Document:

Employment Agreement for Robert V. Deutsch

 

Exhibit 10.13

AMENDMENT TO AUGUST 16, 1999

EMPLOYMENT AGREEMENT

THIS AMENDMENT (the “Amendment”) is made
and entered into on the 25th day of
February, 2003, by and between CNA Financial Corporation, a Delaware
Corporation (the “Company”) and Robert V. Deutsch (“Executive”), as an
amendment to the August 16, 1999 Employment Agreement (“Employment Agreement”)
heretofore entered into between them:

WITNESSETH

WHEREAS, the parties wish to amend the Employment Agreement in certain respects
to reflect certain changes in the terms and conditions of Executive’s
employment in 2003;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the Executive and the
Company to amend the Employment Agreement, effective January 1, 2003, as
follows:

	1.	 	Section 1 of the Employment
Agreement, “Employment Term”, is hereby
amended to read as follows:
	 
	 	 	“The Company and Executive agree that the Company shall employ Executive on
the terms and conditions set forth herein beginning on the Effective Date
and continuing through and until December 31, 2003 or such earlier date as
of which Executive’s employment is terminated in accordance with Section 6
hereof. The “Effective Date” of this Agreement shall be August 16, 1999.”
	 
	2.	 	Subsection 2(b) of the Employment Agreement, “Duties of Executive”, is
hereby amended to read as follows:
	 
	 	 	“Executive shall diligently and to the best of his abilities assume,
perform, and discharge the duties and responsibilities of Executive Vice
President and Chief Financial Officer of the Company and certain of the CNA
Companies, as determined by the Chairman consistent with such title.
Executive shall devote substantially all of his working time to the
performance of his duties as set forth herein and shall not, without the
prior written consent of the Chairman, accept other employment or render or
perform other services, nor shall he have any direct or indirect ownership
interest in any other business which is in competition with the principal
business of the Company or its subsidiaries and its affiliates, other than
in the form of securities constituting less than five percent (5%) of the
outstanding securities of a corporation (determined by vote or value) or
ownership interests constituting less than five percent (5%) of the value of
any partnership or limited liability company. The foregoing shall not
preclude Executive from engaging in charitable, professional, and personal
investment activities, provided that, in the reasonable judgment of the
Chairman, such activities do not materially interfere with his performance
of his duties and responsibilities hereunder.”
	 
	3.	 	Subsection 3(a) of the Employment Agreement, “Salary”, is hereby amended
to read as follows:
	 
	 	 	“The Company shall pay or cause to be paid to Executive, effective as of
January 1, 2003, and continuing for the period he is employed by the Company
hereunder, an annual base salary of SEVEN HUNDRED THOUSAND DOLLARS
($700,000.00), payable not less frequently than monthly (the “Base
Compensation”). In no event shall Executive’s base salary rate be reduced to
an amount that is less than the amount specified in this paragraph, or to an
amount that is less than the amount that he was previously receiving,
without Executive’s written consent.”

 

 

	4.	 	Subsection 3(b) of the Employment
Agreement, “Incentive Compensation
Award”, is hereby amended by adding the following:
	 
	 	 	“Executive shall be entitled to an Incentive Compensation Award, in
accordance with the CNA Financial Corporation Incentive Compensation Plan
for Certain Executive Officers (the “Incentive Compensation Plan”) according
to the performance criteria and amounts established by the Incentive
Compensation Committee (the “Committee”) pursuant to the Incentive
Compensation Plan in effect for the year 2003, and payment of said award
shall otherwise be in accordance with the provisions of the Incentive
Compensation Plan, including the requirement of annual review and
certification by the Committee of the awards. To the extent that any award
is performance-based, the award shall be determined based on net operating
income as determined by the Committee.”
	 
	 	 	The foregoing amendment to Section 3(b) shall be applicable only to any
Incentive Compensation Award that both accrues, and is due and payable,
subsequent to December 31, 2002.
	 
	5.	 	Subsection 3 (c ) of the Employment Agreement, “Long-Term Incentive
Awards”, is hereby amended by adding the following:
	 
	 	 	“During the term of this Agreement, Executive shall be entitled to awards
under the CNA Financial Corporation 2000 Long Term Incentive Plan (“LTIP”)
according to the performance criteria and amounts established by the
Committee pursuant to the LTIP in effect for the year 2003, and payment of
said award shall otherwise be in accordance with the provisions of the LTIP,
including the requirement of annual review and certification by the
Committee of the awards.”
	 
	 	 	The foregoing amendment to subsection 3(c) shall be applicable only to any
such award pursuant to the LTIP that both accrues, and is due and payable,
subsequent to December 31, 2002.
	 
	6.	 	The fourth installment of 2500 shares of restricted common stock of the
Company, granted pursuant to subsection 3(d) of the Employment Agreement
and which were previously scheduled to vest on December 31, 2003, shall
now vest on December 31, 2002.
	 
	7.	 	The Employment Agreement is hereby amended to add a new subsection 3(h),
as follows:
	 
	 	 	“(h) Section 162(m)
Compliance; Deferral. For avoidance of doubt, respecting
awards to Executive under subsections 3(b) and 3(c) hereof, the Committee
shall retain such discretion as may be provided under the Incentive
Compensation Plan or LTIP to satisfy Section 162(m) of the Internal Revenue
Code of 1986 (“Code”) or any successor provision. The Company may defer the
payment of any Incentive Compensation or LTIP compensation to which
Executive is entitled hereunder or otherwise to the extent necessary for it
to comply with Section 162(m) of the Code or any successor provision with
respect to deductibility of executive compensation. All such deferred
compensation will be credited to the Executive’s SES-CAP account and shall
be subject to the terms thereof.”
	 
	8.	 	Section 4 of the Employment
Agreement, “Other Benefits”, is hereby
amended so that the words “Band 540” are substituted for the words
“grade 96” in said section, and the final sentence of said section 4 is
deleted in its entirety. The portion of the amendment to Section 4 that
deletes the final sentence will only become effective at such time as the
Company implements a policy to eliminate paid vacation time for all Band
540 executives.
	 
	9.	 	Section 5 of the Employment
Agreement, “Expense Reimbursement”, is hereby
amended to read as follows:

 

 

	 	 	“Executive shall be entitled to reimbursement by the Company for all
reasonable and customary travel and other business expenses incurred by
Executive in carrying out his duties under this Agreement, in accordance
with the general reimbursement policies adopted by the Company from time to
time and applicable generally to other Band 540 executives of the Company or
its subsidiaries. The Company will pay the reasonable fees and expenses of
legal counsel to Executive in connection with negotiating the Amendment, and
personal income taxes incurred by Executive as a result of such payment.”
	 
	10.	 	The second sentence of section 6 of the Employment Agreement,
“Termination of Employment”, is hereby amended to read as follows:
	 
	 	 	“Either party may terminate Executive’s employment with the Company by
giving at least 60 days written notice to the other party effective as of
the date specified in such notice; provided, however, that no such 60-day
notice shall be required in the case of a termination for Cause (as defined
in Section 6.2) by the Company or in the case of a termination for Good
Reason (as defined in Section 6.4) by the Executive.
	 
	11.	 	The Heading “6.3
Termination for Convenience by the Company” of the
Employment Agreement is hereby amended to read “6.3 Termination by the
Company Without Cause/Termination for Convenience by the Company”.
	 
	12.	 	Subsection 6.3(a)(i) of the Employment Agreement is hereby amended to
read as follows:
	 
	 	 	“any unpaid Base Compensation; provided, however, that if the Company gives
Executive the 60-day notice of termination under Section 6.3 prior to July
1, 2003, Executive will be entitled to receive unpaid Base Compensation
through September 1, 2003,”
	 
	13.	 	Subsection 6.3(a)(i)(w) of the Employment Agreement is hereby amended to
read as follows:
	 
	 	 	"(w) $550,000.00, which was Executive’s annual rate of Base Compensation as
of the effective date of the 1999 Employment Agreement; plus"
	 
	14.	 	Subsection 6.3(b) of the Employment Agreement is hereby amended to read
as follows:
	 
	 	 	“A pro-rata portion of the amount of the Incentive Compensation Award earned
for the performance period in which the termination occurs determined by
multiplying the Incentive Compensation Award earned through the end of the
performance period in which termination occurs (as determined by actual
performance through the end of that period) by the number of days in the
performance period prior to the date of termination and dividing such
product by the number of days in the performance period; provided, however,
that if the Company gives Executive the 60-day notice of termination under
Subsection 6.3 prior to July 1, 2003, Executive’s entitlement to a pro-rata
portion of any Incentive Compensation Award shall be determined by using a
termination date of September 1, 2003. Distribution under this subsection
6.3(b) for the performance period shall be made at the normally scheduled
time for such distributions (determined without regard to the occurrence of
Executive’s date of termination).”
	 
	15.	 	Subsection 6.3(c ) of the Employment Agreement is hereby amended to read
as follows:
	 
	 	 	“If Executive’s termination of employment occurs before the last day of the
Performance Period with respect to a Long-Term Incentive Award, Executive
(or Executive’s estate) shall be entitled to a payment with respect to the
Long-Term Incentive Award in accordance with the terms of the award, with
the amount determined as though Executive remained employed by the Company
through the end of the Performance Period, and based on actual performance
for the period, but subject to a pro rata reduction for the portion of the
Performance Period after Executive’s date of termination;

 

 

	 	 	provided, however, that if the Company gives Executive the 60-day notice of
termination under subsection 6.3 prior to July 1, 2003, Executive’s
entitlement to a pro-rata portion of any Long-Term Incentive Award shall be
determined by using a termination date of September 1, 2003. Distribution
under this subsection 6.3 (c) for the Performance Period shall be made at
the normally scheduled time for such distribution (determined without regard
to the occurrence of Executive’s date of termination).”
	 
	16.	 	Subsection 6.3(d) of the Employment Agreement is hereby amended to read
as follows:
	 
	 	 	“Any unexercised stock option held by Executive upon termination of
employment shall be fully vested on the date of termination and may be
exercised by Executive at any time up to the third anniversary of
Executive’s date of termination (but not later than the date on which such
stock option would expire if Executive had remained employed by the
Company). The provisions of this subsection 6.3(d) shall apply
notwithstanding any contrary provision in any agreement governing any stock
option award or other option or other right under the Incentive Compensation
Plan or LTIP.”
	 
	17.	 	Subsection 6.3(e) of the Employment Agreement is hereby amended by adding
the following:
	 
	 	 	“More specifically, without limiting the foregoing, Executive shall continue
to participate in such health, dental, vision, and disability plans in which
he is enrolled at the time of termination of employment for the period
during which he is entitled to receive termination payments of Base
Compensation under subsection 6.3 (a)(iii), as if he were still employed by
the Company, said period of participation to run concurrently with any
period of COBRA coverage to which Executive may be entitled; provided, to
the extent that Executive cannot participate in the Company’s health, dental
and vision plans beyond the termination of the COBRA benefit continuation
period or Executive cannot participate in the Company’s disability plan
after he ceases active employment with the Company, Executive shall be
entitled to equivalent such health, dental, vision and disability benefits
as are provided to senior executives of the Company under the Company’s
benefit plans.”
	 
	18.	 	The Employment Agreement is hereby amended to add a new subsection
6.3(f), as follows:
	 
	 	 	"(f) In addition, Executive shall be allowed to continue to receive the tax
services of Topel Forman in the tax year of termination, plus two subsequent
tax years, and to continue to receive an annual club membership allowance of
$10,000 in the year of termination and for the two calendar years following
the year in which he is terminated, the costs of which will be paid for by
the Company.”
	 
	19.	 	Subsection 6.4(b)(iii) of the Employment Agreement is hereby amended so
that the words “Executive Vice President” are substituted for the words
“Senior Vice President” in said subsection.
	 
	20.	 	Subsection 6.5 of the Employment Agreement, “Voluntary Resignation by
Executive”, is hereby amended to read as follows:
	 
	 	 	“In the event that Executive’s employment is terminated by Executive other
than pursuant to subsection 6.4 or as a direct result of his death or
Permanent Disability (as described in subsection 6.1), Executive shall
receive the same payments and other benefits set forth in subsections
6.3(a)-(f); provided, however, that if the Executive terminates his
employment pursuant to this subsection 6.5 prior to September 1, 2003,
Executive shall forfeit all of his rights to the payments set forth in
subsection 6.3(a)(iii).”
	 
	21.	 	Subsection 6.6 of the Employment Agreement, “Failure to Extend
Agreement”, is hereby amended to read as follows:

 

 

	 	 	“In the event that this Agreement has not been extended or renewed by mutual
agreement at the end of its term on December 31, 2003 and the employment of
Executive continues, then the following shall apply:
	 
	(a)	 	Such employment shall constitute an employment at will from month to
month. During Executive’s employment following December 31, 2003, (i) he
shall receive salary at the annual rate of 300% of his annual Base
Compensation as of December 31, 2003; (ii) the terms of this Agreement that
governed Executive’s benefits and perquisites prior to January 1, 2004 will
continue to apply, and will be in addition to Executive’s salary specified
in clause (i) above; (iii) Executive shall be entitled to payment with
respect to the Incentive Compensation Award for calendar year 2003 and LTIP
awards for the performance period ending December 31, 2003 to the extent
provided by this Agreement, but Executive will not be entitled to an
Incentive Compensation Award, or LTIP awards or any other incentive
compensation award for performance periods beginning after December 31,
2003.
	 
	(b)	 	If the Company terminates Executive’s employment following December 31,
2003, or if the Company and Executive shall not have mutually agreed to the
terms of, and entered into, a new employment prior to March 31, 2004, then
Executive’s employment shall terminate on April 1, 2004, and the Company’s
obligations shall be the same as they would have been, and Executive shall
receive the same payments and other benefits that he would have received,
had the Company terminated his employment pursuant to subsection 6.3.”
	 
	22.	 	Section 9 of the Employment
Agreement, “Competition”, is hereby amended
to read as follows:
	 
	 	 	“Executive hereby agrees that, while he is employed by the Company, and for
a period of 12 months following the date of his termination of employment
with the Company for any reason, or until December 31, 2004, whichever
occurs later, he will not, directly or indirectly, without the prior written
approval of the Chairman, enter into any business relationship (either as
principal, agent, board member, officer, consultant, stockholder, employee
or in any other capacity) with any business or other entity that at any
relevant time competes in any respect with any of the principal businesses
of the Company (a “Competitor”); provided,
however, that such prohibited
activity shall not include the ownership of less than 5% of the securities
of any corporation (determined by vote or value) or having ownership
interests constituting less than five percent (5%) of the value of any
partnership or limited liability company regardless of the business of such
corporation or other entity. Upon the written request of Executive, the
Chairman will determine whether a business or other entity constitutes a
“Competitor” for purposes of this Section 9; provided that the Chairman may
require Executive to provide such information as the Chairman reasonably
determines to be necessary to make such determination; and further provided
that the current and continuing effectiveness of such determination may be
conditioned on the accuracy of such information, and on such other factors
as the Chairman may reasonably determine.”
	 
	23.	 	Section 10 of the Employment
Agreement, “Solicitation”, is hereby amended
to read as follows:
	 
	 	 	“Executive agrees that while he is employed by the Company, and for a period
of thirty-six (36) months following his termination of employment with the
Company for any reason, he will not employ, offer to employ, engage as a
consultant, or form an association with any person who is then, or who
during the preceding one year was, an employee of the Company, nor will he
assist any other person in soliciting for employment or consultation any
person who is then, or who during the preceding one year was, an employee of
the Company.”

 

 

	24.	 	Section 11 of the Employment
Agreement, “Non-Interference”, is hereby
amended to read as follows:
	 
	 	 	“Executive agrees that while he is employed by the Company, and for a period
of thirty-six (36) months following his termination of employment with the
Company for any reason, he will not disturb or attempt to disturb any
business relationship or agreement between the Company and any other person
or entity.”
	 
	25.	 	Section 28 of the Employment Agreement, “Notices”, is hereby amended so
that the Facsimile Number for the Executive is changed to (860) 678-7591
in said section.
	 
	26.	 	Except as provided in this Amendment, all other provisions of the
Employment Agreement shall remain in full force and effect during the term
of the Amendment.

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
set forth herein above.

	 	 
	 	CNA FINANCIAL CORPORATION

	 
	By:

Title:	/s/ Jonathan D. Kantor

Executive Vice President, General Counsel & Secretary

	 
	 	ROBERT V. DEUTSCH
	 
	 	/s/ Robert V. Deutsch<PAGE>
                                                                   EXHIBIT 10(9)

                       FIRST AMENDMENT TO CREDIT AGREEMENT

         This First Amendment to Credit Agreement (the "Amendment") is made as
of this __ day of December, 2002 by and among CNA SURETY CORPORATION (the
"Borrower"), the Lenders from time to time a party to the Credit Agreement
defined below (the "Lenders") and LASALLE BANK NATIONAL ASSOCIATION, as
Administrative Agent for the Lenders (the "Agent") and in its individual
capacity as a Lender ("LaSalle").

                              W I T N E S S E T H:

         WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Credit Agreement, dated as of September 30, 2002 (the "Credit
Agreement);

         WHEREAS, contemporaneously herewith, the Aggregate Commitment shall be
reduced from $65,000,000 to $60,000,000, and LaSalle shall assign to U.S. Bank
National Association ("US Bank") $10,000,000 of the reduced $60,000,000
Aggregate Commitment pursuant to an Assignment and Acceptance of even date
herewith in the form of Exhibit A attached hereto (the "Assignment") such that,
as of the date hereof, LaSalle shall hold $50,000,000 of the Aggregate
Commitment and US Bank shall hold $10,000,000 of the Aggregate Commitment;

         WHEREAS, contemporaneously herewith, upon US Bank accepting the
Assignment, the Guaranty of CNA Financial Corporation shall be released and
terminated; and

         WHEREAS, as a condition to US Bank agreeing to accept the Assignment
and pursuant to Section 2.12 of the Credit Agreement, the parties hereto desire
to amend the Credit Agreement as more fully set forth herein;

         NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the adequacy of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
hereto agree as follows:

SECTION I. DEFINITIONS.  Unless otherwise defined herein, all capitalized terms
shall have the meaning given to them in the Credit Agreement.

SECTION II. AMENDMENTS TO CREDIT AGREEMENT.

         2.1 The Credit Agreement is hereby amended by deleting the definition
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" in Article I of the Credit Agreement
in its entirety and inserting the following in its stead:

         ""CONSOLIDATED FIXED CHARGE COVERAGE RATIO' means, as of any date of
determination, the ratio of (a) the Borrower's EBITDA for the period of four
fiscal quarters ending on such date, to (b) the sum of (i) Consolidated Interest
Expense for such period, plus (ii) required payments of principal of
Consolidated Indebtedness made during such period, plus (iii) the sum of all
amounts paid by the Borrower and its Subsidiaries under any Operating Lease
during such period."

                                       1
<PAGE>

         2.2 The Credit Agreement is hereby amended by deleting the definition
of "FLOATING RATE INTEREST PERIOD" in Article I of the Credit Agreement in its
entirety.

         2.3 The Credit Agreement is hereby amended by deleting the definition
of "INTEREST PERIOD" in Article I of the Credit Agreement in its entirety and
inserting the following in its stead:

         ""INTEREST PERIOD" means a LIBOR Interest Period, or, with respect to
any Floating Rate Loan, the period of one or more days during which such Loan is
outstanding as a Floating Rate Loan."

         2.4 The Credit Agreement is hereby amended by deleting the definition
of "LOAN" in Article I of the Credit Agreement in its entirety and inserting the
following in its stead:

         ""LOAN" means, with respect to a Lender, the portion of all Revolving
Loans and Term Loans made by such Lender."

         2.5 The Credit Agreement is hereby amended by deleting the definition
of "PRO-RATA SHARE" in Article I of the Credit Agreement in its entirety and
inserting the following in its stead:

         ""PRO-RATA SHARE" means, when used with respect to a Lender, and any
described aggregate or total amount, an amount equal to such Lender's
proportionate share or portion based on its percentage of the Aggregate
Commitment or, if the Aggregate Commitment has been terminated, its percentage
of the aggregate principal amount of outstanding Advances."

         2.6 The Credit Agreement is hereby amended by deleting the definition
of "RATABLE LOAN" in Article I of the Credit Agreement in its entirety.

         2.7 The Credit Agreement is hereby amended by deleting the definition
of "REQUIRED LENDERS" in Article I of the Credit Agreement in its entirety and
inserting the following in its stead:

         ""REQUIRED LENDERS" means, (a) during all times when the Lenders are
comprised of two (2) or fewer financial institutions, those Lenders in the
aggregate having at least one hundred percent (100%) of the Aggregate
Commitment; provided, that for purposes of this clause (a) LaSalle Bank National
Association and all Lenders which are Affiliates of LaSalle Bank National
Association shall be deemed a single Lender, and (b) during all times when the
Lenders are comprised of three (3) or more financial institutions, those Lenders
in the aggregate having at least 66-2/3% of the Aggregate Commitment."

         2.8 The definition of "REVOLVING CREDIT COMMITMENT" in Article I of the
Credit Agreement is hereby deleted in its entirety and amended by inserting the
following in its stead:

         ""REVOLVING CREDIT COMMITMENT" means Thirty Million and 00/100 Dollars
($30,000,000), as increased from time to time pursuant to Section 2.1.4 hereof."

                                       2
<PAGE>

         2.9 The Credit Agreement is hereby amended by deleting the definition
of "REVOLVING LOAN TERMINATION DATE" in Article I of the Credit Agreement in its
entirety and inserting the following in its stead:

         ""REVOLVING LOAN TERMINATION DATE: means, in the case of all Revolving
Loans, (a) September 30, 2003, unless extended by one or more Lenders pursuant
to any extension pursuant to Section 2.1.5, and, if so extended on the last day
of the additional period for which extended or (b) such earlier date on which
the obligations of the Lenders to make Revolving Loans hereunder are terminated
pursuant to the terms of the Agreement."

         2.10 The Credit Agreement is hereby amended by deleting the definition
"TERM LOAN" and "TERM LOANS" in Article I of the Credit Agreement in their
entirety and inserting the following in their stead:

         ""TERM LOAN" or "TERM LOANS" means any Loans in the form of LIBOR
Loans or Floating Rate Loans made by the Lenders to the Borrower pursuant to
Section 2.2."

         2.11 The Credit Agreement is hereby amended by deleting Section 2.1.4
in its entirety and inserting the following in its stead:

         ""2.1.4 INCREASE IN REVOLVING CREDIT COMMITMENT. So long as no Default
or Unmatured Default has occurred and is continuing, the Revolving Credit
Commitment shall be automatically increased in an amount equal to the scheduled
principal payments made with respect to the Term Loan pursuant to Section 2.2.2,
and the amount of each Lender's Pro-Rata Share of such increase in the Revolving
Credit Commitment shall likewise be ratably increased. Upon any such increase in
the Revolving Credit Commitment, the Borrower shall promptly execute and deliver
to the Lenders replacement notes evidencing such increase. Notwithstanding the
foregoing, in no event may the aggregate principal amount of all outstanding
Loans at any time exceed the Aggregate Commitment."

         2.12 The Credit Agreement is hereby amended by deleting Section 2.1.5
in its entirety and inserting the following in its stead:

         ""2.1.5 EXTENSION OF REVOLVING LOAN TERMINATION DATE. The Revolving
Loan Termination Date as to each Lender's obligation to make Revolving Loans may
be extended upon the prior consent of such Lender for up to two (2) additional
periods of not more than 364 days each, but, in any event, not later than
September 26, 2005. At least forty (40) Business Days but not less than sixty
(60) Business Days prior to the Revolving Loan Termination Date then in effect,
the Borrower may deliver to the Administrative Agent a written request for the
extension of the Revolving Loan Termination Date for an additional period
specifying the effective date of such extension and the length of such extension
not to exceed 364 days. The effective date of such extension shall be on or
prior to the Revolving Loan Termination Date then in effect, and, in any event
not earlier than thirty (30) days prior to such Revolving Loan Termination Date.
Each Lender which consents to such extension shall indicate its agreement to the
requested extension on or before the extension date; however, any Lender may
refuse to

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<PAGE>

consent to any such extension or may revoke its agreement to any such extension
prior to the effective date of such extension."

         2.13 The Credit Agreement is hereby amended by deleting Section 2.2.1
and Section 2.2.2 in their entirety and inserting the following in their stead:

        ""2.2.1 TERM LOAN COMMITMENT. The Lenders hereby agree to make Term
Loans to the Borrower on the Closing Date in the amount of such Lender's
Pro-Rata Share of the Term Loan Commitment. The Term Loans shall mature on the
Term Loan Termination Date. Scheduled payments of principal on the Term Loans
shall be payable as set forth in Section 2.2.2. The commitments of the Lenders
to make the Term Loans shall expire concurrently with the making of the Term
Loans on the Closing Date.

           2.2.2 SCHEDULED TERM LOAN PRINCIPAL PAYMENTS. .  The Borrower shall
make the following scheduled payments of principal under the Term Loans on the
following dates:

                           Date                        Principal Payment
                  ----------------------               -----------------

                  June 30, 2003                             $5,000,000
                  September 30, 2003                        $5,000,000
                  March 31, 2004                            $5,000,000
                  September 30, 2004                        $5,000,000
                  March 31, 2005                            $5,000,000
                  September 30, 2005                        $5,000,000"

         2.14 The Credit Agreement is hereby amended by deleting the words
"Revolving Loans" from the tenth line of Section 2.3.3 and inserting "Revolving
Loan" in their stead.

         2.15 The Credit Agreement is hereby amended by deleting the words "or
Term Loan Commitment reduction notice" in their entirety from the third line of
Section 2.16.

         2.16 The Credit Agreement is hereby amended by deleting all references
to "2.17" in Section 2.19 and inserting "2.19" in their stead.

         2.17 The Credit Agreement is hereby amended by deleting the reference
to "2.17(a)" in the third to last sentence of Section 3.1 and inserting
"2.19(a)" in its stead.

         2.18 The Credit Agreement is hereby amended by deleting Section 6.13(c)
of the Credit Agreement in its entirety and inserting the following in its
stead:

         "(c) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary in an aggregate amount not to
exceed $10,000,000 without the prior written consent of the Lenders."

         2.19 The Credit Agreement is hereby amended by deleting Section 6.18 in
its entirety and inserting the following in its stead:

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<PAGE>

         "6.18 DIVIDENDS. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions on its
capital stock (other than dividends payable in its own capital stock) or redeem,
repurchase or otherwise acquire or retire any of its capital stock at any time
outstanding, except that, so long as no Default or Unmatured Default has
occurred and is continuing (i) the Borrower may declare or pay any dividends or
make any distributions on its capital stock in the ordinary course of business
in any fiscal year in an aggregate amount not to exceed 50% of the Borrower's
net income in such fiscal year, (ii) in addition to the foregoing dividends or
distributions permitted under (i), the Borrower may declare or pay dividends or
make any distributions on its capital stock in an aggregate amount not to exceed
$10,000,000 in any fiscal year, (iii) any Subsidiary may declare or pay any
dividends or make any distributions on its capital stock to any Wholly-Owned
Subsidiary of the Borrower or to the Borrower, and (iv) the Borrower may
repurchase its outstanding stock, provided that any such repurchases after the
date hereof shall not exceed $10,000,000 in the aggregate in any fiscal year."

         2.20 The Credit Agreement is hereby amended by deleting Section 8.2(b)
in its entirety and inserting the following in its stead:

         "(b) reduce the percentage or the number of Lenders, as applicable,
specified in the definition of Required Lenders;"

         2.21 The Credit Agreement is hereby amended by deleting Section 13.1 in
its entirety and inserting the following in its stead:

         "13.1 GIVING NOTICE. Except as otherwise permitted by Section 2.12 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing, by facsimile, first class U.S. mail or overnight courier and addressed
or delivered to such party at (i) in the case of the Borrower or the
Administrative Agent, its address set forth below its signature hereto or (ii)
in the case of a Lender, at the address set forth in its Administrative
Questionnaire, or at such other address as may be designated by such party in a
notice to the other parties. Any notice, if mailed (properly addressed with
postage prepaid), shall be deemed given three (3) Business Days after deposit in
the U.S. mail; any notice, if transmitted by telecopy, shall be deemed given
when transmitted; and any notice if personally delivered or given by courier
shall be deemed given when received by the addressee."

SECTION III. CONDITIONS PRECEDENT.  The effectiveness of this Amendment is
expressly conditioned upon satisfaction of the following conditions precedent:

         3.1 The Lenders shall have received a copy of this Amendment duly
executed by the Borrower.

         3.2 The Lenders shall have received a duly executed Assignment in the
form of Exhibit A attached hereto, and LaSalle shall have received payment of
the $3,500 fee in connection therewith.

                                       5
<PAGE>

         3.3 Each Lender shall have received a duly executed Revolving Note and
Term Note substantially in the form of Exhibit B and Exhibit C attached hereto.

         3.3 The Agent shall have received such other documents, certificates
and assurances as it shall reasonably request, all of which shall have been
delivered on or prior to the date hereof.

         Upon receipt of the foregoing, the Agent shall execute and deliver to
Borrower that certain Termination and Release of Guaranty substantially in the
form of Exhibit D attached hereto.

SECTION IV. REAFFIRMATION OF THE BORROWER. The Borrower hereby represents and
warrants to the Lenders that (i) the warranties set forth in Article 5 of the
Credit Agreement are true and correct on and as of the date hereof, except to
the extent (a) that any such warranties relate to a specific date, or (b)
changes thereto are a result of transactions for which the Lenders have granted
their consent; (ii) the Borrower is on the date hereof in compliance with all of
the terms and provisions set forth in the Credit Agreement as hereby amended;
and (iii) upon execution hereof no Default or Unmatured Default has occurred and
is continuing or has not previously been waived in writing by the Lenders.

SECTION V. FEES AND EXPENSES. The Borrower shall pay, upon demand, all
reasonable attorneys' fees and out-of-pocket costs of the Agent in connection
with this Amendment and the agreements, documents and other items contemplated
hereunder.

SECTION VI. FULL FORCE AND EFFECT. Except as herein amended or cancelled, the
Credit Agreement and all other Loan Documents shall remain in full force and
effect.

SECTION VII. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.

                                       6
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year specified above.

                            CNA SURETY CORPORATION

                            By:      _________________________________
                            Name:    _________________________________
                            Title:   _________________________________

                            LASALLE BANK NATIONAL ASSOCIATION, in its capacity
                            as Agent and as a Lender

                            By:      _________________________________
                            Name:    _________________________________
                            Title:   _________________________________

                            U.S. BANK NATIONAL ASSOCIATION, as a Lender

                            By:      _________________________________
                            Name:    _________________________________
                            Title:   _________________________________

                                       7
<PAGE>

                                    EXHIBIT A

                            ASSIGNMENT AND ACCEPTANCE

         Reference is made to the Credit Agreement, dated as of September 30,
2002 (as amended and in effect on the date hereof, the "Credit Agreement"),
among CNA Surety Corporation, the Lenders named therein and LaSalle Bank
National Association, as Administrative Agent for the Lenders. Terms defined in
the Credit Agreement are used herein with the same meanings.
         The Assignor named on the reverse hereof hereby sells and assigns,
without recourse, to the Assignee named on the reverse hereof, and the Assignee
hereby purchases and assumes, without recourse, from the Assignor, effective as
of the Assignment Date set forth on the reverse hereof, the interests set forth
on the reverse hereof (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
interests set forth on the reverse hereof in the Commitment of the Assignor on
the Assignment Date and Loans owing to the Assignor which are outstanding on the
Assignment Date, but excluding accrued interest and fees to and excluding the
Assignment Date. The Assignee hereby acknowledges receipt of a copy of the
Credit Agreement. From and after the Assignment Date (i) the Assignee shall be a
party to and be bound by the provisions of the Credit Agreement and, to the
extent of the Assigned Interest, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent of the Assigned Interest,
relinquish its rights and be released from its obligations under the Credit
Agreement.
         This Assignment and Acceptance is being delivered to the Administrative
Agent together with (i) if the Assignee is not organized under the laws of the
United States of America, any documentation required to be delivered by the
Assignee pursuant to Section 2.19(b) of the Credit Agreement, duly completed and
executed by the Assignee, and (ii) if the Assignee is not already a Lender under
the Credit Agreement, an Administrative Questionnaire in the form supplied by
the Administrative Agent, duly completed by the Assignee. The Borrower shall pay
the fee payable to the Administrative Agent pursuant to Section 12.3.1 of the
Credit Agreement.
         This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of Illinois.

                                       8
<PAGE>

Date of Assignment:                         December ___, 2002

Legal Name of Assignor:                     LaSalle Bank National Association

Legal Name of Assignee:                     U.S. Bank National Association

Assignee's Address for Borrowings,
Conversions and Continuations:              U.S Bank National Association
                                            Mail Code OS-WI-CCL
                                                          400 City Center
                                            Oshkosh, Wisconsin  54901
                                                          Attn: Complex Credit
                                                                Team Lead
                                                          Phone: 920-237-7604
                                                          Fax: 920-237-7993

Assignee's Address for all other Notices:   U.S. Bank National Association
                                                          Mail Code MK-WI-TGCB
                                                          777 East Wisconsin
                                                          Avenue
                                                          Milwaukee, Wisconsin
                                                          53202
                                                          Attn: Brett Justman
                                                          Phone: 414-765-5027
                                                          Fax: 414-765-4632

Effective Date of Assignment
("Assignment Date")                         December ____, 2002

<TABLE>
<CAPTION>

<S>               <C>                                <C>                                <C>

                                                                                             PERCENTAGE ASSIGNED
                   FACILITY                           PRINCIPAL AMOUNT ASSIGNED             (as percentage of the
                   --------                                                              aggregate Commitments of all
                                                                                            Lenders thereunder)

Commitment Assigned:                                         $10,000,000                         [16.67]%
Loans:
                                                        ---------------------                 ----------------

</TABLE>

                                       9
<PAGE>

The terms set forth above and on the reverse side hereof are hereby agreed to:

<TABLE>

<S>                                                            <C>

                                                                LASALLE BANK NATIONAL ASSOCIATION, as Assignor

                                                                By:
                                                                     ----------------------------------------
                                                                     Name:
                                                                     Title:

                                                                U.S. BANK NATIONAL ASSOCIATION, as Assignee

                                                                By:
                                                                    ----------------------------------------
                                                                     Name:
                                                                     Title:

CNA SURETY CORPORATION                                          LASALLE BANK NATIONAL ASSOCIATION, as
                                                                Administrative Agent

                                                                By:
By:                                                                  ----------------------------------------
   ------------------------------------------                        Name:
   Name:                                                             Title:
   Title:

</TABLE>

                                       10

<PAGE>

                                    EXHIBIT B

                                 REVOLVING NOTE

$25,000,000                                          Dated: December ____, 2002

         FOR VALUE RECEIVED, CNA SURETY CORPORATION ("Borrower") HEREBY PROMISES
TO PAY to the order of LASALLE BANK NATIONAL ASSOCIATION (the "Lender") the
principal sum of Twenty-Five Million United States Dollars ($25,000,000) or, if
less, the aggregate unpaid principal amount of the Revolving Loans made by the
Lender to Borrower pursuant to Section 2.1 of the Credit Agreement (as
hereinafter defined), on or before the Revolving Loan Termination Date;
together, in each case, with interest on any and all principal amounts remaining
unpaid hereunder from time to time. Interest upon the unpaid principal amount
hereof shall accrue at the rates, shall be calculated in the manner and shall be
payable on the dates set forth in the Credit Agreement. After maturity, whether
by acceleration or otherwise, accrued interest shall be payable upon demand.
Both principal and interest shall be payable in accordance with the Credit
Agreement to LaSalle Bank National Association, as Administrative Agent (the
"Administrative Agent") on behalf of the Lender in immediately available funds.
The Revolving Loans made by the Lender to Borrower pursuant to the Credit
Agreement and all payments on account of principal hereof shall be recorded by
the Lender and, prior to any transfer thereof, endorsed on Schedule A attached
hereto which is part of this Revolving Note or otherwise in accordance with its
usual practices; provided, however, that the failure to so record shall not
affect Borrower's obligations under this Revolving Note.

         This Revolving Note replaces and restates that certain Revolving Note
dated September 30, 2002 from the Borrower in favor of LaSalle Bank National
Association, in its capacity as a Lender in the original principal amount of
$35,000,000 (the "Prior Note") and is not a repayment or novation of the Prior
Note.

         This Revolving Note is a Revolving Note referred to in, and is entitled
to the benefits of, the Credit Agreement dated as of September 30, 2002 by and
among Borrower, the financial institutions signatory thereto (including the
Lender), and the Administrative Agent, as amended by that certain First
Amendment to Credit Agreement, dated as of December __, 2002 between the
Borrower, the financial institutions signatory thereto and Administrative Agent
(as amended, modified or supplemented from time to time, collectively, the
"Credit Agreement") and the other Loan Documents. Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Credit Agreement. The Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.

         Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Revolving Note.

                                       11

<PAGE>

         THIS REVOLVING NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE
STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

                             CNA SURETY CORPORATION

                            By:
                               -----------------------------------------------

                            Title:
                                  --------------------------------------------

                                       12
<PAGE>

                                   Schedule A

                              Revolving Credit Note

                            dated September 30, 2002

                             payable to the order of

                        LaSalle Bank National Association

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                             PRINCIPAL PAYMENTS

<S>                      <C>                    <C>                     <C>                       <C>

                          Amount of Principal    Amount of Principal     Unpaid Principal           Notation
Date                           Borrowed                Repaid                 Balance               Made By
----                           --------                ------                 -------               --------

</TABLE>

                                       13

<PAGE>

                                 REVOLVING NOTE

$5,000,000                                            Dated: December ____, 2002

         FOR VALUE RECEIVED, CNA SURETY CORPORATION ("Borrower") HEREBY PROMISES
TO PAY to the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") the
principal sum of Five Million United States Dollars ($5,000,000) or, if less,
the aggregate unpaid principal amount of the Revolving Loans made by the Lender
to Borrower pursuant to Section 2.1 of the Credit Agreement (as hereinafter
defined), on or before the Revolving Loan Termination Date; together, in each
case, with interest on any and all principal amounts remaining unpaid hereunder
from time to time. Interest upon the unpaid principal amount hereof shall accrue
at the rates, shall be calculated in the manner and shall be payable on the
dates set forth in the Credit Agreement. After maturity, whether by acceleration
or otherwise, accrued interest shall be payable upon demand. Both principal and
interest shall be payable in accordance with the Credit Agreement to LaSalle
Bank National Association, as Administrative Agent (the "Administrative Agent")
on behalf of the Lender in immediately available funds. The Revolving Loans made
by the Lender to Borrower pursuant to the Credit Agreement and all payments on
account of principal hereof shall be recorded by the Lender and, prior to any
transfer thereof, endorsed on Schedule A attached hereto which is part of this
Revolving Note or otherwise in accordance with its usual practices; provided,
however, that the failure to so record shall not affect Borrower's obligations
under this Revolving Note.

         This Revolving Note is a Revolving Note referred to in, and is entitled
to the benefits of, the Credit Agreement dated as of September 30, 2002 by and
among Borrower, the financial institutions signatory thereto (including the
Lender), and the Administrative Agent, as amended by that certain First
Amendment to Credit Agreement, dated as of December ___, 2002 between the
Borrower, the financial institutions signatory thereto and Administrative Agent
(as amended, modified or supplemented from time to time, collectively, the
"Credit Agreement") and the other Loan Documents. Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Credit Agreement. The Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.

         Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Revolving Note.

         THIS REVOLVING NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE
STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

                             CNA SURETY CORPORATION

                             By:
                                ----------------------------------------------

                             Title:
                                   --------------------------------------------

                                       14
<PAGE>

                                   Schedule A

                              Revolving Credit Note

                            dated December ____, 2002

                             payable to the order of

                                    [US BANK]

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                             PRINCIPAL PAYMENTS

<S>                      <C>                    <C>                     <C>                          <C>

                          Amount of Principal    Amount of Principal     Unpaid Principal           Notation
Date                           Borrowed                Repaid                 Balance               Made By
----                           --------                ------                 -------               --------

</TABLE>

                                       15
<PAGE>

                                    EXHIBIT C

                                    TERM NOTE

$25,000,000                                            Dated: December ___, 2002

         FOR VALUE RECEIVED, CNA SURETY CORPORATION ("Borrower") HEREBY PROMISES
TO PAY to the order of LASALLE BANK NATIONAL ASSOCIATION (the "Lender") the
principal sum of Twenty-Five Million United States Dollars ($25,000,000), on or
before the Term Loan Termination Date; together with interest on any and all
principal amounts remaining unpaid hereunder from time to time. Principal
payments shall be made as set forth in Section 2.2.2 of the Credit Agreement (as
hereinafter defined), and interest upon the unpaid principal amount hereof shall
accrue at the rates, shall be calculated in the manner and shall be payable on
the dates set forth in the Credit Agreement. After maturity, whether by
acceleration or otherwise, accrued interest shall be payable upon demand. Both
principal and interest shall be payable in accordance with the Credit Agreement
to LaSalle Bank National Association, as Administrative Agent (the
"Administrative Agent") on behalf of the Lender in immediately available funds.

         This Term Note is a Term Note referred to in, and is entitled to the
benefits of, the Credit Agreement dated as of September 30, 2002 by and among
Borrower, the financial institutions signatory thereto (including the Lender),
and the Administrative Agent (as amended, modified or supplemented from time to
time, the "Credit Agreement") and the other Loan Documents. Capitalized terms
used but not otherwise defined herein shall have the respective meanings
ascribed thereto in the Credit Agreement. The Credit Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.

         Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Term Note.

                                       16
<PAGE>

         THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE STATE
OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

                             CNA SURETY CORPORATION

                            By:
                               ------------------------------------------------

                            Title:
                                  ---------------------------------------------

                                       17
<PAGE>

                                    TERM NOTE

$5,000,000                                             Dated: December ___, 2002

         FOR VALUE RECEIVED, CNA SURETY CORPORATION ("Borrower") HEREBY PROMISES
TO PAY to the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") the
principal sum of Five Million United States Dollars ($5,000,000), on or before
the Term Loan Termination Date; together with interest on any and all principal
amounts remaining unpaid hereunder from time to time. Principal payments shall
be made as set forth in Section 2.2.2 of the Credit Agreement (as hereinafter
defined), and interest upon the unpaid principal amount hereof shall accrue at
the rates, shall be calculated in the manner and shall be payable on the dates
set forth in the Credit Agreement. After maturity, whether by acceleration or
otherwise, accrued interest shall be payable upon demand. Both principal and
interest shall be payable in accordance with the Credit Agreement to LaSalle
Bank National Association, as Administrative Agent (the "Administrative Agent")
on behalf of the Lender in immediately available funds.

         This Term Note is a Term Note referred to in, and is entitled to the
benefits of, the Credit Agreement dated as of September 30, 2002 by and among
Borrower, the financial institutions signatory thereto (including the Lender),
and the Administrative Agent, as amended by that certain First Amendment to
Credit Agreement, dated as of December ___, 2002 between the Borrower, the
financial institutions signatory thereto and Administrative Agent (as amended,
modified or supplemented from time to time, collectively, the "Credit
Agreement") and the other Loan Documents. Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Credit Agreement. The Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified. .

         Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Term Note.

                                       18
<PAGE>

         THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE STATE
OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

                             CNA SURETY CORPORATION

                             By:
                                -----------------------------------------------

                             Title:
                                   --------------------------------------------

                                       19

<PAGE>

                                    EXHIBIT D

                        TERMINATION AND RELEASE AGREEMENT

         This Termination and Release Agreement, dated as of __________, ______,
2002 ("AGREEMENT"), is by the Lenders from time to time a party to the Credit
Agreement defined below (the "LENDERS") and LASALLE BANK NATIONAL ASSOCIATION,
as Administrative Agent in favor of CNA FINANCIAL CORPORATION (`GUARANTOR").

         RECITALS

Guarantor executed and delivered that certain Guaranty dated September 30, 2002
in favor of Lenders (the "GUARANTY") covering all Liabilities (as such term is
defined in the Guaranty) of CNA Surety Corporation ("BORROWER") to the Lenders
under that certain Credit Agreement dated September 30, 2002 between Borrower,
the Lenders named therein and Administrative Agent.

Guarantor has requested that Lenders release Guarantor from the Guaranty.

         TERMINATION

Lenders hereby release Guarantor from its obligations with respect to Borrower
under the Guaranty and further agree that the Guaranty is terminated effective
immediately.

                      LASALLE BANK NATIONAL ASSOCIATION, as Administrative
                      Agent and as a Lender

                      By:
                         ---------------------------------------------------
                      Name:
                           -------------------------------------------------
                      Title:
                            ------------------------------------------------

                                       20

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