3. Our duty to defend ends when we have exhausted the applicable Limit of Insurance of our policy.

D. The first sentence under SECTION II - DEFENSE AND EXPENSE OF CLAIMS AND SUITS, B. PAYMENT OF EXPENSES is replaced by the following:

B. PAYMENT OF EXPENSES

We will only pay the following expenses:

E. The following is added to SECTION II - DEFENSE AND EXPENSE OF CLAIMS AND SUITS:

If we have assumed control of the settlement of any claim or defense of any Suit, then the following applies:

1. If we think that our Limit of Insurance stated in our declarations as "each occurrence" or "aggregate" limit, is likely to be exhausted by payment of judgments or settlements, we will notify the First Named Insured, in writing, to that effect.

2. After the applicable Limit of Insurance of this policy has been exhausted by payment of judgments or settlements:

a. We will notify the First Named Insured, in writing, as soon as practicable, that:

(1) Such a limit has actually been exhausted; and

(2) We have no duty to settle any claim or defend any Suit after the applicable limit of this policy has been exhausted.

b. We will initiate and cooperate in the transfer of control, to any appropriate Insured, of all claims and Suits seeking damages which are subject to that limit and which are reported to us before that limit is exhausted. That Insured must cooperate in the transfer of control of said claims and Suits.

We agree to take such steps, as we deem appropriate, to avoid a default in, or continue the defense of, such Suits until such transfer is completed, provided the appropriate Insured is cooperating in completing such transfer.

We have no duty to take any action whatsoever with respect to any claim or Suit seeking damages that would have been subject to that limit had it not been exhausted, if the claim or Suit is reported to us after the applicable limit of this policy has been exhausted.

c. The First Named Insured, and any other Insured involved in a Suit seeking damages subject to that limit, must arrange for the defense of such Suit within such time period as agreed to between the appropriate Insured and us. Absent any such agreement, arrangements for the defense of such Suit must be made by the appropriate Insured as soon as practicable.

3. The First Named Insured will reimburse us for expenses we incur in taking those steps we deem appropriate in accordance with paragraph 2.b. above;

The duty of the First Named Insured to reimburse us will begin on:

a. The date on which the applicable Limit of Insurance is exhausted, if we sent notice in accordance with paragraph 1. above; or

b. The date on which we sent notice in accordance with paragraph 2.a. above, if we did not send notice in accordance with paragraph 1. above.

4. The exhaustion of any Limit of Insurance of this policy by the payment of judgments or settlements, and the resulting end of our duty to settle any claim or defend any