3.5

The Company shall act generally in the name of the undersigned
insurance companies.

3.6 Notice: It is agreed that notice of a claim, or of an occurrence

likely to give rise to a claim, given by the Insured or (by the U.S. Government) to the Company, as required under the terms and conditions of its policy, shall be deemed to be notice to the other undersigned insurance companies. (The Company or its representative hereby undertakes to advise them of such notice.)

SECTION 4

4.1

4.2

4.3

Servicing carrier Allowances, Expenses and Claims Payment.
As an allowance for its services as a servicing carrier as specified
in this Agreement, the Company shall periodically bill the under-
signed insurance companies at the rate of $35 per hour of its pro-
fessional employee's time in performing such services and they shall
pay to the Company the said sums within thirty (30) days of receipt
of a bill therefor.

The Company shall periodically bill the undersigned insurance com-
panies for Allocated Loss Adjustment Expense meaning the types of
expenses set forth in 11 N.Y.C. RR, Chap. IV-C Part 105.2 and the
Insurers shall pay, to the Company the said sums within thirty
days of receipt of a bill therefor.

(30)

The servicing carrier allowance set forth in Section 4.1 intended to compensate the Company for non-allocated expenses considered to be, normal operating costs for services rendered as a servicing carrier. Examples of such expenses include salaries of personnel, office equipment, space. Other functions and expenses are intended to be performed and paid solely by the undersigned insurance companies.

4.4

It is the express intention of the parties hereto that the Company
pot sustain a financial loss with respect to its services as a
servicing carrier. Therefore, in addition to Section 4.1 above:
The undersigned insurance companies shall allow the reimbursement
of the Company for normal operating costs and unallocated loss
adjustment expenses incurred in connection with their business,
which are in excess of the allowances provided in Section 4.1.
The undersigned insurance companies shall also allow the Company
reimbursement of extraordinary expenses incurred as a servicing
carrier, including, but not limited to, any special computer pro-
gramming required or computer time cost necessary to run such
programs.

4.5 The undersigned insurance companies will not question the statements
or settlements of the Company, and will accept the statements of
losses and expenses billed by the Company as conclusive evidence of
their liability to pay for their respective quota share percentages
set forth in the policy. With respect to losses and both allocated
and non-allocated expenses of the Company to be so billed to the
undersigned insurance companies the following guideline shall govern:
a. The Company's allocated and non-allocated expenses, allowances
and loss payments hereunder shall be billed to such of the under-
signed insurance companies as subscribed to the Special Liability
Insurance Policy Form No. N.S.F.1 Ed: 8/76 until such time as they
shall have paid their respective percentages of $5,000,000 in
"Loss" as defined in such policy. Thereafter, the Company's

SECTION 5

5.1

5.2

allocated and non-allocated expenses, allowances and loss payments shall be billed to such of the undersigned insurance companies as subscribed to Special Excess Liability Policy Form No. N.S.F.2 Ed: 8/76 until such time as such Insurers shall have paid their respective percentages of $50,000,000 in "Loss" as defined in such policy.

The Company shall maintain or provide for the maintenance by an
independent third party of claims files, records and accounts with
respect to all transactions entered into on behalf of the under-
signed insurance companies to this Agreement, in accordance with
generally accepted insurance accounting principles, as required by
law, and as directed by the Administration Committee.

The undersigned insurance companies and any designated representative
thereof shall have the right at all reasonable times to inspect
the books, records and files of the Company so far as they pertain
to the operations of the Company on behalf of the undersigned
insurance companies, and shall have the right to copy or abstract
such books, records and files at its own expense. It is agreed that
any required or requested examination or audit of the books or other
records of the Company with respect to its functions as a servicing
carrier of the undersigned insurance companies shall be done at
their expense. Such access shall in no way derogate from the
exclusivity of the right of the Company to supervise and manage
claims for the undersigned insurance companies.

however, that the Company and the Insurers may agree that the Company
shall retain and handle all claims reported to it during that time
the Company acted as a servicing carrier, in accordance with the
terms of this Agreement until the said claims have been terminated
or returned to the Insurers under mutually agreed upon terms. The
termination of this Agreement shall in no way affect or alter the
obligations of the Company or the undersigned insurance companies to
account for or to pay over sums due one another pursuant to this

Agreement and the provisions of Paragraphs 8.1 and 9.1 shall specifically
survive any such termination.

SECTION 8

8.1

Indemnification.

The undersigned insurance companies shall indemnify and hold harmless
the Company and its affiliates and subsidiaries and the directors,
officers, agents and employees of the Company or of any such
affiliate or subsidiary, against and from all costs, including the
amounts of judgments (including interest thereon), settlements.
fines or penalties and expenses, incurred in connection with any
action, suit or proceeding, civil or criminal, to which the Company
or such affiliate or subsidiary or such director, officer, agent, or
employee thereof is made a party because of any act, error, or
omission by or on behalf of the Company in the conduct of its
duties or obligations under this Agreement; provided, however, such
indemnification shall not be provided on any matter in which any
such person or organization shall be finally adjudged in any such
action, suit or proceeding to have committed a breach of duty
involving dishonesty, willful misfeasance or reckless disregard of