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                                                                   EXHIBIT 10.5


                        SERVICES AND INDEMNITY AGREEMENT

This Services and Indemnity Agreement, (hereinafter referred to as the
"Agreement") is made and entered into by and between Western Surety Company a
South Dakota domiciled property and casualty insurer with principal offices
located in Sioux Falls, South Dakota (hereinafter referred to as the
"REINSURER") and Continental Casualty Company, an Illinois domiciled property
and casualty insurer with principal offices located at CNA Plaza, Chicago,
Illinois and its affiliates (hereinafter referred to as the "COMPANY"),
effective October 1, 2002, for the benefit of the REINSURER and the COMPANY.

WHEREAS, the COMPANY and the REINSURER have entered into a Surety Quota Share
Treaty, (hereinafter referred to as the "Reinsurance Agreement") effective
October 1, 2002 for certain Surety Bonds issued by the COMPANY in the United
States on behalf of various principals of REINSURER and reinsured 100% by the
REINSURER (as defined in the Reinsurance Agreement, and hereinafter referred to
as the "Bonds"), pursuant to the terms of such Reinsurance Agreement; and

WHEREAS, the COMPANY and the REINSURER also have entered into a Surety Excess of
Loss Reinsurance Contract (hereinafter referred to as "Excess of Loss
Reinsurance Agreement"); and

WHEREAS, the REINSURER possesses the staff and expertise to administer the
policies and the REINSURER agrees to assume certain duties and responsibilities
to administer such Bonds; and

WHEREAS, the COMPANY'S offer to write such business is based on the REINSURER'S
acceptance of such duties and responsibilities as described herein;

NOW, THEREFORE, the parties in consideration of the mutual agreements,
covenants, and provisions herein contained, agree as follows:

                                     I. TERM

This Agreement shall take effect with the Reinsurance Agreement and have the
same term as provided in the Reinsurance Agreement, except as specified in
Sections 4.5 and 4.7 of Article IV and Section 9.6 of Article IX of this
Agreement. If this Agreement is terminated or expires for any reason, the
Reinsurance Agreement shall simultaneously terminate or expire.


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                                II. APPOINTMENTS

Section 2.1: The REINSURER shall serve as the COMPANY'S underwriting agent for
the Bonds and shall adjust any claims made under the Bonds.

Section 2.2: In consideration for these appointments, the REINSURER and the
COMPANY agree to exercise all authority and perform all duties required by this
Agreement.

                 III. UNDERWRITING AUTHORITY AND RELATED DUTIES

Section 3.1: The REINSURER is authorized and agrees to underwrite, price, issue,
and cancel or nonrenew the Bonds, subject to limitations provided herein. The
REINSURER warrants that it shall underwrite, price, issue, and cancel or
nonrenew the Bonds in a timely and professional manner through qualified
persons, fully familiar with generally accepted standards in the United States
or according to the COMPANY'S formal written guidelines as may be provided from
time to time to the REINSURER.

Section 3.2: Nothing stated anywhere in this Agreement shall impair the
REINSURER'S right to cancel or nonrenew any Bond, providing such action is in
full compliance with applicable law and the COMPANY receives advance notice of
the REINSURER'S intent. The COMPANY has the right to cancel or nonrenew any Bond
upon the prior approval of the REINSURER unless this Agreement expires or is
terminated, whereupon the COMPANY may do so without prior approval but shall
provide ten (10) days prior written notice to the REINSURER.

Section 3.3: The COMPANY agrees that it will, upon written request from the
REINSURER, promptly appoint such persons as agents of the COMPANY or grant such
persons a power of attorney as requested by the REINSURER. The COMPANY also
agrees that it will, upon written request from the REINSURER promptly file with
appropriate regulatory authorities such forms and rates as requested by the
REINSURER. The REINSURER's staff will perform the administrative functions
necessary for the COMPANY to make such appointment, grant such powers and to
make such filings.

                    IV. CLAIMS AUTHORITY AND RELATED DUTIES

Section 4.1: The COMPANY hereby agrees and authorizes the REINSURER to adjust
and pay all claims arising under the Bonds issued under this Agreement, except
as provided in Section 4.5 of Article IV herein. The REINSURER warrants that any
claims arising under the Bonds will be handled in a timely and professional
manner by qualified persons, fully familiar with generally accepted claims
handling standards in the United States or according to the COMPANY's





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formal written guidelines as may be provided from time to time to the REINSURER.
The REINSURER is authorized and agrees to investigate, monitor, and handle any
claims under any of the Bonds issued under this Agreement and reinsured pursuant
to the REINSURANCE AGREEMENT on the COMPANY's behalf or retain any independent
claims consultant or adjuster as may be required.

Section 4.2: THE COMPANY and the REINSURER shall provide the other with prompt
notification of any losses or claims, or any information that makes a loss or
claim reasonably likely under the Bonds and as provided elsewhere in this
Agreement.

Section 4.3: In recognition of statutory, regulatory and legal duties to handle
claims in a prompt and fair manner, the COMPANY and the REINSURER agree to
exercise their best efforts and cooperate fully with the other to handle claims
in said manner and in full compliance with all such requirements.

Section 4.4: Within 20 days after the end of each calendar month while this
Agreement is in effect the REINSURER shall promptly report to the COMPANY on all
open and closed claims handled by it during such month in the reporting format
as mutually agreed to between the COMPANY and the REINSURER. Such reports shall
include information on all claims and allocated claims expenses reserved, paid
and outstanding. The REINSURER shall send the COMPANY a copy of any claim file
upon request by the COMPANY. All claim files will be the joint property of the
COMPANY and the REINSURER during the period this Agreement is in effect.

Section 4.5: Upon termination of this Agreement, or in the event of an order of
liquidation of the COMPANY during the period this Agreement is in effect, such
files shall become the sole property of the COMPANY or its estate. The REINSURER
shall have reasonable access to, and the right to copy, any such claim files in
the COMPANY'S possession on a timely basis, if requested.

Section 4.6: The REINSURER shall pursue salvage or subrogation on behalf of the
COMPANY in all appropriate cases, on any claims arising under the Bonds.

Section 4.7: In the event this Agreement is terminated and unless otherwise
mutually agreed to between the COMPANY and the REINSURER or the REINSURER
otherwise notifies the COMPANY in writing, the REINSURER shall have the right to
settle and handle all subsequent claims and losses until such time as all Bonds
issued, underwritten or serviced by REINSURER pursuant to this Agreement have
expired and the Reinsurance Agreement has expired, and all known claims
thereunder have been paid or settled, have runoff or otherwise have been
disposed of in the judgment of the COMPANY, and all incurred but not reported
loss reserves as respects the business covered by the Reinsurance Agreement have
been reduced to zero, and any amounts owed to the COMPANY




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by others or under the Reinsurance Agreement in regard to any claims have been
collected by the COMPANY. Reinsurance indemnity for any claim or loss discussed
herein shall be provided in accordance with the terms and conditions of the
Reinsurance Agreement.

Section 4.8: All claims and/or losses handled by the REINSURER pursuant to
Section 4.7 herein shall be reported to the COMPANY by the REINSURER within
forty-five (45) days after the end of each calendar quarter in such reporting
format as requested by the COMPANY.


                   V. ACCOUNTING AUTHORITY AND RELATED DUTIES

The parties agree that the REINSURER shall bill its customers directly for the
Bonds and collect all premiums due and owing for such Bonds.


                  VI. REGULATORY COMPLIANCE AND RELATED DUTIES

Section 6.1: The COMPANY and the REINSURER agree to use their best efforts to
achieve full compliance with all applicable statutory, regulatory and legal
requirements.

Section 6.2: THE COMPANY and the REINSURER agree to provide the other, promptly
upon request, with all information and support required for any regulatory
compliance obligation and for any reports, statements or other filings required
by regulatory authorities.

Section 6.3: The REINSURER agrees to monitor all legal, statutory and regulatory
developments affecting the Bonds hereunder and promptly report same to the
COMPANY. Should any such changes affect the Bonds hereunder, the parties agree
to ensure full compliance with such changes. The COMPANY agrees to prepare any
documentation necessary to assure such compliance. In the event that the COMPANY
becomes aware of any such development, it shall report it promptly to the
REINSURER.

Section 6.4: In the event that any State, by statute, regulation or otherwise,
prohibits or restricts the REINSURER'S authority hereunder, the parties agree
that this Agreement and the underlying Reinsurance Agreement are terminated in
accordance with the provisions of same.


                          VII. FACULTATIVE REINSURANCE

When requested by REINSURER the COMPANY shall provide facultative reinsurance to
the REINSURER.




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                               VIII. COMPENSATION

The parties agree that as compensation for the performance of the mutual duties
specified hereunder, COMPANY shall pay the REINSURER $50,000 per calendar
quarter during the term of this Agreement.


                               IX. INDEMNIFICATION

Section 9.1 In addition to the obligations of the REINSURER pursuant to the
terms of the Reinsurance Agreement, the REINSURER shall indemnify the COMPANY as
follows in Sections 9.2 and 9.3. However, Sections 9.2 and 9.3 shall not apply
to any liability, claim, suit, demand, damages (including punitive and exemplary
damages), judgment, cost, interest and expense (including but not limited to
attorneys' fees and disbursements) or regulatory fines or administrative
penalties caused by the action of or the failure to take action by any employee
of the COMPANY. Nor shall Sections 9.2 and 9.3 prevent the application of any
available reinsurance proceeds.

Section 9.2: The REINSURER shall indemnify, defend and hold harmless the
COMPANY, its agents, employees, subsidiaries and affiliates from and against all
liability, claims, suits, demands, damages (including punitive and exemplary
damages), judgments, costs, interest and expense (including but not limited to
attorneys' fees and disbursements) or regulatory fines or administrative
penalties arising out of, or in connection with, any Bond issued under this
Agreement and reinsured under the Reinsurance Agreement, including but not
limited to underwriting activities, policy issuance, claim handling and the
resolution of coverage issues; provided, however, that not withstanding any
other provisions of the Agreement, such indemnification by the REINSURER shall
not extend to any matter subject to the obligations of the COMPANY or its
affiliates under the Reinsurance Agreement or the Excess of Loss Reinsurance
Agreement.

Section 9.3: The REINSURER agrees to indemnify, defend and hold the COMPANY
harmless and make full and prompt reimbursement for any regulatory fines or
administrative penalties levied against the COMPANY relating to the REINSURER'S
failure to fulfill any policy, rate, claim payment or other filing or
obligations required by or to regulatory authorities. The COMPANY shall use its
best efforts to advise the REINSURER as soon as possible of any such fine or
penalty, or any information indicating that a fine or penalty may be levied.

Section 9.4: Any inadvertent delay, omission or error shall not be held to
relieve either party hereto from any liability which would attach to it
hereunder if such delay, omission or error had not been made.





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Section 9.5: The COMPANY agrees to save, indemnify, and hold REINSURER harmless
against any and all loss, liability or damage resulting from any
misrepresentation or breach of warranty by the COMPANY under the terms of this
Agreement.

Section 9.6: The indemnities provided in Sections 9.1, 9.2, 9.4 and 9.5 herein
shall survive any termination of this Agreement.

                  X. REPRESENTATION AND WARRANTIES OF COMPANTY

Section 10.1: The COMPANY hereby represents and warrants to the REINSURER that
all SURETY BUSINESS (as that term is defined in the Reinsurance. Agreement)
written, renewed or assumed by the COMPANY, or by any company that is an
affiliate of the COMPANY on or after October 1, 2002, will be coded as PR 66 (as
that term is defined in the COMPANY's records), and covenants that if it is
discovered that any Surety Business written or assumed by the COMPANY or by any
company that is an affiliate of the COMPANY on or after the October 1, 2002, has
not been coded as PR 66, then that Surety Business will be ceded under the terms
of the Reinsurance Agreement as if that Surety Business has been coded as PR 66.

Section 10.2: The COMPANY hereby represents and warrants that it or its
affiliates will act as a cosurety or write Surety Business as requested by the
REINSURER on the same terms and conditions, using the same filed forms and rates
as the Company and its affiliates used to write Surety Business prior to October
1, 2002.

Section 10.3: The COMPANY hereby represents and warrants that the convention for
determining when losses are incurred as set forth in Article 5 (C) of the
Reinsurance Agreement is the convention that the COMPANY consistently has used
prior to October 1, 2002 in the preparation of its Statutory Consolidated Annual
Statements.

                                 XI. ARBITRATION

In the event of an irreconcilable dispute between the parties to this Agreement,
such dispute shall be submitted for decision to the process of arbitration in
the manner and pursuant to the procedure set forth in the ARBITRATION Article of
the Reinsurance Agreement.

                                XII. MODIFICATION

There will be no modification of or change in the terms of this Agreement, the
Reinsurance Agreement or the Excess of Loss Reinsurance Agreement without the
written approval of the COMPANY and the audit committee of CNA Surety
Corporation.




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                       XIII. BINDING EFFECT OF AGREEMENT

This Agreement will be binding upon and inure to the benefit of the parties,
their successors and assigns.

                                XIV. TERMINATION

Section 14.1: This Agreement and the REINSURER'S obligations, except as
specified in Article I, Sections 4.5 and 4.7 of Article IV, and Section 9.6 of
Article IX hereunder, shall terminate automatically and without notice upon the
occurrence of any one or more of the following events: (a) termination of the
Reinsurance Agreement; or (b) termination or modification of REINSURER'S
participation in the Reinsurance Agreement.

Section 14.2: Any termination of REINSURER'S obligations hereunder shall be
subject always to REINSURER'S duty to satisfy, fulfill, fully perform and
discharge all obligations which may accrue through, but not beyond, the
effective date and time of such termination.

Section 14.3: This Agreement, except as specified in Article I, Sections 4.6 and
4.7 of Article IV, and Section 9.6 of Article IX, may be terminated at any time
by mutual written agreement.

                                XV. CONTRIBUTION

The REINSURER, upon any payment hereunder, shall fully share in the subrogation,
contribution and salvage rights of the COMPANY, as applicable, to the extent of
REINSURER'S payment to the COMPANY.

                      XVI. RESOLUTION OF CONFLICTING TERMS

In the event of any conflict or inconsistency between this Agreement and the
Reinsurance Agreement, this Agreement shall prevail and be controlling.
Notwithstanding anything to the contrary contained in Article XIII herein, any
irreconcilable dispute between parties to this Agreement shall be resolved by
arbitration, in the manner and pursuant to the procedure set forth in the
Reinsurance Agreement, as more fully set forth in Article XI of this Agreement.


                               XVII. SEVERABILITY

In the event any provision of this Agreement shall be declared invalid or
unenforceable by any regulatory body or court having jurisdiction, such validity
or enforceability shall not affect the validity or enforceability of the
remaining portions of this Agreement.




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                          XVIII. HONORABLE UNDERTAKING

The purposes of this Agreement are not to be defeated by narrow or technical
legal interpretations of its provisions. The Agreement shall be construed as an
honorable undertaking and should be interpreted for the purposes of giving
effect to the real intentions of the parties hereto.



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized representatives.


CONTINENTAL CASUALTY COMPANY

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WESTERN SURETY COMPANY

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