Document:

exv10w3

 

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.

 

 

     (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.

 

 

     (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

 

 

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

 

 

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

 

 

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.

 

 

     (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.

 

 

     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

 

 

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

 

 

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.

 

 

     (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.

 

 

     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.

 

 

     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.

 

 

     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 	 	 
	 	 	 

 

 

	 	 	 	 	 

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:

 

 

	 	 	 
	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.

 

 

     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 Dateexv10w4

 

EXHIBIT 10.4

FOURTH AMENDMENT TO THE

CNA SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The CNA SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, as restated by CNA Financial Corporation effective
January 1, 2003, and as previously amended by the First, Second and Third Amendments thereto, is
hereby further amended as follows:

	1.	 	Section 2.4 is amended to read as follows:

	 	2.4	 	Time and Form of Payment.

	 	(a)	 	Except as otherwise provided in a SERP Agreement, the Post-2004 portion of a
Participant’s benefit under this Plan shall be paid in a single lump sum equal to the
actuarial equivalent of such portion as soon as practicable after the date the Participant
terminates employment; provided that if the sum of the Participant’s Rule of 65 Service and
age on the termination date do not equal at least 65, it shall be paid on the later of the
date the Participant terminates employment or the date he reaches either age 55 if he had
completed at least 10 years of Rule of 65 Service on the termination date, or age 65 if he
had not completed 10 years; and provided further that if the Participant terminated prior to
April 1, 2008, payment shall not begin earlier than January 1, 2009, in any case subject to
Section 2.4(c) below.

	 	(b)	 	The Pre-2005 portion of a Participant’s benefit shall be paid in the same manner as his
Retirement Plan benefit, provided that the Benefits Committee may elect to pay the Pre-2005
portion of the benefit of a Choice 1 Participant (as hereinafter defined) in a single lump
sum equal to the actuarial equivalent of the Pre-2005 portion, and may also decide to pay
the Pre-2005 portion of a Choice 2 Participant in any of the forms of annuity available
under the Retirement Plan that are actuarially equivalent. As of December 31, 2004, the
Benefits Committee has elected to pay all Pre-2005 portions that do not exceed $15,000.00
per month in the form of a lump sum, but the Benefits Committee may pay Pre-2005 portions
that would otherwise be payable in a lump sum in the form of a monthly annuity, and may
establish a different standard for payment of Pre-2005 portions in a lump sum, which may be
either more or less than $15,000.00 per month. All determinations by the Benefits Committee
as to the form of payment shall be made by the Benefits Committee in its sole and absolute
discretion, which may be exercised in an arbitrary and capricious manner, and in no event
shall any Participant be considered to have a vested interest in the payment of the Pre-2005
Portion of his benefit in any particular form. Actuarial equivalence shall be determined in
accordance with the applicable actuarial assumptions provided under the Retirement Plan.
Payment of a Participant’s benefit in the form of a lump sum shall fully discharge all
amounts owed to the Participant and to his heirs or beneficiaries under the Plan.

	 	(c)	 	Anything else in this Plan, or a SERP Agreement, to the contrary notwithstanding:

	 	(i)	 	Except as otherwise provided below, no part of the Post-2004 Portion of a
Participant’s benefit shall be payable to any Participant until he has incurred a
separation from service as defined in Code §409A.

	 
	 	(ii)	 	No Post-2004 portion of a benefit shall be payable to a Participant who
is a key employee, as defined in Code §409A, until six months after he has incurred
a separation from service, unless the Participant is disabled. For this purpose, a
Participant shall be considered disabled only if he is receiving benefits under a
CNA disability plan for a period of at least three months, by reason of a medically
determinable physical or mental impairment which can be expected to either result in
death or last for a continuous period of not less than 12 months. Any payments that
would otherwise be payable to a key employee during the six months following his
separation from service shall be accumulated and paid in a lump sum, without
interest, at the end of the six month period.

 

 

	 	(iii)	 	In no event shall the distribution of any Post-2004 benefit be
accelerated to a time earlier than which it would otherwise have been paid, whether
by amendment of the Plan, exercise of the
Operations Committee’s discretion, or otherwise, except in accordance with an
election made, if permitted by the Administrator, not later than December 31, 2005,
as provided by IRS Notice 2005-1, or as otherwise permitted by regulations issued
pursuant to Code §409A.

	 
	 	(iv)	 	In the event that the Administrator, in its sole discretion, determines
that any time or form of distribution provided for in the Plan, or the existence of
a right to elect a different time or form of distribution, would cause the Plan to
fail to meet the requirements of Code §409A, or otherwise cause Participants to be
subject to any adverse federal income tax consequences, the Administrator shall
adopt procedures modifying or removing the form of distribution or election right,
which shall be deemed an amendment to the Plan.

	 
	 	(v)	 	Any SERP Agreement that provides for a different form or time of payment
shall specify the time and manner of payment, without Employer or Participant
discretion, at the time the SERP Agreement is entered into, and shall otherwise
comply with the requirements of this paragraph (c); provided that, in addition to a
severance from service, a SERP Agreement may provide for benefits to be paid at a
specified time or pursuant to a fixed schedule set forth in the SERP Agreement, upon
the occurrence of a change in ownership or control of the Participant’s Employer, or
in a substantial portion of its assets, as defined in Code §409A, or upon the
occurrence of an unforeseeable emergency, as defined in Code §409A; and provided
further that a SERP Agreement may permit a Participant to elect to further defer the
payment of his benefit if the election does not take effect for at least twelve
months and the payment is deferred by at least five years.

	 	(d)	 	For purposes of this Plan, the “Pre-2005 portion” of a Participant’s benefit shall be
equal to the vested benefit to which the Participant would be entitled if his employment
were terminated on December 31, 2004, adjusted in accordance with IRS Notice 2005-1, or
other regulations issued pursuant to §409A, to reflect the time and form of payment, and the
“Post-2004 portion” of a Participant’s benefit shall be the Participant’s entire benefit
reduced by the Pre-2005 portion, as further provided below:

	 	(i)	 	The Pre-2005 portion of a Choice 1 Participant’s benefit shall be the
deferred vested pension to which the Participant would be entitled if he terminated
on December 31, 2004, and shall not include the value of any early retirement
subsidy unless the Participant was eligible for early retirement on December 31,
2004.

	 
	 	(ii)	 	The Pre-2005 portion of a Choice 2 Participant’s benefit shall be his
Accrued Pension Annuity (as defined in the Retirement Plan).

	 
	 	(iii)	 	The Pre-2005 portion of a benefit provided in a SERP Agreement shall be
vested benefit the Participant would be entitled to if he terminated on December 31,
2004, as determined under the terms of the SERP Agreement.

	2.	 	This amendment shall be effective for all benefits that first become payable on or after
January 1, 2008. Except as otherwise provided herein, the Plan shall remain in full force
and effect.

IN WITNESS WHEREOF, this Amendment has been executed on behalf of CNA Financial Corporation
pursuant to the authority reserved under Section 5.1 of the Plan, this 31st day of December, 2007.

	 	 	 	 	 
	 	CNA FINANCIAL CORPORATION

 	 
	 	By:  	/s/ Thomas Pontarelli
 	 
	 	 	Thomas Pontarelli, Executive Vice President & Chief 	 
	 	 	Administration Officer, Continental Casualty
Company

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