EXHIBIT 99.2
Stock Option Terms for Grant Under the
CNA Financial Corporation 2000 Incentive Compensation Plan
On [Date] (the "Grant Date"), CNA Financial Corporation (the "Company")
granted to the Participant an option (the "Option") to purchase a number of
Covered Shares of the Company's common stock (as defined below). The Option
shall be subject to the following Stock Option Terms (sometimes referred to as
the "Award Terms"):
1. Option Award. For purposes of the Award Terms, the "Participant"
shall be the eligible person identified in the award letter included with these
Award Terms (the "Award Letter") and reflecting the date of grant of the Option
that is the same as the Grant Date specified in these Award Terms. For purposes
of the Award Terms, the "Covered Shares" and the "Exercise Price" are,
respectively, the total number of shares the Participant may purchase pursuant
to the Option, and the price per share for such purchase, as specified in the
Award Letter. The Option has been granted under the CNA Financial Corporation
2000 Incentive Compensation Plan (the "Plan"), which is incorporated into and
forms a part of the Award Terms. Certain words, terms and phrases used in the
Award Terms are defined in the Plan (rather than in the Award Terms or Award
Letter), and except where the context clearly implies or indicates the contrary,
and except as otherwise provided in the Award Terms, a word, term, or phrase
used or defined in the Plan is similarly used or defined in the Award Terms and
the Award Letter. Other words, terms or phrases used in the Award Terms or Award
Letter are defined in paragraph 11 of these Award Terms or elsewhere in these
Award Terms or Award Letter.
2. Non-Qualified Option. The Option is not intended to constitute an
"incentive stock option" as that term is used in Section 422 of the Internal
Revenue Code.
3. Date of Exercise. Subject to the limitations of the Plan and these
Award Terms, each installment of Covered Shares of the Option shall be
exercisable on and after the Date of Exercisability for such Installment as
described in the following schedule (but only if the Date of Termination has not
occurred before the Date of Exercisability):
INSTALLMENT DATE OF EXERCISABILITY APPLICABLE TO INSTALLMENT
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First 1/4 of Covered Shares First anniversary of [Grant Date]
Second 1/4 of Covered Shares Second anniversary of [Grant Date]
Third 1/4 of Covered Shares Third anniversary of [Grant Date]
Fourth 1/4 of Covered Shares Fourth anniversary of [Grant Date]
The Option may be exercised on or after the Date of Termination as provided for
herein only as to that portion of the Covered Shares for which it was
exercisable (or became exercisable) immediately prior to the Date of
Termination, if any.
4. Expiration. The Option shall not be exercisable after the Company's
close of business on the last business day that occurs prior to the Expiration
Date. The "Expiration Date" shall be earliest to occur of:
(a) Ten Years. The ten-year anniversary of the Grant Date.
(b) Death or Disability. The one-year anniversary of such Date of
Termination, if the Participant's termination of employment by
Continental Casualty Company or an Affiliate occurs by reason of the
Participant's death or the Participant's Permanent Disability.
(c) Retirement. The three-year anniversary of such Date of Termination, if
the Participant's termination of employment by Continental Casualty
Company or an Affiliate occurs by reason of the Participant's
Retirement (and not by reason of death, Permanent Disability, or for
Cause).
(d) Cause. The Date of Termination, if the Participant's termination occurs
by reason of Cause.
(e) Voluntary Resignation. The Date of Termination, if the Participant's
termination of employment by Continental Casualty Company or an
Affiliate occurs by reason of the Participant's voluntary resignation
(and the termination is for reasons other than as described in
paragraphs (b), (c), or (d) next above, or paragraph (f) next below);
provided, however, that the Incentive Compensation Committee of the
Company's Board of Directors (the "Committee'), in its sole discretion,
may provide for extension of the date specified in this paragraph (e),
except that such extended date may not be later than the earlier of the
90 day anniversary of the Date of Termination or the date specified in
paragraph (a) next above.
(f) Termination without Cause. The Date of Termination, if the
Participant's termination of employment by Continental Casualty Company
or an Affiliate occurs by reason of termination of employment by the
Participant's employer for reasons other than Cause (and the
termination is for reasons other than as described in paragraphs (b),
(c), or (d), next above); provided, however, that the Committee, in its
sole discretion, may provide for extension of the date specified in
this paragraph (f), except that such extended date may not be later
than the earlier of the one-year anniversary of the Date of Termination
or the date specified in paragraph (a) next above; and further provided
that, notwithstanding the provisions of paragraph 3, the Committee may,
in its sole discretion, permit additional exercisability of the Option
to be earned during such extension period.
5. Method of Option Exercise. The Option may be exercised in whole or
in part by filing a written notice with the Secretary of the Company at its
corporate headquarters before the Company's close of business on the last
business day that occurs prior to the Expiration Date, or, if offered by the
Company at the Company's discretion, by electing to exercise the Option through
a Company-arranged broker-dealer. Each exercise of the Option shall be subject
to the Award Letter, the Award Terms and the Plan, and also to the following
provisions:
(a) Any notice of exercise shall specify the number of Covered Shares which
the Participant elects to purchase, and shall be accompanied by payment
of the Exercise Price for such Covered Shares of stock indicated by the
Participant's election.
(b) Payment shall be by check payable to the Company. Except as otherwise
provided by the Committee before the Option is exercised, the
Participant may pay the Exercise Price by authorizing a third party to
sell shares of Covered Shares of stock (or a sufficient portion of
those shares) acquired upon exercise of the Option and remit to the
Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.
(c) The Option shall not be exercisable if and to the extent the Company
determines in its sole discretion that such exercise would be in
violation of applicable state or federal securities laws or the rules
and regulations of any securities exchange on which the Covered Shares
of stock are
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traded. If the Company makes such a determination, it shall use
reasonable efforts to obtain compliance with such laws, rules or
regulations. In making any determination hereunder, the Company may
rely on the opinion of counsel for the Company.
6. Administration. The authority to manage and control the operation
and administration of the Award Terms shall be vested in the Committee, and the
Committee shall have all powers with respect to the Award Terms as it has with
respect to the Plan. Any interpretation of the Award Terms by the Committee and
any decision made by it with respect to the Award Terms is final and binding on
the Company and the Participant.
7. Fractional Shares. In lieu of issuing a fraction of a Covered Share
upon any exercise of the Option, resulting from an adjustment of the Option
pursuant to paragraph 4.2 of the Plan or otherwise, the Company will be entitled
to pay to the Participant an amount equal to the fair market value of such
fractional Covered Share.
8. No Rights As Shareholder. The Participant shall not have any rights
of a shareholder with respect to the Covered Shares subject to the Option,
unless and until a stock certificate for such Covered Shares has been duly
issued following exercise of the Option as provided herein.
9. Governing Documents. The Award Letter shall be subject to the Award
Terms, and the Award Terms shall be subject to the provisions of the Plan, a
copy of which may be obtained by the Participant from the office of the
Secretary of the Company. If discrepancies arise between these Award Terms and
the Plan document, the terms of the Plan document will govern. The Award Terms
are subject to all interpretations, amendments, rules, and regulations
promulgated by the Committee from time to time pursuant to the Plan.
10. Amendment. The Award Terms may be amended by written agreement of
the Participant and the Company, without the consent of any other person except
that any such amendment shall be subject to the approval of the Committee.
11. Definitions. For purposes of the Award Terms, the following
definitions shall apply:
(a) Affiliate. The term "Affiliate" means any business or entity in which
at any relevant time the Company holds directly or indirectly a greater
than a 10% equity (voting or non-voting) interest.
(b) Cause. The Participant will have engaged in conduct that constitutes
"Cause" if the Participant i) engages in any conduct which the Chief
Executive Officer of the Company's insurance subsidiaries reasonably
determines to be fraudulent, constitute willful malfeasance or gross
negligence, or be inconsistent with the dignity and character of an
executive of the Company or ii) violates in a material manner the then
current rules of professional conduct or human resource policies of the
Company. If the Participant has entered into an employment contract
with the Company or any Subsidiary and "Cause" is defined in such
contract, then "Cause" for purposes of these Award Terms shall be as
defined in such contract in lieu of the definition in the immediately
prior sentence.
(c) Date of Exercisability. The Participant's "Date of Exercisability" is
the date on which the specified amount of options are first able to be
exercised as provided for in paragraph 3 of these Award Terms.
(d) Date of Termination. The Participant's "Date of Termination" shall be
the first day occurring on or after the Date of Grant on which the
Participant is not employed by Continental Casualty Company
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or an Affiliate, regardless of the reason for the termination of
employment; provided that a termination of employment shall not be
deemed to occur by reason of a transfer of the Participant's employment
between Continental Casualty Company and an Affiliate or between two
Affiliates; and further provided that the Participant's employment
shall not be considered terminated while the Participant is on a leave
of absence from Continental Casualty Company or an Affiliate approved
by the Participant's employer. If, as a result of a sale or other
transaction, the Participant's employer ceases to be an Affiliate (and
the Participant's employer is or becomes an entity that is not an
Affiliate), the occurrence of such transaction shall be treated as the
Participant's Date of Termination caused by the Participant being
discharged by the employer.
(e) Permanent Disability. The term "Permanent Disability" means a physical
or mental condition of Participant which, as determined by the Company,
in its sole discretion based on all available medical information, is
expected to continue indefinitely and which renders Participant
incapable of substantially performing of the services required of him
by his employer.
(f) Retirement. Termination because of "Retirement" shall mean the
Participant's Date of Termination after attainment of age 62 or, if
earlier, the Participant's Date of Termination which is designated by
the Committee as a "Retirement" for purposes of the Award Terms.