Document:

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                                                                   Exhibit 10(9)

                              EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of JANUARY 1, 2002 by and between CNA Surety
Corporation a Delaware corporation or its subsidiaries ("the Company"), and JOHN
S. HENEGHAN ("the Executive").

                                   WITNESSETH:

WHEREAS, the Company wishes to continue to employ the Executive and the Company
and the Executive desire to enter into an agreement embodying the terms of such
employment (the "Agreement"); and

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
Company and the Executive hereby agree as follows:

1.       EMPLOYMENT.

         a. AGREEMENT TO EMPLOY. Upon the terms and subject to the conditions of
         this Agreement, the Company hereby agrees to continue to employ
         Executive and Executive agrees to employment by the Company.

         b. TERM OF EMPLOYMENT. Except as provided in Paragraph 5(a), the
         Company shall employ Executive for the period commencing on January 1,
         2002 (the "Commencement Date") and ending on December 31, 2003. The
         period during which Executive is employed pursuant to this Agreement
         and any extensions set forth in Paragraph 1(c) of this Agreement shall
         be referred to as the "Employment Period."

         c. RENEWAL. Upon expiration of the original term of this Agreement set
         forth in Paragraph 1(b) of this Agreement, this Agreement shall renew
         automatically for one (1) additional one (1) year term unless the
         Company or the Executive provides the other ninety days written notice
         that the Agreement will not be renewed.

2.       POSITION AND DUTIES.

         a. POSITION. During the Employment Period, Executive shall serve as
         Senior Vice President and Chief Financial Officer of the Company or in
         such other position or positions in the Company and/or in any of its
         subsidiaries as he and the Company shall mutually agree. In addition,
         Executive shall serve in such other position or positions with the
         Company and its subsidiaries commensurate with his position and
         experience as the Board of Directors of the Company (the "Board") shall
         from time to time specify.
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         b. DUTIES. During the Employment Period, Executive shall have the
         duties, responsibilities, and obligations, as the Board shall from time
         to time specify. Executive shall devote his full time to the services
         required of him hereunder, except for vacation time and reasonable
         periods of absence due to sickness, personal injury or other
         disability, and shall use his best efforts, judgment, skill and energy
         to perform such services in a manner consonant with the duties of his
         position and to improve and advance the business and interests of the
         Company and its subsidiaries. Nothing contained herein shall preclude
         Executive from (i) serving on the board of directors of any business
         corporation with the consent of the Board or (ii) serving on the Board
         of, or working for, any charitable or community organization.

         c. LOCATION. Subject to normal business travel, Executive shall perform
         his service hereunder in and shall not be required to change his place
         or residence from the Chicago metropolitan area.

3.       COMPENSATION.

         a. BASE SALARY. During the Employment Period, the Company shall pay
         Executive a base salary of $200,000 per year, payable in bi-weekly
         installments. The President and Compensation Committee of the Board
         shall annually review Executive's base salary in light of competitive
         practices and the performance of Executive and the Company, and may, in
         their discretion, increase such base salary by an amount they determine
         to be appropriate. Any such increase shall not reduce or limit any
         other obligation of the Company hereunder, Executive's base salary as
         set forth above or as may be increased from time to time and shall not
         be reduced without the mutual written consent of the Company and the
         Executive. Executive's base salary as defined in this paragraph may be
         referred to hereinafter as "Base Salary."

         b. ANNUAL BONUS. For each calendar year ending during the Employment
         Period, Executive may earn an annual bonus based on the achievement of
         target levels of performance achieved during the calendar year. During
         the first quarter of each year during the term of this Agreement, the
         President and the Compensation Committee of the Board in their sole
         discretion shall determine the targets and the bonus percentage ("Bonus
         Target") for which the Executive shall be eligible, which bonus
         percentages shall range from 0% to 70% of the Executive's Base Salary
         based upon the performance targets determined by the President and the
         Compensation Committee of the Board. The actual bonus, if any, payable
         for any such year shall be determined solely by the President and the
         Compensation Committee of the Board based upon the performance of the
         Company and/or Executive against the targets with a 35% target for
         "good performance".
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         c. LONG-TERM INCENTIVE COMPENSATION. During the term of the Employment
         period, Executive shall participate in all of the Company's existing
         and future long-term incentive compensation programs for key executives
         at a level commensurate with his position at the Company and consistent
         with the Company's then current policies and practices, as determined
         by the President and Compensation Committee of the Board. Long Term
         Incentive Compensation shall be targeted by the President and the
         Compensation Committee of the Board in accordance with the terms of the
         Company's Long Term Incentive Compensation Plan.

         d. STOCK OPTIONS. The Executive shall be eligible for additional grants
         of stock options under the terms and conditions of the Stock Option
         Plan dated February 24, 1997.

4. BENEFITS, PERQUISITES AND EXPENSES.

         a. BENEFITS. During the Employment Period, to the extent he is eligible
         to participate in any welfare or retirement plans now existing or
         established hereafter under their generally applicable provisions,
         Executive may participate in (i) each welfare benefit plan which may be
         sponsored or maintained by the Company, including, without limitation,
         each group life, hospitalization, medical, dental, health, accident or
         disability insurance or similar plan or program of the Company, and
         (ii) each retirement, profit sharing, deferred compensation or savings
         plan which may be sponsored or maintained by the Company. Nothing in
         this Paragraph 4(a) shall limit the Company's right to amend or
         terminate any such plan. Notwithstanding any plan language to the
         contrary, Executive shall be eligible for four (4) weeks paid vacation,
         for the year commencing January 1, 2002 and each subsequent year of the
         Employment Period.

         b. BUSINESS EXPENSES. During the Employment Period, the Company shall
         pay or reimburse Executive for all reasonable expenses incurred or paid
         by Executive in the performance of Executive's duties hereunder, upon
         presentation of expense statements or vouchers and such other
         information as the Company may require and in accordance with the
         generally applicable policies and procedures of the Company as may be
         amended by it from time to time.

         c. ADDITIONAL BENEFITS. In addition to the foregoing, during the
         Employment Period, the Executive shall be entitled to reimbursement
         from the Corporation for (1) professional tax advice and services and
         (2) up to $5,000 per year for financial planning advice and services.
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5.       TERMINATION OF EMPLOYMENT OR NON-RENEWAL OF AGREEMENT.

         a.       EARLY TERMINATION OF THE EMPLOYMENT PERIOD. Notwithstanding
                  Paragraph 1(b), the Employment Period shall end upon the
                  earliest to occur of (i) a termination of Executive's
                  employment on account of Executive's death or Disability, (ii)
                  a Termination for Cause, (iii) a Termination Without Cause,
                  (iv) a Termination for Good Reason or (v) Termination for
                  Change in Control.

         b.       BENEFITS PAYABLE UPON TERMINATION OR NONRENEWAL. Following the
                  early termination of the Employment Period pursuant to
                  Paragraph 5(a) or Nonrenewal of this Agreement pursuant to
                  Paragraph 1(c), Executive (or, in the event of his death, his
                  surviving spouse, if any, his estate, or such other
                  beneficiary as the Executive may designate by written notice
                  to the Company) shall be paid compensation in accordance with
                  the following provisions:

         (i)      Should the Executive's employment with the Company terminate
                  for any reason, his Earned Salary and accrued vacation shall
                  be paid through his last day of employment at the end of the
                  Company's next regular pay period and Vested Benefits shall be
                  payable in accordance with their terms. In addition:

         (ii)     Should the Executive's employment with the Company terminate
                  for Cause or should the Executive terminate this Agreement
                  without Good Reason, other than the payments set forth in
                  Paragraph 5(b)(i) above and any entitlement to any Vested
                  Benefits, the Company shall have no further obligations to the
                  Executive;

         (iii)    Should the Executive's employment with the Company terminate
                  Without Cause, for Good Reason, for Change of Control or
                  because of the non-renewal of this Agreement, he shall be paid
                  the Severance Benefit, Additional Benefits, Vested Benefits
                  and Incentive Compensation. Notwithstanding anything to the
                  contrary in this Agreement, no Severance Benefit or Incentive
                  Compensation shall be payable if the Executive violates the
                  terms and covenants of section 6 of this Agreement. Moreover,
                  Executive agrees that if he violates section 6 of this
                  Agreement he shall repay forthwith the Company any amount of
                  the Severance Benefit or Incentive Compensation previously
                  paid pursuant to this Paragraph 5(b)(i). In addition, should
                  the Executive's employment with the Company terminate due to a
                  Termination for Change in
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                  Control, any stock options Executive shall have received which
                  are unvested at the time of such termination shall immediately
                  accelerate and become fully vested and the exercise period for
                  such options shall be extended to permit the Executive to
                  exercise such options during the two year period immediately
                  following the Executive's termination.

         (iv)     Should the Executive's employment with Company terminate due
                  to death or Disability, the Company shall pay the Executive an
                  amount equal to a pro-rated amount equal to the product of the
                  Bonus Target for the year in which termination occurs and a
                  fraction the numerator of which is equal to the number of days
                  in the calendar year of the Executive's termination of
                  employment which have elapsed as of the date of such
                  termination and the denominator of which is 365; plus
                  long-term cash Incentive Compensation awards held by the
                  Executive at the date of his termination, which shall be
                  payable, if at all, based upon actual Company performance
                  results (but without regard to any individual performance
                  criteria) for the applicable pro rata portion of performance
                  period.

         c.       TIMING OF PAYMENT. The payments referred to in Paragraph 5(b)
                  shall be made as follows: Earned Salary shall be paid in cash
                  in a single lump sum as soon as practicable, but in no event
                  more than ten business days, following the end of the
                  Employment Period. Severance Benefits shall be paid in equal
                  biweekly installments during the two year period immediately
                  following the Executive's termination. Incentive Compensation
                  shall be payable at the same time as similar awards are paid
                  to other executives still actively employed by the Company and
                  participating in the plans under which the awards are payable.
                  Vested Benefits shall be payable in accordance with the terms
                  of the plan (including, without limitation, the extension of
                  the exercise period of options under any stock option plan)
                  under which such benefits have been awarded or accrued.
                  Additional Benefits shall be provided or made available at the
                  times specified below as to each such Additional Benefit.

         d.       DEFINITIONS. For purposes of sections 5 and 6, capitalized
                  terms have the following meanings:
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         "ADDITIONAL BENEFITS" consists of the following rights and benefits:

         except as otherwise provided below, Executive (and, to the extent
         applicable, his dependents) will be entitled to continue participation
         in all of the Company's health benefit plans (the "Health Plans"),
         until the second anniversary of Executive's termination of employment
         (the "End Date"); provided that Executive's participation in the
         Company's Health Plans shall cease on any earlier date that Executive
         becomes eligible for comparable benefits from a subsequent employer. To
         the extent any such benefits cannot be provided under the terms of the
         applicable plan, policy or program, the Company shall provide a
         comparable benefit under another plan or from the Company's general
         assets. Executive's participation in the Health Plans will be on the
         same terms and conditions that would have applied had Executive
         continued to be employed by the Company through the End Date. The
         Company shall deduct the Executive's cost of the foregoing benefits
         from the Executive's Severance Benefit payments at the same intervals
         as they were deducted from his Base Salary during the Employment
         Period.

         "DISABILITY" means disability as defined in the Company's Long Term
         Disability Plan.

         "EARNED SALARY" means any Base Salary earned, but unpaid, for services
         rendered to the Company on or prior to the date on which the Employment
         Period ends pursuant to Paragraph 5(a) or because of the Nonrenewal of
         this Agreement pursuant to Paragraph 1(c).

         "INCENTIVE COMPENSATION" consists of the sum of:

         (i)      a pro-rated amount equal to the product of the average of the
                  actual performance bonuses paid to the Executive by the
                  Company during the two calendar years prior to the year in
                  which termination occurs ("Prior Bonus") and a fraction the
                  numerator of which is equal to the number of days in the
                  calendar year of Executive's termination of employment which
                  have elapsed as of the date of such termination and the
                  denominator of which is 365; plus

         (ii)     an amount equal to twice the amount of the Prior Bonus; plus

         (iii)    any long-term cash incentive compensation awards held by
                  Executive at the date of his termination, which shall be
                  payable, if at all, based upon actual Company performance
                  results (but without regard to any individual
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         performance criteria) for the applicable pro rata portion of
         performance period.

         "SEVERANCE BENEFIT" means two years Base Salary based upon the
Executive's Base Salary on the date the Executive's employment terminates.

         "TERMINATION FOR CHANGE IN CONTROL" means a termination of Executive's
employment by the Company for any reason other than a Termination for Cause at
the sole discretion of the Company within one year following the date upon which
(i) Continental Casualty Company and any affiliates no longer are able
collectively to elect a majority of the Board, (ii) a sale of all or
substantially all of the assets of the Company is consummated or (iii) a merger,
consolidation or other business combination involving the Company and an
unaffiliated third party is consummated in which the Company is not the
surviving corporation.

         "TERMINATION FOR CAUSE" means a termination of the Executive's
employment by the Company (A) due to conduct of the Executive, which is
determined by the Board, in its sole discretion, to be to: (i) a willful and
continued failure to perform the material duties of his position, (ii) a fraud
against the Company or (iii) a material breach of any provision of this
Agreement which has had (or is expected to have) a material adverse effect on
the business of the Company or its subsidiaries; or (B) due to the Executive's
conviction of a felony.

         "TERMINATION FOR GOOD REASON" means a termination of Executive's
employment by Executive within 90 days following (i) a material diminution in
Executive's positions, duties and responsibilities from those described in
Paragraph 2 hereof, (ii) the removal of Executive from, or the failure to
re-elect Executive as a member of the Board, (iii) a reduction in Executive's
annual Base Salary, (iv) a material reduction in the aggregate value of the
retirement, profit sharing and welfare benefits provided to Executive from those
in effect as of the Commencement Date (other than a reduction which is
proportionate to the reductions applicable to other senior executives pursuant
to a cost-saving plan that includes all senior executives). Notwithstanding the
foregoing, a termination shall not be treated as a Termination for Good Reason
(i) if Executive shall have consented in writing to the occurrence of the event
giving rise to the claim of Termination for Good Reason or (ii) unless Executive
first shall have delivered a written notice to the Company within 30 days of his
having actual knowledge of the occurrence of one of such events stating that he
intends to terminate his employment for Good Reason and specifying the factual
basis for such termination, and such event, if capable of being cured, shall not
have been cured within 30 days of the receipt of such notice.

         "TERMINATION WITHOUT CAUSE" means any termination of Executive's
employment by the Company other than a Termination for Cause.
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         "VESTED BENEFITS" means amounts which are vested or which Executive is
otherwise entitled to receive under the terms of or in accordance with any plan
maintained by the Company at or subsequent to the date of his termination
without regard to the performance by Executive of further services or the
resolution of a contingency.

         e.       FULL DISCHARGE OF COMPANY OBLIGATIONS. In consideration of
                  receiving any payments or benefits under Section 5 of this
                  Agreement, the Executive agrees to sign a release in the form
                  attached to this Agreement as Exhibit A, as a condition
                  precedent to receiving them. The amounts payable to Executive
                  pursuant to this Section 5 following termination of his
                  employment (including amounts payable with respect to Vested
                  Benefits) shall be in full and complete satisfaction of
                  Executive's rights under this Agreement and any other claims
                  he may have in respect of his employment by the Company or any
                  of its subsidiaries. Such amounts shall constitute liquidated
                  damages with respect to any and all such rights and claims and
                  upon Executive's receipt of such amounts, the Company shall be
                  released and discharged from any and all liability to
                  Executive in connection with this Agreement or otherwise in
                  connection with Executive's employment with the Company and
                  its subsidiaries. Nothing in this Paragraph 5(e) shall be
                  construed to release the Company from any obligation to
                  indemnify Executive and hold Executive harmless from and
                  against any claim, loss or cause of action arising from or out
                  of Executive's performance as an officer, director or employee
                  of the Company or any of its subsidiaries or in any other
                  capacity, including any fiduciary capacity, in which Executive
                  served at the request of the Company to the maximum extent
                  permitted by applicable law and the certificate of
                  incorporation and by-laws of the Company.

6. NONCOMPETITION AND CONFIDENTIALITY.

By and in consideration of the salary, benefits and other consideration,
contained in this Agreement, the adequacy and receipt of which is hereby
acknowledged, the Executive agrees that:

         a.       NONCOMPETITION. During the Employment Period and during the
                  two year period (the "Restriction Period") following any
                  termination or Nonrenewal of the Executive's employment, the
                  Executive shall not whether as a principal, partner, employee,
                  agent, consultant, shareholder (other than as a holder, or a
                  member of a group which is a holder, of not in excess of 1% of
                  the outstanding voting shares of any publicly traded company)
                  or in any other relationship or capacity: (i) become
                  associated with any entity that is actively engaged or takes
                  any steps to plan to be engaged in any geographic area in the
                  surety business or in any other business which in competition
                  with the business in which the Company is engaged or to the
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                  Executive's knowledge is actively considering becoming
                  engaged, (ii) contact, call upon, solicit business from, sell,
                  or render services to, any customer or licensed agent of the
                  Company with respect to any service or product identical or
                  similar to any services or products provided or sold by the
                  Company, including but not limited to current products or
                  those under development, distribution strategy, development of
                  computer software and administrative systems for
                  administration.

         b.       CONFIDENTIALITY. The Executive acknowledges and agrees that
                  all records (whether written or recorded electronically)
                  including but not limited to agent and client lists, files,
                  reports, notes, internal memoranda and manuals relating to the
                  Company's business; business plans, business processing
                  techniques, systems and methods; sales processes, sales and
                  training manuals; underwriting procedures and manual; budgets;
                  financial statements; compilations; or summaries of the
                  foregoing, by whomever prepared, and copies or reproductions
                  of the foregoing, relating to the Company's operations or
                  activities, or to the operations or activities of any of the
                  Company's customers, agents, suppliers, vendors, or subsidiary
                  companies thereof, made or received by the Executive during
                  the course of this employment with the Company have been, are
                  and shall remain the sole and exclusive property of the
                  Company and were held by the Executive during his employment
                  only as a trustee for the Company which, at all times,
                  retained ownership and control of said records.

         c.       NON-SOLICITATION OF EMPLOYEES. During the Employment Period
                  and the one year period following any termination or
                  Nonrenewal of Executive's employment, Executive shall not
                  directly or indirectly solicit, nor shall any entity with
                  which the Executive is associated encourage or induce any
                  employee of the Company or any of its subsidiaries to
                  terminate employment with it, and shall not directly or
                  indirectly, either individually or as owner, agent, employee,
                  consultant or otherwise, employ or offer employment to any
                  person who is or was employed by the Company or a subsidiary
                  thereof unless such person shall have ceased to be employed by
                  it for a period of at least six months.

         d.       COMPANY PROPERTY. Except as expressly provided herein,
                  promptly following Executive's termination of employment,
                  Executive shall return to the Company all property of the
                  Company, and all copies thereof in Executive's possession or
                  under his control.
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         e.       INJUNCTIVE RELIEF AND OTHER REMEDIES WITH RESPECT TO
                  COVENANTS. Executive acknowledges and agrees that the
                  covenants and obligations of Executive with respect to
                  noncompetition, nonsolicitation, confidentiality and Company
                  property, relate to special, unique and extraordinary matters
                  and that a violation of any of the terms of such covenants and
                  obligations will cause the Company irreparable injury for
                  which adequate remedies are not available at law. Executive
                  acknowledges and agrees that the geographic scope of his
                  employment with the Company is national, and that the national
                  geographic and the two year restrictions placed upon him in
                  Paragraph 6 of this Agreement are reasonable and necessary to
                  the preservation and vitality of the Company's business,
                  reputation, and good will due to the nature of the Company's
                  business, and given his knowledge and expertise within the
                  insurance industry and the consideration provided in this
                  Agreement, that he will be able to earn satisfactory
                  livelihood or otherwise provide for his financial security
                  without violating such restrictions.

         Therefore, Executive agrees that the Company shall (i) be entitled to,
on both an interim and final basis, an injunction, restraining order or such
other equitable relief (without the requirement to post bond) restraining
Executive from committing any violation of the covenants and obligations
contained in this section 6 and (ii) have no further obligation to make any
payments to Executive hereunder following any material violation of the
covenants and obligations contained in this section 6. These remedies are
cumulative and are in addition to any other rights and remedies the Company may
have at law or in equity. In connection with the foregoing provisions of this
section 6, Executive represents that his economic means and circumstances are
such that such provisions will not prevent him from providing for himself and
his family on a basis satisfactory to him.

         The Executive and Company agree that section 6 of this Agreement is not
subject to the provisions of Paragraph 7(b). The Executive agrees that in the
event he violates said section 6 he will pay all costs and expenses with respect
to the prosecution or defense of any claim or suit brought by or against the
Company including, but not limited to, reasonable attorneys' fees. The Executive
further agrees that in the event he in any way violates the provisions set forth
in section 6, the Company would suffer irreparable harm for which both
preliminary and final injunctive relief would be an appropriate remedy in
addition to such other relief to which the company may also be entitled.

         f.       For purposes of Section 6 of this agreement "the Company"
                  shall include its subsidiaries.

         g.       Notwithstanding anything herein to the contrary, should the
                  Executive terminate the employment period without Good Reason
                  or should the
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                  Company terminate it for Cause, the two year period referred
                  to at various points in this paragraph shall be reduced to one
                  year.

         7.       MISCELLANEOUS.

                  a.       SURVIVAL. Paragraph 5 (relating to early
                           termination), 6 (relating to noncompetition,
                           nonsolicitation and confidentiality, 7(b) (relating
                           to arbitration), 7(c) (relating to legal fees) and
                           7(m) (relating to governing law) shall survive the
                           termination hereof.

                  b.       ARBITRATION. Except for disputes arising out of or
                           relating to the Provisions of section 6, any dispute
                           arising out of or relating to this Agreement,
                           including each and every aspect of the relationship
                           of the Executive and the Company, shall be resolved
                           by binding arbitration. The arbitrator shall be a
                           retired federal judge. If the parties cannot agree on
                           an acceptable arbitrator, the dispute shall be heard
                           by a panel of three retired judges, one appointed by
                           each of the parties and the third appointed by the
                           other two arbitrators. The arbitrator shall hear and
                           decide the dispute not by compromise but according to
                           law as if sitting in court applying the rules of
                           evidence. The arbitrator's decision shall be in
                           writing and shall set forth the facts and law
                           supporting such decision. The arbitration shall be
                           held in Chicago, Illinois and except as otherwise
                           provided in this Paragraph, shall be conducted in
                           accordance with the Voluntary Labor Arbitration Rules
                           of the American Arbitration Association then in
                           effect at the time of the arbitration.

                  c.       BINDING EFFECT. This Agreement shall be binding on,
                           and shall inure to the benefit of, the Company and
                           any person or entity that succeeds to the interest of
                           the Company (regardless of whether such succession
                           does or does not occur by operation of law) by reason
                           of the sale of all or a portion of the Company's
                           stock, a merger, consolidation or reorganization
                           involving the Company or, unless the Company
                           otherwise elects in writing, a sale of the assets of
                           the business of the Company (or portion thereof) in
                           which executive performs a majority of his services.
                           This Agreement shall also inure to the Benefit of
                           Executive's heirs, executors, administrators and
                           legal representatives.

                  d.       ASSIGNMENT. Except as provided under Paragraph 7(c),
                           neither this Agreement not any of the rights or
                           obligations hereunder shall be assigned or delegated
                           by any party hereto without the prior written consent
                           of the other party.
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                  e.       ENTIRE AGREEMENT. This Agreement constitutes the
                           entire agreement between the parties hereto with
                           respect to the matters referred to herein. Not other
                           agreement relating to the terms of Executive's
                           employment by the Company, oral or otherwise, shall
                           be binding between the parties unless it is in
                           writing and signed by the party against whom
                           enforcement is sought. There are no promises,
                           representations, inducements, or statements between
                           the parties other than those that are expressly
                           contained herein. Executive acknowledges that he is
                           entering into this Agreement of his own free will and
                           accord, and with no duress, that he has read this
                           Agreement and that he understands it and its legal
                           consequences.

                  f.       SEVERABILITY; REFORMATION. In the event that one or
                           more of the provisions of this Agreement shall become
                           invalid, illegal or unenforceable in any respect, the
                           validity, legality and enforceability of the
                           remaining provisions contained herein shall not be
                           affected thereby. In the event that any of the
                           provisions of any of Paragraphs 6(a), (b) or (c) is
                           not enforceable in accordance with its terms,
                           Executive and the Company agree that such Paragraph
                           shall be reformed to make such Paragraph enforceable
                           in a manner which provides the Company the maximum
                           rights permitted at law.

                  g.       WAIVER. Waiver by any party hereto of any breach or
                           default by the other party of any of the terms of
                           this Agreement shall not operate as a waiver of any
                           other breach or default, whether similar to or
                           different from the breach or default waived. No
                           waiver of any provision of this Agreement shall be
                           implied from any course of dealing between the
                           parties hereto or from any failure by either party
                           hereto to assert its or his rights hereunder on any
                           occasion or series of occasions.

                  h.       NOTICES. Any notice required or desired to be
                           delivered under this Agreement shall be in writing
                           and shall be delivered personally, by courier
                           service, by registered mail, return receipt
                           requested, or by telecopy and shall be effective upon
                           actual receipt by the party to which such notice
                           shall be directed, and shall be addressed as follows
                           (or to such other address as the party entitled to
                           notice shall hereafter designate in accordance with
                           the terms hereof):
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                  If to the Company:

                  CNA Surety Company
                  CNA Plaza
                  Chicago, Illinois 60685
                  Attention: General Counsel

                  If to the Executive:

                  The home address of Executive noted on the records of the
Company.

                  i.       AMENDMENTS. This Agreement may not be altered,
                           modified or amended except by a written instrument
                           signed by an authorized representative of the Company
                           and by the Executive.

                  j.       HEADINGS. Headings to Paragraphs in this Agreement
                           are for the convenience of the parties only and are
                           not intended to be part of or to affect the meaning
                           or interpretation hereof.

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

                  l.       WITHHOLDING. Any payments provided for herein shall
                           subject to withholding pursuant to applicable
                           Federal, State, and local law then in effect.

                  m.       GOVERNING LAW. This Agreement shall be governed by
                           the laws of the State of Delaware, without reference
                           to principles of conflicts or choice of law under
                           which the law of any other jurisdiction would apply.

                  n.       SOURCE OF PAYMENT. The payments and benefits provided
                           for herein other than stock options may, at the
                           option of the Company, be provided by one or more of
                           its subsidiaries, rather than the Company, itself.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer and the Executive has hereunto set his hand as of the
day and year first above written.

         CNA SURETY CORPORATION                      EXECUTIVE

         By:                                         By:
            -------------------------                   ------------------------
              Mark C. Vonnahme                            John S.Heneghan<PAGE>
                                                                  Exhibit 10(10)

                              EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of JANUARY 1, 2002 by and between CNA Surety
Corporation a Delaware corporation or its subsidiaries ("the Company"), and
DAVID F. PAUL ("the Executive").

                                  WITNESSETH:

WHEREAS, the Company wishes to continue to employ the Executive and the Company
and the Executive desire to enter into an agreement embodying the terms of such
employment (the "Agreement"); and

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
Company and the Executive hereby agree as follows:

1.    EMPLOYMENT.

      a.    AGREEMENT TO EMPLOY. Upon the terms and subject to the conditions
      of this Agreement, the Company hereby agrees to continue to employ
      Executive and Executive agrees to employment by the Company.

      b. TERM OF EMPLOYMENT. Except as provided in Paragraph 5(a), the Company
      shall employ Executive for the period commencing on January 1, 2002 (the
      "Commencement Date") and ending on December 31, 2003. The period during
      which Executive is employed pursuant to this Agreement and any extensions
      set forth in Paragraph 1(c) of this Agreement shall be referred to as the
      "Employment Period."

      c. RENEWAL. Upon expiration of the original term of this Agreement set
      forth in Paragraph 1(b) of this Agreement, this Agreement shall renew
      automatically for one (1) additional one (1) year term unless the Company
      or the Executive provides the other ninety days written notice that the
      Agreement will not be renewed.

2.     POSITION AND DUTIES.

      a. POSITION. During the Employment Period, Executive shall serve as Senior
      Vice President, International Surety of the Company or in such other
      position or positions in the Company and/or in any of its subsidiaries as
      he and the Company shall mutually agree. In addition, Executive shall
      serve in such other position or positions with the Company and its
      subsidiaries commensurate with his position and experience as the Board of
      Directors of the Company (the "Board") shall from time to time specify.
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -2-

      b. DUTIES. During the Employment Period, Executive shall have the duties,
      responsibilities, and obligations, as the Board shall from time to time
      specify. Executive shall devote his full time to the services required of
      him hereunder, except for vacation time and reasonable periods of absence
      due to sickness, personal injury or other disability, and shall use his
      best efforts, judgment, skill and energy to perform such services in a
      manner consonant with the duties of his position and to improve and
      advance the business and interests of the Company and its subsidiaries.
      Nothing contained herein shall preclude Executive from (i) serving on the
      board of directors of any business corporation with the consent of the
      Board or (ii) serving on the Board of, or working for, any charitable or
      community organization.

      c. LOCATION. Subject to normal business travel, Executive shall perform
      his service hereunder in and shall not be required to change his place or
      residence from the Atlanta metropolitan area.

3.    COMPENSATION.

      a. BASE SALARY. During the Employment Period, the Company shall pay
      Executive a base salary of $195,000 per year, payable in bi-weekly
      installments. The President and the Compensation Committee of the Board
      shall annually review Executive's base salary in light of competitive
      practices and the performance of Executive and the Company, and may, in
      their discretion, increase such base salary by an amount they determine to
      be appropriate. Any such increase shall not reduce or limit any other
      obligation of the Company hereunder, Executive's base salary as set forth
      above or as may be increased from time to time and shall not be reduced
      without the mutual written consent of the Company and the Executive.
      Executive's base salary as defined in this paragraph may be referred to
      hereinafter as "Base Salary."

      b. ANNUAL BONUS. For each calendar year ending during the Employment
      Period, Executive may earn an annual bonus based on the achievement of
      target levels of performance achieved during the calendar year. During the
      first quarter of each year during the term of this Agreement, the
      President and the Compensation Committee of the Board in their sole
      discretion shall determine the targets and the bonus percentage ("Bonus
      Target") for which the Executive shall be eligible, which bonus
      percentages shall range from 0% to 70% of the Executive's Base Salary
      based upon the performance targets determined by the President and the
      Compensation Committee of the Board. The actual bonus, if any, payable for
      any such year shall be determined solely by the President and the
      Compensation Committee of the Board based upon the performance of the
      Company and/or Executive against the targets with a 35% target for "good
      performance".
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -3-

      c. LONG-TERM INCENTIVE COMPENSATION. During the term of the Employment
      period, Executive shall participate in all of the Company's existing and
      future long-term incentive compensation programs for key executives at a
      level commensurate with his position at the Company and consistent with
      the Company's then current policies and practices, as determined by the
      President and the Compensation Committee of the Board. Long Term Incentive
      Compensation shall be targeted by the President and the Compensation
      Committee of the Board in accordance with the terms of the Company's Long
      Term Incentive Compensation Plan.

      d. STOCK OPTIONS. The Executive shall be eligible for additional grants of
      stock options under the terms and conditions of the Stock Option Plan
      dated February 24, 1997.

4. BENEFITS, PERQUISITES AND EXPENSES.

      a. BENEFITS. During the Employment Period, to the extent he is eligible to
      participate in any welfare or retirement plans now existing or established
      hereafter under their generally applicable provisions, Executive may
      participate in (i) each welfare benefit plan which may be sponsored or
      maintained by the Company, including, without limitation, each group life,
      hospitalization, medical, dental, health, accident or disability insurance
      or similar plan or program of the Company, and (ii) each retirement,
      profit sharing, deferred compensation or savings plan which may be
      sponsored or maintained by the Company. Nothing in this Paragraph 4(a)
      shall limit the Company's right to amend or terminate any such plan.
      Notwithstanding any plan language to the contrary, Executive shall be
      eligible for four (4) weeks paid vacation, for the year commencing January
      1, 2002 and each subsequent year of the Employment Period.

      b. BUSINESS EXPENSES. During the Employment Period, the Company shall pay
      or reimburse Executive for all reasonable expenses incurred or paid by
      Executive in the performance of Executive's duties hereunder, upon
      presentation of expense statements or vouchers and such other information
      as the Company may require and in accordance with the generally applicable
      policies and procedures of the Company as may be amended by it from time
      to time.

      c. ADDITIONAL BENEFITS. In addition to the foregoing, during the
      Employment Period, the Executive shall be entitled to reimbursement from
      the Corporation for (1) professional tax advice and services and (2) up to
      $5,000 per year for financial planning advice and services.
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -4-

5.    TERMINATION OF EMPLOYMENT OR NON-RENEWAL OF AGREEMENT.

      a.    EARLY TERMINATION OF THE EMPLOYMENT PERIOD. Notwithstanding
            Paragraph 1(b), the Employment Period shall end upon the earliest to
            occur of (i) a termination of Executive's employment on account of
            Executive's death or Disability, (ii) a Termination for Cause, (iii)
            a Termination Without Cause, (iv) a Termination for Good Reason or
            (v) Termination for Change in Control.

      b.    BENEFITS PAYABLE UPON TERMINATION OR NONRENEWAL. Following the early
            termination of the Employment Period pursuant to Paragraph 5(a) or
            Nonrenewal of this Agreement pursuant to Paragraph 1(c), Executive
            (or, in the event of his death, his surviving spouse, if any, his
            estate, or such other beneficiary as the Executive may designate by
            written notice to the Company) shall be paid compensation in
            accordance with the following provisions:

            (i)   Should the Executive's employment with the Company terminate
                  for any reason, his Earned Salary and accrued vacation shall
                  be paid through his last day of employment at the end of the
                  Company's next regular pay period and Vested Benefits shall be
                  payable in accordance with their terms. In addition:

            (ii)  Should the Executive's employment with the Company terminate
                  for Cause or should the Executive terminate this Agreement
                  without Good Reason, other than the payments set forth in
                  Paragraph 5(b)(i) above and any entitlement to any Vested
                  Benefits, the Company shall have no further obligations to the
                  Executive;

            (iii) Should the Executive's employment with the Company terminate
                  Without Cause, for Good Reason, for Change of Control or
                  because of the non-renewal of this Agreement, he shall be paid
                  the Severance Benefit, Additional Benefits, Vested Benefits
                  and Incentive Compensation. Notwithstanding anything to the
                  contrary in this Agreement, no Severance Benefit or Incentive
                  Compensation shall be payable if the Executive violates the
                  terms and covenants of section 6 of this Agreement. Moreover,
                  Executive agrees that if he violates section 6 of this
                  Agreement he shall repay forthwith the Company any amount of
                  the Severance Benefit or Incentive Compensation previously
                  paid pursuant to this
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -5-
                  Paragraph 5(b)(i). In addition, should the Executive's
                  employment with the Company terminate due to a Termination for
                  Change in Control, any stock options Executive shall have
                  received which are unvested at the time of such termination
                  shall immediately accelerate and become fully vested and the
                  exercise period for such options shall be extended to permit
                  the Executive to exercise such options during the two year
                  period immediately following the Executive's termination.

            (iv)  Should the Executive's employment with Company terminate due
                  to death or Disability, the Company shall pay the Executive an
                  amount equal to a pro-rated amount equal to the product of the
                  Bonus Target for the year in which termination occurs and a
                  fraction the numerator of which is equal to the number of days
                  in the calendar year of the Executive's termination of
                  employment which have elapsed as of the date of such
                  termination and the denominator of which is 365; plus
                  long-term cash Incentive Compensation awards held by the
                  Executive at the date of his termination, which shall be
                  payable, if at all, based upon actual Company performance
                  results (but without regard to any individual performance
                  criteria) for the applicable pro rata portion of performance
                  period.

      c.    TIMING OF PAYMENT. The payments referred to in Paragraph 5(b) shall
            be made as follows: Earned Salary shall be paid in cash in a single
            lump sum as soon as practicable, but in no event more than ten
            business days, following the end of the Employment Period. Severance
            Benefits shall be paid in equal biweekly installments during the two
            year period immediately following the Executive's termination.
            Incentive Compensation shall be payable at the same time as similar
            awards are paid to other executives still actively employed by the
            Company and participating in the plans under which the awards are
            payable. Vested Benefits shall be payable in accordance with the
            terms of the plan (including, without limitation, the extension of
            the exercise period of options under any stock option plan) under
            which such benefits have been awarded or accrued. Additional
            Benefits shall be provided or made available at the times specified
            below as to each such Additional Benefit.

      d.    DEFINITIONS. For purposes of sections 5 and 6, capitalized terms
            have the following meanings:
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -6-

      "ADDITIONAL BENEFITS" consists of the following rights and benefits:

      except as otherwise provided below, Executive (and, to the extent
      applicable, his dependents) will be entitled to continue participation in
      all of the Company's health benefit plans (the "Health Plans"), until the
      second anniversary of Executive's termination of employment (the "End
      Date"); provided that Executive's participation in the Company's Health
      Plans shall cease on any earlier date that Executive becomes eligible for
      comparable benefits from a subsequent employer. To the extent any such
      benefits cannot be provided under the terms of the applicable plan, policy
      or program, the Company shall provide a comparable benefit under another
      plan or from the Company's general assets. Executive's participation in
      the Health Plans will be on the same terms and conditions that would have
      applied had Executive continued to be employed by the Company through the
      End Date. The Company shall deduct the Executive's cost of the foregoing
      benefits from the Executive's Severance Benefit payments at the same
      intervals as they were deducted from his Base Salary during the Employment
      Period.

      "DISABILITY" means disability as defined in the Company's Long Term
      Disability Plan.

      "EARNED SALARY" means any Base Salary earned, but unpaid, for services
      rendered to the Company on or prior to the date on which the Employment
      Period ends pursuant to Paragraph 5(a) or because of the Nonrenewal of
      this Agreement pursuant to Paragraph 1(c).

      "INCENTIVE COMPENSATION" consists of the sum of:

      (i)   a pro-rated amount equal to the product of the average of the actual
            performance bonuses paid to the Executive by the Company during the
            two calendar years prior to the year in which termination occurs
            ("Prior Bonus") and a fraction the numerator of which is equal to
            the number of days in the calendar year of Executive's termination
            of employment which have elapsed as of the date of such termination
            and the denominator of which is 365; plus

      (ii)  an amount equal to twice the amount of the Prior Bonus; plus

      (iii) any long-term cash incentive compensation awards held by Executive
            at the date of his termination, which shall be payable, if at all,
            based upon actual Company performance results (but without regard to
            any individual
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -7-

            performance criteria) for the applicable pro rata portion of
            performance period.

            "SEVERANCE BENEFIT" means two years Base Salary based upon the
      Executive's Base Salary on the date the Executive's employment terminates.

            "TERMINATION FOR CHANGE IN CONTROL" means a termination of
      Executive's employment by the Company for any reason other than a
      Termination for Cause at the sole discretion of the Company within one
      year following the date upon which (i) Continental Casualty Company and
      any affiliates no longer are able collectively to elect a majority of the
      Board, (ii) a sale of all or substantially all of the assets of the
      Company is consummated or (iii) a merger, consolidation or other business
      combination involving the Company and an unaffiliated third party is
      consummated in which the Company is not the surviving corporation.

            "TERMINATION FOR CAUSE" means a termination of the Executive's
      employment by the Company (A) due to conduct of the Executive, which is
      determined by the Board, in its sole discretion, to be to: (i) a willful
      and continued failure to perform the material duties of his position, (ii)
      a fraud against the Company or (iii) a material breach of any provision of
      this Agreement which has had (or is expected to have) a material adverse
      effect on the business of the Company or its subsidiaries; or (B) due to
      the Executive's conviction of a felony.

            "TERMINATION FOR GOOD REASON" means a termination of Executive's
      employment by Executive within 90 days following (i) a material diminution
      in Executive's positions, duties and responsibilities from those described
      in Paragraph 2 hereof, (ii) the removal of Executive from, or the failure
      to re-elect Executive as a member of the Board, (iii) a reduction in
      Executive's annual Base Salary, (iv) a material reduction in the aggregate
      value of the retirement, profit sharing and welfare benefits provided to
      Executive from those in effect as of the Commencement Date (other than a
      reduction which is proportionate to the reductions applicable to other
      senior executives pursuant to a cost-saving plan that includes all senior
      executives). Notwithstanding the foregoing, a termination shall not be
      treated as a Termination for Good Reason (i) if Executive shall have
      consented in writing to the occurrence of the event giving rise to the
      claim of Termination for Good Reason or (ii) unless Executive first shall
      have delivered a written notice to the Company within 30 days of his
      having actual knowledge of the occurrence of one of such events stating
      that he intends to terminate his employment for Good Reason and specifying
      the factual basis for such termination, and such event, if capable of
      being cured, shall not have been cured within 30 days of the receipt of
      such notice.

            "TERMINATION WITHOUT CAUSE" means any termination of Executive's
      employment by the Company other than a Termination for Cause.
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -8-

            "VESTED BENEFITS" means amounts which are vested or which Executive
      is otherwise entitled to receive under the terms of or in accordance with
      any plan maintained by the Company at or subsequent to the date of his
      termination without regard to the performance by Executive of further
      services or the resolution of a contingency.

            e.    FULL DISCHARGE OF COMPANY OBLIGATIONS. In consideration of
                  receiving any payments or benefits under Section 5 of this
                  Agreement, the Executive agrees to sign a release in the form
                  attached to this Agreement as Exhibit A, as a condition
                  precedent to receiving them. The amounts payable to Executive
                  pursuant to this Section 5 following termination of his
                  employment (including amounts payable with respect to Vested
                  Benefits) shall be in full and complete satisfaction of
                  Executive's rights under this Agreement and any other claims
                  he may have in respect of his employment by the Company or any
                  of its subsidiaries. Such amounts shall constitute liquidated
                  damages with respect to any and all such rights and claims and
                  upon Executive's receipt of such amounts, the Company shall be
                  released and discharged from any and all liability to
                  Executive in connection with this Agreement or otherwise in
                  connection with Executive's employment with the Company and
                  its subsidiaries. Nothing in this Paragraph 5(e) shall be
                  construed to release the Company from any obligation to
                  indemnify Executive and hold Executive harmless from and
                  against any claim, loss or cause of action arising from or out
                  of Executive's performance as an officer, director or employee
                  of the Company or any of its subsidiaries or in any other
                  capacity, including any fiduciary capacity, in which Executive
                  served at the request of the Company to the maximum extent
                  permitted by applicable law and the certificate of
                  incorporation and by-laws of the Company.

6.    NONCOMPETITION AND CONFIDENTIALITY.

By and in consideration of the salary, benefits and other consideration,
contained in this Agreement, the adequacy and receipt of which is hereby
acknowledged, the Executive agrees that:

      a.    NONCOMPETITION. During the Employment Period and during the two year
            period (the "Restriction Period") following any termination or
            Nonrenewal of the Executive's employment, the Executive shall not
            whether as a principal, partner, employee, agent, consultant,
            shareholder (other than as a holder, or a member of a group which is
            a holder, of not in excess of 1% of the outstanding voting shares of
            any publicly traded company) or in any other relationship or
            capacity: (i) become associated with any entity that is actively
            engaged or takes any steps to plan to be engaged in any geographic
            area in the surety
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page  - 9-

            business or in any other business which in competition with the
            business in which the Company is engaged or to the Executive's
            knowledge is actively considering becoming engaged, (ii) contact,
            call upon, solicit business from, sell, or render services to, any
            customer or licensed agent of the Company with respect to any
            service or product identical or similar to any services or products
            provided or sold by the Company, including but not limited to
            current products or those under development, distribution strategy,
            development of computer software and administrative systems for
            administration.

      b.    CONFIDENTIALITY. The Executive acknowledges and agrees that all
            records (whether written or recorded electronically) including but
            not limited to agent and client lists, files, reports, notes,
            internal memoranda and manuals relating to the Company's business;
            business plans, business processing techniques, systems and
            methods; sales processes, sales and training manuals; underwriting
            procedures and manual; budgets; financial statements;
            compilations; or summaries of the foregoing, by whomever prepared,
            and copies or reproductions of the foregoing, relating to the
            Company's operations or activities, or to the operations or
            activities of any of the Company's customers, agents, suppliers,
            vendors, or subsidiary companies thereof, made or received by the
            Executive during the course of this employment with the Company
            have been, are and shall remain the sole and exclusive property of
            the Company and were held by the Executive during his employment
            only as a trustee for the Company which, at all times, retained
            ownership and control of said records.

      c.    NON-SOLICITATION OF EMPLOYEES. During the Employment Period and the
            one year period following any termination or Nonrenewal of
            Executive's employment, Executive shall not directly or indirectly
            solicit, nor shall any entity with which the Executive is associated
            encourage or induce any employee of the Company or any of its
            subsidiaries to terminate employment with it, and shall not directly
            or indirectly, either individually or as owner, agent, employee,
            consultant or otherwise, employ or offer employment to any person
            who is or was employed by the Company or a subsidiary thereof unless
            such person shall have ceased to be employed by it for a period of
            at least six months.

      d.    COMPANY PROPERTY. Except as expressly provided herein, promptly
            following Executive's termination of employment, Executive shall
            return to the Company all property of the Company, and all copies
            thereof in Executive's possession or under his control.
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -10-

      e.    INJUNCTIVE RELIEF AND OTHER REMEDIES WITH RESPECT TO COVENANTS.
            Executive acknowledges and agrees that the covenants and obligations
            of Executive with respect to noncompetition, nonsolicitation,
            confidentiality and Company property, relate to special, unique and
            extraordinary matters and that a violation of any of the terms of
            such covenants and obligations will cause the Company irreparable
            injury for which adequate remedies are not available at law.
            Executive acknowledges and agrees that the geographic scope of his
            employment with the Company is national, and that the national
            geographic and the two year restrictions placed upon him in
            Paragraph 6 of this Agreement are reasonable and necessary to the
            preservation and vitality of the Company's business, reputation, and
            good will due to the nature of the Company's business, and given his
            knowledge and expertise within the insurance industry and the
            consideration provided in this Agreement, that he will be able to
            earn satisfactory livelihood or otherwise provide for his financial
            security without violating such restrictions.

      Therefore, Executive agrees that the Company shall (i) be entitled to, on
both an interim and final basis, an injunction, restraining order or such other
equitable relief (without the requirement to post bond) restraining Executive
from committing any violation of the covenants and obligations contained in this
section 6 and (ii) have no further obligation to make any payments to Executive
hereunder following any material violation of the covenants and obligations
contained in this section 6. These remedies are cumulative and are in addition
to any other rights and remedies the Company may have at law or in equity. In
connection with the foregoing provisions of this section 6, Executive represents
that his economic means and circumstances are such that such provisions will not
prevent him from providing for himself and his family on a basis satisfactory to
him.

      The Executive and Company agree that section 6 of this Agreement is not
subject to the provisions of Paragraph 7(b). The Executive agrees that in the
event he violates said section 6 he will pay all costs and expenses with respect
to the prosecution or defense of any claim or suit brought by or against the
Company including, but not limited to, reasonable attorneys' fees. The Executive
further agrees that in the event he in any way violates the provisions set forth
in section 6, the Company would suffer irreparable harm for which both
preliminary and final injunctive relief would be an appropriate remedy in
addition to such other relief to which the company may also be entitled.

      f.    For purposes of Section 6 of this agreement "the Company" shall
            include its subsidiaries.
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -11-

      g.    Notwithstanding anything herein to the contrary, should the
            Executive terminate the employment period without Good Reason or
            should the Company terminate it for Cause, the two year period
            referred to at various points in this paragraph shall be reduced to
            one year.

      7.    MISCELLANEOUS.

            a.    SURVIVAL. Paragraph 5 (relating to early termination), 6
                  (relating to noncompetition, nonsolicitation and
                  confidentiality, 7(b) (relating to arbitration), 7(c)
                  (relating to legal fees) and 7(m) (relating to governing
                  law) shall survive the termination hereof.

            b.    ARBITRATION. Except for disputes arising out of or relating
                  to the Provisions of section 6, any dispute arising out of
                  or relating to this Agreement, including each and every
                  aspect of the relationship of the Executive and the Company,
                  shall be resolved by binding arbitration. The arbitrator
                  shall be a retired federal judge. If the parties cannot
                  agree on an acceptable arbitrator, the dispute shall be
                  heard by a panel of three retired judges, one appointed by
                  each of the parties and the third appointed by the other two
                  arbitrators.  The arbitrator shall hear and decide the
                  dispute not by compromise but according to law as if sitting
                  in court applying the rules of evidence. The arbitrator's
                  decision shall be in writing and shall set forth the facts
                  and law supporting such decision. The arbitration shall be
                  held in Chicago, Illinois and except as otherwise provided
                  in this Paragraph, shall be conducted in accordance with the
                  Voluntary Labor Arbitration Rules of the American
                  Arbitration Association then in effect at the time of the
                  arbitration.

            c.    BINDING EFFECT. This Agreement shall be binding on, and
                  shall inure to the benefit of, the Company and any person or
                  entity that succeeds to the interest of the Company
                  (regardless of whether such succession does or does not
                  occur by operation of law) by reason of the sale of all or a
                  portion of the Company's stock, a merger, consolidation or
                  reorganization involving the Company or, unless the Company
                  otherwise elects in writing, a sale of the assets of the
                  business of the Company (or portion thereof) in which
                  executive performs a majority of his services. This
                  Agreement shall also inure to the Benefit of Executive's
                  heirs, executors, administrators and legal representatives.
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -12-

            d.    ASSIGNMENT. Except as provided under Paragraph 7(c), neither
                  this Agreement not any of the rights or obligations
                  hereunder shall be assigned or delegated by any party hereto
                  without the prior written consent of the other party.

            e.    ENTIRE AGREEMENT. This Agreement constitutes the entire
                  agreement between the parties hereto with respect to the
                  matters referred to herein. Not other agreement relating to
                  the terms of Executive's employment by the Company, oral or
                  otherwise, shall be binding between the parties unless it is
                  in writing and signed by the party against whom enforcement is
                  sought. There are no promises, representations, inducements,
                  or statements between the parties other than those that are
                  expressly contained herein. Executive acknowledges that he is
                  entering into this Agreement of his own free will and accord,
                  and with no duress, that he has read this Agreement and that
                  he understands it and its legal consequences.

            f.    SEVERABILITY; REFORMATION. In the event that one or more of
                  the provisions of this Agreement shall become invalid,
                  illegal or unenforceable in any respect, the validity,
                  legality and enforceability of the remaining provisions
                  contained herein shall not be affected thereby. In the event
                  that any of the provisions of any of Paragraphs 6(a), (b) or
                  (c) is not enforceable in accordance with its terms,
                  Executive and the Company agree that such Paragraph shall be
                  reformed to make such Paragraph enforceable in a manner
                  which provides the Company the maximum rights permitted at
                  law.

            g.    WAIVER. Waiver by any party hereto of any breach or default by
                  the other party of any of the terms of this Agreement shall
                  not operate as a waiver of any other breach or default,
                  whether similar to or different from the breach or default
                  waived. No waiver of any provision of this Agreement shall be
                  implied from any course of dealing between the parties hereto
                  or from any failure by either party hereto to assert its or
                  his rights hereunder on any occasion or series of occasions.

            h.    NOTICES. Any notice required or desired to be delivered under
                  this Agreement shall be in writing and shall be delivered
                  personally, by courier service, by registered mail, return
                  receipt requested, or by telecopy and shall be effective upon
                  actual receipt by the party to
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -13-

                  which such notice shall be directed, and shall be addressed as
                  follows (or to such other address as the party entitled to
                  notice shall hereafter designate in accordance with the terms
                  hereof):

            If to the Company:

            CNA Surety Company
            CNA Plaza
            Chicago, Illinois 60685
            Attention: General Counsel

            If to the Executive:

            The home address of Executive noted on the records of the Company.

            i.    AMENDMENTS. This Agreement may not be altered, modified or
                  amended except by a written instrument signed by an
                  authorized representative of the Company and by the
                  Executive.

            j.    HEADINGS. Headings to Paragraphs in this Agreement are for
                  the convenience of the parties only and are not intended to
                  be part of or to affect the meaning or interpretation hereof.

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

            l.    WITHHOLDING. Any payments provided for herein shall subject
                  to withholding pursuant to applicable Federal, State, and
                  local law then in effect.

            m.    GOVERNING LAW. This Agreement shall be governed by the laws
                  of the State of Delaware, without reference to principles of
                  conflicts or choice of law under which the law of any other
                  jurisdiction would apply.

            n.    SOURCE OF PAYMENT. The payments and benefits provided for
                  herein other than stock options may, at the option of the
                  Company, be provided by one or more of its subsidiaries,
                  rather than the Company, itself.
<PAGE>
CNA Surety Corporation
Employment Agreement  -
Page -14-

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer and the Executive has hereunto set his hand as of the
day and year first above written.

      CNA SURETY CORPORATION              EXECUTIVE

      By:                                 By:
         ---------------------------         ---------------------------
            Mark C. Vonnahme                    David F. Paul

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