Document:

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                                                                  EXHIBIT 10(13)

                              EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT, dated as of ______________, 1999, by and between CNA
SURETY CORPORATION a Delaware corporation ("the Company"), and Stephen T. Pate
("the Executive").

                                   WITNESSETH:

     WHEREAS, the Company wishes to continue to employ the Executive and the
Company and the Executive desires 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 hereby 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, 2000 (the "Commencement Date") and ending on December
               31, 2001. 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
               thirty 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, Field Management & Distribution 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

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               Board of Directors of the Company (the "Board") shall from time
               to time specify.

          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 of residence from, the Sioux Falls metropolitan
               area.

     3.   COMPENSATION.

          a.   BASE SALARY. During the Employment Period, the Company shall pay
               Executive an annual base salary of $275,000 per year, payable in
               bi-weekly installments. 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 its discretion, increase such base salary by
               an amount it determines 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 Compensation Committee of the Board
               in its sole discretion shall

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               determine the targets and the bonus percentage ("Bonus Target")
               for which the Executive shall be eligible, which bonus
               percentages shall range from 0% to 80% of the Executive's Base
               Salary based upon the performance targets determined by the
               Compensation Committee of the Board. The actual bonus, if any,
               payable for any such year shall be determined solely by the
               Compensation Committee of the Board based upon the performance of
               the Company and/or Executive against the targets with a 40%
               target for "good performance."

          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 Compensation
               Committee of the Board. Long-term Incentive Compensation shall be
               determined by 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, 2000 and each
               subsequent year of the Employment Period.

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          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.

     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

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                          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 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
                          any 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.

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               c.   TIMING OF PAYMENTS. 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:

     "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).

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     "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 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

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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.

     "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

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               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 is 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 manuals; 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 his 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

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               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.

          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 a 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

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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 Company terminate it for Cause, the two year period
               referred to at various points in this Section 6 shall be reduced
               to one year.

     7.   MISCELLANEOUS.

          a.   SURVIVAL. Paragraphs 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(o) (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

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               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 nor 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. No 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.

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          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):

          If to the Company:

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

          If to 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.

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          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:
    ----------------------------             -----------------------------
          Mark C. Vonnahme                          Stephen T. Pate<PAGE>   1
                                                                  EXHIBIT 10(14)

                              EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT, dated as of ______________, 2000, by and between CNA
SURETY CORPORATION a Delaware corporation ("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 desires 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 hereby 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, 2000
           (the "Commencement Date") and ending on December 31, 2001. 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 thirty days written
           notice that the Agreement will not be renewed.

     2. POSITION AND DUTIES.

        a. POSITION. During the Employment Period, Executive shall serve as 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>   2

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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 of residence from, the Atlanta metropolitan area.

     3. COMPENSATION.

        a. BASE SALARY. During the Employment Period, the Company shall pay
           Executive an annual base salary of $180,000 per year, payable in
           bi-weekly installments. The President shall annually review
           Executive's base salary in light of competitive practices and the
           performance of Executive and the Company, and may, in his discretion,
           increase such base salary by an amount he determines 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 in his 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. The actual bonus, if any,
           payable for any such year shall be determined solely by

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           the President based upon the performance of the Company and/or
           Executive against the targets with a 35% target for "good
           performance."

        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. Long-term Incentive
           Compensation shall be determined by the President 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, 2000 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.

<PAGE>   4
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        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.

     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

<PAGE>   5
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                    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 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 any
                    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 PAYMENTS. 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

<PAGE>   6
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           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:

     "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 (A) the "good
                    performance" level of the Bonus Target for the year in which
                    termination occurs (the "Deemed Bonus Amount") 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 ("Pro Rata
                    Fraction"), if such termination occurs prior to the payment
                    to Executive by the Company of a performance bonus with
                    respect to a full calendar year, (B) actual bonus

<PAGE>   7
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                    paid to Executive by the Company for a full calendar year
                    prior to such termination (the "Prior Bonus Amount")
                    multiplied by the Pro Rata Fraction, if such termination
                    occurs after Executive has received payment by the Company
                    of a performance bonus with respect to a full calendar year
                    but prior to the receipt by Executive of performance bonuses
                    from the Company with respect to two full calendar years,
                    and (C) average of the actual performance bonuses paid to
                    Executive by the Company during the two calendar years prior
                    to the year in which such termination occurs (the "Average
                    Bonus Amount") multiplied by the Pro Rata Fraction; and

               (ii) an amount equal to twice the amount of the Deemed Bonus
                    Amount, the Actual Bonus Amount or Average Bonus Amount, as
                    applicable based upon the year in which such termination
                    occurs; 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 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

<PAGE>   8
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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.

     "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

<PAGE>   9
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           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 is 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 manuals; 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 his employment with the Company have been, are and shall
           remain the sole and exclusive property of

<PAGE>   10
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           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.

        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 a
           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

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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
           Company terminate it for Cause, the two year period referred to at
           various points in this Section 6 shall be reduced to one year.

     7. MISCELLANEOUS.

        a. SURVIVAL. Paragraphs 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(o)
           (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

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           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 nor 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. No 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.

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        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):

        If   to the Company:

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

        If to 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.

<PAGE>   14
CNA Surety Corporation
Employment Agreement -
Page -14-

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

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