SECOND AMENDMENT/CONSULTING AGREEMENT
THIS SECOND AMENDMENT/CONSULTING AGREEMENT (the "Second Amendment/Consulting
Agreement") is made and entered into as of the 22nd day of October, 2004 (the
"Effective Date"), by and between CNA FINANCIAL CORPORATION (the "Company") and
Xxxxxx X. Deutsch ("Deutsch"):
WITNESSETH
WHEREAS, the parties have previously entered into an Employment Agreement (the
"Employment Agreement"), dated August 16, 1999, which was subsequently amended
by an Amendment to said Agreement dated February 25, 2003 (the "Amendment");
WHEREAS, Deutsch's employment with the Company is ending concurrently with the
Effective Date; and
WHEREAS, the Company wishes Deutsch to provide consulting services to the
Company for a period of time after the termination of his employment; and
WHEREAS, the parties wish to amend the Employment Agreement and the Amendment
in certain additional respects;
NOW, THEREFORE, in consideration of the mutual Covenants and agreements set
forth below, it is hereby covenanted and agreed by Deutsch and the Company as
follows:
1. Except as expressly provided in this Second Amendment/Consulting
Agreement, all provisions of the Employment Agreement and the Amendment
shall remain in full force and effect.
2. Section 8 of the Employment Agreement, "Confidentiality", is hereby
amended to add the following language at the end of said Section:
"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 available to
the general public (unless as a result of a breach by Executive of any
of the obligations imposed by this Agreement) concerning the business
and technical information of the Company or other entities. Such
information may without limitation include information relating to
data, finances, marketing, pricing, profit margins, underwriting,
claims, risk control, marketing and business plans, renewals, software,
processing, vendors, administrators, customers or prospective
customers, products, brokers, agents and employees. Information
disclosed by the Company in press releases, shareholder reports, proxy
statements or in SEC or other government agency filings that are
available to the public are deemed to be available to the general
public."
3. Section 9 of the Employment Agreement, "Competition", and Section 22
of the Amendment, are hereby amended to read as follows:
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"Executive hereby agrees that while he is employed by the Company, or
for a period of 12 months following August 1, 2004 (whether or not
Executive's employment with the Company has terminated), whichever
occurs later, he will not, directly or indirectly, without the prior
written approval of the Chairman, 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 competes in any respect with any
of the principal businesses of the Company (a "Competitor"); provided,
however, that such prohibited activity shall not include the ownership
of less than 5% of the securities of any corporation (determined by
vote or value) or having ownership interests constituting less than
five percent (5%) of the value of any partnership or limited liability
company regardless of the business of such corporation or other entity.
Upon the written request of Executive, the Chairman will determine
whether a business or other entity constitutes a "Competitor" for
purposes of this Section 9; provided that the Chairman may require
Executive to provide such information as the Chairman reasonably
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 Chairman may reasonably determine.
Executive acknowledges that that any such business relationship into
which Executive enters after receiving prior written approval of the
Chairman shall not, unless undertaken at the Company's written request,
be subject to coverage under the Company's Directors and Officers
liability insurance coverages or be subject to indemnification by the
Company. Company specifically acknowledges that Deutsch is serving on
the Board of Directors of both Chaucer Holdings PLC and the Casualty
Actuarial Society at the Company's written request."
4. Section 10 of the Employment Agreement, "Solicitation", and Section 23
of the Amendment, are hereby amended to read as follows:
"Executive agrees that while he is employed by the Company, or for a
period of thirty-six (36) months following August 1, 2004 (whether or
not Executive's employment with the Company has terminated), whichever
occurs later, 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, nor will
he assist any other person in soliciting for employment or consultation
any person who is then, or who during the preceding one year was, an
employee of the Company. If Deutsch is properly associated with another
company ("ABC") (e.g., Deutsch is on the Board of Directors of ABC),
then the hiring of an employee of the Company by ABC does not
constitute a breach by Deutsch provided that Deutsch did not assist ABC
in such hiring."
5. Section 11 of the Employment Agreement, "Non-Interference", and
Section 24 of the Amendment, are hereby amended to read as follows:
"Executive agrees that while he is employed by the Company, or for a
period of thirty-six (36) months following August 1, 2004 (whether or
not Executive's employment with the Company has terminated), whichever
occurs later, he will not disturb or attempt to disturb any business
relationship or agreement between the Company and any other person or
entity."
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6. Subsection 3(e) of the Employment Agreement, "Retirement Plan Service",
is amended by adding the following sentence to the end of said
Subsection:
"If the gross lump-sum payment Executive receives from the SERP
pursuant to its terms, after the termination of his employment with the
Company, is less than Two Million Dollars ($2,000,000.00), the Company
agrees to pay Executive an additional amount of termination pay equal
to the difference between $2,000,000.00 and the amount of his gross
SERP lump-sum payment. Said amount of termination pay shall be payable
in a lump-sum at the time Executive receives his SERP payment."
7. The Company and Deutsch agree that his employment with the Company
shall end on the Effective Date. Deutsch also agrees that, concurrently
with his execution of this Second Amendment/Consulting Agreement,
Deutsch shall also execute and deliver to the Company his letter of
resignation as an officer and/or director of the Company and certain of
its subsidiaries, substantially in the form of Annex A to this Second
Amendment/Consulting Agreement, attached hereto and incorporated herein
by reference.
8. The Company and Deutsch agree that Deutsch shall provide certain
consulting services for a period of time, commencing on the Effective
Date and ending on August 31, 2005. The parties agree that this Second
Amendment/Consulting Agreement may be extended beyond its initial term
by mutual written agreement. It is further agreed that the period of
this Second Amendment/Consulting Agreement shall run concurrently with
the period of time, after his termination from the Company, that
Deutsch has agreed to make himself available for assistance with claims
pursuant to Section 12 of the Employment Agreement, and that any
services performed by Deutsch during the term of this Second
Amendment/Consulting Agreement shall be governed by the terms of this
Second Amendment/Consulting Agreement, not said Section 12.
9. During the term of this Second Amendment/Consulting Agreement, Deutsch
shall provide consulting services on those matters as shall be assigned
to him by the Chairman and Chief Executive Officer of the Company's
subsidiaries, collectively known as the "CNA Companies". All such
assignments shall be made in writing.
10. The Company shall pay or cause to be paid to Deutsch, commencing on
the Effective Date and continuing for the term of this agreement, the
amount of THIRTY-FIVE THOUSAND FIVE HUNDRED DOLLARS ($35,500.00) per
month, plus reasonable and necessary expenses as provided in Paragraph
11 below. This amount shall be payable on a monthly basis in
accordance with the procedures noted herein. It is anticipated that
Deutsch's consulting services provided pursuant to the terms of the
Second Amendment/Consulting Agreement will require no more than one
week per month. Should Deutsch's consulting services vary materially
from the one week per month set forth in this paragraph, the parties
agree that the monthly payment of this Paragraph 10 may, by mutual
written agreement, be adjusted upward or downward for any given month;
provided, however, that no downward adjustment will be made if the
failure to perform consulting services for at least one week per month
is caused by the lack of consulting assignments.
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11. The Company shall reimburse Deutsch for all reasonable and
necessary travel expenses incurred by Deutsch in the performance of
his consulting services in accordance with the CNA Travel and
Expense Policy, a copy of which is attached. Should the CNA Travel
and Expense Policy change during the course of this engagement, it
is understood that upon notice to Deutsch of such changes, Deutsch
agrees to comply with any such changes without the necessity of
amending this Second Amendment/Consulting Agreement. Daily working
expenses (e.g., telephone, internet services) are not reimbursable
under this Second Amendment/Consulting Agreement. In addition, the
Company shall pay the reasonable attorneys' fees and costs incurred
by Deutsch in negotiating this Second Amendment/Consulting
Agreement, as well as any taxes that might be payable on said
attorneys' fees.
12. The Company agrees that, during the term of this Second
Amendment/Consulting Agreement, Deutsch shall be allowed to keep
possession of the computer and Blackberry, and the Company shall
maintain for Deutsch's use the Company telephone number, voice mail
system and e-mail address, that the Company had provided him prior to
the termination of his employment with the Company.
13. Deutsch acknowledges that under this Second Amendment/Consulting
Agreement he will act at all times as an independent contractor, and
that this Second Amendment/Consulting Agreement does not establish
the relationship of a partnership, an employment relationship, joint
venture, or principal and agent relationship between the parties,
and that neither party shall have any authority to commit or bind
the other party to any obligations (contractual or otherwise) or
take any actions on behalf of the other party to this Second
Amendment/Consulting Agreement without prior written authorization.
As an independent contractor under this Second Amendment/Consulting
Agreement, Deutsch acknowledges and agrees that any monies that he
receives for consulting services and consulting expenses pursuant to
the terms of this Second Amendment/Consulting Agreement shall not be
considered wages or salary, and that he is personally responsible
for all state, federal and local tax of any kind on the payments
made to Deutsch by the Company for consulting services and
consulting expenses pursuant to the terms of this Second
Amendment/Consulting Agreement. Deutsch further acknowledges and
agrees that all monies that Deutsch receives for consulting services
and consulting expenses shall be reported on an IRS Form 1099.
14. With fifteen (15) days after the end of each three month period
in which this Second Amendment/Consulting Agreement remains in
effect, Deutsch agrees to provide an invoice to the Company upon
completion of the prior quarter's services. Said invoices, to the
extent they relate to the time spent on consulting matters, should
include documentation sufficient to support the time spent on
consulting projects and the specific consulting projects upon which
Deutsch worked, and shall be addressed to Xxxx Xxxxxxxxxx, CNA, CNA
Plaza-40 South, Chicago, IL 60685 either in hard copy or via e-mail.
Said invoices, to the extent they relate to travel expenses and any
non-daily working expenses, should include receipts sufficient to
support itemized travel charges and any charges that are not daily
working expenses, and shall be addressed to Xxxxx Xxxxxx, CNA, CNA
Xxxxx-00 Xxxxx, Xxxxxxx, XX 00000. At Deutsch's option, he may
submit invoices more frequently than quarterly, but not more
frequently than monthly.
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15. The Company agrees to pay Deutsch, in full, any invoice submitted by
Deutsch within thirty (30) days of receipt, unless the Company disputes
an amount contained on an invoice. The Company agrees to furnish
written notice to Deutsch of its dispute of any amount on an invoice
within thirty (30) days after CNA receives such invoice. Deutsch agrees
to provide to the Company full supporting documentation concerning any
disputed amount or invoice within fifteen (15) days after the Company
provides written notification of the dispute to Deutsch. In the event
the Company disputes an invoice amount, Deutsch and the Company agree
to use best efforts to resolve such dispute as soon as possible within
sixty (60) days after the Company provides written notification to
Deutsch.
16. Deutsch warrants that his services under this Second
Amendment/Consulting Agreement will be performed in a professional
manner in accordance with applicable professional standards and agrees
to re-perform any work which does not meet the Company's expectations,
provided the Company identifies any such unsatisfactory work within a
reasonable time after such work is completed.
17. Deutsch agrees that all Confidential Information (as defined in
the amendment to Section 8 of the Employment Agreement set forth in
Paragraph 2 herein) that is known or comes to be known to Deutsch by
reason or in the course of his work under the Employment Agreement,
the Amendment or this Second Amendment/Consulting Agreement is
confidential to the CNA Companies and will not be disclosed to
unauthorized third parties at any time during or after the term of
this Second Amendment/Consulting Agreement. Deutsch further
acknowledges and agrees that during and after all periods of time
that this Second Amendment/Consulting Agreement is effective and/or
he is otherwise providing consulting services to the CNA Companies,
with regard to all Confidential Information, he agrees to observe
and be bound by the provisions and requirements for employees under
the heading "Confidential Information" as set forth in CNA's Code of
Professional Conduct entitled "Our Commitment to Professional
Conduct", a copy of which Deutsch acknowledges receiving. The
provisions of this Paragraph 17 are in addition to the covenants
relating to confidentiality set forth in the Employment Agreement
18. Deutsch acknowledges and agrees that all materials or products
designed or developed by him under this Second Amendment/Consulting
Agreement are deemed works made for hire belonging exclusively to
the Company.
19. Deutsch agrees that under no circumstance may he use the name, logo,
service marks, trademarks, or other protected property of the Company
(including the Company's subsidiary and affiliate companies) in his own
personal or marketing materials without the prior written consent of
the Company. Any violation of this provision shall be a material breach
of this Second Amendment/Consulting Agreement.
20. The Company agrees to indemnify, save and hold Deutsch harmless and
assume the defense of any and all liability, claims, demands, damages
and costs of every kind and nature arising from the consulting services
performed under this Second Amendment/ Consulting Agreement to the same
extent, under Company policies and applicable law, as if Deutsch had
performed those consulting services as an employee of the Company.
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21. Except as otherwise expressly set forth herein, this Second
Amendment/Consulting Agreement contains the entire agreement of the
parties with respect to the subject matter hereof. The parties
acknowledge and agree that the terms of this Second
Amendment/Consulting Agreement may only be amended or waived by an
agreement in writing and signed by the parties hereto.
22. Any controversy or claim arising out of or relating to this Second
Amendment/Consulting Agreement (or the breach thereof) shall be settled
by final, binding and non-appealable arbitration in Chicago, Illinois
by three arbitrators. 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 Deutsch, 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.
IN WITNESS WHEREOF, the parties have entered into this Second
Amendment/Consulting Agreement as of the date set forth herein above.
CNA FINANCIAL CORPORATION
BY: /s/Xxxxxxxx X. Xxxxxx
--------------------------------
Executive Vice President,
General Counsel & Secretary
/s/Xxxxxx X. Deutsch
------------------------------------
XXXXXX X. DEUTSCH, individually
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ANNEX A
LETTER OF RESIGNATION
October 22, 2004
CNA Financial Corporation
CNA Center
Xxxxxxx, Xxxxxxxx 00000
Attention: Executive Vice President, General Counsel & Secretary
Dear Sir:
Effective October 22, 2004, in accordance with the provisions of the Second
Amendment/Consulting Agreement between me and CNA Financial Corporation (the
"Company") effective October 22, 2004, I hereby resign from all positions
(including, without limitation, any position as a member of any board(s) of
directors) with the Company and any other business or entity in which the
Company holds greater than a 10% equity (voting or non-voting) interest,
including, without limitation, resignation as an underwriter for CNA Lloyd's
of Texas and Continental Lloyd's Insurance Company and resignation as an
officer and/or from the boards of directors of the following:
---------------------------------- --------------------------------------------
COMPANY NAME TITLES
---------------------------------- --------------------------------------------
American Casualty Company of Director, Executive Vice President and
Reading, Pennsylvania Chief Financial Officer
---------------------------------- --------------------------------------------
Boston Old Colony Director, Executive Vice President and Chief
Insurance Company Financial Officer
---------------------------------- --------------------------------------------
CNA Casualty of California Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
CNA Lakeview Insurance Company Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
Columbia Casualty Company Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
Commercial Insurance Company Director, Executive Vice President and Chief
of Newark, New Jersey Financial Officer
---------------------------------- --------------------------------------------
Continental Assurance Company Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
Continental Casualty Company Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
Continental Reinsurance Director, Executive Vice President and Chief
Corporation Financial Officer
---------------------------------- --------------------------------------------
Encompass Home and Auto Director, Executive Vice President and Chief
Insurance Company Financial Officer
---------------------------------- --------------------------------------------
Encompass Independent Director, Executive Vice President and Chief
Insurance Company Financial Officer
---------------------------------- --------------------------------------------
Encompass Insurance Company Director, Executive Vice President and Chief
of America Financial Officer
---------------------------------- --------------------------------------------
Encompass Insurance Company Director, Executive Vice President and Chief
of Massachusetts Financial Officer
---------------------------------- --------------------------------------------
Encompass Property and Director, Executive Vice President and Chief
Casualty Company Financial Officer
---------------------------------- --------------------------------------------
Fireman's Insurance Company Director, Executive Vice President and Chief
of Newark, New Jersey Financial Officer
---------------------------------- --------------------------------------------
Galway Insurance Company Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
Kansas City Fire and Marine Director, Executive Vice President and Chief
Insurance Company Financial Officer
---------------------------------- --------------------------------------------
National Fire Insurance Director, Executive Vice President and Chief
Company of Hartford Financial Officer
---------------------------------- --------------------------------------------
National-Ben Franklin Insurance Director, Executive Vice President and Chief
Company of Illinois Financial Officer
---------------------------------- --------------------------------------------
Niagara Fire Insurance Company Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
Pacific Insurance Company Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
The Buckeye Union Insurance Director, Executive Vice President and Chief
Company Financial Officer
---------------------------------- --------------------------------------------
The Continental Corporation Director, Executive Vice President and Chief
Financial Officer
---------------------------------- --------------------------------------------
The Continental Insurance Director, Executive Vice President and Chief
Company Financial Officer
---------------------------------- --------------------------------------------
The Continental Insurance Director, Executive Vice President and Chief
Company of New Jersey Financial Officer
---------------------------------- --------------------------------------------
The Fidelity and Casualty Director, Executive Vice President and Chief
Company of New York Financial Officer
---------------------------------- --------------------------------------------
The Glens Falls Insurance Director, Executive Vice President and Chief
Company Financial Officer
---------------------------------- --------------------------------------------
The Mayflower Insurance Director, Executive Vice President and Chief
Company, Ltd. Financial Officer
---------------------------------- --------------------------------------------
Transcontinental Insurance Executive Vice President and Chief Financial
Company Officer
---------------------------------- --------------------------------------------
Transportation Insurance Director, Executive Vice President and Chief
Company Financial Officer
---------------------------------- --------------------------------------------
Valley Forge Insurance Director, Executive Vice President and Chief
Company Financial Officer
---------------------------------- --------------------------------------------
CNA Financial Corporation Executive Vice President and Chief Financial
Officer
---------------------------------- --------------------------------------------
In the event that the Chief Executive Officer ("CEO") of the Company requests
that I do so, I agree to promptly tender my resignation as a director,
officer, trustee, underwriter and/or member of any other organization(s) with
respect to which my holding such position(s) may reasonably be viewed as
representing the interests of the Company, other than as expressly referenced
in Section 3 of the aforementioned Second Amendment/Consulting Agreement,
provided, however, that if I disagree with any decision of the CEO requiring
my resignation as provided for in this sentence and so inform him in writing,
the CEO will submit the question of such resignation for final determination
to the Board of Directors of the Company, which final determination shall be
dispositive as to whether such resignation is required
Very truly yours,
Xxxxxx X. Deutsch
