# CONDITIONS:

1. **MAINTENANCE OF UNDERLYING INSURANCE**

It is a condition of this Policy that the "Underlying Policy(ies)" shall be maintained in full force and effect, except for any reduction of the aggregate limits of liability contained therein solely by payment by the "Underlying Policy(ies)" or the Insured, of any loss(es) covered by this Policy. In the event of the Insured's failure to maintain the "Underlying Policy(ies)" in full force and effect and except with respect to the aforementioned aggregate reduction, coverage hereunder shall not be invalid, but shall apply to the same extent that it would have applied had there been compliance with this condition.

2. **DEFENSE, ASSISTANCE AND COOPERATION**

a. The Company shall have the right and duty to defend any claim, suit, or proceeding against the Insured seeking damages to which this Policy applies if both the following requirements are satisfied:
   1. all applicable Underlying Limits as stated in Item 5. of the Declarations have been exhausted by actual payment of loss(es) covered by this Policy, whether payment of such limits is by Underlying Insurers and / or the Insured; and
   2. the terms and conditions of all "Underlying Policy(ies)" and Quota Share Policy(ies) (as stated in Item 3.c. of the Declarations and hereinafter referred to as "Quota Share Policy(ies)") obligate such insurers to assume the defense or settlement of such claim, suit, or proceeding, but for the exhaustion of their applicable limits of liability.

b. If paragraph 2.a. above is not applicable and if the terms and conditions of all "Underlying Policy(ies)" and "Quota Share Policy(ies)" give such insurers the right but not the duty to assume charge of the defense or settlement of any claim, suit, or proceeding against the Insured, then the Company shall have the right but not the duty to assume charge of the defense or settlement of any claim, suit, or proceeding against the Insured upon exhaustion of the applicable limits of liability of the "Underlying Policy(ies)", whether by payment of such limits by Underlying Insurers and / or the Insured.

c. If the Company does not exercise the right to assume charge of such defense or settlement, or if the applicable limits of liability of the "Underlying Policy(ies)" are not exhausted or settled, the Company shall have the right and shall be given the opportunity to associate with the Insured or the Underlying Insurer(s) or both, in the defense and control of any claim, suit, or proceeding likely to involve this Policy.

d. With respect to any claim, suit, or proceeding encompassed by 2.a. or 2.b. above, the Insured and the Company shall cooperate in the defense of such claim or suit.

e. The Insured shall not settle any claim, suit, or proceeding for an amount within the Company's Limit of Liability without the Company's consent, and such consent shall not be unreasonably delayed or withheld.
If the Company assumes the duty to defend under either paragraph 2.a. or 2.b. above, that duty shall end once the Company has paid out the applicable Limits of Liability of this Policy as stated in Item 4. of the Declarations.

3. **CANCELLATION**

The cancellation provisions of this Policy will follow the cancellation provisions of the "Followed Policy" except as provided by endorsement to this Policy.

Notwithstanding any other provision in this Policy, in the event that the Company's financial strength rating is issued (1) below "A-" (A minus) by A.M. Best Co., or (2) below "BBB" by Standard & Poor's Ratings Services, (hereinafter "Credit Rating Downgrade"), this Policy may be canceled by the Named Insured by mailing written notice to the Company or by surrender of this Policy to the Company or its authorized agent. If this Policy is