EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 4th day of
February, 2000, effective as of the Effective Date as hereinafter defined, by
and between CNA Financial Corporation, a Delaware corporation (the "Company"),
and Bernard L. Hengesbaugh ("Executive"). For purposes of Sections 8 through 16,
the "Company" shall include its subsidiaries, affiliates and related entities.

                                   WITNESSETH:

         WHEREAS, Executive currently serves as the Chairman and Chief Executive
Officer of all of the principal subsidiaries of the Company pursuant to the
terms of that certain Employment Agreement with the Company, dated as of
February 9, 1999 (the "Prior Employment Agreement"); and

WHEREAS, the Company and the Executive now desire to terminate the Prior
Employment Agreement and to enter into a new employment agreement in
substitution for the Prior Employment Agreement;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the Executive and the Company hereby agree to the following
provisions, which shall supersede and be substituted for the provisions of the
Prior Employment Agreement:

         1. EMPLOYMENT TERM. The Company and Executive agree that the Company
shall continue to employ Executive on the terms and conditions set forth herein
beginning on the Effective Date and 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. The "Effective Date" of this Agreement shall
be January 1, 2000.

         2. DUTIES OF EXECUTIVE.

         (a) Executive shall serve as the Chief Executive Officer of Continental
Casualty Company ("CCC"), the principal insurance subsidiaries of the Company,
and such other subsidiaries of the Company as may be determined by the Board or
the Chief Executive Officer of the Company (the "CNAF CEO"). All of the
Company's subsidiaries including CCC and companies not engaged in the insurance
business, are sometimes collectively referred to herein as the "CNA Companies".
As Chief Executive Officer, Executive shall have responsibility for the day to
day operations of the CNA Companies and for development and implementation of
the CNA Companies' business plans and strategies. Executive shall report to the
Board of Directors of the Company (the "Board"). Executive shall be elected and
shall serve as a member and chairman of the board of directors of CCC, and of
such of the other CNA Companies as may be determined by the Board or the CNAF
CEO, and if so elected, Executive agrees to serve on such boards in such
capacity without additional compensation.

         (b) Executive shall diligently and to the best of his abilities assume,
perform, and discharge the duties and responsibilities of Chairman and Chief
Executive Officer of the CNA Companies as determined by the Board, as well as
such other specific duties and responsibilities as the Board 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 Board, 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 its subsidiaries and its affiliates, other than
in the form of publicly traded securities constituting fewer than five percent
(5%) of the outstanding securities of a corporation (determined by vote or
value) or limited partnership interests constituting fewer than five percent
(5%) of the value of any such partnership. The foregoing shall not preclude


                                    Page 46




Executive from engaging in charitable, professional, and personal investment
activities, provided that, in the reasonable judgment of the Board, such
activities do not materially interfere with his performance of his duties and
responsibilities hereunder.

         3. COMPENSATION.

         (a) SALARY. The Company shall pay or cause to be paid to Executive,
commencing on the Effective Date and continuing for the period he is employed by
the Company hereunder, an annual base salary of NINE HUNDRED FIFTY THOUSAND AND
NO ONE HUNDREDTHS DOLLARS ($950,000.00), payable not less frequently than
monthly (the "Base Compensation"). Such salary shall be reviewed not less
frequently than annually, commencing not later than one year after the Effective
Date, by the Board with a view to making such positive adjustments as the Board
deems equitable and appropriate based on Executive's performance and the overall
profitability and revenue growth of the Company, and if the Board approves an
increase, the increased amount shall thereafter be considered the Executive's
Base Compensation for all purposes of this Agreement. In no event shall
Executive's base salary rate be reduced to an amount that is less than his Base
Compensation, 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") on terms no less favorable to the Executive than the
performance criteria and amounts established by the Incentive Compensation
Committee (the "Committee") in its August 4, 1999 meeting (the "Performance
Criteria"). The establishment of the Performance Criteria by the Committee shall
constitute the establishment of performance criteria under the Incentive
Compensation Plan for each of the years included in the term of this Agreement,
and payment of the Incentive Compensation Awards shall otherwise be in
accordance with the provisions of the Incentive Compensation Plan, including the
requirement of annual review and certification by the Committee of the awards;
provided that satisfaction of the Performance Criteria shall be based on net
income as defined in the Incentive Compensation Plan; and provided further that
the Committee shall not exercise its negative discretion under the Incentive
Compensation Plan to decrease the amount of the Incentive Compensation Award for
any year by more than 10 percent.

         (c) LONG-TERM INCENTIVE AWARDS. During the term of this Agreement,
Executive shall be entitled to annual grants of stock options (the "Stock
Options"), to be granted under and in accordance with the terms of the CNA
Financial Corporation 2000 Long Term Incentive Plan ("LTIP"), contingent on
approval of the LTIP by the Company's shareholders at the Company's 2000 annual
shareholders meeting. The target amount of Stock Options to be granted in each
year shall be the amounts determined by the Committee in its August 4, 1999,
meeting, but the actual amount of Stock Options to be granted for any year shall
be determined by the Committee based on the performance of the Executive and the
CNA Companies. For purposes of the LTIP, each calendar year during the term of
this Agreement shall be considered a Performance Period. Any other awards under
the LTIP shall be in the sole discretion of the Committee, in accordance with
the terms of the LTIP.

         4. OTHER BENEFITS. Commencing on the Effective Date, Executive shall be
entitled to participate in the various benefit plans, programs or arrangements
established and maintained by the Company from time to time applicable to senior
executives of the Company and all fringe benefits made available to grade 96
executives of the Company and its subsidiaries. Executive's entitlement to
participate in any such plan, program or arrangement shall, in each case, be
subject to the terms and conditions thereof, subject to the following:

                                    Page 47


         (a) In determining the amount of Executive's retirement benefit under
the CNA Supplemental Executive Retirement 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 all Incentive
Compensation Awards or other cash incentive compensation payable 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), but shall not include any
awards granted to Executive under the LTIP.

         (b) The Company currently maintains the CNA Supplemental Executive
Savings Plan (the "Supplemental Plan"), which currently permits participants to
make elective deferrals of certain compensation (the "Eligible Compensation"),
not to exceed 16% of the Eligible Compensation. Further, the Supplemental Plan
currently provides for an additional Company allocation equal to 70% of the
amount electively deferred by the participant under the plan, not to exceed 6%
of the participant's Eligible Compensation. For purposes of determining the
maximum amount which may be deferred under the Supplemental Plan, and for
purposes of determining the amount of the matching allocation, Executive's
"Eligible Compensation" shall include all Incentive Compensation Awards or other
cash incentive compensation payable to Executive (with such amounts to be
includible at the time they would otherwise be paid to Executive in the absence
of any elective deferral by Executive). Eligible Compensation shall not include
any awards granted to Executive under the LTIP.

         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.

         6. TERMINATION OF EMPLOYMENT. Executive's employment with the Company
hereunder shall continue until the earlier of December 31, 2002 (or the date to
which the term is extended pursuant to Section 6.6(a)), 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. 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. In such event:

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

         (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 Executive's death
         or Permanent Disability.

         (iii) A pro-rata portion of the amount of the Incentive Compensation
         Award that the Executive would have earned for the performance period
         in which the termination occurs determined by multiplying the Incentive
         Compensation Award that would have been earned had the Executive
         remained employed through the end of such performance period (as
         determined by actual performance through the end of that period and
         without any exercise of negative discretion) 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.


                                    Page 48



         (iv) In the event that the termination occurs during a Performance
         Period under the LTIP with respect to which the Committee has not yet
         made an award of Stock Options (or affirmatively determined not to make
         an award) pursuant to paragraph 3(c), an amount equal to the cash
         equivalent (determined under the methodology described in paragraph
         6.3, as of the date of termination and without any present value
         discount) of the target amount referred to in paragraph 3(c) for such
         Performance Period multiplied by a fraction, the numerator of which is
         the number of days in such Performance Period through and including the
         date of termination and the denominator of which is the total number of
         days in such Performance Period.

         (v) Any unexercised Stock Option held by Executive upon termination of
         employment may be exercised by Executive (or his heirs or personal
         representative) following such termination to the extent of the sum of
         the number of shares with respect to which the Stock Option was vested
         but unexercised immediately prior to such termination, plus an
         additional number of shares determined by multiplying the unvested
         portion of the Stock Option by the fraction described in paragraph
         6.1(a)(iv), and rounded to the next higher number of whole shares. Such
         portion of the Stock Options 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. Other options held by Executive may be
         exercised during the same period, but only to the extent vested under
         the terms of such options. The provisions of this paragraph 6.1(a)(v)
         shall apply notwithstanding any contrary provision in any agreement
         governing any Stock Option or other option.

         (a) 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 the Incentive Compensation Plan or any plan, program or
arrangement described in Section 4, and his right under any long-term incentive
compensation plan, shall remain unaffected and 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.

         6.1. TERMINATION FOR CAUSE BY THE COMPANY. In the event that Executive
shall engage in any conduct that constitutes "Cause" as defined in the following
sentence, 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. For purposes of this Agreement, "Cause" shall include any conduct by the
Executive, which the Board, in good faith, shall determine to be fraudulent, a
breach of fiduciary duty, unlawful or criminal conduct, 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, but only if the Board also determines in good faith that such
conduct has had a material adverse effect on the business or prospects of the
Company. 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, or which is otherwise earned but
not yet paid as of the date of termination (including amounts voluntarily
deferred) 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 annual Incentive Award for the performance period
during which the termination occurs, or any Long-Term Incentive Award or other
amount that is unearned as of the date of termination, and any Stock Option or
other option that is unexercised on the date of termination, shall be forfeited,
and the Company shall have no further obligations under this Agreement.


                                    Page 49



         6.2. TERMINATION FOR CONVENIENCE BY THE COMPANY. In the event that
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 (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 three
hundred percent (300%) of Executive's annual rate of Base Compensation as in
effect immediately prior to his date of termination with such termination
payment to be made in substantially equal installments, not less frequently than
monthly, for a period of thirty-six (36) months following such termination.

         (b) The Company shall also pay to Executive a pro-rata portion of the
amount of the Incentive Compensation Award that he would have earned for the
performance period in which the termination occurs determined in the same manner
as in paragraph 6.1(a)(iii). Executive shall not be entitled to any Incentive
Compensation Award for the period following termination, it being the intent of
the parties that the portion of the termination payments described in paragraph
6.3(a)(iii) that exceeds Base Compensation shall be in lieu of such Incentive
Compensation.

         (c) The Executive shall receive a payment equal to the cash equivalent
of all Stock Options which he would have received if his employment had
continued until December 31, 2002, and if the target number of Stock Options
described in paragraph 3(c) had been granted for each remaining Performance
Period between the last Performance Period for which an award was made (or for
which the Committee affirmatively determined to make no award) prior to the date
of termination and December 31, 2002. The cash equivalent of a future Stock
Option grant shall be equal to 48% of the fair market value of the number of
shares of stock to be covered by the Stock Option, determined based on the on
the fair market value of the stock on the date of termination, and then
discounted from January 1 of the year for which the Stock Option would have been
granted to the date of termination using an interest rate equal to the prime
rate for the date of termination as reported in THE WALL STREET JOURNAL (Midwest
Edition). Fair market value of the Stock shall be determined by taking the
average of the highest and lowest sales prices of the Stock on the date of
termination, as reported as the New York Stock Exchange-Composite Transactions
for such day, or if the Stock was not traded on the New York Stock Exchange on
such day then on the next preceding day on which the stock was traded, all as
reported by THE WALL STREET JOURNAL (Midwest Edition) under the heading New York
Stock Exchange-Composite Transactions, or, if the stock ceases to be listed on
such exchange, as reported on the principal national securities exchange or
national automated stock quotation system on which the stock is traded or
quoted, but in no event shall the price be less than the par value of the stock.
Payment pursuant to this paragraph (iv) shall be made as soon as practicable
after Executive's date of termination.

         (d) Any unexercised Stock Option held by Executive upon termination of
employment shall be fully vested on the date of termination and may be exercised
by the Executive at any time up to the first anniversary of Executive's date of
termination (but not later than the date on which such Stock Option would expire
if Executive had remained employed by the Company). Any options other than Stock
Options may be exercised during the same period, but only to the extent vested
under the terms of such option. The provisions of this paragraph 6.3(d) shall
apply notwithstanding any contrary provision in any agreement governing any
Stock Option or other option.

                                    Page 50



         (e) In the event that Executive dies before all payments pursuant to
this Section 6 have been paid, all remaining payments shall be made to the
beneficiary specifically designated by the Executive in writing prior to his
death, or, if no such beneficiary was designated (or the Company is unable in
good faith to determine the beneficiary designated), to his personal
representative or estate. 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 remain unaffected and shall be
determined by the applicable terms of such plans, programs or arrangements.

         6.3. 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 6.2.

         (b) For purposes of this Agreement, the term "good reason" means any of
the following without Executive's written consent: (i) a reduction in the rate
of Executive's Base Compensation; (ii) any change in the Incentive Compensation
Plan, including an increase in the performance targets or a reduction in the
maximum Incentive Compensation Award (as a percentage of Base Compensation),
which has the effect of reducing the maximum Incentive Compensation Award that
the Executive may earn below the amounts specified in paragraph 3(b), other than
an exercise by the Committee of negative discretion to the extent permitted by
paragraph 3(b), or a failure by the Committee in good faith to determine that
the Performance Criteria have been satisfied; (iii) any change in the number of
the target number of Stock Options under the LTIP or any material adverse change
in the terms of any Stock Option after grant (other than a change permitted by
the terms of the LTIP as of the date of this Agreement); or (iv) a material
breach by the Company of any of the terms of this Agreement; provided, however,
that in no event shall the Executive's employment be considered to have
terminated for good reason unless the Executive shall give written notice to the
Company of his intention to terminate his employment, which notice shall be
given not later than 30 days following the date on which the Executive has
knowledge (or, with the exercise of reasonable diligence), would have knowledge,
of the Company's actions constituting good reason, and the Company shall have
failed within a reasonable time after receipt of such notice to correct such
conduct.

         6.4. 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, or which is otherwise earned but not yet paid as of
the date of termination (including amounts voluntarily deferred) 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
annual Incentive Award for the performance period during which the termination
occurs, or any Long-Term Incentive Award or other amount that is unearned as of
the date of termination, and any Stock Option or other option that is
unexercised on the date of termination, shall be forfeited, and the Company
shall have no further obligations under this Agreement. The rights of Executive
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 shall be determined by
the applicable terms of such plans, programs or arrangements.


                                    Page 51


         6.5. 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) if the
Company employs Executive under this section during the period from January 1,
2003 to March 31, 2003, he shall receive salary during such employment at the
annual rate of 400% 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, and LTIP awards for the performance period ending
December 31, 2002 to the extent provided by this Agreement, but Executive will
not be entitled to an Incentive Compensation Award, or LTIP awards 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 agreement 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 6.2 (but not
including any additional payment with respect to Stock Options pursuant to
paragraph 6.2(c)).

         7. PARACHUTE PAYMENT GROSS-UP. In the event that any payments made to
Executive under this Agreement 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 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.

         8. CONFIDENTIAL INFORMATION AND PROPRIETARY DATA.

         (a) 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 information, knowledge or data that is confidential or
proprietary (as defined in paragraph 8(b)) and that relates to either (i) the
Company, or (ii) any other business or entity in which the Company at any
relevant time holds, directly or indirectly, a greater than a 10% equity (voting
or non-voting) interest (in either case "Confidential Material"). Executive
shall not, without the prior written consent of the CNAF CEO, communicate or
divulge any Confidential Material to anyone other than the Company and those
individuals or entities designated by the Company. Executive agrees that upon
termination of his employment he shall return all copies and originals of
Confidential Material.

         (b) The term "confidential or proprietary" means information, knowledge
or data not known generally outside the Company (unless as a result of a breach
of any of the obligations imposed by this Agreement) concerning the business and
technical information of the Company or any entity described in paragraph 8(a),
including without limitation information relating to data, finances, agents,
trade secrets, processes, purchases, sales, customers, customer lists, price
lists, pricing, margins, financial and marketing data, business plans, and key
employees.

                                    Page 52


         9. 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 CNAF CEO, 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 competes in any respect with any of the
principal businesses of the Company (a "Competitor"); PROVIDED, HOWEVER, that
such prohibited activity shall not include the ownership of fewer than 5% of the
voting securities of any publicly traded corporation (determined by vote or
value) or limited partnership interests constituting fewer than five percent
(5%) of the value of any such partnership regardless of the business of such
corporation; and provided further, that this non-competition restriction shall
not preclude Executive from working for a Competitor in a non-executive
position, or a position which does not involve insurance operations or
strategies. Upon the written request of Executive, the CNAF CEO will determine
whether a business or other entity constitutes a "Competitor" for purposes of
this Section 9; provided that the Chief Executive Officer of CNA Financial
Corporation may require Executive to provide such information as the CNAF CEO
reasonably 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 CNAF CEO may reasonably determine.

         10. 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, 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, nor
will he encourage any person who is then an employee or agent of the Company to
terminate his or her employment or agency with the Company.

         11. 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 or employment relationship or agreement between the Company and any
other person or entity.

         12. ASSISTANCE WITH CLAIMS. Executive agrees that, while he is employed
by the Company, and for a reasonable period (not fewer than 36 months)
thereafter, he will be available, on a reasonable basis, to assist the Company
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. 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 (ii) to assist or participate in any investigation (whether
governmental or private) of the Company or any of their actions, whether or not
a lawsuit has been filed against the Company relating thereto.

         13. 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, 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.

                                    Page 53


         14. EFFECT OF BREACH. Executive acknowledges that his violation of the
covenants set forth in Sections 8, 9, 10, 11 and 13 could cause the Company
irreparable harm and he agrees that the Company shall be entitled to injunctive
relief from a court of competent jurisdiction restraining Executive from actual
or threatened breach of the covenants and that if bond is required to be posted
in order for the Company to secure such relief said bond need only be in a
nominal amount. The right of the Company to seek injunctive relief shall be in
addition to any other remedies available to the Company with respect to an
alleged or threatened breach.

         15. LIMITATION ON REMEDIES. The Company shall not be entitled to
suspend payments otherwise due to Executive by reason of Executive's violation
of Sections 8, 9, 10, 11 and 13, 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 15 shall limit the
Company's remedies in the case of Executive's violation of this Agreement,
except as otherwise specifically provided in this Section 15.

         16. EFFECT OF COVENANTS. Nothing in Sections 8 through 15 shall be
construed to adversely affect the rights that the Company would possess in the
absence of the provisions of such Sections and related entities.

         17. 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.

         18. 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.

         19. 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.

         20. 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).

         21. 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 21, 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
selected according to the rules of the Association. This Section 21 shall not be
construed to limit the Company's right to obtain relief in court under Section
14 with respect to any matter or controversy subject to Section 14 and, prior to

                                    Page 54


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.

         22. 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.

         23. 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.

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

         25. 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.

         26. 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.

         27. 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.

         28. 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 or facsimile numbers set forth below (or such other addresses or
facsimile numbers 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 or facsimile numbers set forth
below:

                                    Page 55


         If to the Company:

         CNA Financial Corporation
         CNA Plaza
         Chicago, IL 60685
         Attn: Corporate Secretary
         Facsimile Number:  (312) 817-0511

         If to Executive:

         Bernard L. Hengesbaugh
         202 Thompson Drive
         Wheaton, IL  60187
         Facsimile Number:  (630) 260-5932

or to such other address as either party shall furnish to the other party in
writing in accordance with the provisions of this Section 28.

         29. 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 as
of the date first above written.

CNA FINANCIAL CORPORATION


By:     /s/JONATHAN D. KANTOR
        -------------------------------------
Title:  Senior Vice President, General Counsel
         and Secretary

BERNARD L. HENGESBAUGH


/S/BERNARD L. HENGESBAUGH
---------------------------------------------
(executed on November 2, 2000)


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