EMPLOYMENT AGREEMENT

     THIS  EMPLOYMENT  AGREEMENT (the  "Agreement")  is made as of the 2d day of
November, 1999 (the "Signing Date"), by and between CNA Financial Corporation, a
Delaware corporation (the "Company"), and Thomas F. Taylor ("Executive");

                                   WITNESSETH:

         WHEREAS, Executive currently serves as Senior Vice President, Specialty
Department of the principal subsidiaries of the Company (i.e., the CNA insurance
companies,  hereinafter  the "CNA  Companies"),  and,  commencing as of June 14,
1999, the Company desires to promote Executive to the position of Executive Vice
President,  Property/Liability of the CNA Companies, and Executive desires to be
employed in that position, all under the terms and subject to the conditions set
forth below:

         NOW,  THEREFORE,  in  consideration  of the foregoing  premises and the
promises and covenants herein, the parties hereto agree as follows:

         1.  EMPLOYMENT  TERM. The Company and Executive  agree that the Company
shall  continue  to employ  Executive  to  perform  the  duties  of Senior  Vice
President,  Specialty  Department  of the CNA  Companies  until  June 13,  1999.
Effective as of June 14, 1999 (the "Effective  Date"),  Executive shall cease to
be Senior Vice President,  Specialty Department of the CNA Companies,  and shall
be  appointed  as  Executive  Vice  President,  Property/Liability  of  the  CNA
Companies on the terms and subject to the conditions set forth herein for a term
continuing  through and until December 31, 2002 or such earlier date as of which
Executive's employment is terminated in accordance with Section 6 hereof.

         2.       DUTIES OF EXECUTIVE.

         (a) Executive shall assume the duties and responsibilities of Executive
Vice  President,  Property/Liability  of the CNA  Companies as of the  Effective
Date.  As Executive  Vice  President,  Property/Liability,  Executive  shall set
policy and direction related to underwriting,  claims,  and actuarial  functions
across all CNA  property/liability  operations.  Executive  shall  report to the
Chairman and Chief  Executive  Officer of the CNA  Companies  (the  "Chairman").
Executive  may be  elected  to and  shall  serve  as a  member  of the  Board of
Directors  of one or more  of the CNA  Companies,  and if so  elected  Executive
agrees to serve on such boards in such capacity without additional compensation;
provided that nothing in this Agreement  shall require that the  shareholders of
any company elect Executive to its board of directors.

         (b) Executive shall diligently and to the best of his abilities assume,
perform,  and  discharge  the  duties and  responsibilities  of  Executive  Vice
President,  Property/Liability  of the CNA  Companies,  as  well  as such  other
specific duties and  responsibilities  as the Chairman shall assign or designate
to Executive from time to time.  Executive shall devote substantially all of his
working time to the performance of his duties as set forth herein and shall not,
without the prior written  consent of the Chairman,  accept other  employment or
render or  perform  other  services,  nor shall he have any  direct or  indirect
ownership  interest  in any  other  business  which is in  competition  with the
business of the Company or the CNA Companies, other than in the form of publicly
traded  securities  constituting  less than five percent (5%) of the outstanding
securities of a corporation (determined by vote or value) or limited partnership
interests  constituting  less  than five  percent  (5%) of the value of any such
partnership.  The  foregoing  shall not  preclude  Executive  from  engaging  in
charitable,  professional, and personal investment activities, provided that, in
the judgment of the Chairman,  such activities do not materially  interfere with
his performance of his duties and responsibilities hereunder.

         (c) The  services to be provided by the  Executive in  accordance  with
this  Agreement  shall be performed at the  principal  executive  offices of the
Company or at such other  location or locations as the Chairman may require from
time to time. It is understood and agreed by the parties hereto that, regardless
of where the Executive is required to perform  services in accordance  with this
Agreement, the Executive shall maintain his residence in New York; provided that
the  Executive  may,  in his sole  discretion,  relocate  his  residence  to the
Chicago, Illinois area.

         3.       COMPENSATION.

         (a) Salary.  The Company  shall pay to Executive,  commencing  June 14,
1999 and continuing for the period he is employed by the Company  hereunder,  an
annual base salary of SIX HUNDRED FIFTY THOUSAND AND NO ONE  HUNDREDTHS  DOLLARS
($650,000.00),   payable   not  less   frequently   than   monthly   (the  "Base
Compensation").  Such  salary rate shall be  increased  by 5% as of each March 1
occurring during the term of the Agreement,  beginning with March 1, 2000. In no
event  shall  Executive's  salary rate be reduced to an amount that is less than
the amount  specified in this  paragraph  (a), or to an amount that is less than
the amount that he was previously receiving without Executive's written consent.

         (b) Incentive  Compensation  Award.  Executive  shall be entitled to an
Incentive  Compensation Award, in accordance with the CNA Financial  Corporation
Incentive  Compensation  Plan for Certain  Executive  Officers  (the  "Incentive
Compensation  Plan").  The amount of the Incentive  Compensation  Award shall be
based  on the  performance  of the  Company  and  its  subsidiaries  during  the
performance  period of the 3d and 4th quarters of calendar year 1999, and during
the performance  periods of calendar years 2000,  2001, and 2002,  respectively,
and the award for each performance period shall be payable in a cash lump sum as
soon as  practicable  after the end of the period,  but in no event prior to the
date  on  which  the  Committee,  as  that  term  is  defined  in the  Incentive
Compensation  Plan (the " Committee"),  certifies the amount,  if any, which has
been earned for the period.  The amount of the Incentive  Compensation Award for
Executive shall be determined  according to the performance criteria and amounts
established by the Committee in its August 4, 1999 meeting subject to the annual
review and  certification  by the Committee of the awards.  The actual amount of
the Incentive Compensation Award payable to Executive with respect to the 3d and
4th quarters of calendar year 1999 and calendar years 2000,  2001 and 2002 shall
be determined by the Committee  based on Executive's  and the Company's  overall
performance,  but in all events the amount of the Incentive  Compensation  Award
shall not be less than 75% nor more than 100% of the  calculation  of the awards
based on the  preliminary  criteria and amounts  established by the Committee in
its August 4, 1999 meeting.

For purposes of this paragraph (b), the term "Net Income" shall have the meaning
ascribed  to it in the  Incentive  Compensation  Plan;  provided  that,  for the
avoidance of doubt, it is recited here that the term "Net Income" of the Company
and its  subsidiaries  for any  performance  period shall mean the after tax Net
Income of the Company and all of its subsidiaries for the performance  period as
reflected on the companies' audited  consolidated  financial statements for such
performance period as filed with the Securities and Exchange  Commission less an
amount equal to the "Net Realized  Investment  Gains"  included in Net Income as
reported in the audited consolidated  financial statements,  but increased by an
amount equal to the "Net Realized  Investment  Losses" included in Net Income as
reported in the audited financial statements. The foregoing notwithstanding, (I)
the Net  Income  shall be  determined  without  taking  into  account  any entry
intended  to reflect  the  cumulative  effect in prior  periods of any change in
accounting principles used in preparing current period financial statements, and
(II) the amount of Net Income for 1999 shall be determined without including any
adjustments  provided by SOP 97-3 (i.e., as though SOP 97-3 were inapplicable to
any aspect of such determination).

         (c)  Long-Term  Incentive  Award.  During  the term of this  Agreement,
Executive shall be entitled to awards under the CNA Financial  Corporation  2000
Long-Term  Incentive  Plan ("LTIP")  according to the  performance  criteria and
amounts  established  by the Committee in its August 4, 1999 meeting and subject
to the annual review and certification by the Committee of the awards; provided,
however,  that any award made in accordance  with the terms of the LTIP shall be
contingent  on  approval  of the  LTIP  by  the  Company's  shareholders  at the
Company's 2000 annual shareholders meeting.

         4. OTHER  BENEFITS.  Executive  shall be entitled to participate in the
various benefit plans,  programs or  arrangements  established and maintained by
the Company from time to time and applicable to senior executives of the Company
such as, but not by way of  limitation,  vacation pay,  health and major medical
insurance,  dental insurance,  life insurance,  long-term disability  insurance,
both  qualified  and  supplemental  retirement or savings  plans,  and long-term
incentive  compensation plans, and to receive all fringe benefits made available
to Grade 96 employees of the Company.  Executive's entitlement to participate in
any such plan,  program or  arrangement  shall,  in each case, be subject to the
terms and conditions thereof.  However, in determining the amount of Executive's
retirement benefit under the CNA Employees' Retirement Benefit Equalization Plan
or any other  supplemental  retirement  plan or program in which  Executive  may
participate, Executive's compensation or pensionable earnings shall be deemed to
include the  incentive  compensation  awards  payable  under  Section  (3)(b) to
Executive  (with such amounts to be includible at the time they would  otherwise
be paid in the absence of any elective deferral by Executive).

         5. EXPENSE REIMBURSEMENT.  Executive shall be entitled to reimbursement
by the  Company  for all  reasonable  and  customary  travel and other  business
expenses  incurred by Executive in carrying out his duties under this Agreement,
in accordance  with the general  reimbursement  policies  adopted by the Company
from  time to  time.  Executive  shall  report  all such  expenditures  not less
frequently  than  monthly   accompanied  by  adequate  records  and  such  other
documentary  evidence  as  required  by the  Company  or by Federal or state tax
statutes or regulations governing the substantiation of such expenditures.

         6. TERMINATION OF EMPLOYMENT.  Executive's  employment with the Company
hereunder  shall  continue until the earlier of December 31, 2002 or the date on
which his employment is terminated  pursuant to this Section 6. Either party may
terminate Executive's employment with the Company by written notice to the other
party  effective  as of the  date  specified  in  such  notice  and  Executive's
employment shall automatically terminate in the event of Executive's death. Upon
termination of Executive's  employment  under this Agreement,  the rights of the
parties under this Agreement shall be determined pursuant to this Section 6.

         6.1 DEATH AND DISABILITY. In the event of the death of Executive or, at
the Company's  election,  in the event of his Permanent  Disability  (as defined
below) during the term of this Agreement and while Executive is in the employ of
the Company, Executive's employment shall terminate; provided, however, that:

         (a)  The   Executive  (or  his  personal   representatives,   heirs  or
         beneficiaries as the case may be) shall be entitled to:

                  (v) Any  unpaid  Base  Compensation,  including  credited  but
         unused vacation pay accrued up to the date of such termination.

                  (w) Any  unpaid  Incentive  Compensation  Award  described  in
         paragraph  3(b)  with  respect  to  the  performance  period  prior  to
         Executive's death or Permanent Disability.

                  (x)  A  pro-rata  portion  of  the  amount  of  the  Incentive
         Compensation  Award  earned  for the  performance  period  in which the
         termination occurs determined by multiplying the Incentive Compensation
         Amount  earned  through  the end of the  performance  period  in  which
         termination occurs (as determined by actual performance through the end
         of that period) by the number of days in the  performance  period prior
         to the date of  termination  and dividing such product by the number of
         days in the performance period.

                  (y) If Executive's termination of employment occurs before the
         last  day  of  the  Performance  Period  with  respect  to a  Long-Term
         Incentive Award, Executive (or Executive's estate) shall be entitled to
         a payment with respect to the Long-Term  Incentive  Award in accordance
         with the  terms of the  award,  with the  amount  determined  as though
         Executive  remained  employed  by the  Company  through  the end of the
         Performance  Period,  and the performance  through  Executive's date of
         termination  of employment was  extrapolated  to the end of the period,
         but subject to a pro rata reduction for the portion of the  Performance
         Period after Executive's termination of employment.  Distribution under
         this  paragraph  (y)  shall  be  made  as  soon  as  practicable  after
         Executive's date of termination.

                  (z) Any  unexercised  option to purchase  stock of the Company
         held by Executive upon termination of employment may be exercised on or
         after the date of  termination  only as to that  portion of the covered
         shares for which it was  exercisable  immediately  prior to the date of
         termination,  and may be exercised through the one-year  anniversary of
         such date of termination,  but in no event later than the date on which
         such option  would expire if  Executive  had  remained  employed by the
         Company.

         (b)  Except as  otherwise  provided  in this  Section  6, the rights of
Executive  or his personal  representatives,  heirs or  beneficiaries  under any
benefit plan,  program or arrangement in which he was  participating at the time
of his  termination,  including any benefits which shall have accrued and vested
under the terms of any plan, program or arrangement  described in Section 4, and
his right under any long-term  incentive  compensation plan, shall be determined
by the applicable terms of such plans, programs or arrangements.

For purposes of this Agreement, the term "Permanent Disability" means a physical
or mental  condition of Executive which, as determined by the Board, in its sole
discretion based on all available medical  information,  is expected to continue
indefinitely and which renders Executive incapable of performing any substantial
portion of the services contemplated hereunder.

         6.2 TERMINATION  FOR CAUSE BY THE COMPANY.  In the event that Executive
shall engage in any conduct which the Board,  in good faith,  shall determine to
be fraudulent, a substantial breach of any material provision of this Agreement,
willful  malfeasance or gross  negligence,  or inconsistent with the dignity and
character  of a senior  executive  of the  Company,  and only if such conduct is
determined by the Board, acting in good faith, to have a material adverse effect
on the business of the Company  (defined  herein as "Cause"),  the Company shall
have the right to terminate  Executive's  employment with the Company by written
notice to  Executive  effective as of the date of such  notice.  Following  such
termination,  the Company shall pay any unpaid Base Compensation accrued through
the date of termination,  any unpaid Incentive  Compensation  Award described in
paragraph 3(b) with respect to the performance  period prior to the date of such
termination,  and  unused  vacation  time  accrued  prior  to the  date  of such
termination.  However,  upon such termination,  Executive's right to payments or
otherwise  with  respect to any other  annual  Incentive  Award,  any  Long-Term
Incentive  Award  that is unpaid as of the date of  termination,  and any option
that is  unexercised  on the date of  termination,  shall be forfeited,  and the
Company have no further obligations under this Agreement.

         6.3  TERMINATION   FOR  CONVENIENCE  BY  THE  COMPANY.   In  the  event
Executive's employment is terminated by the Company for any reason not described
in subsections 6.1 or 6.2 above,  the obligations of the parties hereto shall be
deemed discharged, provided, however, that:

         (a) The Company shall pay to Executive or his personal representatives,
heirs, or beneficiaries,  as the case may be, (i) any unpaid Base  Compensation,
including  credited  but  unused  vacation  pay  accrued  up to the date of such
termination, (ii) any unpaid Incentive Compensation Award described in paragraph
3(b)  with  respect  to the  performance  period  prior  to  the  date  of  such
termination, and (iii) termination payments at the annual rate equal to:

                  (w) Executive's  annual rate of Base Compensation as in effect
         immediately prior to his date of termination; plus

                  (x)  Executive's target annual incentive compensation as
         previously determined by the Committee; plus

                  (y) Executive's  target long term cash incentive  compensation
         as previously determined by the Committee; plus

          (z) An  amount  equal to the  Discounted  Value of  33,000  shares  of
     Company common stock as of the date of  termination,  with the  "Discounted
     Value" of a share of Company common stock being equal to (a) 48% of (i) the
     average of the highest  and lowest  trading  prices of common  stock on the
     date of  termination  as reported as the New York Stock  Exchange-Composite
     Transactions for such day as reported by the Wall Street Journal,  Mid-West
     Edition,  or (ii) if  Company  common  stock is not  traded  on the date of
     termination,  such average on the next preceding day on which such stock is
     traded, or (iii) if Company common stock is not then listed on the New York
     Stock  Exchange,  such  average  as  reported  on  the  principal  national
     securities  exchange or national  automated stock quotation system on which
     Company common stock is traded or quoted,  or (b) if higher,  the par value
     of a share of Company  common stock;  with such  termination  payment to be
     made in substantially equal installments, not less frequently than monthly,
     for a period of twenty-four (24) months following such termination.

(b) If Executive's  termination of employment  occurs before the last day of the
Performance  Period with respect to a Long-Term  Incentive Award,  Executive (or
Executive's estate) shall be entitled to a payment with respect to the Long-Term
Incentive Award in accordance with the terms of the terms of the award, with the
amount  determined as though Executive  remained employed by the Company through
the end of the  Performance  Period,  and  based on actual  performance  for the
period,  but subject to a pro rata reduction for the portion of the  Performance
Period after Executive's date of termination.  Distribution under this paragraph
(b) for the Performance  Period shall be made at the normally scheduled time for
such  distribution  (determined  without regard to the occurrence of Executive's
date of termination).

(c) Any  unexercised  option held by Executive  upon  termination  of employment
shall  expire on the date of  termination  with  respect to all covered  shares;
provided,  however,  that the  Committee,  in its  discretion,  may  provide for
extension of the exercise date,  except that such extended date may not be later
than the earlier of the one-year  anniversary of Executive's date of termination
or the date on which such option would expire if Executive had remained employed
by the Company;  and further provided that the Committee may, in its discretion,
permit continued vesting of the options during such extension period.

(d) Except as  otherwise  provided in this Section 6, the rights of Executive or
his personal  representatives,  heirs, or beneficiaries  under any benefit plan,
program or arrangement in which he participated at the time of such termination,
including  any  benefits  which shall have accrued and vested under the terms of
any plan  described in Section 4, and his rights under any  long-term  incentive
compensation  plan,  shall be determined by the applicable  terms of such plans,
programs or arrangements  (provided that he shall not be entitled to any amounts
under the annual Incentive Compensation Plan for the performance period in which
the termination occurs).

(e) In the event any payments made to Executive  under this subsection 6.3 shall
be found to  constitute  an "excess  parachute  payment"  within the  meaning of
section  280(G) of the  Internal  Revenue  Code or other  payment  subject  to a
federal  excise tax,  the  Company  shall pay to  Executive,  in addition to any
payment  obligation  under the foregoing  provisions of this  paragraph  6.3, an
amount equal to the amount of such excise tax,  plus a tax  gross-up  payment in
the amount of the aggregate additional federal,  state, and local income, excise
or other taxes  payable by Executive  with respect to the receipt of such excise
tax payment.

6.4      TERMINATION FOR GOOD REASON BY EXECUTIVE.

(a) In the event that  Executive's  employment  is  terminated  by Executive for
"good  reason," the Company's  obligations  shall be the same as they would have
been,  and Executive  shall receive the same payments and other benefits that he
would have  received,  had the Company  terminated  his  employment  pursuant to
subsection 6.3.

(b) For purposes of this  Agreement,  the term "good  reason"  means without the
Executive's written consent (i) a change in Executive's  reporting  relationship
such that Executive no longer reports directly to the Chairman, (ii) a reduction
in the rate of Executive's  Base  Compensation,  or a material  reduction in the
target  award  opportunities  under  the  Incentive  Compensation  Plan  or  the
Long-Term  Incentive  Plan in violation of paragraph  3(b) or 3(c), or (iii) the
Executive being required to relocate his residence from New York in violation of
paragraph 2(c).

6.5 VOLUNTARY RESIGNATION BY EXECUTIVE. In the event that Executive's employment
is terminated by Executive  other than pursuant to subsection 6.4 or as a direct
result of his death or Permanent  Disability  (as described in subsection  6.1),
the Company shall pay any unpaid Base  Compensation  accrued through the date of
termination, any unpaid Incentive Compensation Award described in paragraph 3(b)
with respect to the  performance  period prior to the date of such  termination,
and unused vacation time accrued prior to the date of such termination. However,
upon such  termination,  Executive's right to payments or otherwise with respect
to any other annual  Incentive  Award,  any  Long-Term  Incentive  Award that is
unpaid as of the date of termination,  and any option that is unexercised on the
date of termination,  shall not be deemed to be earned,  and the Company have no
further obligations under this Agreement.

6.6 FAILURE TO EXTEND  AGREEMENT.  In the event that this Agreement has not been
extended or renewed by mutual  agreement  at the end of its term on December 31,
2002 and the employment of Executive continues, then the following shall apply:

(a) Such employment  shall constitute an employment at will from month to month.
During Executive's  employment following December 31, 2002, (i) he shall receive
salary at the annual rate of 325% of his annual Base Compensation as of December
31, 2002;  (ii) the terms of this Agreement that governed  Executive's  benefits
and perquisites  prior to January 1, 2003 will continue to apply, and will be in
addition to Executive's  salary  specified in clause (i) above;  (iii) Executive
shall be entitled to payment with respect to the  Incentive  Compensation  Award
for calendar year 2002 to the extent provided by this  Agreement,  but Executive
will not be entitled to an Incentive  Compensation  Award or any other incentive
compensation award for performance periods beginning after December 31, 2002.

(b) If the Company  terminates  Executive's  employment  following  December 31,
2002,  or if the Company and  Executive  shall not have  mutually  agreed to the
terms of, and entered  into,  a new  employment  prior to March 31,  2003,  then
Executive's  employment  shall  terminate  on April 1, 2003,  and the  Company's
obligations  shall be the same as they  would  have been,  and  Executive  shall
receive the same payments and other  benefits that he would have  received,  had
the   Company   terminated   his   employment   pursuant  to   subsection   6.3.
Notwithstanding  the foregoing  provisions of this paragraph (b), if Executive's
employment with the Company  terminates  following  Executive's  rejection of an
offer by the Company to extend the period of the Agreement on substantially  the
same  terms  prior to  termination,  and at a salary  rate that is not less than
Executive's  salary rate prior to the  termination,  and with the amount payable
under the Incentive Compensation Plan and Long-Term Incentive Plan (or successor
plans) at a target level of achievement  not less than the amounts payable under
those plans (or successor  plans) at a target level of achievement  prior to the
termination  (referred  to  as  a  "Comparable   Employment  Offer"),  then  his
employment  shall be  treated  as having  been  terminated  in  accordance  with
paragraph 6.5 (relating to voluntary  resignation),  and Executive  shall not be
entitled to payments,  benefits or other amounts after termination of employment
under this  paragraph  (b), and shall not be entitled to  payments,  benefits or
other amounts after termination of employment under paragraph 6.3.  However,  it
is understood by the parties that if,  following  extensions of the term of this
Agreement,  Executive's  employment terminates by reason of a failure to further
extend the term, and as of the last day of the term  (determined  without regard
to the  automatic  month-to-month  extensions  described in  paragraph  (a) next
above),  Executive  has attained age 55, then the  restriction  of the preceding
sentence shall not apply, and Executive's  right to benefits shall be determined
without regard to whether he rejected the Company's offer to renew.

6.7      PENSION ENHANCEMENT.

         (a)  If  Executive's  employment  with  the  Company  terminates  under
circumstances  described in subsection 6.1 (relating to termination by reason of
death or Disability), subsection 6.3 (relating to termination for convenience by
the  Company),  subsection  6.4  (relating  to  termination  for Good  Reason by
Executive),  or subsection 6.6 (relating to failure to extend Agreement),  then,
in addition to any other  benefits to which  Executive is entitled,  he shall be
entitled to an  Enhanced  Pension  payable  from the CNA  Financial  Corporation
Supplemental  Executive  Retirement  Plan (or, in the discretion of the Company,
under another  non-qualified plan or arrangement  maintained by the Company), or
Executive's  spouse  as of the date of his  termination  (his  "Wife")  shall be
entitled  to a  Survivor  Enhanced  Pension,  to the  extent  provided  in  this
subsection 6.7.

         (b)  Notwithstanding  the provisions of paragraph (a) above,  Executive
shall not be entitled to an Enhanced  Pension if his employment with the Company
terminates under circumstances  described in subsection 6.6 (relating to failure
to extend  Agreement),  and such termination of employment  follows  Executive's
rejection of a Comparable  Employment  Offer by the Company to extend the period
of the Agreement.  It is understood by the parties that if, following extensions
of the term of this Agreement,  Executive's employment terminates by reason of a
failure to further extend the Agreement term as described in subsection 6.6, and
as of the last day of the  term  (determined  without  regard  to the  automatic
month-to-month extensions described in paragraph 6.6(a)), Executive has attained
age 55,  then the  restriction  of this  paragraph  (b)  shall  not  apply,  and
Executive's  right to benefits shall be determined  without regard to whether he
rejected the Company's offer to renew.

         (c)  The  "Enhanced  Pension"  shall  be  comprised  of  equal  monthly
installment  payments  from  the  Company  commencing  on the  first  day of the
calendar  month  following  the  two-year  anniversary  of  Executive's  date of
termination of employment  with the Company (the "Payment  Commencement  Date"),
and  continuing  on  a  monthly  basis  through  the  calendar  month  in  which
Executive's death occurs. Executive may elect to receive payment of the Enhanced
Pension  in the form of a joint and  surviving  spouse  benefit,  subject to the
following:

                  (i) any such  alternative form of benefit shall be actuarially
         equivalent  to the benefit to which he would  otherwise  be entitled in
         accordance with this subsection 6.7 in the absence of this sentence;

                  (ii) any  election of an  alternate  form of payment  shall be
         filed by  Executive  with the  Company in writing in a form  reasonably
         acceptable to the Company not later than 30 days after Executive's date
         of termination; and

                  (iii)  actuarial  equivalency  shall be  determined  using the
         assumptions and methodology applicable to the CNA Employees' Retirement
         Benefit Equalization Plan as of Executive's date of termination.

         (d) The amount of each such  monthly  payment of the  Enhanced  Pension
shall be such  that the  present  value of the  payments,  determined  as of the
Payment  Commencement  Date,  would be $2,000,000,  with such amount  determined
based on the  premium  that would be  required  to  purchase  such a  commercial
annuity as of the Payment Commencement Date. However, if Executive's  employment
terminates on or after December 31, 2002, and on or before April 1, 2003,  under
circumstances  that would otherwise  result in his being entitled to an Enhanced
Pension,  then the monthly  amount  determined in accordance  with the preceding
sentence  shall be not  less  than  $14,432.86.  Notwithstanding  the  foregoing
provisions of this  paragraph  (d), in no event will the annual rate of payments
of the Enhanced  Pension to Executive,  when added to the amount of  Executive's
benefits from the CNA  Employees'  Retirement  Plan (the  "Qualified  Retirement
Plan")  and  the  CNA  Employees'  Retirement  Benefit  Equalization  Plan  (the
"Retirement  Equalization Plan") exceed 2/3's of Executive's annual rate of Base
Compensation  as in  effect on his date of  termination.  For  purposes  of this
paragraph  (d),  the  benefits  under  the  Qualified  Retirement  Plan  and the
Retirement  Equalization  Plan shall be  determined  as though such benefits are
distributed as a single life annuity for the life of Executive commencing on the
Payment  Commencement Date, with the deemed amount of such payments  actuarially
equivalent to the form in fact being  provided  under the  Qualified  Retirement
Plan and the Retirement  Equalization Plan (using the actuarial assumptions then
applicable to each of the respective  plans).  No amounts shall be payable under
this  subsection  6.7 if Executive is not living on the two year  anniversary of
his  date of  termination  of  employment,  and his Wife is not  living  on such
two-year anniversary.

         (e) If the provisions of paragraph (a) are applicable, and Executive is
not living on the two year  anniversary of his date of termination of employment
(and his  death  occurs on or after  his date of  termination),  and his Wife is
living on such two-year anniversary,  his Wife shall be entitled to an "Enhanced
Survivor Pension" which shall be comprised of equal monthly installment payments
from the Company commencing on the first day of the calendar month following the
two-year  anniversary of Executive's  date of termination of employment with the
Company (the "Survivor Payment  Commencement Date"), and continuing on a monthly
basis through the calendar month in which his Wife's death occurs. The amount of
each such monthly  payment of the Enhanced  Survivor  Pension shall be such that
the present  value of the payments,  determined  as of the Payment  Commencement
Date, would be $1,000,000, with such amount determined based on the premium that
would be  required  to  purchase  such a  commercial  annuity as of the  Payment
Commencement Date.  However,  if Executive's  employment  terminates on or after
December 31,  2002,  and on or before April 1, 2003,  under  circumstances  that
would  otherwise  result in his Wife  being  entitled  to an  Enhanced  Survivor
Pension,  then the monthly  amount  determined in accordance  with the preceding
sentence  shall  be not  less  than  $7,659.82.  Notwithstanding  the  foregoing
provisions of this  paragraph  (e), in no event will the annual rate of payments
of the Enhanced  Survivor  Pension,  when added to the surviving spouse benefits
from the Qualified Retirement Plan and the Retirement  Equalization Plan, exceed
1/3 of Executive's  annual rate of Base Compensation as in effect on his date of
termination.  For  purposes  of this  paragraph  (e),  the  benefits  under  the
Qualified  Retirement  Plan  and  the  Retirement  Equalization  Plan  shall  be
determined as though such benefits are  distributed as a joint and 50% surviving
spouse annuity benefit for the life of Executive and his Wife spouse  commencing
on the  Survivor  Payment  Commencement  Date,  with the  deemed  amount of such
payments  actuarially  equivalent to the form in fact being  provided  under the
Qualified  Retirement  Plan and the  Retirement  Equalization  Plan  (using  the
actuarial assumptions then applicable to each of the respective plans).

         (f)  Illustrations  of a manner  of  computation  of the  amount of the
payments that the parties have agreed is acceptable is set forth as Supplement 1
to this Agreement.

         7. CONFIDENTIALITY.  Executive agrees that, while he is employed by the
Company,  and at all times thereafter,  he shall continue to hold in a fiduciary
capacity for the benefit of the Company all secret or confidential  information,
knowledge  or data  relating to the Company and any other  business or entity in
which at any relevant time the Company  holds greater than a 10% equity  (voting
or  non-voting)  interest  (an  "Affiliate")  that shall have been  obtained  by
Executive  during his  employment  by or  affiliation  with the Company and that
shall  not  be  public  knowledge  other  than  by  acts  of  Executive  or  his
representative ("Confidential Material"). Executive shall not, without the prior
written  consent  of the  Chairman,  communicate  or  divulge  any  Confidential
Material to anyone other than the Company and those designated by it.

         8.  COMPETITION.  Executive hereby agrees that, while he is employed by
the Company, and for a period of 24 months following the date of his termination
of  employment  with the  Company  for any  reason,  he will  not,  directly  or
indirectly,  without the prior written approval of the Chairman,  enter into any
business  relationship  (either as  principal,  agent,  board  member,  officer,
consultant, stockholder, employee or in any other capacity) with any business or
other entity that at any  relevant  time engages in the business of insurance (a
"Competitor");  provided,  however,  that  such  prohibited  activity  shall not
include the  ownership of less than 5% of the voting  securities of any publicly
traded  corporation  regardless  of the business of such  corporation.  Upon the
written request of Executive,  the Chairman will determine whether a business or
other entity constitutes a "Competitor" for purposes of this Section 8; provided
that the Chairman  may require  Executive  to provide  such  information  as the
Chairman  determines  to be  necessary to make such  determination;  and further
provided that the current and continuing effectiveness of such determination may
be conditioned on the accuracy of such information, and on such other factors as
the Chairman may determine.

         9.  SOLICITATION.  Executive  agrees  that while he is  employed by the
Company,  and for a period of 36 months  following his termination of employment
with the Company for any reason, he will not employ, offer to employ,  engage as
a consultant,  or form an association with any person who is then, or who during
the  preceding  one year was, an employee of the Company or any  Affiliate,  nor
will he assist any other person in soliciting for employment or consultation any
person who is then, or who during the preceding one year was, an employee of the
Company or any Affiliate.

         10. NON-INTERFERENCE. Executive agrees that while he is employed by the
Company,  and for a period of 36 months  following his termination of employment
with the Company  for any reason,  he will not disturb or attempt to disturb any
business  relationship  or agreement  between either the Company or an Affiliate
and any other person or entity.

         11. ASSISTANCE WITH CLAIMS. Executive agrees that, while he is employed
by  the  Company,  and  for a  reasonable  period  (not  less  than  60  months)
thereafter,  he will be available,  on a reasonable basis, to assist the Company
and its subsidiaries and affiliates in the prosecution or defense of any claims,
suits, litigation,  arbitrations,  investigations, or other proceedings, whether
pending or  threatened  ("Claims")  that may be made or threatened by or against
the Company or any of its subsidiaries or affiliates.  Executive agrees,  unless
precluded  by law, to  promptly  inform the  Company if he is  requested  (i) to
testify or otherwise  become  involved in connection  with any Claim against the
Company or any  subsidiary or affiliate or (ii) to assist or  participate in any
investigation (whether governmental or private) of the Company or any subsidiary
or  affiliate or any of their  actions,  whether or not a lawsuit has been filed
against the Company or any of its subsidiaries or affiliates  relating  thereto.
For  periods  following  the  36-month  anniversary  of the date of  Executive's
termination  of  employment  with the  Company,  the  Company  agrees to provide
reasonable compensation to Executive for such assistance.

         12. RETURN OF MATERIALS.  Executive shall, at any time upon the request
of the Company, and in any event upon the termination of his employment with the
Company,  for whatever reason,  immediately  return and surrender to the Company
all originals and all copies, regardless of medium, of property belonging to the
Company or the Affiliates, created or obtained by Executive as a result of or in
the course of or in connection with his employment  with the Company  regardless
of  whether  such  items  constitute  proprietary  information,   provided  that
Executive shall be under no obligation to return written materials acquired from
third  parties  which  are   generally   available  to  the  public.   Executive
acknowledges  that all  such  materials  are,  and will  remain,  the  exclusive
property of the Company and the Affiliates.

         13. EFFECT OF BREACH.  Executive acknowledges that his violation of the
covenants  set forth in  Sections 7, 8, 9, 10, and 12 could cause the Company or
the  Affiliates  irreparable  harm  and he  agrees  that  the  Company  and  the
Affiliates  shall be entitled to injunctive  relief  restraining  Executive from
actual or threatened  breach of the covenants and that if bond is required to be
posted in order for the  Company or the  Affiliates  to secure  such relief said
bond  need  only  be in a  nominal  amount.  The  right  of the  Company  or the
Affiliates to seek injunctive  relief shall be in addition to any other remedies
available  to the  Company  and the  Affiliates  with  respect  to an alleged or
threatened breach.

         14.  LIMITATION  ON  REMEDIES.  The  Company  shall not be  entitled to
suspend payments  otherwise due to Executive by reason of Executive's  violation
of Sections 7, 8, 9, 10, and 12 (whether  before or after a judgment is obtained
by the Company against Executive).  The Company shall not be entitled to set off
against the amounts  payable to Executive  under this Agreement any amounts owed
to the Company by Executive. Nothing in this Section 14 shall limit the remedies
of the Company and the Affiliates in the case of  Executive's  violation of this
Agreement, except as otherwise specifically provided in this Section 14.

         15.  EFFECT OF  COVENANTS.  Nothing  in  Sections 7 through 14 shall be
construed  to  adversely  affect the rights that the Company and the  Affiliates
would possess in the absence of the provisions of such Sections.

         16. REVISION. The parties hereto expressly agree that in the event that
any of the provisions, covenants, warranties or agreements in this Agreement are
held to be in any respect an  unreasonable  restriction  upon  Executive  or are
otherwise invalid, for whatsoever cause, then the court or arbitrator so holding
is hereby  authorized  to (a)  reduce  the  territory  to which  said  covenant,
warranty  or  agreement  pertains,  the period of time in which  said  covenant,
warranty or agreement  operates or the scope of activity to which said covenant,
warranty  or  agreement  pertains  or (b) effect any other  change to the extent
necessary  to  render  any of  the  restrictions  contained  in  this  Agreement
enforceable.

         17. SEVERABILITY. Each of the terms and provisions of this Agreement is
to be deemed  severable in whole or in part and, if any term or provision of the
application  thereof  in  any  circumstances  should  be  invalid,   illegal  or
unenforceable,  the remaining terms and provisions or the application thereof to
circumstances  other  than  those  as to which it is held  invalid,  illegal  or
unenforceable,  shall not be affected thereby and shall remain in full force and
effect.

         18. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be binding upon
the  parties   hereto  and  their   respective   heirs,   successors,   personal
representatives  and  assigns.  The Company  shall have the right to assign this
Agreement to any  successor in interest to the  business,  or any majority  part
thereof, of the Company or any joint venture or partnership to which the Company
is a joint venturer or general partner which conducts  substantially  all of the
Company's business.  Executive shall not assign any of his obligations or duties
hereunder and any such attempted assignment shall be null and void.

         19. CONTROLLING LAW; JURISDICTION. This Agreement shall be governed by,
interpreted  and  construed  according  to the  laws of the  State  of  Illinois
(without regard to conflict of laws principles).

         20.  ARBITRATION OF ALL DISPUTES.  Any controversy or claim arising out
of or relating to this  Agreement  (or the breach  thereof)  shall be settled by
final,  binding and  non-appealable  arbitration  in Chicago,  Illinois by three
arbitrators.  Except as  otherwise  expressly  provided in this  Section 20, the
arbitration  shall be  conducted  in  accordance  with the rules of the American
Arbitration   Association  (the  "Association")  then  in  effect.  One  of  the
arbitrators  shall be  appointed  by the  Company,  one  shall be  appointed  by
Executive, and the third shall be appointed by the first two arbitrators. If the
first two arbitrators cannot agree on the third arbitrator within 30 days of the
appointment  of the  second  arbitrator,  then  the  third  arbitrator  shall be
appointed  by the  Association.  This Section 20 shall not be construed to limit
the Company's right to obtain relief under Section 13 with respect to any matter
or controversy  subject to Section 13 and, pending a final  determination by the
arbitrator with respect to any such matter or controversy,  the Company shall be
entitled to obtain any such relief by direct  application  to state,  federal or
other applicable court, without being required to first arbitrate such matter or
controversy.

         21. ENTIRE AGREEMENT.  Except as otherwise  expressly set forth herein,
this Agreement  contains the entire  agreement of the parties with regard to the
subject matter  hereof,  supersedes  all prior  agreements  and  understandings,
written or oral,  and may only be amended by an agreement  in writing  signed by
the parties  thereto.  Upon  execution of this Agreement by both the Company and
Executive,  Executive  shall  relinquish  all rights to any  amounts  that would
otherwise be payable for the performance  year 1999 (otherwise  payable in 2003)
under  the  Specialty  Operations  Long-Term  Incentive  Plan.  Nothing  in this
paragraph  21 shall be  construed  to reduce any amount  which  Executive  would
otherwise receive under the Specialty  Operations  Long-Term  Incentive Plan for
performance years ending before January 1, 1999; provided that the effectiveness
of this Agreement  shall be  conditioned on Executive and the Company  executing
the Deferral  Agreement  set forth as Supplement 2 to this  Agreement,  which is
attached  to and  forms a part  of this  Agreement,  and the  provisions  of the
Deferral  Agreement  shall  be  applicable  to the  rights  of  Executive  under
Specialty  Operations  Long-Term  Incentive Plan for performance  years 1995 and
1996  (payable in 2000 and 2001,  respectively),  and 1997 and 1998  (payable in
2001 and 2002, respectively).

         22. ADDITIONAL  DOCUMENTS.  Each party hereto shall, from time to time,
upon request of the other party,  execute any additional  documents  which shall
reasonably be required to effectuate the purposes hereof.

         23. INCORPORATION. The introductory recitals hereof are incorporated in
this Agreement and are binding upon the parties hereto.

         24. FAILURE TO ENFORCE. The failure to enforce any of the provisions of
this Agreement shall not be construed as a waiver of such  provisions.  Further,
any  express  waiver by any party with  respect  to any breach of any  provision
hereunder by any other party shall not constitute a waiver of such party's right
to thereafter fully enforce each and every provision of this Agreement.

         25.  SURVIVAL.  Except as otherwise set forth herein,  the  obligations
contained  in this  Agreement  shall  survive  the  termination,  for any reason
whatsoever, of Executive's employment with the Company.

         26.  HEADINGS.  All  numbers  and  headings  contained  herein  are for
reference  only and are not intended to qualify,  limit or otherwise  affect the
meaning or interpretation of any provision contained herein.

         27. NOTICES.  Notices and all other communications provided for in this
Agreement  shall be in  writing  and shall be  delivered  personally  or sent by
registered  or  certified  mail,  return  receipt  requested,   postage  prepaid
(provided  that  international  mail  shall be sent  via  overnight  or  two-day
delivery),  or sent by facsimile or prepaid  overnight courier to the parties at
the addresses set forth below (or such other  addresses as shall be specified by
the  parties  by  like  notice).  Such  notices,   demands,   claims  and  other
communications shall be deemed given:

         (a)      in the case of delivery by overnight service with guaranteed
next day delivery, the next day or the day designated for delivery;

         (b)      in the case of certified or registered U.S. mail, five days
after deposit in the U.S. mail; or

         (c) in the case of  facsimile,  the date upon  which  the  transmitting
party received confirmation of receipt by facsimile, telephone or otherwise;

provided,  however,  that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that are
to be delivered by the U.S.  mail or by  overnight  service or two-day  delivery
service are to be delivered to the addresses set forth below:

         If to the Company:

         CNA Financial Corporation
         CNA Plaza
         Chicago, IL 60685
         Attn:  Corporate Secretary
         Facsimile No.:  (312)817-0511

         If to Executive:

         Thomas F. Taylor
         78 Pine Cove Road
         Fair Haven, NJ  07704

or to such other  address as either party shall  furnished to the other party in
writing in accordance with the provisions of this Section 27.

         28.  GENDER.  The  masculine,  feminine or neuter  pronouns used herein
shall be interpreted  without  regard to gender,  and the use of the singular or
plural shall be deemed to include the other whenever the context so requires.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on
the Signing Date.

CNA FINANCIAL CORPORATION

By:  /S/JONATHAN D. KANTOR

Title: Senior Vice President, General Counsel
       and Secretary


THOMAS F. TAYLOR

/S/THOMAS F. TAYLOR
<PAGE>

                                  SUPPLEMENT 1
                        ILLUSTRATIONS OF ENHANCED PENSION

         For illustrative  purposes only; actual calculations to be made at time
         of  payment   commencement   date  based  on  compensation,   actuarial
         equivalence and other factors existing at that time.
<TABLE>
<CAPTION>
                                         --------------------- PAYMENT COMMENCEMENT DATE--------------
                                          12/31/04            12/31/07      12/31/10     12/31/13
<S>                                     <C>             <C>            <C>           <C>
TARGET BENEFIT
Target Benefit [Max (66-2/3% of Base,   $  501,637.50    $  580,708.11 $  672,242.23 $778,204.41 Plan
Benefit)]

SOURCES AT PAYMENT COMMENCEMENT DATE
Qualified Plan                          $   35,754.84 (a)$   36,495.86 $   62,168.51 $   97,416.72

SERP                                       120,473.79 (b)   247,007.27    410,872.29    647,883.38

Enhanced Pension                           173,194.26       179,601.96    187,619.54     32,904.31
Total                                   $  329,422.89    $  463,105.09 $  660,660.34    778,204.41

Present Value at Payment Commencement Date
Qualified Plan                          $  133,480.19 (a)$  406,408.25 $  662,708.26 $  985,426.67

SERP (Includes Pre-62 Supplement)        1,682,264.81 (c) 2,766,533.75  4,394,788.74  6,553,716.33

Enhanced Pension                         2,000,000.00     2,000,000.00  2,000,000.00    332,846.23

Total                                   $3,815,745.00    $5,172,942.00 $7,057,497.00  $7,871,989.23


                                         ---------------------------- PAYMENT COMMENCEMENT DATE-------

                                           12/31/04         12/31/07             12/31/10     12/31/13

SPOUSE BENEFITS

TARGET BENEFIT
Target Benefit [Max (33-1/3% of Base,    $  250,818.75      $  290,354.06      $336,121.11     $  389,102.20
Plan Benefit)]

SOURCES AT PAYMENT COMMENCEMENT DATE
Qualified Plan                           $   16,447.23   (a)$   17,591.00      $  29,592.21    $   45,785.86

SERP                                         59,792.34   (d)   119,057.50        195,575.21       304,505.19

Enhanced Pension                             91,917.78          96,473.78         102,208.30       38,811.15
Total                                    $  168,157.35      $  233,122.28      $  327,375.72   $  389,102.20


PRESENT VALUE AT PAYMENT COMMENCEMENT DATE
Qualified Plan                           $   56,430.25   (a)$  182,339.69      $  289,528.44   $  418,572.72

SERP (Includes Pre-62 Supplement)           778,473.75   (c) 1,241,275.31       1,919,373.56    2,783,775.28

Enhanced Pension                          1,000,000.00       1,000,000.00       1,000,000.00      354,810.17

Total                                    $1,834,904.00      $2,423,615.00      $3,208,902.00   $3,557,158.17
</TABLE>
(a) Not available until age 65. Present value reflects  deferred  payment at age
    65.
(b) $156,228.63  prior to age 62.
(c) Includes  subsidy on the  qualified
    benefit not payable at the current age.
(d)  $76,239.57 prior to age 65.
<PAGE>

                                  Supplement 2

                               DEFERRAL AGREEMENT

         THIS AGREEMENT (the  "Agreement"),  made and entered into as of the 2nd
day of  November,  1999 (the  "Signing  Date"),  by and  between  CNA  Financial
Corporation, a Delaware corporation (the "Company"), and Thomas F.
Taylor (the "Executive");

                                WITNESSETH THAT:

         WHEREAS,  the Company has required the deferral of compensation payable
to the  Executive by the Company and the Related  Companies  (as defined  below)
under the Specialty  Operations Long-Term Incentive Plan that would otherwise be
non-deductible  by reason of section 162(m) of the Code (as defined below),  and
thereby  avoid the loss of such  deduction,  and the Executive has accepted such
deferral, and the parties have agreed to enter into this Agreement providing for
the deferral and for  compensation to be provided to the Executive in return for
his acquiescence to such deferral;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below,  it is hereby  covenanted  and agreed by the  Executive and the
Company as follows:

         1. Effective  Date.  This Agreement  shall be effective with respect to
amounts payable under the Specialty Operations Long-Term Incentive Plan that are
attributable  to  performance  years  1995 and 1996  (payable  in 2000 and 2001,
respectively),  and 1997 and 1998 (payable in 2001 and 2002, respectively) which
relate to Executive (the "Covered Compensation").

         2. Deferred Amount.  If any Covered  Compensation  otherwise payable to
the Executive by the Company or any Related Company would be  non-deductible  by
reason of Code section  162(m),  such amount shall not be paid to the  Executive
when otherwise due, but an amount equal to the foregone payment shall instead be
credited to the Executive's Deferral Account in accordance with this paragraph 2
and  paragraph  3. In  determining  the amounts  subject to deferral  under this
paragraph 2, the following shall apply:

(a)      To the extent  necessary in determining  whether amounts payable to the
         Executive  would be  non-deductible  for any year,  the  Committee  (as
         defined  below)  shall  make the  determinations  required  under  this
         paragraph 2 based on an estimate of the total  compensation  to be paid
         to the  Executive  for the  year  (including  both  cash  and  non-cash
         compensation   and  benefits  that  would  be  taken  into  account  in
         determining   whether  the  limitations  of  Code  section  162(m)  are
         exceeded).

(b)      In  determining  whether  amounts  payable  to the  Executive  would be
         non-deductible  for any year,  the Committee  shall assume that, to the
         extent that such total  annual  compensation  exceeds $1  million,  the
         excess is  attributable  to  Covered  Compensation  (not to exceed  the
         maximum amount of Covered  Compensation  otherwise  payable during that
         year).

(c)      In estimating  the  Executive's  total  compensation  for any year, the
         Committee  may request that the  Executive  forecast  whether,  for the
         year, he will be receiving any  compensation  the timing of which is in
         the Executive's discretion.

         3. Deferral  Account.  The Deferral  Account  balance shall be credited
with the amount  determined  in accordance  with  paragraph 2, as of the date on
which such amount would  otherwise  have been paid to the Executive  were it not
for deferral  under this  Agreement.  For any period  during  which  amounts are
credited to the Deferral  Account,  they shall be credited  with interest at the
interest  rates  applicable  to  accounts  maintained  under the CNA  Employees'
Supplemental Savings Plan (the "Supplemental Plan") for the respective period.

         4.  Time  of  Payment  of  Deferred  Amount.  Amounts  credited  to the
Executive's Deferral Account shall be paid upon the earliest of the following:

(a)      As soon as practicable after the Committee determines that such amounts
         will be deductible  when paid (provided  that the Committee  reasonably
         determines  that payment of such  amounts will not cause other  amounts
         (whether cash or non-cash) to become  non-deductible  by reason of Code
         section 162(m)).

(b)      As soon as practicable after the Committee determines that such amounts
         will not be  deductible  by the  Company  when paid,  and that  further
         deferral will not result in such amounts becoming deductible.

(c)      As soon as practicable  after the beginning (but not later than January
         30) of the first calendar year following the calendar year in which the
         Executive  ceases  to be  employed  by  the  Company  and  all  Related
         Companies

Payment shall be made under this paragraph 4 not later than the date  determined
under  paragraph (c),  regardless of whether such payments are deductible by the
Company.

         5. Form of Payment of Deferred Amount.  To the extent that an amount is
payable to or on behalf of the Executive with respect to the Deferral Account in
accordance with paragraph 4, it shall be paid by the Company in a cash lump sum.

         6. Other Costs and Benefits.  This Agreement is intended to defer,  but
not to eliminate, payment of compensation to the Executive.  Accordingly, if any
compensation  or benefits  that would  otherwise be provided to the Executive in
the absence of this  Agreement  are reduced or  eliminated by reason of deferral
under this Agreement,  the Company shall equitably  compensate the Executive for
such reduction or elimination, and the Company shall reimburse the Executive for
any  increased  or  additional  penalty  taxes  which he may  incur by reason of
deferral under this Agreement  which would not have been incurred in the absence
of such deferral,  except that no reimbursement will be made for taxes resulting
from an increase or decrease in individual  income tax rates,  or resulting from
an increase in the amount of compensation  payable to the Executive by reason of
the accrual of earnings or any other provision of this Agreement.

         7.  Transferability.  Awards  granted  under  this  Agreement  are  not
transferable  except as  designated  by the  Executive by will or by the laws of
descent and  distribution.  If any benefits  deliverable to the Executive  under
this  Agreement have not been  delivered at the time of the  Executive's  death,
such  rights  shall  be  exercisable  by the  Designated  Beneficiary,  and such
benefits shall be delivered to the Designated  Beneficiary,  in accordance  with
the  provisions  of the  applicable  terms of this  Agreement.  The  "Designated
Beneficiary"  shall  be  the  beneficiary  or  beneficiaries  designated  by the
Executive to receive  benefits  under the  Company's  group term life  insurance
plan.  If the deceased  Executive  fails to designate a  beneficiary,  or if the
Designated   Beneficiary   does  not  survive  the   Executive,   any   benefits
distributable to the Executive shall be exercised by or distributed to the legal
representative  of the  estate  of the  Executive.  If  the  deceased  Executive
designates a beneficiary and the Designated  Beneficiary  survives the Executive
but  dies  before  the  complete  distribution  of  benefits  to the  Designated
Beneficiary  under  this  Agreement,  then  any  benefits  distributable  to the
Designated  Beneficiary shall be distributed to the legal  representative of the
estate of the Designated Beneficiary.

         8. Related  Companies.  The term  "Related  Company"  means any company
during any period in which  compensation  paid to the  Executive by such company
would be required to be aggregated  with  compensation  paid to the Executive by
the Company,  in accordance with the affiliated  group rules  applicable to Code
section 162(m).  The Company shall enter into such arrangements with the Related
Companies as it shall deem appropriate to implement the terms of this Agreement,
and shall  inform the  Executive  of any  material  failure to provide  for such
implementation.

         9.  Committee.  This Agreement  shall be  administered by the committee
responsible  for  administering  the  Supplemental  Plan (the  "Committee"),  in
accordance with rules applicable to that plan.

         10.  Statements.   The  Committee  shall  provide  the  Executive  with
statements of the Executive's Deferral Account at substantially the same time as
those statements are provided under the  Supplemental  Plan. Upon request of the
Executive,  the  Committee  shall  provide  the  computations  of amounts  under
paragraph 2 and paragraph 4.

         11.  Notices.  Any  notices  required to be given by the Company to the
Executive shall be provided in writing,  and either personally  delivered to the
Executive,  or mailed by registered mail,  postage prepaid,  to the Executive at
the last mailing address provided by the Executive to the Company.

         12.  Limitation of Implied Rights.  Neither the Executive nor any other
person shall, by reason of this Agreement,  acquire any right in or title to any
assets,  funds  or  property  of  the  Company  whatsoever,  including,  without
limitation,  any specific funds, assets, or other property which the Company, in
its sole  discretion,  may set aside in  anticipation  of a liability under this
Agreement.  The  Executive  shall have only a  contractual  right to the amounts
payable  under  this  Agreement,  unsecured  by any assets of the  Company,  and
nothing contained in this Agreement shall constitute a guarantee that the assets
of the Company  shall be  sufficient  to pay any  benefits  to any  person.  The
Company  shall not be entitled  to set off  against  the amounts  payable to the
Executive under this Agreement any amounts owed to the Company by the Executive.

         13.  Code.  For purposes of this  Agreement,  the term "Code" means the
Internal  Revenue Code of 1986,  as amended.  References to sections of the Code
also refer to any successor provisions thereof.  References in this Agreement to
an amount being  "deductible"  refer to its being deductible by the Company or a
Related  Company for Federal  income tax purposes;  provided,  however,  that if
deductibility  would not be precluded by reason of Code section 162(m),  then it
shall be deemed to be "deductible" for purposes of this Agreement, regardless of
whether it is non-deductible for any other reason. If, after the Effective Date,
there is a change in the  provisions or  interpretation  of Code section  162(m)
which  would have a material  effect on the  benefits  to the  Executive  or the
Company,  the parties  shall  negotiate in good faith to preserve the benefit of
this  Agreement  for both  parties;  provided,  however,  that  nothing  in this
Agreement  shall be construed to require the  Executive to consent to any change
in the Agreement without reasonable compensation therefore.

         14. Amendment. This Agreement may be amended or canceled only by mutual
agreement of the parties in writing without the consent of any other person.  So
long as the Executive  lives, no person,  other than the parties  hereto,  shall
have any rights  under or  interest  in this  Agreement  or the  subject  matter
hereof.

         15.  Applicable Law. This Agreement shall be construed and administered
in  accordance  with the laws of the State of  Illinois  to the extent that such
laws are not preempted by the laws of the United States of America.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement on
the Signing Date.


CNA FINANCIAL CORPORATION

By: /S/JONATHAN D. KANTOR

Title: Senior Vice President, General Counsel
       and Secretary


THOMAS F. TAYLOR


/S/THOMAS F. TAYLOR