# International Business Machines Corporation

USD 200,000,000 (as stated in Item 6.b) of the Declarations)

in the aggregate during the currency of this Policy, separately in respect of each hazard insured with an aggregate limit in the Followed Policy

which in turn is excess of various insurances and/or retentions as more fully set forth in the Followed Policy.

Defense Costs to which the Policy applies shall not reduce the Limits of Liability stated above except to the extent Defense Costs covered under the Followed Policy reduce the Limits of Liability of the Followed Policy.

## 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 contained therein solely by payment by 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 no duty to assume charge of the defense of any suit or settlement of any claim against the Insured; however, the Company will assume the defense of a suit brought against the Insured seeking damages to which this Policy applies:

1. after all applicable limits of liability of Underlying Policy(ies) have been exhausted by actual payment of damages whether payment of such limits by underlying insurers or the Insured for any loss(es) covered by this Policy; and

2. if the terms and conditions of all Underlying Policy(ies) and Quota Share Policy(ies) would have obligated all underlying insurers to assume the defense or settlement of such claim or suit, but for the exhaustion (or settlement) of their applicable limits of liability.

(b) If paragraph 2.(a) above is not applicable, the Company shall have the right but not the duty to assume charge of the defense of any suit or settlement of any claim against the Insured upon exhaustion of the applicable limits of liability of the Underlying Policy(ies) by payments of loss(es) covered by this Policy, whether by payment of such limits by underlying insurers or the Insured. If the Company has exercised such right, it may withdraw from the defense and tender the defense to the Insured upon exhaustion of the applicable Limits of Liability under this Policy. If the Company does not exercise the right to assume charge of such defense or settlement, or if the applicable limits of the Underlying Policy(ies) are not exhausted or settled, the Company shall have the right and shall be given the opportunity to associate effectively with the Insured or the underlying insurer(s) or both, in the defense and control of any claim or suit likely to involve this Policy.

(c) With respect to any claim or suit encompassed by (a) or (b) above, the Insured, the underlying insurer(s) and the Company shall cooperate in the defense of such claim or suit.

(d) The Insured shall not settle any claim or suit for an amount within the Company's limit of liability without the Company's prior written consent which consent shall not be unreasonably delayed or withheld.

When the Company assumes charge of the defense or settlement of any suit or claim under paragraph 2 a) above AND the Followed Policy includes an insurer's right to settle claims, the Company will have the same right to settle claims under this Policy as are conferred to the insurer under the Followed Policy.

XL XS-BSF-03 (Ed. 03/14)
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