2. After the applicable limits of all Underlying Insurance cease to apply because of exhaustion by payment of their limits of insurance and if all Underlying Insurance and Other Quota Share Insurance have a duty to defend such Suit, we will assume the duty to defend any Insured against any Suit seeking damages to which this policy applies even if the allegations are groundless, false, or fraudulent.

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

D. SECTION II - DEFENSE AND EXPENSE OF CLAIMS AND SUITS, B., subsection 3.a. is replaced by the following:

a. All Underlying Insurance and Other Quota Share Insurance pay prejudgment interest; and

E. SECTION III - LIMITS OF INSURANCE, C. AGGREGATE LIMIT is replaced by the following:

C. AGGREGATE LIMIT - The Limit of Insurance shown in our Declarations as "aggregate" is the most we will pay under the policy for the sum of damages. However, our aggregate Limit of Insurance:

1. Will not apply when First Underlying Insurance does not apply an aggregate limit, provided all other Underlying Insurance and Other Quota Share Insurance also do not apply an aggregate limit.

2. Will apply in the same manner as the aggregate limit in First Underlying Insurance applies, provided all other Underlying Insurance and Other Quota Share Insurance also applies an aggregate limit in the same manner as First Underlying Insurance.

F. SECTION III - LIMITS OF INSURANCE, F. of the policy and section F. of endorsement 178241 are replaced by the following:

F. SAME BASIS DEFENSE EXPENSES - With respect to any claim or Suit to which this policy applies and for which we assume charge of the settlement or defense, if the limits of insurance of any Underlying Insurance or Other Quota Share Insurance are reduced by defense expenses by the terms of that policy then any defense expense payments we make will reduce our applicable Limits of Insurance in the same manner up to a maximum of fifty percent (50%) of our applicable Limits of Insurance. After the defense expense payments we make reach fifty percent (50%) of the applicable Limit of Insurance, we will pay any defense expenses we incur in excess of such amount.

G. SECTION V - CONDITIONS, B. BANKRUPTCY, subsection 2. is replaced by the following:

2. If the insurer of any Underlying Insurance or Other Quota Share Insurance becomes bankrupt or insolvent, this policy:

a. Does not replace such Underlying Insurance or Other Quota Share Insurance; and

b. Applies as though such Underlying Insurance or Other Quota Share Insurance were available and collectable.