exv10w3






Exhibit 10.3




CAC LIFE AND ANNUITY

INDEMNITY REINSURANCE AGREEMENT




     THIS CAC LIFE AND ANNUITY INDEMNITY REINSURANCE AGREEMENT (this “Agreement”), dated as
of April 30, 2004, is made by and between Continental Assurance Company, an Illinois insurance
company (the “Company”), and Swiss Re Life & Health America Inc., a Connecticut insurance
company (the “Reinsurer”).



     WHEREAS, pursuant to that certain Asset and Stock Purchase Agreement, dated as of February 5,
2004 (the “Purchase Agreement”), by and between the Company and Reinsurer, Reinsurer agreed
to purchase, among other things, the individual life insurance and annuity businesses and certain
assets of the Company, and the capital stock of Valley Forge Life Insurance Company, a Pennsylvania
insurance company, and CNA International Life Company SPC, Ltd., a segregated portfolio company
organized and existing under the laws of the Cayman Islands.



     WHEREAS, under the Purchase Agreement, the Company has agreed to enter into this Agreement so
as to cede to the Reinsurer, and the Reinsurer has agreed to enter into this Agreement so as to
accept and assume from the Company, 100% of the Policy Liabilities (as defined below) arising under
the Policies (as defined below), upon the terms and conditions set forth herein.



     NOW, THEREFORE, in consideration of the mutual covenants and promises, and upon the terms and
conditions, hereinafter set forth, the parties hereto agree as follows:



ARTICLE I

BUSINESS REINSURED




     1. Effective as of 12:00 a.m. on January 1, 2004 (the “Effective Time”), the Company
hereby cedes to the Reinsurer, and the Reinsurer hereby accepts and assumes from the Company as of
the Effective Time, on an indemnity reinsurance (coinsurance) basis, 100% of the Policy Liabilities
arising from any and all (i) binders, endorsements, riders, policies, certificates, contracts of
insurance and supplementary contracts of insurance constituting the Subject Business (as defined
below) issued, renewed, or assumed by the Company prior to the Closing Date (as defined in the
Purchase Agreement), including without limitation all such binders, endorsements, riders, policies,
certificates, contracts and supplementary contracts lapsed and terminated with unpaid claims or
amended to increase coverage or reinstated before, at or after the Closing Date as required
pursuant to the terms thereof (the “Pre-Closing Policies”), (ii) Accommodation Policies (as
defined in the CAC Life and Annuity Administrative Services Agreement between the Company and the
Reinsurer dated as of the date hereof (the “CAC Administrative Services Agreement”)), and
(iii) CAC Additional Policies (as defined in the CAC Administrative Services Agreement) (the
Pre-Closing Policies, Accommodation Policies and CAC Additional Policies being referred to herein
collectively as the “Policies”). The term “Policyholder” shall mean each owner of
a Policy.



     2. The term “Subject Business” shall mean the term, universal and permanent individual
life insurance and annuity products business of the Company.



     3. The term “Policy Liabilities” shall mean all liability and obligations of the
Company, except for Excluded Liabilities (as defined below), based upon or arising out of the
Policies, net of



 









 







any and all amounts (i) actually recovered by the Company under Third Party Reinsurance Agreements
and (ii) that would have been collected from a Specified Reinsurer under a Specified Third Party
Reinsurance Agreement, and such term shall include without limitation liabilities for:




	 	(a)	 	annuity principal and interest, withdrawals, surrenders, Policy loans, returns
of principal and premium and other deposits and any other disbursement, Policyholder
interest, dividend accumulations, benefits, claims, losses and benefit and claim
expenses in respect of the Policies, whether incurred prior to, at or after the
Effective Time, including Extra Contractual Obligations (as defined below) based on
acts, errors or omissions (i) by the Reinsurer or any of its officers, employees,
agents, subcontractors or representatives or (ii) by the Company or any of its
officers, employees, agents, subcontractors or representatives and, in any case
described by this clause (ii), attributable to a direction or request of a Designated
Officer (as defined in Article XIV hereof) of the Reinsurer under this Agreement or the
CAC Administrative Services Agreement, which direction or request, as to actions of
Company employees other than Seller Business Employees (as defined in the Purchase
Agreement), has been given in writing, and any attorneys’ fees incurred by the Company
and the Reinsurer related to such liabilities;
	 
	 	(b)	 	guaranty association assessments in connection with participation by the
Company in any guaranty fund or association established or governed by any state or
jurisdiction to the extent arising on account of premiums, deposits and other
consideration paid or payable in respect of the Policies at or after the Effective
Time;
	 
	 	(c)	 	other assessments or payments (to the extent required to be made with respect
to the Policies) for or on account of regulatory agencies, including but not limited to
valuation fees or payments, that are calculated or assumed with reference to facts or
circumstances related to the Policies (e.g., an assessment base or in force date)
existing at a point in time that is at or after the Effective Time (provided that no
additional amounts will be due as a result of a change in domicile of the Company);
	 
	 	(d)	 	that portion of other assessments or payments (to the extent required to be
made with respect to the Policies) for or on account of regulatory agencies, including
but not limited to valuation fees or payments, that are calculated or assessed with
reference to a period of time commencing before and ending after the Effective Time
which is equal to the full amount of such assessments or payments multiplied by a
fraction, the numerator of which is the number of days from and including the Effective
Time to and including the end of such period and the denominator of which is the number
of days in such period (provided that no additional amounts will be due as a result of
a change in domicile of the Company);
	 
	 	(e)	 	returns or refunds of premiums (irrespective of when due) under the Policies
paid or payable at or after the Effective Time;
	 
	 	(f)	 	premium taxes paid or payable for premiums received by the Company or the
Reinsurer in respect of the Policies at or after the Effective Time;




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	 	(g)	 	commissions due insurance brokers, agents and producers in connection with the
Policies;
	 
	 	(h)	 	amounts due in connection with the Policies under bonus programs and deferred
compensation agreements identified in Schedule A hereto (except bonuses attributable to
the termination of new Subject Business production by the Company);
	 
	 	(i)	 	amounts payable by the Company under Third Party Reinsurance Agreements,
including Specified Third Party Reinsurance Agreements (which amounts, in the case of
amounts that would have been payable to Specified Reinsurers under Specified Third
Party Reinsurance Agreements, shall be paid by the Reinsurer to the Company); and
	 
	 	(j)	 	accrued interest payable to Policyholders, if any, on all unpaid Policy Liabilities.





     4. The term “Excluded Liabilities” shall mean any liability or obligation of the
Company for:




	 	(a)	 	Extra Contractual Obligations based on acts, errors or omissions by the
Company, or any of its officers or employees, agents, subcontractors or
representatives, prior to the Closing Date and any attorneys’ fees incurred by the
Company related to such liabilities or obligations;
	 
	 	(b)	 	Extra Contractual Obligations to the extent resulting from acts, errors or
omissions of the Company or any of its officers or employees, agents, subcontractors or
representatives occurring after the Closing Date and not attributable to a direction or
request of a Designated Officer of the Reinsurer under this Agreement or the CAC
Administrative Services Agreement which direction or request, as to actions of Company
employees other than Business Employees, has been given in writing;
	 
	 	(c)	 	guaranty association assessments in connection with participation by the
Company in any guaranty fund or association established or governed by any state or
other jurisdiction to the extent arising on account of premiums, deposits or other
consideration paid to the Company in respect of the Policies prior to the Effective
Time;
	 
	 	(d)	 	amounts, liabilities and obligations ceded to one or more Specified Reinsurers
under Specified Third Party Reinsurance Agreements irrespective of any recission,
recapture or other termination of any such Specified Third Party Reinsurance
Agreements;
	 
	 	(e)	 	dividends in respect of the Policies, whether incurred prior to, at or after
the Effective Time;
	 
	 	(f)	 	other assessments or payments required to be made with respect to the Policies
for or on account of regulatory agencies, including but not limited to valuation fees
or




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	 	 	 	payments, that are calculated or assumed with reference to facts or circumstances
existing at a point in time that is prior to the Effective Time;
	 
	 	(g)	 	that portion of other assessments or payments required to be made with respect
to Policies for or on account of regulatory agencies, including but not limited to
valuation fees or payments, that are calculated or assessed with reference to a period
of time commencing before and ending after the Effective Time which is equal to the
full amount of such assessments or payments multiplied by a fraction, the numerator of
which is the number of days from and including the beginning of such period to but
excluding the Effective Time and the denominator of which is the number of days in such
period;
	 
	 	(h)	 	premium taxes paid or payable for premiums received by the Company or the
Reinsurer in respect of the Policies prior to the Effective Time; and
	 
	 	(i)	 	accrued interest payable to Policyholders, if any, on all unpaid Excluded
Liabilities.





     For the avoidance of doubt, with respect to a Specified Third Party Reinsurance Agreement, (i)
amounts which would have been payable by the Company to Specified Reinsurers thereunder, in the
absence of any recission, recapture or termination, shall instead be payable by the Reinsurer to
the Company under this Agreement and (ii) amounts, liabilities and obligations formerly ceded to
Specified Reinsurers under such Specified Third Party Reinsurance Agreement shall be deemed
Excluded Liabilities and the Reinsurer shall have no liability to the Company with respect thereto.



     In addition, for the avoidance of doubt, the Reinsurer shall have the benefit of any premium
tax credits and reductions attributable to guaranty fund assessments and similar assessments paid
or payable by the Company with respect to the Policies but only if and to the extent that (i) the
Reinsurer reimburses the Company for such guaranty fund and similar assessments pursuant to this
Agreement and (ii) such credits are applied to reduce, and actually reduce, the premium tax
liability of the Company (as so limited, the “Premium Tax Credits”); provided that the Company
shall apply such credits and any other premium tax credits and reductions attributable to guaranty
fund assessments and similar assessments on a pro rata basis.



     5. The term “Extra Contractual Obligations” shall mean all liabilities and obligations
other than those arising under the express terms and conditions, and within the limits, of the
Policies, including, without limitation, any liability for punitive, exemplary, special or any
other form of extra contractual damages, relating to the Policies, which arise from any act, error
or omission in bad faith, including, without limitation, any act, error or omission relating to (i)
the marketing, underwriting, production, issuance, cancellation or administration of the Policies,
(ii) the investigation, defense, trial, settlement or handling of claims, benefits, or payments
under the Policies, or (iii) the failure to pay or the delay in payment of benefits, claims or any
other amounts due or alleged to be due under or in connection with the Policies.



     6. The term “Third Party Reinsurance Agreement” shall have the meaning given in
paragraph 3 of Article V hereof.



     7. The term “Specified Third Party Reinsurance Agreement” shall mean a Third Party
Reinsurance Agreement under which one or more reinsurers, other than the Reinsurer or an



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Affiliate thereof, on or prior to the third anniversary of this Agreement, has refused to pay
when due any amounts owed to the Company under such Third Party Reinsurance Agreement to the extent
resulting from such reinsurer’s declaration that the Company has breached such Third Party
Reinsurance Agreement by reason of the consummation of the transactions contemplated by the
Purchase Agreement or this Agreement.



     8. The term “Specified Reinsurer” shall mean a reinsurer, other than the Reinsurer or
an Affiliate thereof, that has taken the actions referred to in Section 7 of this Article I with
respect to a Third Party Reinsurance Agreement.



     9. The term “Affiliate” shall mean, with respect to any Person, at the time in
question, any other Person controlling, controlled by or under common control with such Person.



     10. The term “Person” shall mean any natural person, corporation, partnership, limited
liability company, trust, joint venture or other entity.



ARTICLE II

PAYMENT AND ACCOUNTING FOR CERTAIN ASSUMED POLICY LIABILITIES 




     In connection with the Reinsurer’s assumption of the Policy Liabilities described in
paragraphs (b), (c), (d) and (f) of Section 3 of Article I hereof (the “Tax/Assessment
Liabilities”), it is agreed that the Company will make direct payment of such Tax/Assessment
Liabilities and that the Reinsurer’s assumption of liability therefor shall be discharged by the
Company reporting the Tax/Assessment Liabilities paid by the Company to the Reinsurer in accordance
with Article IV and the Reinsurer reimbursing the Company for such amounts also in accordance with
Article IV.



ARTICLE III

TERRITORY




     This Agreement shall apply to Policies covering persons and risks wherever resident or
situated.



ARTICLE IV

POLICY ADMINISTRATION




     The Policies and the Policy Liabilities shall be administered by the Reinsurer in the name of,
and on behalf of, the Company pursuant to the terms of the CAC Administrative Services Agreement.
In connection therewith, the Reinsurer will provide such periodic accounting and settlement reports
to the Company as are set forth in the CAC Administrative Services Agreement. Settlements of
amounts due from the Reinsurer to the Company and amounts due from the Company to the Reinsurer
hereunder, as set forth in such reports, shall be made on a quarterly basis as set forth in the CAC
Administrative Services Agreement; provided, however, that any amounts received by the Reinsurer
from a Specified Reinsurer in connection with the termination or recapture of such Specified
Reinsurer’s obligations under a Specified Third Party Reinsurance Agreement shall be remitted by
the Reinsurer to the Company within 15 days of receipt thereof by the Reinsurer. Notwithstanding
the terms of this Agreement, no amounts settled between the Company and the Reinsurer under Article
II of the Purchase Agreement shall be settled again hereunder.



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ARTICLE V

PREMIUMS AND RECOVERIES




     1. Except as otherwise provided in this Agreement, the Reinsurer shall be entitled to 100% of
all gross premiums, premium adjustments, reinsurance recoverables (including expense allowances),
balances due from agents, principal and interest due on Policy loans, accrued interest receivables
and recoveries received at and after the Effective Time by the Company or the Reinsurer with
respect to the Policies, other than amounts recoverable or recovered from Specified Reinsurers
under Specified Third Party Reinsurance Agreements, together with all Policy related rights of the
Company, including, without limitation, subrogation and coordination of benefits rights including
for the benefit of the Reinsurer any and all Premium Tax Credits to the extent provided for in
Section 4 of Article I. The Company shall promptly endorse and remit and hereby assigns to the
Reinsurer any premiums, premium adjustments, reinsurance recoverables (including expense
allowances), balances due from agents, principal and interest due on Policy loans, accrued interest
receivables, rights, assets and recoveries received or receivable by the Company at or after the
Effective Time in respect of any of the Policies or the satisfaction of Policy Liabilities
(including the Premium Tax Credits to the extent provided in Section 4 of Article I), other than
amounts recoverable or recovered from Specified Reinsurers under Specified Third Party Reinsurance
Agreements. The Company shall likewise promptly endorse and remit and hereby assigns to the
Reinsurer any amount paid to the Company by a reinsurer in connection with a termination or
recapture of a Third Party Reinsurance Agreement other than such amounts paid by a Specified
Reinsurer under a Specified Third Party Reinsurance Agreement (e.g., assets transferred to
the Company to effectuate a recapture). For the avoidance of doubt, any amount paid to either the
Company or the Reinsurer by or on behalf of a Specified Reinsurer under a Specified Third Party
Reinsurance Agreement, including without limitation in connection with a termination or recapture
of such reinsurer’s obligation under such agreement, shall be for the account of the Company, and
the Reinsurer shall promptly endorse and remit to the Company any such amount it receives in
respect thereof. The Company shall provide reasonable assistance to the Reinsurer, upon the
Reinsurer’s request therefor, and at the Reinsurer’s expense (excluding any internal expenses of
the Company), in the collection of any premiums, premium adjustments, reinsurance receivables,
balances due from agents, principal and interest due on Policy loans, accrued interest receivables,
rights, assets and recoveries due the Company in respect of any of the Policies or the satisfaction
of Policy Liabilities. Furthermore, with respect to any such remittance, the Company shall also
promptly furnish the Reinsurer with all pertinent information which it receives pertaining thereto
(e.g., the nature of the payment, source of funds, policy or certificate number or agreement (as
appropriate) and period(s) to which it relates and any instructions accompanying same); provided,
however, that the Company may retain a copy thereof.



     2. Effective as of the Closing Date, as between the Reinsurer and the Company, the Company
shall have no further responsibility for billing and collecting premiums in respect of the Policies
or otherwise servicing or administering any Policies, except as may otherwise be agreed upon in
writing by the parties or required by applicable law. The Company hereby acknowledges that
notwithstanding the foregoing or any other provision of this Agreement to the contrary, as between
the Company and its Policyholders, the Company is not relieved of any obligation under the
Policies, including its responsibility to service its Policyholders.



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     3. A listing of ceded reinsurance agreements under which any Policy Liabilities are reinsured
for the benefit of the Company to reinsurers that are not Affiliates of the Company is Schedule
B to this Agreement (the “Third Party Reinsurance Agreements”). Effective as of the
Closing Date, the Company shall have no further responsibility for ascertaining and collecting
reinsurance recoverables with respect to the Policy Liabilities under the Third Party Reinsurance
Agreements other than the Specified Third Party Reinsurance Agreements. The Reinsurer shall
assume such responsibility for administering on behalf of the Company the Third Party Reinsurance
Agreements, including the Specified Third Party Reinsurance Agreements, under the CAC
Administrative Services Agreement. The collectibility of amounts due under the Third Party
Reinsurance Agreements shall be at the risk of and for the account of the Reinsurer, other than
amounts due from Specified Reinsurers under the Specified Third Party Reinsurance Agreements which
shall be at the risk of and for the account of the Company.



     4. The Reinsurer shall have responsibility and full power and authority to act for and on
behalf of the Company, and will so act in good faith pursuant to the terms of the CAC
Administrative Services Agreement, and the Company shall take such measures as reasonably may be
requested by the Reinsurer, with respect to any and all letters of credit outstanding or assets in
trust held for the benefit of the Company pursuant to the terms of any Third Party Reinsurance
Agreements, collection of amounts owed under any Third Party Reinsurance Agreements, recapture
under any Third Party Reinsurance Agreements and enforcement of the terms of the Third Party
Reinsurance Agreements; provided that, in no event will Reinsurer have any responsibility with
respect to any Specified Reinsurer under a Third Party Reinsurance Agreement after it has become a
Specified Third Party Reinsurance Agreement.



ARTICLE VI

REINSURANCE CREDIT




     1. Licensed or Accredited Status. The Reinsurer is, and shall maintain its status as,
a licensed life insurer or accredited life reinsurer in all jurisdictions of the United States so
that the Company, in the statements required to be filed with its regulatory authority(ies) in such
jurisdictions, shall receive full credit as admitted reinsurance for all of the Reinsurer’s share
of the reserves and any other liabilities ceded hereunder (the “Obligations”).



     2. Reinsurance Credit. If a jurisdiction of the United States will not permit the
Company, in the statements required to be filed with its regulatory authority(ies), to receive full
credit as admitted reinsurance for any of the Reinsurer’s share of the Obligations, the Company
shall forward to the Reinsurer a statement of the Reinsurer’s share of such Obligations. Upon
receipt of such statement, the Reinsurer shall, at its option and at its expense, promptly either:




	 	(a)	 	Provide the Company with a “clean”, unconditional and irrevocable letter of
credit, with terms and bank acceptable to the regulatory authority(ies) in such
jurisdiction so that full credit as admitted reinsurance shall be given for the
Reinsurer’s share of the Obligations under this Agreement in such jurisdiction; or
	 
	 	(b)	 	Establish a trust account for the benefit of the Company, and enter into a
trust agreement concerning such account with terms and a bank, as trustee, acceptable
to the relevant regulatory authority(ies), so that full credit as admitted reinsurance
shall




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	 	 	be given for the Reinsurer’s share of the Obligations under this Agreement in such
jurisdiction.





     3. Rating Agency or RBC Credit. (a) If at any time:




	 	(y)	(i)  	 the Reinsurer has a Standard & Poor’s Corporation
(“S&P”) Insurer Financial Strength Rating of lower than “A-” (or, if
such agency modifies its rating system, the equivalent rating under the
modified system) 

	 
	 	 	 	AND




	 	(ii)	 	the Reinsurer has an Insurance Financial Strength
Rating as provided by Moody’s Investors Service (“Moody’s”) of
lower than “A3” (or, if such agency modifies its rating system, the
equivalent rating under the modified system)

	 
	        OR 	 	 	




	 	(z)	    	the Reinsurer’s total adjusted capital falls to a level which
is less than 150% of company action level risk based capital, as reported to
the insurance department of the Reinsurer’s state of domicile (the “RBC
Trigger”) (or, if the methodology established by the National Association
of Insurance Commissioners for measuring risk based capital is modified, the
measurement level equivalent to the standard in effect on the date hereof
(examples of appropriate adjustments being described on Exhibit B hereto)),





then the Reinsurer shall, at the election of the Reinsurer, take one of the following actions to
ensure its performance hereunder: (A) provide to the Company a “clean”, unconditional and
irrevocable letter of credit to secure the Reinsurer’s share of the Obligations or (B) transfer to
a trust account unencumbered assets adequate to secure Reinsurer’s share of the Obligations (which
trust account shall be established under a trust agreement substantially in the form of Exhibit
A hereto) and pledge such assets to the Company under such trust agreement as reasonably
satisfactory to the Company and sufficient to perfect a first priority lien security interest in
favor of the Company in such assets in the trust account under Article 9 of the Uniform Commercial
Code. During the term of a trust agreement established under Section 3(a) or 3(b) of this Article
VI, the Reinsurer shall not, and shall direct that the trustee shall not, grant or cause to be
created in favor of any third person a security interest in any of the assets in the trust
whatsoever.



     (b) Notwithstanding the provisions of paragraph (a) of this Section 3 of Article VI, in the
event that the insurance regulatory authority of any of the 50 states of the United States, the
District of Columbia or the federal government should determine in writing that the assets in the
trust account established pursuant to this Section 3 of Article VI shall not be deemed admitted
assets or that the Reinsurer will be required to establish a substantially equivalent offsetting
liability, for purposes of the Reinsurer’s financial statements prepared under statutory accounting
principles for filing with such insurance regulatory authority, solely as a result of the
perfection of the Company’s security interest under the trust agreement established pursuant to
this Section 3 of Article VI, the Company and the Reinsurer shall amend the trust agreement so that
the trust agreement complies with the requirements of New York Insurance Department Regulation 114,
except as hereinafter


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 provided. The trust agreement, as so amended, shall provide that the Company shall have the
right to withdraw assets from the trust account only to pay the Company for the Reinsurer’s share
of the Obligations which have not been paid when due or in the event that the Company has received
notice of termination of the trust account under such trust agreement. The minimum amount to be
held in the trust account shall equal 100 percent of the amount required to fund the Reinsurer’s
share of the Obligations.




     (c) Notwithstanding the foregoing, in the event that after a letter of credit or trust account
has been established pursuant to paragraph (a) or paragraph (b) of this Section 3, the Reinsurer is
assigned and maintains the financial strength rating of S&P or Moody’s referred to in subparagraph
(a)(y)(i) or (a)(y)(ii), respectively, of this Section 3 of Article VI and has statutory surplus in
excess of the RBC Trigger, such letter of credit or trust account shall be terminated or returned
to the Reinsurer. If the Reinsurer shall thereafter fail to maintain both of such ratings or the
risk based capital level, the provisions of paragraphs (a) and (b) of this Section 3 shall apply
once again.



ARTICLE VII

TRANSFER OF ASSETS




     1. Transfer of Assets. Cash and/or investment securities will be transferred to the
Reinsurer by the Company in accordance with Section 2.3(b)(i) of the Purchase Agreement.



     2. Adjustment. Adjustment of the amount due pursuant to Section 1 of this Article VII
shall be made in accordance with and pursuant to Section 2.5 of the Purchase Agreement.



     3. Ceding Commission. The Reinsurer shall pay to the Company at the Closing (as
defined in the Purchase Agreement) in accordance with Section 2.3(b)(ii) of the Purchase Agreement
a ceding commission in the amount of $45,000,000 plus interest thereon from January 1, 2004 through
the Closing Date calculated at the Contract Interest Rate (as defined in the Purchase Agreement).



ARTICLE VIII

INSOLVENCY




     1. Payments. In the event of the insolvency of the Company, all reinsurance, ceded,
renewed or otherwise becoming effective under this Agreement shall be payable by the Reinsurer
directly to the Company or to its liquidator, receiver or statutory successor on the basis of the
liability of the Company under the contract or contracts reinsured without diminution because of
the insolvency of the Company.



     2. Notice of Claims. In the event of the insolvency of the Company, the liquidator,
receiver, conservator or statutory successor of the Company shall give written notice to the
Reinsurer of the pendency of a claim against the insolvent Company on the Policies within a
reasonable time after such claim is filed in the insolvency proceeding and during the pendency of
such claim the Reinsurer may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated any defense or defenses which it may deem
available to the Company or its liquidator, receiver, conservator or statutory successor. The
expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the
insolvent



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Company as part of the expense of liquidation to the extent of a proportionate share of the benefit
which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.



     3. Apportionment. Where two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense shall be apportioned in
accordance with the terms of this Agreement as though such expense had been incurred by the
Company.



ARTICLE IX

RIGHTS WITH RESPECT TO THE POLICIES




     The Reinsurer’s reinsurance of the Policy Liabilities of the Company with respect to the
Policies is intended for the sole benefit of the parties to this Agreement and shall not create any
right on the part of any Policyholder, insured, claimant or beneficiary under such Policies against
the Reinsurer or any legal relation between such Policyholders, insureds, claimants or
beneficiaries and the Reinsurer.



ARTICLE X

DIVIDENDS; NON-GUARANTEED ELEMENTS; PARTICIPATING POLICIES 




     1. Except as required under applicable law or regulation or under the terms of any Policy, the
Company shall declare and pay dividends on any participating Policy and reset any non-guaranteed
element of any Policy taking into account the recommendations of the Reinsurer. The Reinsurer
shall assist the Company in determining the dividends in respect of the participating Policies, and
shall administer the payment of dividends, in accordance with Article IV hereof.



     2. The Reinsurer shall remit to the Company, on a quarterly basis pursuant to the CAC
Administrative Services Agreement, an amount equal to 90% of the pre-tax statutory profits, before
Policyholders’ dividends, for the preceding calendar quarter on the Company’s participating
Policies as determined in accordance with Schedule C hereto. In the event that there are
no such profits for the preceding calendar quarter, no amounts shall be remitted by the Reinsurer
to the Company pursuant to this Section 2 of Article X and the loss carryforward provisions
provided in Schedule C hereto shall apply. The obligations of the Reinsurer under this Section 2
shall be the only obligations of the Reinsurer with respect to dividends on the Company’s
participating Policies.



     3. The Company shall have sole responsibility for maintaining the policyholder surplus in
respect of the participating Policies and for compliance with applicable law in respect thereof.



     4. The Reinsurer shall invest and maintain assets in support of the liabilities in respect of
the participating Policies in accordance with the principles set forth on Schedule D
hereto.



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ARTICLE XI

ERRORS AND OMISSIONS




     Inadvertent delays, errors or omissions made in connection with this Agreement or any
transaction hereunder shall not relieve either party from any liability which would have attached
had such delay, error or omission not occurred, provided always that such error or omission is
rectified as soon as possible after discovery.



ARTICLE XII

COOPERATION




     The parties shall cooperate with one another in a commercially reasonable manner to carry out
and implement the terms and objectives of this Agreement, and shall perform such further acts,
execute such further documents and enter into such further agreements as are commercially
reasonable and reasonably necessary to carry out and implement the terms and objectives of the
Agreement. Without limiting the foregoing, each party shall permit the other (and its authorized
representatives) reasonable access to its premises, files and records relating to the Policies and
each party shall make available to the other party (and its authorized representatives) responsible
officials for consultation for the purpose of more fully carrying out the terms and objectives of
this Agreement, provided that the same be requested during normal business hours upon reasonable
notice and without unreasonably disrupting the business of either party. Each party shall retain,
in accordance with its corporate retention policies, all files and records related to the Policies,
but in any event for a period not less than six years following the Closing Date.



ARTICLE XIII

ARBITRATION




     1. Arbitration. As a condition precedent to any cause of action, any and all disputes
between the Company and the Reinsurer arising out of, relating to, or concerning this Agreement,
whether sounding in contract or tort and whether arising during or after termination of this
Agreement, shall be submitted to the decision of a board of arbitration composed of two arbitrators
and an umpire (the “Board”) meeting at a site in Chicago, Illinois. The arbitration shall
be conducted under the Federal Arbitration Act and shall proceed as set forth below.



     2. Notice of Arbitration. A notice requesting arbitration, or any other notice made
in connection therewith, shall be in writing and shall be sent certified or registered mail, return
receipt requested to the affected parties. The notice requesting arbitration shall state in
particulars all issues to be resolved in the view of the claimant, shall appoint the arbitrator
selected by the claimant and shall set a tentative date for the hearing, which date shall be no
sooner than ninety (90) days and no later than one hundred fifty (150) days from the date that the
notice requesting arbitration is mailed. Within thirty (30) days of receipt of claimant’s notice,
the respondent shall notify claimant of any additional issues to be resolved in the arbitration and
of the name of its appointed arbitrator.



     3. Arbitration Panel. Unless otherwise mutually agreed, the members of the Board
shall be impartial and disinterested and shall be active or former executive officers of life
insurance companies, reinsurance companies, or Lloyd’s Underwriters or active or inactive lawyers
with at least twenty (20) years of experience in insurance and reinsurance. The Company and
Reinsurer shall each appoint an arbitrator and the two (2) arbitrators shall choose an umpire
before instituting the



11









 







hearing. If the respondent fails to appoint its arbitrator within thirty (30) days after
having received claimant’s written request for arbitration, the claimant is authorized to and shall
appoint the second arbitrator. If the two arbitrators fail to agree upon the appointment of an
umpire within thirty (30) days after notification of the appointment of the second arbitrator,
within ten (10) days thereof, the two (2) arbitrators shall request the American Arbitration
Association (the “AAA”) to appoint an umpire for the arbitration with the qualifications
set forth in this Article. If the AAA fails to name an umpire, either party may apply to the court
named below to appoint an umpire with the above required qualifications. The umpire shall promptly
notify in writing all parties to the arbitration of his selection and of the scheduled date for the
hearing. Upon resignation or death of any member of the Board, a replacement shall be appointed in
the same fashion as the resigning or deceased member was appointed.



     4. Submission of Briefs. The claimant and respondent shall each submit initial briefs
to the Board outlining the issues in dispute and the basis, authority and reasons for their
respective positions within thirty (30) days of the date of notice of appointment of the umpire.
The claimant and the respondent may submit reply briefs to the Board within ten (10) days after
filing of the initial brief(s). Initial and reply briefs may be amended by the submitting party at
any time, but not later than ten (10) days prior to the date of commencement of the arbitration
hearing. Reasonable responses shall be allowed at the arbitration hearing to new material
contained in any amendments filed to the briefs but not previously responded to.



     5. Arbitration Board’s Decision. The Board shall make a decision and award with
regard to the terms of this Agreement and the original intentions of the parties to the extent
reasonably ascertainable. The Board’s decision and award shall be in writing and shall state the
factual and legal basis for the decision and award. The decision and award shall be based upon a
hearing in which evidence shall be allowed and which the formal rules of evidence shall not
strictly apply but in which cross examination and rebuttal shall be allowed. At its own election
or at the request of the Board, either party may submit a post-hearing brief for consideration of
the Board within twenty (20) days of the close of the hearing. The Board shall make its decision
and award within thirty (30) days following the close of the hearing or the submission of
post-hearing briefs, whichever is later, unless the parties consent to an extension. Every
decision by the Board shall be by a majority of the members of the Board and each decision and
award by the majority of the members of the Board shall be final and binding upon all parties to
the proceeding.



     6. Jurisdiction. Either party may apply to the United States District Court for the
Northern District of Illinois for an order confirming any decision and the award; a judgment of
that Court shall thereupon be entered on any decision or award. If such an order is issued, the
attorneys’ fees of the party so applying and court costs will be paid by the party against whom
confirmation is sought. The Board may award interest calculated from the date the Board determines
that any amounts due the prevailing party should have been paid to the prevailing party.



     7. Expenses. Each party shall bear the expense of the one arbitrator appointed by it
and shall jointly and equally bear with the other party the expense of any stenographer requested,
and of the umpire. The remaining costs of the arbitration proceedings shall be finally allocated
by the Board.



     8. Production of Documents and Witnesses. Subject to customary and recognized legal
rules of privilege, each party participating in the arbitration shall have the obligation to
produce



12









 







those documents and as witnesses to the arbitration those of its employees as any other
participating party reasonably requests providing always that the same witnesses and documents be
obtainable and relevant to the issues before the arbitration and not be unduly burdensome or
excessive. The parties may mutually agree as to pre-hearing discovery prior to the arbitration
hearing and in the absence of agreement, upon the request of any party, pre-hearing discovery may
be conducted as the Board shall determine in its sole discretion to be in the interest of fairness,
full disclosure, and a prompt hearing, decision and award by the Board. The Board shall be the
final judge of the procedures of the Board, the conduct of the arbitration, the rules of evidence,
the rules of privilege and production and of excessiveness and relevancy of any witnesses and
documents upon the petition of any participating party. To the extent permitted by law, the Board
shall have the authority to issue subpoenas and other orders to enforce their decisions.



     9. Relief Available. Nothing herein shall be construed to prevent any participating
party from applying to the United States District Court for the Northern District of Illinois to
issue a restraining order or other equitable relief to maintain the “status quo” of the parties
participating in the arbitration pending the decision and award by the Board or to prevent any
party from incurring irreparable harm or damage at any time prior to the decision and award of the
Board. The Board shall also have the authority to issue interim decisions or awards in the
interest of fairness, full disclosure, and a prompt and orderly hearing and decision and award by
the Board.



     10. Consolidation. In the event that there is a dispute between the Company and
Reinsurer that implicates the provisions of this Agreement or the CAC Administrative Services
Agreement, the Company and Reinsurer shall consolidate any such dispute under such agreements in a
single arbitration proceeding.



ARTICLE XIV

GENERAL PROVISIONS




     1. Notices. (a) Any notice, request or other communication to be given by any party
hereunder shall be in writing and shall be delivered personally, sent by registered or certified
mail, postage prepaid or by overnight courier with written confirmation of delivery or by facsimile
transmission with telephonic confirmation of error-free transmission. Any such notice shall be
deemed given when so delivered personally or if sent by facsimile transmission (and immediately
after transmission confirmed by telephone), if mailed, on the date shown on the receipt therefor,
or if sent by overnight courier, on the date shown on the written confirmation of delivery. Such
notices shall be given to the following address:



13









 





	 	 	 
	If to the Reinsurer:

	 	Swiss Re Life & Health America Inc.

175 King Street

Armonk, New York 10504

Attention: General Counsel

Telephone No.: 914-828-8925

Fax Number: 914-828-7925
	 
	 	 
	With a copy to:

	 	Sutherland Asbill & Brennan LLP

1275 Pennsylvania Avenue, NW

Washington, DC 20004-2415

Attention: David A. Massey

Telephone No.: 202-383-0100

Fax Number: 202-637-3593
	 
	 	 
	If to the Company:

	 	Continental Assurance Company

CNA Plaza

Chicago, Illinois 60685-0001

Attention: Secretary

Tel: (312) 822-1384

Fax: (312) 822-1297
	 
	 	 
	With a copy to:

	 	Dewey Ballantine LLP
	 

	 	1301 Avenue of the Americas
	 

	 	New York, NY 10011
	 

	 	Attention: James A. FitzPatrick, Jr.

Jeff S. Liebmann

	 

	 	Tel: (212) 259-8000
	 

	 	Fax: (212) 259-6333






     (b) Reinsurer shall designate by name two or more officers to provide all requests and
directions to the Company concerning the Business under this Agreement and the CAC Administrative
Services Agreement (the “Designated Officers”). The initial Designated Officers shall be
Donna Kinnaird and Kenneth Stewart. The Reinsurer may change or appoint new Designated Officers by
delivering written notice thereof (in accordance with the delivery methods described in Article
XIV.1(a)) to the Company.



     (c) Any party may by notice given in accordance with this Section 1 of Article XIV to the
other party hereto designate another address or Person for receipt of notices hereunder.



     2. Tax Election. With respect to this Agreement, the Company and the Reinsurer hereby
make the election provided for in Section 1.848-2(g)(8) of the Treasury Regulations issued under
Section 848 of the Internal Revenue Code of 1986, as amended, as set forth in Exhibit C,
which is made a part hereof. Each of the parties hereto agrees to take such further actions as may
be necessary to ensure the effectiveness of such election.



     3. Confidentiality. The Company and the Reinsurer shall hold and cause their
respective officers, directors, employees, agents, advisors, or other representatives (each a
“Representative”) to hold in strict confidence, unless compelled to disclose by applicable
law, (i) any



14









 







term of this Agreement or the transactions contemplated hereby; and (ii) any information that
is furnished by or on behalf of the other party or its Representatives in connection with the
transactions contemplated by this Agreement, except to the extent such information can be shown to
have been (x) previously known by the party to which it was furnished, (y) in the public domain
through no fault of the party to which it was furnished, or (z) later lawfully acquired from other
sources by the party to which it was furnished; provided that such source is not, to such party’s
knowledge, bound by a confidentiality agreement with the other party or its Representatives and is
not, to such party’s knowledge, otherwise prohibited from transmitting the information by a
contractual, legal or fiduciary obligation; provided, however, that the Reinsurer may disclose the
terms of this Agreement to the extent reasonably necessary for the Reinsurer to comply with its
obligations under the CAC Administrative Services Agreement.



     4. Indemnification. Each party hereto shall indemnify, defend and hold the other
party harmless from and against all loss, liability and expense arising out of any failure of the
indemnifying party to perform its obligations in accordance with this Agreement.



     5. Equitable Relief. Each party hereto acknowledges that if it or its employees
violate the terms of this Agreement, the other party will not have an adequate remedy at law. In
the event of such a violation, the other party shall have the right, in addition to any other
rights that may be available to it, to obtain in any court of competent jurisdiction injunctive
relief to restrain any such violation and to compel specific performance of the provisions of this
Agreement. The seeking or obtaining of such injunctive relief shall not foreclose or limit in any
way relief against either party hereto for any monetary damage arising out of such violation.



     6. Set Off. It is understood and agreed that any debits or credits, liquidated or
unliquidated, in favor of or against either party under this Agreement or the CAC Administrative
Services Agreement, are deemed mutual debits or credits, as the case may be, and shall be netted or
set off, as the case may be, and only the balance shall be allowed or paid.



     7. Entire Agreement; Amendments. This Agreement (including the Schedules and Exhibits
hereto), the Purchase Agreement and the CAC Administrative Services Agreement contain the entire
agreement and understanding between the parties with respect to the matters contemplated hereby,
and supersede all prior agreements and understandings, written or oral, between the parties hereto
with respect to such matters. Any change or modification to this Agreement shall be null and void
unless made by amendment to this Agreement and signed by both parties hereto.



     8. Invalidity. The invalidity or unenforceability of any provision or portion hereof
shall not affect the validity or enforceability of the other provisions or portions hereof.



     9. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the same instrument.



     10. Exclusivity. This Agreement is not intended to confer any rights upon any person
other than the parties hereto and their respective successors and permitted assigns.



     11. Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.



15









 





     12. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without giving effect to the principles of conflicts of
laws thereof.



     13. Successors and Assignment. No party hereto shall assign this Agreement or any
rights or obligations hereunder, or subcontract any other party to perform such party’s obligations
hereunder, without the prior written consent of the other party hereto, and any such attempted
assignment or subcontracting without such prior written consent shall be void and of no force and
effect.



     14. Duration and Termination. This Agreement is effective as of the Effective Time
and unlimited as to its duration.



16









 





     IN WITNESS WHEREOF, the Company and the Reinsurer have each executed this Agreement as of the
date first written above.



	 	 	 	 	 
	 	CONTINENTAL ASSURANCE COMPANY

 	 
	 
	 	By:  	/s/ Lawrence J. Boysen	 
	 	 	Name:  	Lawrence J. Boysen	 
	 	 	Title:  	Senior Vice President & Corporate Controller	 
	 
	 
	 	SWISS RE LIFE & HEALTH AMERICA INC.

 	 
	 
	 	By:  	/s/ W. Weldon Wilson	 
	 	 	Name:  	W. Weldon Wilson	 
	 	 	Title:  	Chief Executive Officer	 
	 




17











 





EXHIBIT A




CAC SECURITY TRUST AGREEMENT




          THIS SECURITY TRUST AGREEMENT (this “Agreement”) is made and entered into as of                      by and among CONTINENTAL ASSURANCE COMPANY, a stock insurance company organized
under the laws of Illinois (the “Company”), SWISS RE LIFE & HEALTH AMERICA INC., a
stock insurance company organized under the laws of Connecticut (the “Reinsurer”), and
J.P. MORGAN TRUST COMPANY, N.A. (the “Trustee”).




RECITALS:




     WHEREAS, pursuant to that certain Asset and Stock Purchase Agreement, dated as of February
5, 2004 (the “Purchase Agreement”), by and between the Company and Reinsurer, Reinsurer
agreed to purchase, among other things, the individual life insurance and annuity businesses
and certain assets of the Company, and the capital stock of Valley Forge Life Insurance
Company, a Pennsylvania insurance company, and CNA International Life Company SPC, Ltd., a
segregated portfolio company organized and existing under the laws of the Cayman Islands;



     WHEREAS, pursuant to the Purchase Agreement, the Company and the Reinsurer entered into
the CAC Life and Annuity Indemnity Reinsurance Agreement, dated as of April 30, 2004 (the
“Reinsurance Agreement”), a copy of which is attached hereto as Exhibit A,
pursuant to which the Company has ceded to the Reinsurer, and the Reinsurer has assumed from
the Company, the Company’s individual life insurance and annuity business upon the terms and
conditions set forth therein.



     WHEREAS, if the Reinsurer fails to meet certain ratings or risk based capital levels set
forth in Article VI, Section 3, of the Reinsurance Agreement, the Reinsurer is required to
establish a trust or a letter of credit for the sole benefit of the Company for the purpose of
providing security to the Company for the Reinsurer’s performance under the Reinsurance
Agreement in respect of the Reinsurer’s Obligations (as defined in the Reinsurance Agreement);



     WHEREAS, the Reinsurer has failed to meet either or both of the ratings and risk based
capital levels and has elected to establish a trust and to deposit assets therein in accordance
herewith;



     WHEREAS, the Trustee has agreed to act as Trustee hereunder and to hold such assets in
trust in accordance with the terms of this Agreement; and



     WHEREAS, this Agreement is made for the sole use and benefit of the Company and for the
purpose of setting forth the duties and powers of the Trustee with respect to the Trust Account
(as hereinafter defined).



          NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as



 









 






follows:




     Section 1 Defined Terms. Any capitalized term used but not defined herein shall
have the meaning assigned to such term in the Reinsurance Agreement.



     Section 2 Establishment of Trust Account. Simultaneously with the execution and
delivery of this Agreement, the Reinsurer, as grantor, is establishing a trust account (the
“Trust Account”) with the Trustee for the sole use and benefit of the Company, as
beneficiary, upon the terms and conditions hereinafter set forth. The parties agree that the
trust created hereunder shall be treated as a “grantor trust” for federal income tax purposes,
and the Reinsurer shall report all items of income, gain or loss with respect to the assets in
the Trust Account on its federal income tax return. The Reinsurer hereby grants to the
Company, as security for the payment and performance by the Reinsurer of the Reinsurer’s
Obligations under the Reinsurance Agreement, a security interest in all of the Reinsurer’s
right, title and interest in, to and under the Trust Account and under this Agreement,
including all Permitted Assets (as defined in Section 6 below) and other investment property or
assets now or at any time credited to or carried in the Trust Account (subject to Sections 5,
8, 9 and 17 hereof), and (subject to Section 10 hereof) all proceeds of any of the foregoing,
in whatever form (collectively, the “Collateral”); provided, however, such security
interest of the Company in any Permitted Asset, investment property or assets, or proceeds of
any of the foregoing, that the Reinsurer has withdrawn, substituted for, reinvested or had paid
over in accordance with Sections 5, 8, 9, 10 or 17 hereof, as applicable, shall terminate as of
the date of such withdrawal, substitution, reinvestment or payment, as applicable. The
Reinsurer hereby authorizes the Company to file such financing or continuation statements, or
amendments thereto, as the Company may deem necessary to perfect and preserve the security
interest granted hereby.



     Section 3 Initial Deposit. Within two (2) Business Days (as defined in the
Purchase Agreement) after the execution of this Agreement by the Company, the Reinsurer and
J.P. Morgan Trust Company, N.A. (or another trustee as mutually agreed to between the Reinsurer
and the Company), the Reinsurer shall deposit with the Trustee Permitted Assets with an
aggregate SAP (as hereinafter defined) book value equal to at least 100% of the Reinsurer’s
Obligations as of [date of most recent calendar quarter-end preceding the date hereof for which
statutory financial statements of the Company are available] (such amount being $                    ).
The Reinsurer hereby certifies that as of the date of such deposit the aggregate SAP book
value of the Permitted Assets so deposited shall equal at least 100% of the Obligations as of
[date of most recent calendar quarter-end preceding the date hereof for which statutory
financial statements of the Company are available]. For purposes of this Agreement, (i)
“SAP” shall have the meaning set forth in the Purchase Agreement, (ii) “book
value” shall be determined by reference to the books and records of the Reinsurer and (iii)
the amount of the Obligations shall be determined by the Reinsurer in accordance with generally
accepted actuarial standards and all applicable laws, rules and requirements for the filing of
the Company’s statutory financial reports in the Company’s state of domicile.



     Section 4 The Reinsurer’s Continuing Obligation. Within thirty calendar days
after the end of each calendar quarter beginning with the calendar quarter ended [date of end
of calendar quarter in which this Agreement is dated], the Reinsurer shall (i) determine the
aggregate amount of the Obligations as of the last day of such calendar quarter, (ii) determine
the SAP book value of the Collateral in the Trust Account as of such calendar quarter end,
(iii)



2









 




deposit with the Trustee any additional Permitted Assets necessary so that the aggregate
SAP book value of the Collateral in the Trust Account shall not be less than 100% of the
Obligations as of such calendar quarter end, and (iv) provide to the Company a certificate
signed by an authorized officer of the Reinsurer certifying the amounts described in (i), (ii)
and (iii) and compliance therewith and including reasonable supporting detail of such
computations. The Trustee is authorized to receive and accept whatever additional assets the
Reinsurer from time to time may transfer or remit to the Trust Account, without any duty or
obligation to determine or know whether such assets are Permitted Assets, and to hold and
dispose of the same for the uses and purposes and in the manner and according to the provisions
set forth in this Agreement. All such trust assets at all times shall be maintained in the
Trust Account, which shall continuously be located within the United States of America. The
Trustee shall have no duty or responsibility whatsoever for determining or confirming the
adequacy of the assets in the Trust Account. The Company shall be entitled at any time and
from time to time, by means of written notice to the Reinsurer, to object to the Reinsurer’s
deposit, reinvestment or substitution of assets on the grounds such assets do not constitute
Permitted Assets and the Reinsurer shall as soon as practicable thereafter substitute therefor
assets which constitute Permitted Assets to the reasonable satisfaction of the Company.




     Section 5 Withdrawals from the Trust Account.


Withdrawals from the Trust Account shall be made pursuant to the provisions of this Section 5:




     (a) By the Reinsurer. Subject to Section 5(c), in the event that at any time the
aggregate SAP book value of the Collateral in the Trust Account exceeds 100% of the aggregate
amount of the Obligations as of the end of the immediately preceding calendar quarter, the
Reinsurer shall be entitled to withdraw the excess from the Trust Account. The SAP book value
of each asset in the Trust Account shall include, where applicable, all investment income and
interest due and accrued on such assets. For purposes of this Agreement, SAP book value of the
Collateral shall be as determined by the Reinsurer for purposes of its statutory financial
statements filed with the Insurance Department of the state of domicile of the Reinsurer. The
Trustee shall have no duty or responsibility whatsoever for determining such excess or such SAP
book value. The parties agree, however, that the reinvestment of assets in the Trust Account
in other assets in accordance with Section 9 hereof shall not be considered a withdrawal under
this Section 5(a).



     (b) By the Company. Subject to Section 5(c), the Company shall be entitled to
withdraw assets from the Trust Account having a market value equal to amounts required to pay
or reimburse the Company for the Reinsurer’s failure to fulfill any or all of its Obligations,
including but not limited to payment of any Policy Liabilities (a “Loss”) (the Trustee
shall have no duty or responsibility whatsoever for determining the amount of such Loss or the
market value of the assets withdrawn).



     (c) Procedure. Withdrawals from the Trust Account as permitted above may be made
by the Reinsurer or the Company at any time and from time to time, provided that the
withdrawing party (the “Withdrawing Party”) has provided ten Business Days’ written
notice (the “Notice Period”) to the other party hereto (the “Non-Withdrawing
Party”) consisting of the following (collectively, the “Withdrawal Notice”): (i) a
statement of the Withdrawing Party’s intent to make such withdrawal, (ii) the amount of the
withdrawal, (iii) the effective date of the



3









 




withdrawal (the “Withdrawal Date,” which shall be at least one Business Day after
the end of the Notice Period), and (iv) a certificate stating in reasonable specificity the
reasons for the withdrawal. The Withdrawing Party shall certify to the Trustee in writing that
the Withdrawal Notice has been given to the Non-Withdrawing Party as required and shall attach
a copy of the Withdrawal Notice with such written certificate. No other statement or document
need be presented to the Trustee to authorize a withdrawal from the Trust Account. Trustee
shall obtain and retain a confirmation or receipt evidencing the delivery of the assets that
are withdrawn pursuant to the instructions provided by the Withdrawing Party. In the event
that the Company is the Withdrawing Party, during such ten Business Day period after the
Company’s Withdrawal Notice, the Reinsurer may provide to the Company and the Trustee written
directions as to which assets are to be withdrawn to satisfy the amount of the withdrawal. If
the Reinsurer does not provide any such direction at least one Business Day prior to the
Withdrawal Date, the Company shall provide written direction to the Trustee as to which assets
are to be withdrawn. Upon receipt of the Withdrawing Party’s instructions and in the absence
of receipt within the Notice Period by the Trustee of a written protest to the withdrawal by
the Non-Withdrawing Party, the Trustee shall on the Withdrawal Date promptly take any and all
necessary steps to transfer to the Withdrawing Party all right, title and interest in the
assets being withdrawn, and to deliver the custody thereof to the Withdrawing Party. The
Trustee shall be protected in relying upon any written demand of the Withdrawing Party for such
withdrawal that contains the Withdrawal Notice and certification described in the second
sentence of this Section 5(c). Furthermore, the Trustee shall have no duty or responsibility
whatsoever to question the truth or validity of such demand from the Withdrawing Party or any
notice of protest the Trustee may receive from the Non-Withdrawing Party (as provided for
hereafter) or to determine that any amounts or assets withdrawn from the Trust Account pursuant
to this Section 5 are correct or will be used and applied in a manner consistent with the terms
of this Agreement. If either the Reinsurer or the Company protests such withdrawal within the
Notice Period by written notice to the Trustee and the Non-Withdrawing Party, providing with
reasonable specificity the reasons for such protest, and provided the Trustee has had a
reasonable opportunity to act upon such notice before the assets have been withdrawn and
delivered, the Trustee shall take no further action on the Withdrawal Notice (except to advise
the Withdrawing Party of its receipt of the notice of protest from the Non-Withdrawing Party)
until it has received (i) a final order, no longer subject to appeal, rendered in accordance
with Section 18 hereof, directing the withdrawal of assets and identifying the specific assets
that are to be the subject of the withdrawal or (ii) joint written instructions from the
Reinsurer and the Company directing the withdrawal of assets and identifying the specific
assets that are to be the subject of the withdrawal. The Trustee shall have no duty,
responsibility or obligation whatsoever to participate in any dispute resolution process
between the Company and the Reinsurer as provided in Section 18 hereof, unless requested by the
Reinsurer or the Company, in which event the requesting party shall reimburse and indemnify
Trustee for Trustee’s reasonable costs and expenses (including without limitation reasonable
attorneys’ fees and expenses) in connection with such requested participation.




     Section 6 Permitted Assets.



     (a) Any assets deposited in the Trust Account shall consist only of “Permitted Assets” as
hereinafter defined. “Permitted Assets” shall consist of those assets that constitute
admitted assets under the Connecticut Insurance Code (disregarding, for this purpose, any
concentration or aggregation limitations contained therein), except that for purposes hereof
the following shall not constitute Permitted Assets: (i) investments of the types which would



4









 




constitute admitted assets only pursuant to Section 38a-102a(a) of the Connecticut
Insurance Code (the so-called “basket” provisions) and (ii) investments issued by a parent,
subsidiary or Affiliate (as defined in the Purchase Agreement) of either of the Reinsurer or
the Company; provided, however, if the Reinsurer re-domesticates from Connecticut to another
state, (i) the references to the Connecticut Insurance Code in this Section 6 shall be read as
references to the insurance code in the Reinsurer’s new state of domicile, and (ii) the cites
to the “basket” provisions in this Section 6 shall be read as cites to the basket provisions
under the insurance code in the Reinsurer’s new state of domicile.




     (b) Any deposit or investment direction by the Reinsurer (as provided for in Section 9
below) shall constitute a certification by the Reinsurer to the Trustee and the Company that
the assets so deposited or to be purchased pursuant to such investment direction are Permitted
Assets, and the Trustee shall have no duties, responsibilities or obligations whatsoever to
take notice of, determine or confirm that such assets are Permitted Assets. Accordingly,
neither the Reinsurer nor the Company shall hold the Trustee responsible or liable in any way
whatsoever in the event that any assets in the Trust Account are not Permitted Assets.



     Section 7 Form of Title. Prior to depositing assets with the Trustee, and from
time to time thereafter as required, the Reinsurer shall execute assignments, endorsements in
blank or transfer legal title to the Trustee of all shares, obligations or any other assets
requiring assignments, in order that the Company or the Trustee upon direction of the Company
may whenever necessary negotiate any such assets or transfer such assets to the Company without
the consent or signature from the Reinsurer or any Person. Any assets received by the Trustee
which are not in such proper negotiable or transferable form shall not be accepted by the
Trustee and shall be returned to the Reinsurer as unacceptable. In addition, the Trustee may
hold assets of the Trust Account in bearer form or in its own name or that of a nominee.



     Section 8 Substitution. At any time and from time to time, the Reinsurer may
substitute assets in the Trust Account provided that (i) the Reinsurer sends written notice of
such substitution to the Trustee and the Company and (ii) the Reinsurer replaces any Permitted
Assets, on or before the substitution, with new Permitted Assets having a then current SAP book
value at least equal to then current SAP book value of the assets so substituted. The parties
agree, however, that the reinvestment of Permitted Assets in the Trust Account in other
Permitted Assets in accordance with Section 9 hereof shall not be considered a substitution
under this Section 8. The Trustee shall be protected in relying upon such notice of the
Reinsurer, and the Trustee shall have no duty, responsibility or obligation whatsoever to
determine or confirm the SAP book value of the substituted assets or whether the substituted
assets are Permitted Assets. Neither the Reinsurer nor the Company shall hold the Trustee
responsible or liable in any way whatsoever in the event that new Permitted Assets have
insufficient current SAP book value.



     Section 9 Investment Direction.



     (a) The responsibility for the investment and reinvestment of the assets in the Trust
Account shall be that of the Reinsurer. Unless and until directed by the Reinsurer and
consented to by the Trustee, the Trustee shall have no duty or obligation in respect of the
investment or reinvestment of the assets held in the Trust Account or for giving advice in
respect of their investment or reinvestment.



5









 





     (b) The Trustee shall settle any trades of assets in the Trust Account as directed by the
Reinsurer in accordance with the delivery and payment or the receipt and payment methods for
settling institutional securities trades in the local market in which such purchases and sales
are to settle, unless otherwise required by prevailing standards of the market in which the
transaction occurs. If there is more than one standard method of settling institutional
securities trades in a given market and instructions are consistent with one of such methods,
the Trustee shall settle in accordance with such instructions.



     (c) The Trustee shall not be obligated or required to advance or expend its own funds in
respect of the investing and reinvesting of assets in the Trust Account; however, if for any
reason the Trustee shall have advanced any of its own funds in respect of the investment and
reinvestment of assets in the Trust Account as provided herein, the Trustee shall have a
security interest in the assets in the Trust Account to the extent of the amount of such
advance and the Trustee shall have all the rights and remedies of a secured party under the New
York Uniform Commercial Code. The Trustee shall charge the Trust Account for all assets
purchased at the direction of the Reinsurer. Any losses or gains incurred from any investment
shall be borne exclusively by the Trust Account. The Trustee shall not be liable for any loss
due to changes in market rates or penalties for early redemption.



     Section 10 Dividends, Interest, Etc. All dividends, interest and other income
resulting from the investment of the assets in the Trust Account shall be the property of the
Reinsurer. To the extent that the Trustee shall collect and receive such income from the Trust
Account, it shall pay over to the Reinsurer the amount of such income promptly upon the written
direction of the Reinsurer; provided however, that the Trustee shall have no obligation with
respect to the collection of any unpaid income. Notwithstanding the foregoing, while there is
pending any withdrawal request by the Company hereunder, such amount of income shall be held by
Trustee as part of the Trust Account until the final resolution of such withdrawal request.



     Section 11 Reports, Voting Rights. The Trustee will forward to the Reinsurer or
its designee all proxies and proxy materials and corporate action materials that the Trustee
receives, if any, relating to the assets in the Trust Account. The Reinsurer or its designee
shall have the full and unqualified right to vote any assets in the Trust Account. The Trustee
is authorized to open all mail directed to the Reinsurer, its designee or the Company received
by the Trustee.



     Section 12 Maturing Assets. The Trustee will surrender for payment all maturing
assets and assets called for redemption in the Trust Account and deposit the principal amount
of the proceeds of any such payment received by the Trustee into the Trust Account.



     Section 13 Reports by Trustee.



     (a) The Trustee shall furnish to the Reinsurer and the Company a report listing all assets
in the Trust Account upon its inception and thereafter as of the end of each calendar month.
Such report shall be given as soon as practicable, but in no event later than fifteen calendar
days after the end of each calendar month; provided that, in no event shall the Trustee have
any obligation or duty to determine the SAP book value of such assets.



6









 





     (b) The Trustee shall furnish to the Reinsurer and the Company notice of any deposits to
or withdrawals from the Trust Account by depositing the notice in U.S. regular mail within two
Business Days of the occurrence of such event specifying the assets so deposited or withdrawn.



     Section 14 Representations, Warranties and Covenants of the Reinsurer. The
Reinsurer represents and warrants to the Company, and covenants for the benefit of the Company,
as follows:



     (a) The Reinsurer is (and, for the past five years, has been) a stock insurance company
organized under the laws of Connecticut. For the past five years, the chief executive office of
the Reinsurer, within the meaning of section 9-307 of the Connecticut Uniform Commercial Code
(“UCC”), has been (and, immediately following the date hereof, will be) located in the
[                    ]. The Reinsurer shall not change its jurisdiction of organization or its chief
executive office (within the meaning of section 9-307 of the UCC), except upon 30 days’ prior
written notice to the Company. In the event that the Reinsurer changes its jurisdiction of
organization or the location of its chief executive office, it will only change to a jurisdiction
of organization or change the location of its chief executive office to a jurisdiction in the
United States. The Reinsurer’s true corporate name, as reflected in its organization documents of
record in the State of Connecticut, is (and, for the past five years, has been) that set forth in
the preamble hereto.



     (b) The Reinsurer owns and will own its interest in the Collateral free and clear of any
security interest in, or lien or adverse claim on, the Collateral. From and after the date hereof,
the Reinsurer will not authorize the filing of any other financing statement with respect to the
Collateral, nor authorize the granting of “control” (as defined in the UCC) over any of the
Collateral to any Person other than the Company. From and after the date hereof, the Reinsurer
will not grant any further security interest in, or lien on, the Collateral.



     (c) The Reinsurer will do, execute or otherwise authenticate, acknowledge and deliver, or
cause to be done, executed or otherwise authenticated, acknowledged and delivered, such instruments
of transfer or other records, and take such other steps or actions, as the Company may reasonably
deem necessary to create, perfect or preserve the security interest granted to the Company by
Section 2 hereof or to ensure that such security interest remains prior to any and all other
security interests, liens or other interests of any other Person; and the Reinsurer hereby
authorizes the Company, in the Reinsurer’s name or otherwise, to take, or cause to be taken, any of
the foregoing steps or actions upon any failure by the Reinsurer to comply with any written request
of the Company in respect of any matter subject to this Section 14(c).



     Section 15 Provisions Relating to Trustee.



     (a) The Trustee shall have no responsibility whatsoever to determine that any assets in the
Trust Account are or continue to be Permitted Assets.



     (b) The Trustee may maintain the assets in book-entry form with, and utilize the services of,
any Federal Reserve Bank, The Depository Trust Company or similar such depositories as appropriate,
and such assets may be held in the name of a nominee maintained by the Trustee or any such entity.



7









 





     (c) The Trustee shall (i) be a bank or trust company that is a member of the Federal Reserve
System of the United States of America and shall not be an Affiliate of the Reinsurer or the
Company and (ii) have a location such that the Reinsurer is able to comply with applicable law
concerning location of the Reinsurer’s securities.



     (d) The Trustee shall be entitled to receive as compensation for its services hereunder an
annual fee, computed and payable quarterly in arrears, at such rate as may be agreed from time to
time in writing among the Reinsurer and the Trustee. The Reinsurer shall be solely responsible for
and shall pay the fee of the Trustee and all reasonable expenses of the Trustee. The Trust Account
shall not be utilized for the payment of such fees and expenses. In no event shall the Trustee be
entitled to withdraw assets from the Trust Account for the purposes of paying itself compensation.



     (e) The Trustee shall be responsible for the safekeeping and administration of the Trust
Account in accordance with provisions of this Agreement. The Trustee will use reasonable care in
performing its obligations under this Agreement. The Trustee shall be liable and responsible for
direct damages to the extent they result from Trustee’s negligence, willful misconduct or bad faith
in performing its duties under this Agreement; provided, however, that under no circumstances will
Trustee be liable for any indirect, consequential or special damages (including, without
limitation, lost profits). The Reinsurer hereby indemnifies and holds the Trustee and its
directors, officers, agents and employees (collectively, the “Indemnitees”) harmless from and
against any and all claims, liabilities, losses, damages, fines, penalties, and expenses, including
reasonable out-of-pocket, incidental expenses and legal fees (“Indemnifiable Losses”) that may be
imposed on, incurred by, or asserted against, the Indemnitees or any of them for following any
instructions or other directions provided solely by the Reinsurer upon which the Trustee is
authorized to rely pursuant to the terms of this Agreement or as a result of any action or failure
to act of the Reinsurer, provided the Trustee has not acted with gross negligence, engaged in
willful misconduct or acted in bad faith. The Company hereby indemnifies and holds the Indemnitees
harmless from and against any and all Indemnifiable Losses that may be imposed on, incurred by, or
asserted against, the Indemnitees or any of them for following any instructions or other directions
provided solely by the Company upon which the Trustee is authorized to rely pursuant to the terms
of this Agreement or as a result of any action or failure to act of the Company, provided the
Trustee has not acted with gross negligence, engaged in willful misconduct or acted in bad faith.
Also, each of the Company and the Reinsurer hereby indemnifies and holds the Indemnitees harmless
from and against any and all Indemnifiable Losses that may be imposed on, incurred by, or asserted
against, the Indemnitees or any of them for following any instructions or other directions provided
jointly by the Company and the Reinsurer upon which the Trustee is authorized to rely pursuant to
the terms of this Agreement or as a result of any joint action or joint failure to act of the
Company and the Reinsurer, provided the Trustee has not acted with gross negligence, engaged in
willful misconduct or acted in bad faith, and provided further that solely between the Company and
the Reinsurer, and without limitation on the Trustee’s ability to seek such indemnification from
either the Company or the Reinsurer, the liability of each of the Reinsurer and the Company
pursuant to this sentence shall be limited to fifty percent (50%) of the aggregate liability with
respect to any such indemnification claim. In addition, and not in limitation of the indemnities
provided above in this Section 15(e), the Reinsurer hereby indemnifies and holds harmless the
Indemnitees from any Indemnifiable Losses that may be imposed on, incurred by, or asserted against
the Indemnitees in connection with or arising out of Trustee’s performance under this Agreement,
provided the Indemnitees have not acted with negligence, engaged in willful misconduct or acted in
bad faith. The Reinsurer and the Company hereby acknowledge that the foregoing indemnities and
other provisions of this Section 15 and



8









 




elsewhere in this Agreement for the Trustee’s benefit shall survive the resignation or removal
of the Trustee or the termination of this Agreement.




     (f) The Trustee is authorized to follow and rely upon all notices and instructions given by
Persons named in incumbency certificates or letters of authorization furnished to the Trustee from
time to time by the Reinsurer and the Company, respectively, and by any attorneys-in-fact acting
under written authority furnished to the Trustee by the Reinsurer or the Company including, without
limitation, notices and instructions given by letter, facsimile transmission or electronic media,
if the Trustee believes in good faith to have been given by such Persons. The Trustee shall not
incur any liability to any Person resulting from actions taken or not taken by the Trustee in
reliance in good faith on such notices and instructions. The Trustee shall not incur any liability
in executing or not taking action based on instructions (i) from any attorney-in-fact acting for or
on behalf of the Company or the Reinsurer prior to receipt by it of notice of the revocations of
the written authority of such attorney-in-fact or (ii) from any Person purporting to represent the
Reinsurer or the Company named in an incumbency certificate or letter of authorization delivered
hereunder prior to receipt by it of a more current certificate or letter.



     (g) The Trustee represents and warrants to the Company and the Reinsurer that it has not
entered into, and covenants that it will not enter into, any agreement pursuant to which it agrees
to comply with instructions originated by any Person with respect to the Trust Account, the
Permitted Assets or any other assets from time to time credited to the Trust Account, except as
provided in paragraph (f) of this Section 15.



     (h) The duties and obligations of the Trustee shall only be such as are specifically set forth
in this Agreement, as it may from time to time be amended, and no implied duties or obligations
shall be read into this Agreement against the Trustee, and the Trustee shall have no duties,
obligations or responsibilities under the Purchase Agreement or the Reinsurance Agreement.



     (i) Whenever in the administration of the Trust Account created by this Agreement the Trustee
shall deem it necessary or desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and established as to
the Trustee by a written notification signed by or on behalf of the Reinsurer or the Company and
delivered to the Trustee, and said written notification shall be full warrant to the Trustee for
any action taken, suffered or omitted by it on the faith thereof.



     (j) The Trustee shall keep full and complete records of the administration of the Trust
Account. Upon the written request of the Reinsurer or the Company, the Reinsurer and/or the
Company may examine such records upon reasonable notice to the Trustee at any time during Trustee’s
regular business hours by any Person duly authorized in writing by the Reinsurer and/or the
Company.



     (k) The Trustee hereby accepts the trust herein created and declared upon the terms herein
expressed. The Trustee may resign, by written resignation, effective not less than ninety calendar
days after receipt thereof by the Reinsurer and the Company. The Reinsurer and the Company may
upon mutual agreement remove the Trustee at any time, without assigning any cause therefor, by the
delivery to the Trustee of a written notice of removal, effective not less than ninety calendar
days after receipt by the Trustee of the notice; provided, however, that no such resignation



9









 




or removal shall be effective until a successor trustee (i) has been appointed by the
Reinsurer and the Company, and (ii) has accepted such appointment and all assets in the Trust
Account have been duly transferred to such successor trustee. Upon such resignation or removal,
the Reinsurer and the Company shall use reasonable efforts to ensure that a successor Trustee is
appointed within a reasonable time of notification thereof. In case of the appointment of a
successor trustee, all of the powers, rights and duties of the Trustee named herein shall survive
and continue in the successor Trustee and every successor Trustee shall succeed to take and have
all the estate, powers, rights and duties which belonged to or were held by its predecessor. In
the case of the resignation or removal of a Trustee, the Reinsurer and the Company shall have the
right to a final accounting with respect to the Trust Account.




     (l) In the event that any disagreement between the Reinsurer and the Company, or between any
of them and any other Person, results in adverse claims or demands being made in connection with
the Trust Account, the Trustee may refuse to comply with any claims or demands on it or refuse to
take any other action hereunder, so long as such disagreement continues. In addition, the Trustee
will refuse to take any action on withdrawal if so required by Section 5(c) hereof. The Trustee
shall not be or become liable in any way or to any Person for its failure or refusal to act in
accordance with this Section 15(l), and the Trustee shall be entitled to continue to refrain from
acting until the Trustee shall have received: (i) a final order, no longer subject to appeal,
rendered in accordance with Section 18 hereof directing the distribution of the Trust Account in
such amounts and otherwise on such terms as are provided in such order, or (ii) a written agreement
executed by the Reinsurer and the Company directing delivery of the assets in the Trust Account
(and specifying the Person(s) to whom delivery shall be made and the date and amount of payment),
in which event the Trustee shall disburse the Trust Account in accordance with such order or
agreement.



     (m) Any corporation or association into which Trustee may be converted or merged, or with
which it may be consolidated, or to which it may sell or transfer its corporate trust business and
assets as a whole or substantially as a whole, or any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer to which it is a party, shall be and
become successor Trustee hereunder and vested with all of the assets in the Trust Account and all
of the trusts, powers, discretions, immunities, privileges, obligations and all other matters as
was its predecessor, without the execution or filing of any instrument or any further act, deed or
conveyance on the part of the parties hereof, provided that written notice identifying such
successor Trustee is promptly provided to the Reinsurer and the Company.



     (n) Except with respect to obligations relating to assets withdrawn by the Company pursuant to
Section 5(b) hereof arising after the withdrawal, the Reinsurer agrees to assume any and all
obligations imposed by any applicable law with respect to taxes on the payments from, or earnings
or other income attributable to, the Trust Account, and to indemnify and hold the Trustee and the
Company harmless from and against any such taxes, including any liability on account of any tax
withholding obligation or any failure to withhold, and any additions from late payment, interests,
penalties and other expenses that may be assessed against the Trustee or the Company with respect
thereto. For purposes of any applicable tax withholding or reporting obligations, all earnings or
other income attributable to the Trust Account shall be considered the currently reportable income
of the Reinsurer. The Reinsurer shall be responsible for filing with the Trustee any form or other
claim or evidence of exemption from tax withholding requirements, including two duly completed and
executed Internal Revenue Service Forms W-9 and any updates or successor form thereto.



10









 





     Section 16 Term. This Agreement shall be effective until one of the following events
occurs:



     (a) The Reinsurer and the Company mutually agree to terminate the Agreement and provide
written notice thereof to the Trustee.



     (b) The Reinsurer is assigned and maintains the financial strength rating of Standard & Poor’s
Corporation or Moody’s Investors Service referred to in Article VI, Section 3, subparagraphs
(a)(y)(i) or (a)(y)(ii) of the Reinsurance Agreement, respectively, and has statutory surplus in
excess of the RBC Trigger, and written notice thereof is provided to the Trustee jointly by the
Company and the Reinsurer.



     (c) The Reinsurance Agreement is terminated for any reason whatsoever, and written notice
thereof is provided to the Trustee jointly by the Company and the Reinsurer.



     (d) All assets in the Trust Account are withdrawn in accordance with Section 5.



     Section 17 Termination. Upon the termination of this Agreement, the Trustee shall,
with the Company’s written consent, transfer, pay over and deliver to the Reinsurer all of the
assets of the Trust Account that may then be remaining in the Trust Account, in exchange for a
written receipt from the Reinsurer, at which time all responsibility and liability of the Trustee
with respect to such assets shall cease.



     Section 18 Dispute Resolution. The Reinsurer and the Company acknowledge and agree
that all disputes between them arising under this Agreement shall be determined in accordance with
Article XIII of the Reinsurance Agreement.



     Section 19 Miscellaneous.



     (a) Cooperation. Each party hereto shall cooperate with the other parties and,
individually or collectively, shall promptly take such further action and promptly execute such
further documents, certificates, instruments, statements, filings, conveyances, and agreements, as
may be reasonably necessary to effectuate the purposes of this Agreement.



     (b) Entire Agreement; No Third Party Beneficiaries. Except as otherwise expressly
provided herein, this Agreement (including the agreements, documents and instruments referred to
herein) constitutes the entire agreement between and among the parties with respect to the
transactions contemplated hereby and supersedes all prior arrangements or understandings with
respect thereto, written or oral. Nothing in this Agreement, expressed or implied, is intended to
confer upon any Person, other than the parties or their respective successors and permitted
assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement.



     (c) Amendments. To the extent permitted by applicable law, this Agreement may be
amended by a subsequent writing signed by all the parties hereto.



     (d) Waivers. The failure of any party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such party at a later time to enforce
the same or any other provision of this Agreement. No waiver of any condition or of the breach of
any term contained in this Agreement in one or more instances shall be deemed to be or construed as
a



11









 




further or continuing waiver of such condition or breach or a waiver of any other condition or
of the breach of any other term of this Agreement.




     (e) Assignment. No party hereto shall assign this Agreement or any rights or
obligations hereunder, by operation of law or otherwise, without the prior written consent of the
other parties hereto, and any such attempted assignment without such prior written consent shall be
void and of no force and effect.



     (f) Notices. Any notice, request or other communication (other than communications
relating solely to the assets in the Trust Account as distinguished from the exercise of rights
hereunder) to be given by any party hereunder shall be in writing and shall be delivered
personally, sent by registered or certified mail, postage prepaid or by overnight courier with
written confirmation of delivery or by facsimile transmission with telephonic confirmation of
error-free transmission. Any such notice shall be deemed given when so delivered personally or if
sent by facsimile transmission (and immediately after transmission confirmed by telephone), if
mailed, on the date shown on the receipt therefor, or if sent by overnight courier, on the date
shown on the written confirmation of delivery. Such notices shall be given to the following
address:



	 	 	 
	If to the Company:

	 	Continental Assurance Company

CNA Plaza

Chicago, Illinois 60685-0001

Attention: Secretary

Tel: (312) 822-1384

Fax: (312) 822-1297
	 
	 	 
	 
	 	 
	With copies to:

	 	Dewey Ballantine LLP
	 

	 	1301 Avenue of the Americas
	 

	 	New York, NY 10019
	 

	 	Attention: James A. FitzPatrick, Jr.

Jeff S. Liebmann

	 

	 	Tel: (212) 259-8000

	 

	 	Fax: (212) 259-6333
	 
	 	 
	 
	 	 
	And to:

	 	Continental Casualty Company

CNA Plaza, Corporate Treasury

Chicago, Illinois 60685-0001

Attention: Treasurer

Tel: (312) 822-4637

Fax: (312) 822-4175






12









 






	 	 	 
	If to the Reinsurer:

	 	Swiss Re Life & Health America Inc.
	 

	 	175 King Street
	 

	 	Armonk, New York 10504
	 

	 	Attention: General Counsel
	 

	 	Tel: (914) 828-8925
	 

	 	Fax: (914) 828-7925
	 
	 	 
	 
	 	 
	With a copy to:

	 	David A. Massey
	 

	 	Sutherland Asbill & Brennan LLP
	 

	 	1275 Pennsylvania Avenue, NW
	 

	 	Washington, DC 20004-2415
	 

	 	Tel: (202) 383-0100
	 

	 	Fax: (202) 637-3593
	 
	 	 
	 
	 	 
	If to the Trustee:

	 	J.P. Morgan Trust Company, N.A.
	 

	 	c/o J. P. Morgan Chase Bank
	 

	 	Three MetroTech 5th Floor
	 

	 	Brooklyn, New York 11245
	 

	 	Attention: William Cataldi
	 

	 	Tel: 718-242-5283
	 

	 	Fax: 718-254-5000






     Any party may by notice given in accordance with this Section 19(f) to the other party hereto
designate another address or Person for receipt of notices hereunder.



     (g) Governing Law. Notwithstanding the place where this Agreement may be executed by
any of the parties, and notwithstanding any other agreement among the parties, or any of them, with
respect to the Trust Account, the parties expressly agree that this Agreement and the obligations
of the parties with respect to the Trust Account shall in all respects be governed by, and
construed in accordance with, the laws of the State of Illinois, without regard for any conflicts
of laws principles.



     (h) Notice to Trustee. Except when otherwise expressly provided in this Agreement,
any written notification to be delivered or furnished by the Reinsurer or the Company shall be
sufficiently executed if executed in the name of such party by a duly authorized officer or agent
of such party as may be designated in a resolution or letter of advice by the Reinsurer or the
Company, respectively. Written notice of such designation by each of the Reinsurer and the Company
shall be filed with the Trustee. The Trustee shall be protected in acting upon any written
notification made by such officer or agent of the Reinsurer or the Company with respect to the
authority conferred on such officer or agent.



     (i) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but all of which together shall constitute one and the same
instrument.



     (j) Captions. The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement. All references herein to articles and sections shall be
deemed references to such parts of this Agreement, unless the context shall otherwise require.



13









 





     (k) Interpretations.




     (i) For purposes of this Agreement, the words “hereof,” “herein,” “hereby” and other
words of similar import refer to this Agreement as a whole unless otherwise indicated.
Whenever the words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation.” Whenever the singular is
used herein, the same shall include the plural, and whenever the plural is used herein, the
same shall include the singular, where appropriate. All dollar references in this Agreement
are to the currency of the United States.




     (ii) No uncertainty or ambiguity herein shall be construed or resolved against any
party, whether under any rule of construction or otherwise. No party to this Agreement
shall be considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated and accepted by all parties and their attorneys and shall be
construed and interpreted according to the ordinary meaning of the words used so as fairly
to accomplish the purposes and intentions of all parties hereto.



     (l) Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.



14









 





          IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf
on the day and year first above written.




	 	 	 	 	 
	 	CONTINENTAL ASSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	SWISS RE LIFE & HEALTH
AMERICA INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	J.P. MORGAN TRUST COMPANY, N.A.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




15











 





Exhibit A




CAC Life and Annuity Indemnity Reinsurance Agreement




16









 





EXHIBIT B




RBC Trigger Adjustment Examples





	1.	 	Assuming under current risk based capital requirements, the Company Action Level Risk Based
Capital of the Reinsurer is $1 billion, the RBC Trigger under Section 3, Article VI of this
Agreement would be $1.5 billion. In the event that the methodology established by the
National Association of Insurance Commissioners (the “NAIC”) for measuring risk based capital
were to be modified so that without any change in the financial position of the Reinsurer the
designated Company Action Level Risk Based Capital for the Reinsurer is $1.2 billion, a 20%
increase, the RBC Trigger would likewise increase by 20% to $1.8 billion (effectively, 150% of
the new Company Action Level Risk Based Capital).

	 
	2.	 	Under current NAIC requirements, a Company Action Level RBC Plan would be required if the
Reinsurer’s total adjusted capital were to fall to a level which is less than 100% of a
benchmark known as company action level risk based capital (the “Current Benchmark”). If the
NAIC were to modify its requirements so that a Company Action Level RBC Plan was to be
required if the Reinsurer’s total adjusted capital were to fall below a level equal to 120% of
the Current Benchmark, a 20% adjustment, then the RBC Trigger under Section 3 of Article VI of
this Agreement would likewise be increased by 20% to 180% of the Current Benchmark
(effectively, 150% of the new Company Action Level Risk Based Capital).

	 
	3.	 	The current regulations promulgated by the NAIC require the filing of a Company Action
Level RBC Plan. The current regulations establish the topics and projections to be
addressed in such plan, as well as the regulatory actions that may be taken in connection
with such plan. If the NAIC modifies or replaces the regulations, and establishes new
criteria and measurement methodologies for the assessment of insurer solvency risks, then
the parties would agree to work in good faith to set the RBC Trigger at a level equal to
150% of the standard for filing plans and reviewing financial progress substantially
similar to the current Company Action Level RBC Plan.





B-1









 











EXHIBIT C




TAX ELECTION





	A.	 	The parties will make a joint election, in accordance with Treas. Reg. 1.848-2(g)(8) (the
“Regulation”), issued December 31, 1992, under Section 848 of the Internal Revenue
Code of 1986 (the “Code”), and:







	 	(1)	 	the party with the net positive consideration under this Agreement will
capitalize specified policy acquisition expenses with respect to this Agreement for
such taxable year without regard to the general deductions limitations of Section
848(c)(1) of the Code;

	 
	 	(2)	 	the election will take effect as of the Effective Time and will remain in
effect for all subsequent years that this Agreement remains in effect; and

	 
	 	(3)	 	each party shall attach a schedule to its federal income tax return for its
first taxable year ending after the election becomes effective that identifies the
agreement (including this Agreement) for which joint elections have been made under the
Regulation.







	B.	 	Pursuant to this joint election:







	 	(1)	 	each party will exchange information pertaining to the amount of net
consideration under this Agreement to assure consistency or as may otherwise be
required by the Internal Revenue Service;

	 
	 	(2)	 	the Reinsurer will submit its calculation of the “net consideration”, as
defined under Treas. Reg. 1.848-2(f), to the Company not later than May 1 for each and
every tax year for which this Agreement is in effect;

	 
	 	(3)	 	the Company may challenge such calculation within ten (10) working days of
receipt of the Reinsurer’s calculation; and

	 
	 	(4)	 	the parties will act in good faith to reach agreement as to the correct amount
of net consideration whenever there is disagreement as to the amount of net
consideration, as determined under Treas. Reg. 1.848-2(f).







	C.	 	The Company and the Reinsurer represent and warrant that they are subject to U.S. taxation
under Subchapter L of Chapter 1 of the Code.





C-1









 











Agreed and Accepted:



	 	 	 	 	 
	CONTINENTAL ASSURANCE COMPANY

 	 	 
	 
	By:  	/s/ Lawrence J. Boysen	 	 
	 	Name:  	Lawrence J. Boysen	 	 
	 	Title:  	Senior Vice President & Corporate Controller	 	 
	 



	 	 	 	 	 
	SWISS RE LIFE & HEALTH AMERICA INC.

 	 	 
	 
	By:  	/s/ W. Weldon Wilson	 	 
	 	Name:  	W. Weldon Wilson	 	 
	 	Title:  	Chief Executive Officer	 	 



C-2









 






	 	 	 	 	 



SCHEDULE A



Alan C. Smith — Agency Deferred Compensation Agreement



David S. Jeranian — Agency Deferred Compensation Agreement



Edward Schwarzer — Agency Deferred Compensation Agreement



Earnest T. Uyetake — Agency Deferred Compensation Agreement



Frank J. Crisona — Agency Deferred Compensation Agreement



Fred Sprague — Agency Deferred Compensation Agreement



George S. Ichikawa — Agency Deferred Compensation Agreement



Judd S. Sloane — Agency Deferred Compensation Agreement



L. Terry Lazarus — Agency Deferred Compensation Agreement



Morton Kleiner — Agency Deferred Compensation Agreement



Nancy M. Watt — Agency Deferred Compensation Agreement



Peter B. Diefendorf — Agency Deferred Compensation Agreement



Richard C. Wolff — Agency Deferred Compensation Agreement



Richard M. Rully — Agency Deferred Compensation Agreement



Robert E. Segal — Agency Deferred Compensation Agreement



Robert F. Denny — Agency Deferred Compensation Agreement



Robert K. Inouye — Agency Deferred Compensation Agreement



Stephen C. Harmelin — Agency Deferred Compensation Agreement



Terrence F. Sloane — Agency Deferred Compensation Agreement



Wendell H. Hughes — Agency Deferred Compensation Agreement



William P. Georgenton — Agency Deferred Compensation Agreement



IMO, LSR and MGA bonus program summaries are attached as part of Schedule A.




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SCHEDULE A




TO: CNA Managing General Agents (MGA’s)




From: Life Marketing



In response to feedback from our Managing General Agents we have completely revamped the 2004 CNA
MGA Bonus Plan having eliminated the bonus pool and returning to a simplified traditional pay-out
structure that is much more measurable and predictable. The new structure provides for attractive
bonuses of 28% - 43% retroactive to dollar one.



After you have reviewed and compared the 2004 CNA MGA Bonus Plan I am confident that you will be
pleased with its structure and earning potential for which it provides.



Should you have any questions, please feel free to contact John Swinger 630-719-5961
or myself.




Sincerely,









Ken Keating

VP Life Brokerage




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SCHEDULE A




	 	 	 
	Date:

	 	December 18, 2003
	To:

	 	All IMOs
	Subject:

	 	IMO Bonus Schedule Unchanged in 2004





CNA is maintaining its strong IMO Bonus schedule in 2004, without any modification.



The schedule is as follows:




	 	 	 	 	 
	Annualized Premium	 	Bonus Percentage	 
	 
	 	 	 	 
	$2,000,000
	 	 	10.0%	 
	3,000,000
	 	 	12.5%	 
	5,000,000
	 	 	15.0%	 
	 
	 	 	 	 
	7,500,000
	 	 	17.5%	 
	10,000,000
	 	 	20.0%	 
	12,500,000
	 	 	22.5%	 
	 
	 	 	 	 
	15,000,000
	 	 	25.0%	 
	17,500,000
	 	 	27.5%	 
	20,000,000
	 	 	30.0%	 





Your total annualized premium at year-end will determine your final bonus level, but CNA pays
bonuses on an as-earned basis throughout the year. All bonus percentages are retroactive to first
dollar.



We appreciate the great business you’ve done with CNA in 2003 and look forward to another strong
year in 2004. If you have any questions about the IMO bonus, please contact Julie Hince,
864-363-5402, Amy Whitehead, 720-201-1867, or me.




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SCHEDULE A




* PLEASE REVIEW AND SIGN *




I. INTRODUCTION



This document describes the compensation plan for the Life Sales Representative (LSR) of the CNA
Life Sales Office (LSO) effective January 1, 2004. This Compensation Plan is not a contract and
may be changed by CNA at any time without notice. The parameters used to calculate incentive
compensation and the requirements for earning each component reflect the emphasis and importance
CNA places on underlying new sales and current directives. These parameters and requirements are
subject to change as business conditions and CNA’s emphasis change. CNA Life management will
define any aspects of this plan that are or become subject to interpretation.



This document gives an overview of the plan with a brief explanation of the organization of the
Life Sales Office. Included in this overview is an explanation of the general expectations of the
Life Sales Representative.



This document explains the LSR plan, detailing each plan component. These components include all
of the elements of the direct compensation package including personal production. This document
also describes the administrative provisions of the plan including performance expectations,
restrictions and Fringe Benefit salary calculation.



IMPORTANT NOTE:

CNA reserves the right to change or make exceptions to this document and its personnel policies,
procedures and benefits, including those for retirees, at any time without notice. Neither this
document nor company procedures nor communications are intended to be interpreted as a promise or
guarantee of future or continued employment or as stating provisions and terms of employment. CNA
and CNA employees recognize their mutual right to end their employment relationship at any time and
acknowledge that such relationship is one of employment at will. While some of CNA’s contractual
employee benefit plans are discussed in this document, it is important to remember that all rights
and benefits under them are governed by legal documents, which are available in Employee
Benefits-Home Office. Except with respect to employment at will, the policies and benefits
described in this document may vary from state to state to conform to state law. No representative
of CNA has authority to make any agreement contrary to the provisions of this note.




II. CNA LIFE SALES OFFICES — OVERVIEW



The primary purpose of the Life Sales Office is to grow, promote and develop a predictable and
dependable flow of profitable premium revenue for Life Operations. Life Sales Office personnel
will accomplish this through agent recruitment, appointment, and sales development. LSOs are
staffed by a Manager (Regional Vice President), Sales & Marketing Coordinators, Estate & Business
Planners and Life Sales Representatives.




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LSRs are charged with developing new business by cultivating relationships with CNA
Property/Liability agencies, independent agencies, life agents, and financial planners to generate
sources of new premium. These agents are contracted with CNA as Producers or General Agents and
are paid commissions. Each LSR also is contracted with CNA as a Producer and may generate personal
sales as determined appropriate by the LSO Manager based on corporate direction. LSR personal
production earns overrides as well as commissions.




III.     LSR PLAN




          A. OBJECTIVES




This plan consists of incentives that are designed to motivate and compensate Life Sales
Representatives for the following activities:




	•	 	Generating new business from agents in the CNA Property/Liability agencies and other
sources

	 
	•	 	Encouraging renewal business

	 
	•	 	Building and developing relationships with administrative staff, branch staff, and agencies






          B. LSR PLAN COMPONENTS




This compensation plan is comprised of the following components:




	•	 	LSR Production Override

	 
	•	 	LSR Production Bonus — Paid First Year Premium






IV.     LSR Production Overrides





LSR Production Overrides are intended to promote new sales of CNA’s products from a variety
of sources. First year overrides are directly related to the amount of new business
developed and are calculated as a percentage of first year paid premium. Renewal overrides
are directly related to the amount of continuing business and are calculated as a percentage
of renewal paid premium. First year override percentages are determined by the product sold
and distribution structure. Please note that some business written under an Associate MGA
schedule may not pay an override.



V.     LSR Production Bonus





The calculation of the LSR Production Bonus is predicated on two categories of premiums.
Premiums for a production year from Eligible products (Eligible Premiums) are used to
determine the thresholds in the chart below. The percentage associated with each threshold
is then applied to premiums for the same production year from Bonusable products (Bonusable
Premiums) to calculate the bonus. Life business written under GA+10, MaxPro +10, and GA+15
schedules is excluded from Eligible and Bonusable products. An incentive equal to a
percentage of Bonusable first year paid premiums will be paid based on the




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	 	 	following chart:





LSO Total Production Run-Rate




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LSR’s FY Paid Premium*	 	 	$0-$24.9	 	 	$25-$29.9	 	 	$30-$34.9	 	 	$35+	 
	$0
	 	-             $200,000	 	 	0%	 	 	0%	 	 	0%	 	 	0%	 
	$200,000
	 	-             $249,000	 	 	1%	 	 	2%	 	 	3%	 	 	4%	 
	$250,000
	 	-             $299,999	 	 	2%	 	 	3%	 	 	4%	 	 	5%	 
	$300,000
	 	-             $349,999	 	 	3%	 	 	4%	 	 	5%	 	 	6%	 
	$350,000
	 	-             $399,999	 	 	5%	 	 	6%	 	 	7%	 	 	8%	 
	$400,000
	 	-             $449,999	 	 	6%	 	 	7%	 	 	8%	 	 	10%	 
	$450,000
	 	-             $499,999	 	 	7%	 	 	8%	 	 	10%	 	 	11%	 
	$500,000
	 	-             $549,999	 	 	8%	 	 	9%	 	 	11%	 	 	12%	 
	$550,000
	 	-             $599,999	 	 	9%	 	 	10%	 	 	12%	 	 	13%	 
	$600,000
	 	-             $999,999	 	 	10%	 	 	11%	 	 	13%	 	 	14%	 
	$1,000,000
	 	+	 	 	11%	 	 	12%	 	 	14%	 	 	15%	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 





*Subject to exclusions






	VI.	 	PERSONAL PRODUCTION





A. Commission Payments





Producer commissions for personal production is paid through CNA’s commission system and is
administered apart from all other compensation provisions described herein.





Although the LSR’s primary function is development of brokerage business, CNA does provide
for the payment of commissions on a Producer commission schedule to the LSR for personally
produced business. Personal production is a privilege granted by CNA and will only be
permitted when it does not interfere with the LSR’s responsibilities as specified in the
business plans and this document.





B. Bonus Payments




Any debit balance an LSR may owe will be first deducted from any bonus amounts payable to
the LSR.





By accepting advanced bonus payments, the LSR agrees to pay back such bonus payments to the
extent to which they do not meet the production goal(s) that such bonus was paid upon and
advanced. Regardless of year to date production, an LSR’s cessation of employment with CNA
for any reason whatsoever prior to the last day of a calendar year, makes the LSR ineligible
for any bonus. If the LSR terminates before the end of a calendar year, all bonus amounts
advanced in excess of earned per the bonus schedule are to be re-paid to CNA immediately.




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	VII.	 	ADMINISTRATION






	 	A.	 	CALCULATION AND PAYMENT PROCEDURES





          LSR Production Overrides are calculated and paid on a biweekly basis. These biweekly
calculations reflect the production results for the production/processing period used by CNA’s
corporate systems.




          The LSR Production Bonus advance is calculated quarterly. LSRs who achieve YTD pro rata
production of $300,000 of Eligible first year paid life premium will be paid an advance, subject to
the discretion of management. The advance will be 1% of Bonusable first year paid life premium.
YTD pro rata requirements for the first three-quarters are $75,000/$150,000/$225,000 of Eligible
first year paid life premium. Once an LSR has reached a total actual production level of $300,000,
the bonus percentage shall increase to 3%.




          Production Bonus advances will be subject to recapture:





	•	 	For failure to meet the production level upon which they were based, or
	 
	•	 	Upon termination prior to year-end, or
	 
	• 	 	For unrecovered chargebacks (overpayments)




If questions arise, the Vice President of LSO Distribution along with Regional Vice President will
make a determination whether to continue the advance and at what percentage rate.





Production Overrides are paid after the close of each biweekly production period through the
CNA payroll system.




	 	B.	 	FIRST YEAR SUBSIDY






New LSRs may be eligible for subsidy during their first year. The subsidy payments will be
based on a subsidy schedule selected by the LSO Manager when the LSR is hired. First year LSR’s
earn the same overrides as other LSRs.





First year LSRs receiving a subsidy are not eligible for the LSR Production Bonus. First
year LSRs may opt out of remaining subsidy payments to become eligible for the Production
Bonus on a prospective basis.





The LSR and LSOM must sign the Life Sales Representative Subsidy Agreement prior to any
subsidy payments being made. Such agreement details the terms of the subsidy. No subsidy
is to be paid without such agreement being fully executed.




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	 	C.	 	JOB GRADE AND FUNCTIONAL JOB CODE






The entry-level LSR position is a job grade 220. The Functional Job Code is IX51005. The
Sr. LSR position is a job grade 240. The Functional Job Code is IX51006.





	 	D.	 	PERFORMANCE EXPECTATIONS





          Performance expectations relating to production objectives, as specified in a business plan
and other management objectives are established annually for each LSR. Performance expectations
include but are not limited to a minimum production standard. This minimum production level will
be monitored on a monthly basis.





Each LSR shall annually create a business plan for the upcoming calendar year. The business
plan is to outline the LSR’s goals to contribute to the overall success of the business plan
and goals of the Life Sales Office, the success of the LSO Distribution channel, and CNA
Life Operations. The business plan shall be submitted to the LSOM by February 1 of each
year for approval. The LSOM shall provide a copy of the approved LSR business plan to the
Vice President of LSO Distribution by March 1. The Vice President of LSO Distribution has
the sole authority to accept or reject for re-draft any LSR business plan. LSR’s are not
eligible for bonus without having timely submitted a business plan to their LSOM and having
an approved business plan on file with the Vice President of LSO Distribution no later than
May 1.





If the LSR’s performance is determined to be unsatisfactory, in lieu of other action, the
LSOM may establish a probationary corrective action plan which specifies terms of probation,
reasons for probation, corrective actions and alternative actions. The LSR may be
terminated at the end of the probationary period if terms of the corrective action plan are
not met.





Regardless of any provisions in this document, there may be situations where, at CNA’s
discretion, neither the Performance Improvement Program nor the probationary procedures
would be appropriate and, thus, need not be utilized before immediately terminating an
employee. Such situations may be determined by management, without notice, on an individual
basis.





	 	E.	 	FRINGE BENEFITS






Each LSR will be eligible to participate in the company’s pension, savings, health, group
life and disability benefit programs described in Benefits at CNA.





Benefits related to salary are determined by using the average total compensation paid in
the immediate prior two calendar years.





New employees with less than two years earning history will usually have their coverage and
costs determined by the level of any initial guarantee and/or first year subsidy schedule.




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Benefit levels and any associated payroll deductions for the following contributory and
non-contributory benefits are based on the annual benefit salary:



-     Contributory Life

-     Non-Contributory Life

-     Short-Term Disability Benefits

-     Long Term Disability Premiums

-     Long Term Disability Benefits





Actual Earnings are used to determine contributions to the CNA Savings Plan and the CNA
Retirement Plan.





Benefits requiring flat rate premiums are determined by the amount of coverage elected.





This benefit salary is effective each March 1st and the benefits and costs remain
constant for one full year.





	 	F.	 	TERMINATION OF EMPLOYMENT






In the event of termination, the LSR is entitled to receive production overrides and payment
of incentives for the production period during which the termination occurred plus
production overrides and payment of incentives for the next production period. In the event
of termination due to retirement or death, production overrides and incentive payments will
be paid as above and for an additional two production periods.





	 	Note:	 	This is not applicable to vested commissions for an LSR’s personal production,
provided all terms of the agent contract are met.






Any debit balance the LSR has at time of termination is payable immediately to CNA. Such
debit balance will be deducted until paid in full from any future payments of any kind due
to the LSR. The LSR acknowledges that debit balances are subject to collection if not paid
when requested/upon termination of employment. If an LSR terminates from CNA and seeks
re-appointment as a representative of CNA, such re-appointment is contingent upon the
outstanding debit having been paid in full.





Any customer information in which the LSR has come into contact with as an LSR will remain
strictly confidential and may not be removed from CNA nor utilized by parties for the
benefit of anyone other than CNA. CNA will not re-contract agents or agencies that were
previously in an LSR’s hierarchy for six months following the LSR’s termination.





	 	G.	 	RESTRICTION ON OTHER PAYMENTS






The total compensation package for Life Sales Representatives is as described in this
document.




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CNA recognizes the need to provide assistance to agents for sales involving non-CNA
products. However, CNA requires the first right of refusal on all LSR production. CNA Life
should be considered as the primary market in all situations where CNA maintains a
competitive position.





Market access is limited to Financial Brokerage, Inc., unless authorized by the Vice
President of LSO Distribution in advance and in writing. On any case placed through
Financial Brokerage, Inc., any and all compensation from such outplaced case is the
responsibility of the carrier providing the insurance that was successfully obtained.
Compensation for such outplaced case will be handled in whatever manner the providing
carrier uses, will not be included in the CNA payroll system (as such earnings are not
derived from employment with CNA nor subject to CNA fringe benefits or tax treatment). It
is probable that such compensation will be paid by the providing carrier and result in a
1099 to the LSR from that carrier for any portions of compensation due the LSR.





Failure to comply with these provisions may result in immediate termination of the LSR, at
CNA’s discretion.





	VIII.	 	ACKNOWLEDGEMENT





	 	 	 
	Life Sales Representative
	 
	 	 
	          Print Name:

	 	 

	 
	 	 
	          Signature:

	 	 

	 
	 	 
	          Date:

	 	 

	 
	 	 
	Regional Vice President, Life Sales Office
	 
	 	 
	          Print Name:

	 	 

	 
	 	 
	          Signature:

	 	 

	 
	 	 
	          Date:

	 	 







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	 	December 2, 2003






2004 CNA MGA BONUS PLAN



The 2004 CNA Bonus Plan for MGAs is simple, predictable and very competitive. It’s a
straightforward bonus structure based on paid life premium.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 	Eligible First-Year Paid Premium	 	 	 	Bonus
Percentage	 
	 	 	 	 	 	 
	 	$	0	 	 	to
	 	$	249,999	 	 	 	 	0.0	%	 
	 	 	 	 	 	 
	 	 	250,000	 	 	to
	 	 	499,999	 	 	 	 	28.0	%	 
	 	 	 	 	 	 
	 	 	500,000	 	 	to
	 	 	749,999	 	 	 	 	30.0	%	 
	 	 	 	 	 	 
	 	 	750,000	 	 	to
	 	 	999,999	 	 	 	 	32.0	%	 
	 	 	 	 	 	 
	 	 	1,000,000	 	 	to
	 	 	1,499,999	 	 	 	 	34.0	%	 
	 	 	 	 	 	 
	 	 	1,500,000	 	 	to
	 	 	1,999,999	 	 	 	 	34.5	%	 
	 	 	 	 	 	 
	 	 	2,000,000	 	 	to
	 	 	2,499,999	 	 	 	 	35.0	%	 
	 	 	 	 	 	 
	 	 	2,500,000	 	 	to
	 	 	2,999,999	 	 	 	 	35.5	%	 
	 	 	 	 	 	 
	 	 	3,000,000	 	 	to
	 	 	3,499,999	 	 	 	 	36.0	%	 
	 	 	 	 	 	 
	 	 	3,500,000	 	 	to
	 	 	3,999,999	 	 	 	 	36.5	%	 
	 	 	 	 	 	 
	 	 	4,000,000	 	 	to
	 	 	4,499,999	 	 	 	 	37.0	%	 
	 	 	 	 	 	 
	 	 	4,500,000	 	 	to
	 	 	4,999,999	 	 	 	 	37.5	%	 
	 	 	 	 	 	 
	 	 	5,000,000	 	 	to
	 	 	7,499,999	 	 	 	 	38.0	%	 
	 	 	 	 	 	 
	 	 	7,500,000	 	 	to
	 	 	9,999,999	 	 	 	 	39.0	%	 
	 	 	 	 	 	 
	 	 	10,000,000	 	 	to
	 	 	12,499,999	 	 	 	 	40.0	%	 
	 	 	 	 	 	 
	 	 	12,500,000	 	 	to
	 	 	14,999,999	 	 	 	 	41.0	%	 
	 	 	 	 	 	 
	 	 	15,000,000	 	 	to
	 	 	19,999,999	 	 	 	 	42.0	%	 
	 	 	 	 	 	 
	 	 	20,000,000	 	 	 
	 	 	+	 	 	 	 	43.0	%	 
	 	 	 	 	 	 





Prorated bonuses for new MGAs

For MGAs who are new to CNA, we will prorate the initial qualifying level based on contract date.
We will pay a 28% bonus to any MGA contracted during the second quarter of 2004 who produces at 75%
of the bonus threshold level or $187,500. MGAs contracted in the third and fourth quarters who
produce 50% or $125,000 will also earn a 28% bonus. Percentages higher than 28% will only be




SA-11









 








paid when actual production reaches $500,000 or more.



Simplified program

Our previous bonus plan was comprised of multiple bonuses. This one is much simpler, and it puts
the focus on attracting and rewarding new production. The bonuses we’re discontinuing as of
12/31/03 include: the MGA Quarterly App Count (Apptivity) Bonus, the MGA Renewal App Count
(Apptivity) Bonus, and the Partnership Plus Program.



Because we now have one big bonus program, instead of several smaller ones, we’re able to make the
bonus payouts very attractive.



Placement rates

Policy placement rates will not be an official measurement for the bonus program; however, we will
closely monitor placement rates because they have a major impact on profitability. If an MGA has
poor placement rates, we will take necessary action, ranging from adjusting the bonus pay-out to
termination of the MGA contract.



Monthly advances for consistent, high production

For MGAs with a strong production track record, we will advance bonus payments monthly. The
advance rate will be in line with your general level of production. The rate may be adjusted up or
down through the year if changes warrant it.



Caveats

CNA reserves the right to amend or eliminate this program at any time. Final interpretation of the
terms of this bonus program is the prerogative of CNA sales management.





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SCHEDULE B




THIRD PARTY REINSURANCE AGREEMENTS




CAC Ceded Reinsurance Agreements:




	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	2.

	 	 	Automatic Non-Bulk Y.R.T. Non-Refund Agreement between CAC and Allianz Life Insurance Company
of North America effective May 01, 1987 [Terminated for new business]	 
	 	3.

	 	 	Automatic Non-Bulk Coinsurance Non-Refund Agreement between CAC and Allianz Life Insurance
Company of North America effective June 01, 1987 [Terminated for new business]	 
	 	11.

	 	 	CAC Reinsurance Agreement between CAC and American National Insurance Company effective
November 01, 1963	 
	 	14.

	 	 	Automatic Coinsurance Agreement between CAC and Phoenix Home Life Mutual Insurance Company
effective July 20, 1998 [Terminated for new business] [This contract was novated to ERC Life
Reinsurance Corporation effective January 01, 2000. Scottish Re Group Limited acquired 95% of
the outstanding capital stock of ERC Life Reinsurance Corporation on December 22, 2003.]	 
	 	17.

	 	 	CAC Reinsurance Agreement between CAC and American United Life Insurance Company of
Indianapolis, IN effective June 01, 1970 [This business was 100% reinsured to Employers
Reassurance Corporation]	 
	 	18.

	 	 	Automatic Reinsurance Agreement between CAC and American United Life Insurance Company of
Indianapolis, IN effective June 01, 1978 [Terminated for new business] [This business was 100%
reinsured to Employers Reassurance Corporation]	 
	 	21.

	 	 	Yearly Renewable Term Agreement between CAC and American United Life Insurance Company of
Indianapolis, IN effective August 21, 1995 [This business was 100% reinsured to Employers
Reassurance Corporation]	 
	 	26.

	 	 	Automatic Reinsurance Agreement between CAC and American United Life Insurance Company of
Indianapolis, IN effective July 20, 1998 [This business was 100% reinsured to Employers
Reassurance Corporation]	 
	 	30.

	 	 	Reinsurance Agreement between CAC and Business Men’s Assurance Company of America effective
November 01, 1954 [Generali USA Life Reassurance Company now administers this business]	 
	 	31.

	 	 	Reinsurance Agreement between CAC and Business Men’s Assurance Company of America effective
August 28, 1980 [Generali USA Life Reassurance Company now administers this business]	 
	 	33.

	 	 	Reinsurance Agreement between CAC and Business Men’s Assurance Company of America effective
August 21, 1995 [Generali USA Life Reassurance Company now administers this business]	 
	 	34.

	 	 	Reinsurance Agreement between CAC and Cologne Life Insurance Company effective April 01, 1968
[Terminated for new business]	 
	 	35.

	 	 	Automatic Reinsurance Agreement between CAC and Cologne Life Insurance Company effective
October 01, 1987 [Terminated for new business]	 
	 	36.

	 	 	Reinsurance Agreement between CAC and Cologne Life Insurance Company effective January 01, 1988	 
	 	37.

	 	 	Reinsurance Agreement between CAC and Crown Life Insurance Company
effective July 01, 1977 [This contract was novated to The Canada
Life Assurance Company effective January 01, 1999]	 
	 





SB-1









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	38.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Crown Life
Insurance Company effective April 01, 1982 [This contract was
novated to The Canada Life Assurance Company effective January 01,
1999]	 
	 	39.

	 	 	Automatic Reinsurance Agreement between CAC and Crown Life
Insurance Company effective January 01, 1983 [This contract was
novated to The Canada Life Assurance Company effective January 01,
1999]	 
	 	40.

	 	 	Automatic Coinsurance Reinsurance Agreement between CAC and Crown
Life Insurance Company effective September 01, 1983 [This contract
was novated to The Canada Life Assurance Company effective January
01, 1999]	 
	 	41.

	 	 	Automatic YRT Reinsurance Agreement between CAC and Crown Life
Insurance Company effective September 01, 1987 [Terminated for new
business] [This contract was novated to The Canada Life Assurance
Company effective January 01, 1999]	 
	 	43.

	 	 	Automatic Coinsurance Reinsurance Agreement between CAC and Crown
Life Insurance Company effective October 01, 1987 [Terminated for
new business] [This contract was novated to The Canada Life
Assurance Company effective January 01, 1999]	 
	 	45.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Crown Life
Insurance Company effective January 01, 1989 [This contract was
novated to The Canada Life Assurance Company effective January 01,
1999]	 
	 	46.

	 	 	Automatic Coinsurance Reinsurance Agreement between CAC and
Employers Reassurance Corporation effective October 05, 1995	 
	 	55.

	 	 	Automatic Reinsurance Agreement between CAC and Employers
Reassurance Corporation effective July 20, 1998	 
	 	59.

	 	 	Automatic/Facultative Agreement between CAC and Equitable Life
Assurance Society of the United States effective January 01, 1977	 
	 	60.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Equitable Life
Assurance Society of the United States effective April 01, 1982	 
	 	61.

	 	 	Facultative Reinsurance Agreement between CAC and Equitable Life
Assurance Society of the United States effective January 01, 1984	 
	 	63.

	 	 	Facultative Reinsurance Agreement between CAC and Frankona America
Life Reassurance Company effective January 01, 1979 [The name of
Frankona America Life Reassurance Company changed to ERC Life
Reinsurance Corporation effective February 02, 1996. Scottish Re
Group Limited acquired 95% of the outstanding capital stock of ERC
Life Reinsurance Corporation on December 22, 2003.]	 
	 	67.

	 	 	Automatic YRT Self-Administered Reinsurance Agreement between CAC
and Frankona America Life Reassurance Company effective August 21,
1995 [The name of Frankona America Life Reassurance Company changed
to ERC Life Reinsurance Corporation effective February 02, 1996.
Scottish Re Group Limited acquired 95% of the outstanding capital
stock of ERC Life Reinsurance Corporation on December 22, 2003.]	 
	 	70.

	 	 	Automatic Coinsurance Agreement between CAC and General American
Life Insurance Company effective September 01, 1987 [This contract
was novated to Saint Louis Reinsurance Company effective January
01, 1994. The name of Saint Louis Reinsurance Company was later
changed to RGA Reinsurance Company.]	 
	 	71.

	 	 	Automatic Reinsurance Agreement between CAC and General American
Life Insurance Company effective September 01, 1987 [This contract
was novated to Saint Louis Reinsurance Company effective January
01, 1994. The name of Saint Louis Reinsurance Company was later
changed to RGA Reinsurance Company.]	 
	 	73.

	 	 	Automatic Agreement between CAC and General American Life Insurance
Company effective July 05, 1991 [This contract was novated to Saint
Louis Reinsurance Company effective January 01, 1994. The name of
Saint Louis Reinsurance Company was later changed to RGA
Reinsurance Company.]	 
	 	75.

	 	 	Automatic Reinsurance Agreement between CAC and Gerling Global Life
Insurance Company (U.S. Branch) effective May 01, 1998 [Gerling
Global Life Insurance Company (U.S. Branch) changed its name to
Revios Reinsurance Canada Ltd. (U.S. Branch) effective October 13,
2003]	 
	 





SB-2









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	76.

	 	 	Automatic Reinsurance Agreement between CAC and Gerling Global Life
Reinsurance Company effective July 20, 1998 [Gerling Global Life
Reinsurance Company changed its name to Revios Reinsurance U.S.
Inc. effective October 13, 2003]	 
	 	78.

	 	 	Facultative Reinsurance Agreement between CAC and Hamburg
International Reinsurance Company effective November 01, 1981 [This
contract was novated to HIR Life of America Reassurance Company
effective January 01, 1989]	 
	 	79.

	 	 	Reinsurance Agreement between CAC and HIR Life of America
Reassurance Company effective June 01, 1989	 
	 	80.

	 	 	Automatic Coinsurance Agreement between CAC and Hudson Life
Reassurance Corporation effective January 01, 1982 [This contract
was novated to Cologne Life Reinsurance Company effective January
01, 1997]	 
	 	81.

	 	 	Automatic Coinsurance Agreement between CAC and Hudson Life
Reassurance Corporation effective January 01, 1982 [This contract
was novated to Cologne Life Reinsurance Company effective January
01, 1997]	 
	 	82.

	 	 	Automatic Reinsurance Agreement between CAC and Hudson Life
Reassurance Corporation effective September 01, 1983 [This contract
was novated to Cologne Life Reinsurance Company effective January
01, 1997]	 
	 	83.

	 	 	Automatic Monthly Renewable Term Reinsurance Agreement Number 2053
between CAC and Hartford International Life Reassurance Company
effective November 01, 1984 [This contract was novated to Cologne
Life Reinsurance Company effective January 01, 1997]	 
	 	88.

	 	 	Reinsurance Agreement #6167-1 between CAC and Life Reassurance
Corporation of America effective August 21, 1995 [Life Reassurance
Corporation of America changed its name to Swiss Re Life & Health
America Inc.]	 
	 	89.

	 	 	Reinsurance Agreement #6186-1 between CAC and Life Reassurance
Corporation of America effective October 06, 1995 [Life Reassurance
Corporation of America changed its name to Swiss Re Life & Health
America Inc.]	 
	 	97.

	 	 	Automatic Reinsurance Agreement between CAC and Life Reassurance
Corporation of America effective May 01, 1998 [Life Reassurance
Corporation of America changed its name to Swiss Re Life & Health
America Inc.]	 
	 	99.

	 	 	Automatic Reinsurance Agreement between CAC and Life Reassurance
Corporation of America effective July 20, 1998 [Life Reassurance
Corporation of America changed its name to Swiss Re Life & Health
America Inc.]	 
	 	104.

	 	 	Facultative Reinsurance Agreement between CAC and Life Reassurance
Corporation of America effective November 15, 1967 [Life
Reassurance Corporation of America changed its name to Swiss Re
Life & Health America Inc.]	 
	 	105.

	 	 	Automatic Reinsurance Agreement between CAC and Manufacturers Life
Insurance Company effective April 01, 1981 [Terminated for new
business]	 
	 	106.

	 	 	Automatic Coinsurance Reinsurance Agreement between CAC and
Manufacturers Life Insurance Company effective August 15, 1981
[Terminated for new business]	 
	 	107.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Manufacturers
Life Insurance Company effective April 01, 1982 [Terminated for new
business]	 
	 	107-A.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Manufacturers
Life Insurance Company effective January 01, 1989	 
	 	108.

	 	 	Facultative Reinsurance Agreement between CAC and Manufacturers
Life Insurance Company effective August 01, 1982 [Terminated for
new business]	 
	 	109.

	 	 	Facultative Yrt Reinsurance Agreement between CAC and Manufacturers
Life Insurance Company effective November 01, 1984	 
	 





SB-3









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	110.

	 	 	Reinsurance Agreement between CAC and Manufacturers Life Insurance
Company effective February 01, 1985	 
	 	111.

	 	 	Facultative Excess Reinsurance Agreement between CAC and
Manufacturers Life Insurance Company effective July 01, 1988	 
	 	113.

	 	 	Reinsurance Agreement between CAC and Manufacturers Life Insurance
Company effective October 01, 1990	 
	 	115.

	 	 	Automatic Reinsurance Agreement between CAC and Manulife
Reinsurance Corporation (USA) effective May 01, 1998	 
	 	118.

	 	 	Facultative Reinsurance Agreement between CAC and Munich American
Reassurance Company effective February 05, 1975	 
	 	119.

	 	 	Facultative Reinsurance Agreement on a Coinsurance Basis between
CAC and Munich American Reassurance Company effective January 01,
1981	 
	 	120.

	 	 	Automatic Reinsurance Agreement on a Coinsurance Basis between CAC
and Munich American Reassurance Company effective March 01, 1981	 
	 	121.

	 	 	Automatic Reinsurance Agreement between CAC and Munich American
Reassurance Company effective April 01, 1982 [Terminated for new
business]	 
	 	122.

	 	 	Automatic Reinsurance Agreement between CAC and Munich American
Reassurance Company effective January 01, 1987 [Terminated for new
business]	 
	 	123.

	 	 	Automatic Reinsurance Agreement between CAC and Munich American
Reassurance Company effective May 01, 1987 [Terminated for new
business]	 
	 	125.

	 	 	Automatic Reinsurance Agreement between CAC and Munich American
Reassurance Company effective July 05, 1991	 
	 	126.

	 	 	Automatic Reinsurance Agreement between CAC and Munich American
Reassurance Company effective September 01, 1991	 
	 	129(b).

	 	 	Automatic Reinsurance Agreement between CAC and Munich American
Reassurance Company effective August 21, 1995	 
	 	135.

	 	 	Non-Refund Account Reinsurance Agreement between CAC and North
American Life and Casualty Company effective May 01, 1974
[Terminated for new business] [North American Life and Casualty
Company changed its name to Allianz Life Insurance Company of
North America]	 
	 	136.

	 	 	Facultative Reinsurance Agreement between CAC and North American
Reassurance Company effective January 01, 1964 [North American
Reassurance Company changed its name to Swiss Re Life & Health
America Inc.]	 
	 	137.

	 	 	Facultative Reinsurance Agreement between CAC and North American
Reassurance Company effective November 01, 1963 [North American
Reassurance Company changed its name to Swiss Re Life & Health
America Inc.]	 
	 	138.

	 	 	Facultative Reinsurance Agreement between CAC and Security Benefit
Life Insurance Company effective January 01, 1964 [This treaty was
novated to North American Reassurance Company effective July 1,
1991. North American Reassurance Company changed its name to Swiss
Re Life & Health America Inc.]	 
	 	139(a).

	 	 	Automatic Coinsurance Agreement between CAC and North American
Reassurance Company effective August 01, 1977 [North American
Reassurance Company changed its name to Swiss Re Life & Health
America Inc.]	 
	 	139(b).

	 	 	Facultative Coinsurance Agreement between CAC and North American Reassurance Company effective
August 01, 1979 [North American Reassurance Company changed its name to Swiss Re Life & Health
America Inc.]	 
	 





SB-4









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	140.

	 	 	Facultative Reinsurance Agreement between CAC and North American Reassurance Company effective
September 01, 1979 [Terminated for new business] [North American Reassurance Company changed its
name to Swiss Re Life & Health America Inc.]	 
	 	143.

	 	 	Facultative Obligatory Agreement between CAC and NRG America Life Reassurance Corporation of
Wilmington, Delaware effective June 01, 1981	 
	 	144.

	 	 	Facultative Reinsurance Agreement between CAC and Occidental Life Insurance Company of California
effective January 01, 1972 [This contract was novated to AUSA Life Insurance Company effective
January 01, 2001. AUSA Life Insurance Company later changed its name to Transamerica Financial Life
Insurance Company]	 
	 	145.

	 	 	Life, Disability and Accidental Death Automatic Reinsurance Agreement between CAC and Occidental
Life Insurance Company of California effective July 01, 1977 [This contract was novated to AUSA
Life Insurance Company effective January 01, 2001. AUSA Life Insurance Company later changed its
name to Transamerica Financial Life Insurance Company]	 
	 	146.

	 	 	Facultative Reinsurance Agreement between CAC and Optimum Re Insurance Company effective January
01, 1979	 
	 	147.

	 	 	Universal Life Automatic Reinsurance Agreement between CAC and Optimum Re Insurance Company
effective January 01, 1986	 
	 	148.

	 	 	Universal Life Automatic Coinsurance Agreement between CAC and Optimum Re Insurance Company
effective January 01, 1986 [Terminated for new business]	 
	 	153.

	 	 	Automatic Reinsurance Agreement No. 2082 between CAC and Phoenix Home Life Mutual Insurance Company
effective August 21, 1995 [This contract was novated to ERC Life Reinsurance Corporation effective
January 01, 2000. Scottish Re Group Limited acquired 95% of the outstanding capital stock of ERC
Life Reinsurance Corporation on December 22, 2003.]	 
	 	154.

	 	 	Automatic Coinsurance Agreement No. 2183 between CAC and Phoenix Home Life Mutual Insurance Company
effective October 06, 1995 [Terminated for new business] [This contract was novated to ERC Life
Reinsurance Corporation effective January 01, 2000. Scottish Re Group Limited acquired 95% of the
outstanding capital stock of ERC Life Reinsurance Corporation on December 22, 2003.]	 
	 	161.

	 	 	Reinsurance Agreement between CAC and Phoenix Home Life Mutual Insurance Company effective June 01,
1970 [This contract was novated to ERC Life Reinsurance Corporation effective January 01, 2000.
Scottish Re Group Limited acquired 95% of the outstanding capital stock of ERC Life Reinsurance
Corporation on December 22, 2003.]	 
	 	162.

	 	 	Reinsurance Agreement between CAC and Phoenix Home Life Mutual Insurance Company effective August
01, 1967	 
	 	163.

	 	 	Automatic Reinsurance Agreement No. 2825 between CAC and Phoenix Home Life Mutual Insurance Company
effective July 20, 1998 [This contract was novated to ERC Life Reinsurance Corporation effective
January 01, 2000. Scottish Re Group Limited acquired 95% of the outstanding capital stock of ERC
Life Reinsurance Corporation on December 22, 2003.]	 
	 	164.

	 	 	Servicemen’s Group Life Insurance Conversion Pool Agreement between CAC and Prudential Life
Insurance Company of America effective 09/29/1965	 
	 	165.

	 	 	Automatic Reinsurance Agreement between CAC and RGA Reinsurance Company effective October 06, 1995	 
	 	168.

	 	 	Automatic Reinsurance Agreement between CAC and RGA Reinsurance Company effective May 01, 1998	 
	 	169.

	 	 	Automatic Reinsurance Agreement between CAC and RGA Reinsurance Company effective July 20, 1998	 
	 





SB-5









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	177.

	 	 	Automatic and Facultative Yearly Renewable Term Reinsurance Agreement between CAC and Security Life
of Denver Insurance Company effective October 01, 1990	 
	 	178.

	 	 	Yearly Renewable Term Reinsurance Agreement between CAC and Security Life of Denver Insurance
Company effective July 05, 1991	 
	 	183.

	 	 	Automatic and Facultative Reinsurance Agreement Yearly Renewable Term between CAC and Security Life
of Denver Insurance Company effective August 21, 1995	 
	 	184.

	 	 	Automatic and Facultative Coinsurance Agreement between CAC and Security Life of Denver Insurance
Company effective October 06, 1995	 
	 	190.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Storebrand-Norden International Reinsurance
Company effective April 01, 1982 [Terminated for new business]	 
	 	191.

	 	 	Facultative Reinsurance Agreement between CAC and Sun Life Assurance Company effective June 15, 1982	 
	 	192.

	 	 	Automatic Reinsurance Agreement between CAC and Sun Life Assurance Company effective July 01, 1982	 
	 	193.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Sun Life Assurance Company effective January
01, 1984	 
	 	194.

	 	 	Automatic YRT Reinsurance Agreement between CAC and Sun Life Assurance Company effective December
01, 1986 [Terminated for new business]	 
	 	196.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Sun Life Assurance Company effective January
01, 1989	 
	 	197.

	 	 	Automatic Pool Reinsurance Agreement between CAC and Sun Life Assurance Company effective January
01, 1989	 
	 	198.

	 	 	Automatic Reinsurance Agreement between CAC and Swiss Re Life & Health effective May 01, 1998	 
	 	200.

	 	 	Reinsurance Agreement between CAC and The Lincoln National Life Insurance Company effective March
01, 1956 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	201.

	 	 	Coinsurance Agreement between CAC and The Lincoln National Life Insurance Company effective April
01, 1977 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	202.

	 	 	Reinsurance Agreement between CAC and The Lincoln National Life Insurance Company effective March
01, 1980 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	203.

	 	 	Reinsurance Agreement between CAC and The Lincoln National Life Insurance Company effective April
01, 1982 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	204.

	 	 	Automatic YRT Pool Agreement between CAC and The Lincoln National Life Insurance Company effective
April 01, 1982 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	205.

	 	 	Reinsurance Agreement between CAC and The Lincoln National Life Insurance Company effective April
01, 1982 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	209.

	 	 	Coinsurance Agreement between CAC and The Lincoln National Life Insurance Company effective October
06, 1995 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 





SB-6









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	220.

	 	 	Automatic Reinsurance Agreement between CAC and The Lincoln National Life Insurance Company
effective July 20, 1998 [This business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	225.

	 	 	Reinsurance Agreement between CAC and The Mercantile and General Life Reassurance Company of
America effective April 25, 1993 [This business was 100% reinsured to Swiss Re Life & Health
America Inc.]	 
	 	229.

	 	 	Automatic YRT Pool Agreement between CAC and Transamerica Occidental Life Insurance Company
effective April 01, 1982 [This contract was novated to AUSA Life Insurance Company effective
January 01, 2001. AUSA Life Insurance Company later changed its name to Transamerica Financial Life
Insurance Company]	 
	 	230.

	 	 	Life, Disability and Accidental Death Facultative Reinsurance Agreement between CAC and
Transamerica Occidental Life Insurance Company effective January 01, 1972 [Terminated for new
business] [This contract was novated to AUSA Life Insurance Company effective January 01, 2001.
AUSA Life Insurance Company later changed its name to Transamerica Financial Life Insurance
Company]	 
	 	231.

	 	 	Automatic Reinsurance Agreement between CAC and Transamerica Occidental Life Insurance Company
effective April 01, 1988 [This contract was novated to AUSA Life Insurance Company effective
January 01, 2001. AUSA Life Insurance Company later changed its name to Transamerica Financial Life
Insurance Company]	 
	 	232.

	 	 	Automatic Reinsurance Agreement between CAC and Transamerica Occidental Life Insurance Company
effective October 01, 1990 [This contract was novated to AUSA Life Insurance Company effective
January 01, 2001. AUSA Life Insurance Company later changed its name to Transamerica Financial Life
Insurance Company]	 
	 	234.

	 	 	Automatic Reinsurance Agreement between CAC and Transamerica Occidental Life Insurance Company
effective October 01, 1995 [This contract was novated to AUSA Life Insurance Company effective
January 01, 2001. AUSA Life Insurance Company later changed its name to Transamerica Financial Life
Insurance Company]	 
	 	237.

	 	 	Automatic Reinsurance Agreement between CAC and United States Life Insurance effective September
01, 1952	 
	 	238.

	 	 	Reinsurance Agreement IL008WYN01 between CAC and Urbaine Life Reinsurance Company effective April
01, 1983 [This business was 100% reinsured to National Security Life and Annuity Company effective
January 04, 2002]	 
	 	239.

	 	 	Reinsurance Agreement IL008WYN02 between CAC and Urbaine Life Reinsurance Company effective July
01, 1985 [This business was 100% reinsured to National Security Life and Annuity Company effective
January 04, 2002]	 
	 	240.1.

	 	 	Foreign National Business Automatic Yearly Renewable Term Life Reinsurance Agreement between CAC
and Aggrippina Rueckversicherungs Aktiengesellschaft effective August 01, 1990 [This contract was
novated to Converium Reinsurance Company (Germany) Ltd.]	 
	 	244.

	 	 	Automatic Reinsurance Agreement between CAC and American Phoenix Life and Reassurance Company
effective February 13, 1999 [Terminated for new business] [This contract was novated to ERC Life
Reinsurance Corporation effective January 01, 2000. Scottish Re Group Limited acquired 95% of the
outstanding capital stock of ERC Life Reinsurance Corporation on December 22, 2003.]	 
	 	245.

	 	 	Automatic Reinsurance Agreement between CAC and American United Life Insurance Company effective
April 01, 1999 [Terminated for new business] [This business was 100% reinsured to Employers
Reassurance Corporation]	 
	 	246.

	 	 	Automatic Reinsurance Agreement between CAC and American United Life Insurance Company effective
February 13, 1999 [Terminated for new business] This business was 100% reinsured to Employers
Reassurance Corporation]	 
	 	248.

	 	 	Automatic Reinsurance Agreement between CAC and American United Life Insurance Company effective
March 01, 2001 This business was 100% reinsured to Employers Reassurance Corporation]	 
	 	252.

	 	 	Life Reinsurance Agreement between CAC and Annuity & Life Reassurance America, Inc. effective
November 22, 2000	 
	 





SB-7









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	255.

	 	 	Life Reinsurance Agreement between CAC and Annuity & Life Reassurance (Bermuda), Ltd. effective
March 01, 2001 [this contract was novated to XL Life Ltd. Effective December 31, 2002]	 
	 	259.

	 	 	Automatic Reinsurance Agreement between CAC and Business Men’s Assurance Company of America
effective November 22, 2000 [Generali USA Life Reassurance Company now administers this business]	 
	 	262.

	 	 	Automatic Reinsurance Agreement between CAC and Business Men’s Assurance Company of America
effective March 01, 2001 [Generali USA Life Reassurance Company now administers this business]	 
	 	265.

	 	 	Automatic Reinsurance Agreement between CAC and Employers Reassurance Corporation effective April
01, 1999 [Terminated for new business]	 
	 	266.

	 	 	Automatic Reinsurance Agreement between CAC and Employers Reassurance Corporation effective
October 07, 1999 [Terminated for new business]	 
	 	271.

	 	 	Automatic Reinsurance Agreement between CAC and Employers Reassurance Corporation effective March
01, 2001 [Terminated for new business]	 
	 	276.

	 	 	Automatic Reinsurance Agreement between CAC and Gerling Global Life Reinsurance Company effective
October 07, 1999 [Terminated for new business] [Gerling Global Life Reinsurance Company changed its
name to Revios Reinsurance U.S. Inc. effective October 13, 2003]	 
	 	285.

	 	 	Automatic Reinsurance Agreement between CAC and Life Reassurance Corporation of America effective
February 13, 1999 [Life Reassurance Corporation of America changed its name to Swiss Re Life &
Health America Inc.]	 
	 	287.

	 	 	Automatic Reinsurance Agreement between CAC and Life Reassurance Corporation of America effective
April 01, 1999 [Life Reassurance Corporation of America changed its name to Swiss Re Life & Health
America Inc.]	 
	 	288.

	 	 	Automatic Reinsurance Agreement between CAC and The Lincoln National Life Insurance Company
effective April 01, 1999 [The business was 100% reinsured to Swiss Re Life & Health America Inc.]	 
	 	289.

	 	 	Automatic Reinsurance Agreement between CAC and The Lincoln National Life Insurance Company
effective February 13, 1999 [Terminated for new business] [The business was 100% reinsured to Swiss
Re Life & Health America Inc.]	 
	 	293.

	 	 	Automatic Reinsurance Agreement between CAC and Manulife Reinsurance Corporation (USA) effective
February 13, 1999 [Terminated for new business]	 
	 	294.

	 	 	Automatic Reinsurance Agreement between CAC and Munich American Reassurance Company effective
October 07, 1999	 
	 	295.

	 	 	Automatic Reinsurance Agreement between CAC and Munich American Reassurance Company effective
October 07, 1999	 
	 	298.

	 	 	Automatic Reinsurance Agreement between CAC and RGA Reinsurance Company effective April 01, 1999	 
	 	299.

	 	 	Automatic Reinsurance Agreement between CAC and RGA Reinsurance Company effective 02/13/1999
(Amendment No. 1) [Terminated for new business]	 
	 	302.

	 	 	Automatic Reinsurance Agreement between CAC and RGA Reinsurance Company effective November 22, 2000	 
	 	310.

	 	 	Automatic Reinsurance Agreement between CAC and Scor Life U.S. Re Insurance Company effective
November 22, 2000 [Terminated for new business effective January 1, 2004]	 
	 	315.

	 	 	Automatic Reinsurance Agreement between CAC and Security Life Of Denver Insurance Company
effective October 01, 1998 [Terminated for new business]	 
	 





SB-8









 






	 	 	 	 	 	 
	 
	 	Index No.	 	 	Name	 
	 	318.

	 	 	Automatic Reinsurance Agreement between CAC and Swiss Re Life and Health America effective March
01, 2001	 
	 	323.4.

	 	 	Joint Marketing and Reinsurance Agreement between CAC and VFL and SCOR LIFE Reinsurance Company
effective June 11, 2001 [Terminated for new business]	 
	 	323.5.

	 	 	Direct Marketing and Reinsurance Agreement between CAC and VFL and The Lincoln National Life
Insurance Company effective February 24, 2000 [The business was 100% reinsured to Swiss Re Life &
Health America Inc.]	 
	 	328.

	 	 	Automatic Reinsurance Agreement between CAC and Canada Life Assurance Company effective March 01,
2001	 
	 	333.

	 	 	Automatic Reinsurance Agreement between CAC and Gerling Global Life Reinsurance effective March 01,
2001 [Gerling Global Life Reinsurance Company changed its name to Revios Reinsurance U.S. Inc.
effective October 13, 2003]	 
	 	344.

	 	 	Facultative Reinsurance Agreement between CAC and Allianz Life Insurance Company of North America
effective January 01, 2001	 
	 





CAC Unsigned Treaties:




None





SB-9











 





SCHEDULE C

Calculation of Profits




Calculation of Participating Profits




The following calculation shall be performed quarterly for the participating CAC policies with all
amounts relating solely to the CAC participating policies being reinsured under this Agreement.
Where line numbers are indicated, they refer to the line number of the Summary of Operations (page
4) of the 2002 National Association of Insurance Commissioners Life and Accident and Health
Statement.



Calculation Details:

Add the following:

Premiums and Annuity Considerations (line 1)

Considerations for Supplementary Contracts (line 2)

Net Investment Income — This is to be the investment income on assets backing the statutory

reserves, but excluding investment income on surplus

Amortization of Interest maintenance reserve (line 4)

Commissions and Expense Allowances on reinsurance Ceded (line 6)

Reserve adjustments on reinsurance ceded (line 7)

Miscellaneous income (lines 8.1, 8.2 and 8.3)




Tax Rate x (Statutory Income — Taxable Income) [both calculated prior to policyholder dividends]
Net realized capital gains (or subtract net losses) net of taxes, and net of amounts transferred to
IMR (line 34)



Then subtract the following:




Death Benefits (line 10)

Matured Endowments (line 11)

Annuity Benefits (line 12)

Surrender Benefits and withdrawals for life contracts (line 15)

Interest and adjustments (line 17)

Payments on supplementary contracts (line 18)

Increase in aggregate reserves (line 19)

Commissions (line 21)

General Insurance Expense — $35 per policy per annum

Insurance taxes, licenses and fees — 2% of gross premiums

Increase in loading on deferred and uncollected premium (line 25)




The result is pre-tax statutory profits, before dividends, for the purpose of carrying out the
calculation described in Article X, paragraph 2. Should the result be negative, the absolute value
of the negative will be established as a loss carryforward, which will accrue interest at the
Contract Interest Rate (as defined in the Purchase Agreement). Future profits will be charged
against such loss carryforward and no profits will be remitted to the Company until such loss
carryforward is eliminated.




SC-1









 








SCHEDULE D

Investment Principles





	A.	 	Purpose






	 	1.	 	The purpose of these Investment Guidelines is to establish, authorize, and
document the objectives, policies, procedures, and constraints for investing the assets
supporting the par business (the liabilities) reinsured by Continental Assurance
Company (CAC) to Swiss Re Life and Health America Inc. (the Company).

	 
	 	2.	 	On an overall basis, investment decisions will have as an objective full
compliance with relevant provisions of the investment laws of the Company’s domiciliary
state, and any other state to which it may be subject, and the Internal Revenue Code
and Regulations.

	 
	 	3.	 	There is no substitute for acting prudently, which requires that investment
personnel act always with an appropriate amount of care and in the best interests of
both CAC and the Company in the management of the assets supporting the reinsured
liabilities.







	B.	 	General Performance Objectives and Philosophy






	 	1.	 	The portfolio will be managed based on the characteristics of the liabilities
it is supporting while remaining within applicable legal, regulatory, and business
constraints. The duration, convexity, and cash flows of the underlying liabilities are
several of the many economic and business inputs which will be taken into consideration
when making investment decisions.
	 
	 	2.	 	Portfolio liquidity will be maintained such that reasonably expected cash flow
needs can be met.






	C.	 	Asset Classes Eligible for Investment






	 	1.	 	Investments of the Company shall be reasonably diversified to minimize the
impact of a potential default. From time to time, and subject to this policy
statement, the Company may invest in any or all of the following asset categories:







	 	a.	 	bonds, debentures, mortgage-backed and asset-backed securities,
notes or other debt instruments of governments, government agencies, or
corporations;
	 
	 	b.	 	cash, money market securities issued by governments or
corporations, money market funds or short-term investment pools as permitted
statutorily
	 
	 	c.	 	private placements of agencies or corporations;




SD-1









 






	 	d.	 	derivative instruments including forwards, futures contracts,
put options, call options, caps, collars, swaps, floors, swaptions, commitments
to purchase mortgage-backed securities, and asset-backed securities;







	 	(i)	 	derivative instruments will only be used by the
Company to hedge assets or liabilities or in allowed replication transactions;







	 	e.	 	with respect to any other asset class that is not specifically
delineated herein, the portfolio manager shall ensure that any such investment
complies with legal requirements and is appropriate given the nature of the
underlying liabilities.







	D.	 	PORTFOLIO CONSTRAINTS (PERCENTAGES STATED REFER TO STATEMENT VALUE AS A PERCENT OF TOTAL
ASSETS AND ARE CALCULATED AS ACQUISITION LIMITS)







	 	1.	 	Aggregate portfolio limits:






	 	a.	 	minimum average credit quality of A;
	 
	 	b.	 	maximum of 15% per obligor in obligations (1) issued, assumed
or guaranteed by any agency, political subdivision or instrumentality of any
state which obligations are not general obligations thereof; and (2) issued,
assumed or guaranteed by the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank,
the International Finance Corporation and any other agency or entity engaged in
similar activities and in which the government of the United States
participates.
	 
	 	c.	 	subject to (b) above, maximum of 5% in any individual issuer,
excluding(i) high yield securities (as such term is used in the Insurance Code
of the State of Connecticut) and (ii) securities issued, assumed, guaranteed or
insured by the United States, a state of the United States, a government
sponsored enterprise of the United States, a government money market mutual
fund, a class one money market mutual fund, a class one bond mutual fund and
issues which are insured by a financial guaranty insurer with the highest
generic rating issued by a nationally recognized statistical rating
organization;

	 
	 	d.	 	maximum variance of portfolio effective duration of +/- 15% to
the duration of the underlying liabilities;







	 	2.	 	Fixed income securities:






	 	a.	 	maximum of 10% held in asset-backed securities not
collateralized with mortgage loans;





SD-2









 






	 	a.	 	maximum of 40% held in mortgage-backed ;






	 	(i)	 	mortgage-backeds will be secured with first
mortgages or conventional mortgages with a maximum 70% loan-to-value
ratio, unless guaranteed by a government agency or a government
sponsored enterprise;

	 
	 	(ii)	 	maximum of 5% held in any individual pool
unless guaranteed by a government agency or a government sponsored
enterprise;







	 	c.	 	industry concentrations (excluding securities issued, assumed,
guaranteed or insured by the United States or a government sponsored enterprise
of the United States);







	 	(i)	 	maximum 15% of holdings allowed in an industry group;






	 	d.	 	geographic concentrations (foreign)






	 	(i)	 	Maximum in foreign obligations and investments
(1) up to 10% in any exempted country, and (2) up to 2% in any other
foreign country and up to 15% in the aggregate in all such other
foreign countries. The aggregate foreign obligations and investments
shall not exceed 30%. All such foreign obligations and investments made
within the limitation of this subsection shall also be subject to the
percentage limitations prescribed elsewhere in these guidelines as
applicable to such investment class.







	 	e.	 	maximum of 10% held in private placements (excluding securities
that qualify under Rule 144A under the Securities Act of 1933);

	 
	 	f.	 	maximum of 20% held in Rule 144A’s (securities that qualify under Rule 144A under
the Securities Act of 1933);
	 
	 	g.	 	maximum of 1% in high yield obligations of any one institution and up to 10% in the
aggregate in high yield obligations, all required to be registered under the Securities Act
of 1933
	 
	 	h.	 	minimum credit quality of B on non-investment grade bonds at time
of purchase.






	3.	 	Short-term securities:






	 	a.	 	maximum of 100% held in securities maturing in 397 days or
fewer, or in money market funds;
	 
	 	b.	 	commercial paper held must be rated A2/P2 or better.




SD-3









 












	4.	 	Derivative instruments:






	 	a.	 	derivatives used for hedging shall be limited as follows;






	 	(i)	 	the aggregate statement value of options, swaptions, caps,
floors and warrants purchased shall not exceed 7.5% of
total assets;

	 
	 	(ii)	 	the aggregate statement value of options, swaptions, caps
and floors written shall not exceed 3.0% of total assets;
	 
	 	(iii)	 	the aggregate potential exposure of collars, swaps,
forwards and futures entered into and options, swaptions,
caps and floors written shall not exceed 6.0% of total
assets.







	 	b.	 	derivatives used for replication transactions shall be limited as
follows;







	 	(i)	 	the Company otherwise is authorized to invest its funds in
the asset being replicated;

	 
	 	(ii)	 	the asset being replicated will be subject to all applicable
provisions and limitations (including quantitative limits) as if
the transaction constituted a direct investment in the asset
being replicated;

	 
	 	(iii)	 	as a result of giving effect to the replication transaction, the
aggregate statement value of all assets being replicated shall
be limited to 10% of total assets.






Utilization of derivative instruments to require prior submission and approval of
derivative use plan(s) in accordance with laws and regulations applicable to Swiss
Re.




SD-4