herein and shall not, without the prior written consent of the CEO, accept
other employment or render or perform other services, nor shall he have any
direct or indirect ownership interest in any other business which is in
competition with the business of the Company, the CNA insurance companies or
CNAF, other than in the form of publicly-traded securities constituting less
than five percent (5%) of the outstanding securities of a corporation
(determined by vote or value) or limited partnership interests constituting less
than five percent (5%) of the value of any such partnership. The foregoing shall
not preclude Executive from engaging in charitable, professional, and personal
investment activities, provided that, in the judgment of the CEO, such
activities do not materially interfere with the performance of his duties and
responsibilities hereunder.
     3. Compensation.
     (a) During the Term, the Company shall pay to Executive for the period he
is employed by the Company hereunder, an annual base salary of $500,000.00 (the
“Base Compensation”). The Base Compensation shall be payable not less frequently
than in monthly increments. At the discretion of the CEO and/or the Compensation
Committee (the “Committee”) of CNAF’s Board of Directors, such salary rate may
be increased annually during the term of the Agreement, beginning in 2009, based
on market considerations, responsibilities and performance. In no event shall
Executive’s Base Compensation be reduced to an amount that is less than the
amount specified in this Section 3 (a) without Executive’s written consent, or
to an amount that is less than the amount of Base Compensation that he was
previously receiving under this Agreement without Executive’s written consent.
     (b) The Executive shall be eligible for an annual incentive cash award
(“Bonus”) pursuant to the CNA Financial Corporation 2000 Incentive Compensation
Plan (the “Plan”). Subject to the approval of the Committee, the Executive’s
target Bonus opportunity thereunder shall not be less than the rate of
one-hundred percent (100%) of his Base Compensation for each twelve month bonus
period. In no event shall the target Bonus opportunity be reduced without the
Executive’s written consent. The amount of the Bonus shall be based on the
assessment by the CEO and/or the Committee of Executive’s performance, and shall
be determined and payable in accordance with the terms of the Plan as set forth
in the Plan documents; however, if Executive is a proxy-named officer, the
amount of the Bonus shall be based on the Committee’s assessment in its sole
discretion of Executive’s performance and the net operating income goals (or
other applicable measures ) set annually by the Committee, and shall be
determined and payable in accordance with the terms of the Plan, as set forth in
the Plan documents. The Committee shall also have unlimited negative discretion
under the Plan and this Agreement to decrease the amount of Executive’s Bonus
for any year.

 

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     (c) Subject to the approval of the Committee, Executive shall be eligible
to receive a long-term Incentive cash award, in accordance with the terms of the
Plan, as may be in effect during the Term or such other long term incentive plan
as the Company may from time to time adopt for its senior officers. The
Executive’s target long-term incentive cash award shall be twenty percent (20%)
of his Base Compensation during any applicable three year performance period as
determined by the Company and/or the Committee, beginning with the 2008
performance year and prorated for time of participation for that 2008
performance year; that is, (a) effective for the 2008 performance year of the
2006-2008 cycle, (b) effective for the 2008 and 2009 performance years of the
2007-2009 cycle and (c) effective for all covered years in each subsequent
performance cycle. In no event shall the target award be reduced without the
Executive’s written consent. Actual payout of the long-term incentive cash award
may range from 0% to 200% of target, based on the Company’s overall business
results and performance as determined by the Committee in its sole discretion.
     (d) Subject to the approval of the Committee, Executive shall be awarded a
minimum grant of 10,000 stock appreciation rights paid in stock (“SARs”) of CNA
Financial Corporation (“CNAF”) common stock or equivalent stock options
annually, beginning with the 2009 performance year (awarded in February of
2009), during the term of Executive’s employment under this Agreement. Such
annual grant may be increased at the recommendation of the CEO and upon approval
of the Committee, subject to share availability. Executive’s rights with respect
to shares awarded hereunder shall be subject to the terms of the Plan, share
availability and approval by the Committee.
     (e) Executive shall be awarded a Signing Bonus (the “Signing Bonus”) in the
amount of $400,000, less applicable withholding taxes, payable within first
45 days of the Effective Date. Executive shall also be awarded a special grant
of 15,000 SARs of CNAF common stock on the later to occur of the first day of
employment or the first date when both Executive and the Company have signed
this Agreement, subject to Committee approval, and pursuant to the terms and
conditions set forth in the attached Addendum (the “Addendum”), which is
incorporated by reference into this Agreement. The Signing Bonus shall be
subject to the terms and provisions of that certain New Hire Bonus Payback
Agreement (“Payback Agreement”) of even date herewith between Executive and the
Company.
     (f) For avoidance of doubt respecting awards to Executive under Section 3
(b), 3 (c), 3 (d), 3 (e) and 3 (f) hereof, the Committee shall retain such
discretion as may be provided under the Plan to satisfy Section 162(m) of the
Internal Revenue Code of 1986 (“Code”) or any successor provision. The Company
will defer until the first tax year in which it reasonably anticipates, or
should reasonably anticipate, that deductibility is not limited by said Section
162(m) the payment of all compensation to which Executive is entitled under this
Agreement which the Company reasonably anticipates would be non-deductible under
said Section 162(m) or any successor provision with respect to deductibility of
executive compensation if paid in the tax year in which it would otherwise be
payable. Subject to Section 162(m) of the Code and any other applicable laws or

 

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regulations as interpreted by the Company, deferred compensation may be credited
to the Executive’s SES-CAP account and, if so credited, shall be subject to the
terms thereof and of the Company’s SES-CAP Plan.
     (g) Executive’s pensionable earnings under the Savings & Capital
Accumulation Plan (“S-CAP”) and the CNA Supplemental Savings & Capital
Accumulation Plan (“SES-CAP”) will be calculated and payable as specified in the
respective plan documents, as amended from time to time, and also subject to the
requirements of any other applicable laws or regulations as interpreted by the
Company. Any deferral elections available to Executive with respect to such
pensionable earnings shall be made prior to the beginning of the year in which
any amounts subject to such elections are earned.
     (h) All payments due under this Agreement shall be subject to withholding
as required by law.
     4. Other Benefits. Executive shall be entitled to continue to participate
in the various benefit plans, programs or arrangements established and
maintained by the Company from time to time and applicable to senior executives
of the Company such as, but not by way of limitation, medical benefits, dental
benefits, life insurance, long-term disability insurance, both qualified and
supplemental defined contribution plans, and to receive all fringe benefits made
available to senior executives of the Company, including relocation assistance,
club membership, and tax return preparation. Executive’s entitlement to
participate in any such plan, program or arrangement shall in each case be
subject to the terms and conditions of the Company’s policies with regard to
such plans, programs or arrangements, as adjusted by the Company from time to
time in its sole discretion. Executive shall not be eligible for paid time off
(“PTO”) under the Company’s PTO policy. In the event of termination of
employment, Executive’s available severance benefits shall be determined solely
in accordance with Section 6 hereof.
     5. Expense Reimbursement. Executive shall continue to be entitled to
reimbursement by the Company for all reasonable and customary travel and other
business expenses incurred by Executive in carrying out his duties under this
Agreement, in accordance with the general travel and business reimbursement
policies adopted by the Company as adjusted from time to time. Executive shall
report all such expenditures not less frequently than monthly accompanied by
adequate records and such other documentary evidence as required by the Company
or by Federal or state tax statutes or regulations governing the substantiation
of such expenditures.
     6. Termination of Employment. If Executive’s employment with the Company
shall terminate during the term of this Agreement, the following conditions set
forth herein shall apply with respect to the Executive’s compensation and
benefits hereunder. Either party may terminate Executive’s employment with the
Company during the term of this Agreement by written notice to the other party,
effective as of the date specified in such notice and Executive’s employment
shall automatically terminate in the event of Executive’s death. Upon
termination of Executive’s employment during or at the end of the term of this
Agreement, the rights of the parties under this Agreement shall be determined
pursuant to this Section 6. All payments to be made hereunder shall be made
either to Executive or to his personal representatives, heirs or beneficiaries,
as the case may be. In

 

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the event of Executive’s termination during the term of this Agreement, unless
otherwise specified in this Agreement Executive’s rights, if any, under any of
the Company’s defined contribution, incentive or other benefit plans of any
nature shall be governed by the respective terms of such plans.
     6.1 Death and Disability. In the event of the death of Executive or, at the
Company’s election, in the event of his Permanent Disability (as defined below)
during the term of this Agreement, provided it has not already terminated,
Executive’s employment shall terminate; provided, however, that:
     (a) The Company shall pay to Executive or his personal representatives,
heirs or beneficiaries as the case may be, an amount equal to his: (i) unpaid
Base Compensation and current year’s target Bonus prorated to the date of
termination; (ii) any previous year’s unpaid Bonus based upon actual or
discretionary payouts, if any; and (iii) unpaid cash entitlements, if any,
earned by Executive or payable to his beneficiaries as of the date of
termination which, pursuant to the terms of any applicable Company plan or
program (which unpaid cash entitlements shall not include any unpaid Bonus or
any unpaid long-term incentive cash awards or other awards under the Incentive
Compensation Plan), accrued prior to the date of termination.
     (b) For purposes of this Agreement, the term “Permanent Disability” means a
physical or mental condition of Executive which, as determined by the CEO based
on and consistent with available medical information, is expected to continue
beyond 26 weeks and which renders Executive incapable of performing any
substantial portion of the services contemplated hereunder, with reasonable
accommodation compatible with the fulfillment of his duties as described in
Section 2 hereinabove.
     6.2 Termination for Cause by the Company. In the event that Executive shall
engage in any conduct which the CEO in his sole discretion shall determine to be
“Cause,” as defined herein, he shall be subject to termination forthwith. For
purposes of this Agreement, Cause shall mean engaging in or committing: (i) any
act which would constitute a felony or other act involving fraud, dishonesty,
moral turpitude, unlawful conduct or breach of fiduciary duty; (ii) a
substantial breach of any provision of this Agreement; (iii) willful or reckless
material misconduct in the performance of the Executive’s duties; or (iv) the
habitual neglect of duties; provided however, that, for purposes of clauses
(iii) and (iv), Cause shall not include any one or more of the following: bad
judgment, negligence or any act or omission believed by the Executive in good
faith to have been in or not opposed to the interest of the Company (without any
intent by the Executive to gain, directly or indirectly, a profit to which he
was not legally entitled). If the Executive agrees to resign from his employment
with the Company in lieu of being terminated for Cause, he may be deemed to have
been terminated for Cause for purposes of this Agreement.
     Upon terminating the Executive for Cause, other than paying the Executive
within 30 days of such termination his: (i) unpaid Base Compensation prorated to
the date of termination and (ii) unpaid cash entitlements, if any, earned and
accrued pursuant to the terms of any applicable Company plan or program (which
unpaid cash entitlements shall not include any unpaid Bonus or any unpaid
long-term incentive cash awards or other awards under the Incentive Compensation
Plan) prior to the date of the date of termination, the

 

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Company shall have no further obligations whatsoever to Executive under this
Agreement. In the event of termination for Cause, Executive agrees to continue
to be bound by the covenants set forth herein at Sections 7 through 14
subsequent to the date of such termination, for such periods of time as provided
for in said Sections respectively.
     6.3 Termination by the Company Without Cause/ Termination by Executive for
Good Reason. In the event Executive’s employment is terminated by the Company
“Without Cause” (as that term is defined hereinbelow), or in the event Executive
terminates his employment for “Good Reason” (as that term is defined
hereinbelow):
     (a) The Company shall pay to Executive severance consisting of an amount
equal to the 12 months of the Executive’s Base Compensation and one (1) times
Executive’s target Bonus, or the aggregate amount of unpaid Base Compensation
due to Executive under this Agreement, whichever is greater, in effect at the
time of termination. The severance shall be paid not less frequently than in
equal monthly installments following such termination. The Company shall also
pay the Executive (i) unpaid Base Compensation, prorated to the date of
termination; (ii) current year’s Bonus, prorated to the date of termination, and
payable following the end of the performance year based upon the Committee’s
assessment of Executive’s performance; (ii) any previous year’s unpaid Bonus
based upon actual or discretionary payouts, if any; and (iii) within 30 days of
his termination, unpaid cash entitlements, if any, earned and accrued pursuant
to the terms of any applicable Company plan or program prior to the date of the
date of termination (which unpaid cash entitlements under this Section 6.3 (a)
(ii) shall not include any unpaid Bonus or any unpaid long-term incentive cash
awards or other awards under the Plan). Executive agrees to be bound by the
covenants set forth herein prior to, as of and subsequent to the termination
date. In addition, Executive shall continue to participate, at the active
employee rates, in such health benefits plans in which he is enrolled throughout
the term of the payments set forth in this Section 6.3 (a), up to a maximum of
12 months, with said period of participation to run concurrently with any period
of COBRA coverage to which Executive may be entitled. To the extent such health
benefit coverage extends beyond the aforesaid period of COBRA coverage, the
difference between the premium paid by Executive for participation in such
health benefit plans and the premium that would be payable by an employee
receiving COBRA coverage shall constitute taxable income to Executive, and
deferred compensation, subject to Section 409A of the Code, and Executive shall
not receive any payment or other benefit in lieu of such coverage. Other than as
set forth in this Section 6.3 (a), the Company shall have no further obligations
to Executive under this Agreement in the event of a termination of Executive’s
employment by the Company Without Cause or any termination of Executive’s
employment by Executive.
     (b) “Good Reason” as set forth herein is defined as a reduction in the rate
of Executive’s Base Compensation, annual incentive opportunity or long-term
incentive cash target compensation, a required relocation of his personal
residence to another geographical area outside of the geographical area where
the Company’s home office is located without Executive’s consent, a change in
Executive’s direct reporting relationship to the CEO or other involuntary loss
of position as described herein (other than as a result of a termination by the
Company for Cause) or a substantial diminution in Executive’s duties and
responsibilities without Executive’s consent.

 

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     (c) “Without Cause” as set forth herein is defined as a termination of the
Executive’s employment by the Company for any reason not described in
subsections 6.1 and 6.2.
In the event of any termination of employment as described in this Section 6.3,
Executive agrees to continue to be bound by the covenants set forth herein at
Sections 7 through 14 subsequent to the date of such termination for such
periods of time as provided for in said Sections respectively. Any term or
provision herein to the contrary notwithstanding, the timing and other
conditions of any severance or other payments to be made under this Agreement
shall be subject to the requirements of all applicable laws and regulations,
whether or not they are in existence or in effect when this Agreement is
executed by the parties hereto.
     6.4 Voluntary Resignation by Executive. In the event that Executive’s
employment is voluntarily terminated by Executive other than pursuant to
subsection 6.3 or as a direct result of his death or Permanent Disability (as
described in subsection 6.1), the Company shall have no further obligations to
Executive under this Agreement other than paying the Executive within 30 days of
such termination his: (i) unpaid Base Compensation prorated to the date of
termination and (ii) unpaid cash entitlements, if any, earned and accrued
pursuant to the terms of any applicable Company plan or program (which unpaid
cash entitlements shall not include any unpaid Bonus or any unpaid long-term
incentive cash awards or other awards under the Plan) prior to the date of
termination. In the event of termination of employment as described in this
Section 6.4, Executive agrees to continue to be bound by the covenants set forth
herein at Sections 7 through 14 subsequent to the date of such termination for
such periods of time as provided for in said Sections respectively.
     6.5 Expiration of Agreement. Following April 30, 2011, if the Company and
Executive have not mutually agreed to the terms of, and entered into a new
agreement, Executive’s employment shall be one of employment at will, which may
be terminated by either the Company or the Executive at any time. Such continued
employment after April 30, 2011 shall be subject to the Company’s normal
policies and procedures in effect during said period of continued employment.
     6.6 Other Benefits. In the event that Executive’s employment is terminated
pursuant to Sections 6.1, 6.2 or 6.4 (a), Executive’s coverage under the
Company’s short-term disability plan shall end on the date of termination of
employment; (b) Executive’s coverage under the Company’s long-term disability
plan shall end on the last day of the month in which termination of employment
occurs; and (c) Executive’s coverage under the Company’s non-contributory and
contributory life, dependent life and accidental death and dismemberment plans
shall end on the last day of the month in which termination occurs. In the event
that Executive’s employment is terminated pursuant to Section 6.3, the foregoing
provisions of this Section 6.6 shall also apply, except that in such event
Executive’s coverage under the Company’s contributory life, dependent life and
contributory accidental death and dismemberment plans shall continue through the
end of any applicable severance period upon payment of the applicable premium.

 

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     6.7 Release. Executive acknowledges that the severance benefits set forth
in Section 6 hereof provides significant additional benefits as compared to
those available to the Company’s employees in general. As a condition precedent
to receiving any payments or other benefits pursuant to Section 6 of this
Agreement, Executive agrees to sign a full and complete release acceptable to
the Company releasing the Company, its subsidiaries and affiliates and their
directors, officers and employees of any and all claims, both known and unknown
as of the date of Executive’s termination of employment with the Company. In the
absence of Executive’s executing such a release in a form satisfactory to the
Company, the Company shall have no obligation to Executive to make any payments
or provide any other benefits as provided in said Section 6 or otherwise upon
termination of Executive’s employment by the Company.
     6.8 Involuntary Termination Rule. Any term or provision of this Section 6
or elsewhere in the Agreement to the contrary, the following provisions shall
apply to any payments to be made to Executive pursuant to Section 6.1 on
termination by reason of Permanent Disability, Section 6.3 or Section 6.5(a)
(collectively the “Payments”):
     (a) Each Payment to be made on a separate date shall be treated as a
separate Payment for purposes of §409A of the Code.
     (b) The aggregate amount of all Payments, if any, payable after March 15 of
the year following the year that includes the date of such involuntary
termination (the “Termination Date”) but before the date that is six months
after the Termination Date (increased by any other amounts of taxable
compensation paid to the Executive during such period that would not have been
paid but for such termination) shall not exceed two times the lesser of
(i) Executive’s Base Compensation on the last day of the year immediately prior
to the year that includes the Termination Date or (ii) the limit in effect under
§401(a)(17) of the Code during the year that includes the Termination Date, as
determined by the Company.
     (c) To the extent the Payments payable during the period described in
subparagraph (b) above would otherwise exceed the limit of subparagraph (b),
such Payments shall be reduced to the extent necessary to satisfy the
requirement of subparagraph (b) as determined by the Company, and the amount by
which the Payments are reduced will be paid to Executive in a lump sum, without
interest, on the first business day that is six months after the Termination
Date as determined by the Company. However, if Executive dies during such
period, the limits of subparagraph (b) shall not apply to Payments to the
Executive’s beneficiaries or estate.
     7. Confidentiality. Executive agrees that while he is employed by the
Company, and at all times thereafter, Executive shall not reveal or utilize
information, knowledge or data which is “confidential information” (as that term
is defined hereinbelow) and learned during the course of or as a result of his
employment which relates to: (a) the Company and/or any other business or entity
in which the Company during the course of the Executive’s employment has
directly or indirectly held a greater than a 10% equity interest, whether voting
or non-voting; and (b) the Company’s customers, employees, agents, brokers and

 

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vendors. The Executive acknowledges that all such confidential information is
commercially valuable and is the property of the Company. Upon the termination
of his employment Executive shall return all confidential information and any
copies thereof to the Company, whether it exists in written, electronic,
computerized or other form.
     8. “Confidential Information” Defined. For purposes of this Agreement,
“confidential information” includes all information, knowledge or data (whether
or not a trade secret or protected by laws pertaining to intellectual property)
not generally known outside the Company (unless as a result of a breach of any
of the obligations imposed by this Agreement) concerning the business
operations, performance and other information of the Company or other affiliated
entities as described in Section 7 above. Such information may without
limitation include information relating to data, finances, marketing, pricing,
profit margins, underwriting, claims, loss control, marketing and business
plans, renewals, software, processing, vendors, administrators, customers or
prospective customers, products, brokers, agents and employees.
     9. Competition. Executive hereby agrees that, while he is employed by the
Company, and for a period of 6 months following the date of his termination of
employment with the Company for any reason, he will not, directly or indirectly,
without the prior written approval of the CEO, enter into any business
relationship (either as principal, agent, board member, officer, consultant,
stockholder, employee or in any other capacity) with any business or other
entity that at any relevant time is engaged in the business of insurance in
direct or indirect competition with the Company or any of its affiliates (a
“Competitor”); provided, however, that such prohibited activity shall not
include the ownership of less than 5% of the outstanding securities of any
publicly-traded corporation (determined by vote or value) regardless of the
business of such corporation. Upon the written request of Executive, the CEO
will determine whether a business or other entity constitutes a “Competitor” for
purposes of this Section 9; provided that the CEO may require Executive to
provide such information as the CEO determines to be necessary to make such
determination, and further provided that the current and continuing
effectiveness of such determination may be conditioned on the accuracy of such
information, and on such other factors as the CEO may determine.
     10. Solicitation. Executive agrees that while he is employed by the
Company, and for a period of 24 months following his termination of employment
with the Company for any reason, he will not employ, offer to employ, engage as
a consultant, or form an association with any person who is then, or who during
the preceding one year was, an employee of the Company or any subsidiary or
affiliate of the Company or any successor or purchaser of any portion thereof,
nor will he assist any other person or entity in soliciting for employment or
consultation any person who is then, or who during the preceding one year was,
an employee of the Company or any subsidiary or affiliate of the Company or any
successor or purchaser of any portion thereof.
     11. Non-interference. Executive agrees that while he is employed by the
Company, and for a period of 24 months following his termination of employment
with the Company for any reason, he will not disturb or

 

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attempt to disturb any business relationship or agreement between either the
Company or any subsidiary or affiliate of the Company or any successor or
purchaser of any portion thereof, and any other person or entity.
     12. Assistance with Claims. Executive agrees that, while he is employed by
the Company, and for a reasonable period (not less than 60 months from the date
of termination) thereafter, he will be available, on a reasonable basis, to
assist the Company and its subsidiaries and affiliates in the prosecution or
defense of any claims, suits, litigation, arbitrations, investigations, or other
proceedings, whether pending or threatened (“Claims”) that may be made or
threatened by or against the Company or any of its subsidiaries or affiliates.
Executive agrees, unless precluded by law, to promptly inform the Company if he
is requested (i) to testify or otherwise become involved in connection with any
Claim against the Company or any subsidiary or affiliate or (ii) to assist or
participate in any investigation (whether governmental or private) of the
Company or any subsidiary or affiliate or any of their actions, whether or not a
lawsuit has been filed against the Company or any of its subsidiaries or
affiliates relating thereto. The Company agrees to provide reasonable
compensation, including reasonable attorney’s fees, to Executive for such
assistance provided during such period. Nothing in this Section 12 is intended
or shall be construed to prevent Executive from cooperating fully with any
governmental investigation or review as required by applicable law or
regulation.
     13. Return of Materials. Executive shall, at any time upon the request of
the Company, and in any event upon the termination of his employment with the
Company for any reason, immediately return and surrender to the Company all
originals and all copies, regardless of medium, of any property belonging to the
Company created or obtained by Executive as a result of or in the course of or
in connection with his employment with the Company, regardless of whether such
materials constitute proprietary information, provided that Executive shall be
under no obligation to return written materials acquired from third parties
which are generally available to the public. Executive acknowledges that all
such materials are, and will remain, the exclusive property of the Company.
     14. Scope of Covenants.
     (a) The Executive acknowledges that: (a) as a senior executive of the
Company he has and will have access to confidential information concerning not
only the business segments for which he may have been responsible (a
non-exhaustive summary of which appears in the Company’s reports on Forms 10-K
and 10-Q filed with the Securities and Exchange Commission), but the entire
range of businesses in which the Company was engaged; (b) that the businesses
segments for which he may have been responsible and the Company’s businesses are
conducted nation-wide; and (c) that the Company’s confidential information, if
disclosed or utilized without its authorization would irreparably harm the
Company in: (i) obtaining renewals of existing customers; (ii) selling new
business; (iii) maintaining and establishing existing and new relationships with
employees, agents, brokers, vendors; and (iv) other ways arising out of the
conduct of the businesses in which the Company and its affiliates are engaged.

 

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     (b) To protect such information and such existing and prospective
relationships, and for other significant business reasons, the Executive agrees
that it is reasonable and necessary that: (a) the scope of this Agreement be
national and international; (b) its breadth include the entire insurance
industry; and (c) the duration of the restrictions upon the Executive be as
indicated therein.
     (c) The Executive acknowledges that the Company’s customer, employee and
business relationships are long-standing, near permanent and therefore are of
critical value to the Company. The Executive agrees that neither any of the
provisions in this Agreement nor any enforcement of it by the Company alters or
will alter his ability to earn a livelihood for himself and his family, and
further that both said provisions and said enforcement are reasonably necessary
to protect the Company’s legitimate business and property interests and
relationships, especially those which he was responsible for developing or
maintaining. The Executive agrees that his actual or threatened breach of the
covenants set forth in Sections 7 through 13 above would cause the Company
irreparable harm and that the Company would be entitled to an injunction, in
addition to whatever other remedies may be available, to restrain such actual or
threatened breach. The Executive agrees that if bond is required in order for
the Company to obtain such relief, such bond need only be in a nominal amount
and that he shall reimburse the Company for all costs of any such suit,
including the Company’s reasonable attorneys’ fees. The Executive consents to
the filing of any such suit against him in any of the state or federal courts
located in Illinois or any state in which Executive resides. He further agrees
that in the event of such suit or any other action arising out of or relating to
this Agreement, the parties shall be bound by and the court shall apply the
internal laws of the State of Illinois, irrespective of rules regarding choice
of law or conflicts of laws.
     (d) If he has not already done so, Executive agrees to be bound by and to
execute the Company’s Confidentiality, Computer Responsibility and Professional
Certification Agreement, a copy of which is attached hereto and incorporated by
reference herein.
     (e) For purposes of Sections 7 through 14 hereof, the “Company” shall
include all subsidiaries and affiliates of the Company and CNAF, as well as the
Company.
     15. Effect of Covenants. Nothing in Sections 7 through 14 shall be
construed to limit or otherwise adversely affect any rights, remedies or options
that the Company would possess in the absence of the provisions of such
Sections.
     16. Revision. The parties hereto expressly agree that in the event that any
of the provisions, covenants, warranties or agreements in this Agreement are
held to be in any respect an unreasonable restriction upon Executive or are
otherwise invalid, for whatsoever cause, then the court or arbitrator so holding
is hereby authorized to (a) reduce the territory to which said covenant,
warranty or agreement pertains, the period of time in which said covenant,
warranty or agreement operates or the scope of activity to which said covenant,
warranty or agreement pertains or (b) effect any other change to the extent
necessary to render any of the restrictions contained in this Agreement
enforceable.

 

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     17. Severability. Each of the terms and provisions of this Agreement is to
be deemed severable in whole or in part and, if any term or provision of the
application thereof in any circumstances should be invalid, illegal or
unenforceable, the remaining terms and provisions or the application thereof to
circumstances other than those as to which it is held invalid, illegal or
unenforceable, shall not be affected thereby and shall remain in full force and
effect.
     18. Binding Agreement; Assignment. This Agreement shall be binding upon the
parties hereto and their respective heirs, successors, personal representatives
and assigns. The Company shall have the right to assign this Agreement to any
successor in interest to the business, or any majority part thereof, of the
Company or any joint venture or partnership to which the Company is a joint
venturer or general partner which conducts substantially all of the Company’s
business. Executive shall not assign any of his obligations or duties hereunder,
and any such attempted assignment shall be null and void.
     19. Controlling Law; Jurisdiction. This Agreement shall be governed by,
interpreted and construed according to the laws of the State of Illinois
(without regard to choice of law or conflict of laws principles).
     20. Entire Agreement. Except for the Payback Agreement or as otherwise
expressly set forth herein, this Agreement contains the entire agreement of the
parties with regard to the subject matter hereof, supersedes all prior
agreements and understandings, written or oral, and may only be amended by an
agreement in writing signed by the parties hereto.
     21. Additional Documents. Each party hereto shall, from time to time, upon
request of the other party, execute any additional documents which shall
reasonably be required to effectuate the intent and purposes of this Agreement.
     22. Incorporation. The introductory recitals hereof are incorporated in
this Agreement and are binding upon the parties hereto.
     23. Failure to Enforce. The failure to enforce any of the provisions of
this Agreement shall not be construed as a waiver of such provisions. Further,
any express waiver by either party with respect to any breach of any provision
hereunder by the other party shall not constitute a waiver of such party’s right
to thereafter fully enforce each and every provision of this Agreement.
     24. Survival. Except as otherwise expressly provided herein, the
obligations set forth in this Agreement shall survive the termination, for any
reason whatsoever, of Executive’s employment with the Company, including without
limitation Sections 7 through 13 of this Agreement.

 

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     25. Headings. All numbers and headings contained herein are for reference
only and are not intended to qualify, limit or otherwise affect the meaning or
interpretation of any provision contained herein.
     26. Notices. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or two-day
delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below (or such other addresses as shall be specified by
the parties by like notice). Such notices, demands, claims and other
communications shall be deemed given:
          (a) in the case of delivery by overnight service with guaranteed next
day delivery, the next day or the day designated for delivery;
          (b) in the case of certified or registered U.S. mail, five days after
deposit in the U.S. mail; or
          (c) in the case of facsimile, the date upon which the transmitting
party received confirmation of receipt by facsimile, telephone or otherwise;
provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that are
to be delivered by the U.S. mail or by overnight service or two-day delivery
service are to be delivered to the addresses set forth below:
If to the Company:
CONTINENTAL CASUALTY COMPANY
333 S. Wabash
Chicago, IL 60604
Attn: Corporate Secretary
If to Executive:
Larry A. Haefner
90 Grandview Drive
Glastonbury, CT 06033
or to such other address as either party shall furnish to the other party in
writing in accordance with the provisions of this Section 26.
     27. Gender. The masculine, feminine or neuter pronouns used herein shall be
interpreted without regard to gender, and the use of the singular or plural
shall be deemed to include the other whenever the context so requires.

 

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     28. Arbitration of All Disputes. Except as otherwise provided hereinbelow,
any controversy or claim arising out of or relating to this Agreement (or the
breach thereof) shall be settled by final, binding and non-appealable
arbitration in Chicago, Illinois by three arbitrators. Except as otherwise
expressly provided in this Section 28, the arbitration shall be conducted in
accordance with the rules of the American Arbitration Association (the
“Association”) then in effect. One of the arbitrators shall be appointed by the
Company, one shall be appointed by Executive, and the third shall be appointed
by the first two arbitrators. If the first two arbitrators cannot agree on the
third arbitrator within 30 days of the appointment of the second arbitrator,
then the third arbitrator shall be appointed by the Association. This Section 28
shall not be applicable with respect to any subject matter or controversy or
relating to the provisions of Sections 7 through 14 of this Agreement.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
CONTINENTAL CASUALTY COMPANY

          By:   /s/ Thomas Pontarelli         Thomas Pontarelli        Title:  
Executive Vice President & Chief Administration Officer            /s/ Larry A.
Haefner       Larry A. Haefner           

 

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ADDENDUM TO
EMPLOYMENT AGREEMENT
GRANT OF STOCK APPRECIATION RIGHTS PAID IN STOCK
THIS ADDENDUM to EMPLOYMENT AGREEMENT (the “Addendum”) is made as of even date
with Employment Agreement to which it is attached and into which it is
incorporated (the “Agreement”), by and between Continental Casualty Company, an
Illinois insurance company (the “Company”), and Larry A. Haefner (the
“Executive”);
WITNESSETH:
WHEREAS, the Company and the Executive wish to enter into a written agreement
setting forth the terms and conditions for the granting of certain stock
appreciation rights paid in stock as set forth below;
NOW, THEREFORE, in consideration of the foregoing premises in the Agreement and
in this Addendum, the parties hereto agree as follows:
     1. Stock Appreciation Rights Paid in Stock. Upon execution of the Agreement
and this Addendum by both parties and in the event of approval by the
Compensation Committee (the “Committee”) of CNA Financial Corporation’s (“CNAF”)
Board of Directors as provided herein, the Executive shall be granted 15,000
stock appreciation rights paid in stock (the “SARs”) of CNAF’s common stock. For
purposes of considering such approval, the Company shall take up such
consideration at the next scheduled meeting of said Committee. For purposes of
this Agreement and Addendum and subject to Committee approval, the grant date
shall be the later of the Executive’s first day of employment or the first date
when both Executive and the Company have signed the Agreement (the “Grant
Date”). The Executive’s right to the SARs pursuant to this provision shall
accrue as described in the vesting period provision set forth at Section 3 below
(the “Vesting Period”). The Executive may exercise such SARs at any time prior
to the tenth anniversary of the date of execution of the Agreement. The
Executive’s exercise of all SARs shall be performed in accordance with the terms
of the CNA Financial Corporation 2000 Incentive Compensation Plan (the “Plan”).
Executive’s rights with respect to all SARs that are the subject of this
provision shall be governed by the terms of the Plan.
     2. Vesting Period. With respect to all SARs which are the subject of the
rights described in the provisions set forth above, the Vesting Period shall
begin on the Grant Date. The Vesting Period with respect to each installment
shown on the schedule shall end on the Vesting Date applicable to such
installment, so long as you are employed by Continental Casualty Company or an
affiliate on such a date:

 

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      INSTALLMENT   VESTING DATE APPLICABLE TO INSTALLMENT
One quarter of total SARs determined as indicated in paragraph 1.
  One year from the Date of Grant
One quarter of total SARs determined as indicated in paragraph 1.
  Two years from the Date of Grant
One quarter of total SARs determined as indicated in paragraph 1.
  Three years from the Date of Grant
One quarter of total SARs determined as indicated in paragraph 1.
  Four years from the Date of Grant

     All SARs shall be subject to any restrictions imposed by the Securities Act
of 1933 or the Securities Exchange Act of 1934, as amended or the rules thereto.
     3. Effective Date. Any term or provision contained in this Addendum to the
contrary herein notwithstanding, the terms and provisions of this Addendum and
all rights granted herein shall be subject to the provisions of the Plan and to
the prior review and approval of the Committee.
     4. Application of IRC Section 162(m). In the event the Executive is or
becomes a proxy-named executive or the Company in relation to the Executive is
otherwise subject to the provisions of Section 162(m) of the Internal Revenue
Code, the Company may defer the payment of all compensation to which Executive
is entitled pursuant to this Addendum or the Agreement or otherwise take all
measures, the Company reasonably deems necessary or advisable to comply with
said Section 162(m) of the Internal Revenue Code or any successor provision with
respect to deductibility of executive compensation. All deferred compensation
will be credited to the Executive’s SES-CAP account and shall be subject to the
terms thereof.
     5. Entire Agreement. Subject to the Employment Agreement (the “Agreement’)
to which this Addendum is attached as an addendum thereunder, this Addendum, in
conjunction with the Agreement in its entirety, contains the entire agreement of
the parties with regard to the subject matter hereof, supersedes all prior
agreements and understandings regarding such subject matter, whether written or
oral, and may only be amended by an agreement in writing signed by the parties
thereto.
     6. No Effect on Agreement; Primacy. Except as otherwise specifically set
forth in this Addendum, all terms and conditions contained in the Agreement of
which this Addendum is made part are and shall remain unmodified hereby. In the
event any term or provision of this Addendum is in conflict or inconsistent with
any term or provision of the Agreement, this Addendum shall prevail and take
precedence.

 

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     IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of
the date set forth hereinabove.

                  CONTINENTAL CASUALTY COMPANY       LARRY A. HAEFNER    
 
               
By:
  /s/ Thomas Pontarelli
 
Thomas Pontarelli       /s/ Larry A. Haefner
 
   
 
               
Title:
  Executive Vice President & Chief Administration Officer
 
      April 11, 2008
 
Signing Date