**EXECUTIVE SEVERANCE AGREEMENT**
     **This EXECUTIVE SEVERANCE AGREEMENT**(“Agreement”), made as of the 12th dayof June 2003 (the “Effective Date”), by and among CONTINENTAL CASUALTY COMPANY,an Illinois Insurance Company (the “Company”), and Debra L. McClenahan (the“Executive”).
     **WHEREAS**, the Executive is presently employed by the Company with seniormanagement level responsibility for its reinsurance business unit commonlyknown as CNA Re.
     **WHEREAS**, the Company considers it essential to its best interests tofoster the retention of key management personnel of the Company; and
     **WHEREAS**, the Company recognizes that circumstances may arise that wouldaffect the continuing role of the Executive, and that such circumstances mayresult in the departure or distraction of the Executive to the detriment of theCompany.
     **NOW, THEREFORE**, in consideration of the mutual covenants herein contained,the parties hereto agree as follows:
     1.     **Covered Termination.** The termination benefits described in Section 2hereof shall be provided to the Executive in the event that the Executivesuffers a “Covered Termination” of the Executive’s employment with the Companybetween the Effective Date and December 31, 2005 (the “End Date”). Upon theirmutual written agreement the Company and the Executive may extend the End Date.
          For purposes hereof, “Covered Termination” shall mean termination of theExecutive’s employment by the Company other than for “Cause”, as described inparagraph (a) below; or termination of such employment by the Executive for“Good Reason”, as described in paragraph (b) below; or termination ofemployment as a result of a “Change in Control”, as described in paragraph (c)below. The Executive shall not be treated as having suffered a CoveredTermination in the event of: the Executive’s death or disability, theinvoluntary termination of the Executive’s employment for Cause, theExecutive’s voluntary termination of employment other than for Good Reason, orthe Executive’s termination of employment for any reason following the EndDate.
          (a) **Termination For Cause.** For purposes of this Agreement, Cause shallmean engaging in or committing: (i) any act which would constitute a felony orother act involving fraud, dishonesty, moral turpitude, unlawful conduct orbreach of fiduciary duty; (ii) any conduct which is inconsistent with thedignity and character of an executive of the Company; (iii) a substantialbreach of any material provision of the Company’s Code of Professional Conductor of this Agreement; (iv) willful or reckless material misconduct in theperformance of the Executive’s duties; or (v) the habitual neglect of duties;provided, however, that for purposes of clauses (iv) and (v), Cause shall notinclude any one or more of the following: bad judgment, negligence or any actor omission believed by the Executive in good faith to have been in or notopposed to the interest of the Company (without any intent by the Executive togain, directly or indirectly, a profit to which she was not legally entitled).If the Executive agrees to resign from her employment with the Company in lieuof being terminated for Cause, she will be deemed to have been terminated forCause for purposes of this Agreement.
1

 

          (b) **Termination for Good Reason.** For purposes of this Agreement, thevoluntary termination of employment by the Executive prior to the End Dateshall be deemed a termination for “Good Reason” if:
 (i) there is a substantial diminutionof the Executive’s duties or responsibilities;  (ii) there is a reduction in theExecutive’s “Total Target Compensation” amountfrom that which was in effect on the EffectiveDate. For purposes hereof, “Total TargetCompensation” is defined as the total ofExecutive’s annual base salary, annual incentivetarget, and long-term incentive cash target; or  (iii) there is a relocation, withoutthe Executive’s written consent, of theExecutive’s principal place of business by morethan 50 miles.
          (c) **Change in Control.** For purposes of this Agreement the termination ofemployment by Executive prior to the End Date shall be deemed a termination for“Change in Control” if, (i) Executive does not receive a “Qualified Offer” fromthe Company, any of its subsidiaries or a Successor Entity. For purposeshereof, a “Qualified Offer” is an offer of employment in connection with aChange in Control under terms and conditions that would not constitute GoodReason under Section 1(b) hereof, or (ii) in the case of an offer other thanfrom a Successor Entity, if there is a change in Executive’s reportingrelationship other than to the CEO or CFO of the Company, or the President andCOO of its Property & Casualty business unit.
               For purposes of this Agreement, a “Change in Control” shall be deemed tohave occurred if prior to the End Date all or substantially all of the businessof CNA Re, whether conducted by the Company or any of its subsidiaries isexited, sold, or otherwise transferred, in a single or series of related orunrelated transactions, whether by asset purchase, stock purchase, merger orconsolidation, reinsurance, or any other form of transaction, or combinationthereof, to entities not controlled by the Company. For purposes of thisAgreement, an entity shall be deemed controlled by the Company if it holds,directly or indirectly, 50% or more of the voting interest of such entity. If aChange in Control shall occur, any entity that acquires CNA Re and that becomesthe employer of the Executive in connection therewith shall be referred toherein, together with its affiliates, as the “Successor Entity.”
               The final and binding determination of whether a sale of the business ofCNA Re or any portion thereof shall constitute a Change in Control shall bemade in good faith by the CEO of the Company (“CEO”), as shall thedetermination of whether a termination is a result of Cause or Good Reason oras a result of any other reason or cause.
     2.     **Consequences of Covered Termination.** In the event that the Executive’semployment with the Company shall have been terminated prior to the End Date ina manner that shall constitute a Covered Termination, the Executive shall beprovided with the following severance payments and benefits:
          (a)**Base Salary.** The Executive shall receive following the CoveredTermination an amount equal to one (1) times the Executive’s annual base salaryas in effect at the time of the Covered Termination (disregarding any reductionin base salary rate that constitutes Good Reason under Section 1 (b) hereof)(“Base Salary”) payable in 12 equal monthly installments,
2

 

          (b) **Annual Bonus.** The Executive shall receive following the CoveredTermination an amount equal to one (1) times the annual target bonus as ineffect at the time of the Covered Termination, payable in 12 equal monthlyinstallments.
          (c) **CNA Re Deferred Profit Sharing Plan.** For purposes of the CNA ReDeferred Profit Sharing Plan (DPS), the Executive’s Covered Termination shallbe treated as a termination through retirement, and the Executive shall receivethose amount that would be payable in the event of termination throughretirement pursuant to the terms of the DPS in effect immediately prior to theCovered Termination.
          (d) **Miscellaneous Items.** The Executive shall receive any unpaid basesalary prorated to the date of her termination and any previous year’s earned,but unpaid annual bonus.
          (e) **Welfare Benefits.** Provided they are maintained by the Company, theExecutive shall be entitled to coverage and benefits under the Company’sbenefit programs, on substantially the same terms as were in effect immediatelyprior to a Covered Termination, including any applicable co-payments orpremiums to be paid by the Executive, for a period of one (1) year followingthe Executive’s Covered Termination (the “Continuation Period”), under themedical, dental and group life insurance plans in which the Executive wasparticipating at the time of the Covered Termination, as though the Executive’stermination of employment had not occurred. (The benefits and coverages to beprovided under this paragraph (f) are hereinafter referred to as “WelfareContinuation Coverages”.) All Welfare Continuation Coverages shall apply to theExecutive and any of the Executive’s dependents as and to the extent they wouldhave been eligible for coverage if the Executive had continued to be employedby the Company during the Continuation Period. The Company may provide theExecutive with the Welfare Continuation Coverages under arrangements other thanpursuant to the generally applicable welfare benefit plans of the Company inwhich the Executive was previously participating, provided that the benefitsand coverages so provided are at least as favorable to the Executive ascoverage under the otherwise applicable Welfare Continuation Coverages, on acoverage by coverage basis, and taking into account all tax consequences to theExecutive. The Executive’s entitlement to “COBRA” continuation coverages formedical and dental benefits under section 4980B of the Internal Revenue Code(or any successor provision thereto) shall run concurrent with WelfareContinuation Coverages.
     3.     **Termination Prior To End Date For Cause, Voluntary Termination OtherThan For Good Reason, Or Termination Because Of Death Or Disability.** In theevent of The Executive’s termination prior to the End Date for Cause or due toher voluntary termination other than for Good Reason or her termination becauseof death or disability, the Company shall pay the Executive as severance onlythe Miscellaneous Items set forth in Section 2(d) above and she shall beentitled to benefits only as provided for in Section 5, below.
     4.     **Termination Prior To End Date By The Company Without Cause.** In theevent of the termination of the Executive by the Company prior to the End Dateother than for Cause, she shall receive the same severance payments and otherbenefits as if she had terminated her employment for Good Reason.
     5.     **Other Payments.** Other than as set forth is this Agreement, in the eventof her termination prior to the End Date the Executive shall be entitled to noother severance payments pursuant to any Company severance plans or otherwiseand her rights, if any, under any of the Company’s retirement, savings,benefit, pension, welfare (including medical, dental and life), incentive orother non-severance plans of any nature shall be governed by their terms. Inthe event of her termination for any reason subsequent to the End Date, theExecutive’s
3

 

severance and other benefits shall be governed by the terms of theCompany’s employee benefit plans or programs in effect as of the time of suchtermination.
     6.     **Tax Withholding.** All payments required to be made to the Executiveunder this Agreement shall be subject to the withholding of such amounts, ifany, relating to income tax, excise tax, employment tax and other payroll taxesas the payer may reasonably determine it should withhold pursuant to anyapplicable law or regulation.
     7.     **No Mitigation or Offset.** In the event of a Covered Termination, theExecutive shall be under no obligation to minimize or mitigate damages byseeking other employment, and the obtaining of any such other employment shallin no event effect any reduction of obligations hereunder for the payments andthe benefit coverages required to be provided to the Executive.
     8.     **Covenants.**
          (a) **Confidentiality.** The Executive agrees that, while employed by theCompany, and at all times thereafter, the Executive shall not reveal or utilizeinformation, knowledge or data which is confidential as defined in thisAgreement and learned during the course of or as a result of Executive’semployment which relates to (a) the Company and/or any other business or entityin which the Company during the course of the Executive’s employment hasdirectly or indirectly held a greater than 10% equity interest whether votingor non-voting; (b) the Company’s customers, employees, agents, brokers andvendors. The Executive acknowledges that all such confidential information iscommercially valuable and is the property of the Company. Upon the terminationof Executive’s employment, the Executive shall return all confidentialinformation to the Company, whether it exists in written, electronic,computerized or other form. Notwithstanding the foregoing provisions of thisSection 8(a), the Executive may disclose or use any such information (i) assuch disclosure or use may be required or appropriate in the course of theExecutive’s employment with the Company, (ii) when required by a court of law,by any governmental agency having supervisory authority over the business ofthe Company or by any administrative or legislative body (including a committeethereof) with apparent jurisdiction, provided that in the event Executivebelieves she is so required to make such disclosure or use, she will notify theCompany in writing of the basis for that belief before actually making suchdisclosure or use in order to permit the Company to take steps to protect theCompany’s interest and will cooperate with the Company in all reasonablerespects to permit the Company to oppose such disclosure or use, or (iii) withthe prior written consent of the Company. In addition, if the Executive has notalready done so, she agrees to be bound by the Company’s Confidentiality,Computer Responsibility and Professional Certification Agreement incorporatedby reference herein.
               For purposes of this Agreement, “Confidential Information” includes allinformation, knowledge or data (whether or not a trade secret or protected bylaws pertaining to intellectual property) not generally known outside theCompany (unless as a result of a breach by the Executive of any of theobligations imposed by this Agreement) concerning the business and technicalinformation of the Company or other entities as described above. Suchinformation may without limitation include information relating to data,finances, marketing, pricing, profit margins, underwriting, actuarial, claims,loss control, marketing and business plans, renewals, software, processing,vendors, administrators, customers or prospective customers, products, brokers,agents, and employees.
          (b) **Non-Solicitation.** The Executive agrees that, during her employment andfor a period of 12 months following the Executive’s termination of employmentwith the Company, for whatever reason, should said termination occur betweenthe Effective Date and the End Date, the Executive will not employ, offer toemploy, engage as a consultant, or form an association
4

 

with any person who is then, or who during the preceding one year was, anemployee of the Company, nor will the Executive assist any other person insoliciting for employment or consultation any person who is then, or who duringthe preceding one year was, an employee of the Company.
          (c) **Non-Interference.** The Executive agrees that during her employment andfor a period of 12 months following Executive’s termination of employment, forwhatever reason, with the Company, should said termination occur between theEffective Date and the End Date, the Executive will not disturb or attempt todisturb any business relationship or agreement between and the Company anyother person or entity.
          (d) **Assistance with Claims.** The Executive agrees that, during heremployment and for a reasonable period (not fewer than 24 months from the dateof termination) thereafter, the Executive will be available, on a reasonablebasis to assist the Company in the prosecution or defense of any claims, suits,litigation, arbitrations, investigations, or other proceedings, whether pendingor threatened (“Claims”) that may be made or threatened by or against theCompany. The Executive agrees, unless precluded by law, to promptly inform theCompany if she is requested (i) to testify or otherwise become involved inconnection with any Claim against the Company, or (ii) to assist or participatein any investigation (whether governmental or private) of the Company or any oftheir actions, whether or not a lawsuit has been filed against the Companyrelating thereto. After the termination of her employment, the Company agreesto provide reasonable compensation to the Executive at an hourly rate computedby dividing Executive’s base salary as of her termination by 2080 hours forsuch assistance. The Company also shall reimburse the Executive or cause theExecutive to be reimbursed for any out-of-pocket expenses reasonably incurredby the Executive in complying with this section.
          (e) **Return of Materials.** The Executive shall, at any time upon the requestof the Company, and in any event upon the termination of employment with theCompany, for whatever reason, immediately return and surrender to the Companyall originals and all copies, regardless of medium, of property belonging tothe Company, created or obtained by the Executive as a result of or in thecourse of or in connection with his employment with the Company regardless ofwhether such items constitute proprietary information, provided that theExecutive shall be under no obligation to return written materials acquiredfrom third parties which are generally available to the public. The Executiveacknowledges that all such materials are, and will remain, the exclusiveproperty of the Company.
          (f) **Effect of Breach.** The Executive acknowledges that the violation of thecovenants set forth in this Section 8 would cause the Company irreparable harmand the Executive agrees that the Company shall be entitled to injunctiverelief restraining the Executive from actual or threatened breach of thecovenants and that if bond is required to be posted in order for the Company tosecure such relief said bond need only be in a nominal amount. The right of theCompany to seek injunctive relief shall be in addition to any other remediesavailable to the Company with respect to an alleged or threatened breach. TheExecutive shall be liable for the Company’s reasonable attorneys’ fees andcosts in bringing such an action.
          (g) **Definition of Company.** For purposes of this Section 8 the meaning ofCompany also shall include its parent and any of its subsidiaries oraffiliates.
     9.     **Release of Claims.** As a condition of Executive’s entitlement to theseverance payments and benefits provided in this Agreement, at the time of hertermination, the Executive, shall enter into a release in a form acceptable tothe Company releasing the Company and its parent, subsidiaries, affiliates,directors, officers, employees and agents from
5

 

any and all claims arising prior to the date of such release, includingbut not limited to those arising from the Age Discrimination In Employment Act,as amended.
     10.     **Other Compensation and Benefit Plans.** Except as specifically providedherein, the Covered Termination of the Executive’s employment shall notaccelerate the time of payment or vesting under, or increase the amount ofbenefits due under, any benefit or incentive compensation plans of the Company.The amount of any compensation deemed to be received by the Executive pursuantto this Agreement shall not constitute compensation with respect to which anyother benefit or incentive compensation of such Executive is determined. Exceptas provided herein, the rights and benefits of the Executive under thisAgreement shall not be in lieu of the Executive’s benefits under any employeebenefit plan or program of the Company, which shall be payable in accordancewith the terms and conditions of such plans or programs.
     11.     **Successors and Assigns.** This Agreement and all rights hereunder arepersonal to the Executive and shall not be assignable by the Executive.
     12.     **No Right of Employment.** Nothing in this Agreement shall confer uponthe Executive any right to continue as an employee of the Company or interferein any way with the right of the Company or the Executive to terminate theiremployment relationship at any time.
     13.     **Severability.** The invalidity or unenforceability of any provision ofthis Agreement shall in no way affect the validity or enforceability of anyother provision.
     14.     **Entire Agreement.** This Agreement constitutes the entire agreementamong the parties respecting the subject matter hereof and supersedes any prioragreements respecting the subject matter hereof. No amendment to this Agreementshall be deemed valid unless in writing and signed by the parties, and nodischarge of the terms of this Agreement shall be deemed valid unless by fullperformance by the parties or by a writing signed by the parties. No waiver bya party of any provisions or conditions of this Agreement shall be deemed awaiver of similar or dissimilar provisions and conditions at the same time orany prior or subsequent time.
     15.     **Notices.** Any notice required or permitted to be given by thisAgreement shall be effective only if in writing, delivered personally or bycourier or by facsimile transmission or sent by express, registered orcertified mail, postage prepaid, to the parties at the addresses hereinafterset forth, or at such other places that either party may designate by notice tothe other.
6

 

                    Notice toCNA or the Company shall be addressed to:   Jonathan D. Kantor Executive Vice President and General Counsel CNA Financial Corporation CNA Plaza 43 South Chicago, IL 60685
                    Fax: (312) 817-0511
                    Notice to the Executive shall be addressed to the Executive at the addressindicated on the signature page hereof.
     16.     **Governing Law.** This Agreement shall be construed and interpretedaccording to the laws of the State of Illinois without regard to conflict oflaws principles
     17.     **Counterparts.** This Agreement may be executed in two or morecounterparts, each of which shall constitute an original, but all of which whentaken together shall constitute one Agreement. It shall not be necessary thatany counterpart be signed by the parties hereto so long as each such partyshall have executed a counterpart.
     **IN WITNESS WHEREOF**, the parties have executed this Agreement as of the dayand year first above written.     CONTINENTAL CASUALTY COMPANY    /s/ Jonathan D. Kantor