Amendment No. 1, Dated As of March 31, 2003 To Subscription Agreement

Exhibit 10.3


AMENDMENT NO. 1 TO


SUBSCRIPTION AGREEMENT


THIS AMENDMENT NO. 1 TO THE SUBSCRIPTION AGREEMENT (this "Amendment") is dated as of March 31, 2003, and amends that certain Subscription Agreement ("Subscription Agreement") by and among Argonaut Group, Inc. (the "Corporation") and HCC Insurance Holdings, Inc. ("Investor") dated as of March 12, 2003.


RECITALS


WHEREAS, Seller and Purchaser wish to amend the Subscription Agreement.


NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties to this Amendment hereby agree as follows:


Article I.
Amendments


1.1. The Subscription Agreement is hereby amended by revising Section 1(a) to read as follows:


"a. Subscription. On the terms and subject to the conditions of this
Agreement, the Investor hereby irrevocably subscribes for and the
Corporation hereby irrevocably agrees to sell to Investor 2,453,310
shares of Series A Mandatory Convertible Preferred Stock (the
"Shares") of the Corporation (the terms of which are described in the
form of Certificate of Designations, Preferences and Rights of the
Series A Mandatory Convertible Preferred Stock of the Corporation,
attached hereto as Exhibit A (the "Certificate of Designations") for a
purchase price of $12.00 per share for an aggregate purchase price of
Twenty Nine Million Four Hundred Thirty-Nine Thousand Seven Hundred
Twenty Dollars ($29,439,720) payable in cash at the Closing. At any
time prior to Closing, the Corporation shall have the right to require
Investor, subject to Investor's receiving all necessary regulatory
approvals, to increase its investment to $49.9 million and to acquire
additional Shares at the per share purchase price provided herein. If
Investor is unable to obtain all necessary regulatory approvals,
Investor will not be required to purchase more than 2,453,310 Shares.
Nothing contained in this Section 1(a) shall be deemed to modify,
amend, waive or alter the Investor's conditions to Closing set forth
in Section 4."


1.2. The Subscription Agreement is hereby amended by revising Section 3(l) to read as follows:


"l. Right of Participation. If the Corporation authorizes or creates a
new class or series of capital stock and proposes to issue such
capital stock (which for the avoidance of doubt, shall not include
additional shares of its current outstanding class of common stock in
a capital-raising transaction) (a "New Stock Offering"), then the
Corporation shall provide as much advance notice as reasonably
practicable


(without jeopardizing the Corporation's ability to reasonably conduct
the offering on advantageous terms, but in no event less than ten
business days) to Investor of such issuance, which notice shall
include the proposed amount of shares to be offered, the material
terms of such shares and the price at which shares shall be offered
(the "Stock Offering Notice"), so as to enable Investor the
opportunity to purchase all or any portion of such securities in
connection with such issuance. If the Corporation proposes to issue
debt securities (other than bank debt) in a capital raising
transaction (a "New Debt Offering"), the Corporation shall provide as
much advance notice as reasonably practicable (without jeopardizing
the Corporation's ability to reasonably conduct the offering on
advantageous terms, but in no event less than three (3) business days)
to Investor of such issuance, which notice shall include the proposed
amount of debt securities to be offered and the proposed material
terms of such debt securities (the "Debt Offering Notice"), so as to
enable Investor the opportunity to purchase all or any portion of such
debt securities in connection with such issuance. Investor may
exercise the foregoing rights by delivering a notice of such exercise
(the "Notice of Exercise") to the Corporation within two business days
after the time notice of the New Stock Offering or the New Debt
Offering is given to Investor by the Corporation. Such Notice of
Exercise shall state the number of shares of capital stock or amount
of debt securities, as the case may be, that Investor desires to
purchase in such offering. Subject to t ...