Executive Severance Agreement



 


EXECUTIVE SEVERANCE AGREEMENT



     This EXECUTIVE SEVERANCE AGREEMENT (“Agreement”), made as of the 12th day
of June 2003 (the “Effective Date”), by and among CONTINENTAL CASUALTY COMPANY,
an Illinois Insurance Company (the “Company”), and Debra L. McClenahan (the
“Executive”).


     WHEREAS, the Executive is presently employed by the Company with senior
management level responsibility for its reinsurance business unit commonly
known as CNA Re.


     WHEREAS, the Company considers it essential to its best interests to
foster the retention of key management personnel of the Company; and


     WHEREAS, the Company recognizes that circumstances may arise that would
affect the continuing role of the Executive, and that such circumstances may
result in the departure or distraction of the Executive to the detriment of the
Company.


     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:


     1.     Covered Termination. The termination benefits described in Section 2
hereof shall be provided to the Executive in the event that the Executive
suffers a “Covered Termination” of the Executive’s employment with the Company
between the Effective Date and December 31, 2005 (the “End Date”). Upon their
mutual written agreement the Company and the Executive may extend the End Date.


          For purposes hereof, “Covered Termination” shall mean termination of the
Executive’s employment by the Company other than for “Cause”, as described in
paragraph (a) below; or termination of such employment by the Executive for
“Good Reason”, as described in paragraph (b) below; or termination of
employment as a result of a “Change in Control”, as described in paragraph (c)
below. The Executive shall not be treated as having suffered a Covered
Termination in the event of: the Executive’s death or disability, the
involuntary termination of the Executive’s employment for Cause, the
Executive’s voluntary termination of employment other than for Good Reason, or
the Executive’s termination of employment for any reason following the End
Date.


          (a) Termination For Cause. 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) any conduct which is inconsistent with the
dignity and character of an executive of the Company; (iii) a substantial
breach of any material provision of the Company’s Code of Professional Conduct
or of this Agreement; (iv) willful or reckless material misconduct in the
performance of the Executive’s duties; or (v) the habitual neglect of duties;
provided, however, that for purposes of clauses (iv) and (v), 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 she was not legally entitled).
If the Executive agrees to resign from her employment with the Company in lieu
of being terminated for Cause, she will be deemed to have been terminated for
Cause for purposes of this Agreement.



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          (b) Termination for Good Reason. For purposes of this Agreement, the
voluntary termination of employment by the Executive prior to the End Date
shall be deemed a termination for “Good Reason” if:




	 	(i)	 	there is a substantial diminution
of the Executive’s duties or responsibilities;
	 
	 	(ii)	 	there is a reduction in the
Executive’s “Total Target Compensation” amount
from that which was in effect on the Effective
Date. For purposes hereof, “Total Target
Compensation” is defined as the total of
Executive’s annual base salary, annual incentive
target, and long-term incentive cash target; or
	 
	 	(iii)	 	there is a relocation, without
the Executive’s written consent, of the
Executive’s principal place of business by more
than 50 miles.



          (c) Change in Control. For purposes of this Agreement the termination of
employment by Executive prior to the End Date shall be deemed a termination for
“Change in Control” if, (i) Executive does not receive a “Qualified Offer” from
the Company, any of its subsidiaries or a Successor Entity. For purposes
hereof, a “Qualified Offer” is an offer of employment in connection with a
Change in Control under terms and conditions that would not constitute Good
Reason under Section 1(b) hereof, or (ii) in the case of an offer other than
from a Successor Entity, if there is a change in Executive’s reporting
relationship other than to the CEO or CFO of the Company, or the President and
COO of its Property & Casualty business unit.



               For purposes of this Agreement, a “Change in Control” shall be deemed to
have occurred if prior to the End Date all or substantially all of the business
of CNA Re, whether conducted by the Company or any of its subsidiaries is
exited, sold, or otherwise transferred, in a single or series of related or
unrelated transactions, whether by asset purchase, stock purchase, merger or
consolidation, reinsurance, or any other form of transaction, or combination
thereof, to entities not controlled by the Company. For purposes of this
Agreement, an entity shall be deemed controlled by the Company if it holds,
directly or indirectly, 50% or more of the voting interest of such entity. If a
Change in Control shall occur, any entity that acquires CNA Re and that becomes
the employer of the Executive in connection therewith shall be referred to
herein, together with its affiliates, as the “Successor Entity.”


               The final and binding determination of whether a sale of the business of
CNA Re or any portion thereof shall constitute a Change in Control shall be
made in good faith by the CEO of the Company (“CEO”), as shall the
determination of whether a termination is a result of Cause or Good Reason or
as a result of any other reason or cause.


     2.     Consequences of Covered Termination. In the event that the Executive’s
employment with the Company shall have been terminated prior to the End Date in
a manner that shall constitute a Covered Termination, the Executive shall be
provided with the following severance payments and benefits:


          (a)
Base Salary. The Executive shall receive following the Covered
Termination an amount equal to one (1) times the Executive’s annual base salary
as in effect at the time of the Covered Termination (disregarding any reduction
in base salary rate that constitutes Good Reason under Section 1 (b) hereof)
(“Base Salary”) payable in 12 equal monthly installments,



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          (b) Annual Bonus. The Executive shall receive following the Covered
Termination an amount equal to one (1) times the annual target bonus as in
effect at the time of the Covered Termination, payable in 12 equal monthly
installments.



          (c) CNA Re Deferred Profit Sharing Plan. For purposes of the CNA Re
Deferred Profit Sharing Plan (DPS), the Executive’s Covered Termination shall
be treated as a termination through retirement, and the Executive shall receive
those amount that would be payable in the event of termination through
retirement pursuant to the terms of the DPS in effect immediately prior to the
Covered Termination.



          (d) Miscellaneous Items. The Executive shall receive any unpaid base
salary prorated to the date of her termination and any previous year’s earned,
but unpaid annual bonus.



          (e) Welfare Benefits. Provided they are maintained by the Company, the
Executive shall be entitled to coverage and benefits under the Company’s
benefit programs, on substantially the same terms as were in effect immediately
prior to a Covered Termination, including any applicable co-payments or
premiums to be paid by the Executive, for a period of one (1) year following
the Executive’s Covered Termination (the “Continuation Period”), under the
medical, dental and group life insurance plans in which the Executive was
participating at the time of the Covered Termination, as though the Executive’s
termination of employment had not occurred. (The benefits and coverages to be
provided under this paragraph (f) are hereinafter referred to as “Welfare
Continuation Coverages”.) All Welfare Continuation Coverages shall apply to the
Executive and any of the Executive’s dependents as and to the extent they would
have been eligible for coverage if the Executive had continued to be employed
by the Company during the Continuation Period. The Company may provide the
Executive with the Welfare Continuation Coverages under arrangements other than
pursuant to the generally applicable welfare benefit plans of the Company in
which the Executive was previously participating, provided that the benefits
and coverages so provided are at least as favorable to the Executive as
coverage under the otherwise applicable Welfare Continuation Coverages, on a
coverage by coverage basis, and taking into account all tax consequences to the
Executive. The Executive’s entitlement to “COBRA” continuation coverages for
medical and dental benefits under section 4980B of the Internal Revenue Code
(or any successor provision thereto) shall run concurrent with Welfare
Continuation Coverages.



     3.     Termination Prior To End Date For Cause, Voluntary Termination Other
Than For Good Reason, Or Termination Because Of Death Or Disability. In the
event of The Executive’s termination prior to the End Date for Cause or due to
her voluntary termination other than for Good Reason or her termination because
of death or disability, the Company shall pay the Executive as severance only
the Miscellaneous Items set forth in Section 2(d) above and she shall be
entitled to benefits only as provided for in Section 5, below.


     4.     Termination Prior To End Date By The Company Without Cause. In the
event of the termination of the Executive by the Company prior to the End Date
other than for Cause, she shall receive the same severance payments and other
benefits as if she had terminated her employment for Good Reason.


     5.     Other Payments. Other than as set forth is this Agreement, in the event
of her termination prior to the End Date the Executive shall be entitled to no
other severance payments pursuant to any Company severance plans or otherwise
and her rights, if any, under any of the Company’s retirement, savings,
benefit, pension, welfare (including medical, dental and life), incentive or
other non-severance plans of any nature shall be governed by their terms. In
the event of her termination for any reason subsequent to the End Date, the
Executive’s


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severance and other benefits shall be governed by the terms of the
Company’s employee benefit plans or programs in effect as of the time of such
termination.


     6.     Tax Withholding. All payments required to be made to the Executive
under this Agreement shall be subject to the withholding of such amounts, if
any, relating to income tax, excise tax, employment tax and other payroll taxes
as the payer may reasonably determine it should withhold pursuant to any
applicable law or regulation.


     7.     No Mitigation or Offset. In the event of a Covered Termination, the
Executive shall be under no obligation to minimize or mitigate damages by
seeking other employment, and the obtaining of any such other employment shall
in no event effect any reduction of obligations hereunder for the payments and
the benefit coverages required to be provided to the Executive.


     8.     Covenants.


          (a) Confidentiality. The Executive agrees that, while employed by the
Company, and at all times thereafter, the Executive shall not reveal or utilize
information, knowledge or data which is confidential as defined in this
Agreement and learned during the course of or as a result of Executive’s
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 10% equity interest whether voting
or non-voting; (b) the Company’s customers, employees, agents, brokers and
vendors. The Executive acknowledges that all such confidential information is
commercially valuable and is the property of the Company. Upon the termination
of Executive’s employment, the Executive shall return all confidential
information to the Company, whether it exists in written, electronic,
computerized or other form. Notwithstanding the foregoing provisions of this
Section 8(a), the Executive may disclose or use any such information (i) as
such disclosure or use may be required or appropriate in the course of the
Executive’s employment with the Company, (ii) when required by a court of law,
by any governmental agency having supervisory authority over the business of
the Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction, provided that in the event Executive
believes she is so required to make such disclosure or use, she will notify the
Company in writing of the basis for that belief before actually making such
disclosure or use in order to permit the Company to take steps to protect the
Company’s interest and will cooperate with the Company in all reasonable
respects to permit the Company to oppose such disclosure or use, or (iii) with
the prior written consent of the Company. In addition, if the Executive has not
already done so, she agrees to be bound by the Company’s Confidentiality,
Computer Responsibility and Professional Certification Agreement incorporated
by reference herein.



               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 by the Executive of any of the
obligations imposed by this Agreement) concerning the business and technical
information of the Company or other entities as described above. Such
information may without limitation include information relating to data,
finances, marketing, pricing, profit margins, underwriting, actuarial, claims,
loss control, marketing and business plans, renewals, software, processing,
vendors, administrators, customers or prospective customers, products, brokers,
agents, and employees.


          (b) Non-Solicitation. The Executive agrees that, during her employment and
for a period of 12 months following the Executive’s termination of employment
with the Company, for whatever reason, should said termination occur between
the Effective Date and the End Date, the Executive will not employ, offer to
employ, engage as a consultant, or form an association




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with any person who is then, or who during the preceding one year was, an
employee of the Company, nor will the Executive assist any other person in
soliciting for employment or consultation any person who is then, or who during
the preceding one year was, an employee of the Company.


          (c) Non-Interference. The Executive agrees that during her employment and
for a period of 12 months following Executive’s termination of employment, for
whatever reason, with the Company, should said termination occur between the
Effective Date and the End Date, the Executive will not disturb or attempt to
disturb any business relationship or agreement between and the Company any
other person or entity.



          (d) Assistance with Claims. The Executive agrees that, during her
employment and for a reasonable period (not fewer than 24 months from the date
of termination) thereafter, the Executive will be available, on a reasonable
basis to assist the Company 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. The Executive agrees, unless precluded by law, to promptly inform the
Company if she is requested (i) to testify or otherwise become involved in
connection with any Claim against the Company, or (ii) to assist or participate
in any investigation (whether governmental or private) of the Company or any of
their actions, whether or not a lawsuit has been filed against the Company
relating thereto. After the termination of her employment, the Company agrees
to provide reasonable compensation to the Executive at an hourly rate computed
by dividing Executive’s base salary as of her termination by 2080 hours for
such assistance. The Company also shall reimburse the Executive or cause the
Executive to be reimbursed for any out-of-pocket expenses reasonably incurred
by the Executive in complying with this section.



          (e) Return of Materials. The Executive shall, at any time upon the request
of the Company, and in any event upon the termination of employment with the
Company, for whatever reason, immediately return and surrender to the Company
all originals and all copies, regardless of medium, of property belonging to
the Company, created or obtained by the Executive as a result of or in the
course of or in connection with his employment with the Company regardless of
whether such items constitute proprietary information, provided that the
Executive shall be under no obligation to return written materials acquired
from third parties which are generally available to the public. The Executive
acknowledges that all such materials are, and will remain, the exclusive
property of the Company.



          (f) Effect of Breach. The Executive acknowledges that the violation of the
covenants set forth in this Section 8 would cause the Company irreparable harm
and the Executive agrees that the Company shall be entitled to injunctive
relief restraining the Executive from actual or threatened breach of the
covenants and that if bond is required to be posted in order for the Company to
secure such relief said bond need only be in a nominal amount. The right of the
Company to seek injunctive relief shall be in addition to any other remedies
available to the Company with respect to an alleged or threatened breach. The
Executive shall be liable for the Company’s reasonable attorneys’ fees and
costs in bringing such an action.



          (g) Definition of Company. For purposes of this Section 8 the meaning of
Company also shall include its parent and any of its subsidiaries or
affiliates.



     9.     Release of Claims. As a condition of Executive’s entitlement to the
severance payments and benefits provided in this Agreement, at the time of her
termination, the Executive, shall enter into a release in a form acceptable to
the Company releasing the Company and its parent, subsidiaries, affiliates,
directors, officers, employees and agents from


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any and all claims arising prior to the date of such release, including
but not limited to those arising from the Age Discrimination In Employment Act,
as amended.


     10.     Other Compensation and Benefit Plans. Except as specifically provided
herein, the Covered Termination of the Executive’s employment shall not
accelerate the time of payment or vesting under, or increase the amount of
benefits due under, any benefit or incentive compensation plans of the Company.
The amount of any compensation deemed to be received by the Executive pursuant
to this Agreement shall not constitute compensation with respect to which any
other benefit or incentive compensation of such Executive is determined. Except
as provided herein, the rights and benefits of the Executive under this
Agreement shall not be in lieu of the Executive’s benefits under any employee
benefit plan or program of the Company, which shall be payable in accordance
with the terms and conditions of such plans or programs.


     11.     Successors and Assigns. This Agreement and all rights hereunder are
personal to the Executive and shall not be assignable by the Executive.


     12.     No Right of Employment. Nothing in this Agreement shall confer upon
the Executive any right to continue as an employee of the Company or interfere
in any way with the right of the Company or the Executive to terminate their
employment relationship at any time.


     13.     Severability. The invalidity or unenforceability of any provision of
this Agreement shall in no way affect the validity or enforceability of any
other provision.


     14.     Entire Agreement. This Agreement constitutes the entire agreement
among the parties respecting the subject matter hereof and supersedes any prior
agreements respecting the subject matter hereof. No amendment to this Agreement
shall be deemed valid unless in writing and signed by the parties, and no
discharge of the terms of this Agreement shall be deemed valid unless by full
performance by the parties or by a writing signed by the parties. No waiver by
a party of any provisions or conditions of this Agreement shall be deemed a
waiver of similar or dissimilar provisions and conditions at the same time or
any prior or subsequent time.


     15.     Notices. Any notice required or permitted to be given by this
Agreement shall be effective only if in writing, delivered personally or by
courier or by facsimile transmission or sent by express, registered or
certified mail, postage prepaid, to the parties at the addresses hereinafter
set forth, or at such other places that either party may designate by notice to
the other.


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               Notice to
CNA or the Company shall be addressed to:



	 	 
	 	Jonathan D. Kantor

	 	Executive Vice President and General Counsel

	 	CNA Financial Corporation

	 	CNA Plaza 43 South

	 	Chicago, IL 60685




                    Fax: (312) 817-0511


                    Notice to the Executive shall be addressed to the Executive at the address
indicated on the signature page hereof.


     16.     Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Illinois without regard to conflict of
laws principles


     17.     Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute one Agreement. It shall not be necessary that
any counterpart be signed by the parties hereto so long as each such party
shall have executed a counterpart.


     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.



	 	 	 
	 	 	
CONTINENTAL CASUALTY COMPANY
	 
	 
	 	 	
/s/ Jonathan D. Kantor



By: Jonathan D. Kantor

Its: Executive Vice President and General Counsel
	 
	 
	 
	 
	 	 	
EXECUTIVE
	 
	 
	 
	Name:

Address:	 	
/s/ Deborah L. McClenahan



Debra L. McClenahan

942 Pine Tree Lane

Winnetka, IL 60093-1323
	 
	 	 	
Fax: (312) 876-5429




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