Third Amendment And Limited Waiver To Credit Agreement - CNA SURETY CORP - 11-13-2003 by SUR-Agreements

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									EXHIBIT 10.3 THIRD AMENDMENT AND LIMITED WAIVER TO CREDIT AGREEMENT This Third Amendment and Limited Waiver to Credit Agreement (the "Amendment") is made as of this ___ day of November, 2003 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 "Administrative 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 Administrative Agent are parties to that certain Credit Agreement, dated as of September 30, 2002, as amended by that certain First Amendment to Credit Agreement, dated as of December 30, 2002 between the Borrower, the Lenders named therein and Administrative Agent, and as further amended pursuant to that certain Second Amendment to Credit Agreement, dated as of September 30, 2003 between the Borrower, the Lenders named there and Administrative Agent (collectively, the "Credit Agreement); WHEREAS, the parties hereto desire to (i) provide for a limited waiver under the Credit Agreement, and (ii) further 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. LIMITED WAIVER. 2.1 Pursuant to Section 6.15 of the Credit Agreement, the Borrower is required to maintain a Consolidated Fixed Charge Coverage Ratio of not less than 2.50 to 1.0 as of the end of each fiscal quarter for the period of four fiscal quarters ending on such date. Borrower has requested and Administrative Agent and the Lenders have agreed to waive compliance by the Borrower under Section 6.15 solely with respect to the fiscal quarter ended September 30, 2003. Except as expressly set forth herein, this waiver is not intended to be and shall not be construed as a waiver or amendment of any of the terms and provisions of the Credit Agreement, which terms and provisions remain in full force and effect. Furthermore, such waiver shall not constitute a future waiver of compliance with the Consolidated Fixed Charge Coverage Ratio, any other financial covenants or any other provisions under the Credit Agreement or any other document executed in connection therewith. SECTION III. AMENDMENTS TO CREDIT AGREEMENT.

3.1 The Credit Agreement is hereby amended by deleting Section 2.5.2 in its entirety and inserting the following in its stead: "2.5.2 UTILIZATION FEE. If at any time fifty percent (50%) or more of the Revolving Credit Commitment is drawn and utilized, the Borrower agrees to pay to the Administrative Agent for the ratable account of each Lender based on each such Lender's Pro Rata Share a utilization fee at a per annum rate equal to 0.05% times the aggregate outstanding drawn and utilized amount of the Revolving Credit Commitment, payable in arrears on each Payment Date and on the Revolving Loan Termination Date. All accrued utilization fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder."

3.1 The Credit Agreement is hereby amended by deleting Section 2.5.2 in its entirety and inserting the following in its stead: "2.5.2 UTILIZATION FEE. If at any time fifty percent (50%) or more of the Revolving Credit Commitment is drawn and utilized, the Borrower agrees to pay to the Administrative Agent for the ratable account of each Lender based on each such Lender's Pro Rata Share a utilization fee at a per annum rate equal to 0.05% times the aggregate outstanding drawn and utilized amount of the Revolving Credit Commitment, payable in arrears on each Payment Date and on the Revolving Loan Termination Date. All accrued utilization fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder." 3.2 The Credit Agreement is hereby amended by deleting Section 6.15 in its entirety and inserting the following in its stead: "6.15 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower will maintain a Consolidated Fixed Charge Coverage Ratio of not less than 2.50 to 1.0 as of the end of each fiscal quarter for the period of four fiscal quarters ending on such date; provided, however, for the fiscal quarters ended December 31, 2003, March 31, 2004 and June 30, 2004, the Consolidated Fixed Charge Coverage Ratio shall be replaced with a minimum required EBITDA as set forth below:
Fiscal Quarter Ended -------------------December 31, 2003 March 31, 2004 June 30, 2004 Minimum Required EBITDA ----------------------$12,500,000 $13,500,000 $14,000,000

Thereafter, the Consolidated Fixed Charge Coverage Ratio shall be reinstated and the Borrower shall be required to maintain such Consolidated Fixed Charge Coverage Ratio of not less than 2.50 to 1.0 as of the end of each fiscal quarter for the period of four fiscal quarters ending on such date." SECTION IV. CONDITIONS PRECEDENT. The effectiveness of this Amendment is expressly conditioned upon satisfaction of the following conditions precedent: 4.1 The Lenders shall have received a copy of this Amendment duly executed by the Borrower. 4.2 The Administrative Agent shall have received an amendment and waiver fee in the amount of $30,000. 2

4.2 The Administrative 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. 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, except as follows: SECTION V. FEES AND EXPENSES. The Borrower shall pay, upon demand, all reasonable attorneys' fees and out-of-pocket costs of the Administrative 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.

4.2 The Administrative 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. 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, except as follows: SECTION V. FEES AND EXPENSES. The Borrower shall pay, upon demand, all reasonable attorneys' fees and out-of-pocket costs of the Administrative 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. 3

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 Administrative Agent and as a Lender By: _________________________________ Name: _________________________________ Title: _________________________________ U.S. BANK NATIONAL ASSOCIATION, as a Lender By: _________________________________ Name: _________________________________ Title: _________________________________ 4

Exhibit 31(1) CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John F. Welch certify that:

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 Administrative Agent and as a Lender By: _________________________________ Name: _________________________________ Title: _________________________________ U.S. BANK NATIONAL ASSOCIATION, as a Lender By: _________________________________ Name: _________________________________ Title: _________________________________ 4

Exhibit 31(1) CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John F. Welch certify that: 1. I have reviewed this quarterly report on Form 10-Q of CNA Surety Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual

Exhibit 31(1) CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John F. Welch certify that: 1. I have reviewed this quarterly report on Form 10-Q of CNA Surety Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to material affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting; and
Date: November 13, 2003 /s/ John F. Welch John F. Welch President and Chief Executive Officer

Exhibit 31(2)

Exhibit 31(2) CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John S. Heneghan, certify that: 1. I have reviewed this quarterly report on Form 10-Q of CNA Surety Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to material affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting; and
Date: November 13, 2003 /s/ John S. Heneghan John S. Heneghan Vice President and Chief Financial Officer

EXHIBIT 32(1)

EXHIBIT 32(1) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, John F. Welch, Chief Executive Officer of CNA Surety Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge: (1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/John F. Welch ---------------------------John F. Welch Chief Executive Officer

EXHIBIT 32(2) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, John S. Heneghan, Chief Financial Officer of CNA Surety Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge: (1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (3) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/John S. Heneghan ---------------------------John S. Heneghan Chief Financial Officer

EXHIBIT 32(2) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, John S. Heneghan, Chief Financial Officer of CNA Surety Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge: (1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (3) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/John S. Heneghan ---------------------------John S. Heneghan Chief Financial Officer


								
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