Exhibit 10.15

CAPITAL SUPPORT AGREEMENT

This Capital Support Agreement (the “Agreement”) is made and entered into this
12th day of November, 2003 among LOEWS CORPORATION, a Delaware corporation
(“Loews”), CNA FINANCIAL CORPORATION, a Delaware corporation (“CNAF”) and
CONTINENTAL CASUALTY COMPANY, an Illinois insurance company (“CCC”).

WITNESSETH:

WHEREAS, CNAF and its wholly-owned subsidiary, CCC (or certain of its direct or
indirect wholly-owned subsidiaries), plan to enter into various transactions
regarding CNAF and certain portions of CCC’s or such subsidiaries’ business
which are expected to increase CCC’s surplus; and

WHEREAS, Loews owns approximately 90% of the outstanding shares of common stock
of CNAF and, together with CNAF and CCC, will directly and/or indirectly benefit
from such transactions and any related increases in CCC’s surplus; and

WHEREAS, CNAF and CCC have requested Loews, and Loews has agreed, to provide
support to CNAF and CCC by entering into the transactions described in this
Agreement on the terms and subject to the conditions set forth herein.

NOW THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, CNAF, CCC and Loews hereby agree as follows:

1. CAPITAL SUPPORT. Upon the terms and subject to the conditions of this
Agreement, on the third business day following satisfaction or waiver of all of
the conditions to the obligations of the parties set forth in Section 2 of this
Agreement, or at such other time as Loews, CNAF and CCC may agree (the “Closing
Date” which shall refer to the date of closing for the transactions described in
paragraph A. and B. below, it being understood that such transactions need not
close on the same date) Loews, CNAF and CCC will consummate the following
transactions:

A. Purchase of CNAF Preferred Stock by Loews. CNAF will sell to Loews and Loews
will purchase from CNAF the number of additional newly issued shares of a new
class of CNAF Series I Convertible Participating Preferred Stock (the “Preferred
Stock”), determined by dividing $750 million by the Per Share Purchase Price.
The “Per Share Purchase Price” for the Preferred Stock will be one thousand
(1000) times the volume weighted average of the daily trading prices of CNAF
common stock based on trading between 9:30 a.m. and 4:00 p.m. Eastern Time, as
reported by Bloomberg Financial L.P. for the five trading days from and
including November 17, 2003 through November 21, 2003 (the “Pricing Period”). In
the event that CNAF’s announcement of earnings for the third quarter of 2003 is
released on a day following November 12, 2003, the Pricing Period will be moved
forward one business day for each business day that occurs after November 12,
2003 until such announcement occurs. The Preferred Stock shall have the
designation, powers, preferences and rights and the qualifications, limitations
and restrictions set forth in the certificate of designation with respect to
such series (as validly amended, modified or supplemented from time to

 

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time, the “Series I Certificate”) substantially in the form of Exhibit 1
attached hereto and made a part hereof.

Subject to the satisfaction or, to the extent permitted by applicable law,
waiver of the conditions set forth in Section 2 hereof, at the closing of the
transactions contemplated by this Agreement, Loews shall pay such purchase
price, against delivery of a certified copy of the Series I Certificate or other
evidence of the issuance of such shares reasonably acceptable to Loews, by wire
transfer in immediately available funds and CNAF shall promptly contribute the
net proceeds of this issuance of Preferred Stock as capital to CCC. Any term or
provision of this Agreement to the contrary notwithstanding: (a) the Closing
Date for the transaction described in this paragraph A shall be November 24,
2003, unless otherwise agreed in writing by Loews and CNAF; and (b) in the event
that CNAF’s announcement of earnings for the third quarter of 2003 is released
on a day following November 12, 2003, the Closing Date for the transaction
described in this paragraph A shall be moved forward one business day for each
business day that occurs after November 12, 2003 until such announcement occurs.

B. CCC Guaranty and Surplus Notes. Loews and CCC shall execute a Guaranty
Agreement (the “Guaranty Agreement”) in form and substance substantially similar
to the Form of Guaranty Agreement attached as Exhibit 2 hereto, including the
forms of surplus notes (the “Surplus Notes”) attached as Exhibits A and B to the
Guaranty Agreement.

2. CONDITIONS TO CLOSING.

     A. The obligations of Loews to purchase the Preferred Stock and to execute
and deliver the Guaranty Agreement hereunder and to otherwise consummate the
transactions contemplated by this Agreement, shall be subject to the
satisfaction or, to the extent permitted by applicable law, waiver by Loews of
the following conditions:

i. Representations and Warranties. Each of the representations and warranties
and other statements made by CNAF and CCC in this Agreement and the documents
delivered by them pursuant hereto (the “Transaction Documents”) are, at the time
made and on the Closing Date, true and correct in all material respects.

ii. Performance of Obligations. CNAF and CCC shall have performed in all
material respects all of their agreements and obligations hereunder, to the
extent effective at or prior to the Closing Date, under the Transaction
Documents.

iii. Officer’s Certificate. CNAF and CCC shall have furnished or caused to be
furnished to Loews a certificate of each such company (signed by an executive
officer thereof) as to the satisfaction of the conditions applicable to each set
forth in this Section 2.A.

iv. Opinion of Counsel. Jonathan D. Kantor, General Counsel of each of CNAF and
CCC, shall have furnished to Loews his written opinions, dated the Closing Date,
in form and substance reasonably satisfactory to Loews, that:

 

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a. This Agreement has been duly executed and delivered by each of CNAF and CCC
and constitutes a valid and binding obligation of each of CNAF and CCC,
enforceable against CNAF and CCC in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy or other similar laws
affecting creditors’ rights generally or principles of equity.

b. The execution, delivery and performance by each of CNAF and CCC of this
Agreement and by CCC of the Guaranty Agreement and, when issued, the Surplus
Notes and the consummation by CNAF and CCC of the transactions contemplated
hereby and thereby do not and will not (1) contravene, conflict with, or result
in any violation or breach of any provision of their respective certificates or
articles of incorporation or bylaws; (2) to his best knowledge, contravene,
conflict with or result in a violation or breach of any provision of any law,
rule, regulation, judgment, injunction, order or decree applicable to CNAF, or
its subsidiaries, or CCC or its subsidiaries or require any consent, approval or
other action by, filing with or notice to any governmental authority (including
without limitation any regulatory authority) other than as described herein; (3)
to his best knowledge, other than as described herein require any consent or
other action by, filing with or notice to any person under, constitute a default
under (or an event that, with or without notice or lapse of time or both, would
constitute a default), or cause or permit the termination, cancellation,
acceleration, triggering or other change of any right or obligation or the loss
of any benefit to which CNAF or its subsidiaries or CCC or its subsidiaries is
entitled under (A) any provision of any agreement or other instrument binding
upon CNAF or any of its subsidiaries or CCC or its subsidiaries or (B) any
license, franchise, permit, certificate, approval or other similar authorization
held by, or affecting, or relating to, the assets or business of CNAF or any of
its subsidiaries or CCC or its subsidiaries; or (4) result in the creation or
imposition of any lien or other encumbrance on any its or its subsidiaries
asset, other than such exceptions in the case of clauses (2), (3) and (4) as
would not, individually or in the aggregate, be reasonably expected to
materially impair or delay CNAF’s or CCC’s ability to consummate the
transactions contemplated by this Agreement or have a material adverse effect on
the business, financial position, shareholders’ equity or results of operations
of CNAF or CCC and their subsidiaries, taken as a whole.

c. The issuance of the Preferred Stock by CNAF pursuant to this Agreement, the
issuance by CNAF of the common stock of CNAF issuable upon conversion of the
Preferred Stock and the issuance by CCC of the Surplus Notes pursuant to the
Guaranty Agreement have been duly authorized.

d. When issued and delivered to Loews by CNAF against payment therefore as
provided herein, the Preferred Stock will be, and when issued and delivered upon
conversion of the Preferred Stock, the shares of common stock of CNAF issuable
upon conversion thereof will be, duly and validly issued and fully paid and
non-assessable and, to his

 

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knowledge, will not be subject to the preemptive rights or other similar rights
of any securityholder of CNAF or any other person.

e. When issued and delivered to Loews by CCC against payment therefore as
provided in the Guaranty Agreement, each of the Surplus Notes will be duly and
validly issued and will be enforceable against CCC in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy or other
similar laws affecting creditors’ rights generally or principles of equity.

f. None of the offering, issuance or sale of the Preferred Stock, the common
stock of CNAF issuable upon conversion of the Preferred Stock or the Surplus
Notes (or any portion thereof) to Loews is subject, or to such counsel’s
knowledge will become subject, to the registration requirements of Section 5 of
the Securities Act of 1933, as amended (the “1933 Act”).

v. Rating Agency Approval. As of the Closing Date, neither Moody’s Investors
Services, Standard & Poor’s nor A.M. Best Company shall have lowered, or stated
its intention to Loews, CNAF or CCC or publicly to lower, as applicable, any of
the corporate, debt or insurer financial strength ratings of CNAF, CCC or Loews
from the ratings published by such agencies as of the date hereof.

vi. Regulatory Authorities. CCC shall have received the approval of the Director
of the Illinois Department of Insurance and, as applicable, the other insurance
subsidiaries of CNAF shall have received all necessary approvals of their
respective regulators for the consummation of each of the transactions
contemplated by this Agreement, the Guaranty Agreement and the Surplus Notes.

     B. The obligations of CNAF and CCC hereunder to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or, to the
extent permitted by applicable law, waiver by CNAF and CCC of the following
conditions:

i. Representations and Warranties. All representations and warranties and other
statements of Loews herein are, at the time made and on the respective Closing
Dates, true and correct in all material respects.

ii. Regulatory Authorities. The insurance subsidiaries of CNAF shall have
received the approval of their respective regulators for the filings and
exemptions shown on Exhibit 3.

iii. Rating Agencies. At the Closing Date, neither Moody’s Investors Services,
Standard & Poor’s nor A.M. Best Company shall have lowered, or stated its
intention to Loews, CNAF or CCC or publicly to lower, as applicable, any of the
corporate, debt or insurer financial strength ratings of CNAF or CCC from the
ratings published by such agencies as of the date.

3. REPRESENTATIONS AND WARRANTIES.

 

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     A. Loews hereby represents and warrants to CNAF and CCC as follows:

i. Authority. Loews is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, including the execution and delivery on the
Closing Date of the Guaranty Agreement and, if required by the terms thereof, to
consummate the transactions contemplated thereby, including the purchase of the
Surplus Notes.

ii. Due Authorization. The execution and delivery by Loews of this Agreement,
and the consummation by it of the transactions hereby, including the execution
and delivery on the Closing Date of the Guaranty Agreement and, if required by
the terms thereof, the consummation of the transactions contemplated thereby,
including the purchase of the Surplus Notes, have been duly authorized by all
necessary corporate action on the part of Loews.

iii. Enforcement. This Agreement has been duly executed and delivered by Loews
and constitutes a valid and binding obligation of Loews enforceable against
Loews in accordance with its terms, except as the enforceability hereof may be
limited by bankruptcy or other similar laws affecting creditors’ rights
generally or principles of equity. When executed and delivered by Loews, the
Guaranty Agreement, the Surplus Notes and each of the other Transaction
Documents will constitute a valid and binding obligation of Loews enforceable
against Loews in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy or other similar laws affecting creditors’ rights
generally or principles of equity.

iv. Regulatory Approvals. No authorization, approval, consent or order of, or
registration or filing with, any court or other governmental body having
jurisdiction over Loews is required on the part of Loews for the execution and
delivery of this Agreement or the Guaranty Agreement or the consummation by
Loews of the transactions contemplated hereby or thereby.

v. Investment Intent. The Preferred Stock is being acquired, and, if purchased
by Loews pursuant to the Guaranty Agreement, the Surplus Notes will be acquired
by Loews for investment for its own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the federal or state securities laws.

vi. Accredited Investor. Loews is an “accredited investor” within the meaning of
Regulation 501(a) under the Securities Act, can bear the economic risk of its
investment in the Preferred Stock and the Surplus Notes and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Preferred Stock and the Surplus
Notes.

vii. Information. Loews has had a reasonable opportunity to ask questions and
receive answers concerning CNAF and CCC and their financial and business
affairs.

 

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     B. CNAF hereby represents and warrants to Loews as follows:

i. Authority. CNAF is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.

ii. Due Authorization. The execution and delivery by CNAF of this Agreement, and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of CNAF.

iii. Enforcement. This Agreement has been and, when executed, the other
Transaction Documents to which CNAF is a signatory will be, duly executed and
delivered by CNAF and constitutes or will constitute valid and binding
obligations of CNAF enforceable against CNAF in accordance with their respective
terms, except as the enforceability hereof or thereof may be limited by
bankruptcy or other similar laws affecting creditors’ rights generally or
principles of equity.

iv. Non-Contravention. The execution, delivery and performance by CNAF of this
Agreement and the consummation by CNAF of the transactions contemplated hereby
do not and will not (1) contravene, conflict with, or result in any violation or
breach of any provision of CNAF’s certificate of incorporation or bylaws; (2)
contravene, conflict with or result in a violation or breach of any provision of
any law, rule, regulation, judgment, injunction, order or decree applicable to
CNAF or its subsidiaries, or require any consent, approval or other action by,
filing with or notice to any governmental authority (including without
limitation any regulatory authority) other than as described herein; (3) other
than as described herein require any consent or other action by, filing with or
notice to any person under, constitute a default under (or an event that, with
or without notice or lapse of time or both, would constitute a default), or
cause or permit the termination, cancellation, acceleration, triggering or other
change of any right or obligation or the loss of any benefit to which CNAF or
any of its subsidiaries is entitled under (A) any provision of any agreement or
other instrument binding upon CNAF or any of its subsidiaries or (B) any
license, franchise, permit, certificate, approval or other similar authorization
held by, or affecting, or relating to, the assets or business of CNAF or any of
its subsidiaries; or (4) result in the creation or imposition of any lien or
other encumbrance on any its or its subsidiaries asset, other than such
exceptions in the case of clauses (2), (3) and (4) as would not, individually or
in the aggregate, be reasonably expected to materially impair or delay CNA’s
ability to consummate the transactions contemplated by this Agreement or have a
material adverse effect on the business, financial position, shareholders’
equity or results of operations of CNAF and its subsidiaries, taken as a whole.

v. Absence of Certain Changes. Since November 12, 2003, there has been no
material adverse change in the condition (financial or other), earnings,
business, prospects or properties of CNAF.

 

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vi. Preferred Stock Validly Issued. The Preferred Stock, when issued, delivered
and paid for on the Closing Date, and the common stock of CNAF issuable upon
conversion of the Preferred Stock, when issued and delivered upon conversion of
the Preferred Stock, will be duly and validly issued and outstanding, fully paid
and nonassessable and free and clear of any liens or other encumbrance (other
than any liens or encumbrances that may be created as a result of Loews’
ownership of the Preferred Stock or CNAF common stock) and not subject to
preemptive or other similar rights.

vii. No Registration Required. Neither CNAF nor to its knowledge any person
acting on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Preferred Stock to Loews or the issuance to
Loews of the shares of common stock of CNAF issuable upon conversion thereof or
the purchase by Loews of the Surplus Notes (or any portion thereof) from Loews
if required pursuant to Section 1 hereof, to the registration requirements of
Section 5 of the 1933 Act, and CNAF has no reason to believe that the offering,
issuance or sale of the Preferred Stock to Loews or the issuance to Loews of the
shares of common stock of CNAF issuable upon conversion thereof or the purchase
by Loews of the Surplus Notes (or any portion thereof) from Loews if required
pursuant to Section 1 hereof is or will become subject to the registration
requirements of Section 5 of the 1933 Act.

     C. CCC hereby represents and warrants to Loews as follows:

i. Authority. CCC is an insurance company duly organized, validly existing and
authorized to transact its business under the laws of the State of Illinois and
has all requisite corporate power and authority to execute and deliver this
Agreement, the Guaranty Agreement and the Surplus Notes, if required to do so
under the terms and conditions of the Guaranty Agreement, and to perform its
obligations and otherwise consummate the transactions contemplated hereby and
thereby.

ii. Due Authorization. The execution and delivery by CCC of this Agreement, and
the consummation by it of the transactions hereby, including the execution and
delivery on the Closing Date of the Guaranty Agreement and, if required by the
terms thereof, the consummation of the transactions contemplated thereby,
including the execution and delivery of the Surplus Notes, have been duly
authorized by all necessary corporate action on the part of CCC.

iii. Enforcement. This Agreement has been duly executed and delivered by CCC and
constitutes a valid and binding obligation of CCC enforceable against CCC in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy or other similar laws affecting creditors’ rights generally or
principles of equity. When executed and delivered by CCC, the Guaranty
Agreement, the Surplus Notes and each of the other Transaction Documents will
constitute a valid and binding obligation of CCC enforceable against CCC in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy or other similar laws affecting creditors’ rights generally or
principles of equity.

 

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iv. Non-Contravention. The execution, delivery and performance by CCC of this
Agreement and the consummation by CCC of the transactions contemplated hereby,
including the execution and delivery on the Closing Date of the Guaranty
Agreement and, if required by the terms thereof, the consummation of the
transactions contemplated thereby, including the execution and delivery of the
Surplus Notes, do not and will not (1) contravene, conflict with, or result in
any violation or breach of any provision of its articles of incorporation or
bylaws; (2) contravene, conflict with or result in a violation or breach of any
provision of any law, rule, regulation, judgment, injunction, order or decree
applicable to CCC or its subsidiaries, or require any consent, approval or other
action by, filing with or notice to any governmental authority (including
without limitation any regulatory authority) other than as described herein;
(3) other than as described herein require any consent or other action by,
filing with or notice to any person under, constitute a default under (or an
event that, with or without notice or lapse of time or both, would constitute a
default), or cause or permit the termination, cancellation, acceleration,
triggering or other change of any right or obligation or the loss of any benefit
to which CCC or any of its subsidiaries is entitled under (A) any provision of
any agreement or other instrument binding upon CCC or any of its subsidiaries or
(B) any license, franchise, permit, certificate, approval or other similar
authorization held by, or affecting, or relating to, the assets or business of
CCC or any of its subsidiaries; or (4) result in the creation or imposition of
any lien or other encumbrance on any its or its subsidiaries assets, other than
such exceptions in the case of clauses (2), (3) and (4) as would not,
individually or in the aggregate, be reasonably expected to materially impair or
delay its ability to consummate the transactions contemplated by this Agreement
or have a material adverse effect on the business, financial position,
shareholders’ equity or results of operations of CCC and its subsidiaries, taken
as a whole.

v. Absence of Certain Changes. Since November 12, 2003, there has been no
material adverse change in the condition (financial or other), earnings,
business, prospects or properties of CCC.

vi. Surplus Notes Validly Issued. The Surplus Notes, when issued by CCC,
delivered and paid for pursuant to the terms and subject to the conditions in
this Agreement and the Guaranty Agreement, will be duly and validly issued and
free and clear of any liens or other encumbrance (other than any liens or
encumbrances that may be created as a result of Loews’ ownership of the Surplus
Notes) and not subject to preemptive or other similar rights.

vii. No Registration Required. Neither CCC nor to its knowledge any person
acting on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Surplus Notes to Loews to the registration
requirements of Section 5 of the 1933 Act, and CCC has no reason to believe that
the offering, issuance or sale of the Surplus Notes to Loews is or will become
subject to the registration requirements of Section 5 of the 1933 Act.

4. CNAF PURCHASE OF CCC SURPLUS NOTES FROM LOEWS.

  A.   CNAF agrees that promptly after receiving any net proceeds from an
offering or sale of its equity securities after the date hereof to anyone other
than Loews,

 

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    CNAF shall utilize such net proceeds to purchase from Loews, at par, any
then outstanding Surplus Notes (including any accrued but unpaid interest
thereon), without recourse. If the total net proceeds from any such offering are
less than the outstanding principal of and accrued but unpaid interest on the
Surplus Notes at that time, then CNAF will utilize all such proceeds to purchase
a pro rata portion of the principal and accrued but unpaid interest on the
outstanding Surplus Notes. At the time of any such sale of Surplus Notes, Loews
will deliver the applicable Surplus Notes to CNAF against payment therefor,
together with such documents of assignment or other instruments as CNAF may
reasonably request to evidence such purchase and sale. CCC hereby consents to
any sale of the Surplus Notes hereunder and will cooperate with CNAF and Loews
in connection therewith, including by executing and delivering such new or
replacement Surplus Notes as CNAF or Loews may reasonably request.   B.   Not
more than once in every six-month period during which any Surplus Notes remain
outstanding, Loews may make written demand that CNAF purchase from Loews, at
par, said Surplus Note(s) (including any accrued but unpaid interest thereon),
in full or in part, without recourse, whereupon CNAF must proceed with such
purchase on said terms unless upon such demand CNAF reasonably concludes that
such purchase(s) would directly or indirectly cause a material adverse change in
the financial position of CNAF and so notifies Loews in writing within a
reasonable time after such demand is received. In the event of any such purchase
of Surplus Notes, Loews will deliver the applicable Surplus Note(s) to CNAF
against payment therefor, together with such documents of assignment or other
instruments as CNAF may reasonably request to evidence such purchase and sale.
CCC hereby consents to any such purchase of the Surplus Notes hereunder and will
cooperate with CNAF and Loews in connection therewith, including by executing
and delivering such new or replacement Surplus Notes as CNAF or Loews may
reasonably request.

5. DEALINGS WITH REGULATORS. Each of CNAF and CCC shall use its reasonable good
faith efforts to obtain all required regulatory approvals required to consummate
the transactions contemplated hereby and by the Guaranty Agreement and the
Surplus Notes, including, for so long as any Surplus Note remains outstanding or
any amount remains unpaid thereunder, the approval of the Director of the
Illinois Department of Insurance of the payment by CCC of accrued and unpaid
interest on and principal of the Surplus Notes (including any required
prepayments) on the dates and as otherwise provided in the Surplus Notes and in
the event that any such approval has not been obtained for any such payment at
or prior to the relevant payment date, to continue to use its reasonable good
faith efforts to obtain such approval promptly thereafter.

6. COVENANTS. The parties hereto covenant and agree as follows:

     A. The resolution embodied in the Series I Certificate shall be presented
to the Board of Directors of CNAF (and/or a properly authorized committee
thereof) for adoption, upon which adoption the Series I Certificate shall be
filed with the Secretary of State of Delaware, and its terms shall become
effective, and Loews shall receive a copy of the Series I Certificate certified
by the Secretary of the State of Delaware.

     B. Loews and CNAF shall each use its reasonable best efforts to cause a
Conversion (as that term is defined in the Series I Certificate) of the
Preferred Stock to occur within such

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time after filing of the Series I Certificate with the Secretary of State of
Delaware as Loews and CNAF reasonably deem appropriate.

6. AMENDMENT. No term or provision of this Agreement shall be amended, modified,
altered, waived, supplemented or terminated except in a writing signed by the
parties hereto.

7. NOTICE. Any notice, request, instruction, correspondence or other document to
be given hereunder by any party to another (herein collectively called “Notice”)
shall be in writing and delivered personally, sent via nationally recognized
express delivery service, mailed by certified mail, postage prepaid and return
receipt requested or sent by confirmed telecopier as follows:

         

        To Loews:   Loews Corporation     667 Madison Avenue     New York, NY
10021

  Attn:   Corporate Secretary
 
        To CNAF:   CNA Financial Corporation     CNA Plaza     Chicago, Illinois
60685

  Attn:   Jonathan D. Kantor

      Senior Vice President, General Counsel and Secretary
 
        To CCC:   Continental Casualty Company     CNA Plaza     Chicago,
Illinois 60685

  Attn:   Jonathan D. Kantor

      Senior Vice President, General Counsel and Secretary

Notice given by personal delivery, express delivery service or mail shall be
effective upon actual receipt. Notice given by confirmed telecopier shall be
effective upon actual receipt if received during the recipient’s normal business
hours, or at the beginning of the recipient’s next business day after receipt if
not received during the recipient’s normal business hours. All Notices by
confirmed telecopier shall be confirmed promptly after transmission in a writing
sent by personal delivery, nationally recognized express delivery service or
certified mail. Any party may change any address to which Notice is to be given
to it by giving notice as provided above of such change of address.

8. MISCELLANEOUS. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS. This Agreement shall be binding upon each of
the parties hereto and inure to the benefit of and be enforceable by the
relevant party hereto and its respective successors and assigns. This Agreement,
together with the other Transaction Documents, embodies the entire agreement and
understanding among Loews, CNAF and CCC and supersedes all prior agreements and
understandings relating to the subject matter hereof. The headings in this
Agreement are for purposes of reference only, and shall not affect the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.

 

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SIGNATURE PAGE TO FOLLOW

 

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

LOEWS CORPORATION

By: /s/ PETER W. KEEGAN
Name: Peter W. Keegan
Title: SVP and CFO

Attest:

By: /s/ KENNETH ZINGHINI
Name: Kenneth Zinghini
Title: Asst. Secretary

CNA FINANCIAL CORPORATION

By: /s/ ROBERT V. DEUTSCH
Name: Robert V. Deutsch
Title: Executive Vice President and Chief Financial Officer (Principal
Accounting Officer)

Attest:

By: /s/ DAVID B. LEHMAN
Name: David B. Lehman
Title: Asst. Secretary

CONTINENTAL CASUALTY COMPANY

By: /s/ ROBERT V. DEUTSCH
Name: Robert V. Deutsch
Title: Executive Vice President and Chief Financial Officer (Principal
Accounting Officer)

Attest:

By: /s/ DAVID B. LEHMAN
Name: David B. Lehman
Title: Asst. Secretary

 

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EXHIBIT 2

GUARANTY AGREEMENT

     This Guaranty Agreement (the “Guaranty”) is made this 24th day of November,
2003 between LOEWS CORPORATION, a Delaware corporation (“Guarantor”), and
CONTINENTAL CASUALTY COMPANY, an Illinois insurance company (“Company”).

WITNESSETH:

     WHEREAS, the Company is a wholly-owned subsidiary of CNA Financial
Corporation, a Delaware corporation, (“CNAF”) and Guarantor owns approximately
90% of the outstanding shares of common stock of CNAF; and

     WHEREAS, the Company and certain of its subsidiaries (“Subsidiaries”) are
engaged in the businesses of selling financial protection to individuals through
term life insurance, universal life insurance, annuities and other products (the
“Life Business”) and providing group life and group health insurance and related
services to employers, affinity groups and other entities that purchase
insurance as a group (the “Group Business”); and

     WHEREAS, Company and the Subsidiaries plan to dispose of, through one or
more sales of assets or Subsidiary stock or through a reinsurance transaction or
other transfer or disposition, all or portions of the Group Business (any such
transaction being a “Group Transaction”) and the Life Business (any such
transaction being a “Life Transaction” and together with the Group Transaction,
the “Transactions”); and

     WHEREAS, if consummated, the Transactions will each generate proceeds for
the Company and are expected to increase the Company’s surplus and Guarantor,
CNAF and the Company will directly and/or indirectly benefit therefrom; and

     WHEREAS, CNAF and the Company have requested Guarantor, and Guarantor has
agreed, to provide support to CNAF and the Company and in furtherance thereof
have entered into a Capital Support Agreement dated November 12th, 2003 among
Guarantor, CNAF and the Company (the “Capital Support Agreement”) pursuant to
which, among other things, Guarantor agreed to provide the financial
accommodations set forth in this Guaranty, on the terms and subject to the
conditions set forth herein and therein.

     NOW THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, Guarantor and the Company hereby agree as
follows:

     1. GUARANTY.

     a. Agreement to Purchase Surplus Notes of the Company. If a Group Trigger
(as defined below) occurs on or prior to February 26, 2004 (the “Trigger Date”),
then on February 27, 2004 or such earlier date as may be agreed upon between the
Company and the Guarantor (the “Purchase Date”) Guarantor shall purchase a Group
Surplus Note (as defined below) from the Company. If a Life Trigger (as defined
below) occurs on or prior to February 26, 2004, then on the Purchase Date
Guarantor shall purchase a Life Surplus Note (as defined below) from the
Company.

 

--------------------------------------------------------------------------------

 

     i. “Group Trigger” means that as of the close of business on the Trigger
Date, either a) a Group Transaction has not occurred or b) if a Group
Transaction has occurred and the amount by which the Company’s statutory surplus
has increased as a result of the Group Transaction is less than $200 million.
Such determination shall be made based upon the Company’s underlying statutory
equity, adjusted for unamortized goodwill, of CNA Group Life Assurance Company,
a subsidiary of the Company, as reflected in its third quarter 2003 statutory
financial statement filed with its domiciliary regulator (the amount by which
such increase is less than $200 million is the “Group Amount”).

     ii. “Life Trigger” means that as of the close of business on the Trigger
Date, either a) a Life Transaction has not occurred or b) if a Life Transaction
has occurred, and the amount by which the Company’s statutory surplus has
increased as a result of the Life Transaction is less than $300MM (the amount by
which such increase is less than $300 million is the “Life Amount”).

     b. Amount and Form of Surplus Note(s).

     i. If a Group Trigger occurs, then on the Purchase Date Guarantor will
purchase from the Company, and the Company will execute and deliver to Guarantor
against payment therefore, a surplus note in the form and having the terms set
forth in the form of Group Surplus Note attached as Exhibit A hereto (the “Group
Surplus Note”). The original principal amount of the Group Surplus Note shall be
the lesser of a) $200 million or b) the Group Amount .

     ii. If a Life Trigger occurs, then on the Purchase Date Guarantor will
purchase from the Company, and the Company will execute and deliver to Guarantor
against payment therefore, a surplus note in the form and having the terms set
forth in the form of Life Surplus Note attached as Exhibit B hereto (the “Life
Surplus Note”). The original principal amount of the Life Surplus Note shall be
the lesser of a) $300 million or b) the Life Amount.

     2. DEMANDS AND NOTICE. Promptly following the occurrence of either a Group
Trigger or a Life Trigger, but in no event later than the Trigger Date, the
Company shall make a demand upon Guarantor (a “Demand”). A Demand shall be in a
writing signed by the Company’s Chief Financial Officer and shall reasonably and
briefly specify the nature of the event and the calculation of the original
principal amount of the Group Surplus Note and/or the Life Surplus Note to be
purchased by Guarantor, with a specific statement that the Company is calling
upon Guarantor to perform under this Guaranty. A Demand satisfying the foregoing
requirements shall be deemed sufficient notice to Guarantor that it must perform
under this Guaranty.

     3. REPRESENTATIONS AND WARRANTIES. Guarantor’s obligation to purchase a
Group Surplus Note or a Life Surplus Note hereunder shall be subject to the
condition that the representations and warranties made by the Company and CNAF
in the Capital Support Agreement shall be true and correct in all material
respects on the date the Demand is delivered to Guarantor hereunder as if made
on and as of such date and CNAF and CCC shall have performed in all material
respects all of their agreements and obligations hereunder and under the Capital
Support Agreement.

 

--------------------------------------------------------------------------------

 

     4. ENFORCEMENT. If Guarantor fails to purchase the Group Surplus Note if
required under the Group Trigger or the Life Surplus Note if required under the
Life Trigger, the Company may take whatever action at law or in equity to
protect and enforce its rights or remedies, including without limitation
specific performance of any covenant, agreement, or other provision contained in
this Guaranty. No right or remedy contained in this Guaranty and conferred upon
the Company is intended to be exclusive of any other right or remedy contained
in this Guaranty, and every such right or remedy shall be cumulative and shall
be in addition to every other such right or remedy contained in this Guaranty
and in any such instrument or document, now or hereafter executed in connection
with this Guaranty, or now or hereafter existing at law or in equity or by
statute, or otherwise. No course of dealing between the Company and Guarantor or
any failure or delay on the part of the Company in exercising any rights or
remedies under this Guaranty shall operate as a waiver of any rights or remedies
of the Company, and no single or partial exercise of any rights or remedies
under this Guaranty shall operate as a waiver or preclude the exercise of any
other rights or remedies under this Guaranty.

     5. NOTICE. Any Demand, notice, request, instruction, correspondence or
other document to be given hereunder by any party to another (herein
collectively called “Notice”) shall be in writing and delivered personally, sent
via nationally recognized express delivery service, mailed by certified mail,
postage prepaid and return receipt requested or sent by confirmed telecopier as
follows:

          To Guarantor:   Loews Corporation     667 Madison Avenue     New York,
NY 10021

  Attn:   Corporate Secretary
 
        To Company:   Continental Casualty Company     CNA Plaza     Chicago,
Illinois 60685

  Attn:   Jonathan D. Kantor

      Senior Vice President, General Counsel and Secretary

Notice given by personal delivery, express delivery service or mail shall be
effective upon actual receipt. Notice given by confirmed telecopier shall be
effective upon actual receipt if received during the recipient’s normal business
hours, or at the beginning of the recipient’s next business day after receipt if
not received during the recipient’s normal business hours. All Notices by
confirmed telecopier shall be confirmed promptly after transmission in a writing
sent by personal delivery, nationally recognized express delivery service or
certified mail. Any party may change any address to which Notice is to be given
to it by giving notice as provided above of such change of address.

     6. MISCELLANEOUS. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS. This Guaranty shall be binding upon
Guarantor and inure to the benefit of and be enforceable by Company and its
respective successors and assigns. This Guaranty embodies the entire agreement
and understanding between Guarantor and Company and supersedes all prior

 

--------------------------------------------------------------------------------

 

agreements and understandings relating to the subject matter hereof. The
headings in this Guaranty are for purposes of reference only, and shall not
affect the meaning hereof. This Guaranty may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. No term or provision of this Guaranty shall be
amended, modified, altered, waived, supplemented or terminated except in a
writing by the parties hereto.

     IN WITNESS WHEREOF the parties hereto have caused this Guaranty to be
executed as of the day and year first above written.

LOEWS CORPORATION

By: /s/ PETER W. KEEGAN
Name: Peter W. Keegan
Title: SVP and CFO

Attest:

By: /s/ KENNETH ZINGHINI
Name: Kenneth Zinghini
Title: Asst. Secretary

CONTINENTAL CASUALTY COMPANY

By: /s/ ROBERT V. DEUTSCH
Name: Robert V. Deutsch
Title: Executive Vice President and Chief Financial Officer (Principal
Accounting Officer)

Attest:

By: /s/ MARY RIBIKAWSKIS
Name: Mary Ribikawskis
Title: Assistant Vice President and Assistant Secretary

 

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CONTINENTAL CASUALTY COMPANY
LIFE SURPLUS NOTE

February 25, 2004   $300,000,000.00

Continental Casualty Company, an Illinois insurance company, (the “Company”),
for value received, promises to pay to the order of Loews Corporation or its
registered assigns (the “Noteholder”) on demand as provided herein the principal
amount of THREE HUNDRED MILLION DOLLARS ($300,000,000.00), and to pay interest
on the outstanding principal balance of this Surplus Note at the rate equal to
the one-year London Inter-Bank Offering Rate as quoted on Bloomberg Financial
L.P. (“LIBOR”) on the Purchase Date, as that term is defined in that certain
Guaranty Agreement between Loews Corporation and the Company dated November 12,
2003 (the “Guaranty”) plus 350 basis points. The outstanding principal balance
of this Surplus Note, together with any interest due thereon, shall not be
considered as a legal liability on the statutory financial statements of the
Company or be the basis of any offset unless and until the Director of the
Illinois Department of Insurance (the “Director”) approves such payment.

1. Term. This Surplus Note shall have a term of twenty (20) years (“Term”). At
the end of the Term, this Surplus Note shall be due and payable in full by the
Company to the Noteholder, unless earlier paid and satisfied in full.

2. Interest Rate Reset. The interest rate payable on this Surplus Note as
described above shall be reset at the first anniversary of the Purchase Date,
and at each subsequent anniversary thereafter for as long as this Surplus Note
is outstanding to a rate equal to the then one-year LIBOR plus 350 basis points.

3. Payments. All payments or prepayments of principal or interest on this
Surplus Note by the Company may be made only with the prior written approval of
the Director.

a. Application of Payments. Any payments made on account of this Surplus Note
shall be applied first to accrued and unpaid interest, and second to the unpaid
principal hereof.

b. Interest Payments. Subject to the prior written approval of the Director,
payments of interest on this Surplus Note shall be made semi-annually on April
1st and October 1st each year, commencing on October 1, 2004 (each a “Scheduled
Payment Date”). If a Scheduled Payment Date is not a day on which both the
Company and nationally chartered United States banks are open for business,
interest shall be paid on the next business day and shall include accrued and
unpaid interest through such date. Interest on this Surplus Note shall be
calculated on the basis of a 360-day year consisting of twelve 30-day months.

c. Principal Payments.

i. Prepayment at Company’s Option. Subject to the prior written approval of the
Director, the Company may prepay this Surplus Note in whole or part at any time
and from time to time without premium or penalty and with accrued and unpaid
interest through the date of prepayment.

 

--------------------------------------------------------------------------------

 

ii. Mandatory Prepayment upon Certain Events. Subject to the prior written
approval of the Director, following the consummation of a Life Transaction, the
Company shall prepay the lesser of (x) the outstanding principal of and accrued
and unpaid interest on this Surplus Note and (y) an amount equal to the increase
in the Company’s statutory surplus as a result of the Life Transaction. “Life
Transaction” means the disposition, through one or more sales of assets or
subsidiary stock or through a reinsurance transaction or other transfer or
disposition, of all or portions of the businesses of selling financial
protection to individuals through term life insurance, universal life insurance,
annuities and other products. The Company shall give the Noteholder prior
written notice of the closing of the Group Transaction. See Attachment A for an
example of the methodology of the mandatory prepayment.

4. Method of Payment. All payments of principal or interest shall be made by the
Company to the Noteholder without presentment of this Surplus Note or
endorsement of such payment at the address specified by the Noteholder for
payment. Payments of principal or interest on this Surplus Note shall be made,
in accordance with the foregoing and subject to applicable laws and regulations,
to the holder of this Surplus Note at the principal corporate office of such
holder or such other place, which shall be reasonably acceptable to the Company,
as the Noteholder shall designate in writing to the Company. Payments under this
Surplus Note shall be made in immediately available funds in lawful money of the
United States.

5. Ranking of Note. The Company shall not issue any securities which are senior
to or pari passu with this Surplus Note [other than a surplus note issued to
Noteholder on the same date hereof relating to the Company’s or its
subsidiaries’ group business]. By acceptance of this Surplus Note, the
Noteholder expressly agrees that the payment of principal and interest by the
Company is expressly subordinated to claims of creditors of Company under ILL.
REV. STAT. ch. 215 Section 5/205, which provides that surplus notes are at the
eighth priority. The obligations of the Company under this Surplus Note are not
subject either to offset by the Noteholder or to recoupment with respect to any
liability or obligation owed to the Company by the Noteholder.

6. Governing Law. This Surplus Note and the Director’s exercise of regulatory
authority, including approval of payments under this Surplus Note, shall be
governed by, and construed in accordance with, the laws of the State of
Illinois.

7. Transfer Restrictions. No transfer of this Surplus Note other than a transfer
in whole or in part to a subsidiary of the Noteholder shall be valid for any
purpose until all transfer restrictions have been satisfied and such transfer
shall have been recorded in the books of the Company.

TRANSFER RESTRICTIONS

THE COMPANY HAS OFFERED AND SOLD THIS SURPLUS NOTE PURSUANT TO EXEMPTIONS FROM
REGISTRATIONS UNDER THE FEDERAL AND STATE SECURITIES LAWS. A HOLDER OF THIS
SURPLUS NOTE MAY NOT SELL OR OTHERWISE TRANSFER THIS SURPLUS NOTE UNLESS THE
OFFER AND SALE IS REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE APPLICABLE
FEDERAL AND STATE SECURITIES LAWS. THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL
ACCEPTABLE TO THE

 

--------------------------------------------------------------------------------

 

COMPANY THAT ANY SALE OR OTHER TRANSFER OF THIS SURPLUS NOTE SHALL NOT VIOLATE
THE APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

8. Notices. Notice shall mean any written document which is originally executed
and is sent by United States mail, nationally recognized express or messenger
delivery service or telecopy confirmed by telephone, and a Notice shall be
deemed to be given upon its receipt by the addressee (in the case of a telecopy,
upon telephonic confirmation following such receipt).

9. Integration. This Surplus Note including the Schedule shall constitute the
entire agreement between the Company and the Noteholder relating to the subject
matter hereof. It supersedes all prior discussions and other written materials
between the Company and the Noteholder with respect to the subject matter
hereof.

10. Miscellaneous. The rights, privileges, duties and obligations under this
Surplus Note shall be binding on any transferees, successors and assignees. This
Surplus Note embodies the entire agreement and understanding between the Company
and the Noteholder and supersedes all prior agreements and understandings
relating to the subject matter hereof. The headings in this Surplus Note are for
purposes of reference only, and shall not affect the meaning hereof.

SIGNATURE PAGE FOLLOWS.

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Company has caused this Surplus Note to be duly executed
under seal by its officers duly authorized thereunto.

CONTINENTAL CASUALTY COMPANY

      By:  /s/JONATHAN D. KANTOR          
Name:
  Jonathan D. Kantor
Title:
  Executive Vice President, General Counsel and Secretary
 
   
Attest:
   
 
    By:  /s/MARY A. RIBIKAWSKIS         
Name:
  Mary A. Ribikawskis
Title:
  Assistant Vice President and Assistant Secretary

 

--------------------------------------------------------------------------------

 

Life Surplus Note Schedule

                                                              Amount of   Unpaid
        Amount of   Date   Principal   Principal   Notation Date   Principal  
Repaid   Repayment   Balance   Made By

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--------------------------------------------------------------------------------

 
 
                                       

--------------------------------------------------------------------------------

 
 
                                       

--------------------------------------------------------------------------------

 
 
                                       

--------------------------------------------------------------------------------

 
 
                                       

--------------------------------------------------------------------------------

 
 
                                       

--------------------------------------------------------------------------------

 
 
                                       

 

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Attachment A

Mandatory Principal Prepayment Example

Assume that the Life Surplus Notes are funded at $300 million on February 15,
2004. On August 11, 2004, the Life Transaction occurs and is completed in the
form of a reinsurance transaction. Assume that on August 16, 2004 (the mandatory
prepayment date), the amount of accrued and unpaid interest owed by the Company
to the Noteholder is $9,050,000. Also, assume that the Director of the Illinois
Department of Insurance consents to the payment of each of the amounts upon the
closing of the Life Transaction and that there are no tax consequences from the
Life Transaction.

1. The ceding commission and the related increase in surplus to the Company from
the Life Transaction is $500 million. The Company will owe the Noteholder
$309,050,000 which is the entire principal balance along with all accrued and
unpaid interest.

2. The ceding commission and the related increase in surplus to the Company from
the Life Transaction is $200,000,000. The Company will owe the Noteholder
$200,000,000 which represents $9,050,000 in accrued and unpaid interest and a
reduction in outstanding principal of $190,950,000.

Assume that the Life Surplus Notes are funded at $300 million on February 15,
2004. On August 11, 2004, a portion of the Life Transaction occurs and is
completed in the form of a reinsurance transaction. Assume that on August 16,
2004 (the first mandatory prepayment date), the amount of accrued and unpaid
interest owed by the Company to the Noteholder is $9,050,000. Also assume that
the ceding commission and the related increase in surplus to the Company from
the first Life Transaction is $200,000,000. The Company will owe the Noteholder
$200,000,000 which represents $9,050,000 in accrued and unpaid interest and a
reduction in outstanding principal of $190,950,000 with a remaining outstanding
principal balance of $109,050,000. Assume further that the remainder of the Life
Transaction occurs in the form of a sale of the businesses on February 10, 2005
and the second repayment date is February 15, 2005. On February 15, 2005, the
amount of accrued and unpaid interest from August 16, 2004 is $3,253,325. Also,
assume that the Director of the Illinois Department of Insurance consents to the
payment of each of the amounts upon the closing of the Life Transactions and
that there are no tax consequences from the Life Transaction.

1. The sale of the businesses in the second Life Transaction is $300 million.
The Company will pay the Noteholder $112,303,325 which represents $109,050,000
in outstanding principal and $3,253,325 in accrued and unpaid interest.

2. The sale of the businesses in the second Life Transaction is $50,000,000. The
Company will pay the Noteholder $50,000,000 which represents a payment of
$46,746,675 of the outstanding principal and $3,253,325 in accrued and unpaid
interest. The outstanding principal balance after the second mandatory
prepayment date will be $62,303,325.

 

--------------------------------------------------------------------------------

 

CONTINENTAL CASUALTY COMPANY
GROUP SURPLUS NOTE

February 25, 2004   $45,600,000

Continental Casualty Company, an Illinois insurance company, (the “Company”),
for value received, promises to pay to the order of Loews Corporation or its
registered assigns (the “Noteholder”) on demand as provided herein the principal
amount of FORTY-FIVE MILLION SIX HUNDRED THOUSAND DOLLARS ($45,600,000.00), and
to pay interest on the outstanding principal balance of this Surplus Note at a
rate equal to the one-year London Inter-Bank Offering Rate as quoted on
Bloomberg Financial L.P. (“LIBOR”) on the Purchase Date, as that term is defined
in that certain Guaranty Agreement between Loews Corporation and the Company
dated November 12, 2003 (the “Guaranty”) plus 350 basis points, all subject to
the terms and conditions specified herein. The outstanding principal balance of
this Surplus Note, together with any interest due thereon, shall not be
considered as a legal liability on the statutory financial statements of the
Company or be the basis of any offset unless and until the Director of the
Illinois Department of Insurance (the “Director”) approves such payment.

1. Term. This Surplus Note shall have a term of twenty (20) years (“Term”). At
the end of the Term, this Surplus Note shall be due and payable in full by the
Company to the Noteholder, unless earlier paid and satisfied in full.

2. Interest Rate Reset. The interest rate payable on this Surplus Note as
described above shall be reset at the first anniversary of the Purchase Date,
and at each subsequent anniversary thereafter for as long as this Surplus Note
is outstanding to a rate equal to the then one-year LIBOR plus 350 basis points.

3. Payments. All payments or prepayments of principal or interest on this
Surplus Note by the Company may be made only with the prior written approval of
the Director.

a. Application of Payments. Any payments made on account of this Surplus Note
shall be applied first to accrued and unpaid interest, and second to the unpaid
principal hereof.

b. Interest Payments. Subject to the prior written approval of the Director,
payments of interest on this Surplus Note shall be made semi-annually on April
1st and October 1st in each year, commencing on October 1, 2004 (each a
“Scheduled Payment Date”). If a Scheduled Payment Date is not a day on which
both the Company and nationally chartered United States banks are open for
business, interest shall be paid on the next business day and shall include
accrued and unpaid interest through such date. Interest on this Surplus Note
shall be calculated on the basis of a 360-day year consisting of twelve 30-day
months.

c. Principal Payments.

i. Prepayment at Company’s Option. Subject to the prior written approval of the
Director, the Company may prepay this Surplus Note in whole or part at any time
and from time to time without premium or penalty and with accrued and unpaid
interest through the date of prepayment.

 

--------------------------------------------------------------------------------

 

ii. Mandatory Prepayment upon Certain Events. Subject to the prior written
approval of the Director, following the consummation of a Group Transaction, the
Company shall prepay the lesser of (x) the outstanding principal of and accrued
and unpaid interest on this Surplus Note and (y) an amount equal to the increase
in the Company’s statutory surplus as a result of the Group Transaction. Such
determination shall be made based upon the Company’s underlying statutory
equity, adjusted for unamortized goodwill, of CNA Group Life Assurance Company,
a subsidiary of the Company, as reflected in its third quarter 2003 statutory
financial statement filed with its domiciliary regulator. “Group Transaction”
means the disposition, through one or more sales of assets or subsidiary stock
or through a reinsurance transaction or other transfer or disposition, of all or
portions of the businesses of providing group life and group health insurance
and related services to employers, affinity groups and other entities that
purchase insurance as a group. The Company shall give the Noteholder prior
written notice of the closing of the Group Transaction. See Attachment A for an
example of the methodology of the mandatory prepayment.

4. Method of Payment. All payments of principal or interest shall be made by the
Company to the Noteholder without presentment of this Surplus Note or
endorsement of such payment at the address specified by the Noteholder for
payment. Payments of principal or interest on this Surplus Note shall be made,
in accordance with the foregoing and subject to applicable laws and regulations,
to the holder of this Surplus Note at the principal corporate office of such
holder or such other place, which shall be reasonably acceptable to the Company,
as the Noteholder shall designate in writing to the Company. Payments under this
Surplus Note shall be made in immediately available funds in lawful money of the
United States.

5. Ranking of Note. The Company shall not issue any securities which are senior
to or pari passu with this Surplus Note [other than a surplus note issued to
Noteholder on the same date hereof relating to the Company’s or its
subsidiaries’ life business]. By acceptance of this Surplus Note, the Noteholder
expressly agrees that the payment of principal and interest by the Company is
expressly subordinated to claims of creditors of Company under ILL. REV. STAT.
ch. 215 Section 5/205, which provides that surplus notes are at the eighth
priority. The obligations of the Company under this Surplus Note are not subject
either to offset by the Noteholder or to recoupment with respect to any
liability or obligation owed to the Company by the Noteholder.

6. Governing Law. This Surplus Note and the Director’s exercise of regulatory
authority, including approval of payments under this Surplus Note, shall be
governed by, and construed in accordance with, the laws of the State of
Illinois.

7. Transfer Restrictions. No transfer of this Surplus Note other than a transfer
in whole or in part to a subsidiary of the Noteholder shall be valid for any
purpose until all transfer restrictions have been satisfied and such transfer
shall have been recorded in the books of the Company.

TRANSFER RESTRICTIONS

THE COMPANY HAS OFFERED AND SOLD THIS SURPLUS NOTE PURSUANT TO EXEMPTIONS FROM
REGISTRATIONS UNDER THE FEDERAL AND STATE SECURITIES LAWS. A HOLDER OF THIS
SURPLUS NOTE MAY NOT SELL OR OTHERWISE TRANSFER THIS SURPLUS NOTE UNLESS THE
OFFER AND SALE IS REGISTERED OR EXEMPT

 

--------------------------------------------------------------------------------

 

FROM REGISTRATION UNDER THE APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE
COMPANY MAY REQUIRE AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT ANY
SALE OR OTHER TRANSFER OF THIS SURPLUS NOTE SHALL NOT VIOLATE THE APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.

8. Notice. Notice shall mean any written document which is originally executed
and is sent by United States mail, nationally recognized express or messenger
delivery service or telecopy confirmed by telephone, and a Notice shall be
deemed to be given upon its receipt by the addressee (in the case of a telecopy,
upon telephonic confirmation following such receipt).

9. Integration. This Surplus Note including the Schedule shall constitute the
entire agreement between the Company and the Noteholder relating to the subject
matter hereof. It supersedes all prior discussions and other written materials
between the Company and the Noteholder with respect to the subject matter
hereof.

10. Miscellaneous. The rights, privileges, duties and obligations under this
Surplus Note shall be binding on any transferees, successors and assignees. This
Surplus Note embodies the entire agreement and understanding between the Company
and the Noteholder and supersedes all prior agreements and understandings
relating to the subject matter hereof. The headings in this Surplus Note are for
purposes of reference only, and shall not affect the meaning hereof.

SIGNATURE PAGE FOLLOWS.

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Company has caused this Surplus Note to be duly executed
under seal by its officers duly authorized thereunto.

CONTINENTAL CASUALTY COMPANY

      By:  /s/JONATHAN D. KANTOR          
Name:
  Jonathan D. Kantor
Title:
  Executive Vice President, General Counsel and Secretary
 
   
Attest:
   
 
    By: /s/MARY A. RIBIKAWSKIS          
Name:
  Mary A. Ribikawskis
Title:
  Assistant Vice President and Assistant Secretary

 

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Group Surplus Note Schedule

                                                              Amount of   Unpaid
        Amount of   Date   Principal   Principal   Notation Date   Principal  
Repaid   Repayment   Balance   Made By

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--------------------------------------------------------------------------------

 
 
                                       

--------------------------------------------------------------------------------

 
 
                                       

--------------------------------------------------------------------------------

 
 
                                       

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Attachment A

Mandatory Principal Prepayment Example

Assume that the Group Surplus Notes are funded at $200,000,000 on February 15,
2004. Further assume that the Company’s underlying statutory equity, adjusted
for unamortized goodwill, of CNA Group Life Assurance Company (GLA), a
subsidiary of the Company, as reflected in its third quarter 2003 statutory
financial statement filed with its domiciliary regulator is $500,000,000. On
August 11, 2004, the Group Transaction occurs and is completed in the form of a
sale of GLA. Assume that on August 16, 2004 (the mandatory prepayment date), the
amount of accrued and unpaid interest owed by the Company to the Noteholder is
$6,033,333.33. Also, assume that the Director of the Illinois Department of
Insurance consents to the payment of each of the amounts upon the closing of the
Group Transaction.

     1. GLA is sold for $1,000,000,000 and the related increase in surplus to
the Company from the Group Transaction is $500,000,000. The Company will owe the
Noteholder $206,033,333.33 which is the entire principal balance along with all
accrued and unpaid interest.

     2. GLA is sold for $510,000,000 and the related increase in surplus to the
Company from the Group Transaction is $10,000,000. The Company will owe the
Noteholder $10,000,000 which represents $6,033,333.33 in accrued and unpaid
interest and a reduction in outstanding principal of $3,966,666.67 with a
remaining outstanding principal balance of $196,033,333.33.

 

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EXHIBIT 3

Form D Filings

3 PROPOSED REINSURANCE AGREEMENTS TO “DEPOOL” CURRENT CIC POOL STRUCTURE:

1.   CANCELLATION, COMMUTATION & RELEASE AGREEMENT TO AMENDED AND RESTATED
INTERCOMPANY POOLING AGREEMENT ORIGINALLY EFFECTIVE JANUARY 1, 2001 BY AND
BETWEEN THE CONTINENTAL INSURANCE COMPANY AND ITS UNITED STATES AFFILIATES   2.
  SEPARATE (RETRO) REINSURANCE CONTRACTS BETWEEN THE CONTINENTAL INSURANCE
COMPANY(REINSURER) AND EACH OF THE FORMER POOL MEMBERS LISTED IN AGREEMENT NO.1
  3.   SEPARATE (PROSPECTIVE) 100% QUOTA SHARE TREATY BETWEEN THE CONTINENTAL
INSURANCE COMPANY(REINSURER) AND EACH OF THE FORMER POOL MEMBERS LISTED IN
AGREEMENT NO. 1

                                  STATE DOI   SUBMISSION DATE   STATUS  
APPROVAL DATE   AMENDED SUBMISSION DATE

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CA
    09.08.2003     PENDING     11.10.2003          

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DE
    09.18.2003     PENDING     11.10.2003          

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MA
    09.18.2003     PENDING     11.11.2003          

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NH
    09.11.2003     PENDING     11.11.2003          

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NJ
    09.18.2003     PENDING     11.10.2003          

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OH
    09.18.2003     PENDING     11.07.2003          

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100% QUOTA SHARE TREATY BETWEEN THE CIC (REINSURED) AND CCC (REINSURER) — FUNDS
HELD BASIS

                                          AMENDED SUBMISSION         STATE DOI  
SUBMISSION DATE   STATUS   APPROVAL DATE   DATE        

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              10.17.2003 -        
 
              Submitted updated        
 
              pro forma financial        
 
              statements and        
CA
  09.08.2003   PENDING   11.10.2003   updated agreement        

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              10.17.2003 -        
 
              Submitted Amendment        
 
              No. 1 to Form D        
 
              with updated pro        
 
              forma financial        
 
              statements and        
IL
  09.18.2003   PENDING   10.23.2003   updated agreement        

--------------------------------------------------------------------------------

 
 
              10.17.2003 -        
 
              Submitted Amendment        
 
              No. 1 to Form D        
 
              with updated pro        
 
              forma financial        
 
              statements and        
NH
  09.11.2003   PENDING   11.11.2003   updated agreement        

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Form A Exemptions

 

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                                  FOLLOW-UP FILED DOMESTIC   ORIGINAL          
[IMPLEMENTATION DATE REVISED INSURERS   FILE DATE   STATUS   APPROVAL DATE  
DATE REVISED TO 4th QTR]

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CA
  08.21.2003   PENDING   10.29.2003   09.26.2003

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CT
  08.21.2003   APPROVED   09.02.2003   09.26.2003

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DE
  08.21.2003   PENDING   11.10.2003   09.26.2003

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HI
  08.21.2003   APPROVED   09.12.2003   09.26.2003

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IL
  08.21.2003   APPROVED   09.12.2003   09.26.2003

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IN
  08.21.2003   APPROVED   08.28.2003   09.26.2003

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MA
  08.21.2003   APPROVED   10.09.2003   09.26.2003

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NH
  08.21.2003   PENDING   11.11.2003   09.26.2003

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NJ
  08.21.2003   PENDING       09.26.2003

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NY
  08.21.2003   APPROVED   09.04.2003   09.26.2003

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OH
  08.21.2003   PENDING   11.07.2003   09.26.2003

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PA
  08.21.2003   APPROVED   09.11.2003   09.26.2003

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SC
  08.21.2003   APPROVED   10.20.2003   09.26.2003

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SD
  08.21.2003   APPROVED   08.26.2003   09.26.2003

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TX
  08.21.2003   APPROVED   09.11.2003   09.26.2003

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