(f) Compliance. CCC will assist Surety with its Sarbanes-Oxley compliance program, as well asother compliance programs, and periodically provide compliance auditing services. Surety may alsoutilize CCC’s online Risk Control Tracking System (RCTS) for Sarbanes-Oxley compliance reportingpurposes.     (g) Contract Administration. CCC will provide contract administration services to Surety,including, without limitation, sourcing, procurement and negotiation services, as needed.     (h) Real Estate Services. CCC will procure and provide office space to Surety including thenegotiation of rents and lease terms, as well as the provision of facilities planning andmanagement services, all as needed.     (i) Human Resources**.**CCC will provide associate survey and compensation survey materials andother various human resource materials to Surety on an annual basis. In addition, CCC will makeavailable to Surety CCC’s web-based training.     (j) Legal. CCC will provide contract review and legal counsel to Surety as needed.     (k) Marketing. CCC will provide marketing services to Surety as needed.     (l) Organizational Development and Training. CCC will provide Surety with access to hard-copyand on-line training materials and standard talent review tools for succession planning.     (m) Tax Preparation. CCC will assist Surety with state and federal income tax preparation andprovide tax consulting services as needed.Surety may, from time to time, elect to expand or otherwise modify the specific CCC AdministrativeServices enumerated above at mutually acceptable rates determined in accordance with themethodologies applicable to the calculation of the CCC Administrative Services Fee, as furtherdescribed in Section 6.***2. Services To Be Provided By Surety.***In exchange for the Surety Administrative Services Fee (asdefined in Section 7), Surety, through its subsidiary Western Surety Company, shall provide to CCCcertain administrative services which shall include, but not be limited to, the services describedbelow (collectively, the “*Surety Administrative Services*”):     (a) Agency Licensing Services. Surety will assist CCC, along with other subsidiaries andaffiliates of CCC, with the provision of certain agency licensing, appointment and related agentrecord-keeping services, as needed.     (b) Agency Contracts. Surety will assist CCC, along with other subsidiaries and affiliates ofCCC, with the maintenance of agency contracts, as needed.CCC may, from time to time, elect to expand or otherwise modify the specific Surety AdministrativeServices enumerated above at mutually acceptable rates determined in accordance with themethodologies applicable to the calculation of the Surety Administrative Services Fee, as furtherdescribed in Section 7.***3. Employees***. CCC authorizes its employees (collectively, the “*CCC Employees*”) to perform the CCCAdministrative Services for Surety and Surety consents to receive the CCC Administrative Servicesthrough the CCC Employees. Similarly, Surety authorizes its employees (collectively, the “*SuretyEmployees*”) to perform the Surety Administrative Services for CCC and CCC consents to receive theSurety Administrative Services through the Surety Employees. Notwithstanding any provision in thisAgreement to the contrary, however, CCC shall continue to remain the sole employer of the CCCEmployees and Surety shall continue to remain the sole employer of the Surety Employees.
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***4. Control & Responsibility.***CCC shall provide all CCC Administrative Services under the soleultimate direction and control of Surety’s senior management. Similarly, Surety shall provide allSurety Administrative Services under the sole ultimate direction and control of CCC’s seniormanagement. As a result, notwithstanding any provision in this Agreement to the contrary, Suretyshall retain ultimate liability and responsibility for the CCC Administrative Services and CCCshall retain ultimate liability and responsibility for the Surety Administrative Services.***5. Term***. The term of this Agreement (“*Term*”) shall commence effective as of January 1, 2010 andshall automatically renew each year until the earlier to occur of the following: (a) either partyelects to terminate this Agreement by providing written notice to the remaining party at leastthirty (30) days in advance of the date on which the termination is to take effect; or (b) a changein control occurs as to either party such that it is no longer ultimately owned, in whole or inpart, by CNAF, in which event this Agreement shall automatically terminate immediately upon thedate on which the change in control takes effect.***6. CCC Administrative Services Fee***.     (a) In exchange for the CCC Administrative Services, Surety hereby covenants and agrees toremit to CCC compensation in the manner set forth in Appendix A attached hereto andincorporated herein (“*CCC Administrative Services Fee*”). The CCC Administrative Services Fee shallbe: (1) substantially equivalent to the parties’ good faith estimate of Surety’s anticipated usageof the then current definition of the CCC Administrative Services; (2) based on an equitableallocation of the actual costs incurred by CCC in providing the CCC Administrative Servicesincluding, without limitation, salaries, rent, utility charges, legal expenses and auditing fees,as well as sales, excise, value added and real estate taxes; and (3) in conformity with customaryinsurance accounting practices consistently applied in compliance with applicable governmentalrules and regulations in a manner that reflects the reasonable, customary and usual charges for theCCC Administrative Services established in accordance with prudent and rational cost accountingmethodologies and in conformity with applicable arm’s length pricing regulations. The CCCAdministrative Services Fee shall also include reimbursement to CCC for any and all third partycharges CCC incurs in connection with the CCC Administrative Services, plus an arm’s length markupof certain costs to the extent they involve any of the CCC Administrative Services that are noteligible for allocation to Surety under the services cost method (SCM), as defined by the U.S.Internal Revenue Service from time to time (*see e.g.,*Treasury Regulation §1.482-9T(b)).     (b) The portion of the CCC Administrative Services Fee related to procuring and providingoffice space, along with related real estate services, to Surety pursuant to Section 1(h) (“*CCCReal Estate Services Fee*”) is initially calculated based on Surety’s percentage of rentable squarefeet in each office location as negotiated between both parties at the time the lease is executed.For the purpose of calculating the CCC Real Estate Services Fee, Surety’s percentage of rentablesquare feet will remain unchanged until any one of the following conditions is met: (1) Suretyrequest to occupy and subsequently occupies additional space in the office location; (2) thepercentage is renegotiated between both parties due to a significant change in the number ofoccupants in the office location; (3) the lease term is modified; or (4) the lease expires.Although CCC shall monitor periodic changes to Surety’s percentage of rentable square feet, foradministrative convenience, the parties shall true up the CCC Real Estate Services Fee on an annualbasis through the ordinary course of reconciling accounts between the parties. The results of thetrue up shall be mutually agreed by the parties, as evidenced by the approval of CCC’s Controllerand Surety’s Chief Financial Officer (or their respective designees), which approval need not be inwriting. Except as provided in this Section 6(b) and Sections 6(c) and 6(d), the CCCAdministrative Services Fee shall be fixed and shall not be subject to any true up or othermodification, regardless of Surety’s use or non-use of the CCC Administrative Services.
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     (c) The addition or deletion of any recurring CCC Administrative Services that are material innature or dollar amount shall be provided at mutually acceptable rates determined in accordancewith the methodologies applicable to the calculation of the CCC Administrative Services Fee, asdescribed in this Section 6. The adjustment to the CCC Administrative Services Fee shall beevidenced by a mutually executed updated version of Appendix A which shall automaticallysupersede and replace in its entirety the then current version of Appendix A.     (d) The addition or deletion of any non-recurring CCC Administrative Services, whether or notmaterial in nature or dollar amount, shall be provided at mutually acceptable rates determined inaccordance with the methodologies applicable to the calculation of the CCC Administrative ServicesFee, as described in this Section 6. The adjustment to the CCC Administrative Services Fee shallbe mutually approved by CCC’s Controller and Surety’s Chief Financial Officer (or their respectivedesignees), which approval need not be in writing.***7. Surety Administrative Services Fee***.     (a) In exchange for the Surety Administrative Services, CCC hereby covenants and agrees toremit to Surety compensation in the manner set forth in Appendix B attached hereto andincorporated herein (“*Surety Administrative Services Fee*”). The Surety Administrative Services Feeshall be: (1) substantially equivalent to the parties’ good faith estimate of CCC’s anticipatedusage of the then current definition of the Surety Administrative Services; (2) based on anequitable allocation of the actual costs incurred by Surety in providing the Surety AdministrativeServices including, without limitation, salaries, rent, utility charges, legal expenses andauditing fees, as well as sales, excise, value added and real estate taxes; and (3) in conformitywith customary insurance accounting practices consistently applied in compliance with applicablegovernmental rules and regulations in a manner that reflects the reasonable, customary and usualcharges for the Surety Administrative Services established in accordance with prudent and rationalcost accounting methodologies. The Surety Administrative Services Fee shall also includereimbursement to Surety for any and all third party charges Surety incurs in connection with theSurety Administrative Services including, but not limited to, those imposed by state insuranceregulators, plus an arm’s length markup of certain costs to the extent they involve any of theSurety Administrative Services that are not eligible for allocation to CCC at cost. Except asprovided in Sections 7(b) and 7(c), the Surety Administrative Services Fee shall be fixed and shallnot be subject to any true up or other modification, regardless of CCC’s use or non-use of theSurety Administrative Services.     (b) The addition or deletion of any recurring Surety Administrative Services that are materialin nature or dollar amount shall be provided at mutually acceptable rates determined in accordancewith the methodologies applicable to the calculation of the Surety Administrative Services Fee, asdescribed in this Section 7. The adjustment to the Surety Administrative Services Fee shall beevidenced by a mutually executed updated version of Appendix B which shall automaticallysupersede and replace in its entirety the then current version of Appendix B.     (c) The addition or deletion of any non-recurring Surety Administrative Services, whether ornot material in nature or dollar amount, shall be provided at mutually acceptable rates determinedin accordance with the methodologies applicable to the calculation of the Surety AdministrativeServices Fee, as described in this Section 7. The adjustment to the Surety Administrative ServicesFee shall be mutually approved by CCC’s Controller and Surety’s Chief Financial Officer (or theirrespective designees), which approval need not be in writing.***8. Compliance with Laws.***Both parties shall comply with applicable laws in effect from time to timeincluding, without limitation, the Foreign Corrupt Practices Act of 1977 and the Patriot Act, aswell as regulations and restrictions imposed by the U.S. Treasury’s Office of Foreign AssetsControl.
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***9. Choice of Law; Severability***. This Agreement shall be governed by and construed in accordancewith the laws of the state of Illinois without regard to conflict or choice of law principles. Ifany covenant, condition, or provision herein is held to be invalid, the invalidity thereof shall beseverable from the remainder of this Agreement and shall not in any way affect any other covenant,condition or provision herein.***10. Entire Agreement***. This Agreement constitutes the entire agreement between CCC and Suretyrelating to the administrative services they provide to one another, and any prior agreementswhether verbal or written have been superseded, merged and integrated into this Agreementincluding, without limitation, that certain Restated Administrative Services Agreement, dated as ofJuly 1, 2004, by and between the parties, which agreement shall be automatically be terminated andof no further force and effect immediately upon the date upon which this Agreement takes effect.Notwithstanding the foregoing, however, any reinsurance agreements between the parties shallcontinue to remain in full force and effect and shall not be superseded, merged or integrated intothis Agreement.***11. Successors & Assigns; No Third Party Beneficiaries.***This Agreement shall be binding on andinure to the benefit of both parties and their respective successors and permitted assigns and maynot be modified or amended orally, but only in a writing signed by all parties. Surety may notassign its rights or obligations under this Agreement without the prior written consent of CCC,which consent may be withheld in CCC’s sole and absolute discretion. This Agreement shall besolely for the benefit of the parties hereto and no other person or entity (with the exception ofsuccessors and permitted assigns) shall be a third-party beneficiary.***12. Non-Waiver.***No failure or delay by either party in exercising any right with respect to thisAgreement shall operate as a waiver thereof, nor shall any single or partial exercise thereofpreclude any other or further exercise thereof or the exercise of any other right.***13. Counterparts.***This Agreement may be executed in counterparts, each of which shall constitute anoriginal, but all of which together shall constitute one and the same instrument. In addition,this Agreement may be executed via facsimile and that facsimile signatures shall be valid andbinding for all purposes     **IN WITNESS WHEREOF,**the parties have executed and delivered this Administrative ServicesAgreement as of the date first above written.           **Continental Casualty Company**   **CNA Surety Corporation**             By:      By:     Printed Name:     Printed Name:               Title:      Title:          **Attest**:       By:     Printed Name:     Title:     
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**Appendix A**