above in this Paragraph 3, if the Participant’s Date of Termination of Affiliation occurs atany time prior to the distribution of the LTI Award (as provided for in Paragraph 6 below) byreason of termination of employment by the Participant’s employer for Cause, or by reason ofthe Participant’s voluntary or involuntary termination, the Participant’s LTI Award shall beentirely forfeited.Notwithstanding the foregoing provisions of this Paragraph 3, if a Participant has engaged in anyconduct which constitutes Cause prior to the distribution of the LTI Award, the LTI Award shall beentirely forfeited.     4. New Hires, Promotions and Demotions. Except as otherwise provided below, theParticipant’s LTI Award will be based on the target percentage set forth in the Award Letter, aswell as the Participant’s base salary at the commencement of the Performance Period, and shall notbe affected by changes in base salary or status occurring during the Performance Period.(a) New Hires. If the Participant was hired on or prior to July 1 of the third year ofthe Performance Period, the Participant’s LTI Award will be prorated based on the appropriatenumber of complete months of participation. Any employee hired after July 1 of the third yearof the Performance Period will not be eligible to participate until the following performanceperiod. Nothing contained herein shall be construed to imply that any employee hired afterthe beginning of the Performance Period is entitled to any LTI Award unless such employee hasreceived an Award Letter.(b) Promotions and Demotions. If the Participant is either promoted or demoted to a newposition during the Performance Period, the LTI Award will be prorated between the amountthat would have been paid based on his or her original position, and the amount that is basedon his or her new base salary and the target percentage applicable to his or her new position.For purposes of such proration, if the Participant is promoted as part of the Company’sannual salary review process, the new position and base salary will be treated as in effect asof the first day of the year in which it occurs. In the case of promotions that occur outsideof the annual salary review process, and all demotions, the proration will be based on theactual date of the change in status.(c) Limits on Adjustments for Restricted Executives. If following a promotion theParticipant becomes a Restricted Executive (as defined in the Plan) in the year in which theLTI Award is paid, then the amount of the LTI Award determined under Section 4(b) shall notexceed the lesser of (i) the amount the Participant would have received based on theParticipant’s target percentage prior to such promotion, but calculated as if theParticipant’s new base salary had been in effect from the beginning of the Performance Periodor (ii) $9,000,000.     5. Award Amount. The amount to be distributed with respect to the LTI Award shall bedetermined according to the schedule in the Award Letter, subject to review and approval of theCompensation Committee of the Company’s Board of Directors (the “Committee”). If the Adjusted BookValue at the end of the Performance Period is at least the minimum level, but less than the targetlevel, the amount distributable with respect to the LTI Award shall be interpolated between theminimum threshold amount and the target amount. If the Adjusted
2

 
Book Value at the end of the Performance Period is greater than the target level, but lessthan the maximum level, the amount distributable with respect to the LTI Award shall beinterpolated between the target amount and the maximum amount. As soon as practicable after thenecessary financial data for the Performance Period is available to the Committee, the Committeeshall make a determination of the extent of the achievement of the performance goals for thatPerformance Period, and shall make a determination of the amount, if any, of the distribution to bemade for the LTI Award to the Participant for the Performance Period. Payment of the LTI Awardshall be subject to the requirements of Paragraph 7 and, in addition, the Committee may, in itsdiscretion, reduce the amount of the LTI Award or cancel the LTI Award entirely, whether or not therequirements of Paragraph 7 are met.     6. Settlement of Award. The amount that is distributable for the LTI Award shall besettled as soon as practicable as determined by the Company after the Committee makes thedetermination described in Paragraph 5. An amount equal to **[___]**% of the LTI Award shall besettled by the transfer to the Participant of a number of shares of common stock of the Companydetermined by dividing such percentage by the fair market value of a share of stock on the GrantDate, rounded to the next lower whole number, and the balance of the LTI Award (calculated withoutregard to any change in the fair market value of the stock between the Grant Date and settlementdate) shall be settled by a cash payment. Unless otherwise determined by the Committee, taxwithholding applicable to the stock portion of the payment shall be satisfied by reducing thenumber of shares delivered. If the Participant is promoted during the Performance Period, theportion of the Participant’s LTI Award that is payable in common stock shall be based upon thenumber of shares that would have been paid had the promotion not occurred, and any adjustment shallbe made to the cash portion of the LTI Award, except as the Committee may otherwise determine. Ifthe Participant is demoted during the Performance Period, the portion of the Participant’s LTIAward that is payable in common stock shall also be recalculated in accordance with Paragraph 4(b),and the number of shares of common stock shall be reduced to the number of whole shares determinedby dividing such recalculated portion by the fair market value of a share of common stock on theGrant Date, as described above. The shares of stock transferred to the Participant shall besubject to such restrictions on transfer or other conditions as the Committee shall determine.     7. Minimum Performance Rating. Notwithstanding the foregoing, the LTI Award shall notbe paid, and shall be forfeited, if at the time the LTI Award would otherwise be payable theParticipant is not rated at least “Partially Meets” (or the equivalent) under the Company’sperformance evaluation rating system. The Committee may provide for the payment of all or aportion of the LTI Award to a Participant who does not satisfy the minimum rating requirement ifthe Committee determines in its discretion that circumstances nonetheless warrant such a payment.     8. Administration. The authority to manage and to control the operation andadministration of these Award Terms shall be vested in the Committee and the Committee shall haveall powers with respect to these Award Terms as it has with respect to the Plan. Anyinterpretations of these Award Terms by the Committee and any decisions made by it with respect tothese Award Terms are final and binding on all persons.     9. Governing Documents. The Award Letter shall be subject to these Award Terms, andthese Award Terms shall be subject to the provisions of the Plan. A copy of the Plan is included
3

 
in the Company’s Proxy Statement, filed with the Securities and ExchangeCommission on April 2, 2010, available at eitherwww.sec.gov or www.cna.com, or is availablefrom the Corporate Secretary of the Company. If discrepancies arise between the Award Letter andthese Award Terms, these Award Terms will govern and if discrepancies arise between these AwardTerms and the Plan, the terms of the Plan will govern; provided that if the discrepancy relates tothe treatment of the LTI Award upon a Termination of Affiliation, or to any other provision of thePlan that, under the terms of the Plan, may be altered by the terms of an Award Agreement, theseAward Terms shall govern. These Award Terms are subject to all interpretations, amendments, rules,and regulations promulgated by the Committee from time to time pursuant to the Plan.     10. Definitions. For purposes of these Award Terms, the following definitions shallapply: (a) Adjusted Book Value. The “Adjusted Book Value” of the Company means thetotal shareholders’ equity of the Company on the last day of the Performance Period,reduced by equity attributable to preferred stock and accumulated other comprehensiveincome, as determined under generally accepted accounting principles consistentlyapplied. “Adjusted Book Value” shall be determined without regard to items related tochanges in accounting principles, tax and/or regulatory changes, and without regard tocapital contributions and distributions to shareholders during the Performance Period.Certain adjustments to the Net Income reported to the shareholders in the AnnualReports **[in the three-year performance period]**shall be made consistent with thedetermination of Net Income for purposes of the Company’s Annual Incentive Bonus Plan,provided that if such adjustments require the exercise of any discretion by the Companyafter the first 90 days of the Performance Period, such adjustments shall only be madeif they would reduce the LTI Award that would otherwise be payable.  (b) Affiliate. The term “Affiliate” means any business or entity in which atany relevant time the Company directly or indirectly holds greater than a 10% equity(voting or non-voting) interest.  (c) Cause. The term *“*Cause*”*as to a Participant means (i) a Participant’sengaging in any act or omission involving theft, malfeasance, gross negligence, fraud,dishonesty, moral turpitude, unlawful conduct, unethical conduct or breach of fiduciaryduty; (ii) a Participant’s willful or reckless material misconduct in the performanceof the Participant’s duties, engaging in any act that violates, in any materialrespect, any written policy or procedure of the Company or any Affiliate or engaging inany conduct that results in adverse publicity or harm to the business or reputation ofthe Company or any Affiliate; or (iii) a Participant’s habitual neglect of duties;*provided, however,*that for purposes of clauses (ii) and (iii), “Cause” shall notinclude any one or more of the following: bad judgment, negligence or any act oromission believed by the Participant in good faith to have been in, or not opposed to,the best interests of the Company (without intent of the Participant to gain, directlyor indirectly, a profit to which the Participant was not legally entitled). AParticipant who agrees to resign from his or her affiliation with the Company or anAffiliate in lieu of being terminated for Cause may be 
4

 
  deemed to have been terminatedfor Cause for purposes of these Award Terms. (d) Date of Termination of Affiliation. The Participant’s “Date of Terminationof Affiliation” shall be the first day occurring on or after the Grant Date on whichthe Participant is not employed by the Company or any Affiliate, as determined by theCompany, regardless of the reason for the termination of employment; provided that atermination of employment shall not be deemed to occur by reason of a transfer of theParticipant between the Company and an Affiliate or between two Affiliates; and furtherprovided that the Participant’s employment shall not be considered terminated while theParticipant is on a leave of absence from the Company or an Affiliate approved by theParticipant’s employer. If, as a result of a sale or other transaction, theParticipant’s employer ceases to be an Affiliate (and the Participant’s employer is orbecomes an entity that is separate from the Company), the occurrence of suchtransaction shall be treated as the Participant’s Date of Termination of Affiliation,caused by the Participant being discharged by the employer.(e) Permanent Disability. The term “Permanent Disability” means aphysical or mental condition of the Participant which, as determined by the Committeein its sole discretion based on all available medical information, would qualify theParticipant for benefits under the Company’s long-term disability plan as in effectwhen the determination is made (ignoring the requirements of any waiting period) ifthe Participant were a participant in such plan (whether or not the Participantactually participates therein). Notwithstanding the foregoing, if the Company has nolong-term disability plan, “Permanent Disability” means a physical or mental conditionof the Participant which, as determined by the Committee in its sole discretion basedon all available medical information, is expected to continue indefinitely and whichrenders the Participant incapable of performing any substantial portion of the servicerequired by his or her employer.(f) Retirement. Termination because of “Retirement” shall mean theParticipant’s Date of Termination of Affiliation after ceasing to provide services tothe Company or any Affiliate for any reason other than death, Permanent Disability orCause, at or after the Participant’s attainment of age 62 or, if earlier, theParticipant’s Date of Termination of Affiliation which is designated by the Committeeas a “Retirement” for purposes of these Award Terms.
5