EMPLOYMENT AGREEMENT
Exhibit 10.21
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 26th day of October, 2005 (the
“Signing Date”), by and between Continental Casualty Company, an Illinois insurance company (the
“Company”), and Xxxxx X. Xxxxx (“Executive”);
WITNESSETH:
WHEREAS, the Company wishes to employ Executive as Executive Vice President and President &
Chief Executive Officer of Property and Casualty Operations, of the Company with senior management
level responsibility for the principal business units and wholly-owned insurance subsidiaries of
the Company, such wholly-owned insurance subsidiaries being hereinafter referred to collectively 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 Executive Vice President and President & Chief Executive Officer of Property
and Casualty Operations, for the period commencing on January 1, 2006 (“Effective Date”) and ending
on December 31, 2008, or such earlier date as of which Executive’s employment may be 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 Term of this Agreement.
2. Duties of Executive.
(a) Executive shall perform the duties and responsibilities of Executive Vice President and
President & Chief Executive Officer of Property and Casualty Operations 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 at the Company’s discretion 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
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such capacity without additional compensation. Executive further agrees to resign any such
position 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 President & Chief Executive Officer
of Property Casualty Operations, 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 directly or indirectly 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 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 $800,000.00 (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 Incentive 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 2006,
based on market considerations, responsibilities and Executive’s
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performance. In no event shall Executive’s salary rate 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 that he was previously receiving 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 thereunder shall not be less than the rate
of one-hundred percent (100%) of his Base Compensation and his maximum bonus shall not be more than
the greater of (i) two hundred percent (200%) of his base compensation or (ii) $1,600,000 for each
twelve month bonus period. In no event shall the target Bonus 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 shall be determined and payable in accordance with the
terms of the Plan, as set forth in the Plan documents. Determination of the Company and/or CNAF’s
net operating income (“NOI”) for purposes of calculating Executive’s Bonus shall be made by the
Company, subject to the approval of the Committee. The Committee shall have unlimited negative
discretion under the Plan 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 target shall be 25
percent (25%) of his Base Compensation during the three year performance period as determined by
the Company and/or the Committee. 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 stock
option grant of 30,000 shares or equivalent (stock appreciation rights (“SARs’) paid in
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stock) of CNA Financial Corporation (“CNAF”) common stock annually beginning with the 2006
performance year, 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) For avoidance of doubt respecting awards to Executive under Section 3(b), 3(c), and 3(d)
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 may defer the payment of all compensation to which Executive is entitled hereunder or
otherwise to enable it to comply with Section 162(m) of the Code or any successor provision with
respect to deductibility of executive compensation. 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.
(f) Executive’s pensionable earnings under the CNA Retirement Plan, the CNA Supplemental
Executive Retirement Plan (“SERP”), 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.
(g) All payments due under this Agreement shall be subject to withholding as required by law.
(h) To the extent that any of the payments under this Agreement including without limitation
under Section 6 hereof, are governed by Section 409A of the Internal Revenue Code (the “Code”) of
1986, as amended, the parties will work together in good faith to amend any provisions necessary
for compliance in a manner that maintains the basic financial provisions of this Agreement.
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4. Other Benefits. During the period of his employment with the Company hereunder, 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 but not necessarily limited to 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 severance 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
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the Company’s defined contribution, benefit, incentive or other 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 make payment to Executive or his personal representatives, heirs or
beneficiaries as the case may be, as follows:
(i) within 30 days after such termination his: (1) unpaid base salary and current year’s
target Bonus and CNA long-term incentive cash award prorated to the date of termination; (2)
any previous year’s unpaid Bonus based upon actual or discretionary payouts, if any; and (3)
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 award or other award under the Incentive Compensation Plan),
accrued prior to the date of termination.
(ii) In the event that the termination occurs during a Performance Period (as defined under
the Incentive Compensation Plan) with respect to which the Committee has not yet made a future
stock option grant to which Executive is entitled hereunder or equivalent (SARs paid in stock), or
affirmatively determined not to make an award pursuant to subsection 3(d) of this Agreement, an
amount equal to the cash equivalent, as of the date of termination and without any present value
discount of the target amount referred to in subsection 3(d) for such Performance Period multiplied
by a fraction, the numerator of which is the number of days in such Performance Period through and
including the date of termination and the denominator of which is the total number of days in such
Performance Period. For the purpose of this Section 6.1(a)(ii), the cash equivalent of a future
stock option grant to which Executive is entitled hereunder or equivalent (SARs paid in stock)
shall be equal to 48% of the fair market value of the number of shares of stock to be covered by
the future stock option grant or equivalent (SARs paid in stock), determined based on the on the
fair market value of the stock on the date of termination, and then discounted from January 1 of
the year for which the stock option grant or equivalent (SARs paid in stock) would have been
granted to the date of termination using an
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interest rate equal to the prime rate for the date of termination as reported in The Wall
Street Journal (Midwest Edition). Fair market value of the stock shall be determined by taking the
average of the highest and lowest sales prices of the stock on the date of termination, as reported
as the New York Stock Exchange-Composite Transactions for such day, or if the stock was not traded
on the New York Stock Exchange on such day then on the next preceding day on which the stock was
traded, all as reported by The Wall Street Journal (Midwest Edition) under the heading New York
Stock Exchange-Composite Transactions, or, if the stock ceases to be listed on such exchange, as
reported on the principal national securities exchange or national automated stock quotation system
on which the stock is traded or quoted, but in no event shall the price be less than the par value
of the stock; and
(iii) Any unexercised stock option grant to which Executive is entitled hereunder or
equivalent (SARs paid in stock) held by Executive upon termination of employment may be exercised
by Executive (or his heirs or personal representative) following such termination to the extent of
the sum of the number of shares with respect to which each such stock option grant to which
Executive is entitled hereunder or equivalent (SARs paid in stock) was vested but unexercised
immediately prior to such termination, plus an additional number of shares determined by
multiplying the unvested portion of such stock option grant or equivalent (SARs paid in stock) by
the fraction described in subsection 6.1(a)(ii), and rounded to the next higher number of whole
shares. Such prorated portion of each such stock option grant or equivalent (SARs paid in stock)
shall fully vest upon termination and may be exercised through the one-year anniversary of such
date of termination but not thereafter, and in no event later than the date on which such stock
option grant or equivalent (SARs paid in stock) would expire if Executive had remained employed by
the Company. Other stock options held by Executive may be exercised during the same period, but
only to the extent vested under the terms of each such award. If applicable, the provisions of
this subsection 6.1(a)(iii) shall supercede any contrary provision in any other agreement with
Executive governing any stock option grant or equivalent (SARs paid in stock) or other incentive
award.
(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.
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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 material provision of this Agreement; (iii) willful or reckless
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 salary 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 award or other award 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 13, subsequent to the date of
such termination for such periods of time as provided for in said Sections respectively. The CEO
shall, in his discretion but in consultation with the Board of Directors of CNAF, determine
whether, in light of all surrounding circumstances, (i) any additional compensation should be paid
to the Executive as a result of Executive being bound by the provisions of Section 9 hereinbelow in
the event of his termination for Cause and (ii) any modification to the requirements of said
Section 9 in relation to the Executive should be made.
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):
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(a) The Company shall pay to Executive severance consisting of an amount equal to the 24
months of the Executive’s Base Compensation, and two (2) times Executive’s annual target Bonus. The
severance shall be payable not less frequently than in equal monthly installments following such
termination. The Company shall also pay the Executive (i) within 30 days of his termination, his
unpaid base salary, prorated to the date of termination; (ii) at the time of the scheduled March
payout date, current year’s target Bonus and any CNA long-term incentive cash award payable
hereunder, prorated to the date of termination; and (iv) 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)(iv) shall not include any unpaid Bonus or any unpaid long-term incentive cash award
or other award under the Plan). Executive agrees to be bound by the covenants set forth in Sections
7 through 13 hereof 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 24 months, with said period of participation to run concurrently with any period of
COBRA coverage to which Executive may be entitled. 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 for Good Reason.
(b) Any unexercised stock option grant or equivalent (SARs paid in stock) held by Executive
upon termination of his employment shall be fully vested on the date of termination and may be
exercised by Executive at any time up to the first anniversary of Executive’s date of termination
but not thereafter, and in no event later than the date on which such stock option grant or
equivalent (SARs paid in stock) would expire if Executive had remained employed by the Company).
If applicable, the provisions of this subsection 6.3(b) shall supercede any contrary provision in
any other agreement with Executive governing any stock option grant or equivalent (SARs paid in
stock) or other option or other right under the Incentive Compensation Plan.
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(c) “Good Reason” as set forth herein is defined as a reduction in the rate of Executive’s
base salary, annual incentive target 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.
(d) “Without Cause” as set forth herein is defined as a termination of the Executive’s
employment by the Company for any reason not described or referenced in subsections 6.1 and 6.2.
(e) 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 13
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 salary 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 award or other award 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 13
subsequent to the date of such termination for such periods of time as provided for in said
Sections respectively.
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6.5 Expiration of Agreement.
(a) On or before December 31, 2008, the Company may offer to Executive a term of employment
commencing on January 1, 2009 (“Offer”). If the Company does not make an Offer to
Executive by December 31, 2008, then the Executive’s employment shall terminate on December 31,
2008 and Executive shall receive all amounts and benefits set forth in Section 6.3.
(b) If the Company makes an Offer by December 31, 2008 and the Company and Executive have not
mutually agreed to the terms of, and entered into, a new agreement prior to December 31, 2008,
Executive’s employment shall terminate on December 31, 2008 and the Company shall pay to Executive
severance consisting of an amount equal to the 12 months of the Executive’s Base Compensation, and
Executive’s annual target Bonus. The severance shall be payable not less frequently than in equal
monthly installments following such termination. The Company shall also pay the Executive (i)
within 30 days of such termination, his unpaid base salary, prorated to the date of termination;
(ii) at the time of the scheduled March payout date, current year’s target Bonus and any CNA
long-term incentive cash award payable hereunder, prorated to the date of termination; and (iv)
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 6.5(b)(iv) shall not include any unpaid Bonus or
any unpaid long-term incentive cash award or other award under the Plan). Executive agrees to be
bound by the covenants set forth in Sections 7 through 13 hereof 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 6.5(b), 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. 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 pursuant to
this Section 6.5.
6.6 Other Benefits. In the event that Executive’s employment is terminated pursuant to
Sections 6.1, 6.2 or 6.4, Executive’s coverage under the Company’s short-term disability plan,
shall end on the date of such termination of employment; Executive’s coverage under the
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Company’s long-term disability plan shall end on the last day of the month in which such
termination of employment occurs; and 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 such 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 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
represent 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 in a form
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 execution and
delivery to the Company of 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 for
in said Section 6.
7. Confidentiality. Executive agrees that while he is employed by the Company, and at all
times thereafter, Executive shall not reveal or utilize “confidential information” (as that term is
defined in Section 8 of this Agreement) 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.
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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 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 12 months following the date of his termination of employment with the Company for any
reason except that such period shall be for twenty-four (24) months in the case of a termination of
Executive’s employment pursuant to Section 6.5(b) hereof (in either case, the “Restriction
Period”), 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 upon the accuracy of such information, and upon 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 36 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
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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 36 months following his termination of employment with the Company for any reason, he
will not disturb, attempt to disturb or cause anyone else 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 36 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 (collectively “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 interests of 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 as necessary 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
government 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 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, including without limitation all such originals or
copies containing any confidential information, regardless of whether such items constitute
proprietary information, provided that Executive shall be under no obligation to return written
materials acquired from third parties which are generally available to
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the public. Executive acknowledges that all such materials are, and will at all times 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 (an outline 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 is
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 both national and international; (b) its breadth include the entire
insurance industry, both domestic and international; 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, indeed, near permanent and therefore are of great value to the
Company. The Executive agrees that neither any of the provisions in this Agreement nor the
Company’s enforcement of it alters or will alter his ability to earn a livelihood for himself and
his family and further that both 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 any of the
covenants set forth in Sections 7 through 13 above would cause the Company irreparable harm and
that the Company is 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
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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 the state or federal courts located in Illinois or any state in which he
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 and 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 of 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.
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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 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
purposes hereof.
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 any party with
respect to any breach of any provision hereunder by any 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 set forth herein, the obligations contained in
this Agreement shall survive the termination, for any reason whatsoever, of Executive’s employment
with the Company.
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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:
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If to the Company:
CONTINENTAL CASUALTY COMPANY
XXX Xxxxxx
Xxxxxxx, XX 00000
Attn: Corporate Secretary
XXX Xxxxxx
Xxxxxxx, XX 00000
Attn: Corporate Secretary
If to Executive:
Xxxxx X. Xxxxx
00 Xxxxxxxxx Xxxx
Xxxxx Xxxxxxxxxx, XX 00000
00 Xxxxxxxxx Xxxx
Xxxxx Xxxxxxxxxx, XX 00000
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. Any controversy or claim arising out of or relating to this
Agreement (or the breach thereof), except as otherwise indicated hereinbelow, 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 relating to Sections 7 through 14 of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
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| CONTINENTAL CASUALTY COMPANY | ||||
By:
|
/s/ Xxxx Xxxxxxxxxx | |||
Title:
|
Executive Vice President Human Resources | |||
| /s/ Xxxxx X. Xxxxx | ||||
| Xxxxx X. Xxxxx | ||||
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